10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-36642

VIVINT SOLAR, INC.

(Exact name of registrant as specified in its charter)

Delaware	45-5605880
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
1800 West Ashton Blvd. Lehi, UT	84043
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (877) 404-4129

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	VSLR	New York Stock Exchange

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

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

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

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

As of August 1, 2019, the registrant had 121,619,161 shares of common stock, $0.01 par value per share, outstanding.

Vivint Solar, Inc.

Quarterly Report on Form 10-Q

TABLE OF CONTENTS

		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive (Loss) Income	4
	Condensed Consolidated Statements of Redeemable Non-Controlling Interests and Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 4.	Controls and Procedures	42
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 5.	Other Information	71
Item 6.	Exhibits	72
	Signatures	73

1

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Vivint Solar, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par value and footnote 1)

(Unaudited)

	June 30,			December 31,
	2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	198,951		$	219,591
Accounts receivable, net		28,186			14,207
Inventories		13,071			13,257
Prepaid expenses and other current assets		30,783			31,201
Total current assets		270,991			278,256
Restricted cash and cash equivalents		78,567			71,305
Solar energy systems, net		1,637,905			1,938,874
Property and equipment, net		12,650			10,730
Other non-current assets, net		510,537			28,090
TOTAL ASSETS(1)	$	2,510,650		$	2,327,255
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY
Current liabilities:
Accounts payable	$	40,175		$	45,929
Distributions payable to non-controlling interests and redeemable non-controlling interests		11,221			7,846
Accrued compensation		24,545			25,520
Current portion of long-term debt		144,243			12,155
Current portion of deferred revenue		28,911			30,199
Current portion of finance lease obligation		1,089			1,921
Accrued and other current liabilities		53,557			42,860
Total current liabilities		303,741			166,430
Long-term debt, net of current portion		1,181,797			1,203,282
Deferred revenue, net of current portion		15,529			13,524
Finance lease obligation, net of current portion		2,807			505
Deferred tax liability, net		490,496			437,120
Other non-current liabilities		76,994			24,610
Total liabilities(1)		2,071,364			1,845,471
Commitments and contingencies (Note 19)
Redeemable non-controlling interests		118,900			119,572
Stockholders’ equity:
Common stock, $0.01 par value—1,000,000 authorized, 121,606 shares issued and    outstanding as of June 30, 2019; 1,000,000 authorized, 120,114 shares    issued and outstanding as of December 31, 2018		1,216			1,201
Additional paid-in capital		582,338			574,248
Accumulated other comprehensive loss		(18,988	)		(7,223	)
Accumulated deficit		(334,595	)		(279,631	)
Total stockholders’ equity		229,971			288,595
Non-controlling interests		90,415			73,617
Total equity		320,386			362,212
TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY	$	2,510,650		$	2,327,255

⁽¹⁾ The assets of Vivint Solar, Inc. (the “Company”) as of June 30, 2019 and December 31, 2018 include $2,020.8 million and $1,835.8 million consisting of assets of variable interest entities, or VIEs, that can only be used to settle obligations of the VIEs. These assets include solar energy systems, net, of $1,478.5 million and $1,752.3 million as of June 30, 2019 and December 31, 2018; other non-current assets, net of $410.3 million and $10.9 million as of June 30, 2019 and December 31, 2018; cash and cash equivalents of $105.2 million and $62.4 million as of June 30, 2019 and December 31, 2018; accounts receivable, net, of $19.1 million and $6.6 million as of June 30, 2019 and December 31, 2018; restricted cash and cash equivalents of $5.4 million and $2.4 million as of June 30, 2019 and December 31, 2018; and prepaid expenses and other current assets of $2.3 million and $1.3 million as of June 30, 2019 and December 31, 2018. The Company’s liabilities as of June 30, 2019 and December 31, 2018 included $151.1 million and $80.8 million of liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include distributions payable to non-controlling interests and redeemable non-controlling interests of $11.2 million and $7.8 million as of June 30, 2019 and December 31, 2018; deferred revenue of $13.3 million and $12.0 million as of June 30, 2019 and December 31, 2018; long-term debt of $120.3 million and $55.0 million as of June 30, 2019 and December 31, 2018; accrued and other current liabilities of $5.5 million and $4.9 million as of June 30, 2019 and December 31, 2018; and other non-current liabilities of $0.7 million and $1.0 million as of June 30, 2019 and December 31, 2018. For further information see Note 14—Investment Funds.

See accompanying notes to condensed consolidated financial statements.

2

Vivint Solar, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Revenue:
Customer agreements and incentives	$	63,355		$	54,765		$	102,958		$	85,879
Solar energy system and product sales		27,402			26,033			57,170			63,169
Total revenue		90,757			80,798			160,128			149,048
Cost of revenue:
Cost of revenue—customer agreements and incentives		43,074			41,366			83,265			80,053
Cost of revenue—solar energy system and product sales		15,791			18,990			33,054			45,035
Total cost of revenue		58,865			60,356			116,319			125,088
Gross profit		31,892			20,442			43,809			23,960
Operating expenses:
Sales and marketing		37,037			14,033			66,671			25,158
Research and development		524			511			993			997
General and administrative		31,205			22,009			54,254			41,996
Total operating expenses		68,766			36,553			121,918			68,151
Loss from operations		(36,874	)		(16,111	)		(78,109	)		(44,191	)
Interest expense, net		19,472			11,336			38,599			28,258
Other expense (income), net		1,365			(4,109	)		2,750			(6,370	)
Loss before income taxes		(57,711	)		(23,338	)		(119,458	)		(66,079	)
Income tax expense		29,950			35,352			57,437			53,995
Net loss		(87,661	)		(58,690	)		(176,895	)		(120,074	)
Net loss attributable to non-controlling interests and redeemable    non-controlling interests		(59,094	)		(76,806	)		(122,086	)		(125,214	)
Net (loss attributable) income available to common stockholders	$	(28,567	)	$	18,116		$	(54,809	)	$	5,140
Net (loss attributable) income available per share to common    stockholders:
Basic	$	(0.24	)	$	0.16		$	(0.45	)	$	0.04
Diluted	$	(0.24	)	$	0.15		$	(0.45	)	$	0.04
Weighted-average shares used in computing net (loss attributable)    income available per share to common stockholders:
Basic		120,869			116,650			120,589			115,907
Diluted		120,869			121,753			120,589			120,969

 See accompanying notes to condensed consolidated financial statements.

3

Vivint Solar, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net (loss attributable) income available to common stockholders	$	(28,567	)	$	18,116		$	(54,809	)	$	5,140
Other comprehensive loss:
Unrealized (losses) gains on cash flow hedging instruments    (net of tax effect of $(2,675), $(223), $(4,452) and $1,171)		(7,292	)		(602	)		(12,175	)		3,147
Less: Interest (expense) income on derivatives recognized into    earnings (net of tax effect of $(64), $6,058, $(150) and $6,161)		(174	)		16,277			(410	)		16,555
Total other comprehensive loss		(7,118	)		(16,879	)		(11,765	)		(13,408	)
Comprehensive (loss) income	$	(35,685	)	$	1,237		$	(66,574	)	$	(8,268	)

See accompanying notes to condensed consolidated financial statements.

4

Vivint Solar, Inc.

Condensed Consolidated Statements of Redeemable Non-Controlling Interests and Equity

(In thousands)

(Unaudited)

	Redeemable									Accumulated
	Non-							Additional		Other						Total			Non-
	Controlling			Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders’			Controlling			Total
Three Months Ended June 30, 2019	Interests			Shares		Amount		Capital		Loss			Deficit			Equity			Interests			Equity
Balance — March 31, 2019	$	118,667			120,612	$	1,206	$	577,961	$	(11,870	)	$	(306,028	)	$	261,269		$	88,140		$	349,409
Stock-based compensation expense		—			—		—		4,156		—			—			4,156			—			4,156
Issuance of common stock, net		—			994		10		221		—			—			231			—			231
Contributions from non-controlling interests    and redeemable non-controlling interests		8,193			—		—		—		—			—			—			67,077			67,077
Distributions to non-controlling interests and    redeemable non-controlling interests		(2,676	)		—		—		—		—			—			—			(10,992	)		(10,992	)
Total other comprehensive loss		—			—		—		—		(7,118	)		—			(7,118	)		—			(7,118	)
Net loss		(5,284	)		—		—		—		—			(28,567	)		(28,567	)		(53,810	)		(82,377	)
Balance — June 30, 2019	$	118,900			121,606	$	1,216	$	582,338	$	(18,988	)	$	(334,595	)	$	229,971		$	90,415		$	320,386
	Redeemable									Accumulated
	Non-							Additional		Other						Total			Non-
	Controlling			Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders’			Controlling			Total
Six Months Ended June 30, 2019	Interests			Shares		Amount		Capital		Loss			Deficit			Equity			Interests			Equity
Balance — December 31, 2018	$	119,572			120,114	$	1,201	$	574,248	$	(7,223	)	$	(279,631	)	$	288,595		$	73,617		$	362,212
Cumulative-effect adjustment from adoption    of new ASUs		—			—		—		—		—			(155	)		(155	)		—			(155	)
Stock-based compensation expense		—			—		—		7,835		—			—			7,835			—			7,835
Issuance of common stock, net		—			1,492		15		255		—			—			270			—			270
Contributions from non-controlling interests    and redeemable non-controlling interests		18,006			—		—		—		—			—			—			141,632			141,632
Distributions to non-controlling interests and    redeemable non-controlling interests		(4,867	)		—		—		—		—			—			—			(16,559	)		(16,559	)
Total other comprehensive loss		—			—		—		—		(11,765	)		—			(11,765	)		—			(11,765	)
Net loss		(13,811	)		—		—		—		—			(54,809	)		(54,809	)		(108,275	)		(163,084	)
Balance — June 30, 2019	$	118,900			121,606	$	1,216	$	582,338	$	(18,988	)	$	(334,595	)	$	229,971		$	90,415		$	320,386

	Redeemable									Accumulated
	Non-							Additional		Other						Total			Non-
	Controlling			Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders’			Controlling			Total
Three Months Ended June 30, 2018	Interests			Shares		Amount		Capital		Income			Deficit			Equity			Interests			Equity
Balance — March 31, 2018	$	130,107			115,329	$	1,153	$	562,962	$	13,694		$	(277,015	)	$	300,794		$	57,629		$	358,423
Stock-based compensation expense		—			—		—		3,812		—			—			3,812			—			3,812
Issuance of common stock, net		—			3,148		32		598		—			—			630			—			630
Contributions from non-controlling interests    and redeemable non-controlling interests		22,228			—		—		—		—			—			—			43,288			43,288
Distributions to non-controlling interests and    redeemable non-controlling interests		(3,019	)		—		—		—		—			—			—			(10,030	)		(10,030	)
Total other comprehensive loss		—			—		—		—		(16,879	)		—			(16,879	)		—			(16,879	)
Net (loss) income		(26,669	)		—		—		—		—			18,116			18,116			(50,137	)		(32,021	)
Balance — June 30, 2018	$	122,647			118,477	$	1,185	$	567,372	$	(3,185	)	$	(258,899	)	$	306,473		$	40,750		$	347,223
	Redeemable									Accumulated			Retained
	Non-							Additional		Other			Earnings			Total			Non-
	Controlling			Common Stock				Paid-in		Comprehensive			(Accumulated			Stockholders’			Controlling			Total
Six Months Ended June 30, 2018	Interests			Shares		Amount		Capital		Income			Deficit)			Equity			Interests			Equity
Balance — December 31, 2017	$	122,444			115,099	$	1,151	$	559,788	$	6,905		$	213,107		$	780,951		$	80,115		$	861,066
Cumulative-effect adjustment from adoption    of new ASUs		—			—		—		—		3,318			(477,146	)		(473,828	)		—			(473,828	)
Stock-based compensation expense		—			—		—		6,781		—			—			6,781			—			6,781
Issuance of common stock, net		—			3,378		34		803		—			—			837			—			837
Contributions from non-controlling interests    and redeemable non-controlling interests		64,999			—		—		—		—			—			—			43,288			43,288
Distributions to non-controlling interests and    redeemable non-controlling interests		(5,112	)		—		—		—		—			—			—			(17,123	)		(17,123	)
Total other comprehensive loss		—			—		—		—		(13,408	)		—			(13,408	)		—			(13,408	)
Net (loss) income		(59,684	)		—		—		—		—			5,140			5,140			(65,530	)		(60,390	)
Balance — June 30, 2018	$	122,647			118,477	$	1,185	$	567,372	$	(3,185	)	$	(258,899	)	$	306,473		$	40,750		$	347,223

See accompanying notes to condensed consolidated financial statements.

5

Vivint Solar, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(176,895	)	$	(120,074	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		39,317			33,440
Deferred income taxes		57,678			54,173
Stock-based compensation		7,835			6,781
Loss on solar energy systems and property and equipment		4,157			3,025
Non-cash interest and other expense		3,302			13,656
Reduction in lease pass-through financing obligation		(2,032	)		(2,164	)
Losses (gains) on interest rate swaps		2,750			(1,279	)
Changes in operating assets and liabilities:
Accounts receivable, net		(13,979	)		(4,689	)
Inventories		186			9,462
Prepaid expenses and other current assets		816			8,276
Other non-current assets, net		(64,632	)		(6,613	)
Accounts payable		516			1,898
Accrued compensation		(999	)		(2,329	)
Deferred revenue		717			(10,514	)
Accrued and other liabilities		179			(1,915	)
Net cash used in operating activities		(141,084	)		(18,866	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for the cost of solar energy systems		(124,400	)		(146,247	)
Payments for property and equipment		(994	)		(65	)
Proceeds from disposals of solar energy systems and property and equipment		1,128			1,843
Purchase of intangible assets		(115	)		—
Net cash used in investing activities		(124,381	)		(144,469	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from investment by non-controlling interests and redeemable non-controlling interests		159,638			108,287
Distributions paid to non-controlling interests and redeemable non-controlling interests		(18,051	)		(28,558	)
Proceeds from long-term debt		133,164			876,000
Payments on long-term debt		(20,913	)		(689,320	)
Payments for debt issuance and deferred offering costs		(2,962	)		(17,715	)
Proceeds from lease pass-through financing obligation		1,518			1,497
Principal payments on finance lease obligations		(577	)		(1,931	)
Proceeds from issuance of common stock		270			837
Net cash provided by financing activities		252,087			249,097
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS, INCLUDING    RESTRICTED AMOUNTS		(13,378	)		85,762
CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED AMOUNTS—Beginning of period		290,896			154,938
CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED AMOUNTS—End of period	$	277,518		$	240,700
NONCASH INVESTING AND FINANCING ACTIVITIES:
Costs of solar energy systems included in changes in accounts payable, accrued compensation    and accrued and other liabilities	$	43,028		$	(119	)
Right-of-use assets obtained in exchange for new operating lease liabilities	$	8,665		$	—
Right-of-use assets obtained in exchange for new finance lease liabilities	$	3,756		$	619
Receivable for state tax credits recorded as a reduction to solar energy system costs	$	—		$	9

See accompanying notes to condensed consolidated financial statements.

6

Vivint Solar, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization

Vivint Solar, Inc. and its subsidiaries are collectively referred to as the “Company.” The Company most commonly offers solar energy to residential customers through long-term customer contracts, such as power purchase agreements (“PPAs”) and legal-form leases (“Solar Leases”). The Company also offers its customers the option to purchase solar energy systems (“System Sales”) through third-party loan offerings or a cash purchase. The Company enters into customer contracts through a sales organization that primarily uses a direct-to-home sales model. The long-term customer contracts under PPAs and Solar Leases are typically for 20 years and require the customer to make monthly payments to the Company.

The Company has formed various investment funds and entered into long-term debt facilities to monetize the recurring customer payments under its long-term customer contracts and investment tax credits (“ITCs”), accelerated tax depreciation and other incentives associated with residential solar energy systems. The Company uses the cash received from the investment funds, long-term debt facilities and cash generated from operations, including System Sales, to finance a portion of the Company’s variable and fixed costs associated with installing solar energy systems.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The unaudited condensed consolidated financial statements were prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments (all of which were considered of normal recurring nature) considered necessary to present fairly the Company’s financial results. The results of the six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2019 or for any other interim period or other future year.

The unaudited condensed consolidated financial statements reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. The Company uses a qualitative approach in assessing the consolidation requirement for VIEs. This approach focuses on determining whether the Company has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and whether the Company has the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. All of these determinations involve significant management judgments and estimates. The Company has determined that it is the primary beneficiary in the operational VIEs in which it has an equity interest. The Company evaluates its relationships with the VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. For additional information, see Note 14—Investment Funds.

Beginning with the first quarter of 2019, the condensed consolidated statements of operations items formerly captioned “Operating leases and incentives” and “Cost of revenue—operating leases and incentives” are now captioned “Customer agreements and incentives” and “Cost of revenue—customer agreements and incentives.” Also beginning with the first quarter of 2019, the condensed consolidated balance sheet items formerly captioned “Current portion of capital lease obligation” and “Capital lease obligation, net of current portion” are now captioned “Current portion of finance lease obligation” and “Finance lease obligation, net of current portion.” Amounts in these balance sheet items were capital leases under Accounting Standards Codification 840: Leases (“Topic 840”) in periods ending prior to January 1, 2019, while amounts in these balance sheet items are finance leases under Accounting Standards Codification 842: Leases (“Topic 842”) in periods ending subsequent to January 1, 2019. See “—Leases” below for further explanation of these changes.

7

Use of Estimates

The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company regularly makes significant estimates and assumptions including, but not limited to, ITCs; revenue recognition; solar energy systems, net; the impairment analysis of long-lived assets; stock-based compensation; the provision for income taxes; the valuation of derivative financial instruments; the recognition and measurement of loss contingencies; and non-controlling interests and redeemable non-controlling interests. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates.

Liquidity

In order to grow, the Company requires cash to finance the deployment of solar energy systems. As of the date of this filing, the Company will require additional sources of cash beyond current cash balances and currently available financing facilities to fund long-term planned growth. If the Company is unable to secure additional financing when needed, or upon desirable terms, the Company may be unable to finance installation of customers’ systems in a manner consistent with past performance, cost of capital could increase, or the Company may be required to significantly reduce the scope of operations, any of which would have a material adverse effect on its business, financial condition, results of operations and prospects. While the Company believes additional financing is available and will continue to be available to support current levels of operations, the Company believes it has the ability and intent to reduce operations to the level of available financial resources for at least the next 12 months from the date of this report, if necessary.

Performance Obligation—Solar Energy system and Product Sales

For certain System Sales, the Company provides limited post-sale services to monitor the productivity of the solar energy system for 20 years after it has been placed into service. The Company allocates a portion of the transaction price to the monitoring services by estimating the fair market price that the Company would charge for these services if offered separately from the sale of the solar energy system. As of June 30, 2019 and December 31, 2018, the Company had allocated deferred revenue of $4.0 million and $3.3 million to monitoring services that will be recognized over the term of the monitoring services.

Leases

The Company adopted Topic 842 and its subsequent updates effective January 1, 2019. These updates are intended to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the condensed consolidated balance sheets and disclosing key information about leasing arrangements. The Company utilized the additional transition method permitted by Accounting Standards Update (“ASU”) 2018-11 and adopted Topic 842 using a modified retrospective method with a cumulative-effect adjustment to its accumulated deficit as of January 1, 2019. As such, comparative periods ending prior to January 1, 2019 are presented in accordance with Topic 840 and periods ending after January 1, 2019 are presented in accordance with Topic 842. The impact to the accumulated deficit as a result of adopting ASU 2016-02 was a net reduction of approximately $0.2 million. The Company did not use the transitionary practical expedients allowed under Topic 842, and as such, the Company reassessed all contracts existing at the adoption date of January 1, 2019. The Company elected to treat leases with lease terms of 12 months or less as short-term leases. No right-of-use assets or lease liabilities are recognized for short-term leases. The Company has also elected not to separate lease components from non-lease components for all classes of leased assets except for building leases.

The adoption of this ASU resulted in right-of-use assets of $34.6 million related to operating leases being recognized in other non-current assets, net on the condensed consolidated balance sheets as of January 1, 2019. Corresponding lease liabilities of $43.8 million related to operating leases were recognized on the condensed consolidated balance sheets as of January 1, 2019, with the current portion recognized in accrued and other current liabilities and the long-term portion recognized in other non-current liabilities. In addition, at January 1, 2019, approximately $1.0 million of lease-related liabilities were removed from accrued and other current liabilities and approximately $8.2 million of lease-related liabilities were removed from other non-current liabilities and included as reductions to the initial operating lease right-of-use assets. As of January 1, 2019, finance lease right-of-use assets of $0.9 million continued to be recorded in property and equipment, net. Any changes in lease terms or estimates subsequent to adoption of the ASU 2016-02 are reflected in the right-of-use assets and lease liabilities.

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The Company’s PPAs, Solar Leases, and associated rebates and incentives no longer meet the definition of a lease under Topic 842. Accordingly, they are accounted for in accordance with Accounting Standards Codification 606: Revenue from Contracts with Customers (“Topic 606”) beginning on January 1, 2019. The Company concluded that there was no change to its revenue recognition practices for its PPA revenue stream under Topic 606. For Solar Leases, the Company concluded that the impact of applying Topic 606 is immaterial. The Company also concluded that there was no material change related to the timing of revenue recognition for rebates and incentives under Topic 606. Upon the adoption of Topic 842, the Company no longer capitalizes initial direct costs and amortizes them to the respective cost of revenue line items. Instead, the Company now capitalizes costs of obtaining a contract which meet the “incremental” criteria defined in Accounting Standards Codification 340 to other non-current assets, net. These costs are now amortized over the period of benefit to sales and marketing expense on the condensed consolidated statements of operations. In accordance with the Company’s Topic 842 transition discussed above, no prior period amounts were changed.

For purposes of comparison, the following tables show how the balances as of December 31, 2018 and for the three and six months ended June 30, 2018 would have changed if the effects of adopting Topic 842 had been applied to those balances (in thousands):

	December 31, 2018							June 30, 2019
	As Reported		Adjustments			As Adjusted		As Reported
Solar energy systems, net	$	1,938,874	$	(388,087	)	$	1,550,787	$	1,637,905
Other non-current assets, net		28,090		388,087			416,177		510,537

	Three Months Ended June 30,
	2018							2019
	As Reported		Adjustments			As Adjusted		As Reported
Cost of revenue—customer agreements and incentives	$	41,366	$	(4,510	)	$	36,856	$	43,074
Cost of revenue—solar energy system and product sales		18,990		(4,397	)		14,593		15,791
Total cost of revenue		60,356		(8,907	)		51,449		58,865
Gross profit		20,442		8,907			29,349		31,892
Sales and marketing		14,033		8,907			22,940		37,037
Total operating expenses		36,553		8,907			45,460		68,766

	Six Months Ended June 30,
	2018							2019
	As Reported		Adjustments			As Adjusted		As Reported
Cost of revenue—customer agreements and incentives	$	80,053	$	(8,590	)	$	71,463	$	83,265
Cost of revenue—solar energy system and product sales		45,035		(10,254	)		34,781		33,054
Total cost of revenue		125,088		(18,844	)		106,244		116,319
Gross profit		23,960		18,844			42,804		43,809
Sales and marketing		25,158		18,844			44,002		66,671
Total operating expenses		68,151		18,844			86,995		121,918

Software Implementation Costs

The Company adopted ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, effective January 1, 2019.This update clarifies that entities should capitalize implementation costs incurred in cloud computing arrangements that are service contracts, which the Company will now record within other non-current assets, net. The Company will expense the capitalized costs over the term of the hosting arrangement. The service element of a hosting arrangement that is a service contract is not affected by this update, meaning service costs will continue to be expensed as incurred. The Company is applying the amendments in this update on a prospective basis beginning January 1, 2019. No prior periods were impacted as a result of adopting this ASU.

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Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The objective of this update is to provide users of financial statements with more useful information by changing the incurred loss methodology for recognizing credit losses to a more forward-looking methodology that reflects expected credit losses. Under this ASU, the Company’s accounts receivable and certain contract assets are considered financial assets measured at an amortized cost basis and will need to be presented at the net amount expected to be collected. This ASU will be effective for the Company beginning on January 1, 2020 and will be applied through a modified retrospective approach with a cumulative-effect adjustment to retained earnings as of the first reporting period in which the guidance is effective. The Company is still evaluating the impact of this update on its condensed consolidated financial statements and related disclosures.

3. Fair Value Measurements

The Company measures and reports its cash equivalents at fair value. The following tables set forth the fair value of the Company’s financial assets and liabilities included on the condensed consolidated balance sheets measured on a recurring basis by level within the fair value hierarchy (in thousands):

	June 30, 2019
	Level 1		Level 2		Level 3		Total
Financial Liabilities
Interest rate swaps	$	—	$	29,833	$	—	$	29,833
	December 31, 2018
	Level 1		Level 2		Level 3		Total
Financial Assets
Interest rate swaps	$	—	$	130	$	—	$	130
Financial Liabilities
Interest rate swaps	$	—	$	11,146	$	—	$	11,146

The interest rate swaps (Level 2) were valued using a discounted cash flow model that incorporates an assessment of the risk of non-performance by the interest rate swap counterparties and the Company. The valuation model uses various observable inputs including contractual terms, interest rate curves, credit spreads and measures of volatility. Financial liabilities in the table above include interest rate swaps for the Aggregation Facility, which are not designated as hedges, and interest rate swaps for the Solar Asset Backed Notes, Series 2018-2, which are designated as hedges.

The carrying values and fair values of the Company’s long-term debt were as follows (in thousands):

	June 30, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Floating-rate long-term debt	$	712,071	$	712,071	$	587,358	$	587,358
Fixed-rate long-term debt		640,569		684,695		653,031		673,917
Total	$	1,352,640	$	1,396,766	$	1,240,389	$	1,261,275

The Company’s outstanding principal balance of long-term debt is carried at cost. The Company estimated the fair values of its floating-rate debt facilities (Level 2) to approximate their carrying values as interest accrues at floating rates based on market rates. The Company’s fixed-rate debt facilities (Level 2) were valued using quoted prices for the fixed rate debt facilities that are publicly traded, or quoted prices for corporate debt with similar terms for debt facilities that are not publicly traded.

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4. Inventories

Inventories consisted of the following (in thousands):

	June 30,		December 31,
	2019		2018
Solar energy systems held for sale	$	12,202	$	12,321
Photovoltaic installation products		869		936
Total inventories	$	13,071	$	13,257

Solar energy systems held for sale are solar energy systems under construction that have yet to be interconnected to the power grid and that will be sold to customers. Solar energy systems held for sale are stated at the lower of cost, on a first-in, first-out basis, or net realizable value. Photovoltaic installation products are stated at the lower of cost, on an average cost basis, or net realizable value.

5. Solar Energy Systems

Solar energy systems, net consisted of the following (in thousands):

	June 30,			December 31,
	2019			2018
System equipment costs	$	1,783,301		$	1,667,440
Initial direct costs related to solar energy systems		—			435,084
		1,783,301			2,102,524
Less: Accumulated depreciation		(175,784	)		(195,890	)
		1,607,517			1,906,634
Solar energy system inventory		30,388			32,240
Solar energy systems, net	$	1,637,905		$	1,938,874

Solar energy system inventory represents the solar components and materials used in the installation of solar energy systems prior to being installed on customers’ roofs. As such, no depreciation is recorded related to this line item. The Company recorded depreciation expense related to solar energy systems of $13.8 million and $16.1 million for the three months ended June 30, 2019 and 2018. The Company recorded depreciation expense related to solar energy systems of $26.9 million and $31.5 million for the six months ended June 30, 2019 and 2018. The Company did not record any initial direct costs or amortization of initial direct costs related to solar energy systems in 2019 due to the adoption of Topic 842. See Note 2—Summary of Significant Accounting Policies.

6. Property and Equipment

Property and equipment, net consisted of the following (in thousands):

	Estimated	June 30,			December 31,
	Useful Lives	2019			2018
Leasehold improvements	1-12 years	$	10,645		$	10,560
Furniture and computer and other equipment	3 years		4,278			3,816
Vehicles acquired under finance leases	3-5 years		4,876			6,907
			19,799			21,283
Less: Accumulated depreciation and amortization			(7,149	)		(10,553	)
Property and equipment, net		$	12,650		$	10,730

The Company recorded depreciation and amortization expense related to property and equipment of $0.9 million and $1.3 million for the three months ended June 30, 2019 and 2018. The Company recorded depreciation and amortization expense related to property and equipment of $1.0 million and $3.0 million for the six months ended June 30, 2019 and 2018.

Effective January 1, 2019, the Company adopted Topic 842. As part of the adoption, the Company reassessed all contracts existing at the adoption date. The Company determined that a number of vehicle leases that were previously classified as capital leases under Topic 840 were no longer classified as finance leases under Topic 842. This resulted in a reduction to the gross asset and accumulated depreciation and amortization balances related to vehicles and will result in lower depreciation and amortization expense related to property and equipment compared to prior periods.

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7. Other Non-Current Assets

Other non-current assets consisted of the following (in thousands):

	June 30,			December 31,
	2019			2018
Costs to obtain contracts	$	500,969		$	—
Accumulated amortization of costs to obtain contracts		(58,273	)		—
Operating lease right-of-use assets		39,620			—
Sales incentives		9,963			8,588
Other non-current assets		18,258			19,502
Total other non-current assets	$	510,537		$	28,090

The Company recorded amortization of costs to obtain contracts of $7.4 million and $11.3 million for the three and six months ended June 30, 2019. Costs to obtain contracts are amortized over the initial terms of customer contracts, which are typically 20 years.

8. Intangible Assets

Net intangible assets are included in other non-current assets, net and consisted of the following (in thousands):

	June 30,			December 31,
	2019			2018
Cost:
Internal-use software	$	635		$	1,020
Developed technology		522			522
Trademarks/trade names		201			201
Total carrying value		1,358			1,743
Accumulated amortization:
Internal-use software		(365	)		(781	)
Developed technology		(360	)		(324	)
Trademarks/trade names		(109	)		(99	)
Total accumulated amortization		(834	)		(1,204	)
Total intangible assets, net	$	524		$	539

The Company recorded a de minimis amount and $0.1 million of amortization expense for the three months ended June 30, 2019 and 2018, which is included within general and administrative expense on the condensed consolidated statements of operations. The Company recorded amortization expense of $0.1 million and $0.3 million for the six months ended June 30, 2019 and 2018.

9. Accrued Compensation

Accrued compensation consisted of the following (in thousands):

	June 30,		December 31,
	2019		2018
Accrued payroll	$	12,663	$	16,352
Accrued commissions		11,882		9,168
Total accrued compensation	$	24,545	$	25,520

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10. Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following (in thousands):

	June 30,		December 31,
	2019		2018
Accrued unused commitment fees and interest	$	14,517	$	14,102
Current portion of operating lease liabilities		7,398		—
Accrued professional fees		6,575		6,150
Current portion of lease pass-through financing obligation		5,094		5,038
Accrued workers' compensation		4,777		4,033
Workmanship accrual		3,596		2,630
Accrued inventory		3,286		4,380
Sales, use and property taxes payable		2,872		3,132
Other accrued expenses		5,442		3,395
Total accrued and other current liabilities	$	53,557	$	42,860

11. Debt Obligations

Debt obligations consisted of the following as of June 30, 2019 (in thousands, except interest rates):

	Principal		Unamortized Debt										Unused
	Borrowings		Issuance Costs						Net Carrying Value				Borrowing		Interest			Maturity
	Outstanding		Current			Long-term			Current		Long-term		Capacity		Rate			Date
Solar asset backed notes, Series 2018-1(1)	$	454,100	$	(76	)	$	(8,796	)	$	3,919	$	441,309	$	—		5.1	%	October 2028
Solar asset backed notes, Series 2018-2(2)(3)		339,383		(6	)		(6,775	)		294		332,308		—		5.5		August 2023
2017 Term loan facility		185,194		(167	)		(4,429	)		6,740		173,858		—		6.0		January 2035
2018 Forward flow loan facility		112,501		(66	)		(3,231	)		2,174		107,030		17,499		4.7		(4)
2019 Forward flow loan facility		14,087		—			(2,946	)		—		11,141		135,913		5.2		(5)
Credit agreement		1,275		(2	)		(106	)		16		1,151		—		6.5		February 2023
Revolving lines of credit(6)
Aggregation facility		115,000		—			—			—		115,000		260,000		5.6		September 2020
Working capital facility(7)		131,100		—			—			131,100		—		—		5.7		March 2020
Total debt	$	1,352,640	$	(317	)	$	(26,283	)	$	144,243	$	1,181,797	$	413,412

Debt obligations consisted of the following as of December 31, 2018 (in thousands, except interest rates):

	Principal		Unamortized Debt										Unused
	Borrowings		Issuance Costs						Net Carrying Value				Borrowing		Interest			Maturity
	Outstanding		Current			Long-term			Current		Long-term		Capacity		Rate			Date
Solar asset backed notes, Series 2018-1(1)	$	462,826	$	(74	)	$	(9,172	)	$	3,655	$	449,925	$	—		5.1	%	October 2028
Solar asset backed notes, Series 2018-2(2)(3)		342,833		(6	)		(7,388	)		294		335,145		—		5.4		August 2023
2017 Term loan facility		188,922		(170	)		(4,614	)		6,679		177,459		—		6.0		January 2035
2018 Forward flow loan facility		58,425		(43	)		(3,365	)		1,512		53,505		71,575		5.2		(4)
Credit agreement		1,283		(2	)		(118	)		15		1,148		—		6.5		February 2023
Revolving lines of credit(6)
Aggregation facility		50,000		—			—			—		50,000		325,000		5.7		September 2020
Working capital facility(7)		136,100		—			—			—		136,100		—		5.6		March 2020
Total debt	$	1,240,389	$	(295	)	$	(24,657	)	$	12,155	$	1,203,282	$	396,575

(1) The interest rate disclosed in the table above is a weighted-average rate. The Series 2018-1 Notes are comprised of Class A and Class B Notes. Class A Notes accrue interest at 4.73%. Class B Notes accrue interest at 7.37%.

(2) The Series 2018-2 Notes are comprised of Class A and Class B Notes. Class B Notes accrue interest at a rate of LIBOR plus 4.75%. Class A Notes accrue interest at a variable spread over LIBOR that results in a weighted average spread for all 2018-2 Notes of 2.95%.

(3) The interest rate of these notes is partially hedged to an effective interest rate of 6.0% for $325.2 million of the principal borrowings. See Note 13—Derivative Financial Instruments.

(4) The maturity date for this facility is 20 years from the end date of the borrowing availability period when all borrowings are aggregated into one term loan, which will be no later than October 31, 2019.

(5) The maturity date for this facility is 20 years from the end date of the borrowing availability period when all borrowings are aggregated into one term loan, which will be no later than November 20, 2020.

(6) Revolving lines of credit are not presented net of unamortized debt issuance costs.

(7) This facility is recourse debt, which refers to debt that is collateralized by the Company’s general assets. All of the Company’s other debt obligations are non-recourse, which refers to debt that is only collateralized by specified assets or subsidiaries of the Company.

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The Company’s debt facilities include customary events of default, conditions to borrowing and covenants, including covenants that restrict, subject to certain exceptions, the Company’s ability to incur indebtedness, incur liens, make investments, make fundamental changes to its business, dispose of assets, make certain types of restricted payments or enter into certain related party transactions. Additionally, the Company is required to maintain certain financial measurements and interest rate swaps for certain debt facilities. These restrictions do not impact the Company’s ability to enter into investment funds, including those that are similar to those entered into previously. The Company’s debt facilities are secured by net cash flows from long-term customer contracts. The Company was in compliance with all debt covenants as of June 30, 2019.

Solar Asset Backed Notes, Series 2018-1

In June 2018, a wholly owned subsidiary of the Company issued an aggregate principal amount of $400.0 million of Solar Asset Backed Notes, Series 2018-1, Class A (the “2018-1 Class A Notes”) and an aggregate principal amount of $66.0 million of Solar Asset Backed Notes, Series 2018-1, Class B (the “2018-1 Class B Notes” and together with the 2018-1 Class A Notes, the “2018-1 Notes”). The 2018-1 Class A Notes accrue interest at a fixed rate of 4.73% and have an anticipated repayment date of October 30, 2028. The 2018-1 Class B Notes accrue interest at a fixed rate of 7.37% and have an anticipated repayment date of October 30, 2028.

In addition to customary events of default and covenants, the 2018-1 Notes are subject to unscheduled prepayment events that generally are customary in nature for solar securitizations of this type, including (1) asset coverage ratios falling below certain levels, (2) a debt service coverage ratio falling below certain levels, (3) the failure to maintain insurance, and (4) the failure to repay the notes in full prior to the anticipated repayment date for such class of notes. The occurrence of an unscheduled prepayment event or an event of default could result in the more rapid repayment of the 2018-1 Notes, and the occurrence of an event of default could, in certain instances, result in the liquidation of the collateral securing the 2018-1 Notes. The 2018-1 Notes are secured by, and payable solely from the cash flow generated by the membership interests in certain indirectly owned subsidiaries of the Company, each of which subsidiaries is the managing member of a project company that owns a pool of photovoltaic systems and related Solar Leases and PPAs and ancillary rights and agreements that were originated by a wholly owned subsidiary of the Company. As of June 30, 2019, the Company had $15.0 million in required reserves outstanding in collateral accounts with the administrative agent, which are included in restricted cash and cash equivalents.

Solar Asset Backed Notes, Series 2018-2

In June 2018, a wholly owned subsidiary of the Company issued an aggregate principal amount of $296.0 million of Solar Asset Backed Notes, Series 2018-2, Class A (the “2018-2 Class A Notes”) and an aggregate principal amount of $49.0 million of Solar Asset Backed Notes, Series 2018-2, Class B (the “2018-2 Class B Notes” and together with the 2018-2 Class A Notes, the “2018-2 Notes”). The 2018-2 Class A Notes accrue interest at a variable spread over the London Interbank Offered Rate (“LIBOR”) that is intended to result in a weighted average spread for all 2018-2 Notes of 2.95%. The 2018-2 Class B Notes accrue interest at a spread over LIBOR of 4.75% or, if no 2018-2 Class A Notes are outstanding, 2.95%. The Company entered into an interest rate swap concurrent with the issuance of the 2018-2 Notes that results in an implied all-in interest rate of approximately 5.95%. See Note 13—Derivative Financial Instruments. The 2018-2 Notes have a stated maturity of August 29, 2023.

The 2018-2 Notes have the same events of default, covenants and unscheduled prepayment events as the 2018-1 Notes. In addition, the 2018-2 Notes are subject to unscheduled prepayment events relating to certain change of control events and certain liquidity requirements. As of June 30, 2019, the Company had $24.7 million in required reserves outstanding in collateral accounts with the administrative agent, which are included in restricted cash and cash equivalents.

2016 Term Loan Facility

In June 2018, the Company used proceeds from the issuance of the 2018-1 Notes and 2018-2 Notes to pay off the outstanding balance of $282.3 million on the credit facility entered into by a wholly owned subsidiary of the Company in August 2016 (the “2016 Term Loan Facility”) and terminated the credit agreement. At termination, the outstanding balance was composed of $281.8 million of principal and $0.5 million of accrued interest. The termination of the 2016 Term Loan Facility was accounted for as a debt extinguishment. As such, the remaining $6.9 million of unamortized debt issuance costs related to the 2016 Term Loan Facility were recognized in interest expense during the year ended December 31, 2018. There was no prepayment fee associated with the termination of the 2016 Term Loan Facility.

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Subordinated HoldCo Facility

In June 2018, the Company used proceeds from the issuance of the 2018-1 Notes and 2018-2 Notes to pay off the outstanding balance of $206.4 million on the credit facility entered into by a wholly owned subsidiary of the Company in March 2016 (the “Subordinated HoldCo Facility”) and terminated the financing agreement. At termination, the outstanding balance was composed of $196.6 million of principal, $3.9 million of accrued interest, and a prepayment fee of $5.9 million, which was calculated as 3.0% of the outstanding principal balance. The termination of the Subordinated HoldCo Facility was accounted for as a debt extinguishment. As such, the remaining $2.9 million of unamortized debt issuance costs related to the Subordinated HoldCo Facility were recognized in interest expense during the year ended December 31, 2018. The prepayment fee of $5.9 million was also recognized in interest expense during the year ended December 31, 2018.

2017 Term Loan Facility

In January 2017, a wholly owned subsidiary of the Company entered into a long-term fixed rate credit agreement (the “2017 Term Loan Facility”). Interest on borrowings accrues at an annual fixed rate equal to 6.0% and is payable in arrears. Certain principal payments are due on a quarterly basis, subject to the occurrence of certain events. As of June 30, 2019, the Company had $19.9 million in required reserves outstanding in collateral accounts with the administrative agent, which were included in restricted cash and cash equivalents.

2018 Forward Flow Loan Facility

In August 2018, a subsidiary that is indirectly owned by the Company together with investors, entered into a loan agreement (the “2018 Forward Flow Loan Facility”, formerly known as the “Forward Flow Loan Facility”) pursuant to which the Company may borrow up to an aggregate principal amount of $130.0 million. The Company may make multiple borrowings under the 2018 Forward Flow Loan Facility during the availability period, which will continue no later than October 31, 2019. After the availability period, all outstanding loans under the 2018 Forward Flow Loan Facility will be aggregated into a single term loan with a maturity date 20 years after the date of aggregation. Interest on each loan will accrue at an annual rate equal to the U.S. swap rate for the weighted-average life of such loan, plus an applicable margin equal to the greater of (a) 1.9% plus a spread adjustment based on the risk premium on the borrowing date relative to the market index-based risk premium on the closing date and (b) 1.5%. Scheduled principal payments are due on a quarterly basis, at the end of January, April, July and October of each year. Upon the occurrence of certain events, the Company will be required to make prepayments of the loans, including payment of a make-whole amount in certain circumstances. As of June 30, 2019, the Company had $4.7 million in required reserves outstanding in collateral accounts with the administrative agent, which were included in restricted cash and cash equivalents.

2019 Forward Flow Loan Facility

In May 2019, a subsidiary that is indirectly owned by the Company together with investors, entered into a loan agreement (the “2019 Forward Flow Loan Facility”) pursuant to which the Company may borrow up to an aggregate principal amount of $150.0 million. The Company may make multiple borrowings under the 2019 Forward Flow Loan Facility during the availability period, which will continue no later than November 20, 2020. After the availability period, all outstanding loans under the 2019 Forward Flow Loan Facility will be aggregated into a single term loan with a maturity date 20 years after the date of aggregation. On any anniversary of the date of aggregation occurring from and after the sixth such anniversary, upon notice to the lenders, the Company may borrow additional loans under the 2019 Forward Flow Loan Facility if the Company is projected to have sufficient net cash flow to service such additional debt. If any lender declines to fund such additional loans, the Company will have the right to prepay outstanding loans from such lender in an amount equal to 102.5% of such loans, plus accrued and unpaid interest, without any make-whole amount. Interest on each loan will accrue at an annual rate equal to the greater of (a) 4.70% and (b) the U.S. Treasury rate for the weighted-average life of such loan, plus an applicable margin equal to 2.35%. Scheduled principal payments are due on a quarterly basis, at the end of January, April, July and October of each year. Upon the occurrence of certain events, the Company will be required to make prepayments of the loans, including payment of a make-whole amount in certain circumstances. As of June 30, 2019, the Company had $0.7 million in required reserves outstanding in collateral accounts with the administrative agent, which were included in restricted cash and cash equivalents.

Credit Agreement

In February 2016, a wholly owned subsidiary of the Company entered into a fixed rate credit agreement (the “Credit Agreement”). Principal and interest payments under the Credit Agreement are paid quarterly over the term of the loan. Interest accrues on borrowings at a fixed rate of 6.50%.

15

Aggregation Facility

In September 2014, a wholly owned subsidiary of the Company entered into an aggregation credit facility (as amended, the “Aggregation Facility”), pursuant to which the Company may borrow up to an aggregate of $375.0 million and, upon the satisfaction of certain conditions and the approval of the lenders, up to an additional aggregate of $175.0 million in borrowings. Prepayments are permitted under the Aggregation Facility. Under the Aggregation Facility, interest on borrowings accrues at a floating rate equal to either (1)(a) LIBOR or (b) the greatest of (i) the Federal Funds Rate plus 0.5%, (ii) the administrative agent’s prime rate and (iii) LIBOR plus 1% and (2) a margin that varies between 3.25% during the period during which the Company may incur borrowings and 3.75% after such period. As of June 30, 2019, the Company had $3.5 million in required reserves outstanding in collateral accounts with the administrative agent, which were included in restricted cash and cash equivalents.

Working Capital Facility

In March 2015, a wholly owned subsidiary of the Company entered into a revolving credit agreement (the “Working Capital Facility”) pursuant to which the Company may borrow up to an aggregate principal amount of $150.0 million from certain financial institutions. In addition to the outstanding borrowings as of June 30, 2019, the Company had established letters of credit under the Working Capital Facility for up to $18.9 million related to insurance and retail contracts. Prepayments are permitted under the Working Capital Facility. Interest accrues on borrowings at a floating rate equal to, depending on the type of borrowing, (1) a rate equal to the Eurodollar Rate for the interest period divided by one minus the Eurodollar Reserve Percentage, plus a margin of 3.25%; or (2) the highest of (a) the Federal Funds Rate plus 0.50%, (b) the Citibank prime rate and (c) the one-month interest period Eurodollar rate plus 1.00%, plus a margin of 2.25%. Interest is payable depending on the type of borrowing at the end of (1) the interest period that the Company may elect as a term, not to exceed three months, (2) quarterly or (3) at maturity of the Working Capital Facility. The Company is required to maintain $30.0 million in cash and cash equivalents and certain investments as of the last day of each quarter. As of June 30, 2019, the Company was in compliance with such covenants.

12. Leases

The Company is the lessee in all of its lease arrangements. The Company did not enter into any leases with related parties during the presented periods. The Company makes significant assumptions and judgments when assessing contracts for lease components, determining lease classifications and calculating right-of-use asset and lease liability values. These assumptions and judgements may include the useful lives and fair values of the leased assets, the implicit rate underlying the Company’s leases, the Company’s incremental borrowing rate or the Company’s intent to exercise or not exercise options available in lease contracts. Lease costs and other information consisted of the following (in thousands, except terms and rates):

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$	366		$	660
Interest on lease liabilities		58			84
Operating lease cost		2,770			5,540
Short-term lease cost		579			1,301
Total lease cost	$	3,773		$	7,585
Other information
Finance leases:
Operating cash outflows from finance leases	$	58		$	84
Financing cash outflows from finance leases	$	306		$	577
Right-of-use assets obtained in exchange for new finance lease liabilities	$	2,703		$	3,756
Weighted-average remaining lease term - finance leases (in years)		3.6			3.6
Weighted-average discount rate - finance leases		7.7	%		7.7	%
Operating leases:
Operating cash outflows from operating leases	$	2,809		$	5,635
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,755		$	8,665
Weighted-average remaining lease term - operating leases (in years)		9.4			9.4
Weighted-average discount rate - operating leases		8.0	%		8.0	%

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Finance Leases

The Company’s finance leases relate to fleet vehicles. All of the Company’s fleet vehicles are leased pursuant to master lease agreements for a period of three to five years. The master lease agreements allow for the Company to extend fleet vehicle leases on a month-to-month basis. For administrative convenience, the Company will often commit to extension periods of up to one year. As the extensions are not always utilized and are not contractually bound to a specific period of time, these extensions are not included in the initial right-of-use assets and lease liabilities. Instead, these extensions are treated as new leases. The master lease agreements stipulate minimum residual value guarantees that are not typically recognized as part of the Company’s right-of use assets and lease liabilities as these residual value guarantees are not probable of being owed. The rates implicit in the Company’s fleet vehicle finance leases are determinable, and the Company uses those rates to calculate the present value of its lease liabilities related to fleet vehicles.

Future minimum lease payments for the Company’s finance leases as of June 30, 2019 were as follows (in thousands):

2019	$	742
2020		1,171
2021		1,147
2022		1,038
2023		346
Thereafter		—
Total minimum lease payments		4,444
Less: interest		548
Present value of finance lease obligations		3,896
Less: current portion		1,089
Long-term portion	$	2,807

Operating Leases

The Company has entered into lease agreements for offices, warehouses and related equipment located in states in which the Company conducts operations. The Company’s corporate office lease was amended in February 2019 to extend the term by an additional three years, for a total lease term of 15 years. The corporate office lease includes options to extend the lease term for two additional periods of five years. The Company’s warehouse lease agreements range from a term of two to nine years, including exercised options to extend, with five years being the most common lease term. The warehouse lease agreements typically include options to extend the lease term. The Company’s operating lease agreements typically do not include purchase options. The Company includes lease extension options in the right-of-use asset and lease liability when the Company is reasonably certain it will exercise the options. The Company’s equipment lease agreements range from three to five years. The rates implicit in the Company’s operating leases are not readily determinable. As such, the Company uses its incremental borrowing rate to calculate the present value of its operating lease liabilities.

For all non-cancellable lease arrangements, there are no bargain renewal options, penalties for failure to renew, or any guarantee by the Company of the lessor’s debt or a loan from the Company to the lessor related to the leased property.

Future minimum lease payments under non-cancellable operating leases as of June 30, 2019 were as follows (in thousands):

2019	$	5,600
2020		10,195
2021		7,893
2022		5,806
2023		4,781
Thereafter		36,680
Total minimum lease payments		70,955
Less: present value impact		22,259
Present value of operating lease obligations		48,696
Less: current portion		7,398
Long-term portion	$	41,298

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13. Derivative Financial Instruments

Derivative financial instruments at fair value consisted of the following (in thousands):

	June 30, 2019
	Fair Value		Balance Sheet Location
Derivatives designated as hedging instruments:
Interest rate swaps	$	25,951	Other non-current liabilities
Derivatives not designated as hedging instruments:
Interest rate swaps	$	3,882	Other non-current liabilities

	December 31, 2018
	Fair Value		Balance Sheet Location
Derivatives designated as hedging instruments:
Interest rate swaps	$	9,884	Other non-current liabilities
Derivatives not designated as hedging instruments:
Interest rate swaps	$	1,262	Other non-current liabilities
Interest rate swaps	$	130	Other non-current assets

The Company is exposed to interest rate risk relating to its outstanding debt facilities that have variable interest rates. In connection with the March 2017 amendment of the Aggregation Facility, the Company is required to maintain interest rate swaps on a portion of the outstanding loan balance of the Aggregation Facility. As of June 30, 2019, the Company had entered into interest rate swaps with an aggregate notional amount of $40.0 million. The interest rate swaps terminate when the Aggregation Facility matures in September 2020. The Company did not designate these interest rate swaps as hedge instruments and accounts for any changes in fair value in other expense (income), net.

In connection with the 2018-2 Notes, the Company entered into interest rate swaps to offset changes in the variable interest rate for a portion of these notes. As of June 30, 2019, the notional amount of these interest rate swaps was $325.2 million. The notional amount of the interest rate swaps decreases through the maturity of the 2018-2 Notes, similar to the Company’s estimated semi-annual principal payments on the 2018-2 Notes through August 2023. The interest rate swaps are designated as cash flow hedges, and unrealized gains or losses are recorded in other comprehensive income (“OCI”). The amount of accumulated other comprehensive (loss) income (“AOCI”) expected to be reclassified to interest expense within the next 12 months is approximately $3.3 million. The Company will discontinue the hedge accounting designation of these derivatives if interest payments on LIBOR-indexed floating rate loans compared to the payments under the derivatives are no longer highly effective.

The Company records derivatives at fair value. The losses (gains) on derivatives designated as cash flow hedges recognized in OCI, before tax effect, consisted of the following (in thousands):

	Three Months Ended June 30,
	2019		2018
Derivatives designated as cash flow hedges:
Interest rate swaps	$	9,967	$	825

	Six Months Ended June 30,
	2019		2018
Derivatives designated as cash flow hedges:
Interest rate swaps	$	16,627	$	(4,318	)

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The losses (gains) on derivative financial instruments recognized in the condensed consolidated statements of operations, before tax effect, consisted of the following (in thousands):

	Three Months Ended June 30,
	2019				2018
	Interest expense, net		Other expense (income), net		Interest expense, net			Other expense (income), net
Total amounts presented in the income statement line items	$	19,472	$	1,365	$	11,336		$	(4,109	)
Derivatives designated as cash flow hedges:
Interest rate swaps
Losses (gains) reclassified from AOCI into income	$	238	$	—	$	(22,335	)	$	—
Derivatives not designated as hedging instruments:
Interest rate swaps
Losses (gains) recognized in income		—		1,366		—			(1,990	)
Total losses (gains)	$	238	$	1,366	$	(22,335	)	$	(1,990	)

	Six Months Ended June 30,
	2019				2018
	Interest expense, net		Other expense (income), net		Interest expense, net			Other expense (income), net
Total amounts presented in the income statement line items	$	38,599	$	2,750	$	28,258		$	(6,370	)
Derivatives designated as cash flow hedges:
Interest rate swaps
Losses (gains) reclassified from AOCI into income	$	560	$	—	$	(22,716	)	$	—
Derivatives not designated as hedging instruments:
Interest rate swaps
Losses (gains) recognized in income		—		2,750		—			(4,252	)
Total losses (gains)	$	560	$	2,750	$	(22,716	)	$	(4,252	)

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14. Investment Funds

The Company has formed investment funds for the purpose of funding the purchase of solar energy systems under long-term customer contracts. As of June 30, 2019 and December 31, 2018, the aggregate carrying value of these funds’ assets and liabilities (after elimination of intercompany transactions and balances) in the Company’s condensed consolidated balance sheets were as follows (in thousands):

	June 30,		December 31,
	2019		2018
Assets
Current assets:
Cash and cash equivalents	$	105,175	$	62,350
Accounts receivable, net		19,082		6,593
Prepaid expenses and other current assets		2,291		1,289
Total current assets		126,548		70,232
Restricted cash and cash equivalents		5,405		2,443
Solar energy systems, net		1,478,530		1,752,271
Other non-current assets, net		410,322		10,888
Total assets	$	2,020,805	$	1,835,834
Liabilities
Current liabilities:
Distributions payable to non-controlling interests and redeemable    non-controlling interests	$	11,221	$	7,846
Current portion of long-term debt		2,174		1,512
Current portion of deferred revenue		2,328		2,320
Accrued and other current liabilities		5,529		4,860
Total current liabilities		21,252		16,538
Long-term debt, net of current portion		118,171		53,505
Deferred revenue, net of current portion		10,980		9,694
Other non-current liabilities		745		1,023
Total liabilities	$	151,148	$	80,760

Under the fund agreements, cash distributions of income and other receipts by the funds, net of agreed-upon expenses and estimated expenses, tax benefits and detriments of income and loss, and tax benefits of tax credits, are assigned to the fund investors and the Company’s subsidiaries as specified in contractual arrangements. As such, the cash held in investment funds is not readily available to the Company due to the timing of distributions. Certain of these fund arrangements have call and put options to acquire the investor’s equity interest as specified in the contractual agreements. Once the investor’s equity interest is acquired by the Company, the assets, liabilities and operations of the investment fund become wholly owned and no longer require an assessment of non-controlling interests.

Fund investors for three of the funds are managed indirectly by The Blackstone Group L.P. (the “Sponsor”) and are considered related parties. As of June 30, 2019 and December 31, 2018, the cumulative total of contributions into the VIEs by all investors was $1,725.0 million and $1,565.3 million. Of these contributions, a cumulative total of $110.0 million was contributed by related parties in prior periods. A third-party provider has agreed to perform backup maintenance services for all funds, if necessary.

Lease Pass-Through Financing Obligation

During 2015, a wholly owned subsidiary of the Company entered into a lease pass-through fund arrangement under which the Company contributed solar energy systems and the investor contributed cash. The net carrying value of the related solar energy systems was $44.8 million and $55.8 million as of June 30, 2019 and December 31, 2018.

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The Company accounts for the residual of the large upfront payments, net of amounts allocated to the ITCs, and subsequent periodic payments received from the fund investor as a borrowing by recording the proceeds received as a lease pass-through financing obligation, which will be repaid through customer payments that will be received by the investor. Under this approach, the Company continues to account for the arrangement with the customers in its condensed consolidated financial statements, whether the cash generated from the customer arrangements is received by the Company’s wholly owned subsidiary or paid directly to the fund investor. A portion of the amounts received by the fund investor from customer payments is applied to reduce the lease pass-through financing obligation, and the balance is allocated to interest expense. The customer payments are recognized into revenue based on cash receipts during the period as required by GAAP. Interest is calculated on the lease pass-through financing obligation using the effective interest rate method. The effective interest rate is the interest rate that equates the present value of the cash amounts to be received by a fund investor over the master lease term with the present value of the cash amounts paid by the investor to the Company, adjusted for any payments made by the Company. Any additional master lease prepayments by the investor would be recorded as an additional lease pass-through financing obligation, while any refunds of master lease prepayments would reduce the lease pass-through financing obligation.

The lease pass-through financing obligation is nonrecourse. As of June 30, 2019 and December 31, 2018, the Company had recorded financing liabilities of $5.1 million and $5.3 million related to this fund arrangement, which represent the lease pass-through financing obligation recorded in other liabilities.

Guarantees

With respect to the investment funds, the Company and the fund investors have entered into guaranty agreements under which the Company guarantees the performance of certain financial obligations of its subsidiaries to the investment funds. These guarantees do not result in the Company being required to make payments to the fund investors unless such payments are mandated by the investment fund governing documents and the investment fund fails to make such payment. Each of the Company’s investment funds and financing subsidiaries maintains separate books and records from each other and from the Company. The assets of each investment fund are not available to satisfy the debts or obligations of any other investment fund, subsidiary or the Company.

The Company is contractually obligated to make certain VIE investors whole for losses that the investors may suffer in certain limited circumstances resulting from the disallowance or recapture of ITCs. The Company has concluded that the likelihood of a significant recapture event is remote and consequently has not recorded any liability in the condensed consolidated financial statements for any potential recapture exposure. The maximum potential future payments that the Company could have to make under this obligation would depend on the Internal Revenue Service (“IRS”) successfully asserting upon audit that the fair market values of the solar energy systems sold or transferred to the funds as determined by the Company exceeded the allowable basis for the systems for purposes of claiming ITCs. The fair market values of the solar energy systems and related ITCs are determined and the ITCs are allocated to the fund investors in accordance with the funds’ governing agreements. Due to uncertainties associated with estimating the timing and amounts of distributions, the likelihood of an event that may trigger repayment, forfeiture or recapture of ITCs to such investors, and the fact that the Company cannot determine how the IRS will evaluate system values used in claiming ITCs, the Company cannot determine the potential maximum future payments that are required under these guarantees. As of June 30, 2019, the Company has not made any payments under these guarantees. However, several recent investment funds, the 2018-1 Notes and the 2018-2 Notes have required the Company to prepay insurance premiums to cover the risk of ITC recapture. The Company amortizes this prepaid insurance expense over the ITC recapture period. The Company had prepaid insurance balances of $8.1 million and $8.3 million as of June 30, 2019 and December 31, 2018.

From time to time, the Company incurs fees for non-performance, which non-performance may include, but is not limited to, delays in the installation process and interconnection to the power grid of solar energy systems and other factors. Based on the terms of the investment fund agreements, the Company will either reimburse a portion of the fund investor’s capital or pay the fund investor a non-performance fee. No distributions were paid to reimburse fund investors during the three and six months ended June 30, 2019. As of June 30, 2019, no accrual for additional distributions was required.

As a result of the guaranty arrangements in certain funds, the Company was required to hold a minimum cash balance of $10.0 million as of June 30, 2019 and December 31, 2018, which is classified as restricted cash and cash equivalents.

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15. Redeemable Non-Controlling Interests and Equity

Common Stock

The Company had shares of common stock reserved for issuance as follows (in thousands):

	June 30,		December 31,
	2019		2018
Shares available for grant under equity incentive plans		13,544		13,323
Restricted stock units issued and outstanding		7,284		6,172
Stock options issued and outstanding		5,373		3,394
Long-term incentive plan		2,706		2,706
Total		28,907		25,595

Redeemable Non-Controlling Interests and Non-Controlling Interests

Seven of the investment funds include a right for the non-controlling interest holder to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund (each, a “Put Option”). The purchase price for the fund investor’s interest in the seven investment funds under the Put Options is the greater of fair market value at the time the option is exercised and a specified amount, ranging from $2.1 million to $4.1 million. The Put Options for these seven investment funds are exercisable beginning on the date that specified conditions are met for each respective fund. The first of the Put Options are expected to become exercisable beginning in the second quarter of 2021.

Because the Put Options represent redemption features that are not solely within the control of the Company, the non-controlling interests in these investment funds are presented outside of permanent equity. Redeemable non-controlling interests are recorded using the greater of their carrying value at each reporting date (which is impacted by attribution under the hypothetical liquidation at book value (“HLBV”) method) or their estimated redemption value in each reporting period.

In all investment funds except one, the Company’s wholly owned subsidiary has the right to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary (each, a “Call Option”). The purchase price for the fund investors’ interests under the Call Options varies by fund, but is generally the greater of a specified amount, which ranges from approximately $1.2 million to $7.0 million, the fair market value of such interest at the time the option is exercised, or an amount that causes the fund investor to achieve a specified return on investment. The Call Options are exercisable beginning on the date that specified conditions are met for each respective fund. The first of the Call Options are expected to become exercisable beginning in the third quarter of 2020.

16. Equity Compensation Plans

Equity Incentive Plans

2014 Equity Incentive Plan

The Company currently grants equity awards through its 2014 Equity Incentive Plan (the “2014 Plan”). Under the 2014 Plan, the Company may grant stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights, performance stock units, performance shares and performance awards to its employees, directors and consultants, and its parent and subsidiary corporations’ employees and consultants.

As of June 30, 2019, a total of 13.5 million shares of common stock were available to grant under the 2014 Plan, subject to adjustment in the case of certain events. The number of shares available to grant under the 2014 Plan is subject to an annual increase on the first day of each year. In accordance with the annual increase, an additional 4.8 million shares became available to grant in January 2019 under the 2014 Plan.

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Stock Options

Stock Option Activity

Stock option activity for the six months ended June 30, 2019 was as follows (in thousands, except term and per share amounts):

						Weighted-
				Weighted-		Average
	Shares			Average		Remaining		Aggregate
	Underlying			Exercise		Contractual		Intrinsic
	Options			Price		Term (in years)		Value
Outstanding—December 31, 2018		3,394		$	2.77			$	4,689
Granted		2,101			5.06
Exercised		(122	)		2.21
Cancelled		—			—
Outstanding—June 30, 2019		5,373		$	3.68		7.8	$	19,888
Options vested and exercisable—June 30, 2019		2,143		$	2.30		5.7	$	11,142

RSUs

RSU activity for the six months ended June 30, 2019 was as follows (awards in thousands):

				Weighted-
				Average
	Number of			Grant Date
	Awards			Fair Value
Outstanding at December 31, 2018		6,172		$	3.84
Granted		2,666			5.74
Vested		(1,370	)		3.85
Forfeited		(184	)		4.07
Outstanding at June 30, 2019		7,284		$	4.53

Stock-Based Compensation Expense

Stock-based compensation was included in operating expenses as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Cost of revenue	$	404	$	349	$	736	$	623
Sales and marketing		806		1,083		1,541		1,914
General and administrative		2,915		2,349		5,499		4,169
Research and development		31		31		59		75
Total stock-based compensation	$	4,156	$	3,812	$	7,835	$	6,781

Unrecognized stock-based compensation expense for RSUs and stock options as of June 30, 2019 was as follows (in thousands, except years):

	Unrecognized		Weighted-
	Stock-Based		Average Period
	Compensation		of Recognition
	Expense		(in years)
RSUs	$	23,806		1.9
Stock options		6,996		2.2
Total unrecognized stock-based compensation expense	$	30,802

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17. Income Taxes

The income tax expense for the three months ended June 30, 2019 and 2018 was calculated on a discrete basis resulting in a consolidated quarterly effective income tax rate of (51.9)% and (151.5)%. For the six months ended June 30, 2019 and 2018 the Company’s consolidated effective income tax rate was (48.1)% and (81.7)% .The variations between the consolidated effective income tax rate and the U.S. federal statutory rate for the three and six months ended June 30, 2019 and 2018 were primarily attributable to the tax gains recognized on the sale of solar energy systems to investment funds and non-controlling interests and redeemable non-controlling interests.

The Company sells solar energy systems to its investment funds for income tax purposes. As the investment funds are consolidated by the Company, the gain on the sale of the solar energy systems is eliminated in the condensed consolidated financial statements. However, this gain is recognized for tax reporting purposes. The Company accounts for the income tax consequences of these intra-entity transfers as a component of income tax expense during the period in which the transfers occur.

18. Related Party Transactions

The Company’s condensed consolidated statements of operations included related party transactions of $0.2 million and $0.6 million within sales and marketing for the three months ended June 30, 2019 and 2018. The Company’s condensed consolidated statements of operations included related party transactions of $1.0 million and $1.3 million within sales and marketing for the six months ended June 30, 2019 and 2018.

Vivint Services

The Company has negotiated and entered into a number of agreements with its sister company, Vivint, Inc. (“Vivint”). In August 2017, the Company entered into a sales dealer agreement with Vivint, pursuant to which each company will act as a non-exclusive dealer for the other party to market, promote and sell each other’s products. The agreement has an initial term of two years and replaces substantially all of the activities being undertaken under the parties’ former marketing and customer relations agreement. The Company and Vivint also agreed to extend the term of the non-solicitation provisions under an existing non-competition agreement to match the term of the sales dealer agreement.

The Company incurred fees under agreements with Vivint of $3.8 million and $4.3 million for the three months ended June 30, 2019 and 2018. These amounts reflect the level of services provided by Vivint on behalf of the Company. The Company incurred fees under these agreements of $6.2 million and $5.3 million for the six months ended June 30, 2019 and 2018.

Payables to Vivint recorded in accounts payable were $0.5 million and $0.2 million as of June 30, 2019 and December 31, 2018. These payables include amounts due to Vivint related primarily to the sales dealer agreement.

Advances Receivable—Related Party

Net amounts due from direct-sales personnel were $4.9 million and $5.2 million as of June 30, 2019 and December 31, 2018. The Company provided a reserve of $1.0 million and $0.9 million as of June 30, 2019 and December 31, 2018 related to advances to direct-sales personnel who have terminated their employment agreement with the Company.

Investment Funds

Fund investors for three of the investment funds are indirectly managed by the Sponsor and accordingly are considered related parties. The Company accrued equity distributions to these entities of $1.6 million and $1.5 million as of June 30, 2019 and December 31, 2018, included in distributions payable to non-controlling and redeemable non-controlling interests. See Note 14—Investment Funds.

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19. Commitments and Contingencies

Non-Cancellable Operating Leases

See Note 12—Leases for details regarding the Company’s lease arrangements.

Letters of Credit

As of June 30, 2019, the Company had established letters of credit under the Working Capital Facility for up to $18.9 million related to insurance and retail contracts.

Indemnification Obligations

From time to time, the Company enters into contracts that contingently require it to indemnify parties against claims. These contracts primarily relate to provisions in the Company’s services agreements with related parties that may require the Company to indemnify the related parties against services rendered; and certain agreements with the Company’s officers and directors under which the Company may be required to indemnify such persons for liabilities. In addition, under the terms of the agreements related to the Company’s investment funds and other material contracts, the Company may also be required to indemnify fund investors and other third parties for liabilities. For further information see Note 14—Investment Funds.

Residual Commission Payments

The Company pays a portion of sales commissions to its sales representatives on a deferred basis. The amount deferred is based on the value of the system sold by the sales representative and payment is based on the sales representative remaining employed by the Company. As this amount is earned over time, it is not considered an incremental cost of obtaining the contract due to the requirement that the sales representative remain in the Company’s service. As a result, the amount that is earned over time is expensed by the Company over the deferment period. As of June 30, 2019, the total estimated obligation that is currently not recorded in the Company’s condensed consolidated financial statements, but that will be earned and expensed over the deferment period was $17.9 million.

Legal Proceedings

In March 2016, the Company filed suit in the Court of Chancery State of Delaware against SunEdison and SEV Merger Sub Inc. alleging that SunEdison willfully breached its obligations under the Merger Agreement pursuant to which the Company was to be acquired and breached its implied covenant of good faith and fair dealing. In April 2016, SunEdison filed for Chapter 11 bankruptcy, which stayed prosecution of the Company’s litigation in the Delaware court. In September 2016, the Company submitted a proof of claim in the bankruptcy case for an unsecured claim in the initial amount of $1.0 billion, which was subject to dispute, for damages for breach of the Merger Agreement. In April 2018, the Company reached a settlement with the litigation trustee in the bankruptcy case under which the Company’s claim will be allowed in the amount of $590.0 million. This settlement resolves both the lawsuit in the Delaware Chancery Court and the dispute about the amount of the Company’s unsecured creditor claim in the bankruptcy. In April 2018, the Company received an initial distribution of $2.1 million and expects to receive further distributions as assets are distributed to unsecured creditors under the court-approved plan of reorganization in the SunEdison bankruptcy case. While the exact amount to be distributed for this claim is unknown at this time, the payout is expected to be a small fraction of the $590.0 million claim.

In February 2018, two former employees, on behalf of themselves and a purported class, named the Company in a putative class action alleging that the Company misclassified those employees and violated other wage and hour laws. The complaint seeks unspecified damages and statutory penalties for the alleged violations. The Company disputes the allegations and has retained counsel to defend it in the litigation. If an unfavorable outcome were to occur in this case, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

In March 2018, the New Mexico Attorney General’s office filed an action against the Company and several of its officers alleging violation of state consumer protection statutes and other claims. The Company disputes the allegations in the lawsuit and intends to defend itself in the action. The Company is unable to estimate a range of loss, if any, were there to be an adverse final decision. If an unfavorable outcome were to occur in this case, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

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In July 2018, an individual filed a putative class action lawsuit in the U.S. District Court for the District of Columbia, purportedly on behalf of himself and other persons who received certain telephone calls. The lawsuit alleges that the Company violated the Telephone Consumer Protection Act and some of its implementing regulations. The complaint seeks statutory penalties for each alleged violation. The Company disputes the allegations in the complaint, has retained counsel and intends to vigorously defend itself in the litigation. The Company is unable to estimate the amount or range of potential loss, if any, at this time. If an unfavorable outcome were to occur in this case, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

In October 2018, a former employee filed a representative action pursuant to California’s Private Attorneys General Act alleging that the Company violated California labor and employment laws by, among other things, failing to provide its employees with rest and meal breaks. The Company disputes the allegations in the complaint and has retained counsel to represent it in the litigation. The Company is unable to estimate a range of loss, if any, at this time. If an unfavorable outcome were to occur in the case, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

In October 2018, a former sales representative filed a representative action pursuant to California’s Private Attorneys General Act alleging that the Company violated California labor and employment laws by, among other things, failing to properly compensate its direct sellers and reimburse them for business expenses. The Company disputes the allegations in the complaint. The Company is unable to estimate a range of loss, if any, at this time. If an unfavorable outcome were to occur in the case, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

In addition to the matters discussed above, in the normal course of business, the Company has from time to time been named as a party to various legal claims, actions and complaints. While the outcome of these matters cannot be predicted with certainty, the Company does not currently believe that the outcome of any of these claims will have a material adverse effect, individually or in the aggregate, on its consolidated financial position, results of operations or cash flows.

The Company accrues for losses that are probable and can be reasonably estimated. The Company evaluates the adequacy of its legal reserves based on its assessment of many factors, including interpretations of the law and assumptions about the future outcome of each case based on available information.

20. Basic and Diluted Net Loss Per Share

The following table sets forth the computation of the Company’s basic and diluted net loss attributable per share to common stockholders for three and six months ended June 30, 2019 and 2018 (in thousands, except per share amounts):  

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
Numerator:
Net (loss attributable) income available to common stockholders	$	(28,567	)	$	18,116	$	(54,809	)	$	5,140
Denominator:
Shares used in computing net (loss attributable) income available    per share to common stockholders, basic		120,869			116,650		120,589			115,907
Weighted-average effect of potentially dilutive shares to    purchase common stock		—			5,103		—			5,062
Shares used in computing net (loss attributable) income available    per share to common stockholders, diluted		120,869			121,753		120,589			120,969
Net (loss attributable) income available per share to common    stockholders:
Basic	$	(0.24	)	$	0.16	$	(0.45	)	$	0.04
Diluted	$	(0.24	)	$	0.15	$	(0.45	)	$	0.04

For the three and six months ended June 30, 2019, the Company incurred net losses attributable to common stockholders. As such, the potentially dilutive shares were anti-dilutive and were not considered in the weighted-average number of common shares outstanding for either period. For the three and six months ended June 30, 2018, 1.5 million shares in each period were excluded from the dilutive share calculations as the effect on net income per share would have been anti-dilutive.

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21. Subsequent Events

Revolving Warehouse Facility and Termination of the Aggregation Facility

In August 2019, a wholly owned subsidiary of the Company entered into a floating rate revolving warehouse facility (the “Warehouse Facility”) pursuant to which it may borrow up to an aggregate principal amount of $325.0 million, expandable up to $400.0 million, from certain financial institutions for which Bank of America, N.A. is acting as administrative agent and collateral agent. The Aggregation Facility was terminated concurrently with the execution of the Warehouse Facility, and $121.4 million of proceeds from the Warehouse Facility were used, among other things, to pay off the outstanding principal and interest under the Aggregation Facility and to settle related interest rate swaps.

During the period in which the Company may make borrowings under the Warehouse Facility, interest on borrowings accrues at an annual rate equal to the applicable adjusted LIBOR rate plus 2.375%. Thereafter, interest will accrue at an annual rate equal to the applicable adjusted LIBOR rate plus 3.375%. In addition, the Company is required to enter into interest rate hedging arrangements such that not less than 90% of the aggregate expected amortization profile of all outstanding revolving advances is subject to a fixed interest rate or other interest rate protection. Initially, subject to the terms of the Warehouse Facility, only interest payments are due on a quarterly basis, through the availability period, and then certain principal and interest payments may be due. These payments will occur on the 15^th of January, April, July and October of each year, subject to the occurrence of certain events, including a borrowing base deficiency and dispositions with respect to any of the collateral. Principal and interest payable under the Warehouse Facility mature in four years and optional prepayments, in whole or in part, are permitted under the Warehouse Facility no more than once per month, without premium or penalty apart from any customary LIBOR breakage provisions.

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

Forward-Looking Statements

This section should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part 1, Item 1 of this report. This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” “seek” and other similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements.

These forward-looking statements include, but are not limited to:

• federal, state and local regulations and policies governing the electric utility industry;

• the regulatory regime for our offerings and for third-party owned solar energy systems;

• technical limitations imposed by operators of the power grid;

• the continuation of rebates, tax credits and incentives, including changes to the rates of the U.S. federal investment tax credit, or ITC, beginning in 2020;

• the price of utility-generated electricity and electricity from other sources;

• our ability to finance the installation of solar energy systems;

• our ability to efficiently install and interconnect solar energy systems to the power grid;

• our ability to manage growth, product offering mix and costs;

• our ability to further penetrate existing markets and expand into new markets;

• our ability to develop new product offerings and distribution channels;

• our relationship with our sister company Vivint, Inc., or Vivint, and The Blackstone Group L.P., our Sponsor;

• our ability to manage our supply chain;

• the cost of equipment and the residual value of solar panels after the expiration of our customer contracts;

• the course and outcome of litigation and other disputes; and

• our ability to maintain our brand and protect our intellectual property.

In combination with the risk factors we have identified, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Further, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all, or as predictions of future events. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Overview

We offer distributed solar energy — electricity generated by a solar energy system installed at or near customers’ locations — to residential customers primarily through a customer-focused and neighborhood-driven direct-to-home sales model. We believe we are disrupting the traditional electricity market by satisfying customers’ demand for increased energy independence and less expensive, more socially responsible electricity generation. As a result, we primarily compete with traditional utilities in the markets we serve, and our strategy is to price the energy we sell below prevailing retail electricity rates. The price our customers pay to buy energy from us varies depending on the state where the customer is located, the impact of the local traditional utility, customer price sensitivity, the availability of incentives and rebates, the need to offer a compelling financial benefit and the price other solar energy companies charge in the region. We also compete with distributed solar energy system providers for solar energy system sales on the basis of price, service and availability of financing options.

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Our primary product offering includes the following:

• Power Purchase Agreements. Under power purchase agreements, or PPAs, we charge customers a fee per kilowatt hour based on the electricity production of the solar energy system, which is billed monthly. PPAs typically have a term of 20 years and are subject to an annual price escalator of 2.9%. Over the term of the PPA, we operate the system and agree to maintain it in good condition. Customers who buy energy from us under PPAs are covered by our workmanship warranty equal to the length of the term of these agreements.

• Legal-form Leases. Under legal-form leases, or Solar Leases, we charge customers a fixed monthly payment to lease the solar energy system, which is based on a calculation that accounts for expected solar energy generation. Solar Leases typically have a term of 20 years and are typically subject to an annual price escalator of 2.9%, though some markets offer Solar Leases with no annual price escalator. We provide our Solar Lease customers a performance guarantee under which we agree to refund certain payments to the customer if the solar energy system does not meet the guaranteed production level in the prior 12-month period. Over the term of the Solar Lease, we operate the system and agree to maintain it in good condition, and in some markets we offer to install a battery storage system along with the solar energy system. Customers who lease equipment from us under Solar Leases are covered by our workmanship warranty equal to the length of the term of these agreements.

• Solar Energy System Sales. Under solar energy system sales, or System Sales, we offer our customers the option to purchase solar energy systems for cash or through third-party financing. The price for these contracts is determined as a function of the respective market rate and the size of the solar energy system to be installed. Customers can additionally contract with us for certain structural upgrades, smart home products, battery storage systems, electric vehicle charging stations and other accessories in connection with the installation of a solar energy system based on the market where they are located. We believe System Sales are advantageous to us as they provide immediate access to cash.

Of the 101.6 megawatts installed in the six months ended June 30, 2019, approximately 70% were installed under PPAs, 15% were installed under System Sales and 15% were installed under Solar Leases. We will continue to maximize the value of the solar energy systems we install as well as continue to evaluate pricing to optimize our use of capital based on market conditions and utility rates.

Our ability to offer long-term customer contracts depends in part on our ability to finance the installation of the solar energy systems by co-investing or entering into lease arrangements with fund investors who value the resulting customer receivables and ITCs, accelerated tax depreciation and other incentives related to the solar energy systems primarily through structured investments known as “tax equity.” Tax equity investments are generally structured as non-recourse project financings known as investment funds. In the context of the distributed solar energy market, tax equity investors make an upfront advance payment to a sponsor through an investment fund in exchange for a share of the tax attributes and cash flows emanating from an underlying portfolio of solar energy systems. In these investment funds, the U.S. federal tax attributes offset taxes that otherwise would have been payable on the investors’ other operations. The terms and conditions of each investment fund vary significantly by investor and by fund. We continue to negotiate with financial investors to create additional investment funds.

In general, our investment funds have adopted the partnership or inverted lease structures.Under partnership structures, we and our fund investors contribute cash into a partnership company. The partnership uses this cash to acquire solar energy systems developed by us and sells energy from such systems to customers or directly leases the solar energy systems to customers. Under our existing inverted lease structures, we and the fund investor set up a multi-tiered investment vehicle, comprised of two partnership entities, that facilitates the pass through of the tax benefits to the fund investors. In this structure, we contribute solar energy systems to a lessor partnership entity in exchange for interests in the lessor partnership and the fund investors contribute cash to a lessee partnership in exchange for interests in the lessee partnership which in turn makes an investment in the lessor partnership entity in exchange for interests in the lessor partnership. The lessor partnership distributes the cash contributions received from the lessee partnership to our wholly owned subsidiary that contributed the projects to the lessor partnership. The lessor partnership leases the contributed solar energy systems to the lessee partnership under a master lease, and the lessee partnership pays the lessor partnership rent for those systems.

We have determined that we are the primary beneficiary in these partnership and inverted lease structures for accounting purposes. Accordingly, we consolidate the assets and liabilities and operating results of these partnerships in our condensed consolidated financial statements. We recognize the fund investors’ share of the net assets of the investment funds as non-controlling interests and redeemable non-controlling interests in our condensed consolidated balance sheets. These income or loss allocations, reflected on our condensed consolidated statements of operations, may create significant volatility in our reported results of operations, including potentially changing net loss attributable to common stockholders from loss to income, or vice versa, from quarter to quarter.

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Substantially all of our solar energy systems installed through the date of this report have been eligible for ITCs. Pursuant to statute, the ITC rate is scheduled to decline for construction purposes beginning in 2020. If such reductions occur as scheduled, our ability to obtain tax equity may be reduced or be available on less advantageous terms. Furthermore, ITCs have historically supported our ability to provide attractive pricing to customers. If the ITCs are reduced as contemplated, demand for our solar energy systems and our operating results could be adversely affected if we are unable to offset the impact of such reductions.

Recent Developments

Refer to Note 21—Subsequent Events for details on recent developments.

Key Operating Metrics

We regularly review a number of metrics, including the following key operating metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. Some of our key operating metrics are estimates. These estimates are based on our management’s beliefs and assumptions and on information currently available to management. Although we believe that we have a reasonable basis for each of these estimates, these estimates are based on a combination of assumptions that may not prove to be accurate over time, particularly given that a number of them involve estimates of cash flows up to 30 years in the future. Underperformance of the solar energy systems, payment defaults by our customers, cancellation of signed contracts, competition from other distributed solar energy companies, development in the distributed solar energy market and the energy market more broadly, technical innovation or other factors described under the section of this report captioned “Risk Factors” could cause our actual results to differ materially from our calculations. Furthermore, while we believe we have calculated these key metrics in a manner consistent with those used by others in our industry, other companies may in fact calculate these metrics differently than we do now or in the future, which would reduce their usefulness as a comparative measure.

• Solar energy system installations. Solar energy system installations represents the number of solar energy systems installed on customers’ premises. Cumulative solar energy system installations represents the aggregate number of solar energy systems that have been installed on customers’ premises. We track the number of solar energy system installations as of the end of a given period as an indicator of our historical growth and as an indicator of our rate of growth from period to period.

• Megawatts installed. Megawatts installed represents the aggregate megawatt nameplate capacity of solar energy systems for which panels, inverters, and mounting and racking hardware have been installed on customers’ premises in the period. Cumulative megawatts installed represents the aggregate megawatt nameplate capacity of solar energy systems for which panels, inverters, and mounting and racking hardware have been installed on customers’ premises.

• Estimated nominal contracted payments remaining. Estimated nominal contracted payments remaining equals the sum of the remaining cash payments that our customers are expected to pay over the term of their PPAs or Solar Leases with us for systems installed as of the measurement date. For a PPA, we multiply the contract price per kilowatt-hour by the estimated annual energy output of the associated solar energy system to determine the estimated nominal contracted payments. For a Solar Lease, we include the monthly fees and upfront fee, if any, as set forth in the lease.

• Estimated gross retained value under energy contracts. Estimated gross retained value under energy contracts represents the estimated retained value from the solar energy systems during the typical 20-year term of our PPAs and Solar Leases plus the value of contracted solar renewable energy certificates, or SRECs.

• Estimated gross retained value of renewal. Estimated gross retained value of renewal represents the estimated retained value associated with an assumed 10-year renewal term following the expiration of the initial PPA or Solar Lease term. To calculate estimated retained value of renewal, we assume all PPAs and Solar Leases are renewed at 90% of the contractual price in effect at the expiration of the initial term.

• Estimated gross retained value. Estimated gross retained value represents the net cash flows discounted at 6% that we expect to receive from customers pursuant to PPAs and Solar Leases plus the value of contracted SRECS net of estimated cash distributions to fund investors, debt associated with our forward flow facilities and estimated operating expenses for systems installed as of the measurement date.

• Estimated gross retained value per watt. Estimated gross retained value per watt is calculated by dividing the estimated retained value as of the measurement date by the aggregate nameplate capacity of solar energy systems under PPAs and Solar Leases that have been installed as of such date and is subject to the same assumptions and uncertainties as estimated retained value.

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	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Solar energy system installations		8,163		6,678		14,677		12,491
Megawatts installed		56.0		47.0		101.6		87.4

	June 30,		December 31,
	2019		2018
Cumulative solar energy system installations		169,275		154,598
Cumulative megawatts installed		1,162.5		1,060.9
Estimated nominal contracted payments remaining (in millions)	$	3,976.2	$	3,638.1
Estimated gross retained value under energy contracts (in millions)	$	1,587.0	$	1,517.0
Estimated gross retained value of renewal (in millions)	$	531.6	$	479.7
Estimated gross retained value (in millions)	$	2,118.6	$	1,996.7
Estimated gross retained value per watt	$	2.02	$	2.06

Seasonality

We experience seasonal fluctuations in our operations. For example, the amount of revenue we recognize in a given period from PPAs is dependent in part on the amount of energy generated by solar energy systems under such contracts. As a result, customer agreements and incentives revenue is impacted by seasonally shorter daylight hours in winter months. In addition, our ability to install solar energy systems is impacted by weather. For example, we have limited ability to install solar energy systems during the winter months in the Northeastern United States and other areas where winter weather is impactful. Such delays can impact the timing of when we can install and begin to generate revenue from solar energy systems. However, the true extent of these fluctuations may have been masked by our historical growth rates and thus may not be readily apparent from our historical operating results and may be difficult to predict. As such, our historical operating results may not be indicative of future performance.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, cash flows and related footnote disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. Our future condensed consolidated financial statements will be affected to the extent that our actual results materially differ from these estimates.

We believe that the assumptions and estimates associated with ITCs, revenue recognition, solar energy systems, net, the impairment analysis of long-lived assets, stock-based compensation, the provision for income taxes, the valuation of derivative financial instruments, the recognition and measurement of loss contingencies, and non-controlling interests and redeemable non-controlling interests have the greatest potential impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

Effective January 1, 2019, we adopted the following Accounting Standards Updates, or ASUs:

• ASU 2016-02, Leases (Topic 842), orTopic 842, is intended to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the condensed consolidated balance sheets and disclosing key information about leasing arrangements. We utilized the additional transition method permitted by ASU 2018-11 and adopted Topic 842 using a modified retrospective method and as such, did not change any prior period amounts. The impact to the accumulated deficit as a result of adopting Topic 842 was a net reduction of approximately $0.2 million. Additionally, the adoption of this ASU resulted in right-of-use assets of $34.6 million related to operating leases being recognized in other non-current assets, net on the condensed consolidated balance sheets as of January 1, 2019. Corresponding lease liabilities of $43.8 million related to operating leases were recognized on the condensed consolidated balance sheets as of January 1, 2019, with the current portion recognized in accrued and other current liabilities and the long-term portion recognized in other non-current liabilities.

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• ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, or ASU 2018-15, clarified that entities should capitalize implementation costs incurred in cloud computing arrangements that are service contracts, which we will now record within other non-current assets, net. We adopted this ASU on a prospective basis.

See Note 2—Summary of Significant Accounting Policies for additional details on each of these ASUs.

There have been no other material changes to our critical accounting policies and estimates during the six months ended June 30, 2019 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.

Components of Results of Operations

Revenue

Customer Agreements and Incentives.     We recognize revenue for our PPAs based on the actual amount of power generated at rates specified under the contracts. We recognize revenue for our Solar Leases, which include performance guarantees, on a straight-line basis over the lease term.

We apply for and receive SRECs in certain jurisdictions for power generated by solar energy systems we have installed. We generally recognize revenue related to the sale of SRECs upon delivery to the buyer. The market for SRECs is extremely volatile and sellers are often able to obtain better unit pricing by selling a large quantity of SRECs. As a result, we may sell SRECs infrequently, at opportune times and in large quantities and the timing and volume of our SREC sales may lead to fluctuations in our quarterly results.

Solar Energy System and Product Sales.     Solar energy systems and product sales primarily includes revenue from System Sales. Revenue for System Sales is recognized when systems are interconnected to local power grids and granted permission to operate, assuming all other revenue recognition criteria are met. We expect revenue from System Sales to increase in the second half of 2019 compared to first half of 2019. Revenue related to the sale of photovoltaic installation products is recognized at the time of product shipment to the customer, assuming the remaining revenue recognition criteria have been met. Revenue mix will likely vary on a period-to-period basis as a result of regulatory, competitive and other local market conditions.

The following table sets forth our revenue by major product (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Revenue:
Customer agreements and other incentives	$	52,399	$	42,799	$	82,607	$	65,922
SREC sales		10,956		11,966		20,351		19,957
Total customer agreements and incentives		63,355		54,765		102,958		85,879
System Sales		26,759		25,283		56,058		62,047
Photovoltaic installation products		643		571		1,112		943
SREC sales		—		179		—		179
Total solar energy system and product sales		27,402		26,033		57,170		63,169
Total revenue	$	90,757	$	80,798	$	160,128	$	149,048

Operating Expenses

Cost of Revenue—Customer Agreements and Incentives.     Cost of revenue—customer agreements and incentives includes the depreciation of the cost of solar energy systems under long-term customer contracts, which are depreciated for accounting purposes over 30 years and in 2018 included the amortization of the related initial direct costs, which were being amortized over the term of the long-term customer contracts. It also includes allocated indirect material and labor costs related to the processing; account creation; design; installation; interconnection and servicing of solar energy systems that are not capitalized, such as personnel costs not directly associated to a solar energy system installation; warehouse rent and utilities; and fleet vehicle executory costs. The cost of customer agreements and incentives also includes allocated facilities and information technology costs. The cost of revenue for the sales of SRECs is limited to broker fees that are paid in connection with certain SREC transactions. In the second half of 2019, we expect the cost of customer agreements and incentives revenue will increase in absolute dollars compared to the first half of 2019.

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Cost of Revenue—Solar Energy System and Product Sales.     Cost of revenue—solar energy system and product sales consists of direct and allocated indirect material and labor costs and overhead costs for System Sales, photovoltaic installation products and structural upgrades and in 2018 included related costs to obtain contractsassociated with System Sales. Indirect material and labor costs are ratably allocated to System Sales and include costs related to the processing; account creation; design; installation; interconnection and servicing of solar energy systems, such as personnel costs not directly associated to a solar energy system installation; warehouse rent and utilities; and fleet vehicle executory costs. The cost of solar energy system and product sales also includes allocated facilities and information technology costs. Costs of solar energy system sales are recognized in conjunction with the related revenue upon the solar energy system passing an inspection by the responsible governmental department after completion of system installation and interconnection to the power grid, assuming all other revenue recognition criteria are met. In the second half of 2019, we expect the cost of solar energy system and product sales to increase in absolute dollars compared to the first half of 2019.

Sales and Marketing.     Sales and marketing expenses include personnel costs, such as salaries, benefits, bonuses and stock-based compensation for our corporate sales and marketing employees, certain non-capitalizable commission payments and, beginning in 2019, the amortization of capitalized incremental costs to obtain customer contracts. Sales and marketing expenses also include advertising, promotional and other marketing-related expenses; allocated facilities and information technology costs; travel; professional services and costs related to pre-installation sales activities. In the second half of 2019, we expect sales and marketing costs to increase in absolute dollars compared to the first half of 2019. Our investments into new sales channels such as the homebuilder and retail channels are designed to decrease customer acquisition costs over the longer term.

Research and Development.     Research and development expense is comprised primarily of salaries and benefits and other costs related to the development of photovoltaic installation products and other solar technologies. Research and development costs are charged to expense when incurred. In the second half of 2019, we expect research and development costs to remain relatively consistent in absolute dollars compared to the first half of 2019.

General and Administrative.     General and administrative expenses include personnel costs, such as salaries, bonuses and stock-based compensation related to our general and administrative personnel; professional fees related to legal, human resources, accounting and structured finance services; travel; and allocated facilities and information technology costs. In the second half of 2019, we expect general and administrative expenses to decrease in absolute dollars compared to the first half of 2019.

Non-Operating Expenses

Interest Expense.     Interest expense primarily consists of the interest charges associated with our indebtedness including the amortization of debt issuance costs and the interest component of finance lease obligations. In the second half of 2019, we expect our interest expense to increase in absolute dollars compared to the first half of 2019 as we incur additional indebtedness. Additionally, our debt facilities accrue interest at floating rates and increases in those floating rates would result in higher interest expense.

Other Expense (Income), net.     Other expense (income), net primarily consists of changes in fair value for our interest rate swaps not designated as hedges.

Income Tax Expense.     All of our business is conducted in the United States, and therefore income tax expense consists of current and deferred income taxes incurred in U.S federal, state and local jurisdictions.

Net Loss Attributable to Common Stockholders

We determine the net loss attributable to common stockholders by deducting from net loss the net loss attributable to non-controlling interests and redeemable non-controlling interests, which represents the investment fund investors’ allocable share in the results of operations of the investment funds that we consolidate. Generally, gains and losses that are allocated to the fund investors under the hypothetical liquidation at book value, or HLBV, method relate to hypothetical liquidation gains and losses resulting from differences between the net assets of the investment fund and the partners’ respective tax capital accounts in the investment fund. As of June 30, 2019, we had one operational investment fund that did not utilize the HLBV method to allocate gains and losses as we own 100% of the equity of that fund and there is no non-controlling interest attributable to a fund investor.

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Results of Operations

The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report.

The following table sets forth selected condensed consolidated statements of operations data for each of the periods indicated:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
	(In thousands)
Revenue:
Customer agreements and incentives	$	63,355		$	54,765		$	102,958		$	85,879
Solar energy system and product sales		27,402			26,033			57,170			63,169
Total revenue		90,757			80,798			160,128			149,048
Cost of revenue:
Cost of revenue—customer agreements and incentives		43,074			41,366			83,265			80,053
Cost of revenue—solar energy system and product sales		15,791			18,990			33,054			45,035
Total cost of revenue		58,865			60,356			116,319			125,088
Gross profit		31,892			20,442			43,809			23,960
Operating expenses:
Sales and marketing		37,037			14,033			66,671			25,158
Research and development		524			511			993			997
General and administrative		31,205			22,009			54,254			41,996
Total operating expenses		68,766			36,553			121,918			68,151
Loss from operations		(36,874	)		(16,111	)		(78,109	)		(44,191	)
Interest expense, net		19,472			11,336			38,599			28,258
Other expense (income), net		1,365			(4,109	)		2,750			(6,370	)
Loss before income taxes		(57,711	)		(23,338	)		(119,458	)		(66,079	)
Income tax expense		29,950			35,352			57,437			53,995
Net loss		(87,661	)		(58,690	)		(176,895	)		(120,074	)
Net loss attributable to non-controlling interests and redeemable    non-controlling interests		(59,094	)		(76,806	)		(122,086	)		(125,214	)
Net (loss attributable) income available to common stockholders	$	(28,567	)	$	18,116		$	(54,809	)	$	5,140

Comparison of Three Months Ended June 30, 2019 and 2018

Revenue

	Three Months Ended
	June 30,				$ Change
	2019		2018		2019 from 2018
	(In thousands)
Revenue:
Customer agreements and incentives	$	63,355	$	54,765	$	8,590
Solar energy system and product sales		27,402		26,033		1,369
Total revenue	$	90,757	$	80,798	$	9,959

Customer Agreements and Incentives. The $8.6 million increase was due in part to a $9.5 million increase in customer agreements revenue as the total megawatts of solar energy systems placed in service under these long-term customer contracts increased 20% compared to the same period in 2018. This increase was partially offset by a $1.0 million decrease in SREC revenue.

Solar Energy System and Product Sales. The $1.4 million increase was primarily due to an increase in solar energy systems placed in service under System Sales compared to the same period in 2018, reflecting shifts in product and market mix.

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Cost of Revenue

	Three Months Ended
	June 30,				$ Change
	2019		2018		2019 from 2018
	(In thousands)
Cost of revenue:
Cost of revenue—customer agreements and incentives	$	43,074	$	41,366	$	1,708
Cost of revenue—solar energy system and product sales		15,791		18,990		(3,199	)
Total cost of revenue	$	58,865	$	60,356	$	(1,491	)

Cost of Revenue—Customer Agreements and Incentives. The $1.7 million increase was due in part to a $5.0 million increase related to growth in the post-installation maintenance organization to accommodate the increase in the number of solar energy systems placed in service and other non-capitalized installation expense and a $1.9 million increase in depreciation of solar energy system equipment costs due to the increase in the number of solar energy systems placed in service. These increases were partially offset by a $4.2 million decrease in the amortization of initial direct costs resulting from these costs being recorded in this line item during 2018 while similar costs are recorded in sales and marketing expense beginning in 2019 as a result of adopting Topic 842 and a $1.4 million decrease in costs related to system removals in the current period compared to the same period in 2018.

Cost of Revenue—Solar Energy System and Product Sales. The $3.2 million decrease is primarily attributable to a $4.4 million decrease in costs to obtain contracts resulting from these costs being recorded in this line item during 2018 while similar costs are recorded in sales and marketing expense beginning in 2019 as a result of adopting Topic 842. This decrease was partially offset by a $0.6 million increase in electrical and structural upgrade services performed for certain System Sale customers.

Operating Expenses

	Three Months Ended
	June 30,				$ Change
	2019		2018		2019 from 2018
	(In thousands)
Operating expenses:
Sales and marketing	$	37,037	$	14,033	$	23,004
Research and development		524		511		13
General and administrative		31,205		22,009		9,196
Total operating expenses	$	68,766	$	36,553	$	32,213

Sales and Marketing. The $23.0 million increase was primarily due to $12.8 million in costs to obtain contracts and amortization of previously capitalized costs to obtain contracts being included in this line item for the current period as a result of adopting Topic 842 while these costs were included in cost of revenue during 2018, an $8.0 million increase in compensation and benefits due in part to an increase in non-capitalized residual commission payments and inside sales headcount to support new sales channels, a $1.1 million increase in marketing and lead generation activities and a $1.1 million increase in one-time fees related to our retail channel.

General and Administrative. The $9.2 million increase was primarily due to a $7.0 million increase in professional fees, including a $5.6 million increase in closing costs for new investment funds, a $0.9 million increase in insurance costs and a $0.6 million increase in stock-based compensation.

Non-Operating Expenses

	Three Months Ended
	June 30,					$ Change
	2019		2018			2019 from 2018
	(In thousands)
Interest expense, net	$	19,472	$	11,336		$	8,136
Other expense (income), net		1,365		(4,109	)		5,474

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Interest Expense. Interest expense increased $8.1million primarily due to a net $6.8 million reduction in interest expense in the same period in 2018 due to one-timeitems related to refinancing and termination of debt facilities and a $1.5 million increase in interest expense resulting from additional borrowings year over year and higher interest rates on our floating-rate debt facilities.

Other Expense (Income), net. The $5.5 million change from other income to other expense was primarily due to a $3.4 million change in the fair value of our derivative financial instruments and a $2.1 million payment received in 2018 as an initial distribution to us in one of our legal proceedings.

Income Taxes

	Three Months Ended
	June 30,				$ Change
	2019		2018		2019 from 2018
	(In thousands)
Income tax expense	$	29,950	$	35,352	$	(5,402	)

The $5.4 million decrease in income tax expense was primarily attributable to a tax-effected $8.8 million increased loss before income taxes and $3.7 million associated with the net tax effect of non-controlling interests and redeemable non-controlling interests. These decreases in income tax expense were partially offset by a $7.2 million additional expense as a result of increased tax gains recognized on the sale of solar energy systems to investment funds.

Net Loss Attributable to Non-Controlling Interests and Redeemable Non-Controlling Interests

	Three Months Ended
	June 30,						$ Change
	2019			2018			2019 from 2018
	(In thousands)
Net loss attributable to non-controlling interests and redeemable    non-controlling interests	$	(59,094	)	$	(76,806	)	$	17,712

Net loss attributable to non-controlling interests and redeemable non-controlling interests was allocated using the HLBV method. Generally, gains and losses that are allocated to the fund investors relate to hypothetical liquidation gains and losses resulting from differences between the net assets of the investment fund and the partners’ respective tax capital accounts in the investment fund. Losses allocated to the fund investors are generally derived from the receipt of ITCs and tax depreciation under Internal Revenue Code Section 168. These tax benefits are primarily allocated to the investors and reduce the fund investors’ tax capital account. The $17.7 million decrease in net loss attributable to non-controlling interests and redeemable non-controlling interests is primarily due to changes in the terms of our recently formed tax equity funds.

Comparison of Six Months Ended June 30, 2019 and 2018

Revenue

	Six Months Ended
	June 30,				$ Change
	2019		2018		2019 from 2018
	(In thousands)
Revenue:
Customer agreements and incentives	$	102,958	$	85,879	$	17,079
Solar energy system and product sales		57,170		63,169		(5,999	)
Total revenue	$	160,128	$	149,048	$	11,080

Customer Agreements and Incentives. The $17.1 million increase was due in part to a $16.4 million increase in customer agreements revenue as the total megawatts of solar energy systems placed in service under these long-term customer contracts increased 20% compared to the same period in 2018 and a $0.4 million increase in SREC revenue.

Solar Energy System and Product Sales. The $6.0 million decrease was primarily due to a decrease in solar energy systems placed in service under System Sales compared to the same period in 2018, reflecting shifts in product and market mix.

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Cost of Revenue

	Six Months Ended
	June 30,				$ Change
	2019		2018		2019 from 2018
	(In thousands)
Cost of revenue:
Cost of revenue—customer agreements and incentives	$	83,265	$	80,053	$	3,212
Cost of revenue—solar energy system and product sales		33,054		45,035		(11,981	)
Total cost of revenue	$	116,319	$	125,088	$	(8,769	)

Cost of Revenue—Customer Agreements and Incentives. The $3.2 million increase was due in part to an $8.9 million increase related to growth in the post-installation maintenance organization to accommodate the increase in the number of solar energy systems placed in service and other non-capitalized installation expense and a $3.6 million increase in depreciation of solar energy system equipment costs due to the increase in the number of solar energy systems placed in service. These increases were partially offset by an $8.2 million decrease in the amortization of initial direct costs resulting from these costs being recorded in this line item during 2018 while similar costs are recorded in sales and marketing expense beginning in 2019 as a result of adopting Topic 842 and a $2.1 million decrease in costs related to system removals in the current period compared to the same period in 2018.

Cost of Revenue—Solar Energy System and Product Sales. The $12.0 million decrease is primarily attributable to a $10.3 million decrease in costs to obtain contracts resulting from these costs being recorded in this line item during 2018 while similar costs are recorded in sales and marketing expense beginning in 2019 as a result of adopting Topic 842 and a $3.5 million decrease in in the costs of System Sales, reflecting a lower volume of System Sales placed in service compared to the prior year period. These decreases were partially offset by $1.2 million increase in electrical and structural upgrade services performed for certain System Sale customers.

Operating Expenses

	Six Months Ended
	June 30,				$ Change
	2019		2018		2019 from 2018
	(In thousands)
Operating expenses:
Sales and marketing	$	66,671	$	25,158	$	41,513
Research and development		993		997		(4	)
General and administrative		54,254		41,996		12,258
Total operating expenses	$	121,918	$	68,151	$	53,767

Sales and Marketing. The $41.5 million increase was primarily due to $22.5 million in costs to obtain contracts and amortization of previously capitalized costs to obtain contracts being included in this line item for the current period as a result of adopting Topic 842 while these costs were included in cost of revenue during 2018, a $15.2 million increase in compensation and benefits due in part to an increase in non-capitalized residual commission payments and inside sales headcount to support new sales channels, a $2.0 million increase in marketing and lead generation activities, a $1.1 million increase in one-time fees related to our retail channel and a $0.8 million increase in other administrative costs.

General and Administrative. The $12.3 million increase was primarily due to an $8.9 million increase in professional fees, including a $6.1 million increase in closing costs for new investment funds, a $1.9 million increase in insurance costs and a $1.3 million increase in stock-based compensation.

Non-Operating Expenses

	Six Months Ended
	June 30,					$ Change
	2019		2018			2019 from 2018
	(In thousands)
Interest expense, net	$	38,599	$	28,258		$	10,341
Other expense (income), net		2,750		(6,370	)		9,120

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Interest Expense. Interest expense increased $10.3 million primarily due to a net $6.8 million reduction in interest expense in the same period in 2018 due to one-time items related to refinancing and termination of debt facilities and a $4.0 million increase in interest expense resulting from additional borrowings year over year and higher interest rates on our floating-rate debt facilities.

Other Expense (Income), net. The $9.1 million change from other income to other expense was primarily due to a $7.0 million change in the fair value of our derivative financial instruments and a $2.1 million payment received in 2018 as an initial distribution to us in one of our legal proceedings.

Income Taxes

	Six Months Ended
	June 30,				$ Change
	2019		2018		2019 from 2018
	(In thousands)
Income tax expense	$	57,437	$	53,995	$	3,442

The $3.4 million increase in income tax expense was primarily attributable to a $16.0 million additional expense as a result of increased tax gains recognized on the sale of solar energy systems to investment funds. This increases in income tax expense was partially offset by a tax-effected $12.2 million increased loss before income taxes.

Net Loss Attributable to Non-Controlling Interests and Redeemable Non-Controlling Interests

	Six Months Ended
	June 30,						$ Change
	2019			2018			2019 from 2018
	(In thousands)
Net loss attributable to non-controlling interests and redeemable    non-controlling interests	$	(122,086	)	$	(125,214	)	$	3,128

Net loss attributable to non-controlling interests and redeemable non-controlling interests was allocated using the HLBV method. Generally, gains and losses that are allocated to the fund investors relate to hypothetical liquidation gains and losses resulting from differences between the net assets of the investment fund and the partners’ respective tax capital accounts in the investment fund. Losses allocated to the fund investors are generally derived from the receipt of ITCs and tax depreciation under Internal Revenue Code Section 168. These tax benefits are primarily allocated to the investors and reduce the fund investors’ tax capital account.

Liquidity and Capital Resources

As of June 30, 2019, we had cash and cash equivalents of $199.0 million, which consisted principally of cash and time deposits with high-credit-quality financial institutions. As discussed in Note 11—Debt Obligations and Note 14—Investment Funds, we do not have full access to a portion of our cash and cash equivalents. We finance our operations primarily from investment fund arrangements that we have formed with fund investors, from borrowings and from cash inflows from operations.

Our principal uses of cash are funding our operations, including the costs of acquisition and installation of solar energy systems, working capital requirements and the satisfaction of our obligations under our debt instruments. Our business model requires substantial outside financing arrangements to grow the business and facilitate the deployment of additional solar energy systems. While there can be no assurances, we anticipate raising additional required capital from new and existing fund investors, additional borrowings, cash from System Sales and other potential financing vehicles.

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We may seek to raise financing through the sale of equity, equity-linked securities, additional borrowings or other financing vehicles. Additional equity or equity-linked financing may be dilutive to our stockholders. If we raise funding through additional borrowings, such borrowings would have rights that are senior to holders of our equity securities and could contain covenants that restrict our operations. We believe our cash and cash equivalents, including our investment fund commitments, projected investment fund contributions and our current debt facilities as further described below, in addition to financing that we may obtain from other sources, including our financial sponsors, will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, if we are unable to secure additional financing when needed, or upon desirable terms, we may be unable to finance installation of our customers’ systems in a manner consistent with our past performance, our cost of capital could increase, or we may be required to significantly reduce the scope of our operations, any of which would have a material adverse effect on our business, financial condition, results of operations and prospects. In addition, our investment funds and debt instruments impose restrictions on our ability to draw on financing commitments. If we are unable to satisfy such conditions, we may incur penalties for non-performance under certain investment funds, experience installation delays, or be unable to make installations in accordance with our plans or at all. Any of these factors could also impact customer satisfaction, our business, operating results, prospects and financial condition. While we believe additional financing is available and will continue to be available to support our current level of operations, we believe we have the ability and intent to reduce operations to the level of available financial resources for at least the next 12 months, if necessary.

Sources of Funds

Investment Fund Commitments

As of July 31, 2019, we had raised 27 investment funds to which investors such as banks and other large financial investors have committed to invest approximately $2.2 billion. The undrawn committed capital for these funds as of July 31, 2019 is approximately $355.6 million, which we estimate will fund approximately 162 megawatts of future deployments.

Debt Instruments

Debt obligations consisted of the following as of June 30, 2019 (in thousands, except interest rates):

	Principal		Unused
	Borrowings		Borrowing		Interest			Maturity
	Outstanding		Capacity		Rate			Date
Solar asset backed notes, Series 2018-1(1)	$	454,100	$	—		5.1	%	October 2028
Solar asset backed notes, Series 2018-2(2)(3)		339,383		—		5.5		August 2023
2017 Term loan facility		185,194		—		6.0		January 2035
2018 Forward flow loan facility		112,501		17,499		4.7		(4)
2019 Forward flow loan facility		14,087		135,913		5.2		(5)
Credit agreement		1,275		—		6.5		February 2023
Revolving lines of credit
Aggregation facility		115,000		260,000		5.6		September 2020
Working capital facility(6)		131,100		—		5.7		March 2020
Total debt	$	1,352,640	$	413,412

(1)	The interest rate disclosed in the table above is a weighted-average rate. The Series 2018-1 Notes are comprised of Class A and Class B Notes. Class A Notes accrue interest at 4.73%. Class B Notes accrue interest at 7.37%.
(2)	The Series 2018-2 Notes are comprised of Class A and Class B Notes. Class B Notes accrue interest at a rate of LIBOR plus 4.75%. Class A Notes accrue interest at a variable spread over LIBOR that results in a weighted average spread for all 2018-2 Notes of 2.95%.
(3)	The interest rate of these notes is partially hedged to an effective interest rate of 6.0% for $325.2 million of the principal borrowings. See Note 13—Derivative Financial Instruments.
(4)	The maturity date for this facility is 20 years from the end date of the borrowing availability period when all borrowings are aggregated into one term loan, which will be no later than October 31, 2019.
(5)	The maturity date for this facility is 20 years from the end date of the borrowing availability period when all borrowings are aggregated into one term loan, which will be no later than November 20, 2020.
(6)	Facility is recourse debt, which refers to debt that is collateralized by our general assets. All of our other debt obligations are non-recourse, which refers to debt that is only collateralized by specified assets or our subsidiaries.

See Note 11—Debt Obligations for additional details regarding the debt facilities outstanding at June 30, 2019.

39

Revenue from Operations

In the three and six months ended June 30, 2019, we generated $63.4 million and $103.0 million in revenue from customer agreements and incentives, which approximates cash inflow. Cash related to our System Sales is generally received prior to revenue recognition, and we received $27.6 million and $53.5 million related to System Sales for the three and six months ended June 30, 2019. The cash from our revenue partially offsets the cash used in operations for the period.

Uses of Funds

Our principal uses of cash are funding our operations, including the costs of acquisition and installation of solar energy systems, satisfaction of our obligations under our debt instruments and other working capital requirements. From time to time, we also reimburse portions of fund investors’ capital as a result of delays in the installation process and interconnection to the power grid of solar energy systems and other factors. We expect our capital expenditures to continue to increase as we continue to install additional solar energy systems.We will need to raise financing to support our operations, and such financing may not be available to us on acceptable terms, or at all.

Historical Cash Flows

The following table summarizes our cash flows for the periods indicated:

	Six Months Ended
	June 30,
	2019			2018
Net cash (used in) provided by:	(In thousands)
Operating activities	$	(141,084	)	$	(18,866	)
Investing activities		(124,381	)		(144,469	)
Financing activities		252,087			249,097
Net (decrease) increase in cash and cash equivalents, including restricted amounts	$	(13,378	)	$	85,762

Operating Activities

In the six months ended June 30, 2019, we had a net cash outflow from operations of $141.1 million. This was primarily due to outflows of $63.9 million from our net loss excluding noncash and non-operating items and $77.2 million of outflows from changes in working capital.

Investing Activities

In the six months ended June 30, 2019, we used $124.4 million for investing activities primarily due to the costs associated with the design, acquisition and installation of solar energy systems.

Financing Activities

In the six months ended June 30, 2019, we generated $252.1 million from financing activities, of which $159.6 million represented proceeds from investments by non-controlling interests and redeemable non-controlling interests received by our investment funds and $133.2 million represented proceeds from long-term debt. These proceeds were partially offset by distributions to non-controlling interests and redeemable non-controlling interests of $18.1 million and repayments of long-term debt of $20.9 million.

40

Contractual Obligations

Our contractual commitments and obligations as of December 31, 2018 are set forth in the following table. Material changes that have occurred during the six months ended June 30, 2019 are included in the footnotes to the table.

	Payments Due by Period
	Less than						More than
	1 Year		1-3 Years		3-5 Years		5 Years		Total
	(In thousands)
Long-term debt(1)	$	12,450	$	214,084	$	375,720	$	638,135	$	1,240,389
Interest payments related to long-term debt(2)		68,529		117,911		103,594		167,755		457,789
Distributions payable to non-controlling interests    and redeemable non-controlling interests(3)		7,846		—		—		—		7,846
Capital lease obligations and interest(4)		2,069		490		32		—		2,591
Operating lease obligations(4)		11,250		23,472		19,493		63,762		117,977
Total	$	102,144	$	355,957	$	498,839	$	869,652	$	1,826,592

(1)	Does not include additional borrowings and repayments during the six months ended June 30, 2019, which resulted in a net $112.3 million increase in principal borrowings. These borrowings included the following activity: under the Aggregation Facility maturing in September 2020 we incurred $65.0 million of principal borrowings; under the 2018 Forward Flow Loan Facility maturing October 2039 we incurred $54.1 million of principal borrowings; under the 2019 Forward Flow Loan Facility maturing November 2040 we incurred $14.1 million of principal borrowings; under the Solar Asset Backed Notes, Series 2018-1 maturing in October 2028 we reduced principal borrowings by $8.7 million; under the Working Capital Facility maturing March 2020 we reduced principal borrowings by $5.0 million; under the 2017 Term Loan maturing January 2035 we reduced principal borrowings by $3.7 million; and under the Solar Asset Backed Notes, Series 2018-2 maturing in August 2023 we reduced principal borrowings by $3.5 million. For additional information, see Note 11—Debt Obligations.
(2)	Does not include increases in interest payments related to changes in long-term debt during the six months ended June 30, 2019, which for payments due in less than one year increased $6.0 million, payments due in one to three years increased $7.5 million, payments due in three to five years increased $5.0 million and payments due in more than five years increased $33.7 million.
(3)	During the six months ended June 30, 2019, distributions payable to non-controlling interests and redeemable non-controlling interests increased by $3.4 million.
(4)	We adopted Topic 842 effective January 1, 2019. Under Topic 842, leases that were known as capital leases under Topic 840 are now called finance leases. Additionally, as part of the adoption, we reassessed all leases outstanding at the adoption date. The resulting future minimum lease payment schedules for both finance leases and operating leases are contained in Note 12—Leases.

Off-Balance Sheet Arrangements

We include in our condensed consolidated financial statements all assets and liabilities and results of operations of investment fund arrangements that we have entered into. We do not have any off-balance sheet arrangements.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements that we are evaluating, see Note 2—Summary of Significant Accounting Policies.

41

Item 4. Controls and Procedures

Internal Control Over Financial Reporting

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2019 pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2019.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the six months ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

For a list of our current legal proceedings, see Note 19—Commitments and Contingencies.

Item 1A. Risk Factors

You should carefully consider the following risk factors, together with all of the other information included in this report, including the section of this report captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. If any of the following risks occurred, they could materially adversely affect our business, financial condition or operating results. This report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this report.

Risk Related to Our Business

We need to enter into substantial additional financing arrangements to facilitate new customers’ access to our solar energy systems and provide working capital, and if financing is not available to us on acceptable terms when needed, our ability to continue to grow our business would be materially adversely impacted.

Our future success depends on our ability to raise capital from third-party investors and commercial sources, such as banks and other lenders, on competitive terms to help finance the deployment of our solar energy systems. We seek to minimize our cost of capital in order to maintain the price competitiveness of our solar energy systems. We rely on investment funds in order to provide solar energy systems with little to no upfront costs to our customers under our PPAs and Solar Leases. We also rely on access to capital, including through indebtedness in the form of debt facilities and asset-backed securities, to cover the costs of our solar energy systems that are sold outright until the systems are paid for by our customers, whether by cash or through third-party financing arrangements. Certain of our financing arrangements are with fund investors who require particular tax and other benefits. The availability of this tax-advantaged financing depends upon many factors, including:

• our ability to compete with other renewable energy companies for the limited number of potential investment fund investors, each of which has limited funds and limited appetite for the tax benefits associated with these financings;

• the state of financial and credit markets;

• changes in the legal or tax risks associated with these financings; and

• non-renewal of certain incentives or decreases in the associated benefits.

Moreover, potential investors seeking such tax-advantaged financing must remain satisfied that the structures we offer qualify for the tax benefits associated with solar energy systems available to these investors, which depends both on the investors’ assessment of tax law and the absence of any unfavorable interpretations of that law. Changes in existing law, including the currently planned step-down of the ITC, and interpretations by the Internal Revenue Service, or IRS, and the courts could reduce the willingness of fund investors to invest in funds associated with these solar energy system investments or cause these investors to require a larger allocation of customer payments. We are not certain that this type of financing will continue to be available to us. If we are unable to establish new financing when needed, or upon desirable terms, to enable our customers’ access to our solar energy systems, we may be unable to finance installation of our customers’ systems, our cost of capital could increase or our liquidity could be constrained, any of which would have a material adverse effect on our business, financial condition, results of operations and prospects. As of July 31, 2019, we had raised 27 investment funds to which investors such as banks and other large financial investors have committed to invest approximately $2.2 billion. The undrawn committed capital for these funds as of July 31, 2019 is approximately $355.6 million, which we estimate will fund approximately 162 megawatts of future deployments.

The contract terms in certain of our investment fund documents impose conditions on our ability to draw on financing commitments from the fund investors, including if an event occurs that could reasonably be expected to have a material adverse effect on the fund or on us. The terms and conditions of our investment funds can vary and may require us to alter our products, services or product mix. If we do not satisfy such conditions due to events related to our business or a specific investment fund or developments in our industry or otherwise, and as a result we are unable to draw on existing commitments, our inability to draw on such commitments could have a material adverse effect on our business, liquidity, financial condition and prospects. In addition to our inability to draw on investors’ commitments, we have in the past incurred and may in the future incur financial penalties for non-performance, including delays in the installation process and interconnection to the power grid of solar energy systems and other factors. Based on the terms of the investment fund agreements, we will either reimburse a portion of the fund investors’ capital or pay the fund investors a non-performance fee.

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To meet the capital needs of our growing business, we will need to obtain additional financing from new investors and financial institutions and investors and financial institutions who are current investors or with whom we currently have financing arrangements. If any of the investors or financial institutions that currently provide financing decide not to invest in us in the future due to general market conditions, concerns about our business or prospects or any other reason, or decide to invest at levels that are inadequate to support our anticipated needs or materially change the terms under which they are willing to provide future financing, we will need to identify new investors and financial institutions to provide financing and negotiate new financing terms. In addition, our ability to obtain additional financing through the asset-backed securities market or other secured debt markets is subject to our having sufficient assets eligible for securitization or for use as collateral, as well as our ability to obtain appropriate credit ratings. If we are unable to raise additional capital in a timely manner, our ability to meet our capital needs and fund future growth may be limited.

In the past, we have sometimes been unable to timely establish investment funds in accordance with our plans, due in part to the relatively limited number of investors attracted to such types of funds, competition for such capital and the complexity associated with negotiating the agreements with respect to such funds. Delays in raising financing could cause us to delay expanding in existing markets or entering into new markets and hiring additional personnel. Any future delays in raising capital could similarly cause us to delay deployment of a substantial number of solar energy systems for which we have signed PPAs or Solar Leases with customers. Our future ability to obtain additional financing depends on banks’ and other financing sources’ continued confidence in our business model and the renewable energy industry as a whole. It could also be impacted by the liquidity needs of such financing sources themselves. We face intense competition from a variety of other companies, technologies and financing structures for such limited investment capital. If we are unable to continue to offer a competitive investment profile, we may lose access to these funds or they may only be available to us on terms that are less favorable than those received by our competitors. For example, if we experience higher customer default rates than we currently experience in our existing investment funds, it could be more difficult or costly to attract future financing. In our experience, there are a relatively small number of investors that generate sufficient profits and possess the requisite financial sophistication to benefit from and have significant demand for the tax benefits that our investment funds provide. Historically, in the distributed solar energy industry, investors have typically been large financial institutions and a few large, profitable corporations. Our ability to raise investment funds is limited by the relatively small number of such investors. Any inability to secure financing could lead us to cancel planned installations, impair our ability to accept new customers or increase our borrowing costs, any of which would have a material adverse effect on our business, financial condition, results of operations and prospects.

Our business currently depends on the availability of rebates, tax credits and other financial incentives. The expiration, elimination or reduction of these rebates, credits or incentives or our ability to monetize them could adversely impact our business.

Federal, state and local government and regulatory bodies provide for tariff structures and incentives to various parties including owners, end users, distributors, system integrators and manufacturers of solar energy systems to promote solar energy in various forms, including rebates, tax credits and other financial incentives such as system performance payments, renewable energy certificates associated with renewable energy generation, exclusion of solar energy systems from property tax assessments and net metering. We rely on these programs to finance solar energy system installations, which enables us to lower the price we charge customers for energy from, and to lease or purchase, our solar energy systems, helping to achieve acceptance of solar energy with those customers as an alternative to utility-provided power. However, these programs may expire on a particular date, end when the allocated funding or capacity allocations are exhausted or be reduced or terminated. These reductions or terminations often occur without warning. In addition, the financial value of certain incentives decreases over time. For example, the value of SRECs in a market tends to decrease over time as the supply of SREC-producing solar energy systems installed in that market increases. If we overestimate the future value of these programs, it could adversely impact our financial results.

Substantially all of our solar energy systems installed to date have been eligible for ITCs as well as accelerated depreciation benefits. We have relied on, and will continue to rely on, financing structures that monetize a substantial portion of those benefits and provide financing for our solar energy systems. The federal government currently offers a 30% ITC under Section 48(a) of the Internal Revenue Code for the installation of certain solar power facilities, and this 30% rate is available as long as construction of the solar energy system begins by December 31, 2019. By statute, the ITC is scheduled to decrease to 26% of the basis of a solar energy system for systems where construction begins in 2020, 22% for systems where construction begins in 2021 and 10% for systems where construction begins after 2021 or where the solar energy system is placed into service after 2023. The amounts that fund investors are willing to invest could decrease or we may be required to provide a larger allocation of customer payments to the fund investors as a result of this scheduled decrease. To the extent we have a reduced ability to raise investment funds as a result of this reduction or an inability to continue to monetize such benefits in our financing arrangements, the rate of growth of installations of our residential solar energy systems and our ability to maintain such systems could be negatively impacted. In addition, future changes in existing law and interpretations by the IRS and the courts with respect to certain matters, including but not limited to, treatment of the ITC and our financing arrangements, the taxation of business entities, the deductibility of interest expense, and the meaning of “beginning construction” for purposes of the ITC step-down described above could affect the amount that fund investors are willing to invest, which could reduce our access to capital. The ITC has been a significant driver of the financing supporting the adoption of residential solar energy systems in the United States and its scheduled reduction beginning in 2020, unless modified by an intervening change in law, will significantly impact the attractiveness of solar energy to these investors and could potentially harm our business.

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In order to take advantage of the higher ITC rates available based on the year in which construction on a solar energy system begins, we intend to place orders for solar energy components which we will pay for and/or ensure significant physical work has begun prior to the end of the applicable year. While we have attempted to ensure that these orders and purchases will comply with guidance issued by the IRS, this guidance is relatively limited and could change without notice. As such, it is possible that our financing partners or the IRS could challenge whether construction has begun for purposes of the ITC rate step-down described above. It is also possible that we will not be able to use all of the solar energy system components purchased pursuant to this plan.

Applicable authorities may adjust or decrease incentives from time to time or include provisions for minimum domestic content requirements or other requirements to qualify for these incentives. An inability to finance solar energy systems through tax-advantaged structures, to realize or monetize depreciation benefits, to monetize or otherwise receive the benefit of rebates, tax credits, SRECs or other financial incentives, or to otherwise structure investment funds in ways that are both attractive to investors and allow us to provide desirable pricing to customers could adversely impact our results of operations and ability to compete in our industry by increasing our cost of capital, causing us to increase the prices of our energy and solar energy systems and reducing the size of our addressable market. In addition, this would adversely impact our ability to attract investment partners and to form new investment funds and our ability to offer attractive financing to prospective customers.

A material reduction in the retail price of traditional utility-generated electricity or electricity from other sources or other reduction in the cost of such electricity would harm our business, financial condition, results of operations and prospects.

We believe that many of our customers’ interest in solar energy systems is driven by a desire to pay less for their energy costs. However, distributed residential solar energy has yet to achieve broad market adoption for a number of reasons including state regulatory hurdles, utility-imposed interconnection issues for distributed electricity generation systems and unfavorable economics from the customer perspective.

A customer’s interest in a solar energy system may also be affected by the cost of electricity generated from other energy sources, including renewable energy sources. Decreases in the retail prices of electricity from the traditional utilities or from other renewable energy sources would harm our ability to offer competitive pricing and could harm our business. The cost of electricity from traditional utilities could decrease as a result of:

• construction of new power generation plants, including plants utilizing natural gas, nuclear, coal, renewable energy or other generation technologies;

• the construction of additional electric transmission and distribution lines;

• relief of transmission constraints that enable local centers to generate energy less expensively;

• reductions in the price of natural gas or other fuel sources;

• utility rate adjustment and customer class cost reallocation;

• energy conservation technologies and public initiatives to reduce electricity consumption;

• widespread deployment of existing or development of new or lower-cost energy storage technologies that have the ability to reduce a customer’s average cost of electricity by shifting load to off-peak times;

• changes in regulations by federal or state regulatory bodies that lower the cost of generating and transmitting electricity or otherwise reduce regulatory compliance costs for traditional utilities, or otherwise disadvantage residential solar energy providers relative to traditional utilities; and

• development of new energy generation technologies that provide less expensive energy.

A reduction in utility electricity costs would make PPAs or Solar Leases less economically attractive to customers on a monthly basis and would increase the time to breakeven for our System Sales customers. If the cost of energy available from traditional utilities were to decrease due to any of these reasons, or other reasons, we would be at a competitive disadvantage, we may be unable to attract new customers and our growth would be limited. In addition, from time to time we have increased our pricing in certain markets, which may negatively impact our competitiveness.

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Electric utility industry policies and regulations may present technical, regulatory and economic barriers to the purchase and use of solar energy systems that may significantly reduce demand for electricity from our solar energy systems.

Federal, state and local government regulations and policies concerning the electric utility industry, utility rate structures, interconnection procedures, and internal policies of electric utilities, heavily influence the market for electricity generation products and services. These regulations and policies often relate to electricity pricing and the interconnection of distributed electricity generation systems to the power grid. Policies and regulations that promote renewable energy and customer-sited energy generation have been challenged by traditional utilities and questioned by those in government and others arguing for less governmental spending and involvement in the energy market. In addition, it is unclear what, if any, actions the current presidential administration in the United States, the U.S. Department of Energy, and the Federal Energy Regulatory Commission may take regarding existing regulations and policies that affect the cost competitiveness of nuclear, coal and gas electric generation, and fossil fuel mining and exploration. Changes in such policies and regulations could increase the cost or decrease the benefits of solar energy systems or reduce costs and other limitations on competing forms of generation, and adversely affect the attractiveness of our products and our results of operations, cost of capital and growth prospects.

In the United States, governments and the state public service commissions that determine utility rates continually modify these regulations and policies. These regulations and policies could result in a significant reduction in the potential demand for electricity from our solar energy systems and could deter customers from entering into contracts with us. In addition, in certain of our regions, electricity generated by solar energy systems competes most effectively with the most expensive retail rates for electricity from the power grid, rather than the less expensive average price of electricity. Modifications to the utilities’ peak hour pricing policies or rate design, such as movement to a flat rate, would make our current products less competitive with the price of electricity from the power grid. Other regulatory revisions that could impact the competitiveness of our product include moving from a retail rate to a time-of-use compensation mechanism, imposition of fixed demand or grid-service charges, or limitations on whether third-party owned systems are eligible for such programs. It is possible that changes such as these could have the effect of lowering the incentive for residential customers of investor-owned utilities to reduce their purchases of electricity from their utility by supplying more of their own electricity from solar, and thereby reducing demand for our product. A shift in the timing of peak rates for utility-generated electricity to a time of day when solar energy generation is less efficient or nonexistent could make our solar energy system offerings less competitive and reduce demand for our offerings. In addition, since we are required to obtain interconnection permission for each solar energy system from the local utility, changes in a local utility’s regulations, policies or interconnection processes have in the past delayed and in the future could delay or prevent the completion of our solar energy systems. This in turn has delayed and, in the future, could delay or prevent us from generating revenues from such solar energy systems or cause us to redeploy solar energy systems, adversely impacting our results of operations.

In addition, any changes to government or internal utility regulations and policies that favor electric utilities or alternative forms of energy over residential rooftop solar energy could reduce our competitiveness and cause a significant reduction in demand for our offerings or increase our costs or the prices we charge our customers. Certain jurisdictions have proposed allowing traditional utilities to assess various fees on customers purchasing energy from solar energy systems or have imposed or proposed new charges or rate structures that would disproportionately impact solar energy system customers who utilize net metering, either of which would increase the cost of energy to those customers and could reduce demand for our solar energy systems. For example, in California, investor owned utilities are allowed to impose a minimum $10 fixed charge on the monthly bill for residential customers that elect net metering and also impose new fees for interconnection and other non-bypassable charges. Such non-bypassable charges are being authorized by other public utilities commissions outside of California. Additionally, certain utilities in Arizona have approved increased rates and charges for net metering customers, and others have proposed doing away with the state’s renewable electricity standard carve-outs for distributed generation. These policy changes may negatively impact our customers and affect demand for our solar energy systems, and similar changes to net metering policies may occur in other states. It is also possible that these or other changes could be imposed on our current customers, as well as future customers. Due to the current and expected continued concentration of our solar energy systems in California, any such changes in this market would be particularly harmful to our reputation, customer relations, business, results of operations and future growth in these areas. We may be similarly adversely affected if our business becomes concentrated in other jurisdictions.

Relatedly, it is possible that the bankruptcy proceedings initiated by Pacific Gas and Electric Company on January 29, 2019 could have an adverse impact on our customers and operations in California. Any such negative impacts (e.g., resulting from new non-bypassable charges, rate changes, restructuring, etc.) could be harmful to our customer relations, business, results of operations and future growth, especially given the concentration of our solar energy systems in California.

Finally, public service commissions may impose requirements on our business associated with our interactions with consumers. The California Public Utilities Commission and the Public Service Commission of the State of New York have each adopted orders requiring changes to certain of our business practices and continue to take actions suggesting the trend will continue. Other public service commissions could follow California and New York’s lead and impose requirements associated with consumer protection that could affect how we do business and acquire customers.

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We rely on net metering and related policies to offer competitive pricing to our customers in all of our current markets, and changes to net metering policies may significantly reduce demand for electricity from our solar energy systems.

Our business benefits significantly from favorable net metering policies. Net metering allows a homeowner to pay his or her local electric utility only for his or her power usage net of production from the solar energy system, transforming the conventional relationship between customers and traditional utilities. Homeowners receive credit for the energy that the solar installation generates in excess of that needed by the home to offset energy usage at times when the solar installation is not generating energy. In states that provide for net metering, the customer typically pays for the net energy used or receives a credit against future bills at the retail rate if more energy is produced by the solar installation than consumed. In some states and utility territories, customers are also reimbursed by the electric utility for net excess generation on a periodic basis.

In recent years, net metering programs have been subject to regulatory scrutiny and legislative proposals in several states in which we operate. Many utilities have proposed and are proposing new and varied revisions to their net metering programs, with such proposals decided by the state public utilities commissions. These revisions include, but are not limited, to capping the numbers of customers that can elect net metering within a utility service territory, imposing new fixed charges for grid service or interconnection, reducing the retail rate value of the net metered electricity generation, and imposing consumer protection requirements on solar companies. For example, in 2016, the California Public Utilities Commission enacted changes requiring customers within the service territory of San Diego Gas and Electric, Pacific Gas and Electric Company, and Southern California Edison Company, to take service on a net metering successor tariff. Under this successor tariff, utilities are allowed to impose reasonable interconnection fees on customers and some additional charges and customers must take service on time-of-use rates. The California Public Utilities Commission is expected to begin considering additional changes to the net metering successor tariff in 2019 and in 2018 referenced its net metering authority in connection with the imposition of new consumer protection measures on the residential solar industry. Further, municipal utilities are generally not subject to the same state laws and public commission oversight as compared to investor owned utilities and may make drastic and abrupt changes. As we continue to expand into areas with municipal utilities, we may be subject to greater risk of regulatory uncertainty.

If and when net metering caps in certain jurisdictions are reached, the value of the credit that customers receive for net metering will be significantly reduced, utility rate structures will be altered, or fees will be imposed on net metering customers, and future customers may be unable to recognize the same level of cost savings associated with net metering that current customers enjoy. The absence of favorable net metering policies or of net metering entirely, or the imposition of new charges that only or disproportionately impact customers that use net metering would significantly limit customer demand for our solar energy systems and the electricity they generate, could negatively affect existing customers and lead to missed payments or defaults, and could adversely impact our business, results of operations and future growth.

Our business has benefited from the declining cost of equipment, and our financial results may be harmed if the cost of equipment increases in the future.

During previous years, the declining cost of solar panels and the raw materials necessary to manufacture them has been a key driver in the price we charge for electricity and customer adoption of solar energy systems. Despite recent increases in solar panel prices due to the tariffs imposed in February 2018, industry experts indicate, and we have seen, that solar panel and raw material prices have generally declined. However, it is possible that prices will not decline at the same rate as they have over the past several years or that prices may increase. In addition, while the solar panel market has recently seen an increase in supply, growth in the solar industry and the resulting increase in demand for solar panels and the raw materials necessary to manufacture them may put upward pressure on prices. These resulting prices could slow our growth and cause our financial results to suffer. In addition, in the past we have purchased a substantial majority of the solar panels used in our solar energy systems from manufacturers headquartered in China; however, most of the manufacturing now takes place in other Asian countries, such as Malaysia and Vietnam. Changes in governmental support or regulation in China or the other countries where these products are manufactured could affect our ability to purchase panels on competitive terms, and access to specialized technologies could be restricted.

The U.S. government has imposed duties and tariffs on solar cells and could impose additional tariffs on solar cells manufactured outside the United States or implement additional restraints on trade. In January 2018, the President of the United States announced the imposition of safeguard measures for a period of four years that include (1) a 30% tariff on imports of solar cells not partially or fully assembled into other products and (2) a 30% tariff on imported solar panels. The tariff on imported solar panels will decline 5% each year in the second, third and fourth years. The safeguard measures went into effect in February 2018 and apply to imports from all foreign countries, including Mexico and Canada, except certain developing countries that are members of the World Trade Organization.

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In September 2018, the President of the United States announced the imposition of tariffs on $200billion of Chinese goods. Inverters imported from China are listed as subject to the new duties. Tariffs of 10% on inverters went into effect on September 24, 2018, and the tariffs were increased to 25% in May 2019. We are currently seeing various responses from inverter suppliers to the 25% tariff, as they pass on various portions of the tariff to the purchaser through price increases. We currently anticipate minimal impact from the President of the United States’ announcement on August 1, 2019 of an additional 10% tariff on $300 billion of Chinese goods, as the materials used in our business that are subject to these tariffsdo not represent a significant portion of our business.

These combined tariffs make affected solar cells less competitively priced in the United States, and the impacted manufacturers may choose to limit the amount of solar equipment they sell into the United States. The U.S. government may also take broader actions to protect U.S. based manufacturers against imports of solar cells manufactured outside the United States, such as in Southeast Asia, Japan, Germany and South Korea.

The safeguard measures have increased, and other potential tariffs could further increase, our costs of solar panels and other system components, potentially causing a significant impact on our system costs, business and prospects. If we are required to pay higher prices, accept less favorable terms or purchase solar panels or other system components from alternative, higher-priced sources, or if supply is otherwise constrained, our costs would increase significantly, and it may be less economical for us to serve certain markets, which would adversely affect our operating results and growth prospects.

Lack of success in System Sales could negatively impact our operating results and cash flows.

System Sales allow us to expand our product offerings and to enter into additional markets, such as those that prohibit third-party ownership of distributed solar energy systems or that lack a favorable net metering policy. System Sales represented approximately 15% of total megawatts installed in the six months ended June 30, 2019. Industry analysts have indicated that the number of customer-owned solar energy systems has increased significantly relative to third-party ownership in certain markets. Continued increases in the variety and availability of third-party loan financing products to consumers and outright solar energy system purchases could further facilitate this growth. If customer preferences or the residential solar energy market continue to shift toward solar energy system sales, and we are not successful in our efforts, we may lose market share, which could have an adverse effect on our business, operating results and growth prospects. To the extent we are unsuccessful in our efforts to sell solar energy systems or to work with third parties to finance those systems for our customers, our operating cash flows would be negatively affected, and our business and growth prospects would be adversely affected.

Our business is concentrated in California, putting us at risk of region-specific disruptions.

As of June 30, 2019, approximately 35% of our cumulative megawatts installed were located in California. In addition, we expect future installations to occur in California, which could further concentrate our customer base and operational infrastructure. Accordingly, our business and results of operations are particularly susceptible to adverse economic, regulatory, political, weather and other conditions in California and in other markets that may become similarly concentrated. As mentioned above, any adverse impacts to retail electric customers resulting from Pacific Gas and Electric Company’s bankruptcy proceedings could affect a significant portion of our customer base in light of the concentration of our customers in California.

Technical and regulatory limitations may significantly reduce our ability to sell electricity from our solar energy systems and retain employees in certain markets.

Technical and regulatory limits may curb our growth in certain key markets, which may also reduce our ability to retain employees in those markets. For example, the Federal Energy Regulatory Commission, in promulgating the first form small generator interconnection procedures, recommended limiting customer-sited intermittent generation resources, such as our solar energy systems, to a certain percentage of peak load on a given electrical feeder circuit. Similar limits have been adopted by many states as a de facto standard and could constrain our ability to market to customers in certain geographic areas where the concentration of solar installations exceeds this limit. Furthermore, in certain areas, we benefit from policies that allow for expedited or simplified procedures related to connecting solar energy systems to the power grid. If such procedures are changed or cease to be available, our ability to sell the electricity generated by solar energy systems we install may be adversely impacted. As adoption of solar distributed generation rises along with the commercial operation of utility scale solar generation in key markets such as California, the amount of solar energy being fed into the power grid will surpass the amount planned for relative to the amount of aggregate demand. Some traditional utilities claim that in less than five years, solar generation resources may reach a level capable of producing an over-generation situation, which may require some solar generation resources to be curtailed to maintain operation of the power grid. The adverse effects of such curtailment without compensation could adversely impact our business, results of operations and future growth.

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We have incurred operating losses before income taxes and may be unable to achieve or sustain profitability in the future.

We have incurred operating losses before income taxes since our inception. We incurred losses before income taxes of $119.5 million and $66.1 million for the six months ended June 30, 2019 and 2018. We expect to continue to incur losses before income taxes from operations as we finance our operations, expand our installation, engineering, administrative, sales and marketing staffs, and implement internal systems and infrastructure to support financing the installation of new solar energy systems. Our ability to achieve profitability depends on a number of factors, including:

• growing our customer base;

• finding investors willing to invest in our investment funds;

• maintaining and further reducing our cost of capital;

• reducing the time between system installation and interconnection to the power grid, which allows us to begin generating revenue;

• reducing the cost of components for our solar energy systems;

• maximizing the benefits of rebates, tax credits, SRECs and other available incentives;

• reducing our operating costs by optimizing our sales, design and installation processes and supply chain logistics; and

• managing our customer acquisition costs.

Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future.

The majority of our business is conducted using one channel, direct-to-home sales.

Historically, our primary sales channel has been a direct-to-home sales model. We also sell to customers through our inside sales team and have begun to sell through the homebuilder and retail distribution channels. However, we continue to acquire most of our customers through our direct-to-home sales channel. In addition, we have entered into various sales dealer agreements. We compete against companies with greater experience selling solar energy systems to customers through a number of distribution channels in addition to direct-to-home sales, including homebuilders, home improvement stores, large construction companies, electrical and roofing companies, the internet, and through relationships with other third parties. Our less diversified distribution channels may place us at a disadvantage with consumers who prefer to purchase products through these other distribution channels. If customers demonstrate a preference for other distribution channels, we may need to reduce our direct-selling efforts. We are also vulnerable to changes in laws related to direct sales and marketing that could impose additional limitations on unsolicited residential sales calls and may impose additional restrictions such as adjustments to our marketing materials and direct-selling processes, and new training for personnel. If additional laws affecting direct sales and marketing are passed in the markets in which we operate, it would take time to train our sales force to comply with such laws, and we may be exposed to fines or other penalties for violations of such laws. If we fail to compete effectively through our direct-selling efforts or are not successful in developing other sales channels, our financial condition, results of operations and growth prospects could be adversely affected.

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Expansion into new sales channels could be costly and time-consuming. As we enter homebuilder and retail channels, among other new channels, we could be at a disadvantage relative to other companies who have more history in these spaces.

Historically, our primary sales channel has been the direct-to-home sales model. As we continue to expand into other channels, such as the homebuilder and retail channels, we have and may continue to incur significant costs including but not limited to, fees related to meeting volume requirements and investments into inside sales to support these efforts. In addition, we may not initially or ever be successful in utilizing these new channels. Furthermore, we may not be able to compete successfully with companies with a historical presence in such channels, and we may not realize the anticipated benefits of entering such channels. Entering new channels poses numerous risks, including the following:

• incurrence of significant start-up costs to adapt our current processes or develop new sales processes for use in these channels;

• diversion of our management and employees from our core direct-to-home sales model;

• difficulty adapting our current marketing strategies or developing new marketing strategies to these new channels;

• inability to obtain key partners and the necessary volumes to remain viable in the retail space, both for us and for our retail partners;

• inability to compete successfully with companies with a historical presence in such channels; and

• inability to achieve the financial and strategic goals for these channels.

If we are unable to successfully compete in new channels, our operating results and growth prospects could be adversely affected.

We are highly dependent on our ability to attract, train and retain an effective sales force.

The success of our direct-to-home sales efforts depends upon the recruitment, retention and motivation of a large number of sales personnel to compensate for a high turnover rate, which is a common characteristic of a direct-selling business. In order to grow our business, we need to recruit, train and retain sales personnel on a continuing basis. Sales personnel are attracted to direct-selling by competitive earnings opportunities, and direct-sellers typically compete for sales personnel by providing a more competitive earnings opportunity than that offered by the competition. We believe competitors devote substantial effort to determining the effectiveness of such incentives so that they can invest in incentives that are the most cost effective or produce the best return on investment. We compensate our sales personnel on a commission basis, based on system size, contract rate and the expected number of hours the rooftop will be exposed to full sunlight. Some sales personnel may prefer a compensation structure that also includes a salary and equity incentive component. There is significant competition for sales talent in our industry, and from time to time we may need to adjust our compensation model to respond to this competition. These adjustments have caused and are expected to continue to cause our customer acquisition costs to increase and could otherwise adversely impact our operating results and financial performance.

In addition to our sales compensation model, our ability to recruit, train and retain effective sales personnel could be harmed by additional factors, including:

• any adverse publicity regarding us, our solar energy systems, our distribution channel or our industry;

• lack of interest in, or the technical failure of, our solar energy systems;

• lack of a compelling product or income opportunity that generates interest for potential new sales personnel, or perception that other product or income opportunities are more attractive;

• any negative public perception of our sales personnel and direct-selling businesses in general;

• any regulatory actions or charges against us or others in our industry;

• general economic and business conditions; and

• potential saturation or maturity levels in a given market, which could negatively impact our ability to attract and retain sales personnel in such market.

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We are subject to significant competition for the recruitment of sales personnel from other direct-selling companies and from other companies that sell solar energy systems in particular.Regional and district managers of our sales personnel are instrumental in recruiting, retaining and motivating our sales personnel. When managers have elected to leave us and join other companies, the sales personnel they supervise have often left with them. We may experience increased attrition in our sales personnel in the future, which may impact our results of operations and growth. The impact of such attrition could be particularly acute in those jurisdictions, such as California, where contractual non-competition agreements for service providers are not enforceable or are subject to significant limitations.It is therefore continually necessary to innovate and enhance our direct-selling and service model as well as to recruit and retain new sales personnel. If we are unable to do so, our business could be adversely affected.

We are not currently regulated as an electric utility under applicable law in the jurisdictions in which we operate (other than New York), but we may be subject to regulation as an electric utility in the future.

Except as described below with respect to New York, we are not regulated as a public utility in any of the markets in which we currently operate. As a result, we are not subject to the various federal, state and local standards, restrictions and regulatory requirements applicable to traditional utilities that operate transmission and distribution systems and that have an obligation to serve electric customers within a specified jurisdiction.

In October 2017, the Public Service Commission of the State of New York entered an order determining that residential rooftop solar energy providers are “electric corporations” (the term for electric utilities under New York state law) and requiring changes that will affect certain aspects of our business. The N.Y. Public Service Commission expanded its original order of October 2017 in March 2019. The order, which is part of a broader proceeding before the N.Y. Public Service Commission associated with regulating and overseeing distributed energy resource suppliers, is premised on the N.Y. Public Service Commission’s determination that it has the jurisdiction to oversee our business, and businesses like ours, in the same way that it oversees public utilities. Though the N.Y. Public Service Commission is, to our knowledge, the first state public commission to take the position that residential rooftop solar energy providers are subject to the same regulatory oversight as electric utilities, we understand from SEIA that other public service commissions are following what is happening in New York and may take similar action depending on the outcome, and the consumer protection order entered by the California Public Utilities Commission in October 2018 is premised, in part, on the notion that the California Public Utilities Commission has authority to regulate rooftop solar energy providers. If we were subject to the jurisdiction of public service commissions in the same or a similar way as public utilities, those commissions could take action that could materially affect our business operations.

Any additional federal, state, or local regulations that cause us to be treated as an electric utility, or to otherwise be subject to a similar regulatory regime of commission-approved operating tariffs, rate limitations, and related mandatory provisions, could place significant restrictions on our ability to operate our business and execute our business plan by prohibiting, restricting or otherwise regulating our sale of electricity. If we were subject to the same state or federal regulatory authorities as electric utilities in the United States or if new regulatory bodies were established to oversee our business in the United States, then our operating costs would materially increase.

Our business depends in part on the regulatory treatment of third-party owned solar energy systems.

We face regulatory hurdles in some states and jurisdictions, including states and jurisdictions that we intend to enter, where the laws and regulatory policies have not historically embraced competition to the service provided by the incumbent, vertically integrated electric utility. Some of the principal challenges pertain to whether non-customer owned systems qualify for the same levels of rebates or other non-tax incentives available for customer-owned solar energy systems, whether third-party owned systems are eligible at all for these incentives and whether third-party owned systems are eligible for net metering and the associated cost savings. Furthermore, in some states and utility territories third parties are limited in the way that they may deliver solar to their customers. In certain jurisdictions, laws have been interpreted to either prohibit the sale of electricity pursuant to our standard PPA or regulate entities making such sales, and in some cases, such laws have led residential solar energy system providers to use leases in lieu of PPAs. In other states, neither leases nor PPAs are permissible or commercially feasible. Changes in law and reductions in, eliminations of or additional application requirements for, these benefits could reduce demand for our systems, adversely impact our access to capital and could cause us to increase the price we charge our customers for energy.

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If the IRS or the U.S. Treasury Department makes a determination that the fair market value of our solar energy systems is materially lower than what we have reported in our fund tax returns, we may have to pay significant amounts to our investment funds, our fund investors and/or the U.S. government. Such determinations could have a material adverse effect on our business, financial condition and prospects.

We report in our fund tax returns that we and our fund investors claim the ITC based on the fair market value of our solar energy systems. The IRS continues to audit fair market value determinations industry-wide and is currently conducting an audit of one of our investment funds. We are not aware of any other ongoing audits or results of audits related to our appraisals or fair market value determinations of any of our investment funds. If as part of the current examination of one of our investment funds or an examination of any other fund, the IRS were to review the fair market value that we used to establish our basis for claiming ITCs and determine that the ITCs previously claimed should be reduced, we would owe certain of our investment funds or our fund investors an amount equal to 30% of the investor’s share (typically, 99%) of the difference between the fair market value used to establish our basis for claiming ITCs and the adjusted ITC basis determined by the IRS, plus any costs and expenses associated with a challenge to that fair market value, plus a gross up to pay for additional taxes. We could also be subject to tax liabilities, including interest and penalties, based on our share of claimed ITCs. To date, we have not been required to make such payments under any of our investment funds.

Rising interest rates could adversely impact our business.

Rising interest rates could have an adverse impact on our business by increasing our cost of capital. The majority of our cash flows to date have been from customer contracts that have been partially monetized under various investment fund structures. One of the components of this monetization is the present value of the payment streams from the customers who enter into these contracts. If the rate of return required by the fund investor rises as a result of a rise in interest rates, the present value of the customer payment stream and the total value that we are able to derive from monetizing the payment stream will each be reduced. Interest rates are at relatively low levels. If interest rates rise in the future, our costs of capital could increase.

The phase-out of LIBOR may adversely affect a portion of our outstanding debt.

The London Interbank Offered Rate, or LIBOR, is scheduled to be phased out by the end of 2021. It is unclear whether new methods of determining LIBOR will be established such that it continues to exist after 2021, or if alternative floating borrowing rates will be adopted. Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative floating borrowing rate, may adversely affect our borrowing costs. Certain of our debt instruments have interest rates that are LIBOR based and will not have matured prior to the phase-out of LIBOR. We cannot predict the effect of the potential changes to LIBOR or the establishment and use of alternative floating borrowing rates on the portion of our outstanding debt that is LIBOR based. Challenges in changing to a different borrowing rate may result in less favorable pricing on certain of our debt instruments and could have an adverse effect on our financial results and cash flows.

Our investment funds contain arrangements that provide for priority distributions to fund investors until they receive their targeted rates of return. In addition, under the terms of certain of our investment funds, we may be required to make payments to the fund investors if certain tax benefits that are allocated to such fund investors are not realized as expected. Our financial condition may be adversely impacted if a fund is required to make these priority distributions for a longer period than anticipated to achieve the fund investors’ targeted rates of return or if we are required to make any tax-related payments.

Our investment funds contain terms that contractually require the investment funds to make priority distributions to the fund investor, to the extent cash is available, until it achieves its targeted rate of return. The amounts of potential future distributions under these arrangements depends on the amounts and timing of receipt of cash flows into the investment fund, almost all of which is generated from customer payments related to solar energy systems that have been previously purchased (or leased, as applicable) by such fund. If such cash flows are lower than expected, the priority distributions to the investor may continue for longer than initially anticipated.

Additionally, certain of our investment funds require that, under certain circumstances, we forego distributions from the fund that we are otherwise contractually entitled to, or make capital contributions to the fund that can be redirected to the fund investor such that it achieves the targeted return. These forgone distributions or capital contributions will generally occur if the fund investor has not achieved its targeted return prior to the target flip date of the investment fund. None of our investment funds have reached their target flip date, and we anticipate that the first target flip date in which a fund investor is required to have achieved its targeted return is July 1, 2020.

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Our fund investors also expect returns partially in the form of tax benefits and, to enable such returns, our investment funds contain terms that contractually require us to make payments to the funds that are then used to make payments to the fund investor in certain circumstances so that the fund investor receives value equivalent to the tax benefits it expected to receive when it entered into the transaction. The amounts of potential tax payments under these arrangements depend on the tax benefits that accrue to such investors from the funds’ activities and, in some cases, may be impacted by changes in tax law.

Due to uncertainties associated with estimating the timing and amounts of these cash distributions and allocations of tax benefits to such investors, we cannot determine the potential maximum future impact on our cash flows or payments that could occur under these arrangements. We may agree to similar terms in the future if market conditions require it. Any significant payments that we may be required to make or distributions to us that are reduced or diverted as a result of these arrangements could adversely affect our financial condition.

We may incur substantially more debt or take other actions that could restrict our ability to pursue our business strategies.

As of June 30, 2019, we and our subsidiaries had outstanding $1.4 billion in principal amount of indebtedness, including through debt facilities and asset-backed securities issued by our subsidiaries. As of June 30, 2019, we had up to $413.4 million of unused borrowing capacity remaining. These debt facilities restrict our ability to dispose of assets, incur indebtedness, incur liens, pay dividends or make other distributions to holders of our capital stock, repurchase our capital stock, make specified investments or engage in transactions with our affiliates. In addition, we do not have full access to the cash and cash equivalents held in our investments funds until it is distributed per the terms of the arrangements. We and our subsidiaries may incur substantial additional debt in the future, and any debt instrument we enter into in the future may contain similar, or more onerous, restrictions. These restrictions could inhibit our ability to pursue our business strategies. Additionally, our ability to make scheduled payments depends on our operating performance, which is subject to economic, financial, competitive and other factors that may be beyond our control. Furthermore, if we default on one of our debt instruments, and such event of default is not cured or waived, the lenders could terminate commitments to lend and cause all amounts outstanding with respect to the debt to be due and payable immediately, which in turn could result in cross acceleration under other debt instruments. Our assets and cash flow may not be sufficient to fully repay borrowings under all of our outstanding debt instruments if some or all of these instruments are accelerated upon a default.

Furthermore, there is no assurance that we will be able to raise additional capital through the asset-backed securities market or other secured or unsecured debt markets or enter into new debt instruments on acceptable terms. If we are unable to satisfy financial covenants and other terms under existing or new instruments or obtain waivers or forbearance from our lenders or if we are unable to obtain refinancing or new financings for our working capital, equipment and other needs on acceptable terms if and when needed, our business would be adversely affected.

Residential solar energy is an evolving market, which makes it difficult to evaluate our prospects.

The residential solar energy industry is constantly evolving, which makes it difficult to evaluate our prospects. We cannot be certain if historical growth rates reflect future opportunities or whether growth anticipated by us or industry analysts will be realized. Any future growth of the residential solar energy market and the success of our solar energy systems depend on many factors beyond our control, including recognition and acceptance of the residential solar energy market by consumers, the pricing of alternative sources of energy, a favorable regulatory environment, the continuation of expected tax benefits and other incentives and our ability to provide our solar energy systems cost-effectively. If the markets for residential solar energy do not develop at the rate we expect, our business may be adversely affected.

Additionally, there is limited empirical evidence regarding the effect solar energy systems have on the resale value of customers’ houses. Due to the length of our customer contracts, the system deployed on a customer’s roof may be outdated prior to the expiration of the term of the customer contract reducing the likelihood of renewal of our contracts at the end of the 20-year term, and possibly increasing the occurrence of defaults. This could have an adverse effect on our business, financial condition, results of operations and cash flow. As a result, we may be unable to accurately forecast our future performance and to invest accordingly.

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We face competition from traditional regulated electric utilities, from less-regulated third party energy service providers, other solar companies and from new renewable energy companies.

The solar energy and renewable energy industries are both highly competitive and continually evolving as participants strive to distinguish themselves within their markets and compete with large traditional utilities. We believe that our primary competitors are the traditional utilities that supply electricity to our potential customers. Traditional utilities generally have substantially greater financial, technical, operational and other resources than we do. As a result, these competitors may be able to devote more resources to the research, development, promotion and sale of their products or respond more quickly to evolving industry standards and changes in market conditions than we can, including the ability to initiate proceedings before state public utility commissions to reduce the value of net metering. Traditional utilities could also offer other value-added products or services that could help them to compete with us even if the cost of electricity they offer is higher than ours. In addition, a majority of utilities’ sources of electricity is non-solar, which may allow utilities to sell electricity more cheaply than electricity generated by our solar energy systems.

We also compete with companies that are not regulated like traditional utilities but that have access to the traditional utility electricity transmission and distribution infrastructure pursuant to state and local pro-competitive and consumer choice policies. These energy service companies are able to offer customers electricity supply-only solutions that are competitive with our solar energy system options on both price and usage of renewable energy technology while avoiding the long-term agreements and physical installations that our current fund-financed business model requires. This may limit our ability to attract new customers, particularly those who wish to avoid long-term contracts or have an aesthetic or other objection to putting solar panels on their roofs.

Additionally, we compete with solar companies with business models that are similar to ours. Some of these competitors have a higher degree of brand name recognition, differing business and pricing strategies, and greater capital resources than we have, as well as extensive knowledge of our target markets. In addition, our System Sales face increasing competition from other national and local solar energy companies who sell solar energy systems and may offer a broader suite of companion products. We believe the solar industry is becoming increasingly commoditized, and if we are unable to offer differentiated products, establish or maintain a consumer brand that resonates with homeowners or compete with the pricing offered by our competitors, our sales and market share position may be adversely affected.

In addition, we compete with solar companies in the downstream value chain of solar energy. For example, we face competition from purely finance driven organizations that acquire customers and then subcontract out the installation of solar energy systems, from installation businesses that seek financing from external parties, from large construction companies and utilities, and from electrical and roofing companies. Some of these competitors specialize in the residential solar energy market, and some may provide energy at lower costs than we do. Additionally, some of our competitors may offer their products through sales channels that we do not access or that they have more fully developed. Many of our competitors also have significant brand name recognition and have extensive knowledge of our target markets. For us to remain competitive, we must distinguish ourselves from our competitors by offering an integrated approach that successfully competes with each level of products and services offered by our competitors at various points in the value chain. If our competitors develop an integrated approach similar to ours including sales, financing, engineering, manufacturing, installation, maintenance and monitoring services, this will reduce our marketplace differentiation.

We also compete with solar companies that offer community solar products and utility companies that provide renewable power purchase programs. Some customers might choose to subscribe to a community solar project or renewable subscriber programs instead of installing a solar energy system on their home, which could affect our sales. Additionally, some utility companies (and some utility-like entities, such as community choice aggregators in California) have generation portfolios that are increasingly renewable in nature. In California, for example, due to recent legislation, utility companies and community choice aggregators in that state are required to have generation portfolios comprised of 60% renewable energy by 2030, and state regulators are planning for utility companies and community choice aggregators to sell 100% greenhouse gas free electricity to retail customers by 2045. As utility companies in California and elsewhere offer increasingly renewable portfolios to retail customers, those customers might be less inclined to install a solar energy system at their home, which could adversely affect our growth.

As the solar industry grows and evolves, we will also face new competitors who are not currently in the market. Our industry is characterized by low technological barriers to entry, and well-capitalized companies could choose to enter the market and compete with us. Our failure to adapt to changing market conditions and to compete successfully with existing or new competitors will limit our growth and will have a material adverse effect on our business and prospects.

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Developments in alternative technologies or improvements in distributed solar energy generation may materially adversely affect demand for our offerings.

Significant developments in alternative technologies, such as advances in other forms of distributed solar power generation, storage solutions such as batteries, the widespread use or adoption of fuel cells for residential or commercial properties or improvements in other forms of centralized power production may materially and adversely affect our business and prospects in ways we do not currently anticipate. Any failure by us to adopt new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay deployment of our solar energy systems, which could result in product obsolescence, the loss of competitiveness of our systems, decreased revenue and a loss of market share to competitors.

A failure to hire and retain a sufficient number of employees in key functions would constrain our ability to timely complete our customers’ projects.

To support our business, we need to hire, train, deploy, manage and retain a substantial number of skilled installers and electricians in the markets where there is heightened or increasing demand for solar energy products. Competition for qualified personnel in our industry has increased substantially, and we expect it to continue to do so, particularly for skilled electricians and other personnel involved in the installation of solar energy systems. We also compete with the homebuilding and construction industries for skilled labor. As these industries seek to hire additional workers, our cost of labor may increase. Companies with whom we compete to hire installers may offer compensation or incentive plans that certain installers may view as more favorable. We periodically assess the compensation plans and policies for our service providers, including our installers and electricians and, if deemed necessary, may decide to revise those plans and policies. Our installers and electricians may not react well to any such revisions, which in turn could adversely affect retention, motivation and productivity. Additionally, we continually monitor our workforce requirements in the markets in which we operate. Any workforce reductions in markets where sales volume does not support the number of installation and other personnel could in turn adversely affect retention, motivation and productivity. We may also subcontract certain aspects of the installation process to independent contractors. Training these independent contractors and monitoring them for compliance with our policies may require significant management oversight and may present additional risks and challenges compared to those related to managing our employees.

Furthermore, trained installers are typically able to more efficiently install solar energy systems. Shortages of skilled labor could significantly delay installations or otherwise increase our costs. While we do not currently have any unionized employees, we have expanded, and may continue to expand, into areas where labor unions are more prevalent. The unionization of our labor force could also increase our labor costs. In addition, a significant portion of our business has been concentrated in states such as California, where market conditions are particularly favorable to distributed solar energy generation. We have experienced and may in the future experience greater than expected turnover in our installers in those jurisdictions which would adversely impact the geographic mix of new solar energy system installations.

Because we are a licensed electrical contractor in every jurisdiction in which we operate, we are required to employ licensed electricians. As we expand into new markets, we are required to hire and/or contract with seasoned licensed electricians in order for us to qualify for the requisite state and local licenses. Because of the high demand for these seasoned licensed electricians, these individuals currently or in the future may demand greater compensation. In addition, our inability to attract and retain these qualifying electricians may adversely impact our ability to continue operations in current markets or expand into new areas.

If we cannot meet our hiring, retention and efficiency goals, we may be unable to complete our customers’ projects on time, in an acceptable manner or at all. Any significant failures in this regard would materially impair our growth, reputation, business and financial results. If we are required to pay higher compensation than we anticipate, these greater expenses may also adversely impact our financial results and the growth of our business.

We typically act as the licensed general contractor for our customers and are subject to risks associated with construction, cost overruns, delays, regulatory compliance and other contingencies, any of which could have a material adverse effect on our business and results of operations.

We are a licensed contractor in every market we service, and we are typically responsible for every customer installation. We are the general contractor, electrician, construction manager and installer for nearly all our solar energy systems. We may be liable to customers for any damage we cause to their home, belongings or property during the installation of our systems, including any re-roofing services provided under our contracts. In addition, because the solar energy systems we deploy are high-voltage energy systems, we may incur liability for the failure to comply with electrical standards and manufacturer recommendations. Furthermore, prior to obtaining permission to operate our solar energy systems, the systems must pass various inspections. Any delay in passing, or inability to pass, such inspections, would adversely affect our results of operations. Because our profit on a particular installation is based in part on assumptions as to the cost of such project, damage for which we are liable, cost overruns, delays or other execution issues may cause us not to achieve our expected results or cover our costs for that project.

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In addition, the installation of solar energy systems is subject to oversight and regulation in accordance with national, state and local laws and ordinances relating to building, fire and electrical codes, safety, environmental protection, utility interconnection and metering, and related matters. We also rely on certain of our employees to maintain professional licenses in many of the jurisdictions in which we operate, and our failure to employ properly licensed personnel could adversely affect our licensing status in those jurisdictions. It is difficult and costly to track the requirements of every authority having jurisdiction over our operations and our solar energy systems. Any new government regulations or utility policies pertaining to our systems, or changes to existing government regulations or utility policies pertaining to our systems, may result in significant additional expenses to us and our customers and, as a result, could cause a significant reduction in demand for our systems.

We depend on a limited number of suppliers of solar energy system components and technologies to adequately meet anticipated demand for our solar energy systems. Due to the limited number of suppliers in our industry, the acquisition of any of these suppliers by a competitor or any shortage, delay, price change, imposition of tariffs or duties or other limitation in our ability to obtain components or technologies we use could result in sales and installation delays, cancellations and loss of market share.

We purchase solar panels, inverters and other system components from a limited number of suppliers, making us susceptible to quality issues, shortages and price changes. If we fail to develop, maintain and expand our relationships with our suppliers, our ability to adequately meet anticipated demand for our solar energy systems may be adversely affected, or we may only be able to offer our systems at higher costs or after delays. If one or more of the suppliers that we rely upon to meet anticipated demand ceases or reduces production due to its financial condition, acquisition by a competitor or otherwise, is unable to increase production as industry demand increases or is otherwise unable to allocate sufficient production to us, it may be difficult to quickly identify alternative suppliers or to qualify alternative products on commercially reasonable terms, and our ability to satisfy this demand may be adversely affected. There are a limited number of suppliers of solar energy system components and technologies. While we believe there are other sources of supply for these products available, transitioning to a new supplier may result in additional costs and delays in acquiring our solar products and deploying our systems, and may require us to obtain the approval of our financing partners in order to utilize new products. These issues could harm our business or financial performance.

There have also been periods of industry-wide shortages of key components, including solar panels, in times of rapid industry growth. The manufacturing infrastructure for some of these components has a long lead-time, requires significant capital investment and relies on the continued availability of key commodity materials, potentially resulting in an inability to meet demand for these components. The solar industry is growing and, as a result, shortages of key components, including solar panels, may be more likely to occur, which in turn may result in price increases for such components. Even if industry-wide shortages do not occur, suppliers may decide to allocate key components with high demand or insufficient production capacity to more profitable customers, customers with long-term supply agreements or customers other than us and our supply of such components may be reduced as a result.

We have entered into multi-year agreements with certain of our major suppliers, some of which include purchase commitments through December 2019. These agreements are denominated in U.S. dollars. Since our revenue is also generated in U.S. dollars, we are mostly insulated from currency fluctuations. However, since our suppliers often incur a significant amount of their costs by purchasing raw materials and generating operating expenses in foreign currencies, if the value of the U.S. dollar depreciates significantly or for a prolonged period of time against these other currencies, this may cause our suppliers to raise the prices they charge us, which could harm our financial results. As noted above, the U.S. government has imposed a 30% tariff (decreasing by 5% each year for four years) on imports of solar cells not partially or fully assembled into other products and a 30% tariff (decreasing by 5% each year for four years) on imported solar panels from most foreign countries. It is unclear what further actions the current U.S. presidential administration may take with respect to existing and proposed trade agreements, or restrictions on trade generally. The existing tariffs, and any new tariffs, duties or other trade measures, or shortages, delays, price changes or other limitation in our ability to obtain components or technologies we use could limit our growth, cause cancellations or adversely affect our profitability, and result in loss of market share and damage to our brand.

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Our operating results may fluctuate from quarter to quarter and year to year, which could make our future performance difficult to predict and could cause our operating results for a particular period to fall below expectations, resulting in a severe decline in the price of our common stock.

Our quarterly and annual operating results are difficult to predict and may fluctuate significantly in the future. We have experienced seasonal and quarterly fluctuations in the past. However, given that we are in a growing industry, the true extent of these fluctuations may have been masked by our historical growth rates and thus may not be readily apparent from our historical operating results and may be difficult to predict. For example, the amount of revenue we recognize in a given period depends in part on the types of customer contracts we have entered into—because revenue from System Sales is recognized when the system is placed into service whereas revenue from our PPAs and Solar Leases is recognized over the contract life, which is typically 20 years—and, in the case of PPAs and Solar Leases is dependent in part on the amount of energy generated by solar energy systems under such contracts. As a result, revenue derived from PPAs is impacted by seasonally shorter daylight hours in winter months. In addition, our ability to install solar energy systems is impacted by weather, such as during the winter months in the Northeast. Such delays can impact the timing of when we can install and begin to generate revenue from solar energy systems. As such, our past quarterly operating results may not be good indicators of future performance.

In addition to the other risks described in this “Risk Factors” section, the following factors could cause our operating results to fluctuate:

• the expiration or initiation of any rebates or incentives;

• significant fluctuations in customer demand for our offerings;

• our ability to complete installations and interconnect to the power grid in a timely manner;

• the availability and costs of suitable financing;

• the amount and timing of sales of SRECs;

• our ability to continue to expand our operations, and the amount and timing of, and our ability to manage, related expenditures;

• actual or anticipated changes in our growth rate relative to our competitors;

• announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments;

• changes in our pricing policies or terms or those of our competitors, including traditional utilities; and

• actual or anticipated developments in our competitors’ businesses or the competitive landscape.

For these or other reasons, the results of any prior quarterly or annual periods should not be relied upon as indications of our future performance. In addition, our actual revenue, key operating metrics and other operating results in future periods may fall short of the expectations of investors and financial analysts, which could have an adverse effect on the trading price of our common stock.

The profitability and residual value of our solar energy systems during and at the end of the associated term of the PPA or Solar Lease may be lower than projected today and adversely affect our financial performance and valuation.

We maintain ownership of the solar energy systems that we install under our PPAs or Solar Leases. We amortize the costs of our solar energy systems over a 30-year estimated useful life, which exceeds the period of the component warranties and the corresponding payment streams from our contracts with our customers. If we incur repair and maintenance costs on these systems after the warranties have expired, and if they then fail or malfunction, we will be liable for the expense of repairing these systems without a chance of recovery from our suppliers. We are also contractually obligated to remove, store and reinstall the solar energy systems, in many cases for a nominal fee, if customers need to replace or repair their roofs. However, customer fees may not cover our costs to remove, store and reinstall the solar energy systems. In addition, we typically bear the cost of removing the solar energy systems at the end of the term of the customer contract if the customer does not renew his or her contract or purchase the system. Furthermore, it is difficult to predict how future environmental regulations may affect the costs associated with the removal, disposal or recycling of our solar energy systems. We also face other factors that could increase the costs or diminish the production of a solar energy system, such as unanticipated damage or malfunctions, animal interference and weather-related matters. If the residual value of the systems is less than we expect at the end of the customer contract, after giving effect to any associated removal and redeployment costs, we may be required to accelerate all or some of the remaining unamortized costs. If the profitability or the residual value of the systems is lower than expected, this could materially impair our future operating results and estimated retained value.

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Compliance with occupational safety and health requirements and best practices can be costly, and noncompliance with such requirements may result in potentially significant monetary penalties, operational delays and adverse publicity.

The installation of solar energy systems requires our employees to work at heights with complicated and potentially dangerous electrical systems and at potentially high temperatures. The evaluation and modification of buildings as part of the installation process requires our employees to work in locations that may contain potentially dangerous levels of asbestos, lead, mold or other materials known or believed to be hazardous to human health. We also maintain a fleet of over 850 trucks and other vehicles to support our installers and operations. There is substantial risk of serious injury or death if proper safety procedures are not followed. Our operations are subject to regulation under OSHA, DOT, and equivalent state laws. Changes to OSHA, DOT or state requirements, or stricter interpretation or enforcement of existing laws or regulations, could result in increased costs. If we fail to comply with applicable OSHA regulations, even if no work-related serious injury or death occurs, we may be subject to civil or criminal enforcement and be required to pay substantial penalties, incur significant capital expenditures or suspend or limit operations. We could be exposed to increased liability in the future. In the past, we have had workplace accidents and received citations from OSHA regulators for alleged safety violations, resulting in fines. Any such accidents, citations, violations, injuries or failure to comply with industry best practices may subject us to adverse publicity, damage our reputation and competitive position and adversely affect our business or financial performance.

Problems with product quality or performance may cause us to incur expenses, may lower the residual value of our solar energy systems and may damage our market reputation and adversely affect our financial results.

We agree to maintain the solar energy systems installed on our customers’ homes in connection with a PPA or Solar Lease during the length of the term of our customer contracts, which is typically 20 years. We are exposed to any liabilities arising from the systems’ failure to operate properly and are generally under an obligation to ensure that each system remains in good condition during the term of the agreement. We also agree to provide a workmanship warranty for the solar energy systems we sell to customers for a period of one to ten years and in many cases have agreed to operate and maintain those systems for no additional charge. As part of our operations and maintenance work, we provide a pass-through of the inverter and panel manufacturers’ warranty coverage to our System Sales customers, which generally range from ten to 20 years. We also take advantage of manufacturers’ warranty coverage when maintaining solar energy systems installed under PPAs and Solar Leases. One or more of these third-party manufacturers could cease operations and no longer honor these warranties, leaving us to fulfill these potential obligations to our customers or to our fund investors without underlying warranty coverage. We, either ourselves or through our investment funds, bear the cost of such major equipment. Even if the investment fund bears the direct expense of such replacement equipment, we could suffer financial losses associated with a loss of production from the solar energy systems.

To be competitive in the market and to comply with the requirements of our jurisdictions, our Solar Leases contain a performance guarantee in favor of the lessee. Solar Leases with performance guarantees require us to refund certain payments to the lessee if the solar energy system fails to generate a stated minimum amount of electricity in a 12-month period. We may also suffer financial losses associated with such refunds if significant performance guarantee payments are triggered.

Our failure to accurately predict future liabilities related to material quality or performance expenses could result in unexpected volatility in our financial condition. Because of the long estimated useful life of our solar energy systems, we have been required to make assumptions and apply judgments regarding a number of factors, including our anticipated rate of warranty claims, and the durability, performance and reliability of our solar energy systems. We have made these assumptions based on the historic performance of similar systems or on accelerated life cycle testing. Our assumptions could prove to be materially different from the actual performance of our systems, causing us to incur substantial expense to repair or replace defective solar energy systems in the future or to compensate customers for systems that do not meet their performance guarantees. Equipment defects, serial defects or operational deficiencies also would reduce our revenue from customer contracts because the customer payments under such agreements are dependent on system production or would require us to make refunds under performance guarantees. Any widespread product failures or operating deficiencies may damage our market reputation and adversely impact our financial results.

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We are responsible for providing maintenance, repair and billing on solar energy systems that are owned or leased by our investment funds on a fixed fee basis, and our financial performance could be adversely affected if our cost of providing such services is higher than we project.

We typically provide a workmanship warranty for periods of five to 20 years to our investment funds for every system we sell to them. We are also generally contractually obligated to cover the cost of maintenance, repair and billing on any solar energy systems that we sell or lease to our investment funds. We are subject to a maintenance services agreement under which we are required to operate and maintain the system and perform customer billing services for a fixed fee that is calculated to cover our future expected maintenance and servicing costs of the solar energy systems in each investment fund over the term of the PPA or Solar Lease with the covered customers. If our solar energy systems require an above-average number of repairs or if the cost of repairing systems were higher than our estimate, we would need to perform such repairs without additional compensation. If our solar energy systems are damaged in the event of a natural disaster beyond our control, such as an earthquake, tornado, wildfire, tsunami or hurricane, losses could be outside the scope of insurance policies or exceed insurance policy limits, and we could incur unforeseen costs that could harm our business and financial condition. We may also incur significant costs for taking other actions in preparation for, or in reaction to, such events. When required to do so under the terms of a particular investment fund, we purchase property and business interruption insurance or other insurance policies with industry standard coverage and limits approved by the investor’s third-party insurance advisors to hedge against risk, but such coverage may not cover our losses, and we have not acquired such coverage for all of our funds.

Product liability claims against us or accidents could result in adverse publicity and potentially significant monetary damages.

If our solar energy systems or other products were to injure someone, we could be exposed to product liability claims. In addition, it is possible that our products could cause property damage as a result of product malfunctions, defects, improper installation, fire or other causes. We rely on our general liability insurance to cover product liability claims. Any product liability claims we face could be expensive to defend and divert management’s attention. The successful assertion of product liability claims against us could result in potentially significant monetary damages, penalties or fines, increase our insurance rates, subject us to adverse publicity, damage our reputation and competitive position and adversely affect sales of our systems and other products. In addition, product liability claims, injuries, defects or other problems experienced by other companies in the residential solar industry could lead to unfavorable market conditions to the industry as a whole and may have an adverse effect on our ability to attract new customers, thus affecting our growth and financial performance.

Failure by our component suppliers to use ethical business practices and comply with applicable laws and regulations may adversely affect our business.

We do not control our suppliers or their business practices. Accordingly, we cannot guarantee that they follow ethical business practices such as fair wage practices and compliance with environmental, safety and other local laws. A lack of demonstrated compliance could lead us to seek alternative suppliers, which could increase our costs and result in delayed delivery of our products, product shortages or other disruptions of our operations. Violation of labor or other laws by our suppliers or the divergence of a supplier’s labor or other practices from those generally accepted as ethical in the United States or other markets in which we do business could also attract negative publicity for us and harm our business.

Damage to our brand and reputation, or change or loss of use of our brand, could harm our business and results of operations.

We depend significantly on our reputation for high-quality products, best-in-class customer service and the brand name “Vivint Solar” to attract new customers and grow our business. If we fail to continue to deliver our solar energy systems within the planned timelines, if our offerings do not perform as anticipated or if we damage any of our customers’ properties or delay or cancel projects, our brand and reputation could be significantly impaired. Future technical improvements may allow us to offer lower prices or offer new technology to new customers; however, technical limitations in our current solar energy systems may prevent us from offering such lower prices or new technology to our existing customers. The inability of our current customers to benefit from technological improvements could cause our existing customers to lower the value they perceive our existing products offer and impair our brand and reputation.

We have focused particular attention on growing our direct-to-home sales force, leading us in some instances to take on candidates who we later determined did not meet our standards. In addition, given the sheer number of interactions our sales and other personnel have with customers and potential customers, it is inevitable that some customers’ and potential customers’ interactions with our company will be perceived as less than satisfactory. This has led to instances of customer complaints, some of which have affected our digital footprint on rating websites and social media platforms. If we cannot manage our hiring and training processes to avoid or minimize these issues to the extent possible, our reputation may be harmed and our ability to attract new customers would suffer.

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Given our relationship with our sister company Vivint and the similarity in our names, customers may associate us with any problems experienced with Vivint, such as complaints with the Better Business Bureau. Because we have no control over Vivint, we cannot take remedial action to cure any issues Vivint has with its customers, and our brand and reputation may be harmed if we are mistaken for the same company.

In addition, if we were to no longer use, lose the right to continue to use, or if others use, the “Vivint Solar” brand, we could lose recognition in the marketplace among customers, suppliers and partners, which could affect our growth and financial performance, and would require financial and other investment, and management attention in new branding, which may not be as successful.

Marketplace confidence in our liquidity and long-term business prospects is important for building and maintaining our business.

Our financial condition, operating results and business prospects may suffer materially if we are unable to establish and maintain confidence about our liquidity and business prospects among consumers and within our industry. Our solar energy systems require ongoing maintenance and support. If we were to reduce operations now or in the future, existing buyers of our systems might have difficulty in having us repair or service our systems, which remain our responsibility under the terms of many of our customer contracts. As a result, consumers may be less likely to purchase our solar energy systems now if they are uncertain that our business will succeed or that our operations will continue for many years. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with us if they are not convinced that our business will succeed. Accordingly, in order to build and maintain our business, we must maintain confidence among customers, suppliers and other parties in our liquidity and long-term business prospects. We may not succeed in our efforts to build this confidence.

If we fail to manage our recent and future operations and growth effectively, we may be unable to execute our business plan, maintain high levels of customer service or adequately address competitive challenges.

We have experienced growth in recent periods with the cumulative capacity of our solar energy systems growing from 1,060.9 megawatts as of December 31, 2018 to 1,162.5 megawatts as of June 30, 2019, and we intend to continue to expand our business within existing markets, in a number of new locations and through new sales channels in the future. This growth has placed, and any future growth may place, a strain on our management, operational and financial infrastructure. Our operations, growth and expansion require significant time and effort on the part of our management team as it is required to maintain and expand our relationships with customers, suppliers and other third parties and attract new customers, suppliers, sales channel partners and financing, as well as manage multiple geographic locations.

In addition, our current and planned operations, personnel, information technology and other systems and procedures might be inadequate to support our future growth and may require us to make additional unanticipated investments in our infrastructure. Our success and ability to further scale our business will depend, in part, on our ability to manage these changes in a cost-effective and efficient manner.

If we cannot manage our operations and growth, we may be unable to meet our or industry analysts’ expectations regarding growth, opportunity and financial targets, take advantage of market opportunities, execute our business strategies, meet our investment fund commitments or respond to competitive pressures. This could also result in declines in quality or customer satisfaction, increased costs, difficulties in introducing new offerings or other operational difficulties. Any failure to effectively manage our operations and growth could adversely impact our business and reputation.

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Expansion into new markets could be costly and time-consuming. Historically, we have only provided our offerings to residential customers, which could put us at a disadvantage relative to companies who also compete in other markets.

We have historically only provided our offerings to residential customers. We compete with companies who sell solar energy systems in the commercial, industrial and government markets, in addition to the residential market. While we believe that in the future we could have opportunities to expand our operations into other markets, there are no assurances that our design and installation systems will work for non-residential customers or that we will be able to compete successfully with companies with historical presences in such markets or we may not realize the anticipated benefits of entering such markets, and entering new markets has numerous risks, including the following:

• incurring significant costs if we are required to adapt our current or develop new design and installation processes for use in non-residential applications;

• diversion of our management and employees from our core residential business;

• difficulty adapting our current or developing new marketing strategies and sales channels to non-residential customers;

• inability to obtain key customers, brand recognition and market share and compete successfully with companies with historical presences in such markets; and

• inability to achieve the financial and strategic goals for such market.

If we choose to pursue opportunities in additional markets, including batteries or electric vehicle charging stations, and are unable to successfully compete in such markets, our operating results and growth prospects could be materially adversely affected. Additionally, there is intense competition in the residential solar energy market in the markets in which we operate. As new entrants continue to enter into these markets, we may be unable to gain or maintain market share and we may be unable to compete with companies that earn revenue in both the residential market and non-residential markets.

We may not realize the anticipated benefits of future acquisitions, and integration of these acquisitions may disrupt our business and management.

In the future we may acquire companies, project pipelines, products or technologies or enter into joint ventures or other strategic initiatives. We may not realize the anticipated benefits of any future acquisition, and any acquisition has numerous risks. These risks include the following:

• difficulty in assimilating the operations and personnel of the acquired company;

• difficulty in effectively integrating the acquired technologies or products with our current technologies;

• difficulty in maintaining controls, procedures and policies during the transition and integration;

• disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges due to integration issues;

• difficulty integrating the acquired company’s accounting, management information and other administrative systems;

• inability to retain key technical and managerial personnel of the acquired business;

• inability to retain key customers, vendors and other business partners of the acquired business;

• inability to achieve the financial and strategic goals for the acquired and combined businesses;

• incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;

• potential failure of the due diligence processes to identify significant issues with product quality, intellectual property infringement and other legal and financial liabilities, among other things;

• potential inability to assert that internal controls over financial reporting are effective; and

• potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent such acquisitions.

Mergers and acquisitions of companies are inherently risky, and if we do not complete the integration of acquired businesses successfully and in a timely manner, we may not realize the anticipated benefits of the acquisitions to the extent anticipated, which could adversely affect our business, financial condition or results of operations.

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The loss of one or more members of our senior management or key employees may adversely affect our ability to implement our strategy.

We are highly dependent on the efforts and abilities of the principal members of our senior management team, and the loss of one or more key executives could have a negative impact on our business.

We also depend on our ability to retain and motivate key employees and attract qualified new employees. None of our key executives are bound by employment agreements for any specific term, and we do not maintain key person life insurance policies on any of our executive officers. Our compensation structure, which includes salary, bonus, equity and benefits components, is important to our ability to attract, retain and motivate our employees. If we do not provide adequate compensation, or appropriately structure our equity grants, we may be unable to maintain our current workforce or attract new talent in the future, and we may be unable to replace key members of our management team and key employees if we lose their services. Integrating new employees into our team could prove disruptive to our operations, require substantial resources and management attention and ultimately prove unsuccessful. An inability to attract and retain sufficient managerial personnel who have critical industry experience and relationships could limit or delay our strategic efforts, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

We may be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies.

Third parties, including our competitors, may own patents or other intellectual property rights that cover aspects of our technology or business methods. Such parties may claim we have misappropriated, misused, violated or infringed third party intellectual property rights, and, if we gain greater recognition in the market, we face a higher risk of being the subject of claims that we have violated others’ intellectual property rights. Any claim that we violate a third party’s intellectual property rights, whether with or without merit, could be time-consuming, expensive to settle or litigate and could divert our management’s attention and other resources. If we do not successfully settle or defend an intellectual property claim, we could be liable for significant monetary damages and could be prohibited from continuing to use certain technology, business methods, content or brands. To avoid a prohibition, we could seek a license from third parties, which could require us to pay significant royalties, increasing our operating expenses. If a license is not available at all or not available on reasonable terms, we may be required to develop or license a non-violating alternative, either of which could require significant effort and expense. If we cannot license or develop a non-violating alternative, we would be forced to limit or stop sales of our offerings and may be unable to effectively compete. Any of these results would adversely affect our business, results of operations, financial condition and cash flows. To deter other companies from making intellectual property claims against us or to gain leverage in settlement negotiations, we may be forced to significantly increase the size of our intellectual property portfolio through internal efforts and acquisitions from third parties, both of which could require significant expenditures. However, a robust intellectual property portfolio may provide little or no deterrence, particularly for patent holding companies or other patent owners that have no relevant product revenues.

We use “open source” software in our solutions, which may restrict how we distribute our offerings, require that we release the source code of certain software subject to open source licenses or subject us to possible litigation or other actions that could adversely affect our business.

We currently use in our solutions, and expect to continue to use in the future, software that is licensed under so-called “open source,” “free” or other similar licenses. Open source software is made available to the general public on an “as-is” basis under the terms of a non-negotiable license. We currently combine our proprietary software with open source software but not in a manner that we believe requires the release of the source code of our proprietary software to the public. We do not plan to integrate our proprietary software with open source software in ways that would require the release of the source code of our proprietary software to the public, however, our use and distribution of open source software may entail greater risks than use of third-party commercial software. Open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. In addition, if we combine our proprietary software with open source software in a certain manner, we could, under certain open source licenses, be required to release to the public or remove the source code of our proprietary software. We may also face claims alleging noncompliance with open source license terms or infringement or misappropriation of proprietary software. These claims could result in litigation, require us to purchase a costly license or remove the software. In addition, if the license terms for open source software that we use change, we may be forced to re-engineer our solutions, incur additional costs or discontinue the sale of our offerings if re-engineering could not be accomplished on a timely basis. Although we monitor our use of open source software to avoid subjecting our offerings to unintended conditions, few courts have interpreted open source licenses, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our offerings. We cannot guarantee that we have incorporated open source software in our software in a manner that will not subject us to liability, or in a manner that is consistent with our current policies and procedures.

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We may experience increased costs, disruptions or other difficulties with the implementation, operation and functionality of our newenterprise resource planning system.

We are currently implementing a new enterprise resource planning, or ERP, system, which will replace or enhance certain internal financial and operating systems that are critical to our business operations. The implementation, operation and functionality of our new ERP system has required and will continue to require a significant investment of human, technological, and financial resources. Although we have invested, and continue to invest, significant resources in planning, project management, consulting and training, it is possible that significant implementation, operational and functionality issues may arise during the course of implementing and utilizing our new ERP system, including difficulties paying vendors, invoicing customers and tracking inventory. It is also possible that we may experience significant delays, increased costs and other difficulties that are not presently contemplated. Any significant disruptions, delays, deficiencies or errors in the design, implementation and utilization of our new ERP system could adversely affect our operations, prevent us from accurately and timely reporting our financial results and negatively impact our business, results of operations and financial condition.

The installation and operation of solar energy systems depends heavily on suitable solar and meteorological conditions. If meteorological conditions are unexpectedly unfavorable, the electricity production from our solar energy systems may be substantially below our expectations and our ability to timely deploy new systems may be adversely impacted.

The energy produced and revenue and cash receipts generated by a solar energy system depend on suitable solar, atmospheric and weather conditions, all of which are beyond our control. Furthermore, components of our systems, such as panels and inverters, could be damaged by severe weather or other natural disasters, such as hailstorms, hurricanes, lightning or wildfires. Although we maintain insurance to cover for many such casualty events, our investment funds would be obligated to bear the expense of repairing the damaged solar energy systems, sometimes subject to limitations based on our ability to successfully make warranty claims. Our economic model and projected returns on our systems require us to achieve certain production results from our systems and, in some cases, we guarantee these results for both our customers and our investors. If the systems underperform for any reason, our financial results could suffer. These risks are amplified by the anticipated increase in the frequency of extreme weather events due to rising average temperatures worldwide.

Sustained unfavorable weather also could delay our installation of solar energy systems, leading to increased expenses and decreased revenue and cash receipts in the relevant periods. We have experienced seasonal fluctuations in our operations. The amount of revenue we recognize in a given period from PPAs is dependent in part on the amount of energy generated by solar energy systems under such contracts. As a result, customer agreements and incentives revenue is impacted by seasonally shorter daylight hours in winter months. In addition, our ability to install solar energy systems is impacted by weather. We have limited ability to install solar energy systems during the winter months in the Northeast. Such delays can impact the timing of when we can install and begin to generate revenue from solar energy systems. However, given that we are in a growing industry, the true extent of these fluctuations may have been masked by our historical growth rates and thus may not be readily apparent from our historical operating results and may be difficult to predict. As such, our historical operating results may not be indicative of future performance. Furthermore, weather patterns could change, making it harder to predict the average annual amount of sunlight striking each location where we install a solar energy system. This could make our solar energy systems less economical individually or in the aggregate. Any of these events or conditions could harm our business, financial condition, results of operations and prospects.

Disruptions to our solar monitoring systems could negatively impact the operation of our business and our revenues and increase our expenses.

Our ability to accurately charge our customers for the energy produced by our solar energy systems depends on our ability to monitor our customers’ solar energy systems. Our customer agreements require our customers to maintain a broadband internet connection so that we may receive data regarding solar energy system production from their home networks. We could incur significant expenses or disruptions of our operations in connection with failures of our solar monitoring systems, including failures of our customers’ home networks that would prevent us from accurately monitoring solar energy production. In addition, sophisticated hardware and operating system software and applications that we procure from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of our systems. The costs to us to eliminate or alleviate viruses and bugs, or any problems associated with failures of our customers’ home networks could be significant, and the efforts to address these problems could result in interruptions, delays or cessation of service that may impede our sales, distribution or other critical functions. When a customer’s solar monitoring system is not properly communicating with us, we estimate the production of their solar energy systems. Such estimates may prove inaccurate and could cause us to underestimate the power being generated by our solar energy systems and undercharge our customers, thereby harming our results of operations.

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We are exposed to the credit risk of our customers.

Our customers most commonly purchase energy or lease solar energy systems from us pursuant to one of two types of long-term contracts: a PPA or a Solar Lease. The terms of PPAs and Solar Leases are typically for 20 years and require the customer to make monthly payments to us. Accordingly, we are subject to the credit risk of our customers. As of June 30, 2019, the average FICO score of our customers was approximately 755. However, as we grow our business, the risk of customer defaults could increase. Our reserve for this exposure is estimated to be $6.9 million as of June 30, 2019, and our future exposure may exceed the amount of such reserves. While we do not currently extend credit to customers interested in System Sales, many of those customers are interested in financing the purchase of a solar energy system. While these customers may seek third-party financing through their own lender or a lender with whom we have a relationship, if they do not have sufficient credit to qualify for a loan, they may be unable to purchase a solar energy system. This could reduce our potential customer pool and limit our System Sales.

A failure to comply with laws and regulations relating to our interactions with current or prospective residential customers could result in negative publicity, claims, investigations and litigation, and adversely affect our financial performance.

Our business focuses on contracts and transactions with residential customers. We must comply with numerous federal, state and local laws and regulations that govern matters relating to our interactions with consumers, including those pertaining to privacy and data security, consumer financial and credit transactions, home improvement contracts, warranties, door-to-door solicitation as well as specific regulations pertaining to sales and installations of solar energy systems. These laws and regulations are dynamic and subject to potentially differing interpretations, and various federal, state and local legislative and regulatory bodies may initiate investigations, expand current laws or regulations, or enact new laws and regulations, regarding these matters. Changes in these laws or regulations or their interpretation could dramatically affect how we do business, acquire customers, and manage and use information we collect from and about current and prospective customers and the costs associated therewith.

Several states in which we operate have enacted laws and regulations that provide enhanced rights and require increased disclosures to customers. Most of these laws and regulations are specific to the solar industry and have required changes to our contracts, processes and operations. Some of the laws have been enacted along with other changes to state law that further impact the residential solar industry. Other laws and regulations, such as the ones that relate to licensing of sales representatives, are applicable to a wide array of industries, and failure to comply with such regulations could result in citations, fines, license suspensions, revocations and other penalties. Further, to the extent that states undertake enforcement actions against us, or other states enact further laws or regulations applicable to our industry, we may be required to expend additional resources in order to modify our business practices to meet these regulatory requirements.

We strive to comply with all applicable laws and regulations relating to our interactions with residential customers. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. For example, in March 2018, the New Mexico Attorney General’s office filed an action against us and certain of our officers alleging violation of state consumer protection statutes. If federal, state or other local regulators or agencies were to initiate an investigation against us or enact regulations relating to the marketing of our products to residential consumers, responding to such investigation or complying with such regulations could divert management’s attention to our business, require us to modify our operations and incur significant additional expenses, which could have an adverse effect on our business, financial condition and results of operations or could reduce the number of our potential customers.

We cannot ensure that our sales force will comply with our standard practices and policies, as well as applicable laws and regulations. Any such non-compliance, or the perception of non-compliance, potentially could expose us to claims, proceedings, litigation, investigations, and/or enforcement actions by private parties and regulatory authorities, as well as substantial fines and negative publicity, each of which may materially and adversely affect our business. We have incurred, and will continue to incur, significant expenses to comply with the laws, regulations and industry standards that apply to us.

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Any unauthorized access to, or disclosure or theft of personal information or other proprietary information we gather, store or use could harm our reputation and subject us to claims or litigation.

We receive, store and use personal information of our customers, including names, addresses, e-mail addresses, credit information and other housing and energy use information. We also store and use personal information of our employees. In addition, we previously used certain shared information and technology systems with Vivint, and Vivint continues to store some of our historical data. We also receive and maintain confidential information about our own business, including trade secrets and sensitive business information, and receive confidential information from third parties. We engage third-party vendors and service providers to store and otherwise process some of our and our customers’ data, including sensitive and personal information. We and our vendors and service providers may be the targets of cyberattacks, malicious software, phishing schemes, and fraud, and we and our vendors and service providers may suffer cybersecurity breaches and other security incidents due to these and other causes, including employee or contractor error. Our ability to monitor our vendors and service providers’ data security is limited, and, in any event, third parties may be able to circumvent those security measures, resulting in the unauthorized access to, misuse, disclosure, loss or destruction of our and our customers’ data, including sensitive and personal information.

We take certain steps in an effort to protect the security, integrity and confidentiality of the personal information and other proprietary and confidential information we collect, store or transmit, but due to the factors detailed above, there is no guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to the information despite our efforts and those of our vendors and service providers. Because techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we and our suppliers or vendors, including Vivint, may be unable to anticipate these techniques, to implement adequate preventative or mitigation measures, to identify any attacks or incidents on a timely basis, or to remediate or otherwise address any attacks or incidents in a timely manner. In addition, due to a potential time lapse between when certain of our contracted sales representatives and other independent contractors leave us and when we are made aware of their separation, such contracted sales representatives and other independent contractors may have continued access to our customers’ information for a period of time when they should not have such access until we are able to restrict their access.

We are also subject to laws and regulations relating to the collection, use, retention, security and transfer of personal information of our customers and other individuals. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between one company and its subsidiaries. Several jurisdictions have passed new laws in this area, and other jurisdictions are considering imposing additional restrictions. These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction. For example, on June 28, 2018, California enacted the California Consumer Privacy Act, or CCPA, that will, among other things, require covered companies to provide new disclosures to California consumers, and afford such consumers new abilities to opt-out of certain sales of personal information, when it goes into effect on January 1, 2020. The CCPA was amended on September 23, 2018, and it remains unclear whether any further modifications will be made to this legislation or how it will be interpreted. We cannot yet predict the impact of the CCPA on our business or operations, but it may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply. In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that either legally or contractually apply to us, such as the Payment Card Industry Data Security Standard, or PCI DSS, which may affect any processes associated with handling credit card numbers. In the event we fail to be compliant with the PCI DSS, fines and other penalties could result. Complying with emerging and changing requirements may cause us to incur costs or require us to change our business practices. Any actual or alleged failure by us, our affiliates or other parties with whom we do business to comply with privacy-related or data protection laws, regulations and industry standards could result in proceedings against us by governmental entities or others, which could have a detrimental effect on our business, results of operations and financial condition.

Any actual or perceived unauthorized use or disclosure of, or access to, any personal information or other proprietary or confidential information maintained by us or on our behalf, whether through breach of our systems, breach of the systems of our suppliers or vendors, including Vivint, by an unauthorized party, or through employee or contractor error, theft or misuse, or otherwise, could result in harm to our business and results of operations. If any such unauthorized use or disclosure of, or access to, such personal information were to occur or to be believed to have occurred, our operations could be seriously disrupted, and we could be subject to demands, claims and litigation by private parties, and investigations, related actions, and penalties by regulatory authorities. In addition, we could incur significant costs in notifying affected persons and entities and otherwise complying with the multitude of federal, state and local laws and regulations relating to unauthorized access to, or use or disclosure of, personal information or other information. Finally, any perceived or actual unauthorized access to, or use or disclosure of, such information could harm our reputation, substantially impair our ability to attract and retain customers and have an adverse impact on our business, financial condition and results of operations. Even the perception of inadequate security may damage our reputation and negatively impact our ability to win new customers and retain existing customers. Further, we could be required to expend significant capital and other resources to address any data security incident or breach and to implement measures in an effort to prevent further breaches or incidents.

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In addition, we cannot assure that any limitation of liability provisions in our customer and user agreements, contracts with third-party vendors and service providers or other contracts would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim relating to a security breach or other security-related matter. While our insurance policies include liability coverage for certain of these matters, if we experienced a widespread security breach or other incident that impacted a significant number of our customers to whom we owe indemnity obligations, we could be subject to indemnity claims or other damages that exceed our insurance coverage. We also cannot be certain that our insurance coverage will be adequate for data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results and reputation.

We are involved, and may become involved in the future, in legal proceedings that, if adversely adjudicated or settled, could adversely affect our financial results.

We are, and may in the future become, party to litigation and investigation by regulatory authorities. For examples, see Note 19—Commitments and Contingencies. While we intend to defend against these actions vigorously, the ultimate outcomes of these cases are presently not determinable as they are in preliminary phases. In general, litigation claims can be expensive and time consuming to bring or defend against, may result in the diversion of management attention and resources from our business and business goals and could result in settlements or damages that could significantly affect financial results and the conduct of our business. It is not possible to predict the final resolution of the litigation to which we currently are or may in the future become party, and the impact of certain of these matters on our business, prospects, financial condition, liquidity, results of operations and cash flows.

Our reported financial results may be affected, and comparability of our financial results with other companies in our industry may be impacted, by changes in the accounting principles generally accepted in the United States.

Generally accepted accounting principles in the United States are subject to change and interpretation by the Financial Accounting Standards Board, or FASB, the Securities and Exchange Commission, or SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and on the financial results of other companies in our industry and may even affect the reporting of transactions completed before the announcement or effectiveness of a change. For example, in February 2016 the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842), which primarily changed the accounting for operating leases by requiring us to add right-of-use assets and lease liabilities to our consolidated balance sheets as of the adoption date of January 1, 2019. Other companies in our industry may be affected differently by the adoption of Topic 842 or other new accounting standards, including timing of the adoption of new accounting standards, adversely affecting the comparability of our financial statements. See Note 2—Summary of Significant Accounting Policies for information about Topic 842.

Risks Related to our Relationship with Vivint

Our inability to resolve any disputes that arise between us and Vivint with respect to our past and ongoing relationships may adversely affect our financial results, and such disputes may also result in claims for indemnification.

Disputes may arise between Vivint and us in a number of areas relating to our past and ongoing relationships, including the following:

• intellectual property, labor, tax, employee benefits, indemnification and other matters arising from our relationship with Vivint;

• employee retention and recruiting;

• our ability to use, modify and enhance the intellectual property that we have licensed from Vivint;

• business combinations or divestitures;

• exclusivity arrangements;

• the nature, quality and pricing of products and services Vivint agrees to provide to us; and

• business opportunities that may be attractive to both Vivint and us.

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We have entered into certain agreements with Vivint. In August 2017, we entered into a sales dealer agreement with Vivint. Under this agreement, each party will act as a dealer for the other party to market, promote and sell each other’s products. The agreement has a two-year term, which will be automatically renewed for successive one-year terms unless written notice of termination is provided by one of the parties to the other no less than 90 days prior to the end of the then current term. The products, territories and consideration that is payable by each party to the other is determined in accordance with the agreement. There can be no assurances regarding the number of sales and installations of our products that Vivint will be able to generate, or the number of leads that we will be able to generate. In addition, as we work to expand our customer opportunities and product offerings through our relationship with Vivint, our business and results of operations may be adversely affected by factors that affect Vivint’s business and our relationship. Pursuant to the terms of a Non-Competition Agreement we have entered into with Vivint, as amended, we and Vivint each have agreed not to solicit for employment any member of the other’s executive or senior management team, or any of the other’s employees who primarily manage sales, installation or services of the other’s products and services until the termination of the sales dealer agreement. The commitment not to solicit each other’s employees lasts for 180 days after such employee finishes employment with us or Vivint. Notwithstanding the above, a small number of sales representatives work for both Vivint and us. To the extent there is any confusion concerning the relationship between us and Vivint with respect to the products and services we offer and the products and services of Vivint, such sales representatives could expose us to increased claims, proceedings, litigation and investigations by consumers and regulatory authorities. In addition, having sales representatives who work for both Vivint and us could distract such sales representatives, impact the effectiveness of our sales force, and potentially increase the turnover of our existing sales representatives who may feel displaced by the addition of Vivint sales representatives to our sales force.

We may not be able to resolve any potential conflicts relating to these agreements or otherwise, and even if we do, the resolution may be less favorable than if we were dealing with an unaffiliated party. In addition, we have indemnification obligations under some of the agreements we have entered into with Vivint, and disputes between us and Vivint may result in claims for indemnification. However, we do not currently expect that these indemnification obligations will materially affect our potential liability compared to what it would be if we did not enter into these agreements with Vivint.

Risks Related to Our Common Stock

The price of our common stock may be volatile, and the value of your investment could decline.

The trading price of our common stock may be highly volatile. From our initial public offering on October 1, 2014 to June 30, 2019, the closing price of our common stock has ranged from a high of $16.01 to a low of $2.22. Our stock price could continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include:

• our financial condition and the availability and terms of future financing;

• changes in laws or regulations applicable to our industry or offerings, including any new tariffs or trade regulations that affect our ability to import goods at attractive prices or at all;

• additions or departures of key personnel;

• actual or anticipated changes in expectations regarding our performance by investors or securities analysts;

• securities litigation involving us;

• price and volume fluctuations in the overall stock market;

• volatility in the market price and trading volume of companies in our industry or companies that investors consider comparable;

• actual or perceived privacy or data security incidents;

• share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

• the failure of securities analysts to cover our common stock;

• our ability to protect our intellectual property and other proprietary rights;

• sales of our common stock by us, our stockholders or our employees, including sales of equity awards granted to our employees to cover tax withholding obligations;

• litigation or disputes involving us, our industry or both;

• major catastrophic events;

• general economic and market conditions; and

• potential acquisitions.

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Further, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. In addition, the stock prices of many renewable energy companies have experienced wide fluctuations that have often been unrelated to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may cause the market price of our common stock to decline. If the market price of our common stock decreases, investors may not realize any return on investment and may lose some or all of their investments. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We could become the target of additional securities litigation in the future, which could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors’ views of us.

Section 404 of the Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls. Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the Sarbanes-Oxley Act could have a material adverse effect on our business. If we do not effectively implement and utilize our new ERP system as planned or the system does not operate as intended, the effectiveness of our internal controls over financial reporting could be adversely affected or our ability to adequately assess it could be delayed. Failure to maintain effective internal controls could cause investors to lose confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price. In addition, if our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

Additionally, when we cease to be an emerging growth company, we will be required to obtain an annual audit of our internal controls over financial reporting from our independent registered public accounting firm under Section 404 of the Sarbanes-Oxley Act. As part of such audits, we or our independent accounting firm may identify weaknesses and deficiencies that we may not otherwise identify in a timely manner. If our independent accounting firm is not able to complete the work required under such audits on a timely basis, our annual report on Form 10-K may be delayed or deficient. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

As an emerging growth company and a smaller reporting company within the meaning of the Securities Act, we will utilize certain modified disclosure requirements, and we cannot be certain if these reduced requirements will make our common stock less attractive to investors.

We are an emerging growth company, and, for as long as we continue to be an emerging growth company, which we expect to be through the end of 2019, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies” including, but not limited to, not being required to have our independent registered public accounting firm audit our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We have utilized, and we plan in future filings with the Securities and Exchange Commission, or SEC, to continue to utilize, the modified disclosure requirements available to emerging growth companies. As a result, our stockholders may not have access to certain information they may deem important.

Although we expect our emerging growth company status to end on December 31, 2019, we qualify to use the smaller reporting company designation through the filing of our Annual Report on Form 10-K for the year ending December 31, 2019, which allows us to take advantage of many of the same exemptions from disclosure requirements. Similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements and have certain other reduced disclosure obligations in their SEC filings. After the filing of our Annual Report on Form 10-K for the year ending December 31, 2019, we will no longer qualify to use the smaller reporting company designation.

We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

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Our stock price could decline due to the large number of outstanding shares of our common stock eligible for future sale.

Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline. These sales could also make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate.

As of June 30, 2019, we had 121.6 million outstanding shares of common stock. These shares may be sold in the public market in the United States, subject to prior registration in the United States, if required, or reliance upon an exemption from U.S. registration, including, in the case of shares held by affiliates or control persons, compliance with the volume restrictions of Rule 144.

In addition, we have granted and expect to continue to grant equity awards to our directors and employees as additional compensation in an effort to align their interests with those of our stockholders. Approximately 2.7 million shares of our common stock are reserved for future issuance under our Long-Term Incentive Plan, and these shares will issue, vest and be immediately tradable without restriction on the date that our Sponsor and its affiliates achieve specified returns on their invested capital.

Further, equity awards for 12.7 million shares of common stock remained outstanding as of June 30, 2019, with 2.1 million of those shares being vested and exercisable as of June 30, 2019. Additionally, “sell-to-cover” transactions are utilized in connection with the vesting and settlement of equity awards that are granted to our employees so that shares of our common stock are sold on behalf of our employees in an amount sufficient to cover the tax withholding obligations associated with these awards. As a result of these transactions, a significant number of shares of our stock may be sold over a limited time period in connection with significant vesting events.

Stockholders owning an aggregate of 76.1 million shares of our common stock are entitled, under contracts providing for registration rights, to require us to register shares of our common stock owned by them for public sale in the United States, subject to the restrictions of Rule 144. In October 2014, we filed a registration statement on Form S-8 to register 22.9 million shares previously issued or reserved for future issuance under our equity compensation plans and agreements, and we registered an additional 12.9 million shares in March 2017. Under these registration statements, subject to the satisfaction of applicable vesting periods, the shares of common stock issued upon exercise of outstanding options and vested restricted stock units will be available for immediate resale in the United States in the open market. Sales of our common stock as restrictions end or pursuant to registration rights may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales also could cause our stock price to fall and make it more difficult for investors to sell shares of our common stock.

Our Sponsor and its affiliates control us, and their interests may conflict with ours or investors’ in the future.

As of June 30, 2019, 313 Acquisition LLC, which is controlled by our Sponsor and its affiliates, beneficially owned approximately 61% of our common stock. Moreover, under our organizational documents and the stockholders agreement with 313 Acquisition LLC, for so long as our existing owners and their affiliates retain significant ownership of us, we will agree to nominate to our board individuals designated by our Sponsor, whom we refer to as the Sponsor directors. In addition, for so long as 313 Acquisition LLC continues to own shares representing a majority of the total voting power, we will agree to nominate to our board individuals appointed by Summit Partners and Todd Pedersen. Even when our Sponsor and its affiliates and certain of its co-investors cease to own shares of our stock representing a majority of the total voting power, for so long as our Sponsor and its affiliates continue to own a significant percentage of our stock our Sponsor will still be able to significantly influence the composition of our board of directors and the approval of actions requiring stockholder approval. In addition, under the stockholders agreement, affiliates of our Sponsor will have consent rights with respect to certain actions involving our company, provided a certain aggregate ownership threshold is maintained collectively by our Sponsor and its affiliates, together with Summit Partners, Todd Pedersen and Alex Dunn and their respective affiliates. Accordingly, for such period of time, our Sponsor and certain of its co-investors will have significant influence with respect to our management, business plans and policies, including the appointment and removal of our officers. In particular, for so long as our Sponsor and its affiliates continue to own a significant percentage of our stock, our Sponsor will be able to cause or prevent a change of control of our company or a change in the composition of our board of directors and could preclude any unsolicited acquisition of our company. The concentration of ownership could deprive investors of an opportunity to receive a premium for shares of common stock as part of a sale of our company and ultimately might affect the market price of our common stock.

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Our Sponsor and its affiliates engage in a broad spectrum of activities, including investments in the energy sector. In the ordinary course of their business activities, our Sponsor and its affiliates may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. For example, affiliates of our Sponsor regularly invest in utility companies and solar and renewable energy companies that may compete with us. Our certificate of incorporation provides that none of our Sponsor, any of its affiliates or any director who is not employed by us (including any non-employee director who serves as one of our officers in both his or her director and officer capacities) or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. Our Sponsor also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. In addition, our Sponsor may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to our other investors.

We have elected to take advantage of the “controlled company” exemption to the corporate governance rules for New York Stock Exchange, or NYSE, listed companies, which could make our common stock less attractive to some investors or otherwise harm our stock price.

Because we qualify as a “controlled company” under the corporate governance rules for NYSE listed companies, we are not required to have a majority of our board of directors be independent, nor are we required to have a compensation committee or an independent nominating function. In light of our status as a controlled company, in the future we could elect not to have a majority of our board of directors be independent or not to have a compensation committee or nominating and governance committee. Accordingly, should the interests of 313 Acquisition LLC or our Sponsor differ from those of other stockholders, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance rules for NYSE listed companies. Our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price.

If 313 Acquisition LLC were to sell an amount of its shares of our company such that neither it nor another company, individual or group would hold more than 50% of the voting power for the election of our directors, we would no longer be a controlled company. We intend to comply with all applicable NYSE rules if we cease to be a controlled company, however, we may have difficulties complying with NYSE rules relating to the composition of our board of directors, and there can be no assurance that we will be able to attract and retain the number of independent directors needed to comply with NYSE rules before the end of the phase-in period for compliance.

Provisions in our certificate of incorporation, bylaws, stockholders agreement and under Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Our certificate of incorporation, bylaws and stockholders agreement contain provisions that could depress the trading price of our common stock by discouraging, delaying or preventing a change of control of our company or changes in our management that the stockholders of our company may believe advantageous. These provisions include:

• establishing a classified board of directors so that not all members of our board of directors are elected at one time;

• authorizing “blank check” preferred stock that our board of directors could issue to increase the number of outstanding shares to discourage a takeover attempt;

• limiting the ability of stockholders to call a special stockholder meeting;

• limiting the ability of stockholders to act by written consent;

• providing that the board of directors is expressly authorized to make, alter or repeal our bylaws;

• establishing advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings;

• requiring our Sponsor to consent to certain actions, as described under the section of our 2018 Proxy Statement captioned “Related Party Transactions—Agreements with Our Sponsor,” for so long as our Sponsor, Summit Partners, Todd Pedersen and Alex Dunn or their respective affiliates collectively own, in the aggregate, at least 30% of our outstanding shares of common stock;

• the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66-2/3% in voting power of all the then-outstanding shares of stock of our company entitled to vote thereon, voting together as a single class, if Blackstone and its affiliates beneficially own, in the aggregate, less than 30% in voting power of the stock of our company entitled to vote generally in the election of directors; and

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• that certain provisions may be amended only by the affirmative vote of the holders of at least 66-2/3% in voting power of all the then-outstanding shares of stock of our company entitled to vote thereon, voting together as a single class, if Blackstone and its affiliates beneficially own, in the aggregate, less than 30% in voting power of the stock of our company entitled to vote generally in the election of directors.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who do now, or may in the future, cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Item 5. Other Information

Entry into a Material Definitive Agreement

On August 6, 2019, Vivint Solar Financing VI, LLC, or the Borrower, our wholly-owned indirect subsidiary, entered into a floating rate revolving warehouse facility, or the Warehouse Facility, pursuant to which it may borrow up to an aggregate principal amount of $325.0 million, expandable up to $400.0 million, from certain financial institutions for which Bank of America, N.A. is acting as administrative agent and collateral agent. Proceeds of the Warehouse Facility will be used, among other things, to refinance the Aggregation Facility (as defined below) that was set to mature in 2020.

During the period in which the Borrower may make borrowings under the Warehouse Facility, interest on borrowings accrues at an annual rate equal to the applicable adjusted LIBOR rate plus 2.375%. Thereafter, interest will accrue at an annual rate equal to the applicable adjusted LIBOR rate plus 3.375%. In addition, the Borrower is required to enter into interest rate hedging arrangements such that not less than 90% of the aggregate expected amortization profile of all outstanding revolving advances is subject to a fixed interest rate or other interest rate protection. Initially, subject to the terms of the Warehouse Facility, only interest payments are due on a quarterly basis, through the availability period, and then certain principal and interest payments may be due. These payments will occur on the 15^th of January, April, July and October of each year, subject to the occurrence of certain events, including a borrowing base deficiency and dispositions with respect to any of the collateral. Principal and interest payable under the Warehouse Facility mature in four years and optional prepayments, in whole or in part, are permitted under the Warehouse Facility no more than once per month, without premium or penalty apart from any customary LIBOR breakage provisions.

The Warehouse Facility includes customary events of default, conditions to borrowing and covenants, including negative covenants that restrict, subject to certain exceptions, the Borrower’s, guarantors’ and Borrower’s subsidiaries’ ability to incur indebtedness, incur liens, make fundamental changes to their respective businesses, make certain types of restricted payments and investments or enter into certain transactions with affiliates. Certain reserve accounts totaling approximately $4.3 million were funded at closing. In addition, the Borrower is required to maintain an average debt service coverage ratio of 1.15 to 1 and a solar asset payment ratio of 85% to make distributions (and must also satisfy other conditions to make distributions, including no defaults and the funding of certain reserves).

The obligations of the Borrower are secured by a pledge of the membership interests in the Borrower, all of the Borrower’s assets (including membership interests of the Borrower’s directly-owned subsidiaries (including subsidiaries acting as managing members of the underlying investment funds)) and all of the assets of the Borrower’s directly-owned subsidiaries (including, with respect to the subsidiaries that are managing members of underlying investment funds, the membership interests owned by such subsidiaries in such underlying investment funds).

Termination of a Material Agreement

In September 2014, our wholly owned subsidiary entered into an aggregation credit facility, or as amended and restated on March 9, 2017, the Aggregation Facility. For details on the terms of the Aggregation Facility, see Note 11—Debt Obligations. The Aggregation Facility was terminated concurrently with the execution of the Warehouse Facility, and $121.4 million of proceeds from the Warehouse Facility were used to pay off the outstanding principal and interest under the Aggregation Facility and to settle related interest rate swaps.

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Item 6. Exhibits

10.1†	Loan Agreement, dated as of May 31, 2019, by and among Vivint Solar Asset 2 Project Company, LLC, Wells Fargo Bank, National Association, and the other parties named therein
31.1	Certification of Chief Executive Officer, pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer, pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
*	The Certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Vivint Solar, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.
†	Portions of this exhibit have been omitted in accordance with Item 601(b)(10) of Regulation S-K.

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SIGNATURES

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

	VIVINT SOLAR, INC.
Date: August 8, 2019	/s/ David Bywater
	David Bywater Chief Executive Officer (Principal Executive Officer)
Date: August 8, 2019	/s/ Dana Russell
	Dana Russell Chief Financial Officer and Executive Vice President (Principal Financial Officer)

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EX-10.1

Exhibit 10.1

CERTAIN INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED. OMISSIONS ARE DESIGNATED AS [***].

PROJECT GALILEO II

LOAN AGREEMENT

Dated as of May 31, 2019

among

VIVINT SOLAR ASSET 2 PROJECT COMPANY, LLC,

a Delaware limited liability company
(Borrower);

THE LENDERS PARTIES HERETO FROM TIME TO TIME;

WELLS FARGO BANK, NATIONAL ASSOCIATION
(Collateral Agent);

and

WELLS FARGO BANK, NATIONAL ASSOCIATION
(Administrative Agent)

Table of Contents

Page

ARTICLE 1
DEFINITIONS
1.1	Definitions	1
1.2	Rules of Interpretation	34

ARTICLE 2
THE CREDIT FACILITY
2.1	Loan Facility	36
2.2	Commitments	43
2.3	Fees	43
2.4	Other Payment Terms	43
2.5	Pro Rata Treatment	50
2.6	Change of Circumstances	50
2.7	Mitigation of Obligations; Replacement of Lenders	52
2.8	Defaulting Lenders	53

ARTICLE 3
CONDITIONS PRECEDENT
3.1	Conditions Precedent to the Closing Date	54
3.2	Conditions Precedent to Each Borrowing	58

ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1	Representations and Warranties	60

ARTICLE 5
AFFIRMATIVE COVENANTS
5.1	Use of Proceeds	68
5.2	Notices	69
5.3	Portfolio Reports; Financial Statements	69
5.4	Reports; Other Information	70
5.5	Maintenance of Existence	71
5.6	Books, Records, Access	71
5.7	Preservation of Rights; Further Assurance	72
5.8	Payment of Claims, Taxes and Other Government Changes	72
5.9	Compliance With Laws; Instruments, Etc	73
5.10	Indemnification	73

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5.11	Revenue Account	74
5.12	Rating	75
5.13	Separateness Provisions; Required Provisions in LLC Agreements	75
5.14	Performance of Agreements	75
5.15	Scheduled Payment Date Report	75
5.16	Amendments; Other Agreements	75
5.17	Insurance	75
5.18	Foreign Asset Control Regulations	76
5.19	Backup Servicer	76

ARTICLE 6
NEGATIVE COVENANTS
6.1	Analysis Account	76
6.2	Limitations on Liens	76
6.3	Indebtedness	76
6.4	Sale or Lease of Assets	76
6.5	Changes	77
6.6	Distributions	77
6.7	Investments	77
6.8	Federal Reserve Regulations	77
6.9	Fundamental Changes	77
6.10	Amendments; Other Agreements	78
6.11	Name and Location; Fiscal Year	78
6.12	Assignment	78
6.13	Accounts	79
6.14	Transaction with Affiliates	79
6.15	Limitation on Restrictions on Liens	79
6.16	Hedging Agreement	79
6.17	Operations and Maintenance in Partnership	79
6.18	Sanctions Laws	79

ARTICLE 7
ACCOUNTS; APPLICATION OF FUNDS
7.1	Accounts; Application of Funds in Accounts	80

ARTICLE 8
EVENTS OF DEFAULT; REMEDIES
8.1	Events of Default	80
8.2	Remedies	83

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ARTICLE 9
THE AGENTS; AMENDMENTS; ASSIGNMENTS
9.1	Appointment and Authority	84
9.2	Exculpatory Provisions	84
9.3	Reliance by Administrative Agent	87
9.4	Delegation of Duties	88
9.5	Resignation of Administrative Agent	88
9.6	Non-Reliance on Administrative Agent and Other Lenders	89
9.7	Administrative Agent May File Proofs of Claim	89
9.8	Collateral Matters	90
9.9	Indemnification	90
9.10	No Advisory or Fiduciary Responsibility	91
9.11	Amendments	91
9.12	Withholding Tax	93
9.13	Participations	94
9.14	Assignments	95
9.15	Assignability to Federal Reserve Bank or Central Bank	97
9.16	Collateral Agency Agreement and Depositary Agreement.	97
9.17	Merger	98
9.18	Multiple Capacities	98

ARTICLE 10
MISCELLANEOUS
10.1	Addresses; Notices	98
10.2	Right to Set-Off	102
10.3	Delay and Waiver	103
10.4	Costs, Expenses and Attorney’s Fees	103
10.5	Entire Agreement	103
10.6	Governing Law	104
10.7	Severability	104
10.8	Headings	104
10.9	Accounting Terms	104
10.10	No Partnership, Etc	104
10.11	Waiver of Jury Trial	104
10.12	Consent to Jurisdiction; Service of Process	105
10.13	Interest Rate Limitation	105
10.14	Successors and Assigns	106
10.15	Patriot Act Compliance	106
10.16	Binding Effect; Counterparts	106
10.17	Confidentiality	106
10.18	Survival of Agreements	108
10.19	Non-Recourse	108
10.20	Acknowledgement and Consent to Bail-In of EEA Financial Institutions	109

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INDEX OF EXHIBITS

Exhibit A	Form of Note
Exhibit B-1	Form of Borrowing Notice
Exhibit B-2	Form of Loan Aggregation Notice
Exhibit C	Form of Assignment and Acceptance
Exhibit D	Form of Scheduled Payment Date Report
Exhibit E	Form of Advance Model
Exhibit F-1	Form of US Tax Compliance Certificate
Exhibit F-2	Form of US Tax Compliance Certificate
Exhibit F-3	Form of US Tax Compliance Certificate
Exhibit F-4	Form of US Tax Compliance Certificate
Exhibit G	Borrowing Date Certificate
Exhibit H	Cash Flow Coverage Ratio Certificate
Exhibit I	Form of Quarterly Report

INDEX OF SCHEDULES

Schedule A	Amortization Schedule
Schedule 1.1(b)	Knowledge Individuals
Schedule 2.1(f)	Target Loan Balance
Schedule 3.1(l)	Consents
Schedule 4.1(f)	Outstanding Debt
Schedule 5.17	Insurance Requirements
Schedule 6.14	Transactions with Affiliates

INDEX OF ANNEXES

Annex 1	Administrative Agent's Office
Annex 2	Lenders/Lending Office
Annex 3	Lender Commitments

INDEX OF APPENDICES

Appendix 1	Eligibility Representations
Appendix 2	Project Documents
Appendix 3	System Information
Appendix 4	Separateness Provisions

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Appendix 5	Approved Manufacturers
Appendix 6	Approved Form Agreements (Customer Agreements)
Appendix 7	Credit Criteria
Appendix 8	Acceptable Providers
Appendix 9	Assumptions

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LOAN AGREEMENT

This LOAN AGREEMENT, dated as of May 31, 2019 (this “Agreement”), is made by and among Vivint Solar Asset 2 Project Company, LLC, a Delaware limited liability company (the “Borrower”), each of the lenders that is a signatory to this Agreement identified as a “Lender” on the signature pages to this Agreement and listed on Annex 2 or that shall become a “Lender” under this Agreement pursuant to the terms of this Agreement (each individually, a “Lender” and, collectively, the “Lenders”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as the collateral agent for the Secured Parties (in such capacity, together with its successors in such capacity, the “Collateral Agent”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, as the administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”, and, together with the Collateral Agent, the “Agents”).

WHEREAS, the Borrower has entered into that certain Master Engineering, Procurement and Construction Agreement (the “MEPCA”), dated as of the date hereof, with Vivint Solar Developer, LLC, a Delaware limited liability company (the “Seller”), pursuant to which Borrower has agreed to purchase certain Projects, subject to the terms and conditions set forth therein;

WHEREAS, the Borrower requested that the Lenders make loans to the Borrower to partially fund the acquisition of Projects under the MEPCA; and

WHEREAS, in connection with the transactions contemplated hereby, the Lenders require (a) the Borrower to enter into (i) that certain Security Agreement, by and between the Collateral Agent and the Borrower (the “Security Agreement”), pursuant to which the Borrower will grant a security interests in certain of its assets to the Collateral Agent for the benefit of the Secured Parties and (ii) that certain Collateral Agency and Depositary Agreement, by and among the Borrower, the Administrative Agent, the Collateral Agent, the Depositary and the Lenders (the “CADA”), (b) the Borrower Member to enter into that certain Pledge Agreement, by and between the Collateral Agent and the Borrower Member (the “Pledge Agreement”), pursuant to which the Borrower Member will pledge all of the Equity Interests of the Borrower held by the Borrower Member to the Collateral Agent for the benefit of the Secured Parties and (c) the Class B Investor to enter into that certain Class B Pledge Agreement, by and between the Collateral Agent and the Class B Investor (the “Class B Pledge Agreement”), pursuant to which the Class B Investor will pledge all of the Class B Interests of the Borrower Member held by the Class B Investor to the Collateral Agent for the benefit of the Secured Parties.

NOW THEREFORE, in consideration of the agreements herein and in the other Financing Documents and in reliance upon the representations and warranties set forth herein and therein, the parties hereto hereby agree to enter into this Agreement as of the date hereof as follows:

ARTICLE 1

DEFINITIONS

1.1Definitions

.  Except as otherwise expressly provided, capitalized terms used in this Agreement and its exhibits and schedules shall have the meanings set forth below:

“A-Installment Payment” has the meaning set forth in the MEPCA.

“Acceptable DSR Letter of Credit” has the meaning set forth in the CADA.

“Account Bank” means KeyBank National Association.

“Administrative Agent” has the meaning set forth in the introductory paragraph of this Agreement.

“Administrative Agent’s Office” shall mean the Administrative Agent’s address and, as appropriate, account as set forth on Annex 1, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders.

“Administrative Services Agreement” means the Administrative Services Agreement, dated as of the date hereof, between Borrower and Provider.

“Advance Model” means a model in the form of Exhibit E forecasting the Net Cash Flows to the Borrower, in each case: (a) calculated in accordance with and adjusted for the assumptions set forth in Appendix 9, (b) adjusted to exclude Excluded Revenues, (c) accounting for the applicable System Information and (d) calculated in accordance with the Sizing Parameters, in form and substance satisfactory to the Lenders, in consultation with the Borrower.  In addition, the Advance Model will be updated on the first Borrowing Date when such model is delivered and on each subsequent Borrowing Date to reflect any modifications required due to changes in System Information of the Borrower Projects comprising the requested Loans or revised Net Cash Flow based on the System Information for the Borrower Projects (in each case, in accordance with (a) through (d) above).

“Affiliate” of a specified Person means any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the Person specified; provided, that it is expressly acknowledged that the Class A Investors and the Hannon Investor shall not be considered Affiliates of the Borrower Member or the Borrower.  As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of partnership interests or voting securities, by contract or otherwise.

“Agents” has the meaning set forth in the introductory paragraph of this Agreement.

“Aggregation Date” means the earlier of (a) date that is fifteen (15) Business Days after the delivery of the final True-Up Report by Seller to Borrower and the Investor pursuant to Section 2.2(g) of the MEPCA and (b) November 20, 2020.

“Agreement” has the meaning set forth in the introductory paragraph of this Agreement.

“Amortization Profile” means:  

(a)[***]; and

(b)[***]

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“Anti-Bribery and Anti-Corruption Laws” means applicable Laws and regulations addressing prohibitions against improper payments and bribery of officers, directors, employees, agents and affiliates of Governmental Authorities, business partners or other commercial parties, particularly local laws in effect in the jurisdiction in which the Project operates, including without limitation the U.S. Foreign Corrupt Practices Act of 1977 and the U.K. Bribery Act 2010.

“Anti-Terrorism and Money Laundering Laws and Regulations” means applicable Laws and regulations (a) prohibiting transactions with Persons who (i) commit, threaten to commit, or support terrorism, (ii) engage in transactions or conduct operations that are illegal and / or criminal in nature, and / or (iii) participate in monetary transactions in property derived from specified unlawful activity, or (b) otherwise relating to prohibitions in connection with the illegal laundering of the proceeds of any criminal activity and preventing the funds, proceeds and revenue of the Borrower Projects, the Borrower and its Affiliates from being used in connection with the advancement of criminal activity, including without limitation, and to the extent applicable, the Patriot Act and all “know your customer” rules and other applicable regulations.

“Applicable Interest Rate” means: (a) with respect to the Term Loan, a blended per annum rate equal to the weighted average (based on the principal amount of each Loan) of the Fixed Interest Rates for all outstanding Loans, including any Loan drawn on the Aggregation Date, and (b) with respect to any other Loan, the Fixed Interest Rate.

“Applicable Margin” means [***].

“Approved Assignee” shall mean any Person that is (i) a commercial bank, insurance company, investment or mutual fund or other Person that is an “accredited investor” (as defined in Regulation D of the Securities Act of 1933, as amended) or otherwise has a tangible net worth not less than one hundred million Dollars ($100,000,000) and (ii) not a Competitor.

“Approved Manufacturer” means (a) any of the manufacturers set forth in Appendix 5 or (b) any other manufacturer approved in writing by the Lenders in their reasonable discretion upon Borrower’s request.

“Approved Form Agreement” means each of the form Customer Agreements attached hereto as Appendix 6 as such forms may be modified from time to time in accordance with Section 6.10(c).

“Assets” means, with respect to any Person, all right, title and interest of such Person in land, Properties, buildings, improvements, fixtures, foundations, assets and rights of any kind, whether tangible or intangible, real, personal or mixed, including contracts, equipment, systems, books and records, proprietary rights, intellectual property, Permits, rights under or pursuant to all warranties, representations and guarantees, cash, accounts receivable, deposits and prepaid expenses.

“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in the form of Exhibit C or such other form as shall be approved by the Administrative Agent.

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“Attributable Indebtedness” means, on any date, in respect of any Capital Lease Obligations of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.

“Availability Period” means a period commencing on the Closing Date and ending on the Availability Period End Date.

“Availability Period End Date” means the earlier of (a) the date of the acceleration of the obligations pursuant to this Agreement, (b) Aggregation Date and (c) the date that the Commitments have been fully utilized or terminated.

“B-Installment Payment” has the meaning set forth in the MEPCA.

“Backup Addendum” means Addendum No. 26 to the Backup Services Agreement, dated as of the date hereof, by and among Provider, the Initial Backup Servicer, the Administrative Agent and the Borrower.

“Backup Servicer” means the Initial Backup Servicer, and its successors and assigns as Backup Servicer under the Backup Services Agreement.

“Backup Services Agreement” means that certain Master Backup Services Agreement, dated as of June 15, 2016, by and between Provider and the Initial Backup Servicer and as amended by that certain Amendment and Joinder Agreement by and among Provider, the Initial Backup Servicer and Vivint Solar Servicing, LLC, dated as of November 7, 2016.

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

“Bail-In Legislation” means

(a)in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms (as amended or re-enacted), the relevant implementing law or regulation (including any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organization) as described in the EU Bail-In Legislation Schedule from time to time; and

(b)in relation to any other state, any analogous law or regulation from time to time which requires contractual recognition of any Write-Down and Conversion Powers contained in that law or regulation.

“Bankruptcy Event” shall be deemed to occur with respect to any Person if (a) such Person shall institute a voluntary case seeking liquidation or reorganization under the Bankruptcy Law or shall consent to the institution of an involuntary case thereunder against it; (b) such Person shall file a petition, answer or consent or shall otherwise institute any similar proceeding under any other applicable federal, State or other applicable law, or shall consent thereto; (c) such Person shall apply for, or by consent there shall be an appointment of, a receiver, liquidator, sequestrator,

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trustee or other officer with similar powers for itself or any substantial part of its assets; (d) such Person shall make an assignment for the benefit of creditors; (e) such Person shall admit in writing its inability to pay its debts generally as they become due; (f) if an involuntary case shall be commenced seeking the liquidation or reorganization of such Person under the Bankruptcy Law or any similar proceeding shall be commenced against such Person under any other applicable federal, State or other applicable law and (i) the petition commencing the involuntary case is not timely controverted; (ii) the petition commencing the involuntary case is not dismissed within sixty (60) days of its filing; (iii) an interim trustee is appointed to take possession of all or a portion of the property, and/or to operate all or any part of the business of such Person and such appointment is not vacated within sixty (60) days; or (iv) an order for relief shall have been issued or entered therein; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee or other officer having similar powers of such Person or of all or a part of its property, shall have been entered; or (g) any other similar relief shall be granted against such Person under any federal, State or other applicable law.

“Bankruptcy Law” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.

“Base Case” means, with respect to each Advance Model, the resulting outputs when set to run for the assumptions set forth in Appendix 9.

“Benefited Lender” has the meaning set forth in Section 2.5(b).

“Bill of Sale” means a Bill of Sale and Assignment between Seller and the Borrower substantially in the form of Exhibit C attached to the MEPCA.

“Borrower” has the meaning set forth in the introductory paragraph of this Agreement.

“Borrower LLC Agreement” means that Amended and Restated Limited Liability Company Agreement of the Borrower, dated as of the date hereof.

“Borrower Materials” has the meaning set forth in Section 10.1(d).

“Borrower Member” means Vivint Solar Asset 2 Owner, LLC, a Delaware limited liability company.

“Borrower Member LLC Agreement” means the Amended and Restated Limited Liability Company Agreement of the Borrower Member, dated as of the date hereof.

“Borrower Projects” means, as of any date of determination, all Projects owned by the Borrower as of such date.

“Borrowing” means the borrowing of one or more Loans, as applicable, pursuant to the terms of this Agreement.

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“Borrowing Date” means that date on which a Borrowing occurs pursuant to the terms herein.

“Borrowing Date Certificate” has the meaning set forth in Section 3.2(a).

“Borrowing Notice” has the meaning set forth in Section 2.1(a)(iii).

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located.

“CADA” means the Collateral Agency and Depositary Agreement, dated as of the Closing Date, among the Borrower, the Administrative Agent, the Collateral Agent, the Depositary, the Securities Intermediary and, solely for the purposes of Section 2.1, Section 6.2 and Article 7 thereof, the Lenders.

“Cancelled Project” has the meaning set forth in the MEPCA.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Cash Flow Coverage Ratio” means [***].

“Cash Flow Coverage Ratio Certificate” means the certificate in the form of Exhibit H, certifying that the Cash Flow Coverage Ratio Requirement has been satisfied as of the most recent Quarterly Date.

“Cash Flow Coverage Ratio Requirement” means, as of each Quarterly Date, beginning with the third Quarterly Date after the Closing Date, the Cash Flow Coverage Ratio is equal to or exceeds 1.15:1.0.

“Change in Control” shall be deemed to have occurred if:

(a)None of the Sponsor, Hannon Armstrong or a Qualified Purchaser, directly or indirectly through the Borrower Member, has management control of the Borrower;

(b)Borrower Member shall cease to directly own, beneficially and of record, 100% of the issued and outstanding Equity Interests in the Borrower; or

(c)the Class B Investor shall cease to directly own, beneficially and of record, 100% of the issued and outstanding Class B Interests of the Borrower Member.

“Change of Law” means the occurrence, after the Closing Date, of any of the following: (a) the adoption or taking effect of any Governmental Rule, any change in any Governmental Rule

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or in the administration, interpretation, implementation or the application or requirements thereof (whether such change occurs in accordance with the terms of such Governmental Rule as enacted, as a result of amendment, or otherwise), any change in the interpretation or administration of any Governmental Rule by any Governmental Authority, or (b) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) of any Governmental Authority; for the avoidance of doubt, notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change of Law”, regardless of the date enacted, adopted, promulgated or issued.

“Charges” has the meaning set forth in Section 10.13.

“Class A Interest” has the meaning set forth in the Borrower Member LLC Agreement.

“Class A Investors” means a member of the Borrower Member holding one or more Class A Units (as defined in the Borrower Member LLC Agreement) in the Borrower Member.

“Class B Interest” has the meaning set forth in the Borrower Member LLC Agreement.

“Class B Investor” means Vivint Solar Asset 2 Class B, LLC, a Delaware limited liability company.

“Class B LLC Agreement” means the Amended and Restated Limited Liability Company Agreement of the Class B Investor, dated as of the date hereof.

“Class B Pledge Agreement” has the meaning set forth in the recitals to this Agreement.

“Closing Date” means the date when each of the conditions precedent listed in Section 3.1 has been satisfied (or waived in writing by the Lenders).

“Code” means the Internal Revenue Code of 1986, and the regulations promulgated pursuant thereto, as amended or as may be amended from time to time, and any successor federal tax statute.

“Collateral” means all property of, and equity interests in the Loan Parties, now owned or hereafter acquired upon which a Lien is or is purported to be created by any Collateral Document.

“Collateral Accounts” means the Depositary Accounts and the Collections Account.

“Collateral Agent” has the meaning set forth in the introductory paragraph of this Agreement.

“Collateral Documents” means the CADA, the Pledge Agreement, the Security Agreement, the Class B Pledge Agreement, the Interparty Agreement, each Consent, each collateral assignment, the Collections Account Control Agreement each other control agreement

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and any other security documents, financing statements and other documentation filed or recorded in connection with the foregoing.

“Collections Account” means the account of the Borrower established with the Account Bank, which is subject to the Collections Account Control Agreement.

“Collections Account Control Agreement” means the Deposit Account Control Agreement, dated as of the date hereof, by and among the Borrower, Borrower Member, Account Bank and the Collateral Agent.  

“Commitment” means, at any time with respect to each Lender, the commitment of such Lender to make Loans hereunder, expressed as a maximum aggregate principal amount of the Loans to be made by such Lender hereunder as such amount may be reduced from time to time pursuant to Sections 2.2(e), increased or modified from time to time pursuant to assignments by or to such Lender pursuant to Section 9.14.  The initial amount of each Lender’s Commitment is set forth on Annex 3 hereto in the column headed “Initial Commitment,” or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable.  

“Communications” has the meaning set forth in Section 10.1(c).

“Competitor” means any Person directly or through its Affiliates engaged in the business of owning, managing, operating, maintaining or developing renewable energy systems or other energy services for use in distributed generation applications (whether residential or commercial) in the United States; provided, that (x) a Person who is involved in such activities solely as a result of such Person being engaged as a back-up servicer or transition manager (including Wells Fargo Bank, National Association or U.S. Bank National Association) or as a result of making passive investments (including tax equity investments) in such activities or (y) each Lender party hereto as of the Closing Date, and each Affiliate of each such Lender, shall, in each case, not be considered a “Competitor” hereunder.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Consents” means each of (a) that certain MEPCA Consent and Agreement, dated as of the date hereof, by and among the Seller, the Borrower and the Collateral Agent and (b) that certain ASA/MSA Consent and Agreement, dated as of the date hereof, by and among the Provider, the Borrower and the Collateral Agent.

“Construction Reserve Account” has the meaning set forth in the CADA.

“Construction Reserve Required Amount” has the meaning set forth in the CADA.

“Controlled Group” means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b), (c), (m) or (o) of the Code.

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“Credit Criteria” means the credit criteria for the Customers and Systems set forth in Appendix 7.

“Customer” means a Person contractually obligated to make payments to the Borrower under a Customer Agreement.

“Customer Agreement” means, with respect to any Project, the power purchase agreement, lease agreement or other offtake agreement for the purchase and sale of energy or lease of a solar energy system relating to such Project signed by (x) a residential customer and (y) Borrower.

“Customer Payments” means, with respect to each Project, all payments made by the Customer in accordance with its Customer Agreement.

“DBRS” means DBRS, Inc. and its successors thereto.

“Debt” of any Person at any date means, without duplication,

(a)all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments,

(b)the maximum amount (after giving effect to any prior drawings or reductions which may have been reimbursed) of all outstanding letters of credit (including standby and commercial), bankers’ acceptances, bank guarantees, surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person,

(c)net obligations of such Person under any Hedging Agreement,

(d)all obligations of such Person to pay the deferred purchase price of property or services (other than (i) trade accounts payable in the ordinary course of business, (ii) any earn-out obligation until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP and (iii) liabilities accrued in the ordinary course),

(e)indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements and mortgage, industrial revenue bond, industrial development bond and similar financings), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse,

(f)all Attributable Indebtedness;

(g)all obligations of such Person in respect of Disqualified Equity Interests; and

(h)to the extent not otherwise included above, all Guarantees of such Person in respect of any of the foregoing.

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For the purposes of clause (c) above, with respect to any Person, net obligations under any Hedging Agreement on any date shall be deemed to be any Swap Termination Amount payable by such Person as of such date.

“Debt Service Reserve Account” has the meaning set forth in the CADA.

“Debt Service Reserve Required Amount” has the meaning set forth in the CADA.

“Declining Lender” has the meaning set forth in Section 2.1(g)(ii)(B).

“Declining Lender Loans” has the meaning set forth in Section 2.1(g)(ii)(B).

“Default” means any occurrence, circumstance or event, or any combination thereof, which, with the lapse of time, the giving of notice or both, would constitute an Event of Default under this Agreement.

“Default Rate” means, with respect to any Loan, the interest rate per annum equal to the Applicable Interest Rate plus 2.0% per annum.

“Defaulted Customer Agreement” means any Customer Agreement where the applicable Customer is more than 150 days past due on any amount due under such Customer Agreement or has repudiated its obligations under the Customer Agreement.

“Defaulted Customer Modification” means a modification by the Borrower of the electricity or lease rate, annual escalator or other term of any Defaulted Customer Agreement in a manner that lowers the relative Portfolio Value of such Customer Agreement. For the avoidance of doubt, “Defaulted Customer Modifications” shall be modifications that have been negotiated on a Customer-by-Customer basis for the individual circumstances of such Customer, and shall not include modifications that are agreed to by the Borrower on a broader level for multiple Customers due to changes in law.

“Defaulted Customer Modification Cap” means the point at which the total number of Modified Customer Agreements would, but for such modifications, constitute 6% of the total Portfolio Value for all Projects owned by the Borrower as reflected in the Final Advance Model.

“Defaulting Lender” means, subject to Section 2.8(b) any Lender that (a) has failed to (i) fund all or any portion of its Loans within two (2) Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more of the conditions precedent set forth in Sections 3.1 and 3.2 with respect to the relevant Borrowing (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) have not been satisfied, or (ii) pay to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within two (2) Business Days of the date when due, (b) has notified the Borrower or the Administrative Agent in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default,

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shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three (3) Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, at any time following the date of this Agreement, (i) become the subject of a proceeding under any Bankruptcy Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the FDIC or any other state, federal or national regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-In Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.

“Deficient Project” has the meaning set forth in the MEPCA.  

“Depositary” means Wells Fargo Bank, National Association, as Depositary and Securities Intermediary under the CADA.

“Depositary Accounts” has the meaning set forth in the CADA.

“Discharge Date” means the date when the outstanding Obligations (other than unasserted contingent payment obligations that by their nature expressly survive the termination of the Financing Documents) have been paid in full in cash and all Commitments have been terminated.

“Disqualified Equity Interests” means any Equity Interest that, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise (except as a result of a customarily defined change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior occurrence of the Discharge Date), (b) is redeemable at the option of the holder thereof, in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Debt or any other Equity Interests that are described in the foregoing clauses (a), (b) or (c), in whole or in part, in each case, prior to the date that is ninety-one (91) days after the Loan Maturity Date.

“Distressed Customer Agreement” shall mean (a) any Customer Agreement where the applicable Customer is more than [***] days past due on any amount due under such Customer Agreement, (b) any Customer Agreement where (i) the Customer’s interest in the underlying host Property for the applicable Project has been sold or otherwise transferred without either the Customer purchasing the Project or the new owner assuming such Customer Agreement and (ii)

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after [***] days following such transfer, the Borrower reasonably determines that the current Customer will not make any purchase payment due under the Customer Agreement and the new owner will refuse to assume such Customer Agreement but for a modification to the electricity or lease rate, annual escalator or term thereof, or (c) any Customer Agreement subject to a dispute between the Borrower and the Customer which, in light of the facts and circumstances known at the time of such dispute, and after [***] days following the commencement of the dispute (without resolution), the Borrower reasonably determines the Customer under such Customer Agreement could reasonably be expected to stop making rent payments due under the Customer Agreement but for a modification to the electricity or lease rate, annual escalator or term thereof.

“Dollars” and “$” means United States dollars or such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts in the United States of America.

“Downside Case” means, [***].

“Early Amortization Period” shall mean a period beginning on the second consecutive Quarterly Date on which a Repayment Event is continuing until the Quarterly Date upon which a Repayment Event is no longer continuing.

“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

“Eligibility Representations” means the representations set forth in Appendix 1.

“Eligible Assignee” means (a) a Lender, (b) an Affiliate of a Lender, and (c) any other Person (other than the Borrower, Sponsor or any of their respective Affiliates or a natural person).

“Environmental Claim” means any and all obligations, liabilities, losses, administrative, regulatory or judicial actions, suits, demands, decrees, claims, liens, judgments, warning notices, notices of noncompliance or violation, investigations, proceedings, removal or remedial actions or orders, or damages, penalties, fees, out-of-pocket costs, expenses, disbursements, attorneys’ or consultants’ fees, relating in any way to any Environmental Law or any Permit issued under any such Environmental Law (hereafter, “Hazard Claims”), including (a) any and all Hazard Claims by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Hazard Claims by any third party seeking damages, contribution, indemnification, cost recovery,

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compensation or injunctive relief resulting from the Release of Hazardous Materials or arising from injury to health, safety or the environment.

“Environmental Law” means any and all federal, State, regional and local statutes, laws (including common law), regulations, ordinances, judgments, orders, codes or injunctions pertaining to the environment, human health or safety (as affected by exposure to Hazardous Materials), or natural resources, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq.) (“CERCLA”), and the Superfund Amendments and Reauthorization Act of 1986, the Emergency Planning and Community Right to Know Act (42 U.S.C. §§ 11001 et seq.), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. §§ 6901 et seq.), and the Hazardous and Solid Waste Amendments Act of 1984, the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the Federal Water Pollution Control Act (also known as the Clean Water Act) (33 U.S.C. §§ 1251 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. §§ 300f et seq.), the Endangered Species Act (16 U.S.C. §§ 1531 et seq.), the Migratory Bird Treaty Act (16 U.S.C. §§ 703 et seq.), the Bald Eagle Protection Act (16 U.S.C. §§ 668 et seq.), the Oil Pollution Act of 1990 (33 U.S.C. §§ 2701 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. §§ 1801 et seq.), and any similar or analogous state and local statutes or regulations promulgated thereunder, and legally binding decisional law of any Governmental Authority, as each of the foregoing may be amended or supplemented from time to time in the future, in each case to the extent applicable with respect to the property or operation to which application of the term “Environmental Laws” relates.

“Equity Interests” means shares of capital stock, partnership interests, limited liability company interests or membership interests in a limited liability company, beneficial interests in a trust or other equity interests in any Person, and any option, warrant, commitment, preemptive rights or agreements of any kind (including any members’ or voting agreements) entitling the holder thereof to purchase or otherwise acquire any such equity interest.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Event” means (a) a Reportable Event; (b) a withdrawal by the Borrower or any member of the Controlled Group from an ERISA Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any member of the Controlled Group from a Multiemployer Plan; (d) the filing of a notice of intent to terminate an ERISA Plan, the treatment of an ERISA Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate an ERISA Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Plan or Multiemployer Plan; (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any member of the Controlled Group; (g) the failure by the Borrower or any member of the Controlled Group to meet the minimum funding requirements of Section 412 and 430 of the Code or Sections 302 and 303 of ERISA with respect to any ERISA Plan, whether or not waived; (h) the filing pursuant to Section

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412(c) of the Code or Section 303(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any ERISA Plan; or (i) any other event in connection with an ERISA Plan or Multiemployer Plan which, directly or indirectly, could reasonably be expected to subject the Borrower to any material liability under any statute, regulation or governmental order or which could obligate the Borrower or any member of the Controlled Group to indemnify any Person against such liability incurred under any such statute, regulation or order.

“ERISA Plan” means any employee pension benefit plan (as defined in Section 3(2) of ERISA) other than a Multiemployer Plan that is both (a) maintained by the Borrower or any member of the Controlled Group, or to which any of them contributes or is obligated to contribute, for its employees or has made, or was so maintained and in respect of which the Borrower or any member of the Controlled Group could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated and (b) covered by Title IV of ERISA or to which Section 412 of the Code applies.

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

“Event of Default” and “Events of Default” have the meanings given in Section 8.1.

“Event of Loss” shall mean (a) an event which causes all or a material portion of any Asset of a Loan Party to be damaged, destroyed or rendered unfit for normal use for any reason whatsoever (including any covered loss under a casualty insurance policy) and (b) any compulsory transfer or taking, or transfer under threat of compulsory transfer, of any Asset of a Loan Party pursuant to the power of eminent domain, condemnation or otherwise.

“Excluded Project” means (a) a Project with respect to which the Eligibility Representations are not, or are determined to have not been, true and correct on the applicable Purchase Date for such Project, (b) a Deficient Project, or (c) a Cancelled Project.

“Excluded Revenues” means amounts received by the Borrower in respect of (a) contributions by the Borrower Member in connection with the purchase of Projects, (b) proceeds from monetization of SRECs and upfront rebates, including any proceeds from refundable State tax credits or proceeds from the Massachusetts SMART rebate program, (c) proceeds from any Excluded Project, (d) revenues from Deficient Projects or Cancelled Projects and (e) revenues from Projects that, at the time of purchase, would cause the Borrower to fail to satisfy the Credit Criteria, (f) [***] (g) [***]; provided that amounts received from Projects that caused the Borrower to fail to satisfy the Credit Criteria solely due to such Projects’ failure to receive a PTO Letter by a certain date shall not be Excluded Revenue after that date that such Projects receive a PTO Letter.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to any Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for

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the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment under Section 2.7(b) or (c)) or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to Section 2.4(d)(i) or Section 2.4(d)(iii), amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.4(f) and (d) any U.S. federal withholding Taxes imposed pursuant to FATCA.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471 (b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities entered into in connection with the implementation of the foregoing.

“FDIC” means the Federal Deposit Insurance Corporation and its successors.

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Wells Fargo Bank, National Association on such day on such transactions as determined by the Administrative Agent.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Fees” refers to all fees, costs and expenses payable in accordance with the Financing Documents.

“Fee Letters” means each fee letter entered into by the Borrower and one or more of the Agents in connection with this Agreement or the other Financing Documents.

“Final Advance Model” has the meaning set forth in Section 2.1(a)(v)(B).

“Financing Documents” means this Agreement, the Notes, the Collateral Documents and all other documents, agreements or instruments executed in connection with the Obligations.

“Fitch” means Fitch Ratings Inc. and any successor thereto.

“Fixed Interest Rate” means, in respect of each Loan (other than the Term Loan), the per annum interest rate that is equal to the greater of (a) 4.70% and (b) the term equivalent of (i) the

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interpolated U.S.Treasury rate for the weighted-average life of such Loan as of the Borrowing Date for such Loan plus (ii) the Applicable Margin.

“Foreign Lender” means a Lender that is not a U.S. Person.

“FPA” means the Federal Power Act, as amended, and the regulations of FERC issued thereunder.

“GAAP” means (a) generally accepted accounting principles in the United States of America consistently applied or (b) upon mutual agreement of the parties, internationally recognized generally accepted accounting principles, consistently applied.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Governmental Rule” means any statute, law, regulation, ordinance, rule, judgment, order, decree, permit, concession, grant, franchise, license, agreement, directive, guideline, policy requirement or other governmental restriction or any similar form of decision of or determination by, or any interpretation or administration of any of the foregoing having the force of law by, any Governmental Authority, whether now or hereafter in effect.

“Guarantee” of or by any Person means (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Debt or other obligation payable or performable of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Debt or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Debt or other obligation of the payment or performance of such Debt or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Debt or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Debt or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part) or (b) any Lien on any assets of such Person securing any Debt or other obligation of any other Person, whether or not such Debt or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Debt to obtain any such Lien); provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.  The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.

“Hannon Armstrong” means Hannon Armstrong Sustainable Infrastructure Capital, Inc.

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“Hannon Investor” means a member of the Class B Investor holding one or more Hannon Units (as defined in the Class B LLC Agreement) in the Class B Investor.

“Hazard Claims” has the meaning set forth in the definition of “Environmental Claim”.

“Hazardous Materials” means all materials, pollutants, contaminants, chemicals, compounds, constituents, substances or wastes, in any form, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, mold, electromagnetic radio frequency or microwave emissions, that are regulated pursuant to, or which could give rise to liability under, applicable Environmental Law.

“Hedging Agreement” means (a) any and all interest rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc. or any International Foreign Exchange Master Agreement.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Financing Document and (b) to the extent not otherwise described in (a), Other Taxes.

“Indemnitee” has the meaning set forth in Section 5.10(a).

“Independent Engineer” means (a) Leidos Engineering, LLC or (b) any other reputable, qualified engineering firm with substantial experience in the residential solar industry that is not an Affiliate of the Borrower or the Sponsor.

“Ineligible Project Amount” means, as of any Quarterly Date, an amount equal to the product of (a) the Prepayment Rate multiplied by (b) (i) the reduction in Portfolio Value resulting from or attributable to each Ineligible Project Event (disregarding any proceeds received in respect of such Ineligible Project Event and assuming that no Customer Payments will be received in respect of the Project subject to such Ineligible Project Event)  that occurred during the period between the two most recent Quarterly Dates minus (ii) in respect of each Reeligible Project that has not previously been credited for the purposes of determining an Ineligible Project Amount on a prior Quarterly Date, the increase in Portfolio Value resulting from or attributable to the applicable Reeligible Project ceasing to be the subject of an Ineligible Project Event (provided that the Ineligible Project Amount shall not be less than zero).  

“Ineligible Project Event” means, with respect to any Project, such Project (i) is determined to be an Excluded Project, a Deficient Project or a Cancelled Project or (ii) is

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determined to have caused the Borrower to fail to satisfy the Credit Criteria as of the Purchase Date for such Project.

“Information” has the meaning set forth in Section 10.17.

“Initial Backup Servicer” means Wells Fargo.

“Installation” means, with respect to a Project, all Major Equipment is installed and mechanically complete.

“Insurance Consultant” means (a) Moore-McNeil, LLC or (b) any other reputable, qualified insurance consultant with substantial experience in the residential solar industry that is not an Affiliate of the Borrower or the Sponsor.

“Interparty Agreement” means the Interparty Agreement, dated as of the Closing Date, among Borrower Member, Borrower, the Class A Investors, the Class B Investors, HA Galileo 2 LLC, and the Collateral Agent.

“Investors” means the Class A Investors and Class B Investors.

“ITC” means the energy tax credit under Section 48 of the Code.

“ITC Basis Insurance Policy” has the meaning set forth in the MEPCA.

“ITC Basis Insurance Proceeds” means any proceeds received by Borrower under the ITC Basis Insurance Policy.

“ITC Loss Proceeds” means any amounts paid to Borrower by the Seller pursuant to Section 4.4 of the MEPCA.

“Knowledge” means, with respect to a Loan Party, the actual knowledge after reasonable inquiry of any person set forth in Schedule 1.1(b) and each such person’s successors in the same or a similar capacity,provided, however, that for matters relating to a Customer, as of the relevant Borrowing Date for the Project relating to such Customer “Knowledge of the Borrower” shall be limited to the representations and warranties made by such Customer in the Customer Agreement, without Seller undertaking further inquiry or due diligence. Any notice delivered to the any Loan Party (including to the Provider as their agent) by a Secured Party shall provide such person with Knowledge of the facts included therein.

“Kroll” means Kroll Bond Rating Agency Inc. and its successors thereto.

“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority. For the avoidance of doubt, for purposes of Sections 2.4(d) and (g), the term “Laws” includes FATCA.

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“Legal Requirements” means, as to any Person, the articles of incorporation, bylaws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation including any Governmental Rule, any requirement or obligation under a Permit, and any determination of any Governmental Authority in each case applicable to or binding upon such Person or any of its properties or to which such Person or any of its property is subject.

“Lender” has the meaning set forth in the introductory paragraph to this Agreement.

“Lending Office” means the office in the United States of America designated as such beneath the name of such Lender on Annex 2 or such other office of such Lender as such Lender may specify in writing from time to time to the Administrative Agent and the Borrower in accordance with this Agreement.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any Capital Lease Obligation having substantially the same economic effect as any of the foregoing).

“LLC Agreements” means, collectively, (a) the Borrower LLC Agreement and (b) the Borrower Member LLC Agreement.

“Loan” and “Loans” means the loans made by the Lenders under this Agreement, including the Term Loan and the Upsize Loan (if any).

“Loan Aggregation Notice” has the meaning set forth in Section 2.1(a)(v)(A).

“Loan Aggregation Notice Date” has the meaning set forth in Section 2.1(a)(v)(A).

“Loan Maturity Date” means the earlier of (a) the date that is the twentieth (20^th) anniversary of the Aggregation Date, and (b) the date of acceleration of the Loans pursuant to Section 8.2.

“Loan Parties” means the Borrower Member, the Class B Investor and the Borrower.

“Maintenance Services Agreement” means the Maintenance Services Agreement, dated as of the date hereof, between Borrower and Provider.

“Make-Whole Amount” means, [***]:

“Called Principal” means, with respect to any Loan, the principal of such Loan that is to be prepaid pursuant to Section 2.1(f)(i) or Section 2.1(f)(ii)(B).

“Discounted Value” means, with respect to the Called Principal of any Loan, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted

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financial practice and at a discount factor (applied on the same periodic basis as that on which interest on such Loan is payable) equal to the Reinvestment Yield with respect to such Called Principal.

“Reinvestment Yield” means, with respect to the Called Principal of any Loan, 0.50% plus the yield to maturity implied by (i) the yields reported, as of 10:00 a.m. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as “Page PX1” (or such other display as may replace Page PX1) on Bloomberg Financial Markets for the most recently issued actively traded on the run U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable (including by way of interpolation), the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (or any comparable successor publication) for U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date.  In the case of each determination under clause (i) or clause (ii), as the case may be, of the preceding sentence, such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded on the run U.S. Treasury security with the maturity closest to and greater than such Remaining Average Life and (2) the actively traded on the run U.S. Treasury security with the maturity closest to and less than such Remaining Average Life.  The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of the applicable Loan.

“Remaining Average Life” means, with respect to any Called Principal, the number of years (calculated to the nearest two decimal places) obtained by dividing (a) such Called Principal into (b) the sum of the products obtained by multiplying (i) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (ii) the number of years (calculated to the nearest two decimal places) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.

“Remaining Scheduled Payments” means, with respect to the Called Principal of any Loan, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date; provided that if such Settlement Date is not a date on which interest payments are due to be made on such Loan hereunder, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 2.1(f)(i) or Section 2.1(f)(ii)(B).

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“Settlement Date” means, with respect to the Called Principal of any Loan, the date on which such Called Principal is to be prepaid pursuant toSection 2.1(f)(i) orSection 2.1(f)(ii)(B).

“Major Equipment” means solar panels and inverters, including, if applicable, direct current module optimizers.

“Mandatory Payment” means, as of each Scheduled Payment Date, the sum of accrued interest and principal on the Loans (including, without duplication, Mandatory Principal and interest, any amounts required to be paid pursuant to Section 2.1(f)(ii) and any Target Debt Sweep Amount) that are due and payable in cash on such Scheduled Payment Date.

“Mandatory Principal” means, as of each Scheduled Payment Date beginning with the second Scheduled Payment Date occurring after the end of the Target Debt Sweep Period, principal (other than accrued and unpaid Target Debt Sweep Amounts) due and payable in cash on such Scheduled Payment Date in accordance with the Amortization Profile.

“Margin Stock” has the meaning set forth in Regulation U.

“Material Adverse Effect” means a (a) material adverse effect on the business, operations, assets, liabilities (actual or contingent) or financial condition of the Borrower and its Subsidiaries, taken as a whole; (b) material adverse effect on the ability of the Loan Parties (taken as a whole) to fully and timely perform any of their payment obligations under any Financing Document to which the Borrower or any of the Loan Parties is a party; (c) material adverse effect on the rights and remedies available to the Lenders or the Collateral Agent under any Financing Document.

“Maximum Loan Size” has the meaning set forth in the definition of “Sizing Parameters”.

“Maximum Rate” has the meaning set forth in Section 10.13.

“MEPCA” has the meaning set forth in the recitals to this Agreement.

“Modified Customer Agreement” means any Defaulted Customer Agreement that is subject to a Defaulted Customer Modification.

“Monthly True-Up Certificate” has the meaning set forth in the MEPCA.

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

“Multiemployer Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to which the Borrower or any member of the Controlled Group is making, or has an obligation to make, contributions, or has made, or has been obligated to make, contributions within any of the preceding five (5) plan years immediately preceding the Closing Date.

“Net Cash Flow” means, with respect to a period, an amount equal to Customer Payments received by the Borrower generated by Borrower Projects (which shall not include Excluded Revenues) minus the fees paid to the Agents and Operating Expenses paid, in each case during such period; provided, any projection of Net Cash Flow shall assume that Project Revenue

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Reduction Events that are in effect at the time such projection is made will remain in effect and that no cash flow shall be received from Projects subject to Project Compensation Events.

“Non-Consenting Lender” has the meaning set forth in Section 9.11(h).

“Non-Participating Lender” has the meaning set forth in Section 2.1(g)(ii)(A).

“Note” and “Notes” has the meanings given in Section 2.1(d)(ii).

“Notice of Default” has the meaning given in Section 5.2(c).

“Notice of Event of Default” has the meaning given in Section 5.2(c).

“Obligations” means and includes all loans, advances, debts, obligations, and liabilities howsoever arising (and whether arising or incurred before or after any Bankruptcy Event with respect to the Borrower or any other Person), owed by such Loan Party to the Agents or the Secured Parties of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, pursuant to the terms of this Agreement, or any of the other Financing Documents, including all principal, interest, indemnity or reimbursement obligations, fees, charges, expenses, attorneys’ fees and accountants fees chargeable to such Person in connection with its dealings with such Person and payable by such Person under this Agreement or any of the other Financing Documents.

“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.

“Operating Expenses” has the meaning set forth in the CADA.

“Operative Documents” means the Financing Documents, the LLC Agreements and the Project Documents.

“Organizational Documents” means (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Financing Document, or sold or assigned an interest in any Loan or Financing Document).

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“Other Documents” means, with respect to each Borrower Project, the Customer Agreement and the interconnection agreement.

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Financing Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.7(b) or Section 2.7(c)).

“Outstanding Principal” means, as of any date of determination, the aggregate amount of principal outstanding under all Loans on such date.

“Participant” has the meaning set forth in Section 9.13(a).

“Participant Register” has the meaning set forth in Section 9.13(b).

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Title III of Pub. L. 107-56 (signed into law October 26, 2001), as amended from time to time.

“Payment Account” has the meaning set forth in the CADA.

“PBGC” means the Pension Benefit Guaranty Corporation.

“Permit” means any permit, franchise, lease, order, license, notice, certification, approval, exemption, qualification, right or authorization from or registration, notice or filing with any Governmental Authority.

“Permitted Liens” means (a) Liens imposed by any Governmental Authority for Taxes not yet due or being contested in good faith and by appropriate proceedings and in respect of which (i) appropriate reserves acceptable to the Lenders have been established in accordance with GAAP, (ii) enforcement of the contested Tax is effectively stayed for the entire duration of such contest and (iii) any Tax determined to be due, together with any interest or penalties thereon, is promptly paid after resolution of such conflict; (b) Liens arising out of judgments or awards that do not otherwise constitute an Event of Default so long as an appeal or proceeding for review is being prosecuted in good faith and for the payment of which appropriate reserves have been established in accordance with GAAP, bonds (with recourse to a Person other than the Borrower) or other security have been provided or are fully covered by insurance, in each case, as acceptable to the Lenders in such manner and amount as to reasonably assure that any amounts determined to be due will be promptly paid in full when such contest is determined; (c) Liens created under the Financing Documents; (d) Liens arising as a matter of Law and (e) Liens permitted under the Project Documents.

“Person” means any natural person, corporation, limited liability company, partnership, firm, association, Governmental Authority or any other entity whether acting in an individual, fiduciary or other capacity.

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“Platform” has the meaning set forth in Section 10.1(d).

“Pledge Agreement” has the meaning set forth in the recitals to this Agreement.

“PML Study” has the meaning set forth in Section 5.17(b).

“Portfolio Report” means each of the operations reports and monthly operating reports, as applicable, delivered under the Maintenance Services Agreement or the Administrative Services Agreement.

“Portfolio Value” shall mean, as of the date of determination, the remaining present value through the Loan Maturity Date of the projected Net Cash Flow in accordance with the Advance Models, discounted at a rate of [***].

“Prepayment Date” means that date on which a prepayment occurs pursuant to Section 2.1(f)(iii).

“Prepayment Rate” means [***].

“Project” means a System (but expressly excluding any storage component thereof) installed on the rooftop of a Customer’s residential property and (a) used or to be used to generate electricity for sale to such Customer or (b) leased to a Customer, in each case under a Customer Agreement, the associated rights under such Customer Agreement, and all other related rights to the extent applicable thereto, including, without limitation, all parts and manufacturer’s warranties and rights to access Customer data, and all Permits and real property rights and other rights with respect to such Customers’ real property contained in such Customer Agreement necessary for the operation of the System and the lease of the System to the Customer or sale of electricity pursuant to the related Customer Agreement, as applicable, and all rights pursuant to any related Environmental Attributes and Rebates (in each case, as defined in the MEPCA).

“Project Compensation Amount” means, as of any Scheduled Payment Date, an amount equal to the product of (i) the Prepayment Rate times (ii) the reduction in Portfolio Value resulting from or attributable to each Project Compensation Event (disregarding any proceeds received in respect of such Project Compensation Event and assuming that no Customer Payments will be received in respect of the Project subject to such Project Compensation Event) that occurred during the period between the two most recent Quarterly Dates.

“Project Compensation Event” means with respect to any Project:

(a)the occurrence of an early termination of the Customer Agreement in respect of such Project and payment of the termination payment by the Customer for such Project in connection with such termination under and in accordance with the Customer Agreement for such Project;

(b)such Project experiences an Event of Loss and is not repaired, restored, replaced or rebuilt to substantially the same condition as existed immediately prior to the Event of Loss within one hundred fifty (150) days of such Event of Loss;

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(c)future amounts due under a Customer Agreement for such Project have been prepaid by the Customer for such Project; or

(d)the Customer in respect of such Project has purchased such Project in accordance with the terms of the Customer Agreement for such Project.

“Project Documents” means the Project Documents set forth in Appendix 2 hereto (as well as any successor, substitute or replacement documents therefor), and the Transaction Documents.

“Project Locations” has the meaning set forth in the MEPCA.

“Project Revenue Reduction Amount” means, [***].

“Project Revenue Reduction Event” means with respect to any Project:

(a)the Customer for such Project becomes more than [***] days past due on any amount due under the Customer Agreement for such Project (provided, for the avoidance of doubt, that at such time such Customer is performing its obligations under such Customer Agreement in accordance with the terms thereof and thereafter remains fully current on all amounts due for a period of no less than three (3) consecutive months, such Project shall not be deemed to be subject to a Project Revenue Reduction Event);

(b)the occurrence of an early termination of the Customer Agreement in respect of such Project (without a replacement being entered into that would cause the Project to meet the Eligibility Representations) and the Customer for such Project fails to make a termination payment under and in accordance with the terms of the Customer Agreement for such Project by the date that is [***] days after such termination; or

(c)the Customer Agreement for such Project is a Distressed Customer Agreement and such Distressed Customer Agreement is amended to modify the electricity or lease rate, annual escalator or term thereof.

“Property” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.

“Proportionate Share” means, at any time with respect to each Lender, the percentage obtained by dividing the outstanding principal amount of the Loans and Commitments of such Lender at such time by the Outstanding Principal and Commitments of all Lenders at such time.

“Provider” means Vivint Solar Provider, LLC, a Delaware limited liability company.

“Provider Default” means (a) the delivery by the Borrower to Provider of a written notice of the termination of the Provider as the “Provider” as such term is defined in the Administrative Services Agreement or the Maintenance Services Agreement, (b) the termination of the Provider as the “Provider” as such term is defined in the Administrative Services Agreement or the Maintenance Services Agreement or (c) any other event that would with the giving of notice, passage of time or both would result in the termination of the Provider as the “Provider” as such

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term is defined in the Administrative Services Agreement or the Maintenance Services Agreement. A Provider Default may be cured (x) if the grounds for removal are rescinded in writing by Borrower Member or cease to exist or (y) by the appointment of a Qualified Manageras replacement “Provider” on terms materially similar to the terminated Service Agreements (including the applicable Backup Services Agreement) and where such removal and replacement could not reasonably be expected to otherwise have a Material Adverse Effect.  The Initial Backup Serviceris acknowledged to be an acceptable replacement “Provider” in respect of the Administrative Services Agreement and each Person set forth of Appendix 8 is acknowledged to be an acceptable replacement “Provider” in respect of the Maintenance Services Agreement.

“PRRE Percentage” shall mean, [***].

“PRRE Threshold” means the lesser of (a) the greater of (i) [***] percent and (ii) the product of [***] percent ([***]%) multiplied by the number of Quarterly Dates that have elapsed in full since first Quarterly Date following the Closing Date and (b) [***] percent ([***]%).

“PTO Date” has the meaning set forth in the MEPCA.

“PTO Letter” has the meaning set forth in the MEPCA.

“Public Lender” has the meaning set forth in Section 10.1(d).

“PUHCA” means the Public Utility Holding Company Act of 2005 and all the implementing rules regulations of FERC issued thereunder.

“Purchase Date” has the meaning set forth in the MEPCA.

“Qualified Appraiser” has the meaning set forth in the MEPCA.

“Qualified Manager” means a Person that (a) has the Requisite Experience, and (b) either (i) has (A) a credit rating of “[***]” or higher by S&P and “[***]” or higher by Moody’s, in each case, with a neutral or positive outlook, or (B) a tangible net worth of at least $[***], or (ii) has a direct or indirect parent with (A) a credit rating of “[***]” or higher by S&P and “[***]” or higher by Moody’s, in each case, with a neutral or positive outlook, or (B) a tangible net worth of at least $[***]; provided, that such Person can satisfy the Requisite Experience by engaging a third party service provider who has the Requisite Experience.

“Qualified Purchaser” means a Person that purchases the direct or indirect Equity Interests in Borrower Member or Provider, as applicable, that is a Qualified Manager and which has certified at the time it acquires such direct or indirect Equity Interests that it intends to hold such interests and not treat them “as available for sale” or equivalent for accounting purposes.

“Quarterly Date” means the last Business Day of the first month occurring after the end each calendar quarter, commencing with the quarter in which the initial Borrowing Date occurs.

“Ratings Agency” means any of S&P, Moody’s, Fitch, Kroll or DBRS.

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“Recipient” means (a) an Agent, (b) any Lender or (c) any other Secured Party, as applicable.

“Reeligible Project” shall mean, as of any Scheduled Payment Date, a Borrower Project that (a) was previously the subject of an Ineligible Project Event and in respect of which a prepayment was made under Section 2.1(f)(ii)(F) on a prior Scheduled Payment Date and (b) is no longer the subject of an Ineligible Project Event.

“Register” has the meaning set forth in Section 9.14(c).

“Regulation T” means Regulation T of the Federal Reserve Board as from time to time in effect, and all official rulings and interpretations thereunder or thereof.

“Regulation U” means Regulation U of the Federal Reserve Board as from time to time in effect, and all official rulings and interpretations thereunder or thereof.

“Regulation X” means Regulation X of the Federal Reserve Board as from time to time in effect, and all official rulings and interpretations thereunder or thereof.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

“Release” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing or migrating of Hazardous Materials in, into, onto or through the environment or from or through any facility, property or equipment.

“Removal Effective Date” has the meaning set forth in Section 9.5(b).

“Repayment Event” means, as of [***], the Cash Flow Coverage Ratio is less than [***].

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty (30) day notice period is waived.

“Representatives” has the meaning set forth in Section 10.17.

“Required Lenders” means, (a) prior to the Availability Period End Date, the Lenders holding more than 50% of the Commitments then in effect and (b) after the Availability Period End Date, the Lenders holding more than 50% of the Outstanding Principal.  The Loans and Commitments of any Defaulting Lender shall be disregarded in determining Required Lenders at any time.

“Requisite Experience” means a Person that has, for a period of at least [***] consecutive years within the [***] years immediately prior to the date of determination operated at least (a) [***] megawatts of energy generation facilities (of which at least [***] megawatts are residential or commercial solar distributed generation capacity) or (b) [***] megawatts of total aggregate

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solar distributed generation capacity (of which at least [***] megawatts are residential or commercial solar distributed generation capacity).

“Resignation Effective Date” has the meaning set forth in Section 9.5(a).

“Responsible Officer” means (i) with respect to any Loan Party, (a) Chief Executive Officer, President, Chief Commercial Officer, Chief Financial Officer, or Chief Legal Officer and Vice President, Capital Markets and (b) any other officer or employee of the applicable Loan Party designated in or pursuant to an agreement between the applicable Loan Party and the Administrative Agent, and (ii) with respect to any Agent or the Depositary, any officer in the corporate trust office of any Agent or the Depositary, including any president, vice president, executive vice president, assistant vice president, treasurer, secretary, assistant secretary, corporate trust officer or any other officer thereof customarily performing functions similar to those performed by the individuals who at the time shall be such officers, respectively, or to whom any matter is referred because of such officer’s knowledge of or familiarity with the particular subject, and, in each case, having direct responsibility for the administration of this Agreement and the other Financing Documents to which such Person is a party. Any document delivered hereunder that is signed by a Responsible Officer of any Loan Party, as the case may be, shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party, as applicable, and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party, as applicable. Any notice delivered to any Loan Party by a Secured Party shall provide such Person with Knowledge of the facts included therein.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) on or with respect to any Equity Interests in the Borrower, or any other payment (whether in cash, securities or other property on account of any Equity Interest in the Borrower), including any sinking fund or similar deposit or any payment, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests in Borrower or any payments in respect of any management or development fees; provided, that distributions of Excluded Revenues shall not constitute “Restricted Payments”.

“Revenue Account” has the meaning set forth in the CADA.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

“Sanctioned Country” means a country or territory that is the subject of country-wide or territory-wide Sanctions broadly prohibiting dealings with such country or territory (currently, Cuba, Iran, North Korea, Syria, and the Crimea region of Ukraine).

“Sanctioned Person” means any Person:  (a) identified on a Sanctions List; (b) organized, operating from, or ordinarily resident in, or the government or any agency or instrumentality of the government of, any Sanctioned Country; (c) owned or controlled by, or acting for or on behalf of, directly or indirectly, any Person described in the foregoing clause (a) or (b); or (d) otherwise the subject or target of Sanctions.

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“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered, or enforced from time to time by the United States.

“Sanctions Authority” means:  (a) the U.S. government, including OFAC and the U.S. Department of State; (b) the United Nations Security Council; (c) the European Union and each of its member states; or (d) the United Kingdom, including Her Majesty’s Treasury.

“Sanctions List” means any Sanctions-related list of designated Persons maintained by any Sanctions Authority, including, without limitation, the Specially Designated Nationals and Blocked Persons List maintained by OFAC.

“Scheduled Payment Date” means each Quarterly Date, or if any such day is not a Business Day, the immediately succeeding Business Day.

“Scheduled Payment Date Report” means a report delivered by the Borrower at least three (3) Business Days before each Scheduled Payment Date pursuant to Section 5.15, substantially in the form of Exhibit D, and certified by a Responsible Officer of the Borrower, which shall, among other things, (a) report in reasonable detail on the Target Debt Sweep Amount and any other Mandatory Payment payable on such Scheduled Payment Date, each other withdrawal and payment to be made from the Revenue Account and the other Collateral Accounts and each withdrawal and payment made from the Collateral Accounts during the quarter ending on such Scheduled Payment Date and (b) contain the Borrower’s good faith, reasonable and detailed calculation of the Cash Flow Coverage Ratio as of such Scheduled Payment Date.

“Secured Parties” means (a) if applicable, the Agents, (b) the Lenders, and (c) if applicable, the Depositary.

“Security Agreement” has the meaning set forth in the recitals to this Agreement.

“Seller” has the meaning set forth in the recitals to this Agreement.

“Service Agreements” means the Administrative Services Agreement and the Maintenance Services Agreement.

“Sizing Parameters” means, as of each Borrowing Date, the maximum amount of Loans that, if provided to the Borrower and, as of such Borrowing Date, aggregated with Outstanding Principal, would be equal to (i) in the case of each Borrowing Date other than in respect of the Loan on the Aggregation Date or the Upsize Loan, [***]% and (ii) in the case of the Borrowing of the Loan on the Aggregation Date and the Upsize Loan, if any, [***]%, in each case of the amount of Loans that would meet the applicable Amortization Profile (the “Maximum Loan Size”), assuming Net Cash Flows as modeled in the Advance Model delivered in connection with such Borrowing Date or the Final Advance Model delivered in connection with the Aggregation Date.

“Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable

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liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature, (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital, and (e) such Person generally is able to pay its debts and liabilities, contingent obligations and other commitments as they mature.  The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Sponsor” means Vivint Solar, Inc., a Delaware corporation.

“SREC” means the definition “SRECs”, “RECs” or “Renewable Energy Credits”, as applicable, given in the applicable Project Documents, but in any event, includes credits, credit certificates, green tags or similar environmental or green energy attributes (such as those for greenhouse gas reduction or the generation of green power or renewable energy) created by a Governmental Authority of any state or local jurisdiction and/or independent certification board or group generally recognized in the electric power generation industry, and generated by or associated with any System or electricity produced therefrom.

“Standstill Period” has the meaning set forth in the Interparty Agreement.

“State Sanctions List”  means any list adopted by any state Governmental Authority within the United States of America pertaining to Persons that engage in investment or other commercial activities in a Sanctioned Country.

“Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

“Supplemental Reserve Account” has the meaning set forth in the CADA.

“Supplemental Reserve Required Amount” has the meaning set forth in the CADA.

“Swap Termination Amount” means, in respect of any one or more Hedging Agreements entered into by any Person, after taking into account the effect of any legally enforceable netting agreement relating to such Hedging Agreements, for any date on or after the date such Hedging Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s).

“System” means an electric generating photovoltaic system including photovoltaic panels, racks, wiring and other electrical devices, conduit, weatherproof housings, hardware, one or more

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inverters, remote monitoring system, communication system, connectors, meters, disconnects, and optionally, battery storage equipment and energy management equipment, but excluding the Customer’s electrical distribution equipment

“System Information” means the information listed on Appendix 3, which shall be in form, substance and content substantially the same as the tranche data file provided by the Loan Parties to the Lenders during due diligence and on the Closing Date.

“Target Debt Balance” means, as of any Quarterly Date during the Target Debt Sweep Period, the target Loan balance for such Quarterly Date determined in accordance with the Amortization Profile and set forth in Schedule 2.1(f); as such Schedule 2.1(f) is updated on each Borrowing Date to account for the Loan borrowed on such Borrowing Date and on each Prepayment Date pursuant to Section 2.1(f)(iii)(D).  

“Target Debt Sweep Amount” means, as of each Scheduled Payment Date occurring during the Target Debt Sweep Period, an amount that will cause the Outstanding Principal (after giving effect to any payment of principal of Loans and any prepayments made on such Scheduled Payment Date) to be equal to the then-applicable Target Debt Balance as of the most recent Quarterly Date.

“Target Debt Sweep Period” means the period from and including the Availability Period End Date through and including the first Scheduled Payment Date that occurs after the end of the Standstill Period.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Term Loan” has the meaning set forth in Section 2.1(a)(v)(A).

“Total Loan Commitment” means One Hundred Fifty Million Dollars ($150,000,000).

“Transaction Documents” means the MEPCA, the Backup Services Agreement, the Backup Addendum, the Administrative Services Agreement, the Maintenance Services Agreement, that certain Guaranty, dated as of the date hereof, made by Sponsor in favor of Borrower and each Bill of Sale.

“True-Up Report” has the meaning set forth in the MEPCA.

“UCC” means the Uniform Commercial Code of the jurisdiction the law of which governs the document in which such term is used or which governs the creation or perfection of the Liens granted thereunder.

“Undrawn Fee Amount” means, on the applicable Undrawn Fee Payment Date, an amount (if positive) equal to:

(a)[***];

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(b)[***]; and

(c)[***]

“Undrawn Fee Payment Date” means each of [***] or, if any such day is not a Business Day, the immediately preceding Business Day.

“Undrawn Fees” has the meaning set forth in Section 2.3(a).

“Upsize Conditions” means the following conditions: (a) the Borrower has delivered to the Lenders (with a copy to the Administrative Agent) an Upsize Ratings Letter and (b) the Term Loan has (i) achieved a Cash Flow Coverage Ratio of at least 1.15:1.0 as of each elapsed Quarterly Date and (ii) achieved a weighted average Cash Flow Coverage Ratio of at least 1.30:1.0.

“Upsize Loan” has the meaning set forth in Section 2.1(g)(i).

“Upsize Loan Lender” has the meaning set forth in Section 2.1(g)(ii).

“Upsize Loan Notice” has the meaning set forth in Section 2.1(g)(i).

“Upsize Ratings Letter” means a letter from a Ratings Agency with respect to the Loans, based on an updated Final Advance Model and incorporating the actualized characteristics of the Borrower Projects (including the extent of actual Project Revenue Reduction Events and Project Compensation Events as of the date of such letter) showing a rating of BBB (or equivalent) or better based on a maximum loan principal amount that would meet the Amortization Profile.

“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning set forth in Section 2.4(f)(ii)(B)(3).

“VSLR Party” means each of Provider and Seller.

“Wells Fargo” means Wells Fargo Bank, National Association.

“Withholding Agent” means any Loan Party and the Administrative Agent.

“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

1.2Rules of Interpretation

.  Except as otherwise expressly provided, the rules of interpretation set forth below shall apply to this Agreement and the other Financing Documents:

(a)The singular includes the plural and the plural includes the singular.  The definitions of terms apply equally to the singular and plural forms of the terms defined.

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(b)A reference to a Governmental Rule includes any amendment or modification to such Governmental Rule, and all regulations, rulings and other Governmental Rules promulgated under such Governmental Rule.

(c)A reference to a Person includes its successors and permitted assigns and, in the case of Governmental Authorities, Persons succeeding to their respective functions and capacities.

(d)The words “include,” “includes” and “including” are not limiting.

(e)A reference in a document to an Article, Section, Exhibit, Schedule, Annex or Appendix is to the Article, Section, Exhibit, Schedule, Annex or Appendix of such document unless otherwise indicated.  Exhibits, Schedules, Annexes or Appendices to any document shall be deemed incorporated by reference in such document.  In the event of any conflict between the provisions of this Agreement (exclusive of the Exhibits, Schedules, Annexes and Appendices thereto) and any Exhibit, Schedule, Annex or Appendix thereto, the provisions of this Agreement shall control.

(f)References to any document, instrument or agreement (i) shall include all exhibits, schedules and other attachments thereto, (ii) shall include all documents, instruments or agreements issued or executed in replacement thereof, and (iii) shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time, provided such amendment, modification or supplement was made in compliance with this Agreement.

(g)The words “hereof,” “herein” and “hereunder” and words of similar import when used in any document shall refer to such document as a whole and not to any particular provision of such document.

(h)References to “days” shall mean calendar days, unless the term “Business Days” shall be used.  References to a time of day shall mean such time in New York, New York, unless otherwise specified.

(i)The Financing Documents are the result of negotiations between, and have been reviewed by the Borrower, the Agents, each Lender and their respective counsel.  Accordingly, the Financing Documents shall be deemed to be the product of all parties thereto, and no ambiguity shall be construed in favor of or against the Borrower, the Agents or any Lender.

(j)Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “will” and “shall” shall be construed to have the same meaning and effect.

(k)In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.”

(l)Accounting terms have the meanings assigned to them by GAAP, as applied by the accounting entity to which they refer.

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(m)Unless otherwise specified in this Agreement, whenever a payment or performance of an action is required to be made pursuant to this Agreement on a day that is not a Business Day, such payment or performance shall be made on the next succeeding Business Day.

(n)If, at any time after the Closing Date, a Ratings Agency shall change its respective system of classifications, then any Ratings Agency “rating” referred to herein shall be considered to be at or above a specified level if it is at or above the new rating which most closely corresponds to the specified level under the old rating system.

(o)“or” is not exclusive.

(p)All references to “$” are to United States dollars unless otherwise indicated.

(q)References to “writing” include printing, typing, lithography and other means of reproducing words in a tangible visible form.

(r)If a Scheduled Payment Date occurs on a Quarterly Date, references to “most recent Quarterly Date” with respect to such Scheduled Payment Date shall refer to such Scheduled Payment Date.

ARTICLE 2

THE CREDIT FACILITY

2.1Loan Facility

.

(a)Loan Facility.

(i)Availability.

(A) Subject to the terms and conditions set forth herein, each Lender agrees, severally and not jointly, to make one or more Loans to the Borrower, from time to time during the Availability Period, in an aggregate principal amount that will not result in such Lender’s Loans exceeding its Commitment.

(B) Notwithstanding the foregoing, (x) there shall be no more than one (1) Borrowing per calendar month and no such Borrowing shall exceed Fifty Million Dollars ($50,000,000.00) in aggregate principal amount and (y) the total principal amount of all Loans outstanding hereunder shall not exceed the sum of the Commitments.

(C) Each Loan made by a Lender under this Agreement shall reduce such Lender’s proportionate share of the Commitment available hereunder.

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(D) Amounts borrowed hereunder and repaid pursuant to Section 2.1(f) may not be reborrowed under this Section 2.1(a).

(E) Notwithstanding any provision to the contrary, any Borrowing must occur on a date that is a Business Day.

(ii)Loan Sizing; Minimum Draw Amount.  Notwithstanding anything to the contrary in Section 2.1(a)(i), the aggregate amount of each Borrowing (A) shall be in a maximum principal amount no greater than the then-applicable Maximum Loan Size, (B) shall not cause the Outstanding Principal (including the amounts of the requested Borrowing) to exceed the Commitment and (C) shall exceed Five Million Dollars ($5,000,000) or such lesser amount as equal to the remaining Commitment.

(iii)Borrowing Notice.  The Borrower shall request Loans by delivering to the Lenders with a copy to the Administrative Agent an irrevocable written notice in the form of Exhibit B-1 (or such other form as may be approved by the Administrative Agent at the instructions of the Lenders), appropriately completed and signed by a Responsible Officer of the Borrower (a “Borrowing Notice”) by no later than 12:00 p.m., New York time, at least five (5) Business Days before the requested date of each Borrowing.

(iv)The Advance Model.  In connection with any Borrowing Notice, the Borrower shall also deliver to the Administrative Agent and the Lenders simultaneously with such Borrowing Notice the updated actualized Advance Model.

(v)Loan Aggregation Notice.

(A) The Borrower shall request the aggregation of all Loans into a single Loan (such Loan, the “Term Loan”) by delivering to the Administrative Agent an irrevocable written notice in the form of Exhibit B-2 (or such other form as may be approved by the Administrative Agent at the instructions of the Lenders), appropriately completed and signed by a Responsible Officer of the Borrower (the “Loan Aggregation Notice”) by no later than 12:00 p.m., New York time, at least two (2) Business Days before the Aggregation Date (such date of delivery, the “Loan Aggregation Notice Date”).  

(B) Together with the Loan Aggregation Notice, the Borrower shall submit to the Administrative Agent, the Lenders and the applicable Ratings Agency a final actualized Advance Model (the “Final Advance Model”) that takes into account the actual characteristics of all Borrower Projects as of the Aggregation Date.

(C) If the Maximum Loan Size (as determined in accordance with the Final Advance Model) is greater than the principal amount of the Outstanding Principal as of the Loan Aggregation Notice Date, then the Borrower may, but shall not be obligated to, subject to the satisfaction of the conditions precedent set forth in Section 3.2, draw

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any undrawn Commitment in an amount equal to the difference between the Maximum Loan Size minus the Outstanding Principal as of the  Loan Aggregation Notice Date, and such Loan will be aggregated, together with the other Loans outstanding on the Loan Aggregation Notice Date, into the Term Loan.

(b)Interest Provisions Relating to Loans.

(i)Interest Rate.  Subject to Section 2.4(c), the Borrower shall pay interest (including interest accruing after the commencement of an insolvency proceeding under applicable Bankruptcy Law) on the unpaid principal amount of each Loan from the date of the funding of such Loan until the Loan Maturity Date at the Applicable Interest Rate.

(ii)Interest Payment Dates.  Interest on the unpaid principal amount of each Loan shall be payable in arrears on each Scheduled Payment Date with respect to such Loan and upon prepayment of any Loans as and to the extent provided in Section 2.1(f) and at maturity (whether by acceleration or otherwise); provided that interest payable pursuant to Section 2.4(c) shall be payable on demand.

(iii)Interest and Undrawn Fee Computations.  Interest on the Loans and any Undrawn Fees will be calculated on the basis of a year of three hundred sixty (360) days with twelve (12) thirty day months, and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable.  

(iv)Interest Account and Interest Computations.  The Administrative Agent shall record in an account or accounts maintained by the Administrative Agent on its books (A) the Applicable Interest Rate for the Loans; (B) the date and amount of each principal and interest payment on each Loan; and (C) such other information as the Administrative Agent may determine is necessary for the computation of interest payable by the Borrower hereunder consistent with the basis hereof.  The Borrower agrees that all computations by the Administrative Agent of interest shall be deemed prima facie to be correct in the absence of manifest error.

(c)Principal Payments of Loans.  On each Scheduled Payment Date commencing on the first Scheduled Payment Date that occurs after the Standstill Period, the Borrower shall pay to each Lender the principal of such Lender’s outstanding Loan that is then due and payable in accordance with installment amounts set forth for such date in the Amortization Profile.  All outstanding principal of, and all unpaid interest, fees and costs payable hereunder with respect to each of the Loans shall be due and payable in full at par and without payment of the Make-Whole Amount on the Loan Maturity Date.

(d)Promissory Notes.

(i)Evidence of Debt.  The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business.  The accounts or records maintained by the Administrative Agent and each Lender shall constitute prima facie evidence of the accuracy of the information contained therein.  Any failure to so record or any error in

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doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.  Payment by the Administrative Agent to the Lenders in accordance with the terms hereof shall not require presentment of any Note.

(ii)Execution and Delivery of Notes.  Upon the request of any Lender, the Borrower shall duly execute and deliver to such Lender a promissory note substantially in the form of Exhibit A (each, a “Note”), in favor of such Lender in a principal amount equal to such Lender’s Loan, with blanks appropriately completed in conformity herewith.  Each Lender is hereby authorized, at its option, either (i) to endorse on the schedule attached to each of its Notes (or on a continuation of such schedule attached to such Note and made a part thereof) an appropriate notation evidencing the date, amount and maturity of its Loan and payments with respect thereto or (ii) to record the date, amount and maturity of its Loan and payments with respect thereto in its books and records as contemplated by Section 2.1(d)(i).  Such schedule or such books and records, as the case may be, shall constitute prima facie evidence of the accuracy of the information contained therein; provided that the failure of any Lender to make such notations or maintain such records or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.

(iii)The Lenders and any transferees or assignees thereof after the Closing Date will be required to provide to the Administrative Agent or its agents all information, documentation or certifications reasonably requested by the Administrative Agent to permit the Administrative Agent to comply with its tax reporting obligations under applicable laws, including any applicable cost basis reporting obligations.

(e)Loan Funding.

(i)Notice.  The Borrowing Notice, the Advance Model, Loan Aggregation Notice, and the Final Advance Model, shall be delivered to the Administrative Agent and the Lenders, as applicable, in accordance with Section 2.1(a).  The Administrative Agent shall promptly notify each Lender of the date of each requested Borrowing and such Lender’s Proportionate Share of the requested Borrowing.

(ii)Pro Rata Loans.  All Loans shall be made on a pro rata basis by the Lenders in accordance with their respective Proportionate Share, with the Borrowing of Loans to be comprised of a Loan by each Lender equal to such Lender’s Proportionate Share of the Borrowing.

(iii)Administrative Agent Account.  No later than 12:00 p.m., New York time on the date of the requested Borrowing, if the applicable conditions precedent listed in Sections 3.1 and 3.2 have been satisfied or waived, each Lender shall make available the Loans requested in the Borrowing Notice in Dollars and in immediately available funds to the Administrative Agent at its account in the United States identified in Annex 1.

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(f)Prepayments.

(i)Voluntary Prepayment of Loans.  The Borrower may, at its option, prepay, all outstanding Loans in whole or in part.  Any partial prepayment hereunder shall be in a minimum aggregate amount of One Million Dollars ($1,000,000) and in an integral multiple of One Million Dollars ($1,000,000); provided, however, that any prepayment pursuant to this Section 2.1(f)(i) shall not result in any release of Collateral without further action of the Collateral Agent pursuant to the terms of the Financing Documents.  Each voluntary prepayment of Loans under this Section 2.1(f)(i) shall be subject to the payment of Make-Whole Amount.

(ii)Mandatory Prepayments.  [***]

(A) Repayment Event. [***];

(B) Incurrence of Debt. [***];

(C) Loans Exceed Commitment. [***];

(D) Target Debt Sweep. [***];

(E) Aggregation Date. [***].

(F) Ineligible Project Events. [***].

(G) Project Revenue Reduction Events. [***].

(H) Project Compensation Events. [***].

(iii)Terms of Prepayments.

(A) All voluntary and mandatory prepayments of Loans under this Section 2.1(f) shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment.

(B) The Borrower shall give the Administrative Agent and the Lenders at least three (3) Business Days’ notice of any voluntary prepayment under Section 2.1(f)(i) and any mandatory prepayment under Section 2.1(f)(ii)(B).  Each notice of voluntary prepayment or applicable notice mandatory prepayment shall (x) specify the prepayment date, and (y) be accompanied by a certificate signed by a Responsible Officer of the Borrower setting forth in reasonable detail the calculation of the amount of such prepayment and the applicable Make-Whole Amount.

(C) Amounts prepaid pursuant to Sections 2.1(f)(i) and 2.1(f)(ii) shall be applied on a pro rata basis to the remaining scheduled

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installments of the outstanding Loans.  Each prepayment shall be paid to the Lenders in accordance with their respective pro rata share of the outstanding principal amount of such Loans.

(D) In connection with any voluntary and mandatory prepayments of Loans under this Section 2.1(f), the Borrower shall deliver to the Administrative Agent and the Lenders an updated Schedule 2.1(f) reflecting the applicable prepayment and, upon the Lender’s acceptance of such updated schedule, such updated schedule shall automatically become Schedule 2.1(f) hereto.

(g)Accordion.  Notwithstanding any provision of this Section 2.1 to the contrary:

(i)On any anniversary of the Aggregation Date following the sixth such anniversary and upon the satisfaction of the Upsize Conditions, the Borrower may provide a written notice (the “Upsize Loan Notice”) to each of the Lenders that the Borrower intends to request, subject to the satisfaction of the conditions precedent set forth in Section 3.2 and the prior written consent of all Lenders, a Borrowing in an amount equal to (A) the then-applicable Maximum Loan Size minus (B) the total amount of the Term Loan then outstanding (as calculated after each Lender has made an election with respect thereto under Section 2.1(g)(ii) and after the Borrower has made a prepayment, if any, contemplated under Section 2.1(g)(ii)(B)) (the “Upsize Loan”). The interest rate applicable to the Upsize Loan shall be the Fixed Interest Rate calculated on the Borrowing Date of such Upsize Loan.

(ii)Upon receipt of the Upsize Loan Notice, each Lender shall have the right, but not the obligation, to participate in the Upsize Loan in an amount equal to its pro rata share (based on the amount of the Term Loan held by such Lender on the Borrowing Date for the Upsize Loan) (each such Lender, an “Upsize Loan Lender”).

(A) If any Lender consents to permit the Borrower to incur the Upsize Loan but does not consent to provide its pro rata share of such Upsize Loan (each such Lender, a “Non-Participating Lender”), such Non-Participating Lender shall continue to be a Lender with respect to such Non-Participating Lender’s existing share of the Term Loan.

(B) If any Lender does not consent to permit the Borrower to incur the Upsize Loan (each such Lender, a “Declining Lender”), the Borrower shall be permitted to prepay the Loans then held by such Declining Lender (the “Declining Lender Loans”) in an amount equal to one hundred two point five percent (102.5%) of such Declining Lender’s existing share of the Term Loan plus accrued and unpaid interest, for the avoidance of doubt, without any Make Whole Amount.

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2.2Commitments

.

(a)Generally.  Subject to the terms and conditions set forth herein, each Lender agrees, severally and not jointly, to make one or more Loans to the Borrower, from time to time during the Availability Period, in an aggregate principal amount that will not result in such Lender’s Loans exceeding its Commitment.

(b)Scheduled Commitment Termination Date.  Unless previously terminated, the Commitments shall automatically terminate on the Availability Period End Date.

(c)Voluntary Termination or Reduction of Commitments.  The Borrower may, at any time, terminate, or from time to time reduce, the Commitments; provided, that each partial reduction of the Commitments shall be in an amount that is Five Million Dollars ($5,000,000.00) or a larger multiple of Five Million Dollars ($5,000,000.00).

(d)Notice of Voluntary Termination or Reduction.  The Borrower shall notify the Lenders with a copy to the Administrative Agent of any election to terminate or reduce the Commitments under this Section 2.2 at least three (3) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof.  Each notice delivered by the Borrower pursuant to this Section 2.2 shall be irrevocable.

(e)Effect of Termination or Reduction.  Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Proportionate Share of the Commitments.

2.3Fees

.

(a)Undrawn Fee.  On each Undrawn Fee Payment Date, the Borrower shall pay to the Administrative Agent, for the account of each applicable Lender, a commitment fee for each such Lender (the “Undrawn Fees”) in an amount equal to the Undrawn Fee Amount.

(b)Fee Letters.  On the Closing Date and thereafter, the Borrower shall pay to the Administrative Agent, the Collateral Agent, the Depositary and any other parties thereto (for their respective accounts) such fees in the amount and at the times set forth in the Fee Letters.

2.4Other Payment Terms

.

(a)Place and Manner.  All payments to be made by the Borrower shall be made free and clear of and without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 12:00 p.m., New York time, on the date specified herein.  The Administrative Agent will promptly distribute to each Lender its Proportionate Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office.  All payments received by the Administrative Agent after 12:00 p.m., New York time, shall be deemed received on the next succeeding Business Day (it being understood that the Administrative Agent, at the direction of the Lenders, may deem payments received after such

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time on any day to be received on the date due) and any applicable interest or fee shall continue to accrue.

(b)Date.  Unless otherwise specified in this Agreement, whenever any payment due hereunder shall fall due on a day other than a Business Day, such payment shall instead be due on the next succeeding Business Day, and such extension of time shall be included in the computation of interest or fees, as the case may be.

(c)Default Interest.  If any amounts required to be paid by the Borrower under this Agreement or any other Financing Document (including principal or interest payable on any Loan, and any fees or other amounts payable to the Agents or any Lender) remain unpaid after such amounts are due, whether by acceleration or otherwise, the Borrower shall pay interest on the aggregate, outstanding balance of such overdue amount from the date due until the amounts are paid in full at a per annum rate equal to the Default Rate.  Such Default Rate shall apply automatically without the need for any notice from the Administrative Agent or any Lender; provided that the foregoing shall not be intended to modify any other notice obligation hereunder including the notice provisions applicable to Events of Default.

(d)Net of Taxes, Etc.

(i) (A)Taxes.  Any and all payments by or on account of any obligation of any Loan Party under any Financing Document shall be made without deduction or withholding for any Taxes, except as required by applicable Laws.  If any applicable Laws (as determined in the good faith discretion of an applicable Withholding Agent) require the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding, upon the basis or the information and documentation to be delivered pursuant to subsection (g) below.

(B) If such Withholding Agent shall be required by any applicable Laws to withhold ordeduct any Taxes from any such payment, then (1) such Withholding Agent, as required by such Laws, shall withhold or make such deductions as are determined by it to be required based upon the information and documentation received pursuant to subsection (g) below, (2) such Withholding Agent, to the extent required by such Laws, shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with such Laws, and (3) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Loan Party shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section 2.4(d)) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

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(ii)Payment of Other Taxes by the Borrower.  Without limiting the provisions of subsection (i) above, the Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable Laws, including Other Taxes.

(iii)Indemnity.

(A) The Borrower shall indemnify each Agent and each Lender for the full amount of Indemnified Taxes (including any Indemnified Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.4(d)) arising from the execution, delivery or performance of its obligations or from receiving a payment hereunder, or enforcing this Agreement or any Financing Document, payable or paid by, or required to be withheld or deducted from a payment to, such Agent or Lender, or any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally asserted (including indemnifying the Administrative Agent in its capacity as Withholding Agent); provided, that the Borrower shall not be obligated to indemnify any Agent or Lender for any penalties, additional interest or expense relating to Indemnified Taxes arising from such Agent’s or Lender’s gross negligence or willful misconduct as determined by a final and non-appealable judgment of a court of competent jurisdiction.  A certificate as to the amount of such payment or liability delivered to the Borrower by an Agent or Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.  Payments by the Borrower pursuant to this indemnification shall be made within ten (10) days from the date such Agent or Lender makes written demand therefor.  The Borrower shall, and does hereby indemnify the Administrative Agent, and shall make payment in respect thereof within ten (10) days after demand therefor, for any amount which a Lender for any reason fails to pay indefeasibly to the Administrative Agent as required pursuant to Section 2.4(d)(iii)(B) below.

(B) Each Lender shall, and does hereby, severally indemnify, and shall make payment in respect thereof within ten (10) days after demand therefor, (x) the Administrative Agent and the Borrower, as applicable, against any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.12(b) relating to the maintenance of a Participant Register and (y) the Administrative Agent or the Borrower, as applicable, against any Excluded Taxes attributable to such Lender that are payable or paid by the Administrative Agent or the Borrower in connection with any Financing Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant

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Governmental Authority.  A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error.  Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender, as the case may be, under this Agreement or any other Financing Document against any amount due to the Administrative Agent under this clause (B).

(iv)Evidence of Payments.  Upon request by the Borrower or the Administrative Agent (at the direction of Lenders), as the case may be, after any payment of Taxes by any Loan Party or by the Administrative Agent to a Governmental Authority as provided in this Section 2.4(d), the Borrower shall deliver to the Administrative Agent or the Administrative Agent shall deliver to the Borrower, as the case may be, the original or certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to the Borrower or the Administrative Agent, as the case may be.

(v)Treatment of Certain Refunds.  If any Agent or Lender determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by any Loan Party pursuant to this Section 2.4(d) (including by the payment of additional amounts pursuant to this Section 2.4(d)), it shall pay to such Loan Party an amount equal to such refund (but only to the extent of the indemnity payments made under this Section 2.4(d) with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses related thereto (including taxes) of such Agent or Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund).  Such Loan Party, upon the request of such Lender or Agent, shall repay to such Lender or Agent the amount paid over pursuant to this paragraph (v) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such Lender or Agent is required to repay such refund to such Governmental Authority; provided that the Loan Party shall not be obligated to reimburse an Agent or any Lender for any penalties, additional interest or other charges arising from such Agent’s or Lender’s gross negligence or willful misconduct as determined by a final and non-appealable judgment of a court of competent jurisdiction.  Notwithstanding anything to the contrary in this paragraph (v), in no event will a Lender or Agent be required to pay any amount to the Loan Party pursuant to this paragraph (v) the payment of which could place such Lender or Agent in a less favorable net after-tax position than such Lender or Agent would have been in if the tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such tax had never been paid.  This paragraph shall not be construed to require any Agent or Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Loan Party or any other Person.

(vi)Survival of Obligations.  The obligations included in this Section 2.4(d) shall survive the termination of this Agreement and the repayment and discharge of the Obligations of the Loan Parties.

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(e)Application of Payments.

(i)Except as otherwise provided herein (including in Section 7.1), payments made under this Agreement and the other Financing Documents shall be applied in accordance with Sections 3.3(d), 3.3(e) and 3.3(f) of the CADA.

(ii)The Administrative Agent shall promptly distribute to each Lender its Proportionate Share of each payment of principal, payments, fees and any other amounts received by the Administrative Agent for the account of the Lenders under the Financing Documents.  The payments made for the account of each Lender shall be made, and distributed to it, for the account of such Lender’s Lending Office.

(f)Withholding Exemption Certificates.

(i)Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Financing Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable Laws or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Sections 2.4(f)(ii)(A), 2.4(f)(ii)(B) and 2.4(f)(ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(ii)Without limiting the generality of the foregoing,

(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the applicable Withholding Agent) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to

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time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:

(1)in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Financing Document, executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E (whichever is applicable) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Financing Document, executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E (whichever is applicable) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(2)executed copies of IRS Form W-8ECI;

(3)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) an executed certificate substantially in the form of Exhibit F-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E (whichever is applicable); or

(4)to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by one or more of the following executed forms from each of the Foreign Lender’s direct or indirect partners/members, or Participants, or any Participant’s direct or indirect partners/members, as appropriate: IRS Form W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E (whichever is applicable), a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-2 or Exhibit F-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership for U.S. federal income tax purposes and one or more direct or indirect partners/members of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-4 on behalf of each such direct and indirect partner/member;

(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the applicable Withholding Agent) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to

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time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of any other form prescribed by applicable Laws as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable Laws to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

(D) if a payment made to a Lender under any Financing Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by Law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

(E) The Administrative Agent shall deliver to the Borrower on or prior to the date on which it becomes a party to this Agreement (and from time to time thereafter upon the reasonable request of the Borrower), an executed copy of IRS Form W-9.

(iii)Each Lender agrees that if any form or certification it previously delivered pursuant to this Section 2.4(f) expires or becomes obsolete or inaccurate in any respect, it shall promptly update such form or certification or notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

(iv)Wells Fargo Bank, National Association, both in its individual capacity and in its capacity as the Administrative Agent and the Withholding Agent, has no liability to any Loan Party, the Lenders or any other Person in connection with any tax withholding amounts paid or withheld from any payment pursuant to applicable Law or arising from any Loan Party’s or a Lender’s failure, as applicable, to timely provide an accurate, correct and complete IRS Form W-9, an appropriate IRS Form W-8 or such other documentation contemplated under this Agreement.

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(v)Upon request from an applicable Withholding Agent, the Borrower will provide such additional information that it may have to assist such Withholding Agent in making any withholdings or informational reports to the extent such information is necessary for the Withholding Agent to comply with its taxwithholding obligations under applicable Law.

2.5Pro Rata Treatment

.

(a)Except as otherwise provided herein (i) each Borrowing, each payment of Undrawn Fees and each reduction of the Commitments shall be made or shared among the Lenders pro rata according to their respective applicable Commitments and (ii) each payment or prepayment of principal of any Borrowing and each payment of interest on the Loans shall be made for the account of the Lenders pro rata in accordance with the respective principal amounts of their outstanding Loans.  Each Lender agrees that in computing each Lender’s portion of any Borrowing to be made hereunder, the Administrative Agent shall, at the direction of the affected Lender, round each Lender’s percentage of such Borrowing to the next higher or lower whole Dollar amount.

(b)Sharing of Payments, Etc.  If any Lender (a “Benefited Lender”) shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of Loans (or interest thereon) owed to it, in excess of its ratable share of payments on account of such Loans obtained by all Lenders entitled to such payments, such Lender shall forthwith purchase from the other Lenders such participations in the Loans, as the case may be, as shall be necessary to cause such Benefited Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such Benefited Lender, such purchase from such Lender shall be rescinded and each other Lender shall repay to the Benefited Lender the purchase price to the extent of such recovery together with an amount equal to such other Lender’s ratable share (according to the proportion of (i) the amount of such other Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the Benefited Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.5(b) may, to the fullest extent permitted by Laws, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation; provided, that the provisions of this Section 2.5(b) shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender) or any payment obtained by a Lender as consideration for the assignment of sale of a participation in any of its Loans to any assignee or participant, other than to a Loan Party or any of their Affiliates (as to which provisions of this Section 2.5(b) apply).

2.6Change of Circumstances

.

(a)Increased Costs.  If, after the date of this Agreement, any Change of Law:

(i)shall impose, modify or deem applicable any reserve, special deposit, customary loan, insurance charge or similar requirement against assets held by, deposits or other liabilities in or for the account of, credit extended or participated in ,by any Lender;

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(ii)shall subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of “Excluded Taxes” and (C) Connection Income Taxes)on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii)shall impose on any Lender any other condition, costs or expenses (other than Taxes) affecting this Agreement or Loans made by such Lender or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make any such Loan, or to reduce the amount of any sum received or receivable by such Lender or other Recipient hereunder (whether of principal, interest or any other amount), then, upon request of such Lender or other recipient, the Borrower shall promptly, but in no event later than ten (10) Business Days after receipt of written demand therefor by such Lender or other Recipient, pay to such Lender or other Recipient such additional amount or amounts as will compensate such Lender or other Recipient, as the case may be, for such additional costs incurred or reductions suffered.

(b)Capital Requirements.  If any Lender determines that any Change of Law affecting such Lender or any lending office of such Lender or such Lender’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change of Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

(c)Certificates for Reimbursement.  A certificate of a Lender or other Recipient setting forth the amount or amounts necessary to compensate such Lender or other Recipient or its holding company, as the case may be, as specified in Section 2.6(a) or Section 2.6(b) and delivered to the Borrower, shall be conclusive absent manifest error.  The Borrower shall pay such Lender or other Recipient, as the case may be, the amount shown as due on any such certificate within ten (10) Business Days after receipt thereof.

(d)Delay in Requests.  Failure or delay on the part of any Lender or other Recipient to demand compensation pursuant to this Section 2.6 shall not constitute a waiver of such Lender’s or other Recipient’s right to demand such compensation; provided, that the Borrower shall not be required to compensate a Lender or other Recipient pursuant to this Section 2.6 for any increased costs incurred or reductions suffered more than six (6) months prior to the date that such Lender or other Recipient, as the case may be, notifies the Borrower of the Change of Law giving rise to such increased costs or reductions, and of such Lender’s or other Recipient’s intention to claim compensation therefor (except that, if the Change of Law giving rise to such increased costs or

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reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof).

2.7Mitigation of Obligations; Replacement of Lenders

.

(a)Any Lender may designate a Lending Office other than that set forth in Annex 2 and may assign all of its interests under the Financing Documents, and its Notes (if any), to such Lending Office; provided, that such designation and assignment do not at the time of such designation and assignment increase the reasonably foreseeable liability of the Borrower under Section 2.4(d), Section 2.6(a) or Section 2.6(b).

(b)Designation of a Different Lending Office.  If any Lender requests compensation under Section 2.6(a) or Section 2.6(b), or requires the Borrower to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.4(d), then such Lender shall (at the request of the Borrower) use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.4(d), Section 2.6(a) or Section 2.6(b), as the case may be, in the future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(c)Replacement of Lenders.  If any Lender requests compensation under Section 2.6(a) or Section 2.6(b), or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.4(d) and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 2.7(b), or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 9.14), all of its interests, rights (other than its existing rights to payments pursuant to Section 2.4(d), Section 2.6(a) or Section 2.6(b)) and obligations under this Agreement and the related Financing Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided, that:

(i)the Borrower shall have paid to the Administrative Agent the assignment fee (if any) specified in Section 9.14;

(ii)such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Financing Documents from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

(iii)in the case of any such assignment resulting from a claim for compensation under Section 2.6(a) or Section 2.6(b) or payments required to be made pursuant to

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Section 2.4(d), such assignment will result in a reduction in such compensation or payments thereafter;

(iv)such assignment does not conflict with applicable Law; and

(v)in the case of any assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

2.8Defaulting Lenders

.

(a)Defaulting Lender Adjustments.  Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:

(i)Waivers and Amendments.  Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of “Required Lenders” and Section 9.11(c).

(ii)Defaulting Lender Waterfall.  Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article 8 or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 10.2 shall be applied at such time or times as follows:  first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, third, if so determined by the Borrower, to be held in a deposit account and released pro rata in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement; fourth, to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; fifth, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and sixth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made at a time when the conditions set forth in Section 3.2 were satisfied or waived, such payment shall be applied solely to pay the Loans of all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of such Defaulting Lender until such time as all

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Loans are held by the Lenders pro rata in accordance with the Commitments.  Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral pursuant to this Section 2.8shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

(iii)Undrawn Fees.  No Defaulting Lender shall be entitled to receive any Undrawn Fee for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

(b)Defaulting Lender Cure.  If the Borrower provides notice in writing to the Administrative Agent that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any cash collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent (acting at the direction of the Lenders) may determine to be necessary to cause the Loans to be held pro rata by the Lenders in accordance with the Commitments, whereupon, such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

ARTICLE 3

CONDITIONS PRECEDENT

3.1Conditions Precedent to the Closing Date

.  The obligation of each Lender to make Loans and the effectiveness of this Agreement are subject to the prior satisfaction of each of the following conditions, in each case to the satisfaction of each of the Lenders (unless waived pursuant to Section 9.11(c)) on or prior to the Closing Date:

(a)Financing Documents. Delivery to the Administrative Agent and each of the Lenders of each of the following Financing Documents, each duly executed and delivered by the parties thereto:

(i)this Agreement;

(ii)the CADA;

(iii)the Pledge Agreement;

(iv)the Class B Pledge Agreement;

(v)the Security Agreement;

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(vi)the Collections Account Control Agreement;

(vii)the Consents;

(viii)the Interparty Agreement; and

(ix)the Notes (if requested by a Lender).

(b)Representations and Warranties. Each representation and warranty set forth in Section 4.1 is true and correct in all material respects as of the Closing Date, other than those representations and warranties which are modified by materiality by their own terms, which shall be true and correct in all respects as of the Closing Date (unless such representation or warranty relates solely to an earlier date, in which case it shall have been true and correct in all material respects as of such earlier date).

(c)No Default or Event of Default. As of the Closing Date, no event shall have occurred and be continuing or would result from the consummation of the transactions contemplated by this Agreement on the Closing Date that would constitute a Default or an Event of Default under this Agreement.

(d)Secretary’s Certificates, Officer’s Certificate and Legal Opinions. Delivery to the Administrative Agent and each Lender of the following:

(i)a secretary’s certificate, satisfactory in form and substance to each Lender, from each Loan Party, signed by an authorized Responsible Officer of such Loan Party and dated as of the Closing Date, attaching and certifying as to the Organizational Documents of such Loan Party (which, to the extent filed with a Governmental Authority, shall be certified as of a recent date by such Governmental Authority), and attaching and certifying as to the resolutions of the governing body of such Loan Party, the good standing, existence or its equivalent of such Loan Party and of the incumbency of one or more Responsible Officers of such Loan Party;

(ii)a certificate executed by a Responsible Officer of the Borrower certifying to (A) the representations and warranties made by each Loan Party in each Financing Document to which it is a party being true and correct in all material respects as of the Closing Date, other than those representations and warranties which are modified by materiality by their own terms, which shall be true and correct in all respects as of the Closing Date (unless such representation or warranty relates solely to an earlier date, in which case it shall have been true and correct in all material respects as of such earlier date), (B) the absence of a Default or an Event of Default, (C) the absence of any (x) Provider Default under either Service Agreement, (y) material breach by or event of default with respect to any Loan Party of any Project Documents to which it is a party or (z) breach of any Other Documents that could have a Material Adverse Effect, (D) the absence of any Bankruptcy Event with respect to any Loan Party, (E) no Material Adverse Effect has occurred and is continuing as of the Closing Date and, to Borrower’s Knowledge, no event or circumstance exists that could reasonably be expected to result in a Material Adverse Effect, and (F) the satisfaction (or waiver by each Lender) of all conditions precedent to the Closing Date in accordance with the terms and conditions hereof; and

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(iii)an opinion, dated as of the Closing Date, of Latham & Watkins LLP, counsel to the Loan Parties, in form and substance reasonably acceptable to the Agents and each Lender.

(e)Collateral Documents. The Collateral Documents shall have been duly executed and delivered by each Loan Party that is to be a party thereto, together with (x) certificates representing all issued and outstanding Equity Interests of the Borrower, accompanied by undated stock powers executed in blank and (y) documents and instruments to be recorded or filed that the Lenders may deem reasonably necessary to perfect, record and file in the appropriate jurisdictions.

(f)Lien Searches. The Administrative Agent, the Collateral Agent and the Lenders shall have received (A) searches of UCC filings in the jurisdiction of incorporation or formation, as applicable, of each Loan Party, (B) copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens and (C) copies of tax lien, judgment and bankruptcy searches in such jurisdictions.

(g)UCC Financing Statements. The UCC financing statements relating to the Collateral being secured as of the Closing Date shall have been duly filed in each office and in each jurisdiction where required in order to create and perfect the first-priority Lien and security interest set forth in the Collateral Documents.  The Borrower shall have properly delivered or caused to be delivered to the Collateral Agent all Collateral that requires perfection of the Lien and security interest described above by possession or control, including delivery of original certificates representing all issued and outstanding Equity Interests in the Borrower, along with blank transfer powers and proxies.

(h)Payment of Fees. All amounts required to be paid to or deposited with the Administrative Agent, the Collateral Agent, the Depositary or any Lender under this Agreement, the Fee Letters (as of the Closing Date), or any other Financing Document, or under any separate agreement with such parties, and all taxes, fees and other costs payable in connection with the execution, delivery and filing of the documents and instruments required to be filed pursuant to this Section 3.1, shall have been paid in full (or in connection with such taxes, fees (other than fees payable to the Lenders or the Agents) and costs, the Borrower shall have made other arrangements acceptable to the Agents, the Depositary or such Lender(s), as the case may be, in their sole discretion).

(i)KYC. The Agents and Lenders shall have received all such documentation and information requested by the Agents and the Lenders that is necessary (including the names and addresses of the Borrower, taxpayer identification forms, name of officers/board members, documents and copies of government-issued identification of the Borrower and each other Loan Party (or owners thereof)) for the Agents and the Lenders to identify the Borrower and each other Loan Party (or owners thereof)  in accordance with the requirements of the Patriot Act (including the “know your customer” and similar regulations thereunder).

(j)Establishment of Accounts. The Collateral Accounts required to be open as of the Closing Date under the CADA shall have been opened in the name of the Borrower.

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(k)Payment of Expenses. The expenses incurred and invoiced as of or prior to the Closing Date shall have been paid by the Borrower or its Affiliates in accordance with Section 10.4.

(l)Consents and Approvals. The Borrower shall have obtained all approvals (to the extent required to have been obtained by such time) and all consents, in each case that are necessary for its entry into the Financing Documents, Transaction Documents and Project Documents to which it is a party and implementation of the transactions contemplated in the Financing Documents, Transaction Documents and Project Documents, each of which is listed on Schedule 3.1(l).

(m)Transaction Documents. Delivery to the Administrative Agent and each of the Lenders of each of the Transaction Documents then in effect, each duly executed and delivered by the parties thereto.

(n)Advance Model. The Administrative Agent and each Lender shall have received the template Advance Model, in each case in form and substance reasonably satisfactory to each Lender.

(o)Independent Engineer Report. The Administrative Agent and each Lender shall have received a report from the Independent Engineer and, if such report is not addressed to the Administrative Agent and the Lenders, a reliance letter from the Independent Engineer, each in form and substance satisfactory to each Lender.

(p)Appraisal. The Administrative Agent and each Lender shall have received an appraisal from the Qualified Appraiser in respect of solar energy generating systems of the type and size substantially similar to the Systems that the Borrower reasonably anticipates to purchase under the MEPCA for each Project Location where the Systems will be located and a reliance letter from the Qualified Appraiser, each in form and substance satisfactory to each Lender.

(q)Insurance Report and Certificates. The Administrative Agent and each Lender shall have received (i) an insurance report from the Insurance Consultant, including an opinion as to the adequacy of the insurance maintained by the Borrower, and if the insurance report is not addressed to the Administrative Agent and the Lenders, a reliance letter from the Insurance Consultant in form and substance satisfactory to each Lender and (ii) an insurance certificate from the Borrower’s insurance broker identifying the underwriters, types of insurance, applicable insurance limits and policy terms consistent with such insurance report and evidence, including customary insurance certificates, that all insurance required to be obtained and maintained pursuant to the Operative Documents has been obtained and all premiums thereon have been paid in full.

(r)No Provider Default. No Provider Default shall have occurred and be continuing.

(s)No Litigation. No action, suit, administrative proceeding or investigation shall have been instituted or threatened in writing against any Loan Party that could reasonably be expected to have a Material Adverse Effect.

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3.2Conditions Precedent to Each Borrowing

.  The obligation of each Lender to make any Loans is subject to the prior satisfaction of the following conditions (unless waived pursuant to Section 9.11(c)):

(a)Borrowing Date Certificate. Delivery of a certificate executed by a Responsible Officer of the Borrower in the form of Exhibit G (with a copy to the Administrative Agent), dated as of the Borrowing Date (a “Borrowing Date Certificate”):

(i)certifying that all representations and warranties made by each Loan Party under the Financing Documents are true and correct in all material respects as of such Borrowing Date, other than those representations and warranties which are modified by materiality by their own terms, which shall be true and correct in all respects as of such Borrowing Date (unless such representation or warranty relates solely to an earlier date, in which case it shall have been true and correct in all material respects as of such earlier date); provided, however, that with respect to each Project, the Borrower shall only make the Eligibility Representations for such Project as of the first Borrowing Date on or after the date such Project becomes subject to the Financing Documents;

(ii)certifying that no Default or Event of Default has occurred and is continuing or will result from the Borrowing of such Loan;

(iii)certifying that no Material Adverse Effect has occurred and is continuing since the Closing Date, and, to the Borrower’s Knowledge, no event or circumstance exists that could reasonably be expected to result in a Material Adverse Effect has occurred and is continuing;

(iv)certifying to the absence of any Bankruptcy Event with respect to the Loan Parties;

(v)certifying as to the absence of any (x) Provider Default, (y) material breach by or event of default with respect to any Loan Party of any Project Documents to which it is a party or (z) breach of any Other Documents that could have a Material Adverse Effect;

(vi)certifying that each such Project is located in a Project Location;

(vii)certifying that each Project that is the subject of the requested Borrowing and each Customer for each such Project, as applicable, satisfies the Credit Criteria; and

(viii)certifying that Installation has been successfully completed for each Project that is subject to the requested Borrowing.

(b)Borrowing Notice. Delivery to the Administrative Agent of a Borrowing Notice in accordance with Section 2.1(a)(iii) that is subsequently reviewed, accepted and approved by the Lenders and the amount of the Loans being requested shall be greater than Five Million Dollars ($5,000,000) or such lesser amount as is then remaining under the Commitment.

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(c)True-Up Certificate. Delivery to the Lenders (with a copy to the Administrative Agent) of the Monthly True-Up Certificate received by the Borrower with respect to the Projects purchased by the Borrower and to be financed by such Borrowing, and evidence of payment by the Borrower to the Seller of the A-Installment Payment with respect to each such Project.

(d)Liens. All Liens contemplated to be created and perfected in favor of the Collateral Agent pursuant to the Collateral Documents shall have been so created, perfected and filed in the applicable jurisdictions, including in respect of any Project that becomes subject to this Agreement on or prior to the Borrowing of such Loan.

(e)Payment of Fees. All amounts required to be paid to or deposited with any Secured Party hereunder or under any other Financing Document, and all taxes, fees and other costs payable in connection with the execution, delivery, recordation and filing of the documents and instruments required to be filed as a condition precedent to Section 3.1 and this Section 3.2, shall have been paid in full (or shall be paid concurrently with the occurrence of such Borrowing) or arrangements for the payment thereof from the Loans shall have been made, which arrangements shall be acceptable to the Agents and the Lenders.

(f)DSR Funded to Required Amount. After giving effect to such proposed Borrowing, the Debt Service Reserve Account shall be funded, or an Acceptable DSR Letter of Credit has been posted, in an aggregate amount greater than or equal to the Debt Service Reserve Required Amount.

(g)Construction Reserve Funded to Required Amount. After giving effect to such proposed Borrowing, the Construction Reserve Account shall be funded in an amount greater than or equal to the Construction Reserve Required Amount.

(h)Supplemental Reserve Funded to Required Amount. After giving effect to such proposed Borrowing, the Supplemental Reserve Account shall be funded in an amount greater than or equal to the Supplemental Reserve Required Balance (as defined in the CADA).

(i)No Provider Default. No Provider Default shall have occurred and be continuing.

(j)No Change in Control. No Change in Control shall have occurred, unless such Change in Control has been approved by the Required Lenders.

(k)Purchase Date. The Purchase Date shall have occurred and the A-Installment Payment shall have been made, in each case with respect to each Project to be financed by such Borrowing.

(l)Advance Model. The Administrative Agent and each Lender shall have received an updated actualized Advance Model that shall have incorporated the Borrowing and each new Project that is the subject of the requested Borrowing, in form and substance reasonably satisfactory to the Lenders.

(m)Rating. The Administrative Agent and each Lender shall have received a Ratings Agency letter dated as of (i) the Aggregation Date in the case of a Borrowing on the Aggregation Date or (ii) a date not more than the three (3) months prior to the Borrowing Date in the case of a

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Borrowing of all other Loans, in each case demonstrating a credit rating of BBB or higher from such Ratings Agency.

(n)Project Documents and Transaction Documents. Delivery to each of the Lenders of each of the Project Documents then in effect and delivery to the Administrative Agent and each of the Lenders of any updates to the Transaction Documents since the Closing Date or the prior Borrowing Date, in each case each duly executed and delivered by the parties thereto.

(o)Installation.  Installation has been successfully completed for each Project that is the subject of the requested Borrowing.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

4.1Representations and Warranties

.  Borrower represents, to each Agent and the Lenders as of the date such representations are given, including each Borrowing Date and the Closing Date:

(a)Organization.

(i)The Borrower (A) is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware; (B) is duly qualified, authorized to do business and in good standing in each other jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary; (C) has all requisite limited liability company power and authority to own or lease the property it purports to own or lease and to carry on its business as now being conducted and as proposed to be conducted under the Operative Documents to which it is a party; and (D) has all requisite limited liability company power and authority to execute, deliver and perform its obligations under each of the Operative Documents and each other agreement or instrument contemplated thereby to which it is a party and to borrow hereunder.

(ii)The Borrower Member (A) is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware; (B) is duly qualified, authorized to do business and in good standing in each other jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary; (C) has all requisite limited liability company power and authority to own or hold its interest in the Borrower and to carry on its business as now being conducted and as proposed to be conducted by it under the Operative Documents to which it is a party; and (D) has all requisite limited liability company power and authority to execute, deliver and perform its obligations under each of the Operative Documents and each other agreement or instrument contemplated thereby to which it is a party.

(iii)The Class B Investor (A) is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware; (B) is duly qualified, authorized to do business and in good standing in each other jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary; (C) has all requisite limited liability company power and authority to own or hold its

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interest in the Borrower Member and to carry on its business as now being conducted and as proposed to be conducted by it under the Operative Documents to which it is a party; and (D) has all requisite limited liability company power and authority to execute, deliver and perform its obligations under each of the Operative Documents and each other agreement or instrument contemplated thereby to which it is a party.

(iv)The only holder of Equity Interests in the Borrower is the Borrower Member and (A) there are no other outstanding Equity Interests with respect to the Borrower and (B) there are no outstanding obligations of the Borrower to repurchase, redeem, or otherwise acquire any membership or other equity interests in the Borrower or to make payments to any Person, such as “phantom stock” payments, where the amount thereof is calculated with reference to the fair market value or equity value of the Borrower.  The Borrower is authorized to issue and has issued only one class of membership interests.

(v)The only holder of Class B Interests in the Borrower Member is the Class B Investor and (A) there are no outstanding Equity Interests with respect to the Borrower Member other than the Class A Interests and the Class B Interests and (B) there are no outstanding obligations of the Borrower Member to repurchase, redeem, or otherwise acquire any membership or other equity interests in the Borrower Member or to make payments to any Person, such as “phantom stock” payments, where the amount thereof is calculated with reference to the fair market value or equity value of the Borrower Member.  The Borrower Member is authorized to issue and has issued only Class A Interests and Class B Interests and is not authorized to issue and has not issued any other class of membership interest.

(b)Authorization; No Conflict; Defaults.  

(i)Each Loan Party has duly authorized, executed and delivered each Operative Document to which it is a party, and neither such entity’s execution and delivery thereof nor the performance thereof (A) will be in conflict with or result in a breach of such entity’s Organizational Documents as amended, supplemented or modified; (B) will violate any other material Legal Requirement applicable to or binding on such Loan Party or any of its respective properties; (C) will result in any breach of or constitute any default under, or result in or require the creation of any Lien (other than Permitted Liens) upon any of the Collateral under any agreement or instrument to which it is a party or by which it or any of the Collateral may be bound or affected; or (D) will require the consent or approval of or filings with any Person, which has not already been obtained or made, as applicable, and which consent or approval is in full force and effect.

(ii)No Default or Event of Default has occurred and is continuing under any Financing Document.

(c)Enforceability.  Each Financing Document to which a Loan Party is a party is a legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and

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subject to general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law).

(d)ERISA.  Neither the Borrower nor, except as would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, any member of the Controlled Group sponsors, maintains, administers, contributes to, participates in, or has any obligation to contribute to or any liability under, any ERISA Plan.  The Borrower does not have any employees.  Without limiting the generality of the foregoing, except as would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, there has been no and there is not reasonably expected to be any ERISA Event.

(e)Taxes.  All U.S. federal, state and local tax returns, information statements and reports, and all other material tax returns, information statements or reports, in each case, related to Taxes, of any Loan Party required to be filed have been timely filed (or any such Person has timely filed for a valid extension and such extension has not expired), and all material Taxes (including any payments in lieu of Taxes) upon such Persons and upon their properties, Assets, income, profits, businesses and franchises which are due and payable have been timely paid except to the extent the same are being contested in accordance with Section 5.8.  All such returns, information statements and reports are true and accurate in all material respects.  There are no Liens for Taxes (other than Liens for Taxes not yet due and payable) on any Assets of any Loan Party, no unresolved written claim or proposed adjustment has been asserted with respect to any Taxes of any Loan Party, no waiver or agreement by any Loan Party is in force for the extension of time for the assessment or payment of any Tax or regarding the application the statute of limitations for any Taxes or tax returns, and no request for any such extension or waiver is currently pending.  There is no pending or, to the Knowledge of the Borrower, threatened audit or investigation by any Governmental Authority of any Loan Party with respect to Taxes.  No Loan Party is a party to or bound by any Tax sharing arrangement with any Person or any other agreement pursuant to which it is liable for the Taxes of another Person (including any Affiliate of a Loan Party), other than the Financing Documents and the Transaction Documents.  No Loan Party has any liability for Taxes of any Person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign law) or as a transferee or successor.  No power of attorney currently in force has been granted with respect to Taxes of any Loan Party.  No written claim has been made by any Governmental Authority and received by any Loan Party in a jurisdiction where such Loan Party does not file a tax return that it is or may be subject to taxation in that jurisdiction.  No Loan Party has engaged in any “listed transaction” as defined in Treasury Regulation Section 1.6011-4 or made any disclosure under Treasury Regulation Section 1.6011-4.  Other than as set forth in the Advance Model, all real property, personal property, sales, use and similar taxes imposed upon any Project (or for which the Borrower may become liable as a result of the purchase of any Project) or the sale or generation of the energy produced by any Project are payable by the applicable residential customer, or are fully reimbursable to the Borrower by such residential customer, under its Customer Agreement.  Borrower Member is a U.S. Person, the Borrower is treated for U.S. federal income tax purposes as disregarded as an entity separate from Borrower Member (as described in U.S. Treasury Regulations Section 301.7701-2(c)(2)(i)), and neither the execution and delivery of the Financing Documents nor the consummation of any of the transactions contemplated by such Financing Documents will affect such status.  No election has been filed to treat the Borrower as an association taxable as a corporation for federal income tax purposes.

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(f)Business. The Borrower has not conducted any business other than acquisition, construction, installation, lease, ownership of, and sale of energy from, and the operation, management, maintenance and financing of, the Projects and activities related or incident thereto (including those contemplated by the Operative Documents).  The Borrower does not have any outstanding Debt or other material liabilities other than as permitted pursuant to Section 6.3 and as scheduled on Schedule 4.1(f). Borrower is not a party to or bound by any material contract other than the Operative Documents, this Agreement and the other Financing Documents.

(g)Collateral.  Each Collateral Document will, upon execution and delivery thereof, be effective to create in favor of the Collateral Agent for the benefit of the Secured Parties, legal, valid and enforceable Liens on, and security interests in, the Collateral described therein to the extent intended to be created thereby and (i) when financing statements in appropriate form are filed in the appropriate offices and (ii) upon the taking of possession or control by the Collateral Agent of such Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent possession or control by the Collateral Agent is required hereunder), the Liens created by the Collateral Documents shall constitute fully perfected Liens on, and security interests in (to the extent intended to be created thereby), all right, title and interest of the grantors in such Collateral to the extent perfection can be obtained by filing financing statements or taking control, in each case subject to no Liens other than Permitted Liens.

(h)Investment Company, Holding Company Act.  Borrower is not an “investment company” within the meaning of, or is regulated as an “investment company” under, the Investment Company Act of 1940.

(i)Federal Reserve Regulations.  No Loan Party is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of the Loans will be used by any Loan Party to purchase Margin Stock, or to extend credit to others for the purpose of purchasing or carrying Margin Stock or otherwise in violation of Regulation T, U or X.

(j)Financial Statements.  The Borrower represents that (x) the most recent financial statements (including the notes thereto) delivered in respect of the Borrower pursuant to Section 5.3 fairly present in all material respects the financial condition of the Borrower as of the date thereof and have been prepared in accordance with GAAP applied on a consistent basis, subject to the audit and normal year-end adjustments and the absence of footnotes and associated disclosures, (y) such financial statements and notes thereto disclose all direct or contingent material liabilities of the Borrower as of the dates thereof and (z) except as disclosed to the Lenders in writing, there has occurred no Material Adverse Effect since the date of the most recent financial statements delivered pursuant to Section 5.3.

(k)Project Documents.  With respect to each of the Project Documents, (w) true, complete and correct copies of all Project Documents as currently in effect have been delivered via electronic data room to the Lenders by the Borrower, (x) each Project Document is a legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and

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subject to general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law), (y) none of the Project Documents has been materially amended or modified since the effective date of such Project Document other than as set forth in Appendix 2 or permitted by Section 6.10 and copies of all such amendments and modifications have been delivered to the Lenders and (z) no material default or event of default has occurred and is continuing under any Project Document to which the Borrower is a party.

(l)Litigation.  There are no instituted, pending or, to the Loan Parties’ Knowledge, threatened actions, suits or proceedings of any kind, including actions, suits or proceedings by or before any Governmental Authority, against a Loan Party or any business, property or rights of a Loan Party as to which, if adversely determined against such Loan Party, could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

(m)Disclosure.  To the Borrower’s Knowledge, all written information that has been made available by any of the Loan Parties to any Secured Party in connection with the transactions contemplated by this Agreement and the other Operative Documents (such information to be taken as a whole, including, without limitation, updated or supplemented information), or that has been furnished by any of the Loan Parties to any third party in connection with the preparation and delivery by such third party of a report or certificate to any Secured Party, is complete and correct in all material respects, and does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading under the circumstances in which they are made; provided, however, that in each case no representation or warranty is made with respect to projections, assumptions or other forward-looking statements provided by or on behalf of the Loan Parties with respect to the Advance Models other than as provided in Section 4.1(r).

(n)Subsidiaries; Equity Interests.  Class B Investor has no Subsidiaries or other Equity Interests other than those in Borrower Member, Borrower Member has no Subsidiaries or other Equity Interests other than those in Borrower, and Borrower has no Subsidiaries or other Equity Interests.

(o)Capital Structure.  The Equity Interests of Borrower and Borrower Member have been duly authorized and validly issued, and are fully paid and non-assessable.  There is no existing option, warrant, call, right, commitment or other agreement to which Borrower or Borrower Member is a party requiring, and there is no membership interest, partnership interest, or other Equity Interests of Borrower or Borrower Member outstanding which upon conversion or exchange would require, the issuance by Borrower or Borrower Member, as applicable, of any additional membership interests, partnership interests or other Equity Interests of Borrower or Borrower Member, as applicable, or other securities convertible into, exchangeable for or evidencing the right to subscribe for or purchase, a membership interest, a partnership interest or other Equity Interest of Borrower or Borrower Member, as applicable.

(p)Compliance with Law.  Each Loan Party has complied in all material respects with all applicable Legal Requirements, including consumer protection laws but not including Environmental Laws which are addressed under Section 4.1(u) or Anti-Bribery and Anti-Corruption Laws, Anti-Terrorism and Money Laundering Laws and Regulations or Sanctions,

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which are addressed under Section 4.1(t), except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

(q)No Other Bank Accounts.  The Borrower does not have any deposit or securities accounts other than the Collateral Accounts and the Payment Account.

(r)Projections.  The Borrower has disclosed to the Lenders the assumptions that each Advance Model is based on (other than the assumptions set forth in Appendix 9) and the forecasts and other projections in the Advance Models submitted to the Lenders (i) are based on good faith estimates and commercially reasonable assumptions as to all factual matters material thereto and (ii) are generally consistent with the Project Documents, and other adjustments as approved by the Lenders; provided, however, that (A) none of the Advance Models, nor the assumptions set forth therein are to be viewed as facts and that actual results during the term of the Loans may differ from the Advance Model, and that the differences may be material, and (B) the Borrower believed in good faith that each Advance Model as of the relevant date of delivery was reasonable and attainable.

(s)Solvency.  Immediately after the consummation of the transactions to occur on the Closing Date and immediately following the making of each Loan and after giving effect to the application of the proceeds thereof, the Borrower is Solvent.

(t)Foreign-Asset Control Regulations.  

(i)Each of the Loan Parties has implemented and maintains in effect policies and procedures reasonably designed to ensure compliance by it and its Subsidiaries and its Affiliates, and their respective directors, officers, employees and agents, with applicable Anti-Bribery and Anti-Corruption Laws, applicable Anti-Terrorism and Money Laundering Laws and Regulations and applicable Sanctions.

(ii)No Loan Party or any of its Subsidiaries or, to the Loan Party’s knowledge, any of their respective directors, officers, respective employees, agents or Affiliates:  (A) is a Sanctioned Person; (B) is engaged or intends to engage in the future in any unlawful dealings with, involving or for the benefit of, any Sanctioned Person in violation of Sanctions; (C) is designated or identified on a State Sanctions List; or (D) will directly or knowingly use any part of any proceeds of the Loans or lend, contribute, or otherwise make available such proceeds (1) to fund or facilitate any unlawful activities or business of, with or involving any Sanctioned Person in violation of Sanctions or (2) in any other manner that would constitute or give rise to a violation of applicable Sanctions by any Loan Party, any of its Subsidiaries, the Administrative Agent or any Lender.

(iii)No Loan Party or any of its Subsidiaries or, to the Loan Party’s knowledge, any of their respective directors, officers, employees, agents or Affiliates has taken or will take any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment or giving of money, property, gifts or anything else of value, directly or indirectly, to any “government official” (including any officer or employee of a government or government-owned or controlled entity; any officer or employee of a public international organization; any person acting in an official capacity for or on behalf of any

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of the foregoing; or any political party, party official, or candidate for political office) to improperly influence an official action, secure an improper advantage or in any manner that would constitute or give rise to a violation of applicable Anti-Bribery and Anti-Corruption Laws.

(iv)No Loan Party or any of its Subsidiaries or, to the Loan Party’s knowledge, any of their respective directors, officers, employees, agents or Affiliates is or has been, in the past five (5) years, subject to any action, proceeding, litigation, claim or investigation by a Governmental Authority with regard to any actual or alleged violation of applicable Sanctions, applicable Anti-Bribery and Anti-Corruption Laws or applicable Anti-Terrorism and Money Laundering Laws and Regulations.

(u)Environmental Compliance.  Each Project is, and has been developed, constructed and operated, in material compliance with all applicable Environmental Laws and Permits; no notice of violation of such Environmental Laws or Permits has been issued by any Governmental Authority with respect to any Project which has not been resolved or which is reasonably expected, in the aggregate across all such notices of violation for all Projects, to have a Material Adverse Effect; there is no pending or, to the Borrower’s Knowledge, threatened action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration in respect of any Environmental Laws or Permits against any Loan Party or (as it relates to the Projects) VSLR Party or with respect to any Project which could reasonably be expected, in the aggregate across all such actions, charges, claims, demands, suits, proceedings, petitions, governmental investigations and arbitrations, to have a Material Adverse Effect; there has been no Release of any Hazardous Material by a Loan Party on, from or related to any Project that has resulted in or could reasonably be expected, in the aggregate across all such Releases, to result in a Material Adverse Effect; and no action has been taken by any Loan Party or VSLR Party that would cause any Project not to be in material compliance with all applicable Environmental Laws or Permits pertaining to Hazardous Materials.

(v)Knowledge Individuals.  Each of the individuals listed on Schedule 1.1(b) is a Responsible Officer, who is responsible for the management and administration of the Borrower.

(w)EEA Financial Institution. The Borrower is not an EEA Financial Institution.

(x)Consents.  All consents, approvals and filings then required to be obtained or made by Seller and each Affiliates of Seller (other than Loan Parties) to execute, deliver and perform the Operative Documents to which it is a party have been obtained or made and are in full force and effect.

(y)Permits.  As of each Borrowing Date, all Permits required under the Customer Agreements or otherwise for each System that is the subject of Borrowing on such Borrowing Date to generate electricity (i) for sale to the Customer, or (ii) pursuant to the lease of such System to the Customer, as applicable, have been obtained and are in full force and effect (except for the applicable PTO Letter for such Project and the final building inspection approval for such Project, which, in each case, may or may not have been obtained).   As of each Borrowing Date, none of the Loan Parties nor any of their Affiliates have received written notice from any Governmental Authority regarding any revocation, withdrawal, suspension, cancellation or termination of any

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such Permit, except where such revocation, withdrawal, suspension, cancellation or termination would not materially adversely affect the Borrower’s ability (or the ability of any of the Borrower’s direct or indirect owners) to claim ITCs, amortization and depreciation deductions for such Projects.

(z)Insurance.  As of each Borrowing Date, all policies of insurance required to be maintained with respect to the Borrower Projects that are the subject of Borrowing on such Borrowing Date under Section 5.17 are in full force and effect and have been paid in full or are not in arrears.  No notice of cancellation has been received with respect to such policies and the Borrower is in compliance in all material respects with all conditions contained in such policies; and

(aa)Title.  As of each Borrowing Date, with respect to each Project that is the subject of Borrowing on such Borrowing Date, the Borrower has good and valid legal and beneficial title to such Project, including all of the assets and properties (tangible and intangible) constituting any part of such Project, and all of such assets and properties are free and clear of all Liens or encumbrances other than Permitted Liens.

(bb)Real Property Rights.  As of each Borrowing Date, the Customer under the applicable Customer Agreement has provided to Borrower and its contractors a right to access the property where such System is or will be installed.

(cc)Intellectual Property.  As of each Borrowing Date, the Borrower owns or has a valid license to all intellectual property that is necessary to install, operate and maintain each Borrower Project that is the subject of Borrowing on such Borrowing Date.  There are no pending or, to the Knowledge of Borrower, threatened, claims, actions, judicial or other adversary proceedings, or disputes (i) directly against the Borrower concerning any item of such intellectual property, (ii) directly against any such license or (iii) that would have a Material Adverse Effect on the Borrower or each Borrower Project that is the subject of Borrowing on such Borrowing Date, taken as a whole with all Borrower Projects.

(dd)No Condemnation.  As of each Borrowing Date, to the Knowledge of the Borrower, no condemnation is pending or threatened with respect to any such Borrower Project that is the subject of Borrowing on such Borrowing Date, or any portion thereof material to the ownership or operation of any such Borrower Project, and no unrepaired casualty exists with respect to any such Borrower Project or any portion thereof material to the ownership or operation of any such Borrower Project or the sale of electricity therefrom.

(ee)Project Warranties. To the Knowledge of the Borrower, all warranties relating to the Systems in the Borrower Projects from any manufacturer of any Major Equipment therein are in full force and effect in all material respects.

(ff)Approved Equipment. Projects with any Major Equipment not manufactured by an Approved Manufacturer do not exceed [***]([***]%) of the STC DC nameplate MW of all Borrower Projects.

(gg)Qualifying Facility Status.

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(i)Each Borrower Project is, or will be as applicable, a qualifying small power production facility in accordance with 18 C.F.R. Part 292 and is exempt from: (1) the Public Utility Holding Company Act of 2005 and from State laws and regulations respecting the rates and the financial and organizational regulation of electric utilities as set forth in 18 C.F.R. Section 292.602(b) and (c), respectively; and (2) from all Sections of the Federal Power Act except for those set forth in 18 C.F.R. Sections 292.601(2) through (5).

(ii)As of each Borrowing Date, none of the Secured Parties nor any Affiliate (as that term is defined in Section 1261(1) of PUHCA, 42 U.S.C. § 16451(1)) of any of them will, solely as a result of Borrower’s construction, ownership, leasing or operating of the Borrower Projects, the sale or transmission of electricity from the Borrower Projects or the entering into any Operative Document or any transaction contemplated hereby or thereby, be subject to, or not exempt from, regulation under the FPA or PUHCA or under State laws and regulations respecting the rates or the financial or organizational regulation of electric utilities, except that (A) if any of the Secured Parties otherwise is a “holding company” as defined in PUHCA, the purchase, acquisition or taking by such Secured Party of a security (as defined in Section 3(16) of the FPA, 16 U.S.C. § 796(17)) of the Borrower, because Borrower is or may become an “electric utility company” as defined in PUHCA, may be subject to Section 203(a)(2) of the FPA, 16 U.S.C. § 824(b)(a)(2) (provided that such Secured Party may be eligible for a blanket authorization granted pursuant to 18 C.F.R. § 33.1(c), if such acquisition meets the criteria of a blanket authorization), and (B) upon exercise by a Secured Party of certain remedies allowed under the Financing Documents, such Secured Party and its Affiliates (as that term is defined in Section 1262(1) of PUHCA, 42 U.S.C. § 16451(1)) may become subject to regulation under the FPA or PUHCA, to the extent such entity becomes an owner or operator of, or controls, the Borrower, or any Borrower Project’s FERC jurisdictional facilities or contracts, if any.

ARTICLE 5

AFFIRMATIVE COVENANTS

The Borrower covenants and agrees that until the Discharge Date, it shall:

5.1Use of Proceeds

.  Use the proceeds of the Loans solely (a) to make A-Installment Payments and B-Installment Payments under the MEPCA in respect of Project which are not Excluded Projects, (b) to pay all or a portion of the Final True-Up Amount (as defined in the MEPCA) under the MEPCA, (c) to fund the Construction Reserve Account, the Supplemental Reserve Account and the Debt Service Reserve Account, (d) to pay fees (including the Undrawn Fees), costs and expenses as permitted under this Agreement (including, for the avoidance of doubt, fees, costs and expenses under the Services Agreements) or (e) solely with respect to any Loan drawn on or after the Aggregation Date, if any, to make a Restricted Payment to Borrower Member in accordance with Section 6.6.

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5.2Notices

.  Promptly, upon acquiring notice or giving notice, as the case may be, or obtaining Knowledge thereof, give written notice to the Administrative Agent and each Lender of:

(a)the filing or commencement of, or any threat or notice of intention of any Person to file or commence, any action, suit, litigation, Environmental Claim, investigation or proceeding, whether at law or in equity by or before any Governmental Authority or any other material written notice from a Governmental Authority with respect to any Loan Party, any Financing Document, any Project Document or any Guarantee, except to the extent that such action, suit, litigation, investigation, proceeding or notice could not reasonably be expected to have a Material Adverse Effect;

(b)any dispute or disputes between the Borrower and any Person, which could reasonably be expected to have a Material Adverse Effect and that involve (i) claims against the Borrower or the Borrower Projects, (ii) injunctive or declaratory relief, or (iii) revocation, material modification, or suspension of any applicable Permit or imposition of additional material conditions with respect thereto;

(c)the occurrence of a Default or Event of Default (and any notice thereof shall be entitled, respectively, “Notice of Default” or “Notice of Event of Default”);

(d)any matter which has, or would be reasonably expected to have, a Material Adverse Effect;

(e)(i) the occurrence of, or notice given or received by a Loan Party in respect of, any breach, default or claim under a Project Document, (ii) notice of any event of default or termination given to or received by Borrower under any Project Document, together with a copy of any such notice, and (iii) the occurrence of, or notice given or received by a Loan Party in respect of any breach, default or claim under any Project Document that could have a Material Adverse Effect;

(f)the adoption of or participation in any ERISA Plan, or intention to adopt or participate in any ERISA Plan, by the Borrower, or the occurrence of any ERISA Event;

(g)the occurrence of a Provider Default; and

(h)any material change to any Affiliate’s underwriting, appraisal or Project development policies or processes, solely to the extent that such change renders invalid the assumptions used in the preparation of the previous report of the Independent Engineer provided to the Lenders.

5.3Portfolio Reports; Financial Statements

.  Deliver to each Lender:

(a)No later than ten (10) days following the date of delivery of such reports, any performance, financial or status reports, including any Portfolio Report, delivered or required to be delivered to each Investor under the Project Documents.

(b)Within thirty (30) days of the end of each fiscal quarter, to the extent not included in the reports delivered pursuant to Section 5.3(a), a report in the form attached as Exhibit I, which shall include (i) reporting on an aggregate basis across all Projects of (x) actual production data

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against budgeted production data, (y) actual Customer Payments, Operating Expenses and Net Cash Flow received against projected Customer Payments, projected Operating Expenses and projected Net Cash Flow reflected in the applicable Advance Model, (ii) (x) details on accounts receivable aging taken directly from the source system including that maintained by any third party servicer, (y) Customer defaults occurring during such quarterly reporting period, cumulative Customer defaults and calculation of PRRE Percentage with a comparison to the applicable PRRE Threshold, (iii) a zip code for each Project and (iv) the estimated first-year energy generation data for each Project for the year commencing on the date such Project was granted permission to operate.

(c)As soon as available but no later than sixty (60) days after the close of each quarterly fiscal period, quarterly (and year-to-date) unaudited financial statements of the Borrower prepared in accordance with GAAP and certified by the chief financial officer of the Borrower as of the end of such period, including a balance sheet and the related statement of income, stockholders’ or member’s equity and cash flows, in each case setting forth comparative figures for the corresponding periods from the prior year, to the extent available; provided, that no quarterly financial statements shall be due with respect to the fourth quarter of the fiscal year; provided, further, that no quarterly financial statements of the Borrower shall be due with respect to the third quarter of 2018.

(d)As soon as available but no later than one hundred fifty (150) days after the close of each applicable fiscal year, the audited financial statements, including a balance sheet and the related statement of income, stockholders’ or member’s equity and cash flows, and any footnotes thereto, in each case setting forth comparative figures for the prior year, to the extent available, of the Borrower, as certified by Deloitte Touche Tohmatsu, Ernst & Young, KPMG International or PricewaterhouseCoopers, or another nationally-recognized independent certified public accountant selected by Borrower and reasonably acceptable to the Lenders.

(e)Concurrently with any delivery of a Draft Withdrawal/Transfer Certificate (as defined in the CADA) which specifies a distribution to be made to Borrower Member in accordance with Section 3.3(d) or Section 3.3(e) of the CADA or otherwise on each Scheduled Payment Date, a certificate signed by an authorized Responsible Officer of the Borrower (i) certifying that such Responsible Officer has made or caused to be made a review of the transactions and financial condition of the Borrower during the relevant fiscal period and that, to the knowledge of such Responsible Officer, no Default or Event of Default exists or if any such event or condition existed or exists, the nature thereof and the corrective actions that the Borrower has taken or proposes to take with respect thereto and (ii) setting forth the Cash Flow Coverage Ratio as of the most recent Quarterly Date, including computations in reasonable detail satisfactory to the Lenders demonstrating such Cash Flow Coverage Ratio.

(f)Within three (3) Business Days after each Quarterly Date, a Cash Flow Coverage Ratio Certificate in respect of such Quarterly Date.

5.4Reports; Other Information

.

(a)Deliver to the Lenders copies of any material documents and reports furnished to the Borrower by a Governmental Authority or by any counterparty to a Project Document (other

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than reports already delivered pursuant to Section 5.3(a)), or furnished by the Borrower to such Governmental Authority or such counterparty.

(b)Deliver to the Lenders (with a copy to the Administrative Agent) promptly after receipt thereof a copy of any “management letter” received by the Borrower from its independent accounts and management’s response thereto.

(c)Promptly, from time to time, deliver such other information regarding the operations, business affairs and financial condition of the Borrower or any other Loan Party, or compliance with the terms of any Operative Document, as any Lender may reasonably request.

(d)Delivery to the Administrative Agent of a Scheduled Payment Date report which shall, among other things, detail any Mandatory Payment payable on such Scheduled Payment Date, other payments under the Revenue Account waterfall and the applicable Cash Flow Coverage Ratio, together with reasonable supporting calculations as applicable.

5.5Maintenance of Existence

.  Except as otherwise expressly permitted under this Agreement: (a) do or cause to be done all things required to maintain and preserve and keep in full force its existence as a Delaware limited liability company; (b) take all reasonable action required to maintain all material rights, privileges (including its good standing where applicable in the relevant jurisdiction), permits, licenses and franchises necessary or desirable in the normal conduct of its business, (c) perform all of its material obligations under the Project Documents to which it is a party; and (d) to engage only in the activities permitted by the Operative Documents, and activities related or incident thereto, except, in the cases of clause (b) above, where the failure to take such actions could not reasonably be expected to have a Material Adverse Effect.

5.6Books, Records, Access

.

(a)The Borrower shall maintain books, accounts and records in accordance with GAAP and in material compliance with applicable Laws and the regulations of any Governmental Authority having jurisdiction thereof.

(b)At any time during normal business hours and upon reasonable written notice to the Borrower, but so long as no Event of Default has occurred and is continuing, no more frequently than twice per calendar year, subject to Section 10.17, and to the extent permitted by applicable Laws, permit any representatives and independent contractors of the Administrative Agent (on behalf of the Lender) and any Lender (including an Independent Engineer) to visit the premises of the Borrower, Borrower Member or Sponsor, inspect all of the Borrower’s books, accounts, records and properties and make copies thereof and to discuss its affairs, finances and accounts with its directors, officers, the Independent Engineer and independent public accountants (subject to such accountants’ customary policies and procedures). Notwithstanding anything to the contrary in this Section 5.6(b), none of the Borrower, Borrower Member or Sponsor shall be required to disclose, permit the inspection, examination or making copies or abstracts of, or discussion of, any document, information or other matter that (i) constitutes non-financial trade secrets or non-financial proprietary information, (ii) in respect of which disclosure to the Administrative Agent or any Lender (or their respective representatives or contractors) is

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prohibited by Law or (iii) is subject to attorney client or similar privilege or constitutes attorney work-product.

(c)The Borrower shall reimburse the Administrative Agent and Lenders for reasonable out-of-pocket expenses incurred in connection with Section 5.6(b) by the Administrative Agent and Lenders and their respective Representatives limited to, so long as no Event of Default has occurred, two inspections per year; provided, that notwithstanding anything to contrary herein, any expenses incurred pursuant to Section 5.6(b) by the Administrative Agent or any Lender during the continuance of an Event of Default shall be for the account of the Borrower and not subject to any limitations set forth herein or elsewhere.

5.7Preservation of Rights; Further Assurance

.

(a)(i) Maintain in full force and effect, preserve, protect and defend the material rights of each Loan Party and (ii) take all actions necessary to prevent termination or cancellation (except as required by the Operative Documents) by, and enforce against, other parties the material terms of each Project Document, including enforcement of any claims with respect thereto, except in each case to the extent the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b)Preserve and maintain the security interests granted under the Collateral Documents and undertake all actions that are necessary or appropriate to (i) maintain the Collateral Agent’s security interest in the Collateral in full force and effect at all times (including the priority thereof), (ii) preserve and protect the Collateral and (iii) protect and enforce the Borrower’s rights and title and the rights of the Collateral Agent and the other Secured Parties to the Collateral, including the making or delivery of all filings and recordations, the payment of all fees and other charges and the issuance of supplemental documentation.

(c)From time to time as reasonably requested by any Lender, execute, acknowledge, record, register, deliver and/or file all such notices, statements, instruments and other documents (including any financing statement, continuation statement, certificate of title or estoppel certificate) as are necessary or appropriate to carry out the interest and purposes of the Financing Documents or necessary to maintain the Collateral Agent’s perfected security interest in the Collateral to the extent and in the priority required pursuant to the Collateral Documents.

5.8Payment of Claims, Taxes and Other Government Changes

.

(a)Pay, or cause to be paid, (i) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by Law have or may become a Lien upon any of its properties or Assets (hereinafter referred to as the “Claims”) and (ii) all Taxes, assessments and governmental charges of any kind that may at any time be lawfully due or levied against or with respect to it, its properties or Assets (including any Project, and including, in each case, all material Taxes, assessments and charges lawfully made by any Governmental Authority for public improvements that may be secured by a Lien on such Project), in each instance before any penalty or fine is incurred with respect thereto; provided that the foregoing shall not be deemed to require that a Loan Party pay any such Tax or other liability that is imposed on a residential customer under its Customer Agreement or that a residential customer

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is contractually obligated to pay under its Customer Agreement, provided further, however, that the Borrower may, by appropriate proceedings, contest or cause to be contested in good faith any such Claims, Taxes, assessments and other charges and, in such event, may, if permitted by applicable Laws, permit the Claims, Taxes, assessments or other charges so contested to remain unpaid during any period, including appeals, when the Borrower is in good faith contesting or causing to be contested the same by appropriate proceedings, so long as (a) appropriate reserves have been established by the Borrower in accordance with GAAP, or other provision for the payment thereof reasonably satisfactory to the Administrative Agent (acting on the written instructions of the Required Lenders) shall have been made, (b) enforcement of the contested claim, Tax, assessment or other charge is effectively stayed pursuant to applicable Laws for the entire duration of such contest and (c) any claim, Tax, assessment or other charge determined to be due, together with any interest or penalties thereon, is promptly paid after resolution of such contest.

(b)The Borrower shall at all times be classified as a disregarded entity for U.S. federal income tax purposes.

5.9Compliance With Laws; Instruments, Etc

.  Comply in all respects, with all Permits and Laws, including consumer protection laws and Environmental Laws, but excluding Anti-Bribery and Anti-Corruption Laws, Anti-Terrorism and Money Laundering Laws and Regulations and Sanctions which are addressed in Section 5.18 and without limitation to Section 6.18, and all orders, writs, injunctions and decrees applicable to it or to its business or property, except (i) if the failure to comply therewith could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (ii) that the Borrower may contest good faith by appropriate proceedings conducted in good faith the validity or application of any such Laws.

5.10Indemnification

.

(a)Without duplication of the Borrower’s obligations under Section 2.4(d) or Section 2.6, the Borrower agrees to indemnify each Secured Party (other than the Depositary, who is indemnified under Section 6.2 of the CADA) and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any and all fees, losses, claims, damages, liabilities, costs and related expenses, including reasonable counsel fees, charges and disbursements of counsel to the Agents and court costs, incurred by or asserted against any Indemnitee arising out of, connected with, or as a result of (i) the execution or delivery of this Agreement or any other Financing Document or any agreement or instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the transactions contemplated hereby and thereby or any amendment, supplement, or modification thereto and any agreement entered into by Sponsor or any Loan Party in connection therewith, (ii) the use of the proceeds of the Loans, (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto (and regardless of whether such matter is initiated by a third party or by the Borrower, any other Loan Party or any of their respective Affiliates), or (iv) any actual or alleged presence or Release of Hazardous Materials on any property currently or formerly owned, leased or occupied by the Borrower, or any Environmental Claim related in any way to the Borrower, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee including those incurred in

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connection with any action, claim or suit brought to enforce the Indemnitee’s right to indemnification; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by a final and non-appealable judgment to have resulted from such Indemnitee’s gross negligence, bad faith or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee (other than the Agents) for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Financing Document, if the Borrower or such Loan Party has obtained a final or non-appealable judgment in its favor on such claim as determined by a court of competent jurisdiction.Notwithstanding the foregoing, any indemnification relating to Taxes, other than Taxes resulting from any non-Tax claim, shall be covered by Sections 2.4(d) and 2.6 and shall not be covered by this Section 5.10.

(b)To the extent that the Borrower fails to pay any amount required to be paid by them to the Administrative Agent or the Collateral Agent under Section 5.10(a) or Section 10.4(a), each Lender severally agrees to pay to the Administrative Agent and the Collateral Agent, as the case may be, such Lender’s Proportionate Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent or the Collateral Agent in its capacity as such.

(c)To the extent permitted by applicable Laws, the Borrower and Lenders shall not assert and hereby waive any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, any transaction contemplate hereby or by the other Financing Documents, any Loan or the use of the proceeds thereof.

(d)The provisions of this Section 5.10 shall remain operative and in full force and effect regardless of the expiration of the term or assignment of this Agreement, the resignation or removal of any Agent, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the invalidity or unenforceability of any term or provision of this Agreement or any other Financing Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent or any Lender.  Any amounts due and payable by the Borrower under this Section 5.10 shall be payable on demand by the applicable Indemnitee, but in no event later than ten (10) Business Days after receipt of an invoice for such amounts from such Indemnitee; provided, however, that such Indemnitee shall promptly refund such amount to the extent that there is a final judicial or arbitral determination that such Indemnitee was not entitled to indemnification rights with respect to such payment pursuant to the express terms of this Section 5.10.  

5.11Revenue Account

.  Borrower shall promptly deposit or cause to be deposited all income, fees, revenue and other funds payable to Borrower into the Revenue Account or, in the case of Customer Payments, the Collections Account for further application to the Revenue Account in accordance with the CADA; provided, that that Borrower shall be permitted to immediately distribute any Excluded Revenues to Borrower Member upon receipt thereof. The

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Borrower shall deposit capital contributions and the proceeds of Loans that are expected to be used to fund A-Installment Payments or B-Installment Payments under the MEPCA into the Payment Account (as defined in the CADA).

5.12Rating Letter

. (a) On the first Quarterly Date of each calendar year, Borrower shall deliver to the Lenders (with a copy to the Administrative Agent) a letter from a Ratings Agency with respect to the Loans and dated as of a date within the prior three (3) calendar months and (b) on the Aggregation Date, Borrower shall deliver to the Lenders (with a copy to the Administrative Agent) a letter from a Ratings Agency with respect to the Term Loan demonstrating a credit rating of [***] or higher and dated as of the Aggregation Date.

5.13Separateness Provisions; Required Provisions in LLC Agreements

.  The LLC Agreement of the Borrower shall include, and the Borrower shall comply with the provisions set forth in Appendix 4.

5.14Performance of Agreements

.  The Borrower shall duly and punctually perform, observe and comply in all material respects with all of the terms, provisions, conditions, covenants and agreements on its part to be performed, observed and complied with hereunder and under the Transaction Documents and the other Project Documents to which it is a party, and Borrower shall prudently exercise and enforce their material rights, authorities and discretions under the Transaction Documents and the other Project Documents to which it is a party.

5.15Scheduled Payment Date Report

.  At least three (3) Business Days prior to each Scheduled Payment Date, the Borrower shall deliver or cause to be delivered to the Administrative Agent and the Lenders a fully executed and complete Scheduled Payment Date Report.

5.16Amendments; Other Agreements

.  Promptly after the execution and delivery thereof, the Borrower shall furnish to the Lenders (with a copy to the Administrative Agent) copies of (a) all material waivers, amendments, supplements or modifications of any Project Document and, subject to any applicable Laws and within four (4) Business Days of the execution and delivery thereof, any amendment, supplement or modification thereto and (b) all waivers, amendments, supplements or modifications of any Other Documents and any additional material contracts or agreements to which the Borrower becomes a party after the Closing Date, in the case of this clause (b), to the extent such waivers, amendments, supplements or modifications could reasonably be expected to have a Material Adverse Effect.

5.17Insurance

.

(a)At its sole cost and expense, procure and maintain, or cause to be procured and maintained (including making changes to coverage and carriers) the casualty, general liability (including product liability), property damage and/or other types of insurance set forth in Schedule 5.17; provided that if any such insurance is not available on commercially reasonable terms, only such insurance shall then be required to be carried pursuant to this Section 5.17 as is then available on commercially reasonable terms; provided, however, that if such insurance subsequently becomes available on commercially reasonable terms the Borrower shall acquire and maintain the insurance set forth in Schedule 5.17.  All notices to the Administrative Agent delivered pursuant

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to this Section 5.17 shall be delivered to the Administrative Agent at its address set forth in Section 10.1.

(b)The Borrower shall deliver to the Lenders (with a copy to the Administrative Agent), on the Aggregation Date, a probable maximum loss study (the “PML Study”), in form and substance reasonably acceptable to the Required Lenders, including an analysis of earthquakes and named windstorms in respect of all purchased Projects. The PML Study will include, among others, the expected loss for the 1/500-year scenario for each category of earthquake and name windstorm. The Borrower shall maintain earthquake coverage and/or named windstorm coverage at the level of one hundred twenty-five percent (125%) of the result of the PML Study.

5.18Foreign Asset Control Regulations

.  (a) Conduct its businesses in compliance with all Anti-Bribery and Anti-Corruption Laws, Anti-Terrorism and Money Laundering Laws and Regulations and Sanctions, (b) maintain policies and procedures reasonably designed to promote and achieve compliance by the Borrower and its respective directors, officers, employees and agents acting in connection with the Borrower’s business (if any) with such laws.

5.19Backup Servicer

.  The Borrower shall maintain at all times, a backup servicer with respect to the management, administration and servicing of all the Borrower Projects on terms and conditions reasonably acceptable to the Administrative Agent at the direction of the Required Lenders.  The Administrative Agent (acting at the direction of the Required Lenders) acknowledges and agrees that it and the Lenders have approved the Backup Services Agreement.

ARTICLE 6

NEGATIVE COVENANTS

Borrower covenants and agrees that until the Discharge Date it shall not:

6.1Analysis Account

.  Designate the Collections Account as the “Analysis Account” as defined in the Collections Account Control Agreement.

6.2Limitations on Liens

.  (a) Create or assume any Lien on any of its property assets or revenue, whether now owned or hereafter acquired, except for Permitted Liens or (b) suffer to exist any Lien on any of its property assets or revenues, whether now owned or hereafter acquired, except for Permitted Liens.

6.3Indebtedness

.  Incur, create, assume or permit to exist any Debt except for Debt created under the Financing Documents.

6.4Sale or Lease of Assets

.  Directly or indirectly sell, lease, assign, transfer or otherwise dispose of any of its Property or Assets (including any portion of any Equity Interest owned by the Borrower), whether now owned or hereafter acquired except:

(a)the granting of Liens to the Collateral Agent;

(b)the sale, assignment, transfer, or other disposition of SRECs or Environmental Attributes (as defined in the MEPCA);

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(c)any transfer of a Project to a Customer or designee under and in accordance with the terms of a Customer Agreement in the form of an Approved Form Agreement;

(d)transfers of amounts constituting Excluded Revenues;

(e)any Restricted Payment in accordance with Section 6.6; or

(f)so long as no Default or Event of Default has occurred and is continuing or would result therefrom, the sale by the Borrower in an arm’s length transaction; provided that (i) the consideration for such sale is paid entirely in cash and is paid directly into the Revenue Account, and (ii) such sale will be non-recourse to the Borrower or any Loan Party, and the Borrower and the Loan Parties will cease to have any obligation, liability or responsibility in respect of any disposed Assets.

6.5Changes

.  Conduct any business other than the acquisition and ownership of subsidiaries which engage in the acquisition, ownership, leasing and financing of the Borrower Projects and activities related or incident thereto (including those contemplated by the Operative Documents but excluding the engineering, development, construction or creation of Borrower Projects), hire or become an employer of an employee or assume or incur any obligation under or in connection with any ERISA Plan.

6.6Distributions

.  Directly or indirectly, make or declare any Restricted Payment or incur any obligation (contingent or otherwise) to do so, except for Restricted Payments on a Scheduled Payment Date from Borrower to Borrower Member from any monies remaining in the Revenue Account after giving effect to the withdrawals and transfers specified in Section 3.3(d)(i) through (x) or Section 3.3(e)(i) through (xiii) of the CADA, as applicable, and upon satisfaction of the following conditions:

(a)no Default or Event of Default has occurred and is continuing or would be caused thereby;

(b)no Repayment Event has occurred and is continuing; and

(c)(A) the Construction Reserve Account has been fully funded in an amount at least equal to the Construction Reserve Required Amount, (B) the Debt Service Reserve Account has been fully funded, or an Acceptable DSR Letter of Credit has been posted, in an amount at least equal to the Debt Service Reserve Required Amount and (C) the Supplemental Reserve Account has been fully funded in an amount at least equal to the Supplemental Reserve Required Amount.

6.7Investments

.  Make or permit to remain outstanding any advances or loans or extensions of credit to, or purchase, redeem or own any Equity Interests in, or any assets constituting an ongoing business from, or make or permit any other investment in, any Person.

6.8Federal Reserve Regulations

.  Apply any part of the proceeds of any Loan to the purchasing or carrying of any Margin Stock.

6.9Fundamental Changes

.  Liquidate or dissolve, or sell or lease or otherwise transfer or dispose of, all or any substantial part of its property, assets or business, or combine, merge or

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consolidate with or into any other entity (in each case, whether in one transaction or a series of transactions) other than the sale of assets as permitted by Section 6.4.

6.10Amendments; Other Agreements

.

(a)Without the prior written consent of the Required Lenders, (i) terminate or cancel, exercise any right or remedy under or pursuant to any breach or default of, (ii) materially amend, modify, supplement or consent to any change in any provision of or (iii) materially waive any material default under, material breach of, material condition, closing deliverable or other required item under, or the performance of a material obligation by any Person, in each case, under any (x) Other Documents, except to the extent that such actions could not reasonably be expected to have a Material Adverse Effect or otherwise adversely impact Net Cash Flow or Portfolio Value (other than in respect of Distressed Customer Agreements) or (y) Transaction Documents unless such amendment, consent or waiver is either approved in writing by the Administrative Agent (acting at the direction of the Required Lenders) or immaterial; provided, however, that no prior written consent by the Required Lenders shall be required in the case of any amendment, modification or supplement to or waiver under Other Documents or any Transaction Documents solely to (A) correct a manifest error therein that is not material or (B) to increase the aggregate amount of an Investor’s commitment; provided, further, (1) the Borrower shall be permitted to enter into an agreement to amend or modify the electricity or lease rate, annual escalator or term of any Distressed Customer Agreement only, so long as such amendment or modification is made in good faith for a commercially reasonable purpose and is intended to maximize the long-term economic value of the Customer Agreement as against its value if such amendment or modification had not been entered into (as reasonably determined by the Borrower in good faith and in light of the facts and circumstances known at the time of such amendment or modification) and (2) for any Customer Agreement for which the Borrower reasonably determines the Customer under such Customer Agreement could reasonably be expected to stop making payments due under the Customer Agreement, the Borrower may enter into a delayed payment plan to adjust the timing of payments under such Customer Agreement for up to twelve (12) months.

(b)Amend, modify, supplement or consent to any change in any provision of the LLC Agreements, except to the extent that such actions could not reasonably be expected to materially and adversely affect the Administrative Agent or the Lenders.

(c)Amend, modify, supplement or consent to any change in any Approved Form Agreement unless (i) such amendments, modifications, supplements or changes do not (w) reallocate risk from the Customer to the Borrower or any of its Affiliates, or (x) reduce any payment obligations of the Customer, (y) reduces the creditworthiness standards with which the Customer must comply, or (z) otherwise materially increase the risk profile of the Lenders and (ii) the Borrower has promptly (and in any event within five (5) Business Days) provided copies of such amendments, modifications, supplements or changes to the Administrative Agent.

6.11Name and Location; Fiscal Year

.  Change its name, its state of business, accounting policies (except as permitted by GAAP) or its fiscal year without the Administrative Agent’s (acting at the direction of the Required Lenders) prior written consent.

6.12Assignment

.  Assign its rights hereunder or under any other Operative Document.

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6.13Accounts

.  Establish or maintain any deposit, securities or other account in its own name other than the Collateral Accounts and the Payment Account.

6.14Transaction with Affiliates

.  Engage in any transactions with any of its Affiliates except (a) transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Loan Party than could be obtained on arm’s-length basis from unrelated third parties, or (b) transactions pursuant to agreements in existence on the Closing Date and set forth on Schedule 6.14 or any amendment thereto to the extent such an amendment is not adverse to the Lenders in any material respect.

6.15Limitation on Restrictions on Liens

.  Enter into, or allow Borrower to enter into, any agreement, instrument or other undertaking that restricts or limits the ability of any Loan Party to create, incur, assume or suffer to exist Liens on the property of such Person for the benefit of the Agents and Lender with respect to the Obligations of the Loan Parties or the Financing Documents, except, in each case, the Operative Documents in existence on the Closing Date, to the extent reviewed and approved by the Lenders.

6.16Hedging Agreement

.  Enter into any Hedging Agreement.

6.17Operations and Maintenance in Partnership

.  Vote to terminate or to appoint a new operations and maintenance provider, or consent to the appointment of a new operations and maintenance provider; provided, that if any vote or appointment is required within a certain time period under the applicable Project Document, if the Required Lenders do not consent (unless such consent was reasonably withheld) within such time period, then the Borrower may vote or appoint or consent to a new operations and maintenance provider or administrative services provider in order to comply with the terms of the applicable Project Documents; provided, further, that the consent of the Required Lenders may not be unreasonably withheld if the new operations and maintenance provider or administrative services provider meets the standards set forth in the applicable Project Documents.

6.18Sanctions Laws

.  Directly or indirectly, use any part of the proceeds of any Loan, or lend, contribute or otherwise make available such proceeds: (a) in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment or giving of money, property, gifts or anything else of value, directly or indirectly, to any “government official” (including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office) to improperly influence official action or secure an improper advantage; (b) in any manner that would constitute or give rise to a violation of applicable Anti-Bribery and Anti-Corruption Laws or applicable Anti-Terrorism and Money Laundering Laws and Regulations; (c) to fund or facilitate any activities or business of, with or involving any Sanctioned Person in violation of applicable Sanctions; or (d)

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in any manner that would constitute or give rise to a violation of applicable Sanctions by any Loan Party, any of its Subsidiaries, the Administrative Agent or any Lender.

ARTICLE 7

ACCOUNTS; APPLICATION OF FUNDS

7.1Accounts; Application of Funds in Accounts

.

(a)On or prior to the Closing Date, the Borrower shall cause the Depositary Accounts to be established at Depositary and the Collections Account to be established at the Account Bank.

(b)The Borrower shall, and shall cause Provider, to (i) promptly transfer any customer payments consisting of checks representing Customer Payments into the Collections Account, (ii) promptly deposit any recurring Customer ACH or debit card payments that are due to Borrower to the Collections Account upon receipt of such payment, (iii) identify the payor of any non-recurring Customer ACH or credit card payments as soon as reasonably practicable and cause all such amounts that have been identified as being payable to Borrower to be deposited into the Collections Account as soon as reasonably practicable and (iv) hold all amounts received by or on behalf of Borrower separately allocated for Borrower, separate from any VSLR Parties’ assets and to ensure that any agents engaged to collect and hold amounts on behalf of Borrower hold such assets separate from their own assets.

(c)The Borrower shall cause funds on deposit in the Depositary Accounts and the Collections Account to be applied in the manner, at the times and in the order of priority as set forth in the CADA.

ARTICLE 8

EVENTS OF DEFAULT; REMEDIES

8.1Events of Default

.  The occurrence of any of the following events shall constitute an event of default (individually, an “Event of Default,” and collectively, “Events of Default”) hereunder:

(a)Failure to Make Payments.  Any Loan Party shall fail to pay, in accordance with the terms of this Agreement, (i) any Mandatory Principal with respect to any Loan on the date that such Mandatory Principal is due and payable (other than on the Loan Maturity Date), whether at a Scheduled Payment Date or at a date fixed for prepayment (including under Section 2.1(f)(ii), unless otherwise provided therein) or by declaration or otherwise or any interest on any Loan or other amount payable hereunder (other than such interest or amount payable on the Loan Maturity Date) within five (5) Business Days after the date that such payment is due or (ii) any principal with respect to any Loan or any interest on any Loan or other amount payable hereunder on the Loan Maturity Date.

(b)Judgments.  There is entered against any Loan Party any one or more final judgments or orders for the payment of money and the aggregate amount of all such judgments or orders for all such parties equals or exceeds $10,000,000 (to the extent not covered by a valid and

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binding policy of insurance issued by an independent third party as to which the insurer has been notified of such judgment or order and has not denied coverage) and such judgments or orders shall not have been satisfied, vacated, discharged or stayed or bonded to the reasonable satisfaction of the Lenders pending an appeal for a period of sixty (60) consecutive days;

(c)Misstatements.  Any representation, warranty, certification or statement of trust made or deemed made by a Loan Party in the Financing Documents, any amendment or modification thereof or waiver thereto, or in any certificate or financial statement furnished pursuant thereto to any Agent or Secured Party pursuant to this Agreement or any other Financing Document, shall prove to have been inaccurate or misleading in any material respect as of the date made or deemed made, and such misstatement or inaccuracy could reasonably be expected to materially adversely affect the interests of the Lenders, and, if curable, such misstatement or inaccuracy remains unremedied for sixty (60) days; provided, that an Event of Default shall not arise solely as a result of a misrepresentation with respect to a Borrower Project that render such Borrower Project an Excluded Project.

(d)Bankruptcy.  Any Loan Party shall become subject to a Bankruptcy Event.

(e)ERISA.  (i) The Borrower shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) that is not excepted under Section 408 of ERISA and regulatory guidance thereunder resulting in a Material Adverse Effect to the Borrower; (ii) an ERISA Event shall occur with respect to any ERISA Plan which results in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect; or (iii) the Borrower or any member of the Controlled Group fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect.

(f)Breach of Terms of Financing Agreements.

(i)Any Loan Party shall fail to perform or observe any covenant set forth in Section 5.2, Section 5.5(a), Section 5.18, or Article 6 of this Agreement.

(ii)Any Loan Party shall fail to perform or observe any other covenant (other than those specified in Section 8.1(a) or Section 8.1(f)(i)) to be performed or observed by it hereunder or under any other Financing Document and not otherwise specifically provided for elsewhere in this Section 8.1, and such failure shall continue unremedied for a period of thirty (30) days after the Borrower becomes aware of such failure; provided, that if (x) such failure can be remedied, (y) such failure cannot reasonably be remedied within such thirty (30)-day period, and (z) the Borrower commences cure of such failure within such thirty (30)-day period and thereafter diligently seeks to remedy the failure, then an “Event of Default” shall not be deemed to have occurred until the earlier of (A) such time as Borrower ceases reasonable efforts to cure such failure and (B) sixty (60) calendar days following such failure.

(g)Security.  Any of the Collateral Documents, once executed and delivered, (i) shall fail to provide the Collateral Agent (on behalf of the Secured Parties) a first priority perfected

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security interest (subject only to Permitted Liens) in all of the Collateral (except to the extent that any such perfection or priority results from the failure of the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Documents), (ii) shall cease to be in full force and effect, or (iii) the validity or the applicability thereof to the Obligations to be secured or guaranteed thereby or any part thereof shall be disaffirmed by or on behalf of any Loan Party.

(h)Change in Control.  A Change in Control shall have occurred.

(i)Invalidity of Financing Documents.  Any material provision of any Financing Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or as a result of acts or omissions by the Administrative Agent or Collateral Agent or any Lender or upon the occurrence of the Discharge Date, shall cease to be in full force and effect, or any Loan Party shall contest in writing the validity or enforceability of any provision of any Financing Document, or any Loan Party shall deny in writing that it has any or further liability or obligation under any Financing Document (other than as a result of repayment in full of the Obligations and termination of the Commitments), or any Loan Party shall purport in writing to revoke or rescind any Financing Document.

(j)Transaction Documents.  Any Loan Party shall fail to observe or perform any of its obligations under or otherwise breaches any representation, warranty, term or condition of the Transaction Documents applicable to it which could reasonably be expected to have a Material Adverse Effect, which breach or default shall continue unremedied for the lesser of (i) the applicable cure period for such breach or default set forth in the applicable Transaction Document and (ii) a period of thirty (30) days after the Borrower becomes aware of such breach or default, subject to an extension of up to thirty (30) days (for a total cure period of no more than sixty (60) days in the aggregate) if (x) such breach or default can be remedied, (y) such breach or default cannot reasonably be remedied within such initial thirty (30)-day period but the Borrower reasonably expects that such breach of default can be remedied within the subsequent thirty (30)-day period, and (z) the Borrower commences cure of such breach or default within such initial thirty (30)-day period and thereafter diligently seeks to remedy the breach or default during the subsequent thirty (30)-day period.

(k)Services Agreements.  Any material amendment, modification or waiver of either of the Administrative Services Agreement or the Maintenance Services Agreement shall be executed by Borrower and Provider without the prior written consent of the Administrative Agent (acting at the instruction of the Required Lenders), including any amendment, modification or waiver which would alter or modify the scope of services to be provided by, or compensation to be provided to, Provider.

(l)Provider Event of Default. (A) Either (i) Borrower has delivered a termination notice to the Provider under either of the Administrative Services Agreement or the Maintenance Services Agreement or (ii) Provider shall cease to be directly or indirectly owned by either the Sponsor or a Qualified Purchaser which, in either case, directly or indirectly owns, beneficially and of record, at least [***]% of the issued and outstanding Equity Interests in Borrower Member and (B) no successor servicer (including Wells Fargo as “Backup Servicer” under the Backup Services Agreement) has been appointed to replace the Provider within ninety (90) days after the

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delivery of such termination notice, which period may be extended up to sixty (60)additional days so long as such transition is diligently pursued under the Backup Services Agreement; provided, that for purposes of clause (ii), a Person shall be deemed to meet the Requisite Experience test in the definition of “Qualified Purchaser” if substantially the same employees of the Provider remain employed by the Provider in substantially their same roles.

8.2Remedies

.

(a)If any Event of Default (other than any event described in Section 8.1(d)) shall have occurred and be continuing, the Administrative Agent shall, upon the direction of the Required Lenders, by notice to the Borrower:

(i)immediately terminate the Commitments of each Lender and the obligation of each Lender to make Loans; and

(ii)declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued fees and all other liabilities of the Borrower accrued hereunder and under any other Financing Document, shall become forthwith due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Financing Document to the contrary notwithstanding.

(b)If any Event of Default described in Section 8.1(d) shall have occurred and be continuing:

(i)the Commitments of each Lender and the obligation of each Lender to make Loans shall automatically terminate (if not previously terminated or expired); and

(ii)the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued fees and all other liabilities of the Borrower accrued hereunder and under any other Financing Document, shall automatically become due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Financing Document to the contrary notwithstanding.

(c)Upon the occurrence and during the continuance of any Event of Default, in addition to the exercise of remedies set forth in Sections 8.2(a) and 8.2(b), (i) the Agents,  upon direction from the Required Lenders, shall immediately exercise exclusive control of or over any or all of the Collateral Accounts, including taking any and all actions necessary or advisable in pursuance of the foregoing, such as issuing any notice of exclusive control contemplated by the applicable control agreements and (ii) each Secured Party shall be, subject to the terms of the Financing Documents and the Interparty Agreement, entitled to exercise the rights and remedies available to such Secured Party under and in accordance with the provisions of the other Financing Documents to which it is a party or any applicable Laws.

(d)Notwithstanding the foregoing, the ability of the Collateral Agent to exercise remedies hereunder shall at all times be subject to the terms of the Interparty Agreement.

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ARTICLE 9THE AGENTS; AMENDMENTS; ASSIGNMENTS

9.1Appointment and Authority

.  Each of the Lenders hereby irrevocably appoints Wells Fargo Bank, National Association to act on its behalf as Administrative Agent and Collateral Agent (in accordance with the terms of the CADA), respectively, hereunder and under the other Financing Documents and authorizes the Administrative Agent and Collateral Agent, respectively, to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent and Collateral Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.  The provisions of this Article 9 are solely for the benefit of the Administrative Agent, Collateral Agent, and the Secured Parties, and the Borrower shall not have rights as a third party beneficiary of any of such provisions.  It is understood and agreed that the use of the term “agent” herein or in any other Financing Documents (or any other similar term) with reference to the Administrative Agent or Collateral Agent is not intended to denote or connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

9.2Exculpatory Provisions

.  The Administrative Agent (which term as used in this sentence and the last sentence in Section 10.5 shall include reference to each of its affiliates, and its own and its affiliates’ officers, directors, employees, representatives and agents) shall not have any duties or obligations except those expressly set forth herein and in the other Financing Documents, and its duties hereunder shall be administrative in nature.  Without limiting the generality of the foregoing, the Administrative Agent:

(a)shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

(b)shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Financing Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Financing Documents); provided that the Administrative Agent shall not be required to take any action that, in its opinion, may expose the Administrative Agent to liability or that is contrary to any Financing Document or applicable Laws, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Bankruptcy Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Bankruptcy Law;

(c)shall not, except as expressly set forth herein and in the other Financing Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity;

(d)shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in any Financing Document, or in any certificate or other document

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referred to or provided for in, or received by any of them under, any Financing Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of any Financing Document or any other document referred to or provided for in any Financing Document to monitor the status of a Lien on or performance of the Collateral or for any failure by the Borrower or any other Person to perform any of its obligations under any Financing Document;

(e)shall not be required to initiate or conduct any litigation or collection proceedings under any Financing Document; and

(f) shall not be responsible for any action taken or omitted to be taken by it under any Financing Document or under any other document or instrument referred to or provided for in any Financing Document or in connection with any Financing Document, except for its own gross negligence or willful misconduct.  Without limiting the generality of the foregoing, in any circumstance where Administrative Agent is required to exercise discretion, the Administrative Agent may, at its option, seek to obtain instructions or directions from the Required Lenders (written or otherwise), and the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers.

The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.1 and 8.2) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by a final and non-appealable judgment. The Administrative Agent shall be deemed not to have knowledge of any event, default, Default, Event of Default or information, or be required to act upon any event, default, Default, Event of Default or information (including the sending of notice) unless and until notice describing such event, default, Default, Event of Default or information is given in writing to a Responsible Officer of the Administrative Agent by the Borrower or a Lender.  Absent such written notice, the Administrative Agent shall have no duty to ascertain whether any such event or default (including any Event of Default) shall have occurred.

Knowledge of the Administrative Agent shall not be attributed or imputed to Wells Fargo’s other roles in the transaction and knowledge of the Collateral Agent and the Depositary shall not be attributed or imputed to each other or to the Administrative Agent (other than those where the roles are performed by the same group or division within Wells Fargo or otherwise share the same Responsible Officers), or any affiliate, line of business, or other division of Wells Fargo (and vice versa).

The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (A) any statement, warranty or representation made in or in connection with this Agreement or any other Financing Document, (B) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (C) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (D) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Financing Document or any other agreement, instrument or document or (E) the satisfaction of any condition set forth in Article 3 or

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elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

Delivery of any reports, information and documents to the Administrative Agent provided for herein or any other Financing Document is for informational purposes only (unless otherwise expressly stated), and the Administrative Agent’s receipt of such or otherwise publicly available shall not constitute actual or constructive knowledge or notice of any information contained therein or determinable from information contained therein, including the Borrower’s compliance with any of its representations, warranties or covenants hereunder (as to which the Administrative Agent is entitled to rely exclusively on officer’s certificates). The Administrative Agent shall not have actual notice of any default or any other matter unless a Responsible Officer of the Administrative Agent receives actual written notice of such default or other matter.

The right of the Administrative Agent to perform any permissive or discretionary act enumerated in this Agreement or any related document shall not be construed as a duty.

The Administrative Agent may rely and shall be protected in acting or refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper Person.  The Administrative Agent need not investigate any fact or matter stated in any document. The Administrative Agent need not investigate or re-calculate, evaluate, certify, verify or independently determine the accuracy of any numerical information, report, certificate, information, statement, representation or warranty or any fact or matter stated in any such document and may conclusively rely as to the truth of the statements and the accuracy of the information therein.

Before the Administrative Agent takes any discretionary action or refrains from taking any action under this Agreement or any other Financing Document, it may require an officer's certificate or an opinion of counsel, the costs of which (including the Administrative Agent’s reasonable attorney’s fees and expenses) shall be paid by the Borrower.  The Administrative Agent shall not be liable for any action it takes or omits to take in good faith in reliance on such officer's certificate or opinion of counsel.

No provision of this Agreement or any other Financing Document shall require the Administrative Agent to expend or risk its own funds or otherwise incur any financial or other liability in the performance of any of its duties hereunder or thereunder, or in the exercise of any of its rights or powers.

The Administrative Agent shall not be personally liable with respect to any action it takes, suffers or omits to take in good faith in accordance with a direction received by it from the Required Lenders in accordance with this Agreement or any other Financing Document or for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement or any other Financing Document, except to the extent of any loss that is a result of the Administrative Agent’s gross negligence or willful misconduct.

The Administrative Agent shall not be liable for any action or inaction of any Loan Party, the Collateral Agent, the Depositary, any Lender, or any other party (or agent thereof) to

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this Agreement or any Financing Document and may assume compliance by such parties with their obligations under this Agreement or any other Financing Document, unless a Responsible Officer of the Administrative Agent shall have received written notice to the contrary.

Notwithstanding anything to the contrary herein or otherwise, under no circumstance will the Administrative Agent be liable for special, punitive, indirect, or consequential loss or damage of any kind whatsoever (including lost profits), whether or not foreseeable, even if the Administrative Agent is actually aware of or has been advised of the likelihood of such loss or damage.

The Administrative Agent shall not be responsible or liable for delays or failures in performance resulting from acts beyond its control.  Such acts shall include but not be limited to acts of God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations superimposed after the fact, fire, communication line failures, computer viruses, power failures, earthquakes or other disasters.

The Administrative Agent shall have no duty to see to, or be responsible for the correctness or accuracy of, any recording, filing or depositing of this Agreement or any agreement referred to herein, or any financing statement or continuation statement evidencing a security interest, or to see to the maintenance of any such recording or filing or depositing or to any rerecording, refilling or re-depositing of any thereof.

Except for action expressly required of the Administrative Agent under this Agreement and under the other Financing Documents to which the Administrative Agent is intended to be a party, the Administrative Agent shall in all cases be fully justified in failing or refusing to take discretionary action under this Agreement and under the other Financing Documents that, in its opinion or the opinion of its counsel, may reasonably expose the Administrative Agent to liability or that is contrary to any Financing Document or applicable Law.

9.3Reliance by Administrative Agent

.  The Administrative Agent shall be entitled to conclusively rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.  The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition hereunder to the making of a Loan that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan.  The Administrative Agent may consult with legal counsel (including counsel for the Borrower), independent public accountants, market consultants, independent engineers and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith in accordance with the advice of such counsel, accountants or experts.  As to any matters not expressly provided for by any Financing Document, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under any Financing Document in accordance with instructions given by the Required Lenders or, if provided in this Agreement, in accordance with the instructions given

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by the Required Lenders or all Lenders as is required in such circumstance, and such instructions of such Lenders and any action taken or failure to act pursuant to such instructions shall be binding on all of the Lenders.

9.4Delegation of Duties

.  The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Financing Document by or through any one or more sub-agents appointed by the Administrative Agent.  The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties.  The exculpatory provisions of this Article 9 shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.  The Administrative Agent may employ agents, sub-agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any sub-agents or attorneys-in-fact appointed by it with due care.

9.5Resignation of Administrative Agent

.

(a)The Administrative Agent may at any time give notice of its resignation to the Lenders and the Borrower.  Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States.  If no such successor shall have been so appointed by the Required Lenders or shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not be obligated to) on behalf of the Lenders, appoint a successor Administrative Agent meeting the qualifications set forth above.  Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.

(b)If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Required Lenders may, to the extent permitted by applicable Laws, by notice in writing to the Borrower and such Person remove such Person as Administrative Agent and, in consultation with the Borrower, appoint a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days (or such earlier day as shall be agreed by the Required Lenders) (the “Removal Effective Date”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.

(c)With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (i) the retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Financing Documents and (ii) except for any indemnity payments or other amounts then owed to the retiring or removed Administrative Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above.  Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor

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shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or removed) Administrative Agent (other than as provided in Section 2.4(d)(vi) and other than any rights to indemnity payments or other amounts owed to the retiring or removed Administrative Agent as of the Resignation Effective Date or the Removal Effective Date, as applicable), and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Financing Documents (if not already discharged therefrom as provided above in this Section 9.5).  The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.  After the retiring or removed Administrative Agent’s resignation or removal hereunder and under the other Financing Documents, the provisions of this Article 9 and Sections 10.4 and 5.10 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.

9.6Non-Reliance on Administrative Agent and Other Lenders

.  Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Financing Document or any related agreement or any document furnished hereunder or thereunder.

9.7Administrative Agent May File Proofs of Claim

.  In case of the pendency of any proceeding under any Bankruptcy Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a)to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations of the Loan Parties that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.3 and 10.4) allowed in such judicial proceeding; and

(b)to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for

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the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.3 and 10.4.

Nothing contained herein shall be deemed to authorize or obligate the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender to authorize or obligate the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

9.8Collateral Matters

.  Without limiting the provisions of Section 9.7, the Lenders irrevocably authorize the Administrative Agent, upon written direction from the Lenders:

(a) to release any Lien on any property granted to or held by the Administrative Agent under any Financing Document (i) upon the Discharge Date, (ii) that is sold or otherwise disposed of or to be sold or otherwise disposed of as part of or in connection with any sale or other disposition permitted hereunder or under any other Financing Document, or (iii) subject to Section 9.11, if approved, authorized or ratified in writing by the Required Lenders; and

(b)to subordinate any Lien on any property granted to or held by the Administrative Agent under any Financing Document to the holder of any Lien on such property that is permitted by Section 6.2.

9.9Indemnification

.  Without limiting the obligations (including, but not limited to, the Obligations) of the Borrower hereunder, each Lender agrees to indemnify each of the Agents, ratably in accordance with its Proportionate Share for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including reasonable and documented out-of-pocket attorneys’ fees and expenses, and court costs) which may at any time be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of this Agreement or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or the enforcement of any of the terms hereof or thereof or of any such other documents including those incurred in connection with any action, claim or suit brought to enforce the Agents’ right to indemnification; provided, however, that no Lender shall be liable for any of the foregoing to the extent either (i) Borrower is responsible for such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements under the terms of this Agreement or the other Financing Documents or (ii) such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements arise solely from the relevant Agent’s gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction.  The Agents shall be fully justified in refusing to take or to continue to take any action hereunder unless it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.  Without limitation of the foregoing, each Lender agrees to reimburse the relevant Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by such Agent in connection with the preparation, execution, administration or enforcement of, or legal advice in respect of rights or responsibilities

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under, the Operative Documents, to the extent that such Agent is not reimbursed promptly for such expenses by the Borrower.

9.10No Advisory or Fiduciary Responsibility

.  In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Financing Document), the Borrower acknowledges and agrees, and acknowledges its Affiliates’ understanding, that: (a) (i) the services regarding this Agreement provided by the Administrative Agent and the Lenders are arm’s-length commercial transactions between the Borrower and its Affiliates, on the one hand, and the Administrative Agent and the Lenders, on the other hand, (ii) the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (iii) the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Financing Documents; (b) (i) each of the Administrative Agent and each Lender is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Borroweror any of itsAffiliates, or any other Person and (ii) neither the Administrative Agent nor any Lender has any obligation to the Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Financing Documents; and (c) the Administrative Agent and the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and neither the Administrative Agent nor any Lender has any obligation to disclose any of such interests to the Borrower or its Affiliates.  To the fullest extent permitted by Laws, the Borrower hereby waives and releases any claims that it may have against the Administrative Agent or any Lender with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

9.11Amendments

.

(a)Generally. No amendment or waiver of any provision of this Agreement or any other Financing Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall effect any of the changes described in clauses(b), (c), and/or (d) of this Section 9.11 without the additional consent(s) required therein.

(b)Consent of Affected Lenders. No amendment, waiver or consent described in clause (a) of this Section 9.11 shall, without the written consent of each Lender affected thereby:

(i)extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.2);

(ii)postpone any date fixed by this Agreement or any other Financing Document for or reduce or forgive the amount of any payment or mandatory prepayment

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of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Financing Document; or

(iii)reduce or forgive the principal of, or the rate of interest specified herein on, any Loan, or any fees or other amounts payable hereunder or under any other Financing Document to the Lenders (or change the timing of payment of such fees or other amounts), or change the manner of computation of any financial ratio (including any change in any applicable defined term) used in determining the Applicable Interest Rate that would result in a reduction of any interest rate on any Loan or any fee payable hereunder; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest at the Default Rate;

(c)Consent of All Lenders. No amendment, waiver or consent described in clause (a) of this Section 9.11 shall, without the written consent of each Lender:

(i)waive any condition set forth in Sections 3.1 or 3.2;

(ii)change any provision of this Section 9.11 or the definition of “Required Lenders,” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder;

(iii)change the definition of “Eligible Assignee”;

(iv)release all or substantially all the Collateral, or release any Loan Party from such Person’s obligations under this Agreement or any Collateral Document, or permit the release of any funds from the Collateral Accounts, in each case, unless in accordance with the Financing Documents; or

(v)amend, modify or otherwise waive any condition set forth in Section 2.1(g).

(d)Consent of Administrative Agent. No amendment, waiver or consent described in clause (a) of this Section 9.11 shall, without the written consent of the Administrative Agent (in addition to the Lenders required above), affect the rights or duties of the Administrative Agent or Collateral Agent under this Agreement or any other Financing Document.

(e)Fee Letters.  The Fee Letters may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.

(f)Defaulting Lenders.  Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender, (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender disproportionately adversely relative to other affected Lenders shall require

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the consent of such Defaulting Lender, and (z) the interest, principal and maturity of Loans made by such Defaulting Lender may not be modified without the Defaulting Lender’s consent.

(g)Errors and Omissions.  The Administrative Agent and the Borrower may amend any Financing Document to correct administrative errors or omissions, or to effect administrative changes that are not adverse to any Lender.  Notwithstanding anything to the contrary contained herein, such amendments shall become effective without any further consent of any other party to such Financing Document.

(h)Non-Consenting Lenders.  Other than in connection with Borrower’s request for an Upsize Loan pursuant to Section 2.1(g), in the event that (i) the Borrower or the Administrative Agent has requested that the Lenders consent to a departure or waiver of any provisions of the Financing Documents or agree to any amendment thereto, (ii) the consent, waiver or amendment in question requires the agreement of all affected Lenders in accordance with the terms of Section 9.11(b) or all Lenders in accordance with the terms of Section 9.11(c) and (iii) the Required Lenders have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed to be a “Non-Consenting Lender”. If any Lender becomes a Non-Consenting Lender, then the Borrower may, on ten (10) Business Days’ prior written notice to the Administrative Agent and such Lender, replace such Lender by causing such Lender to (and such Lender shall be obligated to) assign pursuant to Section 9.14 (with the assignment fee to be paid by the Borrower in such instance) its Commitment and its outstanding Loans, if any, to one or more Eligible Assignees; provided, that (A) neither the Administrative Agent nor any Lender shall have any obligation to the Borrower to find a replacement Lender or other such Person, (B) on the date of such assignment, the replacement Lender shall pay to the Non-Consenting Lender an amount equal to the sum of (1) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of such Non-Consenting Lender and (2) an amount equal to all accrued, but theretofore unpaid fees, if any, owing to such Non-Consenting Lender pursuant to Section 2.3 and (C) on the date of such assignment, the Borrower shall pay any amounts payable to such Non-Consenting Lender pursuant to Section 2.6.

9.12Withholding Tax

.

(a)If the forms or other documentation required by Section 2.4(f) are not delivered to the Administrative Agent, then the Administrative Agent may withhold from any interest payment to any Lender not providing such forms or other documentation, an amount equivalent to the applicable withholding tax.

(b)If the Internal Revenue Service or any authority of the United States of America or other jurisdiction asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Administrative Agent or any other Person of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify promptly the Administrative Agent fully for all amounts paid, directly or indirectly, by such Person as tax or otherwise, including penalties and interest, together with all expenses incurred, including legal expenses, allocated staff costs, and any out-of-pocket expenses.

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9.13Participations

.

(a)Each Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other Persons (each, a “Participant”) in all or a portion of its rights and obligations under this Agreement and the other Financing Documents (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender’s obligations under this Agreement and the other Financing Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other Persons shall be entitled to the benefit of the cost protection provisions contained in Sections 2.4(d) and 2.6, to the same extent as if they were Lenders and (iv) the Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to the Loans and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers with respect to matters requiring consent of all Lenders pursuant to Section 9.8).  To the extent permitted by Laws, each participating bank or other Person shall also be entitled to the benefits of Section 10.2 as though it were a Lender; provided, that such participating bank or other Person agrees to be subject to Section 2.5(b) as though it were a Lender.  Other than as otherwise specified in this clause (a), no participating bank or other Person shall have any other rights under this Agreement, including direct rights against any Loan Party nor any rights to any remedies and shall not be considered for any purpose to be a party to this Agreement.  In no event shall a Loan Party be responsible for any costs or expenses of any counsel engaged by a participating bank or other Person that has acquired a participation from a Lender.

(b)Any Lender that sells a participation, acting solely for this purpose as an agent of the Borrower, shall maintain a register in which it enters the name and address of each participant, and the principal amount (and stated interest) of each participant’s interest in the Loans under the Financing Documents (the “Participant Register”); provided, that no Lender shall have an obligation to disclose the Participant Register (including the identity of any participant or any information relating to a participant’s interest in any commitments, loans or its other obligations under any Financing Document) to any Person except to the extent that such disclosure is necessary to establish that the Loans or other obligations under this Agreement are in registered form for tax purposes under section 5f. 103-1(c) of the United States Treasury Regulations and section 1.163-5(b) of the proposed United States Treasury Regulations (or any amended or successor version).  The entries in the Participant Register shall be conclusive absent manifest error, and the Lender maintaining the Participant Register shall treat each Person whose name is recorded in the register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.  For the avoidance of doubt, the Administrative Agent, in its capacity as such, shall have no responsibility for maintaining a Participant Register.

(c)Any Lender or participant may, in connection with any participation or proposed participation pursuant to this Section 9.13, disclose to the participant or proposed participant any information relating to the Loan Parties or their respective Affiliates furnished to such Lender by or on behalf of the Loan Parties; provided, that, prior to any such disclosure of information designated by the Borrower as confidential, each such participant or proposed participant shall execute an agreement whereby such participant shall agree (subject to customary exceptions) to

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preserve the confidentiality of such confidential information on terms no less restrictive than those applicable to the Lenders pursuant to Section 10.17.

9.14Assignments

.

(a)(i) Prior to the Availability Period End Date, each Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with prior written notice to the Administrative Agent and, unless an Event of Default has occurred and is continuing, prior written consent of the Borrower (such consent not to be unreasonably withheld, conditioned or delayed) and (ii) after the Availability Period End Date, each Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Loans at the time owing to it) with prior written notice to the Administrative Agent and, only if such assignment is to a Competitor and unless an Event of Default has occurred and is continuing, the prior written consent of the Borrower (such consent not to be unreasonably withheld, conditioned or delayed); provided, however, in the case of clause (ii) above that if such assignment is to a Lender, an Affiliate of a Lender or an Approved Assignee, no consent of the Borrower shall be required; provided, further,  in each case, that (x) the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall be in an integral multiple of, and not less than One Million Dollars ($1,000,000) (or, if less, the entire remaining amount of such Lender’s Commitment or Loans), (y) the parties to each assignment shall (A) execute and deliver to the Administrative Agent an Assignment and Acceptance via an electronic settlement system acceptable to the Administrative Agent or (B) if previously agreed with the Administrative Agent, manually execute and deliver to the Administrative Agent an Assignment and Acceptance, and, in each case, shall pay to the Administrative Agent a processing and recordation fee of Three Thousand Five Hundred Dollars ($3,500) (which fee may be waived or reduced in the sole discretion of the Administrative Agent), and (z) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent (1) written notice designating one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Loan Parties and their Affiliates or their respective securities) will be made available and who may receive such information in accordance with the assignee’s compliance procedures and applicable Laws, including Federal and state securities laws and (2) all applicable tax forms.  Upon acceptance and recording pursuant to clause (a) of this Section 9.14, from and after the effective date specified in each Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.4(d), 2.6, 5.9, 5.10 and 10.4, as well as to any Undrawn Fees accrued for its account and not yet paid).

(b)By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows:  (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any Lien or adverse claim and that its Commitment, and the outstanding balances of its Loans, in each case without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment

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and Acceptance, (ii) except as set forth in subclause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the other Financing Documents, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Financing Document or any other instrument or document furnished pursuant hereto, or the financial condition of the Borrower or any other Loan Party or the performance or observance by the Borrower or any other Person of any of its obligations under this Agreement, any other Financing Document or any other instrument or document furnished pursuant hereto, or thereto, or in connection therewith; (iii) such assignee represents and warrants that it is an Eligible Assignee legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement and the other Financing Documents, together with copies of the most recent financial statements delivered pursuant to Section 5.3 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, the Collateral Agent, such assigning Lender or any other Secured Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent and the Collateral Agent, respectively, by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

(c)The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in Columbia, Maryland, a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment thereof, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive absent manifest error and the Borrower, each Lender and the Agents may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Borrower, the Collateral Agent and any Lender at any reasonable time and from time to time upon reasonable prior notice.

(d)Upon its receipt of, and consent to, a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the processing and recordation fee referred to in Section 9.14(a), if applicable, and the written consent, if required, of the Borrower, to such assignment and any applicable tax forms, the Administrative Agent shall (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register.  No assignment shall be effective unless it has been recorded in the Register as provided in this clause (d).

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(e)At the assigning Lender’s option, the Borrower shall execute and deliver to such new lender a new Note in the form attached hereto as Exhibit A, in a principal amount equal to the Loans being assigned, and the Borrower shall execute and exchange with the assigning Lender a replacement note for any Note in an amount equal to amount of the Loans retained by the Lender, if any.

(f)Any Lender may, in connection with any assignment or proposed assignment pursuant to this Section 9.14, disclose to the assignee or proposed assignee any information relating to the Loan Parties or their respective Affiliates furnished to such Lender by or on behalf of the Loan Parties; provided, that, prior to any such disclosure of information designated by the Borrower as confidential, each such assignee or proposed assignee shall execute an agreement whereby such assignee shall agree (subject to customary exceptions) to preserve the confidentiality of such confidential information on terms no less restrictive than those applicable to the Lenders pursuant to Section 10.17.

9.15Assignability to Federal Reserve Bank or Central Bank

.

(a)Any Lender may at any time assign all or any portion of its rights under this Agreement to secure extensions of credit to such Lender or in support of obligations owed by such Lender; provided, that no such assignment shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto.

(b)Any Lender or its direct or indirect parent may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any such pledge or assignment to a Federal Reserve Bank or any other central bank in the jurisdiction of such Lender or its direct or indirect parent, and this Section 9.15 shall not apply to any such pledge or assignment of a security interest; provided, that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto; and provided, further, that any payment in respect of such pledge or assignment made by the Borrower to or for the account of the pledging or assigning Lender in accordance with the terms of this Agreement shall satisfy the Borrower’s obligations hereunder in respect of such pledged or assigned Loans to the extent of such payment.

9.16Collateral Agency Agreement and Depositary Agreement.

(a)On the Closing Date, each of the Agents is hereby directed to enter into the CADA in its capacity as Administrative Agent on behalf of the Lenders, and Collateral Agent on behalf of the Secured Parties, as applicable, and the Lenders hereby authorize and direct the Administrative Agent to execute and deliver the foregoing agreement on behalf of the Lenders, and the Secured Parties hereby authorize and direct the Collateral Agent to execute and deliver the foregoing agreement on behalf of the Secured Parties.  On the Closing Date, the Collateral Agent is hereby directed to enter into the Interparty Agreement in its capacity as Collateral Agent on behalf of the Secured Parties, and the Secured Parties hereby authorize and direct the Collateral Agent to execute and deliver the foregoing agreement on behalf of the Secured Parties.

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(b)Each of the Lenders and Secured Parties hereby acknowledges that it has received and reviewed a copy of each of the CADA and the Interparty Agreement, and agrees to be bound by the terms thereof.  Without limiting the generality of the foregoing, each Lender(and each Person that becomes a Lender) hereby (a) authorizes and directs the Administrative Agent to designate and appoint Wells Fargo Bank, National Association to act as the initial collateral agent and the initial depositary of such Lender under the Financing Documents pursuant to the CADA and (b) authorizes and directs each Agent to execute the CADA and the other Financing Documents to which it is a party and the Interparty Agreement, in each case, on behalf of such Lender and agrees that the Agents may take such actions on behalf of such Lender as are contemplated by the terms of the CADA and the Interparty Agreement, as applicable.

9.17Merger

.  Any entity into which the Administrative Agent may be merged or converted or with which it may be consolidated or any entity resulting from any merger, conversion or consolidation to which the Administrative Agent shall be a party, or any entity succeeding to the business of the Administrative Agent or its corporate trust operations, shall be the successor of the Administrative Agent hereunder without the execution or filing of any paper with any party hereto or any further act on the part of any of the parties hereto except where an instrument of transfer or assignment is required by law to effect such succession, anything herein to the contrary notwithstanding; provided, however, that such successor must be a U.S. Person.

9.18Multiple Capacities

.  The parties expressly acknowledge and consent to Wells Fargo acting in the multiple capacities of Administrative Agent, Collateral Agent and Depositary.  Wells Fargo may, in such multiple capacities, discharge its separate functions fully, without hindrance or regard to conflict of interest principles or other breach of duties to the extent that any such conflict or breach arises from the performance by Wells Fargo of express duties set forth in the Financing Documents in any of such capacities, all of which defenses, claims or assertions are hereby expressly waived by the other parties hereto except in the case of negligence (other than errors in judgment) and willful misconduct by Wells Fargo.

ARTICLE 10

MISCELLANEOUS

10.1Addresses; Notices

.

(a)Any communications between the parties hereto or notices provided herein to be given may be given to the following addresses:

To the Borrower:

Vivint Solar Asset 2 Project Company, LLC

c/o Vivint Solar, Inc.

1800 W Ashton Blvd

Lehi, UT 84043

Attn: [***]

Facsimile: [***]

Email: [***]

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With a copy to:

Vivint Solar, Inc.

1800 W Ashton Blvd

Lehi, UT 84043

Attn:  [***]

Facsimile: [***]

Email: [***]

With a copy to:

BAL INVESTMENT & ADVISORY, INC.

555 California Street, 4th Floor,

CA5-705-04-01

San Francisco, CA 94104

Attn:  [***]

Phone No.:  [***]

Fax No.:  [***]

Email:  [***]

With a copy to:

BAL Investment & Advisory, Inc.

One Financial Plaza, 2nd Floor,

RI1-537-02-02

Providence, RI 02903

Attn:  [***]

Phone No.:  [***]

Fax No.:  [***]

Email:  [***]

With a copy to:

HA Galileo 2 LLC

1906 Towne Centre Blvd., Ste. 370

Annapolis, MD 21401

Attn:  [***]

Phone No.:  [***]

Fax No.:  [***]

Email:  [***]

To the Administrative Agent or Collateral Agent:

Administrative Agent/Collateral Agent Office:

(For financial/loan activity – advances, pay down, interest/fee billing and

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payments, rollovers, rate-settings):

Wells Fargo Bank, National Association

9062 Old Annapolis Road

Columbia, Maryland 21045

Attention: [***]

E-mail: [***]

Other Notices as Administrative Agent/Collateral Agent:

(For financial statements, compliance certificates, maturity extension and commitment change notices, amendments, consents, vote taking, etc.):

Wells Fargo Bank, National Association

9062 Old Annapolis Road

Columbia, Maryland 21045

Attention: [***]

E-mail: [***]

To the Lenders:  at such address and fax number as set forth in Annex 2 or as each Lender may provide in writing to the Borrower and the Administrative Agent.

(b)All notices or other communications required or permitted to be given hereunder shall be in writing and shall be considered as properly given (i) if delivered in person; (ii) if sent by a nationally recognized overnight delivery service; (iii) in the event overnight delivery services are not readily available, if mailed by first class mail, postage prepaid, registered or certified with return receipt requested; or (iv) if sent by telecopy or electronic mail with a confirmation of receipt.  Notice so given shall be effective upon receipt by the addressee, except that communication or notice so transmitted by telecopy or other direct written electronic means shall be deemed to have been validly and effectively given on the day (if a Business Day and, if not, on the next following Business Day) on which it is transmitted if transmitted before 4:00 p.m., recipient’s time, and if transmitted after that time, on the next following Business Day; provided, however, that if any notice is tendered to an addressee and the delivery thereof is refused by such addressee, such notice shall be effective upon such tender.  Any party shall have the right to change its address for notice hereunder to any other location by giving thirty (30) days’ written notice to the other parties in the manner set forth hereinabove.

(c)The Borrower hereby agrees, unless directed otherwise by the Administrative Agent or unless the electronic mail address referred to below has not been provided by the Administrative Agent to the Borrower, that notwithstanding anything to the contrary in clause (b) above, it will provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to the Financing Documents or to the Lenders under Article 5, including all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) is or relates to a Borrowing Notice or a notice pursuant to Section 2.1(a)(iii), (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides a Notice of Default or Notice of Event of Default under this Agreement or any other Financing Document or (iv) is required to be delivered to satisfy any condition precedent

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to the effectiveness of this Agreement and/or any Borrowing or other extension of credit hereunder (all such non-excluded communications being referred to herein collectively as “Communications”), by transmitting the Communications in an electronic/soft medium that is properly identified in a format acceptable to the Administrative Agent to an electronic mail address as directed by the Administrative Agent.  In addition, the Borrower agrees to continue to provide the Communications to the Administrative Agent or the Lenders, as the case may be, in the manner specified in the Financing Documents but only to the extent requested by the Administrative Agent.

(d)The Borrower hereby acknowledges that (i) the Administrative Agent will make available to the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively, the “Borrower Materials”) by posting the Borrower Materials on Intralinks or another similar electronic system (the “Platform”) and (ii) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a “Public Lender”).  The Borrower hereby agrees that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Borrower or its securities for purposes of United States federal and state securities laws ; (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated as “Public Investor;” and (z) the Administrative Agent shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not marked as “Public Investor.” The following Borrower Materials shall be marked “PUBLIC”, unless the Borrower notifies the Administrative Agent promptly that any such document contains material non-public information: (1) the Financing Documents and (2) notification of changes in the terms of the Financing Documents; provided, however, that the parties acknowledge and agree that the Fee Letters contain sensitive proprietary information and shall not be marked, treated as, or considered “PUBLIC” in any respect.  Notwithstanding anything herein to the contrary, any and all Borrower Materials are subject to the confidentiality provisions of Section 10.17.

(e)Each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable Laws, including United States Federal and state securities laws, to make reference to Communications that are not made available through the “Public Side Information” portion of the Platform and that may contain material non-public information with respect to the Borrower or its securities for purposes of United States Federal or state securities laws.

(f)THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”.  NEITHER THE ADMINISTRATIVE AGENT NOR ANY OF ITS RELATED PARTIES WARRANTS THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS OR THE ADEQUACY OF THE PLATFORM AND EACH EXPRESSLY DISCLAIMS LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS.  NO WARRANTY OF ANY KIND, EXPRESS,

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IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS IS MADE BY THE ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM.  IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES HAVE ANY LIABILITY TO THE BORROWER, ANY LENDER OR ANY OTHER PERSON FOR DAMAGES OF ANY KIND, WHETHER OR NOT BASED ON STRICT LIABILITY AND INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE BORROWER’S OR THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE PLATFORM, ANY OTHER ELECTRONIC PLATFORM OR ELECTRONIC MESSAGING SERVICE OR THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY SUCH PERSON IS FOUND IN A FINAL NON-APPEALABLE RULING BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH PERSON’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

(g)The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Financing Documents.  Each Lender agrees that receipt of notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such Lender for purposes of the Financing Documents.  Each Lender agrees to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lender’s e-mail address to which the foregoing notice may be sent by electronic transmission and that the foregoing notice may be sent to such e-mail address.

(h)Nothing herein shall prejudice the right of the Administrative Agent or any Lender to give notice or other communications pursuant to any Financing Document in any other manner specified in such Financing Document.

10.2Right to Set-Off

.  If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, except to the extent prohibited by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of any Loan Party against any of and all the obligations of any Loan Party now or hereafter existing under this Agreement and other Financing Documents held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such other Financing Document and although such obligations may be unmatured; provided, that in the event that any Defaulting Lender shall exercise any such right of setoff, the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender under this Section 10.2 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

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10.3Delay and Waiver

.  No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Financing Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under any other Financing Document preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided, and provided under each other Financing Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

Notwithstanding anything to the contrary contained herein or in any other Financing Document, the authority to enforce rights and remedies hereunder and under the other Financing Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 8.2 for the benefit of all the Lenders; provided, however, that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Financing Documents, (b) any Lender from exercising setoff rights in accordance with Section 10.2 (subject to the terms of Section 2.5), or (c) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Bankruptcy Law; and provided, further, that if at any time there is no Person acting as Administrative Agent hereunder and under the other Financing Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 8.2 and (ii) in addition to the matters set forth in clauses (b), (c) and (d) of the preceding proviso and subject to Section 2.5, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.

10.4Costs, Expenses and Attorney’s Fees

.  The Borrower shall pay all reasonable costs and out-of-pocket expenses (a) incurred by the Agents and their Affiliates, Depositary and any Lender in connection with the preparation, negotiation, closing and costs of administering this Agreement and the other Financing Documents (whether or not the transactions contemplated hereby or thereby shall be consummated and regardless of whether any Borrowing Date occurs) or in connection with any amendments, modifications or waivers of the provisions hereof and thereof, including the reasonable fees, out-of-pocket expenses and disbursements of counsel for the Agents or (b) incurred by the Agents and their Affiliates, Depositary or any Lender in connection with the enforcement or protection of its rights under this Agreement and the other Financing Documents or in connection with the Loans or the performance of this Agreement.

10.5Entire Agreement

.  This Agreement, the Fee Letters and the other Financing Documents constitute the entire contract between the parties relative to the subject matter hereof and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties hereto. There are no unwritten oral agreements among the parties with respect to the subject matter hereto. Any other previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Financing Documents.  Nothing in this Agreement or in the other Financing Documents, expressed or implied, is intended to confer upon any Person (other than the parties hereto and thereto, their respective successors and assigns permitted hereunder and, to the extent expressly contemplated hereby, the Related Parties of each

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of the Agents and the Lenders) any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Financing Documents.

10.6Governing Law

.  THIS AGREEMENT, THE OTHER FINANCING DOCUMENTS, AND ANY INSTRUMENT OR AGREEMENT REQUIRED HEREUNDER (TO THE EXTENT NOT EXPRESSLY PROVIDED FOR THEREIN) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

10.7Severability

.  In case any one or more of the provisions contained in this Agreement or any other Financing Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction).  The parties hereto shall enter into good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

10.8Headings

.  Article, Section and paragraph headings and the table of contents used herein have been inserted in this Agreement as a matter of convenience for reference only and are not a part of this Agreement and shall not be used in the interpretation of any provision of this Agreement.

10.9Accounting Terms

.  All accounting terms not specifically defined herein shall be construed in accordance with GAAP and practices consistent with those applied in the preparation of the financial statements submitted by the Borrower to the Administrative Agent and Lenders pursuant to this Agreement, and (unless otherwise indicated) all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles and practices consistently applied.

10.10No Partnership, Etc

.  The Agents, the Lenders and the Borrower intend that the relationship between them shall be solely that of creditor and debtor.  Nothing contained in this Agreement, the Notes or in any of the other Financing Documents shall be deemed or construed to create a partnership, tenancy-in-common, joint tenancy, joint venture or co-ownership by or between or among the Agents, the Lenders and the Borrower or any other Person.  Neither the Agents nor the Lenders shall be in any way responsible or liable for the debts, losses, obligations or duties of the Borrower or any other Person with respect to the Borrower Projects or otherwise.  All obligations to pay real property or other taxes, assessments, insurance premiums, and all other fees and charges arising from the ownership, operation or occupancy of the Borrower Projects and to perform all obligations under other agreements and contracts relating to the Borrower Projects shall be the sole responsibility of the Borrower.

10.11Waiver of Jury Trial

.  EACH PARTY HERETO HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY

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OTHER FINANCING DOCUMENT.  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.11.

10.12Consent to Jurisdiction; Service of Process

.

(a)Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the courts of the State of New York, sitting in the Borough of Manhattan, The City of New York, New York, United States of America, or of the United States of America for the Southern District of New York sitting in the Borough of Manhattan, The City of New York, New York, United States of America, any appellate court from any thereof, in any legal action or proceeding arising out of or relating to this Agreement or the other Financing Documents, or for the recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such courts of the State of New York or, to the extent permitted by Laws, such Federal court.  Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement shall affect any right that the Administrative Agent, the Collateral Agent, or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Financing Documents against the Loan Parties or their respective properties in the courts of any jurisdiction.

(b)Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Financing Documents in any courts of the State of New York or Federal court, each sitting in the Borough of Manhattan, The City of New York, New York, United States of America.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by Laws, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.  Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.1.  Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by Laws.

10.13Interest Rate Limitation

.  Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable Laws (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable Laws, the rate of interest payable in respect of such Loan, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable

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as a result of the operation of this Section 10.13 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment, shall have been received by such Lender.

10.14Successors and Assigns

.

(a)Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party; and all covenants, promises and agreements by or on behalf of any Loan Party, the Agents or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

(b)No Loan Party shall assign or delegate any of its rights or duties under this Agreement or any Financing Document without the prior written consent of each Lender, and any attempted assignment shall be null and void.

10.15Patriot Act Compliance

.  The Administrative Agent hereby notifies the Borrower that, pursuant to the requirements of the Patriot Act, it and any other Agent and any Lender shall be required to obtain, verify and record information that identifies the Borrower and the Borrower Member, which information includes the names and addresses and other information that will allow it, any other Agent or any Lender to identify the Borrower and the Borrower Member in accordance with the requirements of the Patriot Act.  The Borrower shall promptly deliver information described in the immediately preceding sentence when requested by the Administrative Agent, any other Agent or any Lender in writing pursuant to the requirements of the Patriot Act, and shall promptly deliver such other information when requested by the Administrative Agent, any other Agent or any Lender in writing pursuant to such Person’s ongoing obligations under “know your customer” and anti-money laundering rules and regulations.

10.16Binding Effect; Counterparts

.

(a)This Agreement shall become effective when it shall have been executed by the Borrower and each of the Agents and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto.

(b)This Agreement may be executed in one or more duplicate counterparts and by facsimile or other electronic transmission, each of which shall constitute an original but all of which shall become effective as provided in clause (a) above.  Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterparty of this Agreement.

10.17Confidentiality

. Each of the Agents and the Lenders agree to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ officers, directors, employees, agents, advisors, counsel and representatives (collectively, its “Representatives”) who have the need to know the Information to evaluate or engage in transactions contemplated by the Financing Documents (it being understood that, prior to any such disclosure, the Representative has signed a non-use and non-

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disclosure agreement in content similar to the provisions of this Section 10.17 or have otherwise been instructed by the Agent or Lender, as applicable, not to disclose such Information and to treat such Information confidentially in accordance with the terms of this Section 10.17), (b) to the extent requested or required by any governmental agency or other regulatory authority (including any self-regulatory organization having or claiming to have jurisdiction) or in connection with any legal proceedings to make any disclosure that is prohibited or otherwise constrained by this Section 10.17, the Agent or Lender, as applicable, will (other than in connection with any regulatory inquiry or proceeding), to the extent reasonably practicable and permitted by Laws, judicial or regulatory authority, provide the Borrower and Borrower Member with prompt written notice of such requirement so that the Borrower or Borrower Member, as the case may be, may seek a protective order or other appropriate relief (at the Borrower’s sole expense), and subject to the foregoing, such Agent or Lender, as applicable, may furnish that portion (and only that portion) of the Information that the Agent or Lender, as applicable, is legally compelled or is otherwise required to disclose without liability hereunder, (c) subject to an agreement containing provisions substantially the same as those of this Section 10.17, to (i) any actual or prospective assignee of or participant in any of its rights or obligations under this Agreement and the other Financing Documents, or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower or any of its obligations; provided, however, that Information may be disclosed to any pledgee of a Lender that is a Governmental Authority without being subject to an agreement containing confidentiality provisions substantially similar to those of this Section 10.17, (d) with the consent of the Borrower or (e) to the extent such Information becomes publicly known or generally made available other than as a result of a breach of this Section 10.17.  For the purposes of this Section 10.17, “Information” shall mean (A) any information disclosed by the Borrower, Borrower Member or its Affiliates, either directly or indirectly, in writing, orally or by inspection of tangible objects, including without limitation, algorithms, business plans, customer data, customer lists, customer names, designs documents, drawing, engineering information, financial analysis, forecasts, formulas, hardware configuration information, know-how, ideas, inventions, market information, marketing plans, processes, products, product plans, research, specifications, software, data tags and content, source code, trade secrets or any other information which is designated as “confidential,” “proprietary” or some similar designation or should be reasonably be understood by the receiving party as being confidential, (B) any information otherwise obtained, directly or indirectly, by a receiving party through inspection, review or analysis of the disclosed information, and (C) this Agreement, the terms hereof and the transactions contemplated hereby.  Information that is disclosed orally shall be “Information” for purposes of this Section 10.17 if it is (x) designated as confidential at the time of disclosure or within a reasonable time after disclosure; or (y) should be reasonably understood to be confidential.  Information may also include information of a third party that is in the possession of the Borrower, Borrower Member or their Affiliates and is disclosed to the Agents and the Lenders in connection with this Agreement.  Clause (a) and (b) of the definition of “Information” shall not, however, include any information that (1) was publicly known and made generally available in the public domain prior to the time of disclosure, (2) becomes publicly known and made generally available after disclosure other than as a result of a breach of this Section 10.17, (3) is already in the possession of the Agent or Lender at the time of disclosure as shown by the Agent’s or Lender’s files and records immediately prior to the time of disclosure, (4) is obtained by the Agent or Lender from a third party lawfully in possession of such information and without a breach of such third party’s obligations of confidentiality, or (5) is independently developed by the Agent or Lender

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without use or reference to the Borrower’s, Borrower Member’s or their Affiliates’ Information, as shown by documents and other competent evidence in the Agent’s or Lender’s possession.  Any Person required to maintain the confidentiality of Information as provided in this Section 10.17 shall be considered to have complied with its obligation to do so if such Person has taken at least those measures that it takes to protect its own confidential information of a similar nature, but in no case less than reasonable care (including, without limitation, all precautions the Agent or Lender employs with respect to its confidential materials).  For the avoidance of doubt, any and all Borrower Materials are subject to the confidentiality provisions of this Section 10.17.  

10.18Survival of Agreements

.  All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Financing Document shall be considered to have been relied upon by the Lenders and shall survive the making by the Lenders of the Loans, regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Undrawn Fees or any other amount payable under this Agreement or any other Financing Document is outstanding and unpaid and so long as the Commitments have not been terminated.  The provisions of Sections 2.4(d), 2.6, 5.9, 5.10, 10.4 and this Section 10.18 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the invalidity or unenforceability of any term or provision of this Agreement or any other Financing Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent or any Lender.

10.19Non-Recourse

.  Except as set forth in this Section 10.19, notwithstanding anything in this Agreement or the other Financing Documents to the contrary, the Lenders and Secured Parties shall have no claims with respect to this Agreement or any other Financing Document or the transactions contemplated thereby against the Investors, any other shareholder or holder of Equity Interests in the Borrower or any of its or their respective Affiliates (other than the Loan Parties), shareholders, officers, directors or employees (collectively, but excluding the Loan Parties, the “Non-Recourse Persons”), and the Secured Parties’ recourse against the Non-Recourse Persons shall be limited to the Collateral as and to the extent provided herein and in the Collateral Documents; provided that (a) the foregoing provision of this Section 10.19 shall not constitute a waiver, release or discharge of any of the indebtedness, or of any of the terms, covenants, conditions, or provisions of this Agreement, any other Collateral Document or Financing Document and the same shall continue (but without personal liability to the Non-Recourse Persons) until fully paid, discharged, observed, or performed, and (b) the foregoing provision of this Section 10.19 shall not limit or restrict the right of any Secured Party (or any assignee, beneficiary or successor to any of them) to name the Borrower, Borrower Member or any other Person as a defendant in any action or suit for a judicial foreclosure or for the exercise of any other remedy under or with respect to this Agreement or any other Financing Document, or for injunction or specific performance, so long as no judgment in the nature of a deficiency judgment shall be enforced against any Non-Recourse Person, except as set forth in this Section 10.19.  The limitations on recourse set forth in this Section 10.19 shall survive the termination of this Agreement and the full payment and performance of the Obligations hereunder and under the other Financing Documents.

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10.20Acknowledgement and Consent to Bail-In of EEA Financial Institutions

.  Notwithstanding anything to the contrary in any Financing Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Lender that is an EEA Financial Institution arising under any Financing Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

(a)the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any Lender that is an EEA Financial Institution; and

(b)the effects of any Bail-In Action on any such liability, including, if applicable:

(i)a reduction in full or in part or cancellation of any such liability;

(ii)a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Financing Document; or

(iii)the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of any EEA Resolution Authority.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their officers thereunto duly authorized as of the Closing Date.

Borrower:

Vivint Solar Asset 2 Project Company, LLC,
a Delaware limited liability company

By:Name:
Title:  

Signature Page to Loan Agreement

WELLS FARGO BANK, NATIONAL ASSOCIATION,

not in its individual capacity but solely as Administrative Agent and Collateral Agent

By:Name:
Title:  

Signature Page to Loan Agreement

[____________],

as a Lender

By:Name:
Title:  

[Lender signature pages to be added]

Execution Version

EXHIBIT Ato Loan Agreement

FORM OF NOTE

Note

No. [_____]

New York, New York

[___________], 20[__]

For value received, the undersigned, VIVINT SOLAR ASSET 2 PROJECT COMPANY, LLC, a Delaware limited liability company (“Borrower”), unconditionally promises to pay to [               ], or  its permitted assigns (the “Lender”), the principal amount of [  DOLLARS ($  )], or if less,  the  aggregate  unpaid  and outstanding principal amount of this Note advanced by the Lender to Borrower pursuant to that certain Loan Agreement, dated as of May 31, 2019 (as amended, modified or supplemented and in effect from time to time, the “Loan Agreement”) by and among the Borrower, the Lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent for the Lenders (in such capacity, including its successors and permitted assigns, the “Administrative Agent”) and Wells Fargo Bank, National Association, as collateral agent for the Secured Parties (in such capacity, including its successors and permitted assigns, the “Collateral Agent”), and all other amounts owed by Borrower to the Lender hereunder.

Payments of principal of, and interest on, this Note and any Make-Whole Amount are to be made to the Administrative Agent, for the account of the Lender, in lawful money of the United States of America.

This is one of the Notes referred to in Section 2.1(d)(ii) of the Loan Agreement and is entitled to the benefits thereof and is subject to all terms, provisions and conditions thereof. Capitalized terms used and not defined herein shall have the meanings set forth in Section 1.1 of the Loan Agreement.

This Note is made in connection with and is secured by, among other instruments, the provisions of the Collateral Documents. Reference is hereby made to the Loan Agreement and the Collateral Documents for the provisions, among others, with respect to the custody and application of the Collateral, the nature and extent of the security provided thereunder, the rights, duties and obligations of Borrower and the rights of the holder of this Note.

The principal amount hereof is payable in accordance with the Loan Agreement, and such principal amount may be prepaid along with any Make-Whole Amount, where applicable, solely in accordance with the Loan Agreement.

Borrower authorizes the Lender to record on the schedule annexed to this Note the date and amount of each Loan made by the Lender and each payment or prepayment of principal thereunder and agrees that all such notations shall constitute prima facie evidence of the accuracy of the matters noted. Borrower further authorizes the Lender to attach to and make a part of this Note continuations of the schedule attached thereto as necessary. No failure to make any such

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notations, nor any errors in making any such notations, shall affect the validity of Borrower’s obligations to repay the full unpaid principal amount of the Loans.

Borrower further agrees to pay, in lawful money of the United States of America and in immediately available funds, interest from the date hereof on the unpaid and outstanding principal amount hereof until such unpaid and outstanding principal amount shall become due and payable (whether at stated maturity, by acceleration or otherwise) at the rates of interest and at the times set forth in the Loan Agreement, and Borrower agrees to pay any Make-Whole Amount, other fees and costs as stated in the Loan Agreement at the times specified in, and otherwise in accordance with, the Loan Agreement.

If any payment due on this Note becomes due and payable on a date which is not a Business Day, such payment shall be made on the next succeeding Business Day, in accordance with the Loan Agreement.

Upon the occurrence of any one or more Events of Default, all amounts then remaining unpaid on this Note, along with any Make-Whole Amount determined in respect of such amounts, may become or be declared to be immediately due and payable as provided in the Loan Agreement and other Loan Documents, without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or notices or demands of any kind, all of which are expressly waived by Borrower.

Borrower agrees to pay all costs and expenses, including without limitation reasonable attorneys’ fees, incurred in connection with the interpretation or enforcement of this Note, at the times specified in, and otherwise in accordance with, the Loan Agreement.

Except as permitted by the Loan Agreement, this Note or the indebtedness evidenced hereby may not be assigned by Lender to any other Person. Transfer of this Note may be effected only by a surrender of the Note by Lender and either reissuance of the Note or issuance of a new Note by the Borrower to the new lender.

THIS NOTE SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CONFLICTS OF LAWS (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

A-111

VIVINT SOLAR ASSET 2

PROJECT COMPANY, LLC,

a Delaware limited liability company

By:________________________

Name:

Title:

A-112

  Date   Advance Prepayment or Repayment Outstanding Balance

A-113

EXHIBIT B-1to Loan Agreement

FORM OF BORROWING NOTICE

BORROWING NOTICE

Date:_____________¹

Requested Borrowing Date:______________

[***]
Attention: [***]
E-mail: [***]

Each of the Lenders party to the Loan Agreement defined below

Re:Galileo II Loan Agreement – Borrowing Notice

This Borrowing Notice is delivered to you pursuant to Section 2.1(a)(iii) of the Loan Agreement dated as of May 31, 2019, (as amended, modified or supplemented and in effect from time to time, the “Loan Agreement”) by and among Vivint Solar Asset 2 Project Company, LLC, a Delaware limited liability company (the “Borrower”), the Lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent for the Lenders (in such capacity, including any successor and permitted assigns thereto, the “Administrative Agent”) and Wells Fargo Bank, National Association, as collateral agent for the Secured Parties (in such capacity, including any successor and permitted assigns thereto, the “Collateral Agent”), pursuant to which the Lenders have agreed to make Loans to the Borrower. Each capitalized term used and not otherwise defined herein shall have the meaning assigned thereto in Section 1.1 of the Loan Agreement.  

This Borrowing Notice constitutes a request for a Loan as set forth below:

1.The aggregate principal amount of the Loan requested is $_____________ (the “Requested Amount”).²

2.The Borrowing Date of the Loan requested is ____________ (the “Requested Borrowing Date”), which is a Business Day.

¹  To be dated no later than 12:00 p.m., New York time, at least five (5) Business Days before the requested date of each Borrowing.

²  The Requested Amount must exceed $2,500,000 or such lesser amount equal to the amount remaining Commitment. The total aggregate principal amount advanced to date under the Loan Agreement, when aggregated with the Requested Amount, must not exceed the sum of the Commitments.

B-1-1

3.Proceeds of the Loan requested should be directed to the following account[s]:

[_______]

The undersigned further confirms and certifies to Administrative Agent and each Lender that, as of the date hereof:

(a)The Requested Amount, when aggregated with total aggregate principal amount advanced to date under the Loan Agreement, is no greater than the sum of the Commitments; and

(b)Attached hereto as Schedule 1 is the proposed updated Advance Model.

[Remainder of page intentionally left blank]

B-1-2

IN WITNESS WHEREOF, the undersigned has caused this Borrowing Notice to be executed as of the date first written above.

VIVINT SOLAR ASSET 2 PROJECT COMPANY, LLC,
a Delaware limited liability company, as Borrower

By:
Name:
Title:

B-1-3

Schedule 1
Advance Model
[See Attached.]

B-1-4

EXHIBIT B-2to Loan AgreementFORM OF LOAN AGGREGATION NOTICE

Date:____________³

[***]

Attention: [***]
E-mail: [***]

Each of the Lenders party to the Loan Agreement defined below

Re:Galileo II Loan Agreement – Loan Aggregation Notice

This Loan Aggregation Notice is delivered to you pursuant to Section 2.1(a)(v) of that certain Loan Agreement, dated as of May 31, 2019 (as amended, modified or supplemented and in effect from time to time, the “Loan Agreement”) by and among Vivint Solar Asset 2 Project Company, LLC, a Delaware limited liability company (the “Borrower”), the Lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent for the Lenders (in such capacity, including its successors and permitted assigns, the “Administrative Agent”) and Wells Fargo Bank, National Association, as collateral agent for the Secured Parties (in such capacity, including its successors and permitted assigns, the “Collateral Agent”). Each capitalized term used and not otherwise defined herein shall have the meaning assigned thereto in Section 1.1 of the Loan Agreement.

This Loan Aggregation Notice constitutes a request to aggregate all Loans outstanding into a single Loan (the “Term Loan”) as forth below:

1.The Aggregation Date will occur on _____________.

2.The Outstanding Principal as of the Aggregation Date is equal to $_____________

3.The Maximum Loan Size as of the Aggregation Date is $_____________, which such amount is supported by the reasonably detailed, good faith calculations of the Borrower attached hereto as Appendix A.

4.[The Borrower hereby confirms it will immediately prepay the Loans outstanding on the Aggregation Date in accordance with Section 2.1(f)(ii)(E) in an amount equal to $_____________, which such amount is equal to the Outstanding Principal as of the Aggregation Date minus the Maximum Loan Size.]⁴

³  To be dated no later than 12:00 p.m., New York time, at least two (2) Business Days before the Aggregation Date.

⁴  To be included if the Outstanding Principal as of the Aggregation Date exceeds the Maximum Loan Size.

B-2-1

5.Attached hereto as Appendix Bis the Final Advance Model, taking into account the actual characteristics of all the Projects owned by the Borrower as of the Aggregation Date.

6.[The aggregate principal amount of the Loan requested is $_____________ (the “Requested Amount”).

7.Proceeds of the Loan requested should be directed to the following account[s]:

[_______]

The undersigned further confirms and certifies to Administrative Agent and each Lender that, as of the date hereof, the Requested Amount, when aggregated with total aggregate principal amount advanced to date under the Loan Agreement, is no greater than the sum of the Commitments.]⁵

[Signature page follows]

⁵  To be included if the Outstanding Principal as of the Aggregation Date is less than the Maximum Loan Size and the Borrower is requesting a Borrowing on the Aggregation Date.

B-2-2

IN WITNESS WHEREOF, the undersigned has caused this Loan Aggregation Notice to be executed as of the date first written above.

VIVINT SOLAR ASSET 2 PROJECT COMPANY, LLC,
a Delaware limited liability company, as Borrower

By:
Name:
Title:

B-2-3

APPENDIX AMaximum Loan Size Calculations
[to be attached]

B-2-4

APPENDIX BFinal Advance Model
[to be attached]

B-2-5

EXHIBIT Cto Loan Agreement

FORM OF ASSIGNMENT AND ACCEPTANCE

FORM OF ASSIGNMENT AND ACCEPTANCE

This Assignment and Acceptance (this “Assignment and Acceptance”) is dated as of the Effective Date set forth below and is entered into by and between [the][each]⁶ Assignor identified in item 1 below ([the][each, an] “Assignor”) and [the][each]⁷ Assignee identified in item 2 below ([the][each, an] “Assignee”).  [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees]⁸ hereunder are several and not joint.]⁹  Capitalized terms used but not defined herein shall have the meanings given to them in the Loan Agreement identified below (as amended, modified, or supplemented and in effect from time to time, the “Loan Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee.  The Standard Terms and Conditions set forth in Annex 1 attached hereto (the “Standard Terms”) are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Acceptance as if set forth herein in full.

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and the Loan Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Loan Agreement and any other documents or instruments delivered pursuant thereto in the amount[s] and equal to the percentage interest[s] identified below of all the outstanding rights and obligations under the respective facilities identified below, and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Loan Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “Assigned Interest”).  Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly

⁶  For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language.  If the assignment is from multiple Assignors, choose the second bracketed language.

⁷  For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language.  If the assignment is to multiple Assignees, choose the second bracketed language.

⁸  Select as appropriate.

⁹  Include bracketed language if there are either multiple Assignors or multiple Assignees.

C-1

provided in this Assignment and Acceptance, without representation or warranty by [the][any] Assignor.

1. Assignor[s]:


[Assignor [is] [is not] a Defaulting Lender]

2. Assignee[s]:


[for each Assignee, indicate [Lender], [Affiliate] of [identify Lender], or [other Person (other than the Borrower, Sponsor or any of their respective Affiliates)]]

3. Borrower(s):

4. Administrative Agent: [***], as the administrative agent for the Lenders under the Loan Agreement

5. Loan Agreement: Loan Agreement, dated as of May 31, 2019 among Vivint Solar Asset 2 Project Company, LLC, the Lenders from time to time party thereto, Wells Fargo Bank, National Association, as collateral agent for the Secured Parties, and Wells Fargo Bank, National Association, as administrative agent for the Lenders.

6.

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Assigned Interest[s]:

Assignor[s]10	Assignee[s]11	Facility Assigned12	Aggregate Amount of Commitment/Loans for all Lenders13	Amount of Commitment/Loans Assigned	Percentage Assigned of Commitment/ Loans14	CUSIP Number
		____________	$________________	$_________	____________%
		____________	$________________	$_________	____________%
		____________	$________________	$_________	____________%

[7.Trade Date:__________________]¹⁵

Effective Date: __________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

¹⁰  List each Assignor, as appropriate.

¹¹  List each Assignee and, if available, its market entity identifier, as appropriate.

¹²  Fill in the appropriate terminology for the types of facilities under the Loan Agreement that are being assigned under this Assignment (e.g., “Commitment”, etc.).

¹³  Amounts in this column and in the column immediately to the right to be adjusted to take into account any payments or prepayments made between the Trade Date and the Effective Date.

¹⁴  Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.

¹⁵  To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.

C-3

The terms set forth in this Assignment and Acceptance are hereby agreed to:

ASSIGNOR[S]¹⁶

[NAME OF ASSIGNOR]

By:

[NAME OF ASSIGNOR]

By: Title:

ASSIGNEE[S]¹⁷
[NAME OF ASSIGNEE]

By: Title:

[NAME OF ASSIGNEE]

By: Title:

¹⁶  Add additional signature blocks as needed. Include both Fund/Pension Plan and manager making the trade (if applicable).

¹⁷  Add additional signature blocks as needed. Include both Fund/Pension Plan and manager making the trade (if applicable).

C-4

Consented to and Accepted:

[***],

as Administrative Agent

By: Title:

VIVINT SOLAR ASSET 2 PROJECT COMPANY, LLC,

as Borrower

By: Title: ^]18

¹⁸  To be included to the extent Borrower consent is required.

C-5

ANNEX 1 TO ASSIGNMENT AND ACCEPTANCE
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ACCEPTANCE

1.Representations and Warranties.

1.1.Assignor.  [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim, (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby and (iv) it is [not] a Defaulting Lender; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Loan Agreement or any other Financing Documents, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Financing Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Financing Documents or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Financing Documents.

1.2.Assignee.  [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby and to become a Lender under the Loan Agreement, (ii) it is an Eligible Assignee pursuant to the Loan Agreement, (iii) from and after the Effective Date, it shall be bound by the provisions of the Loan Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Loan Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 5.3 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Loan Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Financing Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Financing Documents are required to be performed by it as a Lender.

C-6

2.Payments.  From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date.Notwithstanding the foregoing, the Administrative Agent shall make all payments of interest, fees or other amounts paid or payable in kind from and after the Effective Date to [the][the relevant] Assignee.

3.General Provisions.  This Assignment and Acceptance shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns.  This Assignment and Acceptance may be executed in any number of counterparts, which together shall constitute one instrument.  Delivery of an executed counterpart of a signature page of this Assignment and Acceptance by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance.  This Assignment and Acceptance shall be governed by, and construed in accordance with, the law of the State of New York

.

C-7

EXHIBIT Dto Loan Agreement

FORM OF SCHEDULED PAYMENT DATE REPORT

SCHEDULED PAYMENT DATE REPORT

[____], 20[__]¹⁹

[***]
Attention: [***]
E-mail: [***]

Each of the Lenders party to the Loan Agreement defined below

Re:Galileo II Loan Arrangement – Schedule Payment Date Report

Ladies and Gentlemen:

This Scheduled Payment Date Report (this “Scheduled Payment Date Report”) is delivered to you pursuant to Section 5.4(d) and Section 5.15 of that certain Loan Agreement, dated as of May 31, 2019 (as amended, modified or supplemented and in effect from time to time, the “Loan Agreement”) by and among Vivint Solar Asset 2 Project Company, LLC, a Delaware limited liability company (the “Borrower”), the Lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent for the Lenders (in such capacity, including any successor and permitted assigns thereto, the “Administrative Agent”) and Wells Fargo Bank, National Association, as collateral agent for the Secured Parties (in such capacity, including any successor and permitted assigns thereto, the “Collateral Agent”), pursuant to which the Lenders have agreed to make Loans to the Borrower. Each capitalized term used and not otherwise defined herein shall have the meaning assigned thereto in Section 1.1 of the Loan Agreement.

This Scheduled Payment Date Report is delivered in respect of the Scheduled Payment Date to occur on [____], 20[__] (the “Scheduled Payment Date”).

The Borrower hereby certifies to the Administrative Agent and the Lenders as follows:

1.attached hereto as Appendix A is a report in reasonable detail on (a) the interest, principal (including any Target Debt Sweep Amount) and any other Mandatory Payment payable on the Scheduled Payment Date, (b) each withdrawal and transfer to be made from the Collections Account, the Revenue Account and the other Accounts and (c) each other withdrawal and transfer made from the Collections Account or the Accounts during the quarter ending on the Scheduled Payment Date;

¹⁹  To be delivered at least 3 Business Days before the applicable Scheduled Payment Date.

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2.attached hereto as Appendix B are the Borrower’s good faith, reasonable and detailed calculations showing the Cash Flow Coverage Ratio for the period ending on the most recent Quarterly Date; and

3.attached hereto as Appendix C is (a) a comprehensive report of each Borrower Project that became the subject of an Ineligible Project Event or a Project Compensation Event, each Borrower Project currently subject to a Project Revenue Reduction Event and each Borrower Project that became a Reeligible Project occurring during the quarterly period ending on the most recent Quarterly Date and (b) the Borrower’s good faith, detailed calculation of the aggregate Ineligible Project Amount and Project Compensation Amount accrued during the applicable calendar quarter and all prior calendar quarters (including such amounts from prior calendar quarters that remain unpaid) and the Project Revenue Reduction Amount on the Scheduled Payment Date.

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IN WITNESS WHEREOF, the Borrower has caused this Scheduled Payment Date Report to be duly executed and delivered as of the date first written above.

BORROWER:

VIVINT SOLAR ASSET 2 PROJECT COMPANY, LLC

By: Name:
Title:

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Appendix A to Scheduled Payment Date ReportReport on Payments as of the Scheduled Payment Date[To be attached]

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Appendix B to Scheduled Payment Date ReportCash Flow Coverage Ratio Calculations[To be attached]

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Appendix C to Scheduled Payment Date ReportIneligible Project Amount, Project Compensation Amount and Project Revenue Reduction Amount[To be attached]

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EXHIBIT F-1to Loan Agreement

FORM OF US TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Loan Agreement dated as of May 31, 2019 (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”), among Vivint Solar Asset 2 Project Company, LLC (the “Borrower”), Wells Fargo Bank, National Association, as collateral agent for the Secured Parties, Wells Fargo Bank, National Association, as administrative agent for the Lenders (in such capacity, together with its successors and permitted assigns in such capacity, the “Administrative Agent”), and each lender from time to time party thereto.  

Pursuant to the provisions of Section 2.4(f) of the Loan Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not “10 percent shareholder” of the Borrower (or its regarded parent) within the meaning of Section 881(c)(3)(B) of the Code and (iv) it is not a “controlled foreign corporation” related to the Borrower (or its regarded parent) as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable.  By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

[NAME OF LENDER]

By:  _______________________

Name:  ________________________

Title:  ________________________

Date: ________ __, 20[  ]

F-1-1

EXHIBIT F-2to Loan Agreement

FORM OF US TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Loan Agreement dated as of May 31, 2019 (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”), among Vivint Solar Asset 2 Project Company, LLC (the “Borrower”), Wells Fargo Bank, National Association, as collateral agent for the Secured Parties, Wells Fargo Bank, National Association, as administrative agent for the Lenders (in such capacity, together with its successors and permitted assigns in such capacity, the “Administrative Agent”), and each lender from time to time party thereto.  

Pursuant to the provisions of Section 2.4(f) of the Loan Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a “10 percent shareholder” of the Borrower (or its regarded parent) within the meaning of Section 881(c)(3)(B) of the Code, and (iv) it is not a “controlled foreign corporation” related to the Borrower (or its regarded parent) as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable.  By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

[NAME OF PARTICIPANT]

By:  _______________________

Name:  ________________________

Title:  ________________________

Date: ________ __, 20[  ]

F-2-1

EXHIBIT F-3to Loan Agreement

FORM OF US TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Loan Agreement dated as of May 31, 2019 (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”), among Vivint Solar Asset 2 Project Company, LLC (the “Borrower”), Wells Fargo Bank, National Association, as collateral agent for the Secured Parties, Wells Fargo Bank, National Association, as administrative agent for the Lenders (in such capacity, together with its successors and permitted assigns in such capacity, the “Administrative Agent”), and each lender from time to time party thereto.  

Pursuant to the provisions of Section 2.4(f)  of the Loan Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a “10 percent shareholder” of the Borrower (or its regarded parent) within the meaning of Section 881(c)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a “controlled foreign corporation” related to the Borrower (or its regarded parent) as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption.  By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

[NAME OF PARTICIPANT]

By:  _______________________

Name:  ________________________

Title:  ________________________

Date: ________ __, 20[  ]

F-3-1

EXHIBIT F-4to Loan Agreement

FORM OF US TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Loan Agreement dated as of May 31, 2019 (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”), among Vivint Solar Asset 2 Project Company, LLC (the “Borrower”), Wells Fargo Bank, National Association, as collateral agent for the Secured Parties, Wells Fargo Bank, National Association, as administrative agent for the Lenders (in such capacity, together with its successors and permitted assigns in such capacity, the “Administrative Agent”), and each lender from time to time party thereto.  

Pursuant to the provisions of Section 2.4(f)  of the Loan Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Loan Agreement or any other Financing Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a “10 percent shareholder” of the Borrower (or its regarded parent) within the meaning of Section 881(c)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a “controlled foreign corporation” related to the Borrower (or its regarded parent) as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption.  By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

[NAME OF LENDER]

By:  _______________________

Name:  ________________________

Title:  ________________________

Date: ________ __, 20[  ]

F-4-1

EXHIBIT Gto Loan Agreement

FORM OF BORROWING DATE CERTIFICATE

BORROWING DATE CERTIFICATE

This Borrowing Date Certificate (this “Borrowing Date Certificate”) dated as of [________], 20[19][20], is delivered to you pursuant to Section 3.2(a) of the Loan Agreement dated as of May 31, 2019, (as amended, modified or supplemented and in effect from time to time, the “Loan Agreement”) by and among Vivint Solar Asset 2 Project Company, LLC, a Delaware limited liability company (the “Borrower”), the Lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent for the Lenders (in such capacity, including any successor and permitted assigns thereto, the “Administrative Agent”) and Wells Fargo Bank, National Association, as collateral agent for the Secured Parties (in such capacity, including any successor and permitted assigns thereto, the “Collateral Agent”), pursuant to which the Lenders have agreed to make Loans to the Borrower. Each capitalized term used and not otherwise defined herein shall have the meaning assigned thereto in Section 1.1 of the Loan Agreement.

The undersigned Responsible Officer of Borrower hereby certifies, represents and warrants as of the date hereof that he/she is the [__________] of Borrower, and that, as such, he/she is authorized to execute and deliver this Borrowing Date Certificate to the Administrative Agent on behalf of the Borrower, and that:

(a)Each of the representations and warranties made by each Loan Party under the Financing Documents are true and correct in all material respects as of such Requested Borrowing Date (as defined in the Borrowing Notice to which this Borrowing Date Certificate is attached), other than those representations and warranties which are modified by materiality by their own terms, which are true and correct in all respects as of such Requested Borrowing Date (unless such representation or warranty relates solely to an earlier date, in which case it is true and correct in all material respects as of such earlier date);

(b)The Eligibility Representations set forth in Appendix 3 of the Loan Agreement are true, complete, and correct with respect to each Project for which the Requested Borrowing Date is the first Borrowing Date after such Project became subject to the Financing Documents;

(c)No Default of Event of Default has occurred and is continuing pursuant to the Loan Agreement or will result from the Borrowing of the requested Loan;

(d)No Material Adverse Effect has occurred or is continuing since the Closing Date, and, to Borrower’s Knowledge, no event or circumstance exists that could reasonably be expected to result in a Material Adverse Effect has occurred and is continuing;

(e)No Bankruptcy Event has occurred with respect to any Loan Party;

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(f)There is (i) no Provider Default, (ii) no material breach by or event of default with respect to any Loan Party of any Project Documents to which Borrower is a party and (iii) no breach of any Other Documents that could have a Material Adverse Effect;

(g)Each Project that is the subject of such requested Borrowing is located in a Project Location; and

(h)Each Customer for each Project that is the subject of such requested Borrowing and each such Project, as applicable, satisfies the Credit Criteria.

(i)Installation has been successfully completed for each Project that is the subject of such requested Borrowing.

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IN WITNESS WHEREOF, the undersigned has caused this Borrowing Date Certificate to be executed and delivered, and the certifications and warranties contained herein to be made on behalf of the Borrower, by a Responsible Officer of the Borrower as of the date first written above.

VIVINT SOLAR ASSET 2 PROJECT COMPANY, LLC,
a Delaware limited liability company

By:
Name:
Title:

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EXHIBIT H
to Loan Agreement

FORM OF CASH FLOW COVERAGE RATIO CERTIFICATE

CASH FLOW COVERAGE RATIO CERTIFICATE

[____], 20[__]²⁰

Each of the Lenders party to the Loan Agreement defined below

Re:Galileo II Loan Agreement – Cash Flow Coverage Ratio Certificate

Ladies and Gentlemen:

This certificate (this “Certificate”) is delivered to you pursuant to Section 5.3(f) of that certain Loan Agreement, dated as of May 31, 2019 (as amended, modified or supplemented and in effect from time to time, the “Loan Agreement”) by and among Vivint Solar Asset 2 Project Company, LLC, a Delaware limited liability company (the “Borrower”), the Lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent for the Lenders (in such capacity, including its successors and permitted assigns, the “Administrative Agent”) and Wells Fargo Bank, National Association, as collateral agent for the Secured Parties (in such capacity, including its successors and permitted assigns, the “Collateral Agent”), pursuant to which the Lenders have agreed to make Loans to the Borrower. Each capitalized term used and not otherwise defined herein shall have the meaning assigned thereto in Section 1.1 of the Loan Agreement.

The Borrower hereby certifies to the Lenders that, as of the most recent Quarterly Date, (a) the Cash Flow Coverage Ratio was equal to [___] and the Cash Flow Coverage Ratio Requirement was achieved and (b) attached hereto as Appendix A are the Borrower’s reasonably detailed calculations showing the Cash Flow Coverage Ratio for the six-month period ending on the Quarterly Date immediately preceding this Certificate, and otherwise calculated in good faith and a manner consistent in all material respects with and supported by the [most recently updated]²¹ [Final]²² Advance Model.

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²⁰  To be delivered at least 3 Business Days before the applicable Scheduled Payment Date.

²¹  Note to form: Insert prior to Aggregation Date.

²²  Note to form: Insert after Aggregation Date.

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IN WITNESS WHEREOF, the Borrower has caused this Certificate to be duly executed and delivered as of the date first written above.

BORROWER:

VIVINT Solar Asset 2 Project Company, LLC

By: Name:
Title:

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Appendix A to Cash Flow Coverage Ratio Certificate
Cash Flow Coverage Ratio Calculations

Appendix A

[To be attached]

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EXHIBIT Ito Loan Agreement

FORM OF QUARTERLY OPERATING REPORT

[To be attached.]

H-4

Execution Version

SCHEDULE A²³

AMORTIZATION SCHEDULE

Quarter Ending	Scheduled Principal Payment
	$

²³  To be updated at each Borrowing.

SCHEDULE A

SCHEDULE 1.1(b)

KNOWLEDGE INDIVIDUALS

Chief Executive Officer, President

Chief Commercial Officer

Chief Legal Officer

Chief Financial Officer

Vice President, Capital Markets

SCHEDULE 1.1(b)

SCHEDULE 2.1(f)²⁴

TARGET LOAN BALANCE

Quarter Ending	Target Debt Balance
	$

²⁴  To be updated at each Borrowing.

SCHEDULE 2.1(f)

SCHEDULE 3.1(l)

CONSENTS

None.

SCHEDULE 3.1(l)

SCHEDULE 4.1(f)

OUTSTANDING DEBT

None.

SCHEDULE 4.1(f)

SCHEDULE 5.17

INSURANCE REQUIREMENTS

Pursuant to the terms of the Loan Agreement, as to any matters referenced herein, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with instructions given by the Secured Parties, and such instructions of such Secured Parties and any action taken or failure to act pursuant to such instructions shall be binding on all of the Secured Parties.

1.1General Requirements.  The Borrower shall without cost to the Secured Parties, maintain or cause to be maintained on its behalf in effect at all times (unless otherwise stated below) on and after the Closing Date (except as otherwise stated below) the types of insurance required by the following provisions together with any other types of insurance required pursuant to any Project Document or any Transaction Document with respect to the Projects, in such form acceptable to the Administrative Agent, with insurance companies rated “A-” or better, with a minimum size rating of “X” as determined by A.M. Best, “A” or better by Standard and Poor’s, an equivalent rating by another nationally-recognized insurance rating agency of similar standing or other companies reasonably satisfactory to the Administrative Agent.  For purposes of this Schedule 5.17, references to insurance limits, deductibles or other terms and conditions that are subject to the acceptance of and/or review and approval of the Administrative Agent are deemed to include “in consultation with the Insurance Consultant.”

(a) All-Risk Property / Machinery Breakdown Insurance/ Installation Floater. In respect of all Systems, “All-Risk” property, as such term is used in the insurance industry, covering loss or damage to the System including coverage for mechanical and electrical breakdown (including “electrical arcing”) plus resulting or ensuing damage arising out of design error, faulty workmanship or faulty materials, the perils of flood and earthquake (or earth movement), windstorm (named or unnamed), hail, lightning, strike, riot and civil commotion, sabotage, resulting damage caused by extremes of temperature, vandalism and malicious mischief, subject to terms and conditions that are consistent with current industry practice and acceptable to the Administrative Agent.  Coverage shall be maintained in an amount that is not less than the greater of (i) $20,000,000 per occurrence (subject to a sublimit of $500,000 per location) or (ii) such other amount required by the Administrative Agent in accordance with Section 1.3 of this Schedule 5.17 and that is in a form and substance acceptable to the Administrative Agent and that is sufficient to comply with the requirements of the Project Documents; provided, that coverage for each System shall be included under an installation floater or other similar coverage (whether under the same policy required in this Section 1.1(a) or a separate policy) until the PTO Letter has been received for such System in an amount equal to the full replacement cost value of such System (subject to a per jobsite sublimit $250,000 on a per occurrence basis) in accordance with the MPECA entered into between the Borrower and the Seller; provided, further, for the avoidance of doubt, the Borrower and/or its designated loss payee as required herein shall be the beneficiary of any such insurance maintained for installation of the Systems and not the Seller.  All responsibility for verification of compliance with the Project Documents shall rest solely with the Borrower.

Sub-limits are permitted with respect to the following perils:

SCHEDULE 5.17

i.debris removal with a limit of not less than 25% of the loss or such other amount agreed by the Administrative Agent;

ii.inland transit with limits consistent with  the replacement cost values at risk, if any;

iii.offsite storage with limits consistent with the replacement cost values at risk, if any;

iv.earthquake (or earth movement) with limits not less than $5,000,000 per occurrence and in the annual aggregate or as otherwise required by the Administrative Agent in accordance with Section 1.3 of this Schedule 5.17;

v.flood with limits not less than $10,000,000 per occurrence and in the annual aggregate for all flood zones, or such other amount required by the Administrative Agent in accordance with Section 1.3 of this Schedule 5.17;

vi.windstorm (named or unnamed) and hail, full policy limits on a per occurrence basis, to the extent reasonably available, however, if a full per occurrence policy limit is not reasonably available and is subject to a sublimit and/or annual aggregate, such wind and hail coverage shall be maintained in an amount agreed to by the Administrative Agent in accordance with Section 1.3 of this Schedule 5.17;

vii.such other coverages acceptable to the Administrative Agent that are customarily sub-limited and/or aggregated in reasonable amounts consistent with current industry practice with respect to similar risks and acceptable to the Administrative Agent.

Such policy shall include:  (a) an automatic reinstatement of limits following each loss (except for the perils of earthquake (or earth movement), pollution cleanup, flood and windstorm/hail (as provided for in (vi) above)), (b) replacement cost valuation coverage with no deduction for depreciation and no coinsurance clauses (or a waiver thereof) and (c) mechanical and electrical breakdown insurance including coverage for resulting damage with respect to consequence of design, workmanship or material defect on a replacement cost basis with limits acceptable to the Administrative Agent.

All such policies may have per occurrence deductibles of not greater than $5,000 for all perils, except 2% of the total insured value of all locations sustaining damage, subject to a $100,000 minimum, for earthquake (or earth movement), flood and named windstorm, or as otherwise agreed by the Administrative Agent.

(b)Business Interruption Insurance.  The Borrower shall maintain or cause to be maintained, with respect to each installation, business interruption insurance following all perils required and insured above under Section 1.1 (a) of this Schedule 5.17, including mechanical or

SCHEDULE 5.17

electrical breakdown and inland transit perils, with limits and terms and conditions approved by the Administrative Agent (including all revenues derived from the sale of renewable energy credits of such installation less non continuing expenses) and in accordance with Section 1.3 of this Schedule 5.17.  If coverage is subject to an indemnification period, such period shall not be less than twelve (12) months unless otherwise agreed to by Administrative Agent.  The deductible or waiting period shall not exceed five (5) days unless otherwise approved by the Administrative Agent.

(c)Commercial General Liability Insurance.  Commercial general liability insurance covering the Borrower and each Project’s operations, written on “occurrence” policy forms, including coverage for premises/operations, products/completed operations, broad form property damage, blanket contractual liability, and personal injury, with no exclusions for explosion, collapse and underground perils, or fire, with primary coverage limits of no less than $1,000,000 any one occurrence for injuries or death to one or more persons or damage to property including products and completed operations and an annual aggregate limit of not less than $2,000,000, except $1,000,000 annual aggregate for products/completed operations.  The commercial general liability policy shall also include a severability of interest clause and insure punitive damages to the extent commercially available and allowed by applicable Law.  Deductibles in excess of $25,000 shall be subject to review and approval by the Administrative Agent.

(d)Automobile Liability Insurance.  Automobile liability insurance covering the Borrower, including coverage for any owned, leased, non-owned and hired automobiles (if applicable) for both bodily injury and property damage in accordance with statutory legal requirements, with combined single limits of no less than $1,000,000 per accident with respect to bodily injury, property damage or death.  To the extent that the Borrower does not own any automobiles, contingent liability for hired, leased and non-owned automobiles (as applicable) may be obtained through endorsement to the general liability policy required in Section 1(c) of this Schedule 5.17 above.  Deductibles in excess of $10,000 shall be subject to review and approval by the Administrative Agent.

(e)Workers’ Compensation Insurance.  Workers’ compensation insurance in accordance with statutory requirements at any time in which the Borrower has employees, including coverage for employer’s liability with a limit of not less than $1,000,000 and such other forms of insurance which the Borrower is required by applicable Law to provide for loss resulting from injury, sickness, disability or death of each of its employees.  Deductibles in excess of $10,000 shall be subject to review and approval by the Administrative Agent.

(f)Umbrella or Excess Liability Insurance.  Umbrella or excess liability insurance of not less than $25,000,000 per occurrence and annual aggregate (inclusive of the requirements and limits in Sections 1.1(c), (d) and (e) of this Schedule 5.17 with respect to employer’s liability) covering the Borrower and each installation’s operations.  Such coverage shall be on a per occurrence basis and over and above coverage provided by the policies described in Sections 1.1(c), (d) and (e) of this Schedule 5.17 with respect to employer’s liability.  If the policy or policies provided under this Section 1.1(f) contain(s) aggregate limits, and such limits are reduced below $15,000,000 during the applicable policy term by any one or more incidents, occurrences, claims, settlements or judgments against such insurance which has caused the insurer

SCHEDULE 5.17

to establish a reserve, the Borrower shall, within ten (10) Business Days after obtaining knowledge of such event, inform the Administrative Agent in writing of such reduction and the events giving rise thereto, and within thirty (30) Business Days of one or more incidents, occurrences, claims, settlements or judgments against such insurance which has caused the insurer to establish a reserve, purchase an additional umbrella/excess liability insurance policy satisfying the requirements of this Section 1.1(f), unless waived by the Administrative Agent.

(g)Contractors and Subcontractors.  The Borrower shall use commercially reasonable efforts to require contractors and subcontractors (including any Affiliates) with which it has a direct contractual relationship, if any, that will be performing construction, operations and maintenance or other on-site work on its behalf (as applicable), to obtain and maintain the types of insurance required in Sections 1.1 (c), (d), and (e) of this Schedule 5.17 above in amounts that are customary for contractors and subcontractors performing similar work and operations.

1.2Special Insurance Provisions.  

(a)Loss Payable Endorsement.  All policies of property insurance required to be maintained pursuant Sections 1.1(a) and (b) of this Schedule 5.17 shall name the Collateral Agent as loss payee as its interests may appear for all losses insured thereunder, pursuant to a loss payable endorsement approved by the Administrative Agent.

(b)Non-Vitiation.  All policies of property insurance required to be maintained pursuant to Sections 1.1(a) and (b) of this Schedule 5.17 shall insure the interests of the Administrative Agent regardless of any breach or violation by the Borrower, its affiliates or others acting on its or their behalf of any warranties, declarations or conditions contained in such policies, any action or inaction.  The foregoing may be accomplished by the use of an approved loss payable endorsement, multiple insured clause or such other clause or wording approved by Administrative Agent providing similar coverage.

(c)Additional Insured & Waiver of Subrogation.  All policies of insurance required in Sections 1.1(a)-(f) of this Schedule 5.17 above that are maintained by the Borrower or on behalf of the Borrower shall (i) include the Secured Parties and each of their successors or assigns as additional insureds either by policy definition or separate endorsement (with the exception of workers’ compensation); and (ii) provide a waiver of subrogation in favor of the parties noted in (i) above.

(d)Severability of Interest, Primary and Non-Contributory.  All liability policies required in Sections 1.1(c), (d) and (f) of this Schedule 5.17 above that are maintained by the Borrower or on behalf of the Borrower shall expressly provide that all provisions thereof, except the limits of liability (which shall be applicable to all insureds as a group) shall operate in the same manner as if there were a separate policy covering each such insured and shall not contain exclusions or limitations for cross-liability (to the extent commercially available).  All policies required in this Schedule 5.17 shall not impose liability for premiums on additional insureds and shall be considered primary and non-contributory in relation to any other policies the Secured Parties may hold.

SCHEDULE 5.17

(e)Notice of Cancellation.  All policies of insurance required in Section 1.1 of this Schedule 5.17 shall provide thirty (30) days’ written notice of cancellation to the Administrative Agent, with the exception of ten (10) days’ notice for nonpayment of premium.  To the extent endorsement of the required policies to provide such written notice of cancellation to the Administrative Agent is not commercially available; the Borrower shall be obligated to provide written notice or cancellation to the Administrative Agent.  The Borrower shall be obligated to provide written notice of material change to the Administrative Agent unless such notice is otherwise provided by endorsement of the required policies.  For the purposes of this Section 1.2(e) of this Schedule 5.17,“materially changed” means any change that would cause the Borrower to be in non-compliance with the insurance requirements of this Schedule 5.17 or a reduction in coverage as compared to what was previously insured by the Borrower.

(f)Claims-Made Forms.  If any liability insurance required under the provisions of this Schedule 5.17 is permitted to be written on a “claims made” basis, then such insurance shall include (i) a retroactive date (as such term is specified in each of such policies) that is no later than the Closing Date; and (ii) each time any policy written on a “claims made” basis is not renewed or the retroactive date of such policy is to be changed, the Borrower shall obtain or cause to be obtained for each such policy or policies the broadest extended reporting period coverage, or “tail”, reasonably available in the commercial insurance market for each such policy or policies but in no event shall such extended reporting period or “tail” coverage be less than the greater of two (2) years or such other amount required under the Project Documents.  In the alternative, the Borrower can meet the requirements of this Section 1.2(f) by obtaining “prior acts” coverage from a subsequent insurance carrier.

(g)Loss Adjustment and Settlement.  Any loss insured under a policy of property insurance required to be maintained pursuant to Sections 1.1(a)-(c) of this Schedule 5.17 shall be adjusted with the respective insurance companies, including the filing in a timely manner of appropriate proceedings, by the Borrower, with the approval of the Administrative Agent if such loss is in excess of $250,000 for any one casualty or loss or an aggregate of $250,000 in any fiscal year.  In addition, the Borrower may, in its reasonable judgment, consent to the settlement of any loss, provided, that in the event that the amount of the loss exceeds $250,000 any one casualty or loss in any fiscal year, the terms of such settlement is agreed in writing by the Administrative Agent.  The Administrative Agent shall be entitled at their option to participate in any such compromise, adjustment or settlement of a loss in excess of $250,000 for any one casualty or in excess of $250,000 in the aggregate in any fiscal year.

(h)Acceptable Policy Terms and Conditions.  All policies of insurance required to be maintained pursuant to this Schedule 5.17 shall contain terms and conditions reasonably acceptable to the Administrative Agent after consultation with the Insurance Consultant.

(i)Draft Insurance Policy Review.  To the extent that the Borrower furnishes the Administrative Agent or the Insurance Consultant with draft copies of the policies of property insurance it intends to procure that are required to be maintained pursuant to Sections 1.1(a) and (b) of this Schedule 5.17 including the identities of the insurer(s), the insured amounts and the deductibles, all of which the Administrative Agent (in consultation with the Insurance Consultant) have approved, the Borrower warrants that the insurance policies procured by or on behalf of it

SCHEDULE 5.17

shall, to the extent commercially reasonable, be the same in all material respects as the policies previously approved by the Administrative Agent.

(j)Reports.  Concurrently with the furnishing of the certification referred to in Section 1.4 of this Schedule 5.17, the Borrower shall furnish the Administrative Agent and the Insurance Consultant with a report of an independent insurance broker, stating that in the opinion of such broker, the insurance then carried or to be renewed is in accordance with the terms of this Schedule 5.17.  In addition, the Borrower shall advise the Administrative Agent in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Borrower or other party providing insurance on its behalf which may invalidate or render unenforceable, in whole or in part, any insurance being maintained by the Borrower pursuant to this Schedule 5.17.

(k)Failure to Maintain Insurance.  In the event the Borrower fails to take out or maintain or to cause any Persons that are a party to a Project Document to take out and maintain, the full insurance coverage required by this Schedule 5.17 or by their respective Project Document, the Administrative Agent may (but shall not be obligated to), upon thirty (30) days’ prior notice (unless the aforementioned insurance would lapse within such period, in which event notice should be given as soon as reasonably possible) to the Borrower of any such failure, take out the required policies of insurance and pay the premiums on the same.  All amounts so advanced by the Administrative Agent shall become an additional obligation of the Borrower to the Administrative Agent, and the Borrower shall forthwith pay such amounts to the Administrative Agent together with interest thereon at the Default Rate within thirty (30) days from the date so advanced.

(l)Failure to Collect.  In the event that the Borrower or any other party providing insurance on its behalf fails to respond in a timely and appropriate manner (as reasonably determined by the Administrative Agent) to take any steps necessary or reasonably requested by the Administrative Agent to collect from any insurers for any loss covered by any insurance required to be maintained by this Schedule 5.17, the Administrative Agent shall have the right to make all proofs of loss, negotiate all claims and/or receive all or any part of the proceeds of the foregoing insurance policies, either in its own name or the name of the Borrower; provided, however, that the Borrower shall, upon the request of the Administrative Agent and at the Borrower’s own cost and expense, make all proofs of loss and take all other steps necessary or reasonably requested by the Administrative Agent to collect from insurers for any loss covered by any insurance required to be obtained by this Schedule 5.17.

(m)Other Insurance.  The Borrower shall maintain or cause to be maintained such insurance in addition to or in lieu of that required by the foregoing provisions of this Schedule 5.17 as the Administrative Agent may from time to time require, at its direction, due to (i) new information coming to the attention of the Administrative Agent after the Closing Date or (ii) changed circumstances after the Closing Date, which, in the case of either of the foregoing clauses (i) and (ii), is reasonably determined by the Administrative Agent to render the insurance coverage set forth in this Schedule 5.17 materially inadequate.

(n)Project Specific Limits – Property Insurance.  The Borrower shall maintain or cause to be maintained the property insurance required herein with policies that contain limits

SCHEDULE 5.17

that are specific to the Borrower’s operations (and the Project) and are not combined, comingled or shared with other assets unrelated to the Borrower.

1.3Other Insurance Requirements.  In addition to the other requirements of this Schedule 5.17, such other or additional insurance (as to risks covered, policy amounts, policy provisions or otherwise) as the Administrative Agent may reasonably request from time to time provided that such other insurance and amounts are then commonly insured against with respect to similar properties in similar regions with similar exposures and which are available on commercially reasonable terms.  The Administrative Agent reserves the right to reevaluate and require the purchase of a higher policy loss limit, including increased sublimits for earthquake (or earth movement), flood, wind and hail, and business interruption (all in addition to what is already above in Sections 1.1(a)(iv), (v) and (vi) and Section 1.1(b) of this Schedule 5.17 and with deductibles and terms and conditions acceptable to the Administrative Agent.  It is hereby agreed and understood that the Administrative Agent’s right to reevaluate the purchase of additional insurance and/or insurance limits includes the delivery of a probable maximum loss analysis in a form satisfactory to the Administrative Agent within sixty (60) days after the delivery of the True-Up Report.  Such PML analysis shall include, at a minimum, an analysis of earthquake risks of PV solar installations in California and Hawaii and windstorm risks of installations in Hawaii and any coastal regions of the United States.

1.4Certification of Compliance.  The Borrower shall deliver to the Administrative Agent, within ten (10) Business Days after each annual policy renewal date for each policy, (1) certificates of insurance or binders, in form and substance reasonably satisfactory to the Administrative Agent, evidencing all of the insurance required by this Schedule 5.17.  Such certificates of insurance/binders shall be executed by each insurer or by an authorized representative of each insurer where it is not practical for such insurer to execute the certificate itself.  Such certificates of insurance/binders shall identify underwriters, the type of insurance, the insurance limits and the policy term and shall specifically list the special provisions enumerated for such insurance required by this Schedule 5.17.  Upon reasonable request, the Borrower will promptly furnish the Administrative Agent with copies of all insurance policies, binders and cover notes or other evidence of such insurance relating to the insurance required to be maintained by the Borrower.

1.5Waiver of Insurance Requirements.  If at any time the Administrative Agent determines in its reasonable judgment (after consultation with the Insurance Consultant) that any insurance (including the limits or deductibles thereof) required to be maintained by this Schedule 5.17 is not available on commercially reasonable terms due to prevailing conditions in the commercial insurance market at such time, then upon the written request of the Borrower together with a written report of the Borrower’s insurance broker or another independent insurance broker of nationally-recognized standing in the insurance industry (i) certifying that such insurance is not available on commercially reasonable terms (and, in any case where the required maximum coverage is not reasonably available, certifying as to the maximum amount which is so available), (ii) explaining in detail the basis for such broker’s conclusions, and (iii) containing such other information as the Administrative Agent or the Insurance Consultant may reasonably request, the Administrative Agent may (after consultation with the Insurance Consultant) temporarily waive such requirement; provided, however, that the Administrative Agent may, in its sole judgment, decline to waive any such insurance requirement.  At any time after the granting of any temporary

SCHEDULE 5.17

waiver pursuant to this Section 1.5 of this Schedule 5.17, but not more than once in any year, the Administrative Agent may request, and the Borrower shall furnish to the Administrative Agent within thirty (30) days after such request, an updated insurance report reasonably acceptable to the Administrative Agent and the Insurance Consultant from the Borrower’s independent insurance broker.  Any waiver granted pursuant to this Schedule 5.17 shall expire, without further action by any party, immediately upon (A) such waived insurance requirement becoming available on commercially reasonable terms, as reasonably determined by the Administrative Agent, (in consultation with the Insurance Consultant and the Borrower) or (B) failure of the Borrower to deliver an updated insurance report pursuant to the immediately preceding sentence.

1.6No Duty to Verify Insurance Compliance.  The Administrative Agent shall be entitled, upon reasonable advance notice, to review the Borrower’s (or other appropriate party’s) books and records regarding all insurance policies maintained with respect to the Projects and the Borrower’s obligations under this Schedule 5.17.  Notwithstanding the foregoing, no provision of this Schedule 5.17 shall impose on the Administrative Agent any duty or obligation to verify the existence or adequacy of the insurance coverage maintained by the Borrower under this Schedule 5.17, nor shall the Administrative Agent be responsible for any representations or warranties made by or on behalf of the Borrower or any other party to any insurance company or underwriter.

SCHEDULE 5.17

SCHEDULE 6.14

TRANSACTIONS WITH AFFILIATES

The Master Engineering Procurement and Construction Agreement is made and entered into as of May 31, 2019, by and between Vivint Solar Developer, LLC, a Delaware limited liability company and Vivint Solar Asset 2 Project Company, LLC, a Delaware limited liability company.

The Guaranty dated as of May 31, 2019, by Vivint Solar, Inc., a Delaware corporation, in favor of Vivint Solar Asset 2 Project Company, LLC, a Delaware limited liability company.

The Master Backup Services Agreement, dated as of June 15, 2016, by and between Vivint Solar Provider, LLC, a Delaware limited liability company, and Wells Fargo Bank, National Association, and as amended by that certain Amendment and Joinder Agreement by and among Vivint Solar Provider, LLC and Wells Fargo Bank and Vivint Solar Servicer, LLC, a Delaware limited liability company, dated as of November 7, 2016, and as modified by that certain Covered Agreement Addendum No. 26, dated as May 31, 2019, by and among Vivint Solar Provider, LLC, a Delaware limited liability company, Wells Fargo Bank, National Association, and Vivint Solar Asset 2 Project Company, LLC, a Delaware limited liability company.

The Administrative Services Agreement, dated as of May 31, 2019, between Vivint Provider, LLC, a Delaware limited liability company, and Vivint Solar Developer Asset 2 Project Company, LLC, a Delaware limited liability company, as amended, restated, supplemented or otherwise modified from time to time.

The Maintenance Services Agreement, dated as of May 31, 2019, between Vivint Solar Provider, LLC, a Delaware limited liability company and Vivint Solar Asset 2 Project Company, LLC, a Delaware limited liability company.

The SREC Transfer Agreement, dated as of May 31, 2019, between Vivint Solar SREC Aggregator, LLC, a Delaware limited liability company and Vivint Solar Asset 2 Project Company, LLC, a Delaware limited liability company.

SCHEDULE 6.14

ANNEX 1

to Loan Agreement

Administrative Agent’s Office

All payments to be paid to or on behalf of the Administrative Agent shall be paid to:

NAME OF BANK:	[***]
ABA NUMBER:	[***]
SWIFT CODE:	[***]
ACCOUNT NUMBER:	[***]
ACCOUNT NAME:	[***]
FFC ACCOUNT NUMBER:	[***]
ATTENTION:	[***]
REF:	[***]

Annex 127465.00015

ANNEX 2

to Loan Agreement

Lender/Lending Offices

Forethought Life Insurance Company

10 West Market Street

Suite 2300

Indianapolis, IN 46204

with copy to:

[***]

Global Atlantic Financial Company

Assistant Vice President

Operations-Treasury

20 Guest Street, 9th Flr

Brighton, MA 02135

Email: [***]

Tel: [***]

Bank Name: [***]

Bank ABA: [***]

Account Name: [***]

Account Number: [***]

Reference Number: [***]

Metropolitan Tower Life Insurance Company

See attached.

Metropolitan Property and Casualty Insurance Company

See attached.

Annex 2

ANNEX 3

to Loan Agreement

Lender Commitments

Lender	Initial Commitment
[***]	$[***]
[***]	$[***]
[***]	$[***]
Total	$150,000,000

Annex 2

Execution Version

APPENDIX 1

Eligibility Representations and Warranties

As of each date of acquisition of a Project, with respect to such Project (and the System included in such Project) being acquired by the Borrower from Seller, the Borrower hereby makes the following Eligibility Representations (the “Eligibility Representations”):

1. Accuracy of System Information:  The System Information for the System in such Project is true and correct in all material respects and does not omit any necessary information that makes such entry misleading.

2. Customer Agreement:  The Customer Agreement is substantially in the form of one of the Approved Form Agreements and the Customer Agreement for such Project, as applicable, complies with and satisfies the following conditions:

a. Customer Payments in U.S. Dollars: The related Customer is obligated per the terms of the related Customer Agreement to make payments in U.S. dollars to the counterparty of the related Customer Agreement.

b. Absolute and Unconditional Obligation:  The related Customer Agreement is by its terms an absolute and unconditional obligation of the Customer to pay for electricity generated and delivered, or that will be generated and delivered, by the related System to such Customer after the PTO Date for such related System has been achieved, and such payment obligations under the related Customer Agreement do not provide for offset for any reason.

c. Customer Agreement:  The related Customer Agreement provides that Provider or an affiliate of Provider agrees to design, procure and install and maintain and repair Systems (subject to force majeure exceptions) at the property specified in such Customer Agreement for no charge (other than any fees related to activation, removal and reinstallation of the system, or other fees as set forth in the form of Customer Agreements as delivered by or on behalf of the Borrower to Administrative Agent or the Approved Form Agreements, as applicable) over the term of the contract other than for power purchases or lease payments, and the Customer agrees to purchase electric energy produced by such Systems or lease such Systems.

d. Non-Cancelable; Prepayable:  The related Customer Agreement is non-cancelable by its terms after the start of installation of the System and, other than with respect to Customer Agreements that have been fully prepaid or partially prepaid prior to the Borrowing Date, prepayable only in connection with (i) a Customer default or (ii) a Customer selling their home to a transferee that does not meet the creditworthiness conditions set forth in Annex 7 of the Agreement, in either case in an amount determined by a stated formula (including, with respect to all of the Approved Form Agreements and certain other Customer Agreements, the

#4851-4732-5549v327465.00015

discounting of a pre-determined $/Watt System value at a pre-determined discount rate as specified in such Customer Agreement).

e. Customer Tax Status: The Customer is not a tax-exempt entity described in Section 168(h)(2) of the Code. The Customer is not described in Section 50(b)(3) or (4) of the Code.

f. Governing Law of Customer Agreement:  The related Customer Agreement is governed by the laws of a state of the United States and was not originated in, nor is it subject to the laws of, any jurisdiction, the laws of which would make unlawful the sale, transfer or assignment of the related Customer Agreement.

g. Assignments:  All related Customer Agreements have been assigned to the Borrower, and the Borrower (i) is the seller of electricity produced by, or lessor of, the related System under such Customer Agreement, and (ii) is entitled to receive the payments to be made by the applicable Customer under such Customer Agreement.

h. Host Customer:  Customer satisfies all criteria of Vivint’s Credit Underwriting Policy at the time or origination.

3. Legal, Valid and Binding Agreement:  To the Borrower’s Knowledge, the related Customer Agreement is legal, valid and binding on the related Customer, enforceable against such related Customer in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights generally, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity).

4. Full Force and Effect:  With respect to the Borrower, the related Customer Agreement is in full force and effect in accordance with its respective terms and the Borrower is not in material breach or default under such Customer Agreement, and, to the Borrower’s Knowledge, with respect to the Customer, the related Customer Agreement is in full force and effect in accordance with its respective terms, and no material breach or default by such Customer has occurred and is continuing thereunder, and such Customer Agreement has not been rescinded, cancelled or otherwise terminated by such Customer.

5. System: Solely with respect to any System for which the final installment payment under the MEPCA has been or is being made, the System has received PTO.

6. Ordinary Course of Business:  The related Customer Agreement relates to the sale of power from or the leasing of a System originated in the ordinary course of business of an affiliate of the Borrower.

7. Legal Compliance:  The Customer Agreement and the origination thereof and the installation of the related System, in each case, was in compliance in all material respects with applicable federal, state and local laws and regulations (including without limitation,

all consumer protection laws) at the time such Customer Agreement was originated and executed and such System was installed.

8. Permits: All requisite licenses, permits and governmental approvals as may be reasonably necessary to perform under such Customer Agreement have been duly obtained, except for those permits and other approvals that will be obtained at a later date pursuant to such agreement (and except for the final building inspection approval for such Project which may or may not have been obtained and except for PTO).

9. Origination: Customer Agreements have been originated in compliance in all material respects with all applicable laws and regulations.

10. No Condemnation:  To the Borrower’s Knowledge, no condemnation is pending or threatened with respect to the system.

11. Warranties:  To the Borrower’s Knowledge, all manufacturer warranties relating to the related System are in full force and effect in all material respects (other than with respect to those manufacturer warranties that are no longer being honored by the relevant manufacturer with respect to all customers generally).

12. Covered Assets:  Provider or an affiliate of Provider, which is an experienced operator licensed, or using licensed personnel (including, without limitation, by subcontracting certain maintenance and administrative services), as applicable, as required by applicable law, is obligated to provide certain maintenance and administrative services associated with such Systems in accordance with the Maintenance Service Agreement or the Administrative Services Agreement, as applicable.

13. Ownership and Liens:  The Borrower has title to the Project, free and clear of all liens and encumbrances, except for customary permitted liens.

14. Notices of Ownership:  Seller has filed a precautionary fixture filing (or its functional equivalent) in respect of the related System or such other similar filing as may be required by applicable law including, without limitation, pursuant to Cal. Pub. Util. Code §§ 2868-2869, and the Borrower has provided a copy thereof to the Secured Parties; provided, however, that (i) certain of such filings may be released from time-to-time in order to assist the applicable Customer in a pending refinancing of such Customer’s mortgage loan or sale of home and (ii) such filings may not have been filed or maintained in a manner that would provide priority under applicable law over an encumbrance or owner of the real property subject to the filing.

15. Insurance:  The System is insured as specified under the LLC Agreement of Borrower Member and Section 5.17 of the Agreement.

APPENDIX 2

Project Documents

None.

APPENDIX 3

SYSTEM INFORMATION

[Attached]

APPENDIX 4

SEPARATENESS PROVISIONS

The Borrower shall maintain its existence separate and distinct from any other Person, including its members by taking, among others, the following actions:

i. maintaining in full effect its existence, rights and franchises as a limited liability company under the laws of the State of Delaware and obtaining and preserving its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of the Borrower LLC Agreement and each other instrument or agreement necessary or appropriate to properly administer the Borrower LLC Agreement and permit and effectuate the transactions contemplated hereby and thereby;

ii. maintaining its own deposit accounts, separate from those of any other Person, any of its officers and their respective Affiliates;

iii. conducting all material transactions between the Borrower and any of its Affiliates on an arm’s length basis and on a commercially reasonable basis;

iv. conducting its affairs separately from those of any other Person, any of its officers or any of their respective Affiliates and maintaining accurate and separate books, records and accounts and financial statements, it being agreed that performance under the Transaction Documents shall not result in the Borrower’s contravening Section 3(b) of the Borrower LLC Agreement;

v. acting solely in its own limited liability company name and not that of any other Person, any of its officers or any of their respective Affiliates, and at all times using its own invoices and checks separate from those of any other Person, any of its officers or any of their respective Affiliates;

vi. maintaining all of its assets in its own name and not commingling its assets with those of another Person;

vii. not maintaining its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

viii. paying its own operating expenses and other liabilities out of its own funds;

ix. refraining from directly entering into any cross-marketing activities with the sole member or any of its Affiliates;

x. not acquiring obligations or securities of its members or Affiliates;

xi. not taking any action that knowingly shall cause the Borrower to become insolvent;

xii. observing all limited liability company formalities, including maintaining meeting minutes or records of meetings and acting on behalf of itself only pursuant to due authorization, required hereby and by the Delaware Certificate (as defined in the Borrower LLC

Agreement);

xiii. holding itself out to the public as a legal entity separate and distinct from any other Person and promptly correcting any known or suspected misunderstanding regarding its separate identity;

xiv. causing its members, managers, directors, officers, agents and other representatives to act at all times with respect to it consistently and in furtherance of the foregoing and in the best interests of the Borrower;

xv. not allowing the Borrower to guarantee or become obligated for the debts of any other entity or hold out its credit as being available to satisfy the obligations of others; and

xvi. filing its own tax returns, if any, as may be required under applicable law, to the extent it is (1) not part of a consolidated group filing a consolidated return or returns or (2) not treated as a division for tax purposes of another taxpayer, and paying any taxes so required to be paid under applicable law.

APPENDIX 5

APPROVED MANUFACTURERS

Approved Panel Manufacturers	Approved Countries
Jinko Solar (U.S.) Inc.	China	Malaysia
Hanwha Q Cells America Inc.	China	Korea	Poland
JA Solar USA, Inc.	China
Canadian Solar, Inc.	China	Canada	Vietnam
LONGi Solar Technology (US), Inc.	Malaysia
Changzhou Trina Solar Energy Co., Ltd.	China	Thailand	Vietnam	Malaysia
LG Solar USA, Inc.	South Korea
SunPower Corporation	US	Philippines
REC Solar, Inc.	Singapore
First Solar, Inc.	US	Malaysia
ReneSolar
Kyocera
Silfab

Approved Inverter Manufacturers	Approved Countries
Enphase Energy, Inc.	China	Canada
Fronius USA LLC	US	Austria
SMA Solar Technology	US	Germany
Delta	China
Schneider Electric	US	India
ABB Group/Power-One Renewable Energy Solutions, LLC	US	Italy
SolarEdge Technologies, Inc.	China	Hungary	Israel
Ginlong Technologies	China
Kaco
Solectrica

APPENDIX 6

APPROVED FORM AGREEMENTS (CUSTOMER AGREEMENTS)

[Attached]

APPENDIX 7

CREDIT CRITERIA

The “Credit Criteria” shall require, as of the date the FICO score was retrieved by Seller in accordance with its customer practices:

(i) (A) [***];

(ii) (A) [***];

(iii) (A) [***];

(iv) [***];

(v) (A) [***];

(vi) [***];

(vii) [***].

APPENDIX 8

ACCEPTABLE PROVIDERS

US Bank

Consolidated Asset Management Services

Novogradac

Omnidian

CCA

Radian Gen

Eso Capital Advisors

APPENDIX 9

ASSUMPTIONS

Base Case Performance Assumptions
Generation Sensitivity		P50
Availability Loss	% of Generation	[***]
Default Loss	%/year	[***]
Degradation	%/year	[***]
Operating Expenses
Maintenance Service Agreement Cost	kWdc/year	[***]
Administrative Service Agreement Cost	kWdc/year	[***]
Project Company Insurance Premium	% of MEPCA Purchase Price	[***]
Administrative Costs (Audit fees, etc.)	$ Annually	[***]
Administrative Agent Fee	$ Annually	[***]
Annual Rating Fee	$ Annually	[***]
Backup Servicer	$ Annually	[***]
Operating Expense Escalation
Maintenance Service Agreement Cost	%/year	[***]
Administrative Service Agreement Cost	%/year	[***]
Project Company Insurance Premium	%/year	[***]
Administrative Costs (Audit fees, etc.)	%/year	[***]
Administrative Agent Fee	%/year	[***]

Annual Rating Fee	%/year	[***]
Backup Servicer	%/year	[***]

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David Bywater, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Vivint Solar, Inc.;

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(s) 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: August 8, 2019	By:	/s/ David Bywater
		David Bywater
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dana Russell, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Vivint Solar, Inc.;

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(s) 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: August 8, 2019	By:	/s/ Dana Russell
		Dana Russell
		Chief Financial Officer and Executive Vice President
		(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION 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 of Vivint Solar, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: August 8, 2019	By:	/s/ David Bywater
		David Bywater
		Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION 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 of Vivint Solar, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: August 8, 2019	By:	/s/ Dana Russell
		Dana Russell
		Chief Financial Officer and Executive Vice President
		(Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 01, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Trading Symbol	VSLR
Entity Registrant Name	Vivint Solar, Inc.
Entity Central Index Key	0001607716
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity File Number	1-36642
Entity Tax Identification Number	455605880
Entity Address, Address Line One	1800 West Ashton Blvd.
Entity Address, City or Town	Lehi
Entity Address, State or Province	UT
Entity Address, Postal Zip Code	84043
City Area Code	877
Local Phone Number	404-4129
Entity Common Stock, Shares Outstanding		121,619,161

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents		$ 198,951	$ 219,591
Accounts receivable, net		28,186	14,207
Inventories		13,071	13,257
Prepaid expenses and other current assets		30,783	31,201
Total current assets		270,991	278,256
Restricted cash and cash equivalents		78,567	71,305
Solar energy systems, net		1,637,905	1,938,874
Property and equipment, net		12,650	10,730
Other non-current assets, net		510,537	28,090
TOTAL ASSETS	[1]	2,510,650	2,327,255
Current liabilities:
Accounts payable		40,175	45,929
Distributions payable to non-controlling interests and redeemable non-controlling interests		11,221	7,846
Accrued compensation		24,545	25,520
Current portion of long-term debt		144,243	12,155
Current portion of deferred revenue		28,911	30,199
Current portion of finance lease obligation		1,089	1,921
Accrued and other current liabilities		53,557	42,860
Total current liabilities		303,741	166,430
Long-term debt, net of current portion		1,181,797	1,203,282
Deferred revenue, net of current portion		15,529	13,524
Finance lease obligation, net of current portion		2,807	505
Deferred tax liability, net		490,496	437,120
Other non-current liabilities		76,994	24,610
Total liabilities	[1]	2,071,364	1,845,471
Commitments and contingencies (Note 19)
Redeemable non-controlling interests		118,900	119,572
Stockholders’ equity:
Common stock, $0.01 par value—1,000,000 authorized, 121,606 shares issued and outstanding as of June 30, 2019; 1,000,000 authorized, 120,114 shares issued and outstanding as of December 31, 2018		1,216	1,201
Additional paid-in capital		582,338	574,248
Accumulated other comprehensive loss		(18,988)	(7,223)
Accumulated deficit		(334,595)	(279,631)
Total stockholders’ equity		229,971	288,595
Non-controlling interests		90,415	73,617
Total equity		320,386	362,212
TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY		$ 2,510,650	$ 2,327,255

[1] The assets of Vivint Solar, Inc. (the “Company”) as of June 30, 2019 and December 31, 2018 include $2,020.8 million and $1,835.8 million consisting of assets of variable interest entities, or VIEs, that can only be used to settle obligations of the VIEs. These assets include solar energy systems, net, of $1,478.5 million and $1,752.3 million as of June 30, 2019 and December 31, 2018; other non-current assets, net of $410.3 million and $10.9 million as of June 30, 2019 and December 31, 2018; cash and cash equivalents of $105.2 million and $62.4 million as of June 30, 2019 and December 31, 2018; accounts receivable, net, of $19.1 million and $6.6 million as of June 30, 2019 and December 31, 2018; restricted cash and cash equivalents of $5.4 million and $2.4 million as of June 30, 2019 and December 31, 2018; and prepaid expenses and other current assets of $2.3 million and $1.3 million as of June 30, 2019 and December 31, 2018. The Company’s liabilities as of June 30, 2019 and December 31, 2018 included $151.1 million and $80.8 million of liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include distributions payable to non-controlling interests and redeemable non-controlling interests of $11.2 million and $7.8 million as of June 30, 2019 and December 31, 2018; deferred revenue of $13.3 million and $12.0 million as of June 30, 2019 and December 31, 2018; long-term debt of $120.3 million and $55.0 million as of June 30, 2019 and December 31, 2018; accrued and other current liabilities of $5.5 million and $4.9 million as of June 30, 2019 and December 31, 2018; and other non-current liabilities of $0.7 million and $1.0 million as of June 30, 2019 and December 31, 2018. For further information see Note 14—Investment Funds.

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Common stock, par value		$ 0.01	$ 0.01
Common stock, shares authorized		1,000,000,000	1,000,000,000
Common stock, shares issued		121,606,000	120,114,000
Common stock, shares outstanding		121,606,000	120,114,000
Total assets	[1]	$ 2,510,650	$ 2,327,255
Solar energy systems, net		1,637,905	1,938,874
Cash and cash equivalents		198,951	219,591
Accounts receivable, net		28,186	14,207
Other non-current assets, net		510,537	28,090
Restricted cash and cash equivalents		78,567	71,305
Prepaid expenses and other current assets		30,783	31,201
Total liabilities	[1]	2,071,364	1,845,471
Distributions payable to non-controlling interests and redeemable non-controlling interests		11,221	7,846
Accrued and other current liabilities		53,557	42,860
Other non-current liabilities		76,994	24,610
Variable Interest Entities
Total assets		2,020,805	1,835,834
Solar energy systems, net		1,478,530	1,752,271
Cash and cash equivalents		105,175	62,350
Accounts receivable, net		19,082	6,593
Other non-current assets, net		410,322	10,888
Restricted cash and cash equivalents		5,405	2,443
Prepaid expenses and other current assets		2,291	1,289
Total liabilities		151,148	80,760
Distributions payable to non-controlling interests and redeemable non-controlling interests		11,221	7,846
Deferred revenue		13,300	12,000
Long-term debt		120,300	55,000
Accrued and other current liabilities		5,529	4,860
Other non-current liabilities		$ 745	$ 1,023

[1] The assets of Vivint Solar, Inc. (the “Company”) as of June 30, 2019 and December 31, 2018 include $2,020.8 million and $1,835.8 million consisting of assets of variable interest entities, or VIEs, that can only be used to settle obligations of the VIEs. These assets include solar energy systems, net, of $1,478.5 million and $1,752.3 million as of June 30, 2019 and December 31, 2018; other non-current assets, net of $410.3 million and $10.9 million as of June 30, 2019 and December 31, 2018; cash and cash equivalents of $105.2 million and $62.4 million as of June 30, 2019 and December 31, 2018; accounts receivable, net, of $19.1 million and $6.6 million as of June 30, 2019 and December 31, 2018; restricted cash and cash equivalents of $5.4 million and $2.4 million as of June 30, 2019 and December 31, 2018; and prepaid expenses and other current assets of $2.3 million and $1.3 million as of June 30, 2019 and December 31, 2018. The Company’s liabilities as of June 30, 2019 and December 31, 2018 included $151.1 million and $80.8 million of liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include distributions payable to non-controlling interests and redeemable non-controlling interests of $11.2 million and $7.8 million as of June 30, 2019 and December 31, 2018; deferred revenue of $13.3 million and $12.0 million as of June 30, 2019 and December 31, 2018; long-term debt of $120.3 million and $55.0 million as of June 30, 2019 and December 31, 2018; accrued and other current liabilities of $5.5 million and $4.9 million as of June 30, 2019 and December 31, 2018; and other non-current liabilities of $0.7 million and $1.0 million as of June 30, 2019 and December 31, 2018. For further information see Note 14—Investment Funds.

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue:
Total revenue	$ 90,757	$ 80,798	$ 160,128	$ 149,048
Cost of revenue:
Total cost of revenue	58,865	60,356	116,319	125,088
Gross profit	31,892	20,442	43,809	23,960
Operating expenses:
Sales and marketing	37,037	14,033	66,671	25,158
Research and development	524	511	993	997
General and administrative	31,205	22,009	54,254	41,996
Total operating expenses	68,766	36,553	121,918	68,151
Loss from operations	(36,874)	(16,111)	(78,109)	(44,191)
Interest expense, net	19,472	11,336	38,599	28,258
Other expense (income), net	1,365	(4,109)	2,750	(6,370)
Loss before income taxes	(57,711)	(23,338)	(119,458)	(66,079)
Income tax expense	29,950	35,352	57,437	53,995
Net loss	(87,661)	(58,690)	(176,895)	(120,074)
Net loss attributable to non-controlling interests and redeemable non-controlling interests	(59,094)	(76,806)	(122,086)	(125,214)
Net (loss attributable) income available to common stockholders	$ (28,567)	$ 18,116	$ (54,809)	$ 5,140
Net (loss attributable) income available per share to common stockholders:
Basic	$ (0.24)	$ 0.16	$ (0.45)	$ 0.04
Diluted	$ (0.24)	$ 0.15	$ (0.45)	$ 0.04
Weighted-average shares used in computing net (loss attributable) income available per share to common stockholders:
Basic	120,869	116,650	120,589	115,907
Diluted	120,869	121,753	120,589	120,969
Customer Agreements and Incentives
Revenue:
Total revenue	$ 63,355	$ 54,765	$ 102,958	$ 85,879
Cost of revenue:
Total cost of revenue	43,074	41,366	83,265	80,053
Solar Energy System and Product Sales
Revenue:
Total revenue	27,402	26,033	57,170	63,169
Cost of revenue:
Total cost of revenue	$ 15,791	$ 18,990	$ 33,054	$ 45,035

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Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net (loss attributable) income available to common stockholders	$ (28,567)	$ 18,116	$ (54,809)	$ 5,140
Other comprehensive loss:
Unrealized (losses) gains on cash flow hedging instruments (net of tax effect of $(2,675), $(223), $(4,452) and $1,171)	(7,292)	(602)	(12,175)	3,147
Less: Interest (expense) income on derivatives recognized into earnings (net of tax effect of $(64), $6,058, $(150) and $6,161)	(174)	16,277	(410)	16,555
Total other comprehensive loss	(7,118)	(16,879)	(11,765)	(13,408)
Comprehensive (loss) income	$ (35,685)	$ 1,237	$ (66,574)	$ (8,268)

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Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]
Unrealized losses on cash flow hedging instruments, tax	$ (2,675)	$ (223)	$ (4,452)	$ 1,171
Interest expense on derivatives recognized into earnings, tax	$ (64)	$ 6,058	$ (150)	$ 6,161

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Condensed Consolidated Statements of Redeemable Non-Controlling Interests and Equity - USD ($) shares in Thousands, $ in Thousands	Total	Redeemable Non-Controlling Interests	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive (Loss) Income	Retained Earnings (Accumulated Deficit)	Total Stockholders Equity	Non-Controlling Interests
Balance at Dec. 31, 2017	$ 861,066	$ 122,444	$ 1,151	$ 559,788	$ 6,905	$ 213,107	$ 780,951	$ 80,115
Balance (in Shares) at Dec. 31, 2017			115,099
Cumulative-effect adjustment from adoption of new ASUs	(473,828)				3,318	(477,146)	(473,828)
Stock-based compensation expense	6,781			6,781			6,781
Issuance of common stock, net	837		$ 34	803			837
Issuance of common stock, net (in shares)			3,378
Contributions from non-controlling interests and redeemable non-controlling interests	43,288	64,999						43,288
Distributions to non-controlling interests and redeemable non-controlling interests	(17,123)	(5,112)						(17,123)
Total other comprehensive loss	(13,408)				(13,408)		(13,408)
Net (loss) income	(60,390)	(59,684)				5,140	5,140	(65,530)
Balance at Jun. 30, 2018	347,223	122,647	$ 1,185	567,372	(3,185)	(258,899)	306,473	40,750
Balance (in Shares) at Jun. 30, 2018			118,477
Balance at Mar. 31, 2018	358,423	130,107	$ 1,153	562,962	13,694	(277,015)	300,794	57,629
Balance (in Shares) at Mar. 31, 2018			115,329
Stock-based compensation expense	3,812			3,812			3,812
Issuance of common stock, net	630		$ 32	598			630
Issuance of common stock, net (in shares)			3,148
Contributions from non-controlling interests and redeemable non-controlling interests	43,288	22,228						43,288
Distributions to non-controlling interests and redeemable non-controlling interests	(10,030)	(3,019)						(10,030)
Total other comprehensive loss	(16,879)				(16,879)		(16,879)
Net (loss) income	(32,021)	(26,669)				18,116	18,116	(50,137)
Balance at Jun. 30, 2018	347,223	122,647	$ 1,185	567,372	(3,185)	(258,899)	306,473	40,750
Balance (in Shares) at Jun. 30, 2018			118,477
Balance at Dec. 31, 2018	$ 362,212	119,572	$ 1,201	574,248	(7,223)	(279,631)	288,595	73,617
Balance (in Shares) at Dec. 31, 2018	120,114		120,114
Cumulative-effect adjustment from adoption of new ASUs	$ (155)					(155)	(155)
Stock-based compensation expense	7,835			7,835			7,835
Issuance of common stock, net	270		$ 15	255			270
Issuance of common stock, net (in shares)			1,492
Contributions from non-controlling interests and redeemable non-controlling interests	141,632	18,006						141,632
Distributions to non-controlling interests and redeemable non-controlling interests	(16,559)	(4,867)						(16,559)
Total other comprehensive loss	(11,765)				(11,765)		(11,765)
Net (loss) income	(163,084)	(13,811)				(54,809)	(54,809)	(108,275)
Balance at Jun. 30, 2019	$ 320,386	118,900	$ 1,216	582,338	(18,988)	(334,595)	229,971	90,415
Balance (in Shares) at Jun. 30, 2019	121,606		121,606
Balance at Mar. 31, 2019	$ 349,409	118,667	$ 1,206	577,961	(11,870)	(306,028)	261,269	88,140
Balance (in Shares) at Mar. 31, 2019			120,612
Stock-based compensation expense	4,156			4,156			4,156
Issuance of common stock, net	231		$ 10	221			231
Issuance of common stock, net (in shares)			994
Contributions from non-controlling interests and redeemable non-controlling interests	67,077	8,193						67,077
Distributions to non-controlling interests and redeemable non-controlling interests	(10,992)	(2,676)						(10,992)
Total other comprehensive loss	(7,118)				(7,118)		(7,118)
Net (loss) income	(82,377)	(5,284)				(28,567)	(28,567)	(53,810)
Balance at Jun. 30, 2019	$ 320,386	$ 118,900	$ 1,216	$ 582,338	$ (18,988)	$ (334,595)	$ 229,971	$ 90,415
Balance (in Shares) at Jun. 30, 2019	121,606		121,606

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (176,895)	$ (120,074)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	39,317	33,440
Deferred income taxes	57,678	54,173
Stock-based compensation	7,835	6,781
Loss on solar energy systems and property and equipment	4,157	3,025
Non-cash interest and other expense	3,302	13,656
Reduction in lease pass-through financing obligation	(2,032)	(2,164)
Losses (gains) on interest rate swaps	2,750	(1,279)
Changes in operating assets and liabilities:
Accounts receivable, net	(13,979)	(4,689)
Inventories	186	9,462
Prepaid expenses and other current assets	816	8,276
Other non-current assets, net	(64,632)	(6,613)
Accounts payable	516	1,898
Accrued compensation	(999)	(2,329)
Deferred revenue	717	(10,514)
Accrued and other liabilities	179	(1,915)
Net cash used in operating activities	(141,084)	(18,866)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for the cost of solar energy systems	(124,400)	(146,247)
Payments for property and equipment	(994)	(65)
Proceeds from disposals of solar energy systems and property and equipment	1,128	1,843
Purchase of intangible assets	(115)
Net cash used in investing activities	(124,381)	(144,469)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from investment by non-controlling interests and redeemable non-controlling interests	159,638	108,287
Distributions paid to non-controlling interests and redeemable non-controlling interests	(18,051)	(28,558)
Proceeds from long-term debt	133,164	876,000
Payments on long-term debt	(20,913)	(689,320)
Payments for debt issuance and deferred offering costs	(2,962)	(17,715)
Proceeds from lease pass-through financing obligation	1,518	1,497
Principal payments on finance lease obligations	(577)	(1,931)
Proceeds from issuance of common stock	270	837
Net cash provided by financing activities	252,087	249,097
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED AMOUNTS	(13,378)	85,762
CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED AMOUNTS—Beginning of period	290,896	154,938
CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED AMOUNTS—End of period	277,518	240,700
NONCASH INVESTING AND FINANCING ACTIVITIES:
Costs of solar energy systems included in changes in accounts payable, accrued compensation and accrued and other liabilities	43,028	(119)
Right-of-use assets obtained in exchange for new operating lease liabilities	8,665
Right-of-use assets obtained in exchange for new finance lease liabilities	$ 3,756	619
Solar energy system sales
NONCASH INVESTING AND FINANCING ACTIVITIES:
Receivable for state tax credits recorded as a reduction to solar energy system costs		$ 9

XML

Organization

6 Months Ended

Jun. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization

1. Organization

Vivint Solar, Inc. and its subsidiaries are collectively referred to as the “Company.” The Company most commonly offers solar energy to residential customers through long-term customer contracts, such as power purchase agreements (“PPAs”) and legal-form leases (“Solar Leases”). The Company also offers its customers the option to purchase solar energy systems (“System Sales”) through third-party loan offerings or a cash purchase. The Company enters into customer contracts through a sales organization that primarily uses a direct-to-home sales model. The long-term customer contracts under PPAs and Solar Leases are typically for 20 years and require the customer to make monthly payments to the Company.

The Company has formed various investment funds and entered into long-term debt facilities to monetize the recurring customer payments under its long-term customer contracts and investment tax credits (“ITCs”), accelerated tax depreciation and other incentives associated with residential solar energy systems. The Company uses the cash received from the investment funds, long-term debt facilities and cash generated from operations, including System Sales, to finance a portion of the Company’s variable and fixed costs associated with installing solar energy systems.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The unaudited condensed consolidated financial statements were prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments (all of which were considered of normal recurring nature) considered necessary to present fairly the Company’s financial results. The results of the six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2019 or for any other interim period or other future year.

The unaudited condensed consolidated financial statements reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. The Company uses a qualitative approach in assessing the consolidation requirement for VIEs. This approach focuses on determining whether the Company has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and whether the Company has the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. All of these determinations involve significant management judgments and estimates. The Company has determined that it is the primary beneficiary in the operational VIEs in which it has an equity interest. The Company evaluates its relationships with the VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. For additional information, see Note 14—Investment Funds.

Beginning with the first quarter of 2019, the condensed consolidated statements of operations items formerly captioned “Operating leases and incentives” and “Cost of revenue—operating leases and incentives” are now captioned “Customer agreements and incentives” and “Cost of revenue—customer agreements and incentives.” Also beginning with the first quarter of 2019, the condensed consolidated balance sheet items formerly captioned “Current portion of capital lease obligation” and “Capital lease obligation, net of current portion” are now captioned “Current portion of finance lease obligation” and “Finance lease obligation, net of current portion.” Amounts in these balance sheet items were capital leases under Accounting Standards Codification 840: Leases (“Topic 840”) in periods ending prior to January 1, 2019, while amounts in these balance sheet items are finance leases under Accounting Standards Codification 842: Leases (“Topic 842”) in periods ending subsequent to January 1, 2019. See “—Leases” below for further explanation of these changes.

Use of Estimates

The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company regularly makes significant estimates and assumptions including, but not limited to, ITCs; revenue recognition; solar energy systems, net; the impairment analysis of long-lived assets; stock-based compensation; the provision for income taxes; the valuation of derivative financial instruments; the recognition and measurement of loss contingencies; and non-controlling interests and redeemable non-controlling interests. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates.

Liquidity

In order to grow, the Company requires cash to finance the deployment of solar energy systems. As of the date of this filing, the Company will require additional sources of cash beyond current cash balances and currently available financing facilities to fund long-term planned growth. If the Company is unable to secure additional financing when needed, or upon desirable terms, the Company may be unable to finance installation of customers’ systems in a manner consistent with past performance, cost of capital could increase, or the Company may be required to significantly reduce the scope of operations, any of which would have a material adverse effect on its business, financial condition, results of operations and prospects. While the Company believes additional financing is available and will continue to be available to support current levels of operations, the Company believes it has the ability and intent to reduce operations to the level of available financial resources for at least the next 12 months from the date of this report, if necessary.

Performance Obligation—Solar Energy system and Product Sales

For certain System Sales, the Company provides limited post-sale services to monitor the productivity of the solar energy system for 20 years after it has been placed into service. The Company allocates a portion of the transaction price to the monitoring services by estimating the fair market price that the Company would charge for these services if offered separately from the sale of the solar energy system. As of June 30, 2019 and December 31, 2018, the Company had allocated deferred revenue of $4.0 million and $3.3 million to monitoring services that will be recognized over the term of the monitoring services.

Leases

The Company adopted Topic 842 and its subsequent updates effective January 1, 2019. These updates are intended to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the condensed consolidated balance sheets and disclosing key information about leasing arrangements. The Company utilized the additional transition method permitted by Accounting Standards Update (“ASU”) 2018-11 and adopted Topic 842 using a modified retrospective method with a cumulative-effect adjustment to its accumulated deficit as of January 1, 2019. As such, comparative periods ending prior to January 1, 2019 are presented in accordance with Topic 840 and periods ending after January 1, 2019 are presented in accordance with Topic 842. The impact to the accumulated deficit as a result of adopting ASU 2016-02 was a net reduction of approximately $0.2 million. The Company did not use the transitionary practical expedients allowed under Topic 842, and as such, the Company reassessed all contracts existing at the adoption date of January 1, 2019. The Company elected to treat leases with lease terms of 12 months or less as short-term leases. No right-of-use assets or lease liabilities are recognized for short-term leases. The Company has also elected not to separate lease components from non-lease components for all classes of leased assets except for building leases.

The adoption of this ASU resulted in right-of-use assets of $34.6 million related to operating leases being recognized in other non-current assets, net on the condensed consolidated balance sheets as of January 1, 2019. Corresponding lease liabilities of $43.8 million related to operating leases were recognized on the condensed consolidated balance sheets as of January 1, 2019, with the current portion recognized in accrued and other current liabilities and the long-term portion recognized in other non-current liabilities. In addition, at January 1, 2019, approximately $1.0 million of lease-related liabilities were removed from accrued and other current liabilities and approximately $8.2 million of lease-related liabilities were removed from other non-current liabilities and included as reductions to the initial operating lease right-of-use assets. As of January 1, 2019, finance lease right-of-use assets of $0.9 million continued to be recorded in property and equipment, net. Any changes in lease terms or estimates subsequent to adoption of the ASU 2016-02 are reflected in the right-of-use assets and lease liabilities.

The Company’s PPAs, Solar Leases, and associated rebates and incentives no longer meet the definition of a lease under Topic 842. Accordingly, they are accounted for in accordance with Accounting Standards Codification 606: Revenue from Contracts with Customers (“Topic 606”) beginning on January 1, 2019. The Company concluded that there was no change to its revenue recognition practices for its PPA revenue stream under Topic 606. For Solar Leases, the Company concluded that the impact of applying Topic 606 is immaterial. The Company also concluded that there was no material change related to the timing of revenue recognition for rebates and incentives under Topic 606. Upon the adoption of Topic 842, the Company no longer capitalizes initial direct costs and amortizes them to the respective cost of revenue line items. Instead, the Company now capitalizes costs of obtaining a contract which meet the “incremental” criteria defined in Accounting Standards Codification 340 to other non-current assets, net. These costs are now amortized over the period of benefit to sales and marketing expense on the condensed consolidated statements of operations. In accordance with the Company’s Topic 842 transition discussed above, no prior period amounts were changed.

For purposes of comparison, the following tables show how the balances as of December 31, 2018 and for the three and six months ended June 30, 2018 would have changed if the effects of adopting Topic 842 had been applied to those balances (in thousands):

	December 31, 2018							June 30, 2019
	As Reported		Adjustments			As Adjusted		As Reported
Solar energy systems, net	$	1,938,874	$	(388,087	)	$	1,550,787	$	1,637,905
Other non-current assets, net		28,090		388,087			416,177		510,537

	Three Months Ended June 30,
	2018							2019
	As Reported		Adjustments			As Adjusted		As Reported
Cost of revenue—customer agreements and incentives	$	41,366	$	(4,510	)	$	36,856	$	43,074
Cost of revenue—solar energy system and product sales		18,990		(4,397	)		14,593		15,791
Total cost of revenue		60,356		(8,907	)		51,449		58,865
Gross profit		20,442		8,907			29,349		31,892
Sales and marketing		14,033		8,907			22,940		37,037
Total operating expenses		36,553		8,907			45,460		68,766

	Six Months Ended June 30,
	2018							2019
	As Reported		Adjustments			As Adjusted		As Reported
Cost of revenue—customer agreements and incentives	$	80,053	$	(8,590	)	$	71,463	$	83,265
Cost of revenue—solar energy system and product sales		45,035		(10,254	)		34,781		33,054
Total cost of revenue		125,088		(18,844	)		106,244		116,319
Gross profit		23,960		18,844			42,804		43,809
Sales and marketing		25,158		18,844			44,002		66,671
Total operating expenses		68,151		18,844			86,995		121,918

Software Implementation Costs

The Company adopted ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, effective January 1, 2019.This update clarifies that entities should capitalize implementation costs incurred in cloud computing arrangements that are service contracts, which the Company will now record within other non-current assets, net. The Company will expense the capitalized costs over the term of the hosting arrangement. The service element of a hosting arrangement that is a service contract is not affected by this update, meaning service costs will continue to be expensed as incurred. The Company is applying the amendments in this update on a prospective basis beginning January 1, 2019. No prior periods were impacted as a result of adopting this ASU.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The objective of this update is to provide users of financial statements with more useful information by changing the incurred loss methodology for recognizing credit losses to a more forward-looking methodology that reflects expected credit losses. Under this ASU, the Company’s accounts receivable and certain contract assets are considered financial assets measured at an amortized cost basis and will need to be presented at the net amount expected to be collected. This ASU will be effective for the Company beginning on January 1, 2020 and will be applied through a modified retrospective approach with a cumulative-effect adjustment to retained earnings as of the first reporting period in which the guidance is effective. The Company is still evaluating the impact of this update on its condensed consolidated financial statements and related disclosures.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The Company measures and reports its cash equivalents at fair value. The following tables set forth the fair value of the Company’s financial assets and liabilities included on the condensed consolidated balance sheets measured on a recurring basis by level within the fair value hierarchy (in thousands):

	June 30, 2019
	Level 1		Level 2		Level 3		Total
Financial Liabilities
Interest rate swaps	$	—	$	29,833	$	—	$	29,833
	December 31, 2018
	Level 1		Level 2		Level 3		Total
Financial Assets
Interest rate swaps	$	—	$	130	$	—	$	130
Financial Liabilities
Interest rate swaps	$	—	$	11,146	$	—	$	11,146

The interest rate swaps (Level 2) were valued using a discounted cash flow model that incorporates an assessment of the risk of non-performance by the interest rate swap counterparties and the Company. The valuation model uses various observable inputs including contractual terms, interest rate curves, credit spreads and measures of volatility. Financial liabilities in the table above include interest rate swaps for the Aggregation Facility, which are not designated as hedges, and interest rate swaps for the Solar Asset Backed Notes, Series 2018-2, which are designated as hedges.

The carrying values and fair values of the Company’s long-term debt were as follows (in thousands):

	June 30, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Floating-rate long-term debt	$	712,071	$	712,071	$	587,358	$	587,358
Fixed-rate long-term debt		640,569		684,695		653,031		673,917
Total	$	1,352,640	$	1,396,766	$	1,240,389	$	1,261,275

The Company’s outstanding principal balance of long-term debt is carried at cost. The Company estimated the fair values of its floating-rate debt facilities (Level 2) to approximate their carrying values as interest accrues at floating rates based on market rates. The Company’s fixed-rate debt facilities (Level 2) were valued using quoted prices for the fixed rate debt facilities that are publicly traded, or quoted prices for corporate debt with similar terms for debt facilities that are not publicly traded.

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Inventories

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Inventories

4. Inventories

Inventories consisted of the following (in thousands):

	June 30,		December 31,
	2019		2018
Solar energy systems held for sale	$	12,202	$	12,321
Photovoltaic installation products		869		936
Total inventories	$	13,071	$	13,257

Solar energy systems held for sale are solar energy systems under construction that have yet to be interconnected to the power grid and that will be sold to customers. Solar energy systems held for sale are stated at the lower of cost, on a first-in, first-out basis, or net realizable value. Photovoltaic installation products are stated at the lower of cost, on an average cost basis, or net realizable value.

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Solar Energy Systems

6 Months Ended

Jun. 30, 2019

Solar Energy Systems Disclosure [Abstract]

Solar Energy Systems

5. Solar Energy Systems

Solar energy systems, net consisted of the following (in thousands):

	June 30,			December 31,
	2019			2018
System equipment costs	$	1,783,301		$	1,667,440
Initial direct costs related to solar energy systems		—			435,084
		1,783,301			2,102,524
Less: Accumulated depreciation		(175,784	)		(195,890	)
		1,607,517			1,906,634
Solar energy system inventory		30,388			32,240
Solar energy systems, net	$	1,637,905		$	1,938,874

Solar energy system inventory represents the solar components and materials used in the installation of solar energy systems prior to being installed on customers’ roofs. As such, no depreciation is recorded related to this line item. The Company recorded depreciation expense related to solar energy systems of $13.8 million and $16.1 million for the three months ended June 30, 2019 and 2018. The Company recorded depreciation expense related to solar energy systems of $26.9 million and $31.5 million for the six months ended June 30, 2019 and 2018. The Company did not record any initial direct costs or amortization of initial direct costs related to solar energy systems in 2019 due to the adoption of Topic 842. See Note 2—Summary of Significant Accounting Policies.

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Property and Equipment

6 Months Ended

Jun. 30, 2019

Property Plant And Equipment [Abstract]

Property and Equipment

6. Property and Equipment

Property and equipment, net consisted of the following (in thousands):

	Estimated	June 30,			December 31,
	Useful Lives	2019			2018
Leasehold improvements	1-12 years	$	10,645		$	10,560
Furniture and computer and other equipment	3 years		4,278			3,816
Vehicles acquired under finance leases	3-5 years		4,876			6,907
			19,799			21,283
Less: Accumulated depreciation and amortization			(7,149	)		(10,553	)
Property and equipment, net		$	12,650		$	10,730

The Company recorded depreciation and amortization expense related to property and equipment of $0.9 million and $1.3 million for the three months ended June 30, 2019 and 2018. The Company recorded depreciation and amortization expense related to property and equipment of $1.0 million and $3.0 million for the six months ended June 30, 2019 and 2018.

Effective January 1, 2019, the Company adopted Topic 842. As part of the adoption, the Company reassessed all contracts existing at the adoption date. The Company determined that a number of vehicle leases that were previously classified as capital leases under Topic 840 were no longer classified as finance leases under Topic 842. This resulted in a reduction to the gross asset and accumulated depreciation and amortization balances related to vehicles and will result in lower depreciation and amortization expense related to property and equipment compared to prior periods.

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Other Non-Current Assets

6 Months Ended

Jun. 30, 2019

Other Assets Noncurrent Disclosure [Abstract]

Other Non-Current Assets

7. Other Non-Current Assets

Other non-current assets consisted of the following (in thousands):

	June 30,			December 31,
	2019			2018
Costs to obtain contracts	$	500,969		$	—
Accumulated amortization of costs to obtain contracts		(58,273	)		—
Operating lease right-of-use assets		39,620			—
Sales incentives		9,963			8,588
Other non-current assets		18,258			19,502
Total other non-current assets	$	510,537		$	28,090

The Company recorded amortization of costs to obtain contracts of $7.4 million and $11.3 million for the three and six months ended June 30, 2019. Costs to obtain contracts are amortized over the initial terms of customer contracts, which are typically 20 years.

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Intangible Assets

6 Months Ended

Jun. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets

8. Intangible Assets

Net intangible assets are included in other non-current assets, net and consisted of the following (in thousands):

	June 30,			December 31,
	2019			2018
Cost:
Internal-use software	$	635		$	1,020
Developed technology		522			522
Trademarks/trade names		201			201
Total carrying value		1,358			1,743
Accumulated amortization:
Internal-use software		(365	)		(781	)
Developed technology		(360	)		(324	)
Trademarks/trade names		(109	)		(99	)
Total accumulated amortization		(834	)		(1,204	)
Total intangible assets, net	$	524		$	539

The Company recorded a de minimis amount and $0.1 million of amortization expense for the three months ended June 30, 2019 and 2018, which is included within general and administrative expense on the condensed consolidated statements of operations. The Company recorded amortization expense of $0.1 million and $0.3 million for the six months ended June 30, 2019 and 2018.

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Accrued Compensation

6 Months Ended

Jun. 30, 2019

Accrued Compensation Disclosure [Abstract]

Accrued Compensation

9. Accrued Compensation

Accrued compensation consisted of the following (in thousands):

	June 30,		December 31,
	2019		2018
Accrued payroll	$	12,663	$	16,352
Accrued commissions		11,882		9,168
Total accrued compensation	$	24,545	$	25,520

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Accrued and Other Current Liabilities

6 Months Ended

Jun. 30, 2019

Payables And Accruals [Abstract]

Accrued and Other Current Liabilities

10. Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following (in thousands):

	June 30,		December 31,
	2019		2018
Accrued unused commitment fees and interest	$	14,517	$	14,102
Current portion of operating lease liabilities		7,398		—
Accrued professional fees		6,575		6,150
Current portion of lease pass-through financing obligation		5,094		5,038
Accrued workers' compensation		4,777		4,033
Workmanship accrual		3,596		2,630
Accrued inventory		3,286		4,380
Sales, use and property taxes payable		2,872		3,132
Other accrued expenses		5,442		3,395
Total accrued and other current liabilities	$	53,557	$	42,860

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Debt Obligations

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Debt Obligations

11. Debt Obligations

Debt obligations consisted of the following as of June 30, 2019 (in thousands, except interest rates):

	Principal		Unamortized Debt										Unused
	Borrowings		Issuance Costs						Net Carrying Value				Borrowing		Interest			Maturity
	Outstanding		Current			Long-term			Current		Long-term		Capacity		Rate			Date
Solar asset backed notes, Series 2018-1(1)	$	454,100	$	(76	)	$	(8,796	)	$	3,919	$	441,309	$	—		5.1	%	October 2028
Solar asset backed notes, Series 2018-2(2)(3)		339,383		(6	)		(6,775	)		294		332,308		—		5.5		August 2023
2017 Term loan facility		185,194		(167	)		(4,429	)		6,740		173,858		—		6.0		January 2035
2018 Forward flow loan facility		112,501		(66	)		(3,231	)		2,174		107,030		17,499		4.7		(4)
2019 Forward flow loan facility		14,087		—			(2,946	)		—		11,141		135,913		5.2		(5)
Credit agreement		1,275		(2	)		(106	)		16		1,151		—		6.5		February 2023
Revolving lines of credit(6)
Aggregation facility		115,000		—			—			—		115,000		260,000		5.6		September 2020
Working capital facility(7)		131,100		—			—			131,100		—		—		5.7		March 2020
Total debt	$	1,352,640	$	(317	)	$	(26,283	)	$	144,243	$	1,181,797	$	413,412

Debt obligations consisted of the following as of December 31, 2018 (in thousands, except interest rates):

	Principal		Unamortized Debt										Unused
	Borrowings		Issuance Costs						Net Carrying Value				Borrowing		Interest			Maturity
	Outstanding		Current			Long-term			Current		Long-term		Capacity		Rate			Date
Solar asset backed notes, Series 2018-1(1)	$	462,826	$	(74	)	$	(9,172	)	$	3,655	$	449,925	$	—		5.1	%	October 2028
Solar asset backed notes, Series 2018-2(2)(3)		342,833		(6	)		(7,388	)		294		335,145		—		5.4		August 2023
2017 Term loan facility		188,922		(170	)		(4,614	)		6,679		177,459		—		6.0		January 2035
2018 Forward flow loan facility		58,425		(43	)		(3,365	)		1,512		53,505		71,575		5.2		(4)
Credit agreement		1,283		(2	)		(118	)		15		1,148		—		6.5		February 2023
Revolving lines of credit(6)
Aggregation facility		50,000		—			—			—		50,000		325,000		5.7		September 2020
Working capital facility(7)		136,100		—			—			—		136,100		—		5.6		March 2020
Total debt	$	1,240,389	$	(295	)	$	(24,657	)	$	12,155	$	1,203,282	$	396,575

(1) The interest rate disclosed in the table above is a weighted-average rate. The Series 2018-1 Notes are comprised of Class A and Class B Notes. Class A Notes accrue interest at 4.73%. Class B Notes accrue interest at 7.37%.

(2) The Series 2018-2 Notes are comprised of Class A and Class B Notes. Class B Notes accrue interest at a rate of LIBOR plus 4.75%. Class A Notes accrue interest at a variable spread over LIBOR that results in a weighted average spread for all 2018-2 Notes of 2.95%.

(3) The interest rate of these notes is partially hedged to an effective interest rate of 6.0% for $325.2 million of the principal borrowings. See Note 13—Derivative Financial Instruments.

(4) The maturity date for this facility is 20 years from the end date of the borrowing availability period when all borrowings are aggregated into one term loan, which will be no later than October 31, 2019.

(5) The maturity date for this facility is 20 years from the end date of the borrowing availability period when all borrowings are aggregated into one term loan, which will be no later than November 20, 2020.

(6) Revolving lines of credit are not presented net of unamortized debt issuance costs.

(7) This facility is recourse debt, which refers to debt that is collateralized by the Company’s general assets. All of the Company’s other debt obligations are non-recourse, which refers to debt that is only collateralized by specified assets or subsidiaries of the Company.

The Company’s debt facilities include customary events of default, conditions to borrowing and covenants, including covenants that restrict, subject to certain exceptions, the Company’s ability to incur indebtedness, incur liens, make investments, make fundamental changes to its business, dispose of assets, make certain types of restricted payments or enter into certain related party transactions. Additionally, the Company is required to maintain certain financial measurements and interest rate swaps for certain debt facilities. These restrictions do not impact the Company’s ability to enter into investment funds, including those that are similar to those entered into previously. The Company’s debt facilities are secured by net cash flows from long-term customer contracts. The Company was in compliance with all debt covenants as of June 30, 2019.

Solar Asset Backed Notes, Series 2018-1

In June 2018, a wholly owned subsidiary of the Company issued an aggregate principal amount of $400.0 million of Solar Asset Backed Notes, Series 2018-1, Class A (the “2018-1 Class A Notes”) and an aggregate principal amount of $66.0 million of Solar Asset Backed Notes, Series 2018-1, Class B (the “2018-1 Class B Notes” and together with the 2018-1 Class A Notes, the “2018-1 Notes”). The 2018-1 Class A Notes accrue interest at a fixed rate of 4.73% and have an anticipated repayment date of October 30, 2028. The 2018-1 Class B Notes accrue interest at a fixed rate of 7.37% and have an anticipated repayment date of October 30, 2028.

In addition to customary events of default and covenants, the 2018-1 Notes are subject to unscheduled prepayment events that generally are customary in nature for solar securitizations of this type, including (1) asset coverage ratios falling below certain levels, (2) a debt service coverage ratio falling below certain levels, (3) the failure to maintain insurance, and (4) the failure to repay the notes in full prior to the anticipated repayment date for such class of notes. The occurrence of an unscheduled prepayment event or an event of default could result in the more rapid repayment of the 2018-1 Notes, and the occurrence of an event of default could, in certain instances, result in the liquidation of the collateral securing the 2018-1 Notes. The 2018-1 Notes are secured by, and payable solely from the cash flow generated by the membership interests in certain indirectly owned subsidiaries of the Company, each of which subsidiaries is the managing member of a project company that owns a pool of photovoltaic systems and related Solar Leases and PPAs and ancillary rights and agreements that were originated by a wholly owned subsidiary of the Company. As of June 30, 2019, the Company had $15.0 million in required reserves outstanding in collateral accounts with the administrative agent, which are included in restricted cash and cash equivalents.

Solar Asset Backed Notes, Series 2018-2

In June 2018, a wholly owned subsidiary of the Company issued an aggregate principal amount of $296.0 million of Solar Asset Backed Notes, Series 2018-2, Class A (the “2018-2 Class A Notes”) and an aggregate principal amount of $49.0 million of Solar Asset Backed Notes, Series 2018-2, Class B (the “2018-2 Class B Notes” and together with the 2018-2 Class A Notes, the “2018-2 Notes”). The 2018-2 Class A Notes accrue interest at a variable spread over the London Interbank Offered Rate (“LIBOR”) that is intended to result in a weighted average spread for all 2018-2 Notes of 2.95%. The 2018-2 Class B Notes accrue interest at a spread over LIBOR of 4.75% or, if no 2018-2 Class A Notes are outstanding, 2.95%. The Company entered into an interest rate swap concurrent with the issuance of the 2018-2 Notes that results in an implied all-in interest rate of approximately 5.95%. See Note 13—Derivative Financial Instruments. The 2018-2 Notes have a stated maturity of August 29, 2023.

The 2018-2 Notes have the same events of default, covenants and unscheduled prepayment events as the 2018-1 Notes. In addition, the 2018-2 Notes are subject to unscheduled prepayment events relating to certain change of control events and certain liquidity requirements. As of June 30, 2019, the Company had $24.7 million in required reserves outstanding in collateral accounts with the administrative agent, which are included in restricted cash and cash equivalents.

2016 Term Loan Facility

In June 2018, the Company used proceeds from the issuance of the 2018-1 Notes and 2018-2 Notes to pay off the outstanding balance of $282.3 million on the credit facility entered into by a wholly owned subsidiary of the Company in August 2016 (the “2016 Term Loan Facility”) and terminated the credit agreement. At termination, the outstanding balance was composed of $281.8 million of principal and $0.5 million of accrued interest. The termination of the 2016 Term Loan Facility was accounted for as a debt extinguishment. As such, the remaining $6.9 million of unamortized debt issuance costs related to the 2016 Term Loan Facility were recognized in interest expense during the year ended December 31, 2018. There was no prepayment fee associated with the termination of the 2016 Term Loan Facility.

Subordinated HoldCo Facility

In June 2018, the Company used proceeds from the issuance of the 2018-1 Notes and 2018-2 Notes to pay off the outstanding balance of $206.4 million on the credit facility entered into by a wholly owned subsidiary of the Company in March 2016 (the “Subordinated HoldCo Facility”) and terminated the financing agreement. At termination, the outstanding balance was composed of $196.6 million of principal, $3.9 million of accrued interest, and a prepayment fee of $5.9 million, which was calculated as 3.0% of the outstanding principal balance. The termination of the Subordinated HoldCo Facility was accounted for as a debt extinguishment. As such, the remaining $2.9 million of unamortized debt issuance costs related to the Subordinated HoldCo Facility were recognized in interest expense during the year ended December 31, 2018. The prepayment fee of $5.9 million was also recognized in interest expense during the year ended December 31, 2018.

2017 Term Loan Facility

In January 2017, a wholly owned subsidiary of the Company entered into a long-term fixed rate credit agreement (the “2017 Term Loan Facility”). Interest on borrowings accrues at an annual fixed rate equal to 6.0% and is payable in arrears. Certain principal payments are due on a quarterly basis, subject to the occurrence of certain events. As of June 30, 2019, the Company had $19.9 million in required reserves outstanding in collateral accounts with the administrative agent, which were included in restricted cash and cash equivalents.

2018 Forward Flow Loan Facility

In August 2018, a subsidiary that is indirectly owned by the Company together with investors, entered into a loan agreement (the “2018 Forward Flow Loan Facility”, formerly known as the “Forward Flow Loan Facility”) pursuant to which the Company may borrow up to an aggregate principal amount of $130.0 million. The Company may make multiple borrowings under the 2018 Forward Flow Loan Facility during the availability period, which will continue no later than October 31, 2019. After the availability period, all outstanding loans under the 2018 Forward Flow Loan Facility will be aggregated into a single term loan with a maturity date 20 years after the date of aggregation. Interest on each loan will accrue at an annual rate equal to the U.S. swap rate for the weighted-average life of such loan, plus an applicable margin equal to the greater of (a) 1.9% plus a spread adjustment based on the risk premium on the borrowing date relative to the market index-based risk premium on the closing date and (b) 1.5%. Scheduled principal payments are due on a quarterly basis, at the end of January, April, July and October of each year. Upon the occurrence of certain events, the Company will be required to make prepayments of the loans, including payment of a make-whole amount in certain circumstances. As of June 30, 2019, the Company had $4.7 million in required reserves outstanding in collateral accounts with the administrative agent, which were included in restricted cash and cash equivalents.

2019 Forward Flow Loan Facility

In May 2019, a subsidiary that is indirectly owned by the Company together with investors, entered into a loan agreement (the “2019 Forward Flow Loan Facility”) pursuant to which the Company may borrow up to an aggregate principal amount of $150.0 million. The Company may make multiple borrowings under the 2019 Forward Flow Loan Facility during the availability period, which will continue no later than November 20, 2020. After the availability period, all outstanding loans under the 2019 Forward Flow Loan Facility will be aggregated into a single term loan with a maturity date 20 years after the date of aggregation. On any anniversary of the date of aggregation occurring from and after the sixth such anniversary, upon notice to the lenders, the Company may borrow additional loans under the 2019 Forward Flow Loan Facility if the Company is projected to have sufficient net cash flow to service such additional debt. If any lender declines to fund such additional loans, the Company will have the right to prepay outstanding loans from such lender in an amount equal to 102.5% of such loans, plus accrued and unpaid interest, without any make-whole amount. Interest on each loan will accrue at an annual rate equal to the greater of (a) 4.70% and (b) the U.S. Treasury rate for the weighted-average life of such loan, plus an applicable margin equal to 2.35%. Scheduled principal payments are due on a quarterly basis, at the end of January, April, July and October of each year. Upon the occurrence of certain events, the Company will be required to make prepayments of the loans, including payment of a make-whole amount in certain circumstances. As of June 30, 2019, the Company had $0.7 million in required reserves outstanding in collateral accounts with the administrative agent, which were included in restricted cash and cash equivalents.

Credit Agreement

In February 2016, a wholly owned subsidiary of the Company entered into a fixed rate credit agreement (the “Credit Agreement”). Principal and interest payments under the Credit Agreement are paid quarterly over the term of the loan. Interest accrues on borrowings at a fixed rate of 6.50%.

Aggregation Facility

In September 2014, a wholly owned subsidiary of the Company entered into an aggregation credit facility (as amended, the “Aggregation Facility”), pursuant to which the Company may borrow up to an aggregate of $375.0 million and, upon the satisfaction of certain conditions and the approval of the lenders, up to an additional aggregate of $175.0 million in borrowings. Prepayments are permitted under the Aggregation Facility. Under the Aggregation Facility, interest on borrowings accrues at a floating rate equal to either (1)(a) LIBOR or (b) the greatest of (i) the Federal Funds Rate plus 0.5%, (ii) the administrative agent’s prime rate and (iii) LIBOR plus 1% and (2) a margin that varies between 3.25% during the period during which the Company may incur borrowings and 3.75% after such period. As of June 30, 2019, the Company had $3.5 million in required reserves outstanding in collateral accounts with the administrative agent, which were included in restricted cash and cash equivalents.

Working Capital Facility

In March 2015, a wholly owned subsidiary of the Company entered into a revolving credit agreement (the “Working Capital Facility”) pursuant to which the Company may borrow up to an aggregate principal amount of $150.0 million from certain financial institutions. In addition to the outstanding borrowings as of June 30, 2019, the Company had established letters of credit under the Working Capital Facility for up to $18.9 million related to insurance and retail contracts. Prepayments are permitted under the Working Capital Facility. Interest accrues on borrowings at a floating rate equal to, depending on the type of borrowing, (1) a rate equal to the Eurodollar Rate for the interest period divided by one minus the Eurodollar Reserve Percentage, plus a margin of 3.25%; or (2) the highest of (a) the Federal Funds Rate plus 0.50%, (b) the Citibank prime rate and (c) the one-month interest period Eurodollar rate plus 1.00%, plus a margin of 2.25%. Interest is payable depending on the type of borrowing at the end of (1) the interest period that the Company may elect as a term, not to exceed three months, (2) quarterly or (3) at maturity of the Working Capital Facility. The Company is required to maintain $30.0 million in cash and cash equivalents and certain investments as of the last day of each quarter. As of June 30, 2019, the Company was in compliance with such covenants.

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Leases

6 Months Ended

Jun. 30, 2019

Lessee Disclosure [Abstract]

Leases

12. Leases

The Company is the lessee in all of its lease arrangements. The Company did not enter into any leases with related parties during the presented periods. The Company makes significant assumptions and judgments when assessing contracts for lease components, determining lease classifications and calculating right-of-use asset and lease liability values. These assumptions and judgements may include the useful lives and fair values of the leased assets, the implicit rate underlying the Company’s leases, the Company’s incremental borrowing rate or the Company’s intent to exercise or not exercise options available in lease contracts. Lease costs and other information consisted of the following (in thousands, except terms and rates):

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$	366		$	660
Interest on lease liabilities		58			84
Operating lease cost		2,770			5,540
Short-term lease cost		579			1,301
Total lease cost	$	3,773		$	7,585
Other information
Finance leases:
Operating cash outflows from finance leases	$	58		$	84
Financing cash outflows from finance leases	$	306		$	577
Right-of-use assets obtained in exchange for new finance lease liabilities	$	2,703		$	3,756
Weighted-average remaining lease term - finance leases (in years)		3.6			3.6
Weighted-average discount rate - finance leases		7.7	%		7.7	%
Operating leases:
Operating cash outflows from operating leases	$	2,809		$	5,635
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,755		$	8,665
Weighted-average remaining lease term - operating leases (in years)		9.4			9.4
Weighted-average discount rate - operating leases		8.0	%		8.0	%

Finance Leases

The Company’s finance leases relate to fleet vehicles. All of the Company’s fleet vehicles are leased pursuant to master lease agreements for a period of three to five years. The master lease agreements allow for the Company to extend fleet vehicle leases on a month-to-month basis. For administrative convenience, the Company will often commit to extension periods of up to one year. As the extensions are not always utilized and are not contractually bound to a specific period of time, these extensions are not included in the initial right-of-use assets and lease liabilities. Instead, these extensions are treated as new leases. The master lease agreements stipulate minimum residual value guarantees that are not typically recognized as part of the Company’s right-of use assets and lease liabilities as these residual value guarantees are not probable of being owed. The rates implicit in the Company’s fleet vehicle finance leases are determinable, and the Company uses those rates to calculate the present value of its lease liabilities related to fleet vehicles.

Future minimum lease payments for the Company’s finance leases as of June 30, 2019 were as follows (in thousands):

2019	$	742
2020		1,171
2021		1,147
2022		1,038
2023		346
Thereafter		—
Total minimum lease payments		4,444
Less: interest		548
Present value of finance lease obligations		3,896
Less: current portion		1,089
Long-term portion	$	2,807

Operating Leases

The Company has entered into lease agreements for offices, warehouses and related equipment located in states in which the Company conducts operations. The Company’s corporate office lease was amended in February 2019 to extend the term by an additional three years, for a total lease term of 15 years. The corporate office lease includes options to extend the lease term for two additional periods of five years. The Company’s warehouse lease agreements range from a term of two to nine years, including exercised options to extend, with five years being the most common lease term. The warehouse lease agreements typically include options to extend the lease term. The Company’s operating lease agreements typically do not include purchase options. The Company includes lease extension options in the right-of-use asset and lease liability when the Company is reasonably certain it will exercise the options. The Company’s equipment lease agreements range from three to five years. The rates implicit in the Company’s operating leases are not readily determinable. As such, the Company uses its incremental borrowing rate to calculate the present value of its operating lease liabilities.

For all non-cancellable lease arrangements, there are no bargain renewal options, penalties for failure to renew, or any guarantee by the Company of the lessor’s debt or a loan from the Company to the lessor related to the leased property.

Future minimum lease payments under non-cancellable operating leases as of June 30, 2019 were as follows (in thousands):

2019	$	5,600
2020		10,195
2021		7,893
2022		5,806
2023		4,781
Thereafter		36,680
Total minimum lease payments		70,955
Less: present value impact		22,259
Present value of operating lease obligations		48,696
Less: current portion		7,398
Long-term portion	$	41,298

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

13. Derivative Financial Instruments

Derivative financial instruments at fair value consisted of the following (in thousands):

	June 30, 2019
	Fair Value		Balance Sheet Location
Derivatives designated as hedging instruments:
Interest rate swaps	$	25,951	Other non-current liabilities
Derivatives not designated as hedging instruments:
Interest rate swaps	$	3,882	Other non-current liabilities

	December 31, 2018
	Fair Value		Balance Sheet Location
Derivatives designated as hedging instruments:
Interest rate swaps	$	9,884	Other non-current liabilities
Derivatives not designated as hedging instruments:
Interest rate swaps	$	1,262	Other non-current liabilities
Interest rate swaps	$	130	Other non-current assets

The Company is exposed to interest rate risk relating to its outstanding debt facilities that have variable interest rates. In connection with the March 2017 amendment of the Aggregation Facility, the Company is required to maintain interest rate swaps on a portion of the outstanding loan balance of the Aggregation Facility. As of June 30, 2019, the Company had entered into interest rate swaps with an aggregate notional amount of $40.0 million. The interest rate swaps terminate when the Aggregation Facility matures in September 2020. The Company did not designate these interest rate swaps as hedge instruments and accounts for any changes in fair value in other expense (income), net.

In connection with the 2018-2 Notes, the Company entered into interest rate swaps to offset changes in the variable interest rate for a portion of these notes. As of June 30, 2019, the notional amount of these interest rate swaps was $325.2 million. The notional amount of the interest rate swaps decreases through the maturity of the 2018-2 Notes, similar to the Company’s estimated semi-annual principal payments on the 2018-2 Notes through August 2023. The interest rate swaps are designated as cash flow hedges, and unrealized gains or losses are recorded in other comprehensive income (“OCI”). The amount of accumulated other comprehensive (loss) income (“AOCI”) expected to be reclassified to interest expense within the next 12 months is approximately $3.3 million. The Company will discontinue the hedge accounting designation of these derivatives if interest payments on LIBOR-indexed floating rate loans compared to the payments under the derivatives are no longer highly effective.

The Company records derivatives at fair value. The losses (gains) on derivatives designated as cash flow hedges recognized in OCI, before tax effect, consisted of the following (in thousands):

	Three Months Ended June 30,
	2019		2018
Derivatives designated as cash flow hedges:
Interest rate swaps	$	9,967	$	825

	Six Months Ended June 30,
	2019		2018
Derivatives designated as cash flow hedges:
Interest rate swaps	$	16,627	$	(4,318	)

The losses (gains) on derivative financial instruments recognized in the condensed consolidated statements of operations, before tax effect, consisted of the following (in thousands):

	Three Months Ended June 30,
	2019				2018
	Interest expense, net		Other expense (income), net		Interest expense, net			Other expense (income), net
Total amounts presented in the income statement line items	$	19,472	$	1,365	$	11,336		$	(4,109	)
Derivatives designated as cash flow hedges:
Interest rate swaps
Losses (gains) reclassified from AOCI into income	$	238	$	—	$	(22,335	)	$	—
Derivatives not designated as hedging instruments:
Interest rate swaps
Losses (gains) recognized in income		—		1,366		—			(1,990	)
Total losses (gains)	$	238	$	1,366	$	(22,335	)	$	(1,990	)

	Six Months Ended June 30,
	2019				2018
	Interest expense, net		Other expense (income), net		Interest expense, net			Other expense (income), net
Total amounts presented in the income statement line items	$	38,599	$	2,750	$	28,258		$	(6,370	)
Derivatives designated as cash flow hedges:
Interest rate swaps
Losses (gains) reclassified from AOCI into income	$	560	$	—	$	(22,716	)	$	—
Derivatives not designated as hedging instruments:
Interest rate swaps
Losses (gains) recognized in income		—		2,750		—			(4,252	)
Total losses (gains)	$	560	$	2,750	$	(22,716	)	$	(4,252	)

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Investment Funds

6 Months Ended

Jun. 30, 2019

Summarized Financial Data Of Subsidiary [Abstract]

Investment Funds

14. Investment Funds

The Company has formed investment funds for the purpose of funding the purchase of solar energy systems under long-term customer contracts. As of June 30, 2019 and December 31, 2018, the aggregate carrying value of these funds’ assets and liabilities (after elimination of intercompany transactions and balances) in the Company’s condensed consolidated balance sheets were as follows (in thousands):

	June 30,		December 31,
	2019		2018
Assets
Current assets:
Cash and cash equivalents	$	105,175	$	62,350
Accounts receivable, net		19,082		6,593
Prepaid expenses and other current assets		2,291		1,289
Total current assets		126,548		70,232
Restricted cash and cash equivalents		5,405		2,443
Solar energy systems, net		1,478,530		1,752,271
Other non-current assets, net		410,322		10,888
Total assets	$	2,020,805	$	1,835,834
Liabilities
Current liabilities:
Distributions payable to non-controlling interests and redeemable    non-controlling interests	$	11,221	$	7,846
Current portion of long-term debt		2,174		1,512
Current portion of deferred revenue		2,328		2,320
Accrued and other current liabilities		5,529		4,860
Total current liabilities		21,252		16,538
Long-term debt, net of current portion		118,171		53,505
Deferred revenue, net of current portion		10,980		9,694
Other non-current liabilities		745		1,023
Total liabilities	$	151,148	$	80,760

Under the fund agreements, cash distributions of income and other receipts by the funds, net of agreed-upon expenses and estimated expenses, tax benefits and detriments of income and loss, and tax benefits of tax credits, are assigned to the fund investors and the Company’s subsidiaries as specified in contractual arrangements. As such, the cash held in investment funds is not readily available to the Company due to the timing of distributions. Certain of these fund arrangements have call and put options to acquire the investor’s equity interest as specified in the contractual agreements. Once the investor’s equity interest is acquired by the Company, the assets, liabilities and operations of the investment fund become wholly owned and no longer require an assessment of non-controlling interests.

Fund investors for three of the funds are managed indirectly by The Blackstone Group L.P. (the “Sponsor”) and are considered related parties. As of June 30, 2019 and December 31, 2018, the cumulative total of contributions into the VIEs by all investors was $1,725.0 million and $1,565.3 million. Of these contributions, a cumulative total of $110.0 million was contributed by related parties in prior periods. A third-party provider has agreed to perform backup maintenance services for all funds, if necessary.

Lease Pass-Through Financing Obligation

During 2015, a wholly owned subsidiary of the Company entered into a lease pass-through fund arrangement under which the Company contributed solar energy systems and the investor contributed cash. The net carrying value of the related solar energy systems was $44.8 million and $55.8 million as of June 30, 2019 and December 31, 2018.

The Company accounts for the residual of the large upfront payments, net of amounts allocated to the ITCs, and subsequent periodic payments received from the fund investor as a borrowing by recording the proceeds received as a lease pass-through financing obligation, which will be repaid through customer payments that will be received by the investor. Under this approach, the Company continues to account for the arrangement with the customers in its condensed consolidated financial statements, whether the cash generated from the customer arrangements is received by the Company’s wholly owned subsidiary or paid directly to the fund investor. A portion of the amounts received by the fund investor from customer payments is applied to reduce the lease pass-through financing obligation, and the balance is allocated to interest expense. The customer payments are recognized into revenue based on cash receipts during the period as required by GAAP. Interest is calculated on the lease pass-through financing obligation using the effective interest rate method. The effective interest rate is the interest rate that equates the present value of the cash amounts to be received by a fund investor over the master lease term with the present value of the cash amounts paid by the investor to the Company, adjusted for any payments made by the Company. Any additional master lease prepayments by the investor would be recorded as an additional lease pass-through financing obligation, while any refunds of master lease prepayments would reduce the lease pass-through financing obligation.

The lease pass-through financing obligation is nonrecourse. As of June 30, 2019 and December 31, 2018, the Company had recorded financing liabilities of $5.1 million and $5.3 million related to this fund arrangement, which represent the lease pass-through financing obligation recorded in other liabilities.

Guarantees

With respect to the investment funds, the Company and the fund investors have entered into guaranty agreements under which the Company guarantees the performance of certain financial obligations of its subsidiaries to the investment funds. These guarantees do not result in the Company being required to make payments to the fund investors unless such payments are mandated by the investment fund governing documents and the investment fund fails to make such payment. Each of the Company’s investment funds and financing subsidiaries maintains separate books and records from each other and from the Company. The assets of each investment fund are not available to satisfy the debts or obligations of any other investment fund, subsidiary or the Company.

The Company is contractually obligated to make certain VIE investors whole for losses that the investors may suffer in certain limited circumstances resulting from the disallowance or recapture of ITCs. The Company has concluded that the likelihood of a significant recapture event is remote and consequently has not recorded any liability in the condensed consolidated financial statements for any potential recapture exposure. The maximum potential future payments that the Company could have to make under this obligation would depend on the Internal Revenue Service (“IRS”) successfully asserting upon audit that the fair market values of the solar energy systems sold or transferred to the funds as determined by the Company exceeded the allowable basis for the systems for purposes of claiming ITCs. The fair market values of the solar energy systems and related ITCs are determined and the ITCs are allocated to the fund investors in accordance with the funds’ governing agreements. Due to uncertainties associated with estimating the timing and amounts of distributions, the likelihood of an event that may trigger repayment, forfeiture or recapture of ITCs to such investors, and the fact that the Company cannot determine how the IRS will evaluate system values used in claiming ITCs, the Company cannot determine the potential maximum future payments that are required under these guarantees. As of June 30, 2019, the Company has not made any payments under these guarantees. However, several recent investment funds, the 2018-1 Notes and the 2018-2 Notes have required the Company to prepay insurance premiums to cover the risk of ITC recapture. The Company amortizes this prepaid insurance expense over the ITC recapture period. The Company had prepaid insurance balances of $8.1 million and $8.3 million as of June 30, 2019 and December 31, 2018.

From time to time, the Company incurs fees for non-performance, which non-performance may include, but is not limited to, delays in the installation process and interconnection to the power grid of solar energy systems and other factors. Based on the terms of the investment fund agreements, the Company will either reimburse a portion of the fund investor’s capital or pay the fund investor a non-performance fee. No distributions were paid to reimburse fund investors during the three and six months ended June 30, 2019. As of June 30, 2019, no accrual for additional distributions was required.

As a result of the guaranty arrangements in certain funds, the Company was required to hold a minimum cash balance of $10.0 million as of June 30, 2019 and December 31, 2018, which is classified as restricted cash and cash equivalents.

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Redeemable Non-Controlling Interests and Equity

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Redeemable Non-Controlling Interests and Equity

15. Redeemable Non-Controlling Interests and Equity

Common Stock

The Company had shares of common stock reserved for issuance as follows (in thousands):

	June 30,		December 31,
	2019		2018
Shares available for grant under equity incentive plans		13,544		13,323
Restricted stock units issued and outstanding		7,284		6,172
Stock options issued and outstanding		5,373		3,394
Long-term incentive plan		2,706		2,706
Total		28,907		25,595

Redeemable Non-Controlling Interests and Non-Controlling Interests

Seven of the investment funds include a right for the non-controlling interest holder to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund (each, a “Put Option”). The purchase price for the fund investor’s interest in the seven investment funds under the Put Options is the greater of fair market value at the time the option is exercised and a specified amount, ranging from $2.1 million to $4.1 million. The Put Options for these seven investment funds are exercisable beginning on the date that specified conditions are met for each respective fund. The first of the Put Options are expected to become exercisable beginning in the second quarter of 2021.

Because the Put Options represent redemption features that are not solely within the control of the Company, the non-controlling interests in these investment funds are presented outside of permanent equity. Redeemable non-controlling interests are recorded using the greater of their carrying value at each reporting date (which is impacted by attribution under the hypothetical liquidation at book value (“HLBV”) method) or their estimated redemption value in each reporting period.

In all investment funds except one, the Company’s wholly owned subsidiary has the right to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary (each, a “Call Option”). The purchase price for the fund investors’ interests under the Call Options varies by fund, but is generally the greater of a specified amount, which ranges from approximately $1.2 million to $7.0 million, the fair market value of such interest at the time the option is exercised, or an amount that causes the fund investor to achieve a specified return on investment. The Call Options are exercisable beginning on the date that specified conditions are met for each respective fund. The first of the Call Options are expected to become exercisable beginning in the third quarter of 2020.

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Equity Compensation Plans

6 Months Ended

Jun. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Equity Compensation Plans

16. Equity Compensation Plans

Equity Incentive Plans

2014 Equity Incentive Plan

The Company currently grants equity awards through its 2014 Equity Incentive Plan (the “2014 Plan”). Under the 2014 Plan, the Company may grant stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights, performance stock units, performance shares and performance awards to its employees, directors and consultants, and its parent and subsidiary corporations’ employees and consultants.

As of June 30, 2019, a total of 13.5 million shares of common stock were available to grant under the 2014 Plan, subject to adjustment in the case of certain events. The number of shares available to grant under the 2014 Plan is subject to an annual increase on the first day of each year. In accordance with the annual increase, an additional 4.8 million shares became available to grant in January 2019 under the 2014 Plan.

Stock Options

Stock Option Activity

Stock option activity for the six months ended June 30, 2019 was as follows (in thousands, except term and per share amounts):

						Weighted-
				Weighted-		Average
	Shares			Average		Remaining		Aggregate
	Underlying			Exercise		Contractual		Intrinsic
	Options			Price		Term (in years)		Value
Outstanding—December 31, 2018		3,394		$	2.77			$	4,689
Granted		2,101			5.06
Exercised		(122	)		2.21
Cancelled		—			—
Outstanding—June 30, 2019		5,373		$	3.68		7.8	$	19,888
Options vested and exercisable—June 30, 2019		2,143		$	2.30		5.7	$	11,142

RSUs

RSU activity for the six months ended June 30, 2019 was as follows (awards in thousands):

				Weighted-
				Average
	Number of			Grant Date
	Awards			Fair Value
Outstanding at December 31, 2018		6,172		$	3.84
Granted		2,666			5.74
Vested		(1,370	)		3.85
Forfeited		(184	)		4.07
Outstanding at June 30, 2019		7,284		$	4.53

Stock-Based Compensation Expense

Stock-based compensation was included in operating expenses as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Cost of revenue	$	404	$	349	$	736	$	623
Sales and marketing		806		1,083		1,541		1,914
General and administrative		2,915		2,349		5,499		4,169
Research and development		31		31		59		75
Total stock-based compensation	$	4,156	$	3,812	$	7,835	$	6,781

Unrecognized stock-based compensation expense for RSUs and stock options as of June 30, 2019 was as follows (in thousands, except years):

	Unrecognized		Weighted-
	Stock-Based		Average Period
	Compensation		of Recognition
	Expense		(in years)
RSUs	$	23,806		1.9
Stock options		6,996		2.2
Total unrecognized stock-based compensation expense	$	30,802

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Income Taxes

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

17. Income Taxes

The income tax expense for the three months ended June 30, 2019 and 2018 was calculated on a discrete basis resulting in a consolidated quarterly effective income tax rate of (51.9)% and (151.5)%. For the six months ended June 30, 2019 and 2018 the Company’s consolidated effective income tax rate was (48.1)% and (81.7)% .The variations between the consolidated effective income tax rate and the U.S. federal statutory rate for the three and six months ended June 30, 2019 and 2018 were primarily attributable to the tax gains recognized on the sale of solar energy systems to investment funds and non-controlling interests and redeemable non-controlling interests.

The Company sells solar energy systems to its investment funds for income tax purposes. As the investment funds are consolidated by the Company, the gain on the sale of the solar energy systems is eliminated in the condensed consolidated financial statements. However, this gain is recognized for tax reporting purposes. The Company accounts for the income tax consequences of these intra-entity transfers as a component of income tax expense during the period in which the transfers occur.

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Related Party Transactions

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions

18. Related Party Transactions

The Company’s condensed consolidated statements of operations included related party transactions of $0.2 million and $0.6 million within sales and marketing for the three months ended June 30, 2019 and 2018. The Company’s condensed consolidated statements of operations included related party transactions of $1.0 million and $1.3 million within sales and marketing for the six months ended June 30, 2019 and 2018.

Vivint Services

The Company has negotiated and entered into a number of agreements with its sister company, Vivint, Inc. (“Vivint”). In August 2017, the Company entered into a sales dealer agreement with Vivint, pursuant to which each company will act as a non-exclusive dealer for the other party to market, promote and sell each other’s products. The agreement has an initial term of two years and replaces substantially all of the activities being undertaken under the parties’ former marketing and customer relations agreement. The Company and Vivint also agreed to extend the term of the non-solicitation provisions under an existing non-competition agreement to match the term of the sales dealer agreement.

The Company incurred fees under agreements with Vivint of $3.8 million and $4.3 million for the three months ended June 30, 2019 and 2018. These amounts reflect the level of services provided by Vivint on behalf of the Company. The Company incurred fees under these agreements of $6.2 million and $5.3 million for the six months ended June 30, 2019 and 2018.

Payables to Vivint recorded in accounts payable were $0.5 million and $0.2 million as of June 30, 2019 and December 31, 2018. These payables include amounts due to Vivint related primarily to the sales dealer agreement.

Advances Receivable—Related Party

Net amounts due from direct-sales personnel were $4.9 million and $5.2 million as of June 30, 2019 and December 31, 2018. The Company provided a reserve of $1.0 million and $0.9 million as of June 30, 2019 and December 31, 2018 related to advances to direct-sales personnel who have terminated their employment agreement with the Company.

Investment Funds

Fund investors for three of the investment funds are indirectly managed by the Sponsor and accordingly are considered related parties. The Company accrued equity distributions to these entities of $1.6 million and $1.5 million as of June 30, 2019 and December 31, 2018, included in distributions payable to non-controlling and redeemable non-controlling interests. See Note 14—Investment Funds.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

19. Commitments and Contingencies

Non-Cancellable Operating Leases

See Note 12—Leases for details regarding the Company’s lease arrangements.

Letters of Credit

As of June 30, 2019, the Company had established letters of credit under the Working Capital Facility for up to $18.9 million related to insurance and retail contracts.

Indemnification Obligations

From time to time, the Company enters into contracts that contingently require it to indemnify parties against claims. These contracts primarily relate to provisions in the Company’s services agreements with related parties that may require the Company to indemnify the related parties against services rendered; and certain agreements with the Company’s officers and directors under which the Company may be required to indemnify such persons for liabilities. In addition, under the terms of the agreements related to the Company’s investment funds and other material contracts, the Company may also be required to indemnify fund investors and other third parties for liabilities. For further information see Note 14—Investment Funds.

Residual Commission Payments

The Company pays a portion of sales commissions to its sales representatives on a deferred basis. The amount deferred is based on the value of the system sold by the sales representative and payment is based on the sales representative remaining employed by the Company. As this amount is earned over time, it is not considered an incremental cost of obtaining the contract due to the requirement that the sales representative remain in the Company’s service. As a result, the amount that is earned over time is expensed by the Company over the deferment period. As of June 30, 2019, the total estimated obligation that is currently not recorded in the Company’s condensed consolidated financial statements, but that will be earned and expensed over the deferment period was $17.9 million.

Legal Proceedings

In March 2016, the Company filed suit in the Court of Chancery State of Delaware against SunEdison and SEV Merger Sub Inc. alleging that SunEdison willfully breached its obligations under the Merger Agreement pursuant to which the Company was to be acquired and breached its implied covenant of good faith and fair dealing. In April 2016, SunEdison filed for Chapter 11 bankruptcy, which stayed prosecution of the Company’s litigation in the Delaware court. In September 2016, the Company submitted a proof of claim in the bankruptcy case for an unsecured claim in the initial amount of $1.0 billion, which was subject to dispute, for damages for breach of the Merger Agreement. In April 2018, the Company reached a settlement with the litigation trustee in the bankruptcy case under which the Company’s claim will be allowed in the amount of $590.0 million. This settlement resolves both the lawsuit in the Delaware Chancery Court and the dispute about the amount of the Company’s unsecured creditor claim in the bankruptcy. In April 2018, the Company received an initial distribution of $2.1 million and expects to receive further distributions as assets are distributed to unsecured creditors under the court-approved plan of reorganization in the SunEdison bankruptcy case. While the exact amount to be distributed for this claim is unknown at this time, the payout is expected to be a small fraction of the $590.0 million claim.

In February 2018, two former employees, on behalf of themselves and a purported class, named the Company in a putative class action alleging that the Company misclassified those employees and violated other wage and hour laws. The complaint seeks unspecified damages and statutory penalties for the alleged violations. The Company disputes the allegations and has retained counsel to defend it in the litigation. If an unfavorable outcome were to occur in this case, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

In March 2018, the New Mexico Attorney General’s office filed an action against the Company and several of its officers alleging violation of state consumer protection statutes and other claims. The Company disputes the allegations in the lawsuit and intends to defend itself in the action. The Company is unable to estimate a range of loss, if any, were there to be an adverse final decision. If an unfavorable outcome were to occur in this case, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

In July 2018, an individual filed a putative class action lawsuit in the U.S. District Court for the District of Columbia, purportedly on behalf of himself and other persons who received certain telephone calls. The lawsuit alleges that the Company violated the Telephone Consumer Protection Act and some of its implementing regulations. The complaint seeks statutory penalties for each alleged violation. The Company disputes the allegations in the complaint, has retained counsel and intends to vigorously defend itself in the litigation. The Company is unable to estimate the amount or range of potential loss, if any, at this time. If an unfavorable outcome were to occur in this case, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

In October 2018, a former employee filed a representative action pursuant to California’s Private Attorneys General Act alleging that the Company violated California labor and employment laws by, among other things, failing to provide its employees with rest and meal breaks. The Company disputes the allegations in the complaint and has retained counsel to represent it in the litigation. The Company is unable to estimate a range of loss, if any, at this time. If an unfavorable outcome were to occur in the case, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

In October 2018, a former sales representative filed a representative action pursuant to California’s Private Attorneys General Act alleging that the Company violated California labor and employment laws by, among other things, failing to properly compensate its direct sellers and reimburse them for business expenses. The Company disputes the allegations in the complaint. The Company is unable to estimate a range of loss, if any, at this time. If an unfavorable outcome were to occur in the case, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

In addition to the matters discussed above, in the normal course of business, the Company has from time to time been named as a party to various legal claims, actions and complaints. While the outcome of these matters cannot be predicted with certainty, the Company does not currently believe that the outcome of any of these claims will have a material adverse effect, individually or in the aggregate, on its consolidated financial position, results of operations or cash flows.

The Company accrues for losses that are probable and can be reasonably estimated. The Company evaluates the adequacy of its legal reserves based on its assessment of many factors, including interpretations of the law and assumptions about the future outcome of each case based on available information.

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Basic and Diluted Net Loss Per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Basic and Diluted Net Loss Per Share

20. Basic and Diluted Net Loss Per Share

The following table sets forth the computation of the Company’s basic and diluted net loss attributable per share to common stockholders for three and six months ended June 30, 2019 and 2018 (in thousands, except per share amounts):  

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
Numerator:
Net (loss attributable) income available to common stockholders	$	(28,567	)	$	18,116	$	(54,809	)	$	5,140
Denominator:
Shares used in computing net (loss attributable) income available    per share to common stockholders, basic		120,869			116,650		120,589			115,907
Weighted-average effect of potentially dilutive shares to    purchase common stock		—			5,103		—			5,062
Shares used in computing net (loss attributable) income available    per share to common stockholders, diluted		120,869			121,753		120,589			120,969
Net (loss attributable) income available per share to common    stockholders:
Basic	$	(0.24	)	$	0.16	$	(0.45	)	$	0.04
Diluted	$	(0.24	)	$	0.15	$	(0.45	)	$	0.04

For the three and six months ended June 30, 2019, the Company incurred net losses attributable to common stockholders. As such, the potentially dilutive shares were anti-dilutive and were not considered in the weighted-average number of common shares outstanding for either period. For the three and six months ended June 30, 2018, 1.5 million shares in each period were excluded from the dilutive share calculations as the effect on net income per share would have been anti-dilutive.

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Subsequent Events

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

21. Subsequent Events

Revolving Warehouse Facility and Termination of the Aggregation Facility

In August 2019, a wholly owned subsidiary of the Company entered into a floating rate revolving warehouse facility (the “Warehouse Facility”) pursuant to which it may borrow up to an aggregate principal amount of $325.0 million, expandable up to $400.0 million, from certain financial institutions for which Bank of America, N.A. is acting as administrative agent and collateral agent. The Aggregation Facility was terminated concurrently with the execution of the Warehouse Facility, and $121.4 million of proceeds from the Warehouse Facility were used, among other things, to pay off the outstanding principal and interest under the Aggregation Facility and to settle related interest rate swaps.

During the period in which the Company may make borrowings under the Warehouse Facility, interest on borrowings accrues at an annual rate equal to the applicable adjusted LIBOR rate plus 2.375%. Thereafter, interest will accrue at an annual rate equal to the applicable adjusted LIBOR rate plus 3.375%. In addition, the Company is required to enter into interest rate hedging arrangements such that not less than 90% of the aggregate expected amortization profile of all outstanding revolving advances is subject to a fixed interest rate or other interest rate protection. Initially, subject to the terms of the Warehouse Facility, only interest payments are due on a quarterly basis, through the availability period, and then certain principal and interest payments may be due. These payments will occur on the 15^th of January, April, July and October of each year, subject to the occurrence of certain events, including a borrowing base deficiency and dispositions with respect to any of the collateral. Principal and interest payable under the Warehouse Facility mature in four years and optional prepayments, in whole or in part, are permitted under the Warehouse Facility no more than once per month, without premium or penalty apart from any customary LIBOR breakage provisions.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The unaudited condensed consolidated financial statements were prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments (all of which were considered of normal recurring nature) considered necessary to present fairly the Company’s financial results. The results of the six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2019 or for any other interim period or other future year.

The unaudited condensed consolidated financial statements reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. The Company uses a qualitative approach in assessing the consolidation requirement for VIEs. This approach focuses on determining whether the Company has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and whether the Company has the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. All of these determinations involve significant management judgments and estimates. The Company has determined that it is the primary beneficiary in the operational VIEs in which it has an equity interest. The Company evaluates its relationships with the VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. For additional information, see Note 14—Investment Funds.

Beginning with the first quarter of 2019, the condensed consolidated statements of operations items formerly captioned “Operating leases and incentives” and “Cost of revenue—operating leases and incentives” are now captioned “Customer agreements and incentives” and “Cost of revenue—customer agreements and incentives.” Also beginning with the first quarter of 2019, the condensed consolidated balance sheet items formerly captioned “Current portion of capital lease obligation” and “Capital lease obligation, net of current portion” are now captioned “Current portion of finance lease obligation” and “Finance lease obligation, net of current portion.” Amounts in these balance sheet items were capital leases under Accounting Standards Codification 840: Leases (“Topic 840”) in periods ending prior to January 1, 2019, while amounts in these balance sheet items are finance leases under Accounting Standards Codification 842: Leases (“Topic 842”) in periods ending subsequent to January 1, 2019. See “—Leases” below for further explanation of these changes.

Use of Estimates

Use of Estimates

The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company regularly makes significant estimates and assumptions including, but not limited to, ITCs; revenue recognition; solar energy systems, net; the impairment analysis of long-lived assets; stock-based compensation; the provision for income taxes; the valuation of derivative financial instruments; the recognition and measurement of loss contingencies; and non-controlling interests and redeemable non-controlling interests. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates.

Liquidity

Liquidity

In order to grow, the Company requires cash to finance the deployment of solar energy systems. As of the date of this filing, the Company will require additional sources of cash beyond current cash balances and currently available financing facilities to fund long-term planned growth. If the Company is unable to secure additional financing when needed, or upon desirable terms, the Company may be unable to finance installation of customers’ systems in a manner consistent with past performance, cost of capital could increase, or the Company may be required to significantly reduce the scope of operations, any of which would have a material adverse effect on its business, financial condition, results of operations and prospects. While the Company believes additional financing is available and will continue to be available to support current levels of operations, the Company believes it has the ability and intent to reduce operations to the level of available financial resources for at least the next 12 months from the date of this report, if necessary.

Performance Obligation—Solar Energy System and Product Sales

Performance Obligation—Solar Energy system and Product Sales

For certain System Sales, the Company provides limited post-sale services to monitor the productivity of the solar energy system for 20 years after it has been placed into service. The Company allocates a portion of the transaction price to the monitoring services by estimating the fair market price that the Company would charge for these services if offered separately from the sale of the solar energy system. As of June 30, 2019 and December 31, 2018, the Company had allocated deferred revenue of $4.0 million and $3.3 million to monitoring services that will be recognized over the term of the monitoring services.

Leases

Leases

The Company adopted Topic 842 and its subsequent updates effective January 1, 2019. These updates are intended to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the condensed consolidated balance sheets and disclosing key information about leasing arrangements. The Company utilized the additional transition method permitted by Accounting Standards Update (“ASU”) 2018-11 and adopted Topic 842 using a modified retrospective method with a cumulative-effect adjustment to its accumulated deficit as of January 1, 2019. As such, comparative periods ending prior to January 1, 2019 are presented in accordance with Topic 840 and periods ending after January 1, 2019 are presented in accordance with Topic 842. The impact to the accumulated deficit as a result of adopting ASU 2016-02 was a net reduction of approximately $0.2 million. The Company did not use the transitionary practical expedients allowed under Topic 842, and as such, the Company reassessed all contracts existing at the adoption date of January 1, 2019. The Company elected to treat leases with lease terms of 12 months or less as short-term leases. No right-of-use assets or lease liabilities are recognized for short-term leases. The Company has also elected not to separate lease components from non-lease components for all classes of leased assets except for building leases.

The adoption of this ASU resulted in right-of-use assets of $34.6 million related to operating leases being recognized in other non-current assets, net on the condensed consolidated balance sheets as of January 1, 2019. Corresponding lease liabilities of $43.8 million related to operating leases were recognized on the condensed consolidated balance sheets as of January 1, 2019, with the current portion recognized in accrued and other current liabilities and the long-term portion recognized in other non-current liabilities. In addition, at January 1, 2019, approximately $1.0 million of lease-related liabilities were removed from accrued and other current liabilities and approximately $8.2 million of lease-related liabilities were removed from other non-current liabilities and included as reductions to the initial operating lease right-of-use assets. As of January 1, 2019, finance lease right-of-use assets of $0.9 million continued to be recorded in property and equipment, net. Any changes in lease terms or estimates subsequent to adoption of the ASU 2016-02 are reflected in the right-of-use assets and lease liabilities.

The Company’s PPAs, Solar Leases, and associated rebates and incentives no longer meet the definition of a lease under Topic 842. Accordingly, they are accounted for in accordance with Accounting Standards Codification 606: Revenue from Contracts with Customers (“Topic 606”) beginning on January 1, 2019. The Company concluded that there was no change to its revenue recognition practices for its PPA revenue stream under Topic 606. For Solar Leases, the Company concluded that the impact of applying Topic 606 is immaterial. The Company also concluded that there was no material change related to the timing of revenue recognition for rebates and incentives under Topic 606. Upon the adoption of Topic 842, the Company no longer capitalizes initial direct costs and amortizes them to the respective cost of revenue line items. Instead, the Company now capitalizes costs of obtaining a contract which meet the “incremental” criteria defined in Accounting Standards Codification 340 to other non-current assets, net. These costs are now amortized over the period of benefit to sales and marketing expense on the condensed consolidated statements of operations. In accordance with the Company’s Topic 842 transition discussed above, no prior period amounts were changed.

For purposes of comparison, the following tables show how the balances as of December 31, 2018 and for the three and six months ended June 30, 2018 would have changed if the effects of adopting Topic 842 had been applied to those balances (in thousands):

	December 31, 2018							June 30, 2019
	As Reported		Adjustments			As Adjusted		As Reported
Solar energy systems, net	$	1,938,874	$	(388,087	)	$	1,550,787	$	1,637,905
Other non-current assets, net		28,090		388,087			416,177		510,537

	Three Months Ended June 30,
	2018							2019
	As Reported		Adjustments			As Adjusted		As Reported
Cost of revenue—customer agreements and incentives	$	41,366	$	(4,510	)	$	36,856	$	43,074
Cost of revenue—solar energy system and product sales		18,990		(4,397	)		14,593		15,791
Total cost of revenue		60,356		(8,907	)		51,449		58,865
Gross profit		20,442		8,907			29,349		31,892
Sales and marketing		14,033		8,907			22,940		37,037
Total operating expenses		36,553		8,907			45,460		68,766

	Six Months Ended June 30,
	2018							2019
	As Reported		Adjustments			As Adjusted		As Reported
Cost of revenue—customer agreements and incentives	$	80,053	$	(8,590	)	$	71,463	$	83,265
Cost of revenue—solar energy system and product sales		45,035		(10,254	)		34,781		33,054
Total cost of revenue		125,088		(18,844	)		106,244		116,319
Gross profit		23,960		18,844			42,804		43,809
Sales and marketing		25,158		18,844			44,002		66,671
Total operating expenses		68,151		18,844			86,995		121,918

Software Implementation Costs

Software Implementation Costs

The Company adopted ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, effective January 1, 2019.This update clarifies that entities should capitalize implementation costs incurred in cloud computing arrangements that are service contracts, which the Company will now record within other non-current assets, net. The Company will expense the capitalized costs over the term of the hosting arrangement. The service element of a hosting arrangement that is a service contract is not affected by this update, meaning service costs will continue to be expensed as incurred. The Company is applying the amendments in this update on a prospective basis beginning January 1, 2019. No prior periods were impacted as a result of adopting this ASU.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The objective of this update is to provide users of financial statements with more useful information by changing the incurred loss methodology for recognizing credit losses to a more forward-looking methodology that reflects expected credit losses. Under this ASU, the Company’s accounts receivable and certain contract assets are considered financial assets measured at an amortized cost basis and will need to be presented at the net amount expected to be collected. This ASU will be effective for the Company beginning on January 1, 2020 and will be applied through a modified retrospective approach with a cumulative-effect adjustment to retained earnings as of the first reporting period in which the guidance is effective. The Company is still evaluating the impact of this update on its condensed consolidated financial statements and related disclosures.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Summary of Comparison on Effects of Adopting Topic 842

For purposes of comparison, the following tables show how the balances as of December 31, 2018 and for the three and six months ended June 30, 2018 would have changed if the effects of adopting Topic 842 had been applied to those balances (in thousands):

	December 31, 2018							June 30, 2019
	As Reported		Adjustments			As Adjusted		As Reported
Solar energy systems, net	$	1,938,874	$	(388,087	)	$	1,550,787	$	1,637,905
Other non-current assets, net		28,090		388,087			416,177		510,537

	Three Months Ended June 30,
	2018							2019
	As Reported		Adjustments			As Adjusted		As Reported
Cost of revenue—customer agreements and incentives	$	41,366	$	(4,510	)	$	36,856	$	43,074
Cost of revenue—solar energy system and product sales		18,990		(4,397	)		14,593		15,791
Total cost of revenue		60,356		(8,907	)		51,449		58,865
Gross profit		20,442		8,907			29,349		31,892
Sales and marketing		14,033		8,907			22,940		37,037
Total operating expenses		36,553		8,907			45,460		68,766

	Six Months Ended June 30,
	2018							2019
	As Reported		Adjustments			As Adjusted		As Reported
Cost of revenue—customer agreements and incentives	$	80,053	$	(8,590	)	$	71,463	$	83,265
Cost of revenue—solar energy system and product sales		45,035		(10,254	)		34,781		33,054
Total cost of revenue		125,088		(18,844	)		106,244		116,319
Gross profit		23,960		18,844			42,804		43,809
Sales and marketing		25,158		18,844			44,002		66,671
Total operating expenses		68,151		18,844			86,995		121,918

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of Fair Value of Financial Assets and Liabilities Measured on Recurring Basis

The Company measures and reports its cash equivalents at fair value. The following tables set forth the fair value of the Company’s financial assets and liabilities included on the condensed consolidated balance sheets measured on a recurring basis by level within the fair value hierarchy (in thousands):

	June 30, 2019
	Level 1		Level 2		Level 3		Total
Financial Liabilities
Interest rate swaps	$	—	$	29,833	$	—	$	29,833
	December 31, 2018
	Level 1		Level 2		Level 3		Total
Financial Assets
Interest rate swaps	$	—	$	130	$	—	$	130
Financial Liabilities
Interest rate swaps	$	—	$	11,146	$	—	$	11,146

Schedule of Carrying Values and Fair Values of Company's Long-term Debt

The carrying values and fair values of the Company’s long-term debt were as follows (in thousands):

	June 30, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Floating-rate long-term debt	$	712,071	$	712,071	$	587,358	$	587,358
Fixed-rate long-term debt		640,569		684,695		653,031		673,917
Total	$	1,352,640	$	1,396,766	$	1,240,389	$	1,261,275

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Inventories (Tables)

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Summary of Inventories

Inventories consisted of the following (in thousands):

	June 30,		December 31,
	2019		2018
Solar energy systems held for sale	$	12,202	$	12,321
Photovoltaic installation products		869		936
Total inventories	$	13,071	$	13,257

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Solar Energy Systems (Tables)

6 Months Ended

Jun. 30, 2019

Solar Energy Systems Disclosure [Abstract]

Solar Energy Systems

Solar energy systems, net consisted of the following (in thousands):

	June 30,			December 31,
	2019			2018
System equipment costs	$	1,783,301		$	1,667,440
Initial direct costs related to solar energy systems		—			435,084
		1,783,301			2,102,524
Less: Accumulated depreciation		(175,784	)		(195,890	)
		1,607,517			1,906,634
Solar energy system inventory		30,388			32,240
Solar energy systems, net	$	1,637,905		$	1,938,874

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Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2019

Property Plant And Equipment [Abstract]

Summary of Property and Equipment Net

Property and equipment, net consisted of the following (in thousands):

	Estimated	June 30,			December 31,
	Useful Lives	2019			2018
Leasehold improvements	1-12 years	$	10,645		$	10,560
Furniture and computer and other equipment	3 years		4,278			3,816
Vehicles acquired under finance leases	3-5 years		4,876			6,907
			19,799			21,283
Less: Accumulated depreciation and amortization			(7,149	)		(10,553	)
Property and equipment, net		$	12,650		$	10,730

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Other Non-Current Assets (Tables)

6 Months Ended

Jun. 30, 2019

Other Assets Noncurrent Disclosure [Abstract]

Schedule of Other Non-Current Assets

Other non-current assets consisted of the following (in thousands):

	June 30,			December 31,
	2019			2018
Costs to obtain contracts	$	500,969		$	—
Accumulated amortization of costs to obtain contracts		(58,273	)		—
Operating lease right-of-use assets		39,620			—
Sales incentives		9,963			8,588
Other non-current assets		18,258			19,502
Total other non-current assets	$	510,537		$	28,090

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Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Summary of Net Intangible Assets Included in Other Non Current assets , Net

Net intangible assets are included in other non-current assets, net and consisted of the following (in thousands):

	June 30,			December 31,
	2019			2018
Cost:
Internal-use software	$	635		$	1,020
Developed technology		522			522
Trademarks/trade names		201			201
Total carrying value		1,358			1,743
Accumulated amortization:
Internal-use software		(365	)		(781	)
Developed technology		(360	)		(324	)
Trademarks/trade names		(109	)		(99	)
Total accumulated amortization		(834	)		(1,204	)
Total intangible assets, net	$	524		$	539

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Accrued Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Accrued Compensation Disclosure [Abstract]

Summary of Accrued Compensation

Accrued compensation consisted of the following (in thousands):

	June 30,		December 31,
	2019		2018
Accrued payroll	$	12,663	$	16,352
Accrued commissions		11,882		9,168
Total accrued compensation	$	24,545	$	25,520

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Accrued and Other Current Liabilities (Tables)

6 Months Ended

Jun. 30, 2019

Payables And Accruals [Abstract]

Schedule of Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following (in thousands):

	June 30,		December 31,
	2019		2018
Accrued unused commitment fees and interest	$	14,517	$	14,102
Current portion of operating lease liabilities		7,398		—
Accrued professional fees		6,575		6,150
Current portion of lease pass-through financing obligation		5,094		5,038
Accrued workers' compensation		4,777		4,033
Workmanship accrual		3,596		2,630
Accrued inventory		3,286		4,380
Sales, use and property taxes payable		2,872		3,132
Other accrued expenses		5,442		3,395
Total accrued and other current liabilities	$	53,557	$	42,860

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Debt Obligations (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of Debt

Debt obligations consisted of the following as of June 30, 2019 (in thousands, except interest rates):

	Principal		Unamortized Debt										Unused
	Borrowings		Issuance Costs						Net Carrying Value				Borrowing		Interest			Maturity
	Outstanding		Current			Long-term			Current		Long-term		Capacity		Rate			Date
Solar asset backed notes, Series 2018-1(1)	$	454,100	$	(76	)	$	(8,796	)	$	3,919	$	441,309	$	—		5.1	%	October 2028
Solar asset backed notes, Series 2018-2(2)(3)		339,383		(6	)		(6,775	)		294		332,308		—		5.5		August 2023
2017 Term loan facility		185,194		(167	)		(4,429	)		6,740		173,858		—		6.0		January 2035
2018 Forward flow loan facility		112,501		(66	)		(3,231	)		2,174		107,030		17,499		4.7		(4)
2019 Forward flow loan facility		14,087		—			(2,946	)		—		11,141		135,913		5.2		(5)
Credit agreement		1,275		(2	)		(106	)		16		1,151		—		6.5		February 2023
Revolving lines of credit(6)
Aggregation facility		115,000		—			—			—		115,000		260,000		5.6		September 2020
Working capital facility(7)		131,100		—			—			131,100		—		—		5.7		March 2020
Total debt	$	1,352,640	$	(317	)	$	(26,283	)	$	144,243	$	1,181,797	$	413,412

Debt obligations consisted of the following as of December 31, 2018 (in thousands, except interest rates):

	Principal		Unamortized Debt										Unused
	Borrowings		Issuance Costs						Net Carrying Value				Borrowing		Interest			Maturity
	Outstanding		Current			Long-term			Current		Long-term		Capacity		Rate			Date
Solar asset backed notes, Series 2018-1(1)	$	462,826	$	(74	)	$	(9,172	)	$	3,655	$	449,925	$	—		5.1	%	October 2028
Solar asset backed notes, Series 2018-2(2)(3)		342,833		(6	)		(7,388	)		294		335,145		—		5.4		August 2023
2017 Term loan facility		188,922		(170	)		(4,614	)		6,679		177,459		—		6.0		January 2035
2018 Forward flow loan facility		58,425		(43	)		(3,365	)		1,512		53,505		71,575		5.2		(4)
Credit agreement		1,283		(2	)		(118	)		15		1,148		—		6.5		February 2023
Revolving lines of credit(6)
Aggregation facility		50,000		—			—			—		50,000		325,000		5.7		September 2020
Working capital facility(7)		136,100		—			—			—		136,100		—		5.6		March 2020
Total debt	$	1,240,389	$	(295	)	$	(24,657	)	$	12,155	$	1,203,282	$	396,575

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Lessee Disclosure [Abstract]

Summary of Lease Costs and Other Information

Lease costs and other information consisted of the following (in thousands, except terms and rates):

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$	366		$	660
Interest on lease liabilities		58			84
Operating lease cost		2,770			5,540
Short-term lease cost		579			1,301
Total lease cost	$	3,773		$	7,585
Other information
Finance leases:
Operating cash outflows from finance leases	$	58		$	84
Financing cash outflows from finance leases	$	306		$	577
Right-of-use assets obtained in exchange for new finance lease liabilities	$	2,703		$	3,756
Weighted-average remaining lease term - finance leases (in years)		3.6			3.6
Weighted-average discount rate - finance leases		7.7	%		7.7	%
Operating leases:
Operating cash outflows from operating leases	$	2,809		$	5,635
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,755		$	8,665
Weighted-average remaining lease term - operating leases (in years)		9.4			9.4
Weighted-average discount rate - operating leases		8.0	%		8.0	%

Schedule of Future Minimum Lease Payments for Finance Leases

Future minimum lease payments for the Company’s finance leases as of June 30, 2019 were as follows (in thousands):

2019	$	742
2020		1,171
2021		1,147
2022		1,038
2023		346
Thereafter		—
Total minimum lease payments		4,444
Less: interest		548
Present value of finance lease obligations		3,896
Less: current portion		1,089
Long-term portion	$	2,807

Schedule of Future Minimum Lease Payments Under Non-cancellable Operating Leases

Future minimum lease payments under non-cancellable operating leases as of June 30, 2019 were as follows (in thousands):

2019	$	5,600
2020		10,195
2021		7,893
2022		5,806
2023		4,781
Thereafter		36,680
Total minimum lease payments		70,955
Less: present value impact		22,259
Present value of operating lease obligations		48,696
Less: current portion		7,398
Long-term portion	$	41,298

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Schedule of Derivative Financial Instruments at Fair Value

Derivative financial instruments at fair value consisted of the following (in thousands):

	June 30, 2019
	Fair Value		Balance Sheet Location
Derivatives designated as hedging instruments:
Interest rate swaps	$	25,951	Other non-current liabilities
Derivatives not designated as hedging instruments:
Interest rate swaps	$	3,882	Other non-current liabilities

	December 31, 2018
	Fair Value		Balance Sheet Location
Derivatives designated as hedging instruments:
Interest rate swaps	$	9,884	Other non-current liabilities
Derivatives not designated as hedging instruments:
Interest rate swaps	$	1,262	Other non-current liabilities
Interest rate swaps	$	130	Other non-current assets

Schedule of Losses (Gains) on Derivative Financial Instruments Recognized in OCI and Condensed Consolidated Statements of Operations Before Tax Effect

The Company records derivatives at fair value. The losses (gains) on derivatives designated as cash flow hedges recognized in OCI, before tax effect, consisted of the following (in thousands):

	Three Months Ended June 30,
	2019		2018
Derivatives designated as cash flow hedges:
Interest rate swaps	$	9,967	$	825

	Six Months Ended June 30,
	2019		2018
Derivatives designated as cash flow hedges:
Interest rate swaps	$	16,627	$	(4,318	)

The losses (gains) on derivative financial instruments recognized in the condensed consolidated statements of operations, before tax effect, consisted of the following (in thousands):

	Three Months Ended June 30,
	2019				2018
	Interest expense, net		Other expense (income), net		Interest expense, net			Other expense (income), net
Total amounts presented in the income statement line items	$	19,472	$	1,365	$	11,336		$	(4,109	)
Derivatives designated as cash flow hedges:
Interest rate swaps
Losses (gains) reclassified from AOCI into income	$	238	$	—	$	(22,335	)	$	—
Derivatives not designated as hedging instruments:
Interest rate swaps
Losses (gains) recognized in income		—		1,366		—			(1,990	)
Total losses (gains)	$	238	$	1,366	$	(22,335	)	$	(1,990	)

	Six Months Ended June 30,
	2019				2018
	Interest expense, net		Other expense (income), net		Interest expense, net			Other expense (income), net
Total amounts presented in the income statement line items	$	38,599	$	2,750	$	28,258		$	(6,370	)
Derivatives designated as cash flow hedges:
Interest rate swaps
Losses (gains) reclassified from AOCI into income	$	560	$	—	$	(22,716	)	$	—
Derivatives not designated as hedging instruments:
Interest rate swaps
Losses (gains) recognized in income		—		2,750		—			(4,252	)
Total losses (gains)	$	560	$	2,750	$	(22,716	)	$	(4,252	)

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Investment Funds (Tables)

6 Months Ended

Jun. 30, 2019

Schedule Of Investments [Abstract]

Aggregate Carrying Value of Funds Assets and Liabilities

The Company has formed investment funds for the purpose of funding the purchase of solar energy systems under long-term customer contracts. As of June 30, 2019 and December 31, 2018, the aggregate carrying value of these funds’ assets and liabilities (after elimination of intercompany transactions and balances) in the Company’s condensed consolidated balance sheets were as follows (in thousands):

	June 30,		December 31,
	2019		2018
Assets
Current assets:
Cash and cash equivalents	$	105,175	$	62,350
Accounts receivable, net		19,082		6,593
Prepaid expenses and other current assets		2,291		1,289
Total current assets		126,548		70,232
Restricted cash and cash equivalents		5,405		2,443
Solar energy systems, net		1,478,530		1,752,271
Other non-current assets, net		410,322		10,888
Total assets	$	2,020,805	$	1,835,834
Liabilities
Current liabilities:
Distributions payable to non-controlling interests and redeemable    non-controlling interests	$	11,221	$	7,846
Current portion of long-term debt		2,174		1,512
Current portion of deferred revenue		2,328		2,320
Accrued and other current liabilities		5,529		4,860
Total current liabilities		21,252		16,538
Long-term debt, net of current portion		118,171		53,505
Deferred revenue, net of current portion		10,980		9,694
Other non-current liabilities		745		1,023
Total liabilities	$	151,148	$	80,760

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Redeemable Non-Controlling Interests and Equity (Tables)

6 Months Ended

Jun. 30, 2019

Noncontrolling Interest [Abstract]

Schedule of Shares of Common Stock Reserved for Issuance

The Company had shares of common stock reserved for issuance as follows (in thousands):

	June 30,		December 31,
	2019		2018
Shares available for grant under equity incentive plans		13,544		13,323
Restricted stock units issued and outstanding		7,284		6,172
Stock options issued and outstanding		5,373		3,394
Long-term incentive plan		2,706		2,706
Total		28,907		25,595

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Equity Compensation Plans (Tables)

6 Months Ended

Jun. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock Option Activity

Stock option activity for the six months ended June 30, 2019 was as follows (in thousands, except term and per share amounts):

						Weighted-
				Weighted-		Average
	Shares			Average		Remaining		Aggregate
	Underlying			Exercise		Contractual		Intrinsic
	Options			Price		Term (in years)		Value
Outstanding—December 31, 2018		3,394		$	2.77			$	4,689
Granted		2,101			5.06
Exercised		(122	)		2.21
Cancelled		—			—
Outstanding—June 30, 2019		5,373		$	3.68		7.8	$	19,888
Options vested and exercisable—June 30, 2019		2,143		$	2.30		5.7	$	11,142

RSU Activity

RSU activity for the six months ended June 30, 2019 was as follows (awards in thousands):

				Weighted-
				Average
	Number of			Grant Date
	Awards			Fair Value
Outstanding at December 31, 2018		6,172		$	3.84
Granted		2,666			5.74
Vested		(1,370	)		3.85
Forfeited		(184	)		4.07
Outstanding at June 30, 2019		7,284		$	4.53

Summary of Stock-Based Compensation Expense

Stock-based compensation was included in operating expenses as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Cost of revenue	$	404	$	349	$	736	$	623
Sales and marketing		806		1,083		1,541		1,914
General and administrative		2,915		2,349		5,499		4,169
Research and development		31		31		59		75
Total stock-based compensation	$	4,156	$	3,812	$	7,835	$	6,781

Summary of Unrecognized Stock-Based Compensation Expense

Unrecognized stock-based compensation expense for RSUs and stock options as of June 30, 2019 was as follows (in thousands, except years):

	Unrecognized		Weighted-
	Stock-Based		Average Period
	Compensation		of Recognition
	Expense		(in years)
RSUs	$	23,806		1.9
Stock options		6,996		2.2
Total unrecognized stock-based compensation expense	$	30,802

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Basic and Diluted Net Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net Loss Per Share to Common Stockholders

The following table sets forth the computation of the Company’s basic and diluted net loss attributable per share to common stockholders for three and six months ended June 30, 2019 and 2018 (in thousands, except per share amounts):  

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
Numerator:
Net (loss attributable) income available to common stockholders	$	(28,567	)	$	18,116	$	(54,809	)	$	5,140
Denominator:
Shares used in computing net (loss attributable) income available    per share to common stockholders, basic		120,869			116,650		120,589			115,907
Weighted-average effect of potentially dilutive shares to    purchase common stock		—			5,103		—			5,062
Shares used in computing net (loss attributable) income available    per share to common stockholders, diluted		120,869			121,753		120,589			120,969
Net (loss attributable) income available per share to common    stockholders:
Basic	$	(0.24	)	$	0.16	$	(0.45	)	$	0.04
Diluted	$	(0.24	)	$	0.15	$	(0.45	)	$	0.04

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Organization - Additional Information (Details)	6 Months Ended
	Jun. 30, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Contractual term of customers	20 years

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Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands	Jan. 01, 2019	Jun. 30, 2019	Dec. 31, 2018
Summary Of Significant Accounting Policies [Line Items]
Operating leases right-of-use assets		$ 39,620
Operating leases lease liabilities		48,696
Operating leases liabilities removed from current liabilities	$ 1,000
Monitoring Services
Summary Of Significant Accounting Policies [Line Items]
Deferred revenue		$ 4,000	$ 3,300
ASU 2016-02
Summary Of Significant Accounting Policies [Line Items]
Accumulated deficit	200
Short term leases right of use asset	0
Short term lease liability	0
Operating leases right-of-use assets	34,600
Operating leases lease liabilities	43,800
Operating leases liabilities removed from non current liabilities	8,200
Finance lease right-of-use assets	$ 900

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Summary of Significant Accounting Policies - Summary of Comparison on Effects of Adopting Topic 842 (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Summary Of Significant Accounting Policies [Line Items]
Solar energy systems, net	$ 1,637,905		$ 1,637,905		$ 1,938,874
Other non-current assets, net	510,537		510,537		28,090
Total cost of revenue	58,865	$ 60,356	116,319	$ 125,088
Gross profit	31,892	20,442	43,809	23,960
Sales and marketing	37,037	14,033	66,671	25,158
Total operating expenses	68,766	36,553	121,918	68,151
Customer Agreements and Incentives
Summary Of Significant Accounting Policies [Line Items]
Total cost of revenue	43,074	41,366	83,265	80,053
Solar Energy System and Product Sales
Summary Of Significant Accounting Policies [Line Items]
Total cost of revenue	$ 15,791	18,990	$ 33,054	45,035
ASU 2016-02
Summary Of Significant Accounting Policies [Line Items]
Solar energy systems, net					1,550,787
Other non-current assets, net					416,177
Total cost of revenue		51,449		106,244
Gross profit		29,349		42,804
Sales and marketing		22,940		44,002
Total operating expenses		45,460		86,995
ASU 2016-02 | Customer Agreements and Incentives
Summary Of Significant Accounting Policies [Line Items]
Total cost of revenue		36,856		71,463
ASU 2016-02 | Solar Energy System and Product Sales
Summary Of Significant Accounting Policies [Line Items]
Total cost of revenue		14,593		34,781
Adjustments | ASU 2016-02
Summary Of Significant Accounting Policies [Line Items]
Solar energy systems, net					(388,087)
Other non-current assets, net					$ 388,087
Total cost of revenue		(8,907)		(18,844)
Gross profit		8,907		18,844
Sales and marketing		8,907		18,844
Total operating expenses		8,907		18,844
Adjustments | ASU 2016-02 | Customer Agreements and Incentives
Summary Of Significant Accounting Policies [Line Items]
Total cost of revenue		(4,510)		(8,590)
Adjustments | ASU 2016-02 | Solar Energy System and Product Sales
Summary Of Significant Accounting Policies [Line Items]
Total cost of revenue		$ (4,397)		$ (10,254)

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Fair Value Measurements - Schedule of Fair Value of Financial Assets and Liabilities Measured on Recurring Basis (Details) - Interest Rate Swaps - Fair Value Measurements, Recurring Basis - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Liabilities	$ 29,833	$ 11,146
Financial Assets		130
Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Liabilities	$ 29,833	11,146
Financial Assets		$ 130

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Fair Value Measurements - Schedule of Carrying Values and Fair Values of Long-term Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Long-term debt, Carrying Value	$ 1,352,640	$ 1,240,389
Long-term debt, Fair Value	1,396,766	1,261,275
Floating-rate Long-term Debt
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Long-term debt, Carrying Value	712,071	587,358
Long-term debt, Fair Value	712,071	587,358
Fixed-rate Long-term Debt
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Long-term debt, Carrying Value	640,569	653,031
Long-term debt, Fair Value	$ 684,695	$ 673,917

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Inventories - Summary of Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Solar energy systems held for sale	$ 12,202	$ 12,321
Photovoltaic installation products	869	936
Total inventories	$ 13,071	$ 13,257

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Solar Energy Systems (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Capitalized Costs of Equipment Installed Under Customer Agreements [Line Items]
Solar energy systems, gross	$ 1,783,301	$ 2,102,524
Less: Accumulated depreciation	(175,784)	(195,890)
Solar energy systems, net excluding inventory	1,607,517	1,906,634
Solar energy system inventory	30,388	32,240
Solar energy systems, net	1,637,905	1,938,874
System Equipment Costs
Capitalized Costs of Equipment Installed Under Customer Agreements [Line Items]
Solar energy systems, gross	$ 1,783,301	1,667,440
Initial Direct Costs Related to Solar Energy Systems
Capitalized Costs of Equipment Installed Under Customer Agreements [Line Items]
Solar energy systems, gross		$ 435,084

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Solar Energy Systems - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Solar Energy System Inventory
Capitalized Costs of Equipment Installed Under Customer Agreements [Line Items]
Depreciation	$ 0
Solar Energy Systems
Capitalized Costs of Equipment Installed Under Customer Agreements [Line Items]
Depreciation	$ 13,800,000	$ 16,100,000	$ 26,900,000	$ 31,500,000

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Property and Equipment - Summary of Property and Equipment Net (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Property Plant And Equipment [Line Items]
Property, gross	$ 19,799	$ 21,283
Less: Accumulated depreciation and amortization	(7,149)	(10,553)
Property and equipment, net	12,650	10,730
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property, gross	$ 10,645	10,560
Furniture and Computer and Other Equipment
Property Plant And Equipment [Line Items]
Property and Equipment, Estimated Useful Lives	3 years
Property, gross	$ 4,278	3,816
Vehicles Acquired Under Finance Leases
Property Plant And Equipment [Line Items]
Property, gross	$ 4,876	$ 6,907
Minimum | Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and Equipment, Estimated Useful Lives	1 year
Minimum | Vehicles Acquired Under Finance Leases
Property Plant And Equipment [Line Items]
Property and Equipment, Estimated Useful Lives	3 years
Maximum | Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and Equipment, Estimated Useful Lives	12 years
Maximum | Vehicles Acquired Under Finance Leases
Property Plant And Equipment [Line Items]
Property and Equipment, Estimated Useful Lives	5 years

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Property and Equipment - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Property Plant And Equipment [Line Items]
Depreciation and amortization expense			$ 39,317	$ 33,440
Property and equipment
Property Plant And Equipment [Line Items]
Depreciation and amortization expense	$ 900	$ 1,300	$ 1,000	$ 3,000

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Other Non-Current Assets - Schedule of Other Non-Current Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Other Assets Noncurrent [Abstract]
Costs to obtain contracts	$ 500,969
Accumulated amortization of costs to obtain contracts	(58,273)
Operating lease right-of-use assets	39,620
Sales incentives	9,963	$ 8,588
Other non-current assets	18,258	19,502
Total other non-current assets	$ 510,537	$ 28,090

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Other Non-Current Assets - Additional Information (Details) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)
Other Assets Noncurrent [Abstract]
Amortization of costs to obtain contracts	$ 7.4	$ 11.3
Cost to obtain contracts amortized term	20 years	20 years

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Intangible Assets - Summary of Net Intangible Assets Included in Other Non Current Assets, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Finite Lived Intangible Assets [Line Items]
Intangible assets, carrying value	$ 1,358	$ 1,743
Intangible assets, accumulated amortization	(834)	(1,204)
Total intangible assets, net	524	539
Internal-use software
Finite Lived Intangible Assets [Line Items]
Intangible assets, carrying value	635	1,020
Intangible assets, accumulated amortization	(365)	(781)
Developed Technology
Finite Lived Intangible Assets [Line Items]
Intangible assets, carrying value	522	522
Intangible assets, accumulated amortization	(360)	(324)
Trademarks/Trade Names
Finite Lived Intangible Assets [Line Items]
Intangible assets, carrying value	201	201
Intangible assets, accumulated amortization	$ (109)	$ (99)

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Intangible Assets - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Goodwill And Intangible Assets Disclosure [Abstract]
Amortization of intangible assets	$ 0.1	$ 0.1	$ 0.3

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Accrued Compensation - Summary of Accrued Compensation (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accrued Compensation Disclosure [Abstract]
Accrued payroll	$ 12,663	$ 16,352
Accrued commissions	11,882	9,168
Total accrued compensation	$ 24,545	$ 25,520

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Accrued and Other Current Liabilities - Schedule of Accrued and Other Current Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Payables And Accruals [Abstract]
Accrued unused commitment fees and interest	$ 14,517	$ 14,102
Current portion of operating lease liabilities	7,398
Accrued professional fees	6,575	6,150
Current portion of lease pass-through financing obligation	5,094	5,038
Accrued workers' compensation	4,777	4,033
Workmanship accrual	3,596	2,630
Accrued inventory	3,286	4,380
Sales, use and property taxes payable	2,872	3,132
Other accrued expenses	5,442	3,395
Total accrued and other current liabilities	$ 53,557	$ 42,860

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Debt Obligations - Schedule of Debt Obligations (Details) - USD ($) $ in Thousands		1 Months Ended	6 Months Ended		12 Months Ended
		Jun. 30, 2018	Jun. 30, 2019		Dec. 31, 2018
Debt Instrument [Line Items]
Principal Borrowings Outstanding			$ 1,352,640		$ 1,240,389
Unamortized Debt Issuance Costs, Current			(317)		(295)
Unamortized Debt Issuance Costs, Long-term			(26,283)		(24,657)
Current portion of long-term debt			144,243		12,155
Long-term debt, net of current portion			1,181,797		1,203,282
Unused Borrowing Capacity			413,412		396,575
Solar Asset Backed Notes, Series 2018-1
Debt Instrument [Line Items]
Principal Borrowings Outstanding	[1]		454,100		462,826
Unamortized Debt Issuance Costs, Current	[1]		(76)		(74)
Unamortized Debt Issuance Costs, Long-term	[1]		(8,796)		(9,172)
Current portion of long-term debt	[1]		3,919		3,655
Long-term debt, net of current portion	[1]		$ 441,309		$ 449,925
Interest Rate	[1]		5.10%		5.10%
Maturity Date	[1]		Oct. 31, 2028		Oct. 31, 2028
2017 Term Loan Facility
Debt Instrument [Line Items]
Principal Borrowings Outstanding			$ 185,194		$ 188,922
Unamortized Debt Issuance Costs, Current			(167)		(170)
Unamortized Debt Issuance Costs, Long-term			(4,429)		(4,614)
Current portion of long-term debt			6,740		6,679
Long-term debt, net of current portion			$ 173,858		$ 177,459
Interest Rate			6.00%		6.00%
Maturity Date			Jan. 31, 2035		Jan. 31, 2035
Solar Asset Backed Notes, Series 2018-2
Debt Instrument [Line Items]
Principal Borrowings Outstanding	[2],[3]		$ 339,383		$ 342,833
Unamortized Debt Issuance Costs, Current	[2],[3]		(6)		(6)
Unamortized Debt Issuance Costs, Long-term	[2],[3]		(6,775)		(7,388)
Current portion of long-term debt	[2],[3]		294		294
Long-term debt, net of current portion	[2],[3]		$ 332,308		$ 335,145
Interest Rate	[2],[3]		5.50%		5.40%
Maturity Date		Aug. 29, 2023	Aug. 31, 2023	[2],[3]	Aug. 31, 2023	[2],[3]
2018 Forward Flow Loan Facility
Debt Instrument [Line Items]
Principal Borrowings Outstanding	[4]		$ 112,501		$ 58,425
Unamortized Debt Issuance Costs, Current	[4]		(66)		(43)
Unamortized Debt Issuance Costs, Long-term	[4]		(3,231)		(3,365)
Current portion of long-term debt	[4]		2,174		1,512
Long-term debt, net of current portion	[4]		107,030		53,505
Unused Borrowing Capacity	[4]		$ 17,499		$ 71,575
Interest Rate	[4]		4.70%		5.20%
Credit Agreement
Debt Instrument [Line Items]
Principal Borrowings Outstanding			$ 1,275		$ 1,283
Unamortized Debt Issuance Costs, Current			(2)		(2)
Unamortized Debt Issuance Costs, Long-term			(106)		(118)
Current portion of long-term debt			16		15
Long-term debt, net of current portion			$ 1,151		$ 1,148
Interest Rate			6.50%		6.50%
Maturity Date			Feb. 28, 2023		Feb. 28, 2023
2019 Forward Flow Loan Facility
Debt Instrument [Line Items]
Principal Borrowings Outstanding	[5]		$ 14,087
Unamortized Debt Issuance Costs, Long-term	[5]		(2,946)
Long-term debt, net of current portion	[5]		11,141
Unused Borrowing Capacity	[5]		$ 135,913
Interest Rate	[5]		5.20%
Aggregation Facility
Debt Instrument [Line Items]
Principal Borrowings Outstanding	[6]		$ 115,000		$ 50,000
Long-term debt, net of current portion	[6]		115,000		50,000
Unused Borrowing Capacity	[6]		$ 260,000		$ 325,000
Interest Rate	[6]		5.60%		5.70%
Maturity Date	[6]		Sep. 30, 2020		Sep. 30, 2020
Working Capital Facility
Debt Instrument [Line Items]
Principal Borrowings Outstanding	[6],[7]		$ 131,100		$ 136,100
Current portion of long-term debt	[6],[7]		$ 131,100
Long-term debt, net of current portion	[6],[7]				$ 136,100
Interest Rate	[6],[7]		5.70%		5.60%
Maturity Date	[6],[7]		Mar. 31, 2020		Mar. 31, 2020

[1] The interest rate disclosed in the table above is a weighted-average rate. The Series 2018-1 Notes are comprised of Class A and Class B Notes. Class A Notes accrue interest at 4.73%. Class B Notes accrue interest at 7.37%.

[2] The Series 2018-2 Notes are comprised of Class A and Class B Notes. Class B Notes accrue interest at a rate of LIBOR plus 4.75%. Class A Notes accrue interest at a variable spread over LIBOR that results in a weighted average spread for all 2018-2 Notes of 2.95%.

[3] The interest rate of these notes is partially hedged to an effective interest rate of 6.0% for $325.2 million of the principal borrowings. See Note 13—Derivative Financial Instruments.

[4] The maturity date for this facility is 20 years from the end date of the borrowing availability period when all borrowings are aggregated into one term loan, which will be no later than October 31, 2019.

[5] The maturity date for this facility is 20 years from the end date of the borrowing availability period when all borrowings are aggregated into one term loan, which will be no later than November 20, 2020.

[6] Revolving lines of credit are not presented net of unamortized debt issuance costs.

[7] This facility is recourse debt, which refers to debt that is collateralized by the Company’s general assets. All of the Company’s other debt obligations are non-recourse, which refers to debt that is only collateralized by specified assets or subsidiaries of the Company.

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Debt Obligations - Schedule of Debt Obligations (Parenthetical) (Details) - USD ($)		1 Months Ended			6 Months Ended		12 Months Ended
		May 31, 2019	Aug. 31, 2018	Jun. 30, 2018	Jun. 30, 2019		Dec. 31, 2018
Debt Instrument [Line Items]
Principal borrowings outstanding					$ 1,352,640,000		$ 1,240,389,000
Solar Asset Backed Notes, Series 2018-1
Debt Instrument [Line Items]
Interest Rate	[1]				5.10%		5.10%
Principal borrowings outstanding	[1]				$ 454,100,000		$ 462,826,000
Maturity Date	[1]				Oct. 31, 2028		Oct. 31, 2028
Solar Asset Backed Notes, Series 2018-1 | Class A Notes
Debt Instrument [Line Items]
Interest Rate				4.73%	4.73%
Principal borrowings outstanding				$ 400,000,000
Maturity Date				Oct. 30, 2028
Solar Asset Backed Notes, Series 2018-1 | Class B Notes
Debt Instrument [Line Items]
Interest Rate				7.37%	7.37%
Principal borrowings outstanding				$ 66,000,000
Maturity Date				Oct. 30, 2028
Solar Asset Backed Notes, Series 2018-2
Debt Instrument [Line Items]
Interest Rate	[2],[3]				5.50%		5.40%
Principal borrowings outstanding	[2],[3]				$ 339,383,000		$ 342,833,000
Maturity Date				Aug. 29, 2023	Aug. 31, 2023	[2],[3]	Aug. 31, 2023	[2],[3]
Solar Asset Backed Notes, Series 2018-2 | Interest Rate Swaps
Debt Instrument [Line Items]
Effective interest rate of principal borrowings				5.95%	6.00%
Principal borrowings outstanding					$ 325,200,000
Solar Asset Backed Notes, Series 2018-2 | L I B O R Plus | Weighted Average
Debt Instrument [Line Items]
Debt instrument interest rate				2.95%
Solar Asset Backed Notes, Series 2018-2 | Class A Notes
Debt Instrument [Line Items]
Principal borrowings outstanding				$ 296,000,000
Solar Asset Backed Notes, Series 2018-2 | Class A Notes | L I B O R Plus | Weighted Average
Debt Instrument [Line Items]
Debt instrument interest rate				2.95%	2.95%
Solar Asset Backed Notes, Series 2018-2 | Class B Notes
Debt Instrument [Line Items]
Principal borrowings outstanding				$ 49,000,000
Solar Asset Backed Notes, Series 2018-2 | Class B Notes | L I B O R Plus
Debt Instrument [Line Items]
Debt instrument interest rate					4.75%
Solar Asset Backed Notes, Series 2018-2 | Class B Notes | L I B O R Plus | Weighted Average
Debt Instrument [Line Items]
Debt instrument interest rate				4.75%
2018 Forward Flow Loan Facility
Debt Instrument [Line Items]
Interest Rate	[4]				4.70%		5.20%
Debt instrument interest rate			1.50%
Principal borrowings outstanding	[4]				$ 112,501,000		$ 58,425,000
Debt instrument maturity period			20 years		20 years
2018 Forward Flow Loan Facility | Maximum
Debt Instrument [Line Items]
Maturity Date					Oct. 31, 2019
2019 Forward Flow Loan Facility
Debt Instrument [Line Items]
Interest Rate	[5]				5.20%
Principal borrowings outstanding	[5]				$ 14,087,000
Debt instrument maturity period		20 years			20 years
2019 Forward Flow Loan Facility | Maximum
Debt Instrument [Line Items]
Maturity Date					Nov. 20, 2020

[1] The interest rate disclosed in the table above is a weighted-average rate. The Series 2018-1 Notes are comprised of Class A and Class B Notes. Class A Notes accrue interest at 4.73%. Class B Notes accrue interest at 7.37%.

[2] The Series 2018-2 Notes are comprised of Class A and Class B Notes. Class B Notes accrue interest at a rate of LIBOR plus 4.75%. Class A Notes accrue interest at a variable spread over LIBOR that results in a weighted average spread for all 2018-2 Notes of 2.95%.

[3] The interest rate of these notes is partially hedged to an effective interest rate of 6.0% for $325.2 million of the principal borrowings. See Note 13—Derivative Financial Instruments.

[4] The maturity date for this facility is 20 years from the end date of the borrowing availability period when all borrowings are aggregated into one term loan, which will be no later than October 31, 2019.

[5] The maturity date for this facility is 20 years from the end date of the borrowing availability period when all borrowings are aggregated into one term loan, which will be no later than November 20, 2020.

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Debt Obligations - Additional Information (Details) - USD ($)		1 Months Ended			6 Months Ended		12 Months Ended
		May 31, 2019	Aug. 31, 2018	Jun. 30, 2018	Jun. 30, 2019		Dec. 31, 2018		Jan. 31, 2017	Mar. 31, 2015	Sep. 30, 2014
Debt Instrument [Line Items]
Principal Borrowings Outstanding					$ 1,352,640,000		$ 1,240,389,000
Restricted cash and cash equivalents					78,567,000		71,305,000
Letter of credit related to insurance contracts					18,900,000
Minimum
Debt Instrument [Line Items]
Restricted cash and cash equivalents					10,000,000		10,000,000
Solar Asset Backed Notes, Series 2018-1
Debt Instrument [Line Items]
Principal Borrowings Outstanding	[1]				$ 454,100,000		$ 462,826,000
Interest Rate	[1]				5.10%		5.10%
Revolving credit facility maturity date	[1]				Oct. 31, 2028		Oct. 31, 2028
Solar Asset Backed Notes, Series 2018-1 | Required Reserves
Debt Instrument [Line Items]
Restricted cash and cash equivalents					$ 15,000,000
Solar Asset Backed Notes, Series 2018-1 | Class A Notes
Debt Instrument [Line Items]
Principal Borrowings Outstanding				$ 400,000,000
Interest Rate				4.73%	4.73%
Revolving credit facility maturity date				Oct. 30, 2028
Solar Asset Backed Notes, Series 2018-1 | Class B Notes
Debt Instrument [Line Items]
Principal Borrowings Outstanding				$ 66,000,000
Interest Rate				7.37%	7.37%
Revolving credit facility maturity date				Oct. 30, 2028
Solar Asset Backed Notes, Series 2018-2
Debt Instrument [Line Items]
Principal Borrowings Outstanding	[2],[3]				$ 339,383,000		$ 342,833,000
Interest Rate	[2],[3]				5.50%		5.40%
Revolving credit facility maturity date				Aug. 29, 2023	Aug. 31, 2023	[2],[3]	Aug. 31, 2023	[2],[3]
Solar Asset Backed Notes, Series 2018-2 | Interest Rate Swaps
Debt Instrument [Line Items]
Principal Borrowings Outstanding					$ 325,200,000
Effective interest rate of principal borrowings				5.95%	6.00%
Solar Asset Backed Notes, Series 2018-2 | L I B O R Plus | Weighted Average
Debt Instrument [Line Items]
Debt instrument interest rate				2.95%
Solar Asset Backed Notes, Series 2018-2 | Required Reserves
Debt Instrument [Line Items]
Restricted cash and cash equivalents					$ 24,700,000
Solar Asset Backed Notes, Series 2018-2 | Class A Notes
Debt Instrument [Line Items]
Principal Borrowings Outstanding				$ 296,000,000
Solar Asset Backed Notes, Series 2018-2 | Class A Notes | L I B O R Plus | Weighted Average
Debt Instrument [Line Items]
Debt instrument interest rate				2.95%	2.95%
Solar Asset Backed Notes, Series 2018-2 | Class B Notes
Debt Instrument [Line Items]
Principal Borrowings Outstanding				$ 49,000,000
Solar Asset Backed Notes, Series 2018-2 | Class B Notes | L I B O R Plus
Debt Instrument [Line Items]
Debt instrument interest rate					4.75%
Solar Asset Backed Notes, Series 2018-2 | Class B Notes | L I B O R Plus | Weighted Average
Debt Instrument [Line Items]
Debt instrument interest rate				4.75%
2016 Term Loan Facility
Debt Instrument [Line Items]
Payment of outstanding balance of debt				$ 282,300,000
Payment of outstanding balance of debt principal				281,800,000
Payment of outstanding balance of debt accrued interest				500,000
Unamortized debt issuance costs recognized in interest expense							$ 6,900,000
Prepayment fee				0
Subordinated HoldCo Facility
Debt Instrument [Line Items]
Payment of outstanding balance of debt				206,400,000
Payment of outstanding balance of debt principal				196,600,000
Payment of outstanding balance of debt accrued interest				3,900,000
Unamortized debt issuance costs recognized in interest expense							2,900,000
Prepayment fee				$ 5,900,000
Percentage of principal prepayments fee				3.00%
Subordinated HoldCo Facility | Interest Expense
Debt Instrument [Line Items]
Prepayment fee							5,900,000
2017 Term Loan Facility
Debt Instrument [Line Items]
Principal Borrowings Outstanding					$ 185,194,000		$ 188,922,000
Interest Rate					6.00%		6.00%
Revolving credit facility maturity date					Jan. 31, 2035		Jan. 31, 2035
Interest on borrowings accrue at an annual fixed rate and payable in arrears									6.00%
Debt instrument, frequency of periodic payment					quarterly basis
2017 Term Loan Facility | Required Reserves
Debt Instrument [Line Items]
Restricted cash and cash equivalents					$ 19,900,000
2018 Forward Flow Loan Facility
Debt Instrument [Line Items]
Principal Borrowings Outstanding	[4]				$ 112,501,000		$ 58,425,000
Interest Rate	[4]				4.70%		5.20%
Debt instrument interest rate			1.50%
Maximum borrowing amount under credit agreement			$ 130,000,000
Debt instrument maturity period			20 years		20 years
Debt instrument offering date					Oct. 31, 2019
Debt Instrument interest rate description					Interest on each loan will accrue at an annual rate equal to the U.S. swap rate for the weighted-average life of such loan, plus an applicable margin equal to the greater of (a) 1.9% plus a spread adjustment based on the risk premium on the borrowing date relative to the market index-based risk premium on the closing date and (b) 1.5%. Scheduled principal payments are due on a quarterly basis, at the end of January, April, July and October of each year.
2018 Forward Flow Loan Facility | Maximum
Debt Instrument [Line Items]
Revolving credit facility maturity date					Oct. 31, 2019
2018 Forward Flow Loan Facility | Market Index-Based Risk Premium
Debt Instrument [Line Items]
Debt instrument interest rate			1.90%
2018 Forward Flow Loan Facility | Required Reserves
Debt Instrument [Line Items]
Restricted cash and cash equivalents					$ 4,700,000
2019 Forward Flow Loan Facility
Debt Instrument [Line Items]
Principal Borrowings Outstanding	[5]				$ 14,087,000
Interest Rate	[5]				5.20%
Maximum borrowing amount under credit agreement		$ 150,000,000
Debt instrument maturity period		20 years			20 years
Debt instrument offering date		Nov. 20, 2020
Debt Instrument interest rate description					Interest on each loan will accrue at an annual rate equal to the greater of (a) 4.70% and (b) the U.S. Treasury rate for the weighted-average life of such loan, plus an applicable margin equal to 2.35%. Scheduled principal payments are due on a quarterly basis, at the end of January, April, July and October of each year.
Prepayment percentage on outstanding loans		102.50%
2019 Forward Flow Loan Facility | Maximum
Debt Instrument [Line Items]
Revolving credit facility maturity date					Nov. 20, 2020
2019 Forward Flow Loan Facility | Market Index-Based Risk Premium
Debt Instrument [Line Items]
Debt instrument interest rate		4.70%
2019 Forward Flow Loan Facility | Required Reserves
Debt Instrument [Line Items]
Restricted cash and cash equivalents					$ 700,000
Aggregation Facility
Debt Instrument [Line Items]
Principal Borrowings Outstanding	[6]				$ 115,000,000		$ 50,000,000
Interest Rate	[6]				5.60%		5.70%
Revolving credit facility maturity date	[6]				Sep. 30, 2020		Sep. 30, 2020
Maximum borrowing amount under credit agreement											$ 375,000,000
Additional borrowing capacity											$ 175,000,000
Aggregation Facility | Minimum
Debt Instrument [Line Items]
Debt instrument interest rate					3.25%
Aggregation Facility | Maximum
Debt Instrument [Line Items]
Debt instrument interest rate					3.75%
Aggregation Facility | L I B O R Plus
Debt Instrument [Line Items]
Debt instrument interest rate					1.00%
Aggregation Facility | Federal Funds Rate Plus
Debt Instrument [Line Items]
Debt instrument interest rate					0.50%
Aggregation Facility | Required Reserves
Debt Instrument [Line Items]
Restricted cash and cash equivalents					$ 3,500,000
Working Capital Facility
Debt Instrument [Line Items]
Principal Borrowings Outstanding	[6],[7]				$ 131,100,000		$ 136,100,000
Interest Rate	[6],[7]				5.70%		5.60%
Revolving credit facility maturity date	[6],[7]				Mar. 31, 2020		Mar. 31, 2020
Debt instrument interest rate					2.25%
Maximum borrowing amount under credit agreement										$ 150,000,000
Debt Instrument interest rate description					(1) a rate equal to the Eurodollar Rate for the interest period divided by one minus the Eurodollar Reserve Percentage, plus a margin of 3.25%; or (2) the highest of (a) the Federal Funds Rate plus 0.50%, (b) the Citibank prime rate and (c) the one-month interest period Eurodollar rate plus 1.00%, plus a margin of 2.25%. Interest is payable depending on the type of borrowing at the end of (1) the interest period that the Company may elect as a term, not to exceed three months, (2) quarterly or (3) at maturity of the Working Capital Facility.
Letter of credit related to insurance contracts					$ 18,900,000
Minimum cash balance requirement					$ 30,000,000
Working Capital Facility | Federal Funds Rate Plus
Debt Instrument [Line Items]
Debt instrument interest rate					0.50%
Working Capital Facility | Eurodollar Reserve Percentage Plus
Debt Instrument [Line Items]
Debt instrument interest rate					3.25%
Working Capital Facility | Euro Dollar Rate Plus
Debt Instrument [Line Items]
Debt instrument interest rate					1.00%

[1] The interest rate disclosed in the table above is a weighted-average rate. The Series 2018-1 Notes are comprised of Class A and Class B Notes. Class A Notes accrue interest at 4.73%. Class B Notes accrue interest at 7.37%.

[2] The Series 2018-2 Notes are comprised of Class A and Class B Notes. Class B Notes accrue interest at a rate of LIBOR plus 4.75%. Class A Notes accrue interest at a variable spread over LIBOR that results in a weighted average spread for all 2018-2 Notes of 2.95%.

[3] The interest rate of these notes is partially hedged to an effective interest rate of 6.0% for $325.2 million of the principal borrowings. See Note 13—Derivative Financial Instruments.

[4] The maturity date for this facility is 20 years from the end date of the borrowing availability period when all borrowings are aggregated into one term loan, which will be no later than October 31, 2019.

[5] The maturity date for this facility is 20 years from the end date of the borrowing availability period when all borrowings are aggregated into one term loan, which will be no later than November 20, 2020.

[6] Revolving lines of credit are not presented net of unamortized debt issuance costs.

[7] This facility is recourse debt, which refers to debt that is collateralized by the Company’s general assets. All of the Company’s other debt obligations are non-recourse, which refers to debt that is only collateralized by specified assets or subsidiaries of the Company.

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Leases - Summary of Lease Costs and Other Information (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018
Lease cost
Amortization of right-of-use assets	$ 366	$ 660
Interest on lease liabilities	58	84
Operating lease cost	2,770	5,540
Short-term lease cost	579	1,301
Total lease cost	3,773	7,585
Finance leases:
Operating cash outflows from finance leases	58	84
Financing cash outflows from finance leases	306	577	$ 1,931
Right-of-use assets obtained in exchange for new finance lease liabilities	$ 2,703	$ 3,756	$ 619
Weighted-average remaining lease term - finance leases (in years)	3 years 7 months 6 days	3 years 7 months 6 days
Weighted-average discount rate - finance leases	7.70%	7.70%
Operating leases:
Operating cash outflows from operating leases	$ 2,809	$ 5,635
Right-of-use assets obtained in exchange for new operating lease liabilities	$ 1,755	$ 8,665
Weighted-average remaining lease term - operating leases (in years)	9 years 4 months 24 days	9 years 4 months 24 days
Weighted-average discount rate - operating leases	8.00%	8.00%

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Leases - Additional Information (Details)	6 Months Ended
	Jun. 30, 2019
Fleet Vehicles Lease
Lessee Lease Description [Line Items]
Lessee, Finance Lease, Existence of Option to Extend [true false]	true
Description of finance lease, option to extend	The master lease agreements allow for the Company to extend fleet vehicle leases on a month-to-month basis
Office Lease
Lessee Lease Description [Line Items]
Operating lease, additional term	3 years
Operating lease, term of contract	15 years
Lessee, Operating Lease, Existence of Option to Extend [true false]	true
Description of operating lease, option to extend	The corporate office lease includes options to extend the lease term for two additional periods of five years
Warehouse Lease Agreement
Lessee Lease Description [Line Items]
Operating lease, term of contract	5 years
Lessee, Operating Lease, Existence of Option to Extend [true false]	true
Minimum | Fleet Vehicles Lease
Lessee Lease Description [Line Items]
Finance lease, agreement period	3 years
Minimum | Warehouse Lease Agreement
Lessee Lease Description [Line Items]
Operating lease, term of contract	2 years
Minimum | Equipment Lease Agreement
Lessee Lease Description [Line Items]
Operating lease, term of contract	3 years
Maximum | Fleet Vehicles Lease
Lessee Lease Description [Line Items]
Finance lease, agreement period	5 years
Maximum | Warehouse Lease Agreement
Lessee Lease Description [Line Items]
Operating lease, term of contract	9 years
Maximum | Equipment Lease Agreement
Lessee Lease Description [Line Items]
Operating lease, term of contract	5 years

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Leases - Schedule of Future Minimum Lease Payments for Finance Leases (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Finance Lease Liabilities Payments Due [Abstract]
2019	$ 742
2020	1,171
2021	1,147
2022	1,038
2023	346
Total minimum lease payments	4,444
Less: interest	548
Present value of finance lease obligations	3,896
Less: current portion	1,089	$ 1,921
Long-term portion	$ 2,807	$ 505

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Leases - Schedule of Future Minimum Lease Payments Under Non-cancellable Operating Leases (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Operating Lease Liabilities Payments Due [Abstract]
2019	$ 5,600
2020	10,195
2021	7,893
2022	5,806
2023	4,781
Thereafter	36,680
Total minimum lease payments	70,955
Less: present value impact	22,259
Present value of operating lease obligations	48,696
Less: current portion	7,398
Long-term portion	$ 41,298

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Derivative Financial Instruments - Schedule of Derivative Financial Instruments at Fair Value (Details) - Interest Rate Swaps - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Other Noncurrent Liabilities
Derivatives Fair Value [Line Items]
Fair Value, Derivatives designated as hedging instruments	$ 25,951	$ 9,884
Fair Value, Derivatives not designated as hedging instruments	$ 3,882	1,262
Other Noncurrent Assets
Derivatives Fair Value [Line Items]
Fair Value, Derivatives not designated as hedging instruments		$ 130

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Derivative Financial Instruments - Additional Information (Details)	6 Months Ended
	Jun. 30, 2019 USD ($)
Amended Bank Of America Aggregation Credit Facility | Derivatives Not Designated as Hedging Instruments
Derivatives Fair Value [Line Items]
Notional amount	$ 40,000,000
2018-2 Notes | Interest Rate Swaps
Derivatives Fair Value [Line Items]
Notional amount	325,200,000
Accumulated other comprehensive income, expected amount of cash flow hedge to be reclassified to interest expense within the next 12 months	$ 3,300,000

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Derivative Financial Instruments - Schedule of Losses (Gains) on Derivative Financial Instruments Recognized in OCI and Condensed Consolidated Statements of Operations Before Tax Effect (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative Instruments, Gain (Loss) [Line Items]
Total amounts presented in the income statement line items, Interest expense	$ 19,472	$ 11,336	$ 38,599	$ 28,258
Total losses (gains)			2,750	(1,279)
Total amounts presented in the income statement line items, Other (income) expense, net	1,365	(4,109)	2,750	(6,370)
Interest Expense, Net
Derivative Instruments, Gain (Loss) [Line Items]
Total losses (gains)	238	(22,335)	560	(22,716)
Other (Income) Expense, Net
Derivative Instruments, Gain (Loss) [Line Items]
Total losses (gains)	1,366	(1,990)	2,750	(4,252)
Derivatives Designated as Hedging Instruments | Cash Flow Hedging | Interest Rate Swaps | Interest Expense, Net
Derivative Instruments, Gain (Loss) [Line Items]
Losses (gains) reclassified from AOCI into income	238	(22,335)	560	(22,716)
Derivatives Designated as Hedging Instruments | Cash Flow Hedging | Interest Rate Swaps | Other Comprehensive Income
Derivative Instruments, Gain (Loss) [Line Items]
Losses (gains) recognized in OCI	9,967	825	16,627	(4,318)
Derivatives Not Designated as Hedging Instruments | Interest Rate Swaps | Other (Income) Expense, Net
Derivative Instruments, Gain (Loss) [Line Items]
Losses (gains) recognized in income	$ 1,366	$ (1,990)	$ 2,750	$ (4,252)

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Investment Funds - Additional Information (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Dec. 31, 2018
Investment Holdings [Line Items]
Summary of investment fund		The Company has formed investment funds for the purpose of funding the purchase of solar energy systems under long-term customer contracts.
Investors cash contribution to variable interest equity	$ 1,725,000,000	$ 1,725,000,000	$ 1,565,300,000
Solar energy systems, net	1,637,905,000	1,637,905,000	1,938,874,000
Prepaid insurance balance	8,100,000	8,100,000	8,300,000
Distributions paid to reimburse fund investors	0	0
Accrued distribution	0	0
Restricted cash	78,567,000	78,567,000	71,305,000
Minimum
Investment Holdings [Line Items]
Restricted cash	10,000,000	10,000,000	10,000,000
Variable Interest Entities
Investment Holdings [Line Items]
Solar energy systems, net	1,478,530,000	1,478,530,000	1,752,271,000
Investment tax credit repayment		0
Restricted cash	5,405,000	5,405,000	2,443,000
Financing Obligation
Investment Holdings [Line Items]
Solar energy systems, net	44,800,000	44,800,000	55,800,000
Financing liabilities	5,100,000	5,100,000	$ 5,300,000
Investor
Investment Holdings [Line Items]
Investors cash contribution to variable interest equity	$ 110,000,000	$ 110,000,000

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Investment Funds - Aggregate Carrying Value of Funds Assets and Liabilities (Details) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents		$ 198,951	$ 219,591
Accounts receivable, net		28,186	14,207
Prepaid expenses and other current assets		30,783	31,201
Total current assets		270,991	278,256
Restricted cash and cash equivalents		78,567	71,305
Solar energy systems, net		1,637,905	1,938,874
Other non-current assets, net		510,537	28,090
TOTAL ASSETS	[1]	2,510,650	2,327,255
Current liabilities:
Distributions payable to non-controlling interests and redeemable non-controlling interests		11,221	7,846
Current portion of long-term debt		144,243	12,155
Current portion of deferred revenue		28,911	30,199
Accrued and other current liabilities		53,557	42,860
Total current liabilities		303,741	166,430
Long-term debt, net of current portion		1,181,797	1,203,282
Deferred revenue, net of current portion		15,529	13,524
Other non-current liabilities		76,994	24,610
Total liabilities	[1]	2,071,364	1,845,471
Variable Interest Entities
Current assets:
Cash and cash equivalents		105,175	62,350
Accounts receivable, net		19,082	6,593
Prepaid expenses and other current assets		2,291	1,289
Total current assets		126,548	70,232
Restricted cash and cash equivalents		5,405	2,443
Solar energy systems, net		1,478,530	1,752,271
Other non-current assets, net		410,322	10,888
TOTAL ASSETS		2,020,805	1,835,834
Current liabilities:
Distributions payable to non-controlling interests and redeemable non-controlling interests		11,221	7,846
Current portion of long-term debt		2,174	1,512
Current portion of deferred revenue		2,328	2,320
Accrued and other current liabilities		5,529	4,860
Total current liabilities		21,252	16,538
Long-term debt, net of current portion		118,171	53,505
Deferred revenue, net of current portion		10,980	9,694
Other non-current liabilities		745	1,023
Total liabilities		$ 151,148	$ 80,760

[1] The assets of Vivint Solar, Inc. (the “Company”) as of June 30, 2019 and December 31, 2018 include $2,020.8 million and $1,835.8 million consisting of assets of variable interest entities, or VIEs, that can only be used to settle obligations of the VIEs. These assets include solar energy systems, net, of $1,478.5 million and $1,752.3 million as of June 30, 2019 and December 31, 2018; other non-current assets, net of $410.3 million and $10.9 million as of June 30, 2019 and December 31, 2018; cash and cash equivalents of $105.2 million and $62.4 million as of June 30, 2019 and December 31, 2018; accounts receivable, net, of $19.1 million and $6.6 million as of June 30, 2019 and December 31, 2018; restricted cash and cash equivalents of $5.4 million and $2.4 million as of June 30, 2019 and December 31, 2018; and prepaid expenses and other current assets of $2.3 million and $1.3 million as of June 30, 2019 and December 31, 2018. The Company’s liabilities as of June 30, 2019 and December 31, 2018 included $151.1 million and $80.8 million of liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include distributions payable to non-controlling interests and redeemable non-controlling interests of $11.2 million and $7.8 million as of June 30, 2019 and December 31, 2018; deferred revenue of $13.3 million and $12.0 million as of June 30, 2019 and December 31, 2018; long-term debt of $120.3 million and $55.0 million as of June 30, 2019 and December 31, 2018; accrued and other current liabilities of $5.5 million and $4.9 million as of June 30, 2019 and December 31, 2018; and other non-current liabilities of $0.7 million and $1.0 million as of June 30, 2019 and December 31, 2018. For further information see Note 14—Investment Funds.

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Redeemable Non-Controlling Interests and Equity - Schedule of Shares of Common Stock Reserved for Issuance (Details) - shares	Jun. 30, 2019	Dec. 31, 2018
Equity [Abstract]
Shares available for grant under equity incentive plans	13,544,000	13,323,000
Restricted stock units issued and outstanding	7,284,000	6,172,000
Stock options issued and outstanding	5,373,000	3,394,000
Long-term incentive plan	2,706,000	2,706,000
Total	28,907,000	25,595,000

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Redeemable Non-Controlling Interests and Equity - Additional Information (Details) $ in Millions	Jun. 30, 2019 USD ($)
Put Option | Minimum
Redeemable Noncontrolling Interest [Line Items]
Purchase price for investors' interest in funds under Put Options	$ 2.1
Put Option | Maximum
Redeemable Noncontrolling Interest [Line Items]
Purchase price for investors' interest in funds under Put Options	4.1
Call Option | Minimum
Redeemable Noncontrolling Interest [Line Items]
Purchase price for investors' interest in funds under Put Options	1.2
Call Option | Maximum
Redeemable Noncontrolling Interest [Line Items]
Purchase price for investors' interest in funds under Put Options	$ 7.0

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Equity Compensation Plans - Additional Information (Details) - shares	1 Months Ended
	Jan. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares available for grant under equity incentive plans		13,544,000	13,323,000
2014 Equity Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares available for grant under equity incentive plans		13,500,000
Number of additional shares available for issuance	4,800,000

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Equity Compensation Plans - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Shares Underlying Options, Outstanding, Balance	3,394,000
Shares Underlying Options, Granted	2,101,000
Shares Underlying Options, Exercised	(122,000)
Shares Underlying Options, Outstanding, Balance	5,373,000
Shares Underlying Options, Options vested and exercisable	2,143,000
Weighted-Average Exercise Price, Outstanding, Balance	$ 2.77
Weighted-Average Exercise Price, Granted	5.06
Weighted-Average Exercise Price, Exercised	2.21
Weighted-Average Exercise Price, Outstanding, Balance	3.68
Weighted-Average Exercise Price, Options vested and exercisable	$ 2.30
Weighted-Average Remaining Contractual Term, Outstanding, Balance	7 years 9 months 18 days
Weighted-Average Remaining Contractual Term, Options vested and exercisable	5 years 8 months 12 days
Aggregate Intrinsic Value	$ 19,888	$ 4,689
Aggregate Intrinsic Value, Options vested and exercisable	$ 11,142

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Equity Compensation Plans - RSU Activity (Details)	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Number of Awards, Outstanding at December 31, 2018 | shares	6,172,000
Number of Awards, Granted | shares	2,666,000
Number of Awards, Vested | shares	(1,370,000)
Number of Awards, Forfeited | shares	(184,000)
Number of Awards, Outstanding at June 30, 2019 | shares	7,284,000
Weighted Average Grant Date Fair Value, Outstanding at December 31, 2018 | $ / shares	$ 3.84
Weighted Average Grant Date Fair Value, Granted | $ / shares	5.74
Weighted Average Grant Date Fair Value, Vested | $ / shares	3.85
Weighted Average Grant Date Fair Value, Forfeited | $ / shares	4.07
Weighted Average Grant Date Fair Value, Outstanding at June 30, 2019 | $ / shares	$ 4.53

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Equity Compensation Plans - Summary of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Schedule Of Stock Options [Line Items]
Stock-based compensation expense	$ 4,156	$ 3,812	$ 7,835	$ 6,781
Cost of Revenue
Schedule Of Stock Options [Line Items]
Stock-based compensation expense	404	349	736	623
Sales and Marketing
Schedule Of Stock Options [Line Items]
Stock-based compensation expense	806	1,083	1,541	1,914
General and Administrative
Schedule Of Stock Options [Line Items]
Stock-based compensation expense	2,915	2,349	5,499	4,169
Research and Development
Schedule Of Stock Options [Line Items]
Stock-based compensation expense	$ 31	$ 31	$ 59	$ 75

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Equity Compensation Plans - Summary of Unrecognized Stock-Based Compensation Expense (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Schedule Of Stock Options [Line Items]
Unrecognized Stock-Based Compensation Expense	$ 30,802
RSUs
Schedule Of Stock Options [Line Items]
Unrecognized Stock-Based Compensation Expense, other than stock options	$ 23,806
Weighted- Average Period of Recognition	1 year 10 months 24 days
Stock Options
Schedule Of Stock Options [Line Items]
Unrecognized Stock-Based Compensation Expense, stock options	$ 6,996
Weighted- Average Period of Recognition	2 years 2 months 12 days

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Income Taxes - Additional Information (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Effective income tax rate	(51.90%)	(151.50%)	(48.10%)	(81.70%)

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Related Party Transactions - Additional Information (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Aug. 31, 2017	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Related Party Transaction [Line Items]
Sales and marketing		$ 37,037	$ 14,033	$ 66,671	$ 25,158
Accounts payable—related party		500		500		$ 200
Accrued equity distributions		11,221		11,221		7,846
Related Party
Related Party Transaction [Line Items]
Sales and marketing		200	600	1,000	1,300
Amounts due from direct-sales personnel		4,900		4,900		5,200
Provision for advances to direct-sales personnel				1,000		900
Accrued equity distributions		1,600		1,600		$ 1,500
Vivint Services
Related Party Transaction [Line Items]
Initial term of agreement period	2 years
Fees incurred in conjunction with agreements entered		$ 3,800	$ 4,300	$ 6,200	$ 5,300

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Commitments and Contingencies - Additional Information (Details) - USD ($) $ in Millions	1 Months Ended
	Apr. 30, 2018	Sep. 30, 2016	Jun. 30, 2019
Other Commitments [Line Items]
Standby letter of credit outstanding			$ 18.9
Total estimated obligation earned over deferment period			$ 17.9
Sun Edison Inc
Other Commitments [Line Items]
Unsecured claim initial amount		$ 1,000.0
Claim amount received from other party	$ 590.0
Received initial distribution amount	$ 2.1

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Basic and Diluted Net Loss Per Share - Computation of Basic and Diluted Net Loss Per Share to Common Stockholders (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Numerator:
Net (loss attributable) income available to common stockholders	$ (28,567)	$ 18,116	$ (54,809)	$ 5,140
Denominator:
Shares used in computing net (loss attributable) income available per share to common stockholders, basic	120,869	116,650	120,589	115,907
Weighted-average effect of potentially dilutive shares to purchase common stock		5,103		5,062
Shares used in computing net (loss attributable) income available per share to common stockholders, diluted	120,869	121,753	120,589	120,969
Net (loss attributable) income available per share to common stockholders:
Basic	$ (0.24)	$ 0.16	$ (0.45)	$ 0.04
Diluted	$ (0.24)	$ 0.15	$ (0.45)	$ 0.04

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Basic and Diluted Net Loss Per Share - Additional Information (Details) - shares shares in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018
Earnings Per Share [Abstract]
Number of shares excluded from dilutive shares	1.5	1.5

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Subsequent Events - Additional Information (Details) - Subsequent Event - Revolving Warehouse Facility	Aug. 08, 2019 USD ($)
Subsequent Event [Line Items]
Maximum borrowing amount under credit agreement	$ 325,000,000
Line of credit facility option to expand maximum borrowing capacity	400,000,000
Proceeds from line of credit	$ 121,400,000
Debt instrument maturity period	4 years
Interest Rate Swaps | Minimum
Subsequent Event [Line Items]
Percentage of outstanding term loans in interest rate hedged	90.00%
L I B O R Plus
Subsequent Event [Line Items]
Debt instrument interest rate	2.375%
L I B O R Plus | After Three Years Term of Facility
Subsequent Event [Line Items]
Debt instrument interest rate	3.375%