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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to.
 Commission File Number 0-31687
 
 EVERGREEN SOLAR, INC.
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    04-3242254(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)138 Bartlett StreetMarlboro, Massachusetts 01752
    
    (508) 357-2221(Address of principal executive offices)(zip code)
    
    (Registrants telephone number, including area code)
 
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, Par Value $.01 Per Share
    
    The NASDAQ Stock Market LLC
 Securities registered pursuant to Section 12(g) of the Act:
None
 
 o Yes þ No
 o Yes þ No
 þ Yes o No
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer  o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o Yes þ No




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TABLE OF CONTENTS
 PageItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    13Item 1B. Unresolved Staff Comments
    
    
    29Item 2. Properties
    
    
    30Item 3. Legal Proceedings
    
    
    30Item 4. Submission of Matters to a Vote of Security Holders
    
    
    30PART IIItem 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    31Item 6. Selected Financial Data
    
    
    33Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    34Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    48Item 8. Financial Statements and Supplementary Data
    
    
    48Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    48Item 9A. Controls and Procedures
    
    
    49Item 9B. Other Information
    
    
    49PART IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    50Item 11. Executive Compensation
    
    
    54Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    69Item 13. Certain Relationships and Related Transactions
    
    
    71Item 14. Principal Accounting Fees and Services
    
    
    73PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    73Consolidated Balance Sheets
    
    
    F-3Consolidated Statements of Operations
    
    
    F-4Consolidated Statements of Stockholders Equity
    
    
    F-5Consolidated Statements of Cash Flows
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7Schedule 1  Condensed Financial Information of the Registrant
    
    
    F-36SIGNATURESEx-10.3 First Amendment to Amended and Restated 2000 Stock Option and Incentive PlanEx-10.32 Master Supply Agreement by and between the Registrant and IBC Solar AG, dated July 14, 2008Ex-10.33 Amended and Restated Sales Representative Agreement by and Between the Registrant and Sovello dated October 6, 2008Ex-10.34 Quad Technology License Agreement by and Between the Registrant and Sovello dated October 6, 2008Ex-10.35 Addendum to Quad Technology License Agreement by and Between the Registrant and Sovello dated October 6, 2008Ex-10.36 Undertaking of Evergreen Solar dated October 6, 2008Ex-10.37 Amended and Restated Master Joint Venture Agreement by and among the Registrant, Q-Cells, REC and Sovello AG, dated November 6, 2008Ex-10.38 Form of Amended and Restated Change of Control Severance AgreementEx-10.39 Form of Amended and Restated Change of Control Severance AgreementEx-10.40 Form of Amended and Restated Change of Control Severance AgreementEx-10.41 Amended and Restated Management Incentive PolicyEx-10.42 PV License Agreement by and between ESLR1, LLC and TISICS Ltd. dated September 5, 2007Ex-23.1 Consent of PricewaterhouseCoopers LLP, an Independent Registered Public Accounting FirmEx-23.2 Consent of Leipzig, Germany PricewaterhouseCoopers AGEx-31.1 Certification of the Chief Executive OfficerEx-31.2 Certification of the Chief Financial OfficerEx-32.1 Certification of the Chief Executive OfficerEx-32.2 Certification of the Chief Financial OfficerEx-99.1 - Sovello balance sheet for the period ended December 31,2006Ex-99.2 - Sovllo income statement for the period December 20 to December 31, 2006Ex-99.3 - Sovello cash flow for the period December 20 to December 31, 2006Ex-99.4 - Sovello notes to the financial statements for the period December 20 to December 31, 2006Ex-99.5 - Opinion Letter, Leipzig, Germany PricewaterhouseCoopers AG




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PART I
 Forward-Looking Statements
 This Annual Report on Form 10-K , including Managements Discussion and Analysis of Financial
Condition and Results of Operations in Item 7 of this report and the documents incorporated by
reference herein, contain forward-looking statements that involve risks, uncertainties and
assumptions, including those discussed in Risk Factors in Item 1A of this report. If the risks or
uncertainties ever materialize or any of the assumptions prove incorrect, our results will differ
from those expressed or implied by such forward-looking statements and assumptions. All statements
other than statements of historical fact are statements that could be deemed forward-looking
statements, including but not limited to statements regarding:
 
    
    our future growth, revenue, earnings and gross margin improvement;
    
    the Devens facility expansion and other potential capacity expansions, and the timing of
such facilities becoming fully operational and meeting manufacturing capacity goals on
schedule and within budget;
    
    the sufficiency of our cash, cash equivalents and marketable securities; access to
capital markets to satisfy our anticipated cash requirements; and possible sales of
securities and our planned use of proceeds from such sales;
    
    capital requirements to respond to competitive pressures and acquire complementary
businesses and necessary technologies;
    
    costs associated with research and development, building or improving manufacturing
facilities, general and administrative expenses and business growth;
    
    the demand and market for solar energy, shifts in our geographic product revenue mix, and
our position in the solar power market;
    
    the volume of photovoltaic solar panels we will produce;
    
    the making of strategic investments and expansion of strategic partnerships,
manufacturing operations and distribution networks; and the future benefit of these
activities;
    
    operating efficiency of manufacturing facilities, including increases in manufacturing
scale and technological improvements needed to continuously reduce the cost per watt to
manufacture our products;
    
    revenue from customer contracts primarily denominated in Euros that are subject to
foreign currency exchange risks and the use of derivative financial instruments to manage
those risks;
    
    future plans and benefits from the Sovello joint venture (formerly EverQ), including the
expansion of Sovellos manufacturing capacity and our ability to obtain liquidity for our
investment through an initial public offering of Sovello shares or otherwise;
    
    our receipt or Sovellos receipt of public grant awards and other government funding to
support our expansion or Sovellos expansion;
    
    our expectations regarding product performance and cost and technological competitiveness;
    
    our ability to obtain key raw materials, including silicon supply from our suppliers;
    
    the benefits of our proprietary technology and new manufacturing and other developments,
including our quad wafer furnace design and continued enhancements of our wafer, cell and
panel production technologies; and
    
    the payment of any cash dividends.
 These statements may be identified with such words as we expect, we believe, we
anticipate or similar indications of future expectations. These statements are neither promises
nor guarantees and involve risks and uncertainties, which could cause our actual results to differ
materially from such forward-looking statements. Such risks and uncertainties may include, among
other things, macroeconomic and geopolitical trends and events, the execution and performance of
contracts by distribution partners, suppliers and other partners, and other risks and uncertainties
described herein, including but not limited to the items discussed in Item 1A.Risk Factors. We
caution readers not to place undue reliance on any forward-looking statements contained in this
Annual Report, which speak only as of the date of this Annual Report. We disclaim any obligation to
update publicly or revise any such statements to reflect any change in our expectations, or events,
conditions, or circumstances on which any such statements may be based, or that may affect the
likelihood that actual results will differ from those set forth in such forward-looking statements.
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ITEM 1. BUSINESS.
 BUSINESS OVERVIEW
        3




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Sovello Joint Venture
      INDUSTRY BACKGROUND
 Overview
  4




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Key Growth Drivers and Advantages of Solar Power
  
    
    An Increase in Solar Power Generation Will Reduce Dependence on Fossil
Fuels.Worldwide demand for electricity is expected to nearly double
from 14.3 billion MW hours in 2002 to 25.0 billion MW hours in 2025,
according to the U.S. Department of Energy. Additionally, according to
International Energy Agency 2006 estimates, over 60% of the worlds
electricity is generated from fossil fuels such as coal, natural gas
and oil. The combination of declining finite fossil fuel energy
resources and increasing energy demand is depleting natural resources
as well as driving up electricity costs, underscoring the need for
reliable renewable energy production. Solar power systems are
renewable energy sources that rely on the sun as an energy source and
do not require a fossil fuel supply. As such, they are well positioned
to offer a sustainable long-term alternative means of power
generation.
    
    Environmental Advantages.Solar power is one of the cleanest electric
generation sources, capable of generating electricity without air or
water emissions, noise, vibration, habitat impact or waste generation.
In particular, solar power does not generate greenhouse gases that
contribute to global climate change or other air pollutants, as power
generation based on fossil fuel combustion does, and does not generate
radioactive or other wastes as nuclear power and coal combustion do.
It is anticipated that greenhouse gas regulation in the United States
and internationally will increase the costs and constrain the
development of fossil fuel based electric generation and increase the
attractiveness of solar power as a renewable electricity source.
    
    Flexible Locations.From tiny solar cells powering a hand-held
calculator, to an array of rooftop panels powering an entire home, to
acres of panels on a commercial building roof or field, solar power
products can be deployed in many sizes and configurations and can be
installed almost anywhere in the world. Solar power is among the best
technologies for power generation in urban areas, environmentally
sensitive areas and geographically remote areas in both developing and
developed countries.
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
    
    Government Incentives.Germany, Italy, Japan, Spain and the United
States presently account for the majority of world market demand for
solar power systems. Government policies in these countries, in the
form of both regulation and incentives, have accelerated the adoption
of solar technologies by businesses and consumers. Typical government
incentives include capital cost rebates, feed-in tariffs, tax credits
and net metering. Internationally, Spain, Portugal, Greece, France,
South Korea and Italy have recently developed new solar support
programs. Other countries, including China, are increasingly adopting
similar incentives. In the United States, the 30% investment tax
credit for solar investment was renewed and made eligible for
conversion into a direct grant by the American Recovery and Investment
Act.
  The Solar Power Industry Value Chain
      Key Challenges for Solar Power
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
    
    Continued Reliance on Government Support and Incentives.At present,
most renewable energy sources would not be cost-competitive compared
to traditional energy sources without government support. The PV
industry relies on governmental incentives to encourage production and
consumption, especially for on-grid systems. Changes in government
policies could lead to a reduction in incentives and subsidies to the
renewable energy sector, which could in turn seriously hinder the
growth of the PV industry.
    
    Shortage of Silicon Materials.Efficient use of silicon has been
imperative for the growth of the industry due to the limited supply
and increasing cost of silicon raw material experienced until the
recent past. Even if silicon becomes readily available to support
very rapid industry growth, and prices for silicon decline, silicon is
still a dominant component of the cost of a crystalline silicon solar
panel. The reduction of raw materials waste, particularly the waste
associated with sawing silicon by conventional crystalline silicon
wafer production technology, known as kerf loss, is a key factor in
lowering wafer manufacturing costs.
    
    Simplified and Continuous Processing.Reduce reliance on expensive,
multi-step manufacturing processes.
    
    Reduced Manufacturing Capital Costs.Decrease the costs and risks
associated with new plant investments to lower capital costs per unit
of production.
    
    Improved Product Design and Performance.Increase product conversion
efficiency, longevity and ease of use. Conversion efficiency refers to
the fraction of the suns energy converted to electricity.
  
    
    Crystalline Silicon.Crystalline silicon technology was the earliest
practiced solar wafer fabrication technology and continues to be the
dominant technology for the market, accounting for approximately 88%
of solar cell production in 2007, according to Solarbuzz. Conventional
crystalline silicon technology involves sawing thin wafers from solid
crystalline silicon blocks. Crystalline silicon products are known for
their reliability, performance and longevity. However, factors such as
high materials waste from sawing, complex processing procedures and
high capital costs have limited the speed at which conventional
crystalline silicon wafer manufacturers can reduce manufacturing
costs.
    
    Thin Films.While most major solar power manufacturers currently rely
on crystalline silicon technology for their solar cell production,
these manufacturers, and other new entrants, are also developing
alternative thin film technologies to achieve lower manufacturing
costs. Thin film technology involves depositing several thin layers of
complex materials such as CIGS or CdTe on a substrate, such as glass,
to make a solar cell. Although thin film technologies generally use
certain key materials more efficiently than conventional crystalline
silicon manufacturing technology and are not affected by the current
polysilicon supply shortage, such technologies have disadvantages such
as lower conversion efficiency and, in some cases, reduced product
performance and reliability.
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OUR BUSINESS
 Our Competitive Strengths
  Proven Wafer Manufacturing Technology.
 Established Relationships with Key Suppliers.
 Attractive Take-or-Pay Sales Contracts.
 Strong, Experienced Management Team.
 Our Growth Strategies
  Innovate to Lower the Cost of Solar to Achieve Grid Parity Cost Structure.
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Maintain Our Leadership in Wafer Technology, through Continuous Innovation.
 Proliferate Our Technology Commensurate With the Growing Demand for Solar.
 Our Products
  
    
    Wafers.A crystalline silicon wafer is a flat piece of crystalline
silicon that can be processed and assembled into a solar cell. Our
rectangular wafers measure approximately 80 millimeters by 150
millimeters and are approximately 190 microns thick.
    
    Cells.A solar cell is a device made from a silicon wafer that
converts sunlight into electricity by means of a process known as the
PV effect. Each of our solar cells currently produces approximately
1.8 watts of power. As the conversion efficiency of the solar cell
improves, the power of the cell improves as well.
    
    Panels.A solar panel is an assembly of solar cells that have been
electrically interconnected and laminated in a durable and
weather-tight package. The most common solar panels typically range
from 160 to 200 watts per panel while some specialty panels are
smaller or larger. Our solar panels currently produce up to
approximately 210 watts of power.
  Sales, Marketing and Distribution
  9




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Manufacturing
     10




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Research and Development
  Intellectual Property
 Patents
  
    
    Crystalline Silicon Wafers.Our wafer fabrication technology,
including methods for automated, high-yield production techniques, are
covered by 11 U.S. patents, three Indian patents and four European
patents that have been validated with enforceable rights in multiple
European jurisdictions. In addition, for this technology, we also have
15 pending U.S. patent applications, nine pending PCT applications,
and nine pending national/regional phase foreign patent applications.
    
    Solar Cell Fabrication.Our solar cell processing technology is
covered by four U.S. patents. Among other things, these patents relate
to methods for forming wrap-around contacts on solar cells and methods
for processing solar cells. In addition, for this technology, we also
have four pending U.S. patent applications and three pending PCT
applications.
    
    Solar Panels.For our advanced solar panel designs, we currently own
eight U.S. patents, five Indian patents, two European patents that
have been validated with enforceable rights in multiple European
jurisdictions, and two Japanese patents. The U.S. patents primarily
relate to solar cell panels with an improved backskin, solar cell
panels with an interface mounting system, an encapsulant material for
solar cell panels, and a solar cell roof tile system. In addition, for
this technology, we have four pending U.S. patent applications, three
pending PCT applications, and 13 pending national/regional phase
foreign patent applications.
 Trademarks and Copyrights
  Trade Secrets and Other Confidential Information
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Competition
     Environmental, Health and Safety Regulations
  12




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EMPLOYEES
  AVAILABLE INFORMATION
  
 ITEM 1A. RISK FACTORS.
 Certain Factors Which May Affect Future Results
  RISKS RELATING TO OUR INDUSTRY, PRODUCTS, FINANCIAL RESULTS AND OPERATIONS
 Evaluating our business and future prospects may be difficult due to the rapidly changing market landscape.
  13




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We have a history of losses, expect to incur substantial further losses and may not achieve or
maintain profitability in the future, which in turn could materially decrease the value of our
common stock
  
    
    expand our manufacturing operations, whether domestically or internationally;
    
    develop our distribution network;
    
    continue to research and develop our products and manufacturing technologies;
    
    implement internal systems and infrastructure to support our growth; and
    
    hire additional personnel.
  We may need to raise significant additional capital in order to continue to grow our business and
fund our operations, as planned, which may not be available on acceptable terms or at all.
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Our future success depends on our ability to increase our manufacturing capacity through the
development of manufacturing facilities in addition to the completion of our Devens facility, to
establish contract manufacturers, license our technologies or otherwise outsource the manufacturing
of our products. Our inability to  increase our production capacity directly or
successfully outsource the manufacturing of our products will limit our growth potential and impair
our operating results and financial condition.
   
    
    the completion of any facilities will be subject to the risks inherent in the
establishment of a new manufacturing facility, including risks of delays and cost overruns
as a result of a number of factors, many of which may be out of our control, such as delays
in government approvals, burdensome permit conditions and delays in the customization,
delivery, and installation of manufacturing equipment from numerous suppliers; and
    
    we may be required to depend on third parties or strategic partnerships that we
establish in the development and operation of additional production capacity, which may
subject us to risks that such third parties do not fulfill their obligations to us under
our arrangements with them.
  We may be unable to effectively manage the expansion of our operations, and our Sovello joint
venture agreement that governs our relationship with the other Sovello joint venture participants
may limit our ability to expand our manufacturing outside of the United States.
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If our suppliers fail to deliver polysilicon sufficient to meet our needs or we are unable to
otherwise obtain the polysilicon we need to meet our production targets, our revenue growth, gross
margins and profitability would be adversely affected.
    Our dependence on a limited number of suppliers for raw materials other than polysilicon, key
components for our solar power products and capital equipment could adversely affect our ability to
manufacture and timely deliver our products, which could result in order cancellations and loss of
market share.
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If the market price of polysilicon continues to decrease, we could be at a significant competitive
disadvantage because we have entered into multi-year polysilicon contracts.
 .
 In light of current market conditions, we may be unable to complete an initial public offering of
shares of our Sovello joint venture as was previously contemplated or otherwise realize a return on
our investment in Sovello in the near term.
  We continue to invest significantly in research and development, and these efforts may not result
in improved products or manufacturing processes.
  Our solar power products may not gain market acceptance, which would prevent us from achieving
increased revenues and market share
  
    
    our failure to produce solar power products that compete favorably against other solar
power products on the basis of cost, quality and performance;
    
    our failure to produce solar power products that compete favorably against conventional
energy sources and alternative distributed generation technologies, such as wind and
biomass, on the basis of cost, quality and performance;
    
    whether or not customers will accept our new panel designs under development; and
    
    our failure to develop and maintain successful relationships with distributors, systems
integrators, project developers and other resellers, as well as strategic partners.
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Technological changes in the solar power industry could render our solar power products
uncompetitive or obsolete, which could reduce our market share and cause our revenues to decline
  Our ability to increase market share and revenues depends on our ability to successfully maintain
our existing distribution relationships and expand our distribution channels
  We face risks associated with the marketing, distribution and sale of our solar power products
internationally, and if we are unable to effectively manage these risks, it could impair our
ability to expand our business abroad
  
    
    difficult and expensive compliance with the commercial and legal requirements of
international markets, with which we have only limited experience;
    
    difficulty in interpreting and enforcing contracts governed by foreign law, which may be
subject to multiple, conflicting and changing laws, regulations and tax systems;
    
    inability to obtain, maintain or enforce intellectual property rights;
    
    encountering trade barriers such as export requirements, tariffs, taxes and other
restrictions and expenses, which could affect the competitive pricing of our solar power
products and reduce our market share in some countries;
    
    unavailability of government grants from German or other foreign sources, or for
government grants that have been approved, risk of forfeiture or repayment in whole or in
part:
    
    fluctuations in currency exchange rates relative to the U.S. dollar;
    
    limitations on dividends or restrictions against repatriation of earnings;
    
    difficulty in recruiting and retaining individuals skilled in international business
operations;
    
    increased costs associated with maintaining international marketing efforts; and
    
    inability to develop, manufacture, market and sell our products and services in Germany
and other international markets due to, for example, third-party intellectual property
rights.
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Our dependence on a small number of distribution partners may cause significant fluctuations or
declines in our product revenues
  
    
    reduction, delay or cancellation of orders from one or more of our significant
distribution partners;
    
    selection by one or more of our significant distribution partners of products
competitive with ours;
    
    loss of one or more of our significant distribution partners and our failure to recruit
additional or replacement distribution partners; and
    
    failure of any of our significant distribution partners to make timely payment of our
invoices.
 Our recent long-term customer contracts for our products will result in a significant portion of
our sales of Evergreen Solar manufactured products being concentrated among a limited number of
customers in 2009 and 2010. The failure of one or more customers to purchase our products in
accordance with their contractual commitments could significantly decrease our revenues and harm
our business, financial condition and results of operations.
   Problems with product quality or product performance may cause us to incur warranty expenses and
may damage our market reputation and prevent us from achieving increased sales and market share.
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Our success in the future may depend on our ability to establish and maintain strategic alliances,
and any failure on our part to establish and maintain such relationships could adversely affect our
market penetration and revenue growth
   The success of our business depends on the continuing contributions of our key personnel and our
ability to attract and retain new qualified employees.
   Because we utilize highly flammable materials in our manufacturing processes, we are subject to the
risk of losses arising from explosions and fires, which could materially adversely affect our
financial condition and results of operations.
  The reduction or elimination of government subsidies and economic incentives for solar technology
could cause our revenues to decline.
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If solar power technology is not suitable for widespread adoption or sufficient demand for solar
power products does not develop or takes longer to develop than we anticipate, our revenues would
not significantly increase and we would be unable to achieve or sustain profitability
  
    
    cost-effectiveness of solar power technologies as compared with conventional and
non-solar alternative energy technologies;
    
    performance and reliability of solar power products as compared with conventional and
non-solar alternative energy products;
    
    success of alternative distributed generation technologies such as fuel cells, wind
power and micro turbines;
    
    fluctuations in economic and market conditions that impact the viability of conventional
and non-solar alternative energy sources, such as increases or decreases in the prices of
oil and other fossil fuels;
    
    capital expenditures by customers that tend to decrease when the United States or global
economy slows;
    
    continued deregulation of the electric power industry and broader energy industry; and
    
    availability of government subsidies and incentives.
 We face intense competition from other companies producing solar power and other energy generation
products. If we fail to compete effectively, we may be unable to increase our market share and
revenues
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If we are unable to protect our intellectual property adequately, we could lose our competitive
advantage in the solar power market
  
    
    we cannot be certain that our pending United States and foreign patent applications will
result in issued patents or that the claims in our issued patents are or will be
sufficiently broad to prevent others from developing or using technology similar to ours or
in developing, using, manufacturing, marketing or selling products similar to ours;
    
    given the costs of obtaining patent protection, we may choose not to file patent
applications for or not to maintain issued patents for certain innovations that later turn
out to be important, or we may choose not to obtain foreign patent protection at all or to
obtain patent protection in only some of the foreign countries, which later turn out to be
important markets for us;
    
    although we have a number of foreign patents and applications, the laws of some foreign
jurisdictions do not protect intellectual property rights to the same extent as laws in the
United States, and we may encounter difficulties in protecting and defending our rights in
such foreign jurisdictions;
    
    to the extent we license our technology to third parties in foreign countries, we may
encounter difficulties in protecting and defending our intellectual property rights against
such third parties and others;
    
    third parties may design around our patented technologies, and there is no assurance
that our patents and other intellectual property rights will be sufficient to deter
infringement or misappropriation of our intellectual property rights by others;
    
    third parties may seek to challenge or invalidate our patents, which can result in a
narrowing of or invalidating our patents, or rendering our patents unenforceable;
    
    we may have to participate in proceedings such as interference, cancellation, or
opposition, before the United States Patent and Trademark Office, or before foreign patent
and trademark offices, with respect to our patents, patent applications, trademarks or
trademark applications or those of others, and these actions may result in substantial
costs to us as well as a diversion of management attention;
    
    although we are not currently involved in any litigation involving intellectual property
rights, we may need to enforce our intellectual property rights against third parties for
infringement or misappropriation or defend our intellectual property rights through
lawsuits, which can result in significant costs and diversion of management resources, and
we may not be successful in those lawsuits;
    
    we rely on trade secret protections to protect our interests in proprietary know-how and
processes for which patents are difficult to obtain or enforce; however, we may not be able
to protect our trade secrets adequately; and
    
    the contractual provisions on which we rely to protect our trade secrets and proprietary
information, such as our confidentiality and non-disclosure agreements with our employees,
consultants and other third parties, may be breached, and our trade secrets and proprietary
information may be disclosed to competitors, strategic partners and the public, or others
may independently develop technology equivalent to our trade secrets and proprietary
information.
 Our technology and products could infringe intellectual property rights of others, which may
require costly litigation and, if we are not successful, could cause us to pay substantial damages
and disrupt our business.
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We may be unable to protect adequately or enforce our proprietary information, which may result in
its unauthorized use, reduced revenues or otherwise reduce our ability to compete
    
    
    independently develop substantially equivalent proprietary information, products and
techniques;
    
    otherwise gain access to our proprietary information; or
    
    design around our patents or other intellectual property.
  Licenses for technologies and intellectual property may not be available to us.
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Existing regulations and changes to such regulations concerning the electrical utility industry may
present technical, regulatory and economic barriers to the purchase and use of solar power
products, which may significantly reduce demand for our products.
   Compliance with environmental regulations can be expensive, and noncompliance with these
regulations may result in potentially significant monetary damages and penalties and adverse
publicity.
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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 and
adverse publicity.
  A significant portion of our revenue has been generated from our relationship with Sovello and
Sovello faces many of the same risks and uncertainties we face.
  Litigation against Lehman Brothers and Barclays to recover shares of our common stock loaned to
Lehman Brothers could be expensive, time-consuming and ultimately unsuccessful.
  In light of economic uncertainty and extremely difficult credit markets, our expansion plans may be
delayed and we may not be able to fulfill customer contracts for shipments in 2011 and beyond.
  The significant amount and the structure of our recent offering of senior convertible notes could
adversely affect our business, financial condition and results of operations.
  
    
    requiring us to use a substantial portion of our cash flow from operations to service
our indebtedness, which would reduce our cash flow available for working capital, capital
expenditures, development projects and other general corporate purposes;
    
    limiting our flexibility in planning for or reacting to, and increasing our
vulnerability to, changes in our business, the industry in which we operate and the general
economy; and
    
    placing us at a competitive disadvantage compared to our competitors who have less debt
or are less leveraged.
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Unfavorable changes in foreign currency exchange rates could increase the cost to manufacture our
products or result in foreign currency exchange losses, which could adversely affect our profits,
product orders and market share.
    Our ability to use net operating loss carryforwards may be subject to limitation.
  Provisions of our senior convertible notes could discourage an acquisition of us by a third party.
  26




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##### Table of Contents



RISKS RELATED TO OUR COMMON STOCK
 The issuance or sale of equity, convertible or exchangeable securities in the market, or the
perception of such future sales or issuances, could lead to a decline in the price of our common
stock.
   
    
    164,874,850 shares of common stock outstanding;
    
    3,687,890 shares of common stock underlying options outstanding at a weighted average
exercise price of $4.65 per share;
    
    2,197,996 shares of common stock available and reserved for future issuance or future
grant under our Amended and Restated 2000 Stock Option and Incentive Plan;
    
    277,845 shares of common stock available and reserved for future issuance or future
grant under our Amended and Restated 2000 Employee Stock Purchase Plan;
    
    467,328 shares of common stock underlying warrants outstanding with an exercise price
of $3.34 per share; and
    
    30,856,538 shares of common stock issuable upon the conversion of our outstanding
senior convertible notes in the aggregate principal amount of $373.8 million at an initial
conversion rate of approximately 82.56 shares of common stock per $1,000 principal amount
of notes (equivalent to a conversion price of approximately $12.11 per share).
  Three stockholders own, or claim to own, a large portion of our outstanding voting power and may be
able to influence significantly the outcome of any stockholder vote.
  27




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##### Table of Contents



The price of our common stock may fluctuate significantly, which could result in substantial losses
for our stockholders and subject us to litigation.
   
    
    the size and timing of orders from distribution partners for or shipments of our
products;
    
    the rate and cost at which we are able to expand our manufacturing capacity to meet
product demand, including the rate and cost at which we are able to implement advances
in our manufacturing technology;
    
    our ability to establish and expand key distribution partners and supplier
relationships;
    
    our ability and the terms upon which we are able to raise capital sufficient to
finance the expansion of our manufacturing capacity and our sales and marketing
efforts;
    
    our ability to open complete Devens and other potential capacity expansions within
budget and within the time frame that we expect;
    
    Sovellos ability to expand within budget and within the time frame that they
expect;
    
    our ability to establish strategic relationships with third parties to accelerate
our growth plans;
    
    the amount and timing of expenses associated with our research and development
programs and our ability to develop enhancements to our manufacturing processes and our
products;
    
    delays associated with the supply of specialized materials necessary for the
manufacture of our solar power products;
    
    our ability to execute our cost reduction programs;
    
    charges resulting from replacing existing equipment or technology with new or
improved equipment or technology as part of our strategy to expand our manufacturing
capacity and to decrease our per unit manufacturing cost;
    
    developments in the competitive environment, including the introduction of new
products or technological advancements by our competitors;
    
    the timing of adding the personnel necessary to execute our growth plan; and
    
    general economic conditions, including a worldwide economic slowdown and the
possibility of a prolonged severe recession in the U.S.; recent disruptions to the
credit and financial markets in the U.S. and worldwide; fluctuations in economic and
market conditions that affect the viability of conventional and non-solar renewable
energy sources, such as increases or decreases in the price of oil and other fossil
fuels; and other economic conditions specific to the solar industry
    
    the other risks and uncertainties described in Risk Factors.
  28




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Because we do not intend to pay dividends on our common stock, stockholders will benefit from an
investment in our common stock only if it appreciates in value.
  We are subject to anti-takeover provisions in our charter and by-laws and under Delaware law that
could delay or prevent an acquisition of our company, even if the acquisition would be beneficial
to our stockholders.
  We can issue shares of preferred stock that may adversely affect the rights of a stockholder of our
common stock.
  
    
    adversely affect the voting power of the stockholders of our common stock;
    
    discourage bids for our common stock at a premium and make it more difficult for a
third party to acquire a majority of our common stock;
    
    limit or eliminate any payments that the stockholders of our common stock could expect
to receive upon our liquidation; or
    
    otherwise adversely affect the market price of our common stock.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS.
  29




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ITEM 2. PROPERTIES.
  Location
    
    Area
    
    Purpose138 Bartlett Street, Marlboro, MA
    
    
    30,000  Sq. Ft
    
    
    Corporate Headquarters &Warehouse259 Cedar Hill Street, Marlboro, MA
    
    
    56,000 Sq. Ft
    
    
    Wafer, Cell & Panel Manufacturing257 Cedar Hill Street, Marlboro, MA
    
    
    40,000 Sq. Ft
    
    
    Research & Development112 Barnum
Road, Devens, MA (land lease)
    
    
    23.11 acres
    
    
    Wafer, Cell & Panel Manufacturing2820 Schuette Road, Midland, MI
    
    
    31,000 Sq. Ft
    
    
    High Temperature Filament Manufacturing
    
 ITEM 3. LEGAL PROCEEDINGS.
    
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  30




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PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES:
 Market for Our Common Stock
  High
    
    LowYear ended December 31, 2007First Quarter
    
    $
    10.98
    
    
    $
    6.97Second Quarter
    
    $
    13.21
    
    
    $
    8.11Third Quarter
    
    $
    10.49
    
    
    $
    7.95Fourth Quarter
    
    $
    18.85
    
    
    $
    8.95Year ended December 31, 2008First Quarter
    
    $
    18.62
    
    
    $
    7.52Second Quarter
    
    $
    12.64
    
    
    $
    8.08Third Quarter
    
    $
    10.63
    
    
    $
    3.30Fourth Quarter
    
    $
    6.14
    
    
    $
    1.89
  Dividend Policy
  Equity Compensation Plan Information
  31




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STOCK PERFORMANCE GRAPH
  
 ASSUMES
$100 INVESTED ON DECEMBER 31, 2003
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDED DEC. 31, 2008
 12/31/03
    
    12/31/04
    
    12/31/05
    
    12/31/06
    
    12/31/07
    
    12/31/08Evergreen Solar, Inc.
    
    $
    100.00
    
    
    $
    260.12
    
    
    $
    633.93
    
    
    $
    450.60
    
    
    $
    1027.98
    
    
    $
    189.88HemScott
Group Index
    
    $
    100.00
    
    
    $
    98.29
    
    
    $
    97.06
    
    
    $
    105.65
    
    
    $
    131.32
    
    
    $
    62.22NASDAQ Market Index
    
    $
    100.00
    
    
    $
    108.41
    
    
    $
    110.79
    
    
    $
    122.16
    
    
    $
    134.29
    
    
    $
    79.25
 
 (1)
    
    This Stock Performance Graph is not soliciting material, is not
deemed filed with the Securities and Exchange Commission and shall not
be incorporated by reference in any of our filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934, whether
made before or after the date hereof and irrespective of any general
incorporation language in any such filing.(2)
    
    Information used to prepare this Stock Performance Graph was obtained
from Hemscott, Inc., a source believed to be reliable, but we are not
responsible for any errors or omissions in such information. 32




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ITEM 6. SELECTED FINANCIAL DATA.
  Year Ended December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008STATEMENT OF OPERATIONS DATA:Revenues:Product
    
    $
    22,240
    
    
    $
    43,627
    
    
    $
    102,252
    
    
    $
    58,334
    
    
    $
    95,245Royalty and fee
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,532
    
    
    
    16,714Total Revenues
    
    
    22,240
    
    
    
    43,627
    
    
    
    102,252
    
    
    
    69,866
    
    
    
    111,959Cost of revenues
    
    
    29,717
    
    
    
    39,954
    
    
    
    90,310
    
    
    
    52,838
    
    
    
    93,073Gross profit (loss)
    
    
    (7,477
    )
    
    
    3,673
    
    
    
    11,942
    
    
    
    17,028
    
    
    
    18,886Operating Expenses:Research and development
    
    
    3,392
    
    
    
    10,622
    
    
    
    18,390
    
    
    
    20,594
    
    
    
    22,039Selling, general and administrative
    
    
    8,040
    
    
    
    12,708
    
    
    
    21,890
    
    
    
    20,608
    
    
    
    23,868Equipment write-offs
    
    
    
    
    
    
    
    
    
    
    1,526
    
    
    
    
    
    
    
    8,034Facility start-up
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,404
    
    
    
    30,623Restructuring charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,413Total operating expenses
    
    
    11,432
    
    
    
    23,330
    
    
    
    41,806
    
    
    
    42,606
    
    
    
    114,977Operating loss
    
    
    (18,909
    )
    
    
    (19,657
    )
    
    
    (29,864
    )
    
    
    (25,578
    )
    
    
    (96,091
    )Other income (expense), net
    
    
    (454
    )
    
    
    1,146
    
    
    
    1,851
    
    
    
    6,806
    
    
    
    2,721Loss before minority interest, equity income and accretion
    
    
    (19,363
    )
    
    
    (18,511
    )
    
    
    (28,013
    )
    
    
    (18,772
    )
    
    
    (93,370
    )Minority interest in Sovello AG
    
    
    
    
    
    
    1,195
    
    
    
    849
    
    
    
    
    
    
    
    Equity income from interest in Sovello AG
    
    
    
    
    
    
    
    
    
    
    495
    
    
    
    2,170
    
    
    
    8,435Accretion, dividends and conversion premiums on Series
A convertible preferred stock
    
    
    (2,904
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (22,267
    )
    
    $
    (17,316
    )
    
    $
    (26,669
    )
    
    $
    (16,602
    )
    
    $
    (84,935
    )Net loss per share (basic and diluted)
    
    $
    (0.67
    )
    
    $
    (0.29
    )
    
    $
    (0.41
    )
    
    $
    (0.19
    )
    
    $
    (0.65
    )Weighted average shares used in computing basic and
diluted net loss per share
    
    
    33,204
    
    
    
    59,631
    
    
    
    65,662
    
    
    
    86,799
    
    
    
    130,675As of December 31,2004
    
    2005
    
    2006
    
    2007
    
    2008BALANCE SHEET DATA:Cash, cash equivalents and marketable securities *
    
    $
    11,942
    
    
    $
    116,207
    
    
    $
    49,421
    
    
    $
    140,703
    
    
    $
    177,509Investment in and advances to Sovello AG
    
    
    
    
    
    
    
    
    
    
    70,460
    
    
    
    87,894
    
    
    
    115,553Working capital
    
    
    14,281
    
    
    
    124,404
    
    
    
    57,590
    
    
    
    112,228
    
    
    
    156,792Total assets
    
    
    49,721
    
    
    
    228,959
    
    
    
    207,251
    
    
    
    553,255
    
    
    
    1,001,761Subordinated convertible notes
    
    
    
    
    
    
    90,000
    
    
    
    90,000
    
    
    
    90,000
    
    
    
    Senior convertible notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    373,750Total stockholders equity
    
    
    41,520
    
    
    
    87,450
    
    
    
    92,847
    
    
    
    393,293
    
    
    
    519,679
 
 *
    
    Includes restricted cash at December 31, 2007 33




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 EXECUTIVE OVERVIEW
      Capped Call
 34




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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Accounting for Sovello AG
   35




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Revenue Recognition and Allowance for Doubtful Accounts
    Warranty
   Stock-based Compensation
   36




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Inventory
  Impairment of Long-lived Assets
  Income Taxes
  Results of Operations
 Description of Our Revenues, Costs and Expenses
 Revenues
 37




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Cost of revenues
 Research and development expenses
 Selling, general and administrative expenses
 Facility start-up.
 Restructuring charges
 Other income (expense), net
 Equity income from interest in Sovello AG.
 Minority interest.
 COMPARISON OF YEARS ENDED DECEMBER 31, 2008 AND 2007
 Revenues
 38




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##### Table of Contents



2007
    
    2008By geography:United States
    
    
    82
    %
    
    
    58
    %Germany
    
    
    7
    %
    
    
    28
    %All other
    
    
    11
    %
    
    
    14
    %100
    %
    
    
    100
    %By customer:SunPower Corporation
    
    
    31
    %
    
    
    31
    %Ralos Verriebs GmbH
    
    
    1
    %
    
    
    15
    %SunEdison
    
    
    14
    %
    
    
    2
    %groSolar
    
    
    12
    %
    
    
    4
    %All other
    
    
    42
    %
    
    
    48
    %100
    %
    
    
    100
    %
 Cost of product revenues and gross margin
 Research and development expenses
 Selling, general and administrative expenses
 39




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##### Table of Contents



Equipment write-offs.
 Facility start-up.
 Restructuring charges.
 Other income (expense) net.
 Equity income from interest in Sovello AG.
 Net loss.
 COMPARISON OF YEARS ENDED DECEMBER 31, 2007 AND 2006
  40




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##### Table of Contents



Revenues
   2006
    
    2007By geography:United States
    
    
    37
    %
    
    
    82
    %Germany
    
    
    48
    %
    
    
    7
    %Spain
    
    
    13
    %
    
    
    All other
    
    
    2
    %
    
    
    11
    %100
    %
    
    
    100
    %By customer:SunPower Corporation
    
    
    10
    %
    
    
    31
    %SunEdison
    
    
    
    
    
    
    14
    %groSolar
    
    
    6
    %
    
    
    12
    %Donauer Solartechnik
    
    
    13
    %
    
    
    1
    %All other
    
    
    71
    %
    
    
    42
    %100
    %
    
    
    100
    %
 Cost of product revenues and gross margin
  41




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Research and development expenses
 Loss on disposal of fixed assets.
 Selling, general and administrative expenses
 Facility start-up.
 Other income (expense) net.
 Equity income from interest in Sovello AG.
 Net loss.
 LIQUIDITY AND CAPITAL RESOURCES
  42




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43




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Sovello
Debt Guarantee and Undertaking
  44




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
  
  in the event that the cost of completing Sovello 3 exceeds budget;
  
  if any government grants are required to be repaid by Sovello or are not provided to Sovello as previously approved; or
  
  under certain conditions, in the event that Sovello is in violation of its financial covenants associated with its loan with the bank syndicate.   Evergreen Solar Loans to Sovello
  Date of Loan
    
    Principal (EUR)
    
    Principal (USD)
    
    Interest Rate
    
    Original Date DueJanuary 25, 2007
    
    
    30,000,000
    
    
    $
    41,757,000
    
    
    
    5.43
    %
    
    December 31, 2009
    *June 26, 2008
    
    
    
    
    
    $
    18,174,000
    
    
    
    6.71
    %
    
    December 31, 2009
    *December 22, 2008
    
    
    
    
    
    $
    5,600,000
    
    
    
    6.00
    %
    
    June 30, 2010
    *
 
  Liquidity Risk and Uncertainty
       
  
  possible delays in the completion of our Devens plant, budget overruns or failure to meet expected production levels;
  
  selling less than approximately 90 MW to 110 MW of Devens manufactured product at an average selling price of $2.90 to $3.10 per watt to credit worthy customers;
  
  higher than planned manufacturing costs and failing to achieve expected Devens operating metrics, with any delays in our plan to scale capacity resulting in increased costs that could impair business operations;
  
  further weakening of the Euro against the U.S. dollar, as a substantial portion of the contracted sales are denominated in Euros; and
  
  increased funding requirements for Sovello to complete its third manufacturing facility and achieve its planned manufacturing cost and operating metrics, or to potentially address the loss of any prior or expected government grant funding for Sovello.  
  
  continually monitoring our operating results against expectations and, if required, further restrict operating costs and capital spending if events warrant;
  
  possibly hedging our exposure to fluctuations in the U.S. dollar / Euro exchange rate to limit any adverse exposure, but there can be no assurance that hedges can be put in place at terms acceptable to us or that such hedging activities will be effective; and
  
  negotiating with a number of banks to secure a borrowing base line of credit, without a minimum cash requirement, as is the case with our current line of credit, supported by the expected significant increase in our accounts receivable, inventory and overall working capital.  45




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Contractual Obligations
  Total
    
    
    Less thanYears
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    After 5 YearsNon-cancelable operating leases
    
    $
    7,653
    
    
    $
    3,191
    
    
    $
    4,101
    
    
    $
    361
    
    
    $
    Maturity of Senior Convertible Debt
    
    
    373,750
    
    
    
    
    
    
    
    
    
    
    
    373,750
    
    
    
    Interest expense associated with
Senior Convertible Debt
    
    
    75,290
    
    
    
    15,490
    
    
    
    44,850
    
    
    
    14,950
    
    
    
    Capital expenditure obligations
    
    
    60,406
    
    
    
    60,406
    
    
    
    
    
    
    
    
    
    
    
    Raw materials purchase commitments
    
    
    770,533
    
    
    
    64,496
    
    
    
    332,408
    
    
    
    224,987
    
    
    
    148,642Total contractual cash
obligations
    
    $
    1,287,632
    
    
    $
    143,583
    
    
    $
    381,359
    
    
    $
    614,048
    
    
    $
    148,642
      46




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INCOME TAXES
    RECENT ACCOUNTING PRONOUNCEMENTS
    47




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 INTEREST RATE RISK
  FOREIGN CURRENCY EXCHANGE RATE RISK
      
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
  48




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ITEM 9A. CONTROLS AND PROCEDURES.
 Evaluation of Disclosure Controls and Procedures
   Internal Control Over Financial Reporting
  Managements Report on Internal Control Over Financial Reporting.
  Internal Control -
Integrated Framework Internal Control  Integrated Framework
   
 ITEM 9B. OTHER INFORMATION.
  49




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PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
  Name
    
    Age
    
    PositionRichard M. Feldt
    
    
    57
    
    
    Chief Executive Officer, President and Chairman
of the Board of DirectorsRodolfo Archbold
    
    
    54
    
    
    Vice President, OperationsDr. J. Terry Bailey
    
    
    54
    
    
    Senior Vice President, Marketing and SalesRichard G. Chleboski
    
    
    43
    
    
    Vice President, Strategy and Business DevelopmentMichael El-Hillow
    
    
    57
    
    
    Chief Financial Officer and SecretaryGary T. Pollard
    
    
    49
    
    
    Vice President, Human ResourcesCarl Stegerwald
    
    
    57
    
    
    Vice President, Construction Management and
Facilities EngineeringDr. Brown F. Williams
    
    
    68
    
    
    Vice President, Science and EngineeringTom L. Cadwell (1)(2)
    
    
    63
    
    
    DirectorAllan H. Cohen (1)(3)
    
    
    58
    
    
    DirectorDr. Peter W. Cowden (2)(3)
    
    
    57
    
    
    DirectorEdward C. Grady (1)(2)(3)
    
    
    61
    
    
    Lead Outside DirectorDr. Susan F. Tierney (2)
    
    
    57
    
    
    Director
 
 (1)
    
    Member of the Audit Committee.(2)
    
    Member of the Nominating and Corporate Governance Committee.(3)
    
    Member of the Compensation Committee. Class III Directors (Term Expiring in 2009):
 Tom L. Cadwell
 Dr. Peter W. Cowden
 Class I Directors (Term Expiring in 2010):
 Richard M. Feldt
 50




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##### Table of Contents



Edward C. Grady
 Class II Director Nominee (Term Expiring in 2011):
 Allan H. Cohen
 Dr. Susan F. Tierney
 51




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##### Table of Contents



Non-Director Executive Officers:
 Rodolfo Archbold
 Dr. J. Terry Bailey
 Richard G. Chleboski
 Michael El-Hillow
 Gary T. Pollard
 Carl Stegerwald
 52




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##### Table of Contents



Dr. Brown F. Williams
 Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Business Conduct and Ethics
 www.evergreensolar.com
 www.evergreensolar.com
 Audit Committee
    53




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www.evergreensolar.com.
 Director Nominations
  
 ITEM 11. EXECUTIVE COMPENSATION.
 COMPENSATION
DISCUSSION AND ANALYSIS
 Overview
  
    
    provide compensation that attracts, motivates and retains experienced and well-qualified
executives capable of helping us meet our business objectives;
    
    recognize and reward performance of our executive officers, both as individuals and as
members of a cohesive management team, in meeting certain strategic objectives;
    
    align the interests of our executive team with the corporate strategies and our business
objectives; and
    
    align the interests of our executive team with that of stockholders through long-term
equity-based incentives.
 Executive Summary
   
    
    recommendations from the Chief Executive Officer based on individual executive
performance and benchmarking data;
    
    our goal of having a portion of each executive officers compensation contingent upon
the achievement of specific predetermined corporate objectives;
 54




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##### Table of Contents




    
    ensuring compensation levels reflect the Companys past performance and expectations of
future performance;
    
    ensuring compensation levels are competitive with compensation generally being paid to
executives we seek to recruit to ensure our ability to attract and retain experienced and
well-qualified executives; and
    
    ensuring a significant portion of executive officer compensation is paid in the form of
equity-based incentives to closely link stockholder and executive interests.
    Applied Micro Circuits Corp.
    
    First Solar, Inc.
    
    Opnext, Inc.Atheros Communications
    
    Hittite Microwave Corporation
    
    Semtech CorporationATMI, Inc.
    
    MEMC Electronic Materials, Inc.
    
    SunPower CorporationCree, Inc.
    
    Microsemi Corporation
    
    Tessara Technologies, Inc.Energy Conversion Devices, Inc.
    
    Monolithic Power Systems, Inc.
  55




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##### Table of Contents



Executive Compensation Philosophy
  
    
    Establish base salaries at the 50th percentile;
    
    Set target total cash compensation at the 75th percentile and set
corresponding financial goals at the 75th percentile of the market consensus
amounts developed from a combination of survey and peer group data; and
    
    Set total direct compensation (base salary, bonus and equity) at the 75th
percentile.
 Elements of Compensation
 Base Salary
  th
  56




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Name
    
    2008 Base SalaryRichard M. Feldt
    
    $
    500,000Michael El-Hillow
    
    $
    338,000Rodolfo Archbold
    
    $
    290,000Carl Stegerwald
    
    $
    225,000Dr. Brown F. Williams
    
    $
    338,000
  Annual Incentive
   Target Annual
    
    2008 BonusName
    
    Bonus
    
    Paid in 2009Richard M. Feldt
    
    
    100
    %
    
    $
    332,494Michael El-Hillow
    
    
    75
    %
    
    $
    168,578Rodolfo Archbold
    
    
    75
    %
    
    $
    144,634Carl Stegerwald
    
    
    75
    %
    
    $
    112,216Dr. Brown F. Williams
    
    
    75
    %
    
    $
    168,578
  57




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##### Table of Contents



Portion of Target Award EarnedThreshold Goal
    
    Target Goal
    
    Maximum Goal(15% for each
    
    (30% for each
    
    (45% for each2008 Financial Objectives
    
    objective)
    
    objective)
    
    objective)Fourth Quarter Devens Phase 1
Operating Income
    
    $
    4,000,000
    
    
    $
    8,750,000
    
    
    $
    11,000,000Consolidated Annual Operating Loss
    
    $
    (70,000,000
    )
    
    $
    (40,000,000
    )
    
    $
    (41,400,000
    )
   Long-Term Equity Incentive Awards
  58




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##### Table of Contents



Other Compensation
  Executive Change of Control Severance Agreements and Other Agreements
  59




---



##### Table of Contents



Equity Provisions
  Cash Severance and Continued Benefits
    Tax Deductibility of Executive Compensation
  60




---



##### Table of Contents



REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
   Respectfully submitted by the Compensation Committee,THE COMPENSATION COMMITTEEDr. Peter W. Cowden (Chair)Edward C. GradyAllan H. Cohen
 Compensation Committee Interlocks and Insider Participation
   Summary Compensation Table
  61




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##### Table of Contents



Summary Compensation Table
 (h)Change in PensionValue and(g)
    
    NonqualifiedNon-Equity
    
    Deferred
    
    (i)(c)
    
    (d)
    
    (e)
    
    (f)
    
    Incentive Plan
    
    Compensation
    
    All Other(a)
    
    (b)
    
    Salary
    
    Bonus
    
    Stock Awards
    
    Option Grants
    
    Compensation
    
    Earnings
    
    Compensation
    
    TotalName and Principal Position(s)
    
    Year
    
    ($)
    
    ($)(2)
    
    ($)(1)(3)(4)(5)
    
    ($)
    
    ($)
    
    ($)
    
    ($)(6)(7)
    
    ($)Richard M. Feldt,
Chief
Executive Officer, President
and Chairman of the
Board of Directors
    
    
    2008
    
    
    
    507,692
    
    
    
    332,494
    
    
    
    229,226
    
    
    
    842,918
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    
    
    
    
    1,912,3302007
    
    
    
    396,154
    
    
    
    400,000
    
    
    
    95,236
    
    
    
    1,482,856
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    
    
    
    
    2,374,2462006
    
    
    
    298,075
    
    
    
    263,790
    
    
    
    
    
    
    
    1,440,484
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    
    
    
    
    2,002,349Michael El-Hillow,
Chief
Financial Officer and
Secretary
    
    
    2008
    
    
    
    351,900
    
    
    
    168,578
    
    
    
    481,432
    
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    57,360
    
    
    
    1,059,2702007
    
    
    
    318,750
    
    
    
    268,082
    
    
    
    380,943
    
    
    
    36,738
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    27,907
    
    
    
    1,032,420Rodolfo Archbold,
Vice
President, Operations
    
    
    2008
    
    
    
    302,087
    
    
    
    144,634
    
    
    
    313,394
    
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    750
    
    
    
    760,8652007
    
    
    
    102,353
    
    
    
    
    
    
    
    131,423
    
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    750
    
    
    
    234,526Carl Stegerwald,
Vice
President, Construction
Mangement and Facilities
Engineering
    
    
    2008
    
    
    
    225,000
    
    
    
    112,216
    
    
    
    351,847
    
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    
    
    
    
    689,0632007
    
    
    
    4,327
    
    
    
    
    
    
    
    19,287
    
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    
    
    
    
    23,614Dr. Brown F. Williams,
Vice President,
Science
and Engineering
    
    
    2008
    
    
    
    336,500
    
    
    
    168,578
    
    
    
    352,506
    
    
    
    241,989
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    750
    
    
    
    1,100,3232007
    
    
    
    321,154
    
    
    
    243,750
    
    
    
    307,940
    
    
    
    251,856
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    
    
    
    
    1,124,7002006
    
    
    
    224,038
    
    
    
    131,895
    
    
    
    260,322
    
    
    
    218,282
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    
    
    
    
    834,537
 
 (1)
    
    We did not grant any stock appreciation rights or make any long-term incentive plan payouts
to the Named Executive Officers during Fiscal 2007.(2)
    
    Represents bonuses earned during the fiscal year and paid in the following fiscal year. Mr.
El-Hillows 2007 bonus includes a one time sign-on of $25,000.(3)
    
    Michael El-Hillows 2007 restricted stock grant was based on his commencement of employment
with the Company and was granted on February 12, 2007. Rodolfo Archbolds 2007 restricted
stock grant was based on his commencement of employment with the Company and was granted on
July 30, 2007. Carl Stegerwalds 2007 restricted stock grant was based on his commencement of
employment with the Company and was granted on December 17, 2007.(4)
    
    The stock awards include grants to the Named Executive Officers based on performance for the
year ended December 31, 2006 and 2007. Mr. Feldt received 50,000 and 100,000, respectively,
Mr. El-Hillow received 40,000 shares of restricted common stock for 2007, Mr. Archbold
received 5,000 shares of restricted common stock for 2007 and Dr. Williams received 25,000
and 40,000 shares of restricted common stock, respectively. These restricted shares vest over
four years. The stock option awards are valued using the Black-Scholes method.(5)
    
    Performance-based restricted stock awards were granted to the Named Executive Officers on
February 12, 2007 and February 27, 2006. For fiscal year 2007, Mr. Feldt received 300,000
restricted shares, while Mr. El-Hillow, Mr. Archbold and Dr. Williams each received 100,000
restricted shares. For fiscal year 2006, Mr. Feldt received 300,000 restricted shares, while
Dr. Williams received 100,000 restricted shares. The shares are subject to performance vesting
conditions. The shares for fiscal 2007 will vest only upon the achievement of all of the
following accomplishments within a calendar year by December 31, 2011: (a) $400 million in
revenue, (b) 35% gross margin and (c) 10% net income, as adjusted by the plan. The shares for
fiscal 2006 will vest only upon the achievement of all of the following accomplishments within
a calendar year by December 31, 2010: (a) $300 million in revenue, (b) 35% gross margin and
(c) 7% net income, as adjusted by the plan. All amounts will include the Companys pro rata
share of any joint venture operating results. At the present time the Company believes that
it is unlikely that the performance criteria for these performance-based stock awards will be
achieved and, accordingly, does not expect such shares to vest.(6)
    
    Mr. El-Hillow received $27,157 and $56,610 during fiscal 2007 and 2008, respectively, for
relocation fees as part of his commencement of employment with the company. No Named
Executive Officers received any other perquisites or other personal benefits in excess of
$10,000 during fiscal 2008, 2007 or 2006. The compensation described in this table does not
include medical, group life insurance and other benefits received by the Named Executive
Officers which are available generally to all of our salaried employees.(7)
    
    Amounts for Messrs. El-Hillow (2007 and 2008), Archbold (2007 and 2008) and Williams (2008)
include matching contributions to the 401(k) plan account of the Named Executive Officer. 62




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##### Table of Contents



Grants of Plan-Based Awards
  Grants of Plan-Based Awards for
Fiscal Year Ended December 31, 2008
 (i)All Other StockAwards:
    
    (l)(d)
    
    
    
    
    
    Number of
    
    Grant Date/Fair(b)
    
    (c)
    
    Future
    
    (e)
    
    Shares of Stock
    
    Value of Stock and(a)
    
    Grant
    
    Estimated
    
    Incentive
    
    Payouts Under
    
    or Units
    
    Option AwardsName
    
    Date
    
    Equity
    
    (3)(5)
    
    Plan Awards
    
    (#)(1)
    
    ($)(2)Threshold
    
    Target
    
    Maximum(#)
    
    (#)
    
    (#)Richard M. Feldt
    
    
    3/18/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    778,000Michael El-Hillow
    
    
    3/18/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,000
    
    
    
    311,200Rodolfo Archbold
    
    
    3/18/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    38,900Carl Stegerwald
    
    
    3/18/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dr. Brown F. Williams
    
    
    3/18/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,000
    
    
    
    311,200
 
 (1)
    
    The awards include grants to the Named Executive Officers based on performance for the year
ended December 31, 2007. Mr. Feldt received restricted stock grants of 100,000 shares, Mr.
El-Hillow and Dr. Williams received restricted stock grants of 40,000 each and Mr. Archbold
received restricted stock grants of 5,000 shares (which were prorated based on his start date
with the company in 2007). Mr. Stegerwald was not eligible for a grant for 2007. These
restricted stock grants vest over four years.(2)
    
    Grant date value is used for the valuation of all restricted stock awards. Outstanding Equity Awards at Fiscal Year-End
  63




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##### Table of Contents



OUTSTANDING EQUITY AWARDS AT FISCAL 2008 YEAR END
 Options
    
    Stock AwardsEquity
    
    EquityIncentive
    
    Incentive PlanEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Plan
    
    Awards:Incentive Plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Awards:
    
    Market orAwards:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number of
    
    Payout ValueNumber of
    
    
    
    
    
    
    
    
    
    Number of
    
    
    
    
    
    Unearned
    
    of UnearnedNumber of
    
    Number of
    
    Securities
    
    
    
    
    
    
    
    
    
    Shares or
    
    Market Value
    
    Shares, Units
    
    Shares, UnitsSecurities
    
    Securities
    
    Underlying
    
    
    
    
    
    
    
    
    
    Units of
    
    of Share or
    
    or Other
    
    or OtherUnderlying
    
    Underlying
    
    Unexercised
    
    Option
    
    
    
    
    
    Stock That
    
    Units of Stock
    
    Rights That
    
    Rights ThatUnexercised
    
    Unexercised
    
    Unearned
    
    Exercise
    
    Option
    
    Have Not
    
    That Have
    
    Have Not
    
    Have NotOptions (#)
    
    Options (#)
    
    Options
    
    Price
    
    Expiration
    
    Vested
    
    Not Vested
    
    Vested
    
    VestedName
    
    Exercisable
    
    Unexercisable
    
    (#)
    
    ($)
    
    Date
    
    (#)(2)
    
    ($)
    
    (#)(1)
    
    ($)Richard M. Feldt
    
    
    1,638,000
    
    
    
    
    
    
    
    
    
    
    
    1.61
    
    
    
    12/10/2013187,500
    
    
    
    62,500
    
    
    
    
    
    
    
    7.30
    
    
    
    3/3/201575,000
    
    
    
    75,000
    
    
    
    
    
    
    
    15.09
    
    
    
    2/24/201637,500
    
    
    
    119,625100,000
    
    
    
    319,000300,000
    
    
    
    957,000300,000
    
    
    
    957,000Michael El-Hillow
    
    
    6,192
    
    
    
    
    
    
    
    
    
    
    
    6.51
    
    
    
    7/14/20153,750
    
    
    
    
    
    
    
    
    
    
    
    11.44
    
    
    
    12/7/20157,500
    
    
    
    
    
    
    
    
    
    
    
    12.42
    
    
    
    6/7/20165,000
    
    
    
    
    
    
    
    
    
    
    
    12.42
    
    
    
    6/7/2016150,000
    
    
    
    478,50040,000
    
    
    
    127,600100,000
    
    
    
    319,000Rodolfo Archbold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112,500
    
    
    
    358,8755,000
    
    
    
    15,950100,000
    
    
    
    319,000Carl Stegerwald
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,000
    
    
    
    239,250Dr. Brown F. Williams
    
    
    923
    
    
    
    
    
    
    
    
    
    
    
    4.55
    
    
    
    3/14/2010923
    
    
    
    
    
    
    
    
    
    
    
    4.55
    
    
    
    5/31/2010923
    
    
    
    
    
    
    
    
    
    
    
    4.55
    
    
    
    7/10/2010923
    
    
    
    
    
    
    
    
    
    
    
    6.50
    
    
    
    8/1/2010923
    
    
    
    
    
    
    
    
    
    
    
    6.50
    
    
    
    8/23/2010923
    
    
    
    
    
    
    
    
    
    
    
    6.50
    
    
    
    9/6/2010923
    
    
    
    
    
    
    
    
    
    
    
    6.50
    
    
    
    9/28/20101,000
    
    
    
    
    
    
    
    
    
    
    
    19.00
    
    
    
    11/2/20101,000
    
    
    
    
    
    
    
    
    
    
    
    7.88
    
    
    
    12/13/20101,000
    
    
    
    
    
    
    
    
    
    
    
    10.00
    
    
    
    2/15/20111,000
    
    
    
    
    
    
    
    
    
    
    
    10.00
    
    
    
    2/16/20111,000
    
    
    
    
    
    
    
    
    
    
    
    11.04
    
    
    
    4/18/20111,000
    
    
    
    
    
    
    
    
    
    
    
    12.65
    
    
    
    5/31/20111,000
    
    
    
    
    
    
    
    
    
    
    
    7.59
    
    
    
    7/25/20112,000
    
    
    
    
    
    
    
    
    
    
    
    5.00
    
    
    
    9/5/201139,999
    
    
    
    
    
    
    
    
    
    
    
    3.36
    
    
    
    11/11/201415,000
    
    
    
    5,000
    
    
    
    
    
    
    
    7.30
    
    
    
    3/3/201532,500
    
    
    
    32,500
    
    
    
    
    
    
    
    15.09
    
    
    
    2/24/201625,000
    
    
    
    79,75018,750
    
    
    
    59,81340,000
    
    
    
    127,600100,000
    
    
    
    319,000100,000
    
    
    
    319,000
 
 (1)
    
    Represents performance-based restricted stock awards under the 2000 Plan granted on February
27, 2006 and February 12, 2007. The shares are subject to performance vesting conditions.
The shares for fiscal 2006 will vest only upon the achievement of all of the following
accomplishments within a calendar year by December 31, 2010: (a) $300 million in revenue, (b)
35% gross margin and (c) 7% net income, as adjusted by the plan. The shares for fiscal 2007
will vest only upon the achievement of all of the following accomplishments within a calendar
year by December 31, 2011: (a) $400 million in revenue, (b) 35% gross margin and (c) 10% net
income, as adjusted by the plan. All amounts will include the Companys pro rata share of any
joint venture operating results. At the present time the Company believes that it is unlikely
that the performance criteria for these performance-based stock awards will be achieved and,
accordingly, does not expect such shares to vest. For purposes of this table, the performance
based awards are valued based upon our closing stock price on December 31, 2008 ($3.19).(2)
    
    These restricted stock grants vest over four years. 64




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##### Table of Contents



Options Exercises and Stock Vested
  Option Exercises and Stock Vested
for Fiscal Year Ended December 31, 2008
 Option Awards
    
    Stock AwardsNumber ofShares
    
    Value
    
    Number of Shares
    
    ValueAcquired on
    
    Realized on
    
    Acquired on
    
    Realized onExercise
    
    Exercise
    
    Vesting
    
    VestingName of Executive Officer
    
    (#)
    
    ($)
    
    (#)
    
    ($)Richard M. Feldt
    
    
    
    
    
    
    
    
    
    
    12,500
    
    
    
    125,250Michael El-Hillow (1)
    
    
    1,849
    
    
    
    2,736
    
    
    
    50,000
    
    
    
    501,000Rodolfo Archbold (1)
    
    
    1,269
    
    
    
    1,878
    
    
    
    37,500
    
    
    
    346,500Carl Stegerwald
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    70,500Dr. Brown F. Williams (1)
    
    
    2,693
    
    
    
    2,597
    
    
    
    31,250
    
    
    
    133,625
 
 (1)
    
    The shares and value realized include shares purchased through the Companys 2000 Employee
Stock Purchase Plan. Potential Benefits upon Change of Control or Termination following a Change of Control
 Change of Control Severance Arrangements in General.
  65




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##### Table of Contents



Automatic Acceleration of Vesting Following a Change of Control.
 Value of
    
    Value of
    
    
    
    
    
    TotalUnvested
    
    Unvested
    
    
    
    
    
    PaymentsRestricted
    
    Performance
    
    280G excise
    
    and Value ofValue of
    
    Stock
    
    Share Program
    
    Tax and Gross-
    
    EquityUnvested Stock
    
    Awards
    
    Awards
    
    up Payment
    
    AwardsOptions ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)Richard M. Feldt
    
    
    
    
    
    
    438,625
    
    
    
    1,914,000
    
    
    
    
    
    
    
    2,352,625Michael El-Hillow
    
    
    
    
    
    
    348,243
    
    
    
    319,000
    
    
    
    
    
    
    
    667,243Rodolfo Archbold
    
    
    
    
    
    
    176,445
    
    
    
    319,000
    
    
    
    
    
    
    
    495,445Carl Stegerwald
    
    
    
    
    
    
    79,750
    
    
    
    
    
    
    
    
    
    
    
    79,750Dr. Brown F.
Williams
    
    
    
    
    
    
    172,126
    
    
    
    638,000
    
    
    
    
    
    
    
    810,126
 Automatic Acceleration of Vesting upon an Involuntary Termination Following a Change of
Control.
 Value ofValue of
    
    Unvested
    
    
    
    
    
    TotalAccrued
    
    Value of
    
    Unvested
    
    Performance
    
    280G Excise
    
    Payments andContinuation
    
    Vacation
    
    Unvested
    
    Restricted
    
    Share Program
    
    Tax and Gross-
    
    Value ofBase Salary
    
    Bonus
    
    of Benefits
    
    Pay
    
    Stock Options
    
    Stock Awards
    
    Awards
    
    up Payment
    
    Equity($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    Awards ($)Richard M. Feldt
    
    
    750,000
    
    
    
    750,000
    
    
    
    19,284
    
    
    
    20,192
    
    
    
    
    
    
    
    438,625
    
    
    
    1,914,000
    
    
    
    1,203,187
    
    
    
    5,095,288Michael El-Hillow
    
    
    338,000
    
    
    
    253,500
    
    
    
    12,856
    
    
    
    18,850
    
    
    
    
    
    
    
    606,100
    
    
    
    319,000
    
    
    
    426,973
    
    
    
    1,975,279Rodolfo Archbold
    
    
    290,000
    
    
    
    217,500
    
    
    
    18,464
    
    
    
    13,942
    
    
    
    
    
    
    
    374,825
    
    
    
    319,000
    
    
    
    
    
    
    
    1,233,731Carl Stegerwald
    
    
    225,000
    
    
    
    168,750
    
    
    
    20,655
    
    
    
    12,980
    
    
    
    
    
    
    
    239,250
    
    
    
    
    
    
    
    
    
    
    
    666,635Dr. Brown F. Williams
    
    
    338,000
    
    
    
    253,500
    
    
    
    15,719
    
    
    
    19,500
    
    
    
    
    
    
    
    267,163
    
    
    
    638,000
    
    
    
    510,796
    
    
    
    2,042,678
 66




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##### Table of Contents



Excise Tax Related Change of Control Benefits.
   NON-EMPLOYEE DIRECTOR COMPENSATION
     67




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##### Table of Contents



Non-Employee Director Summary Compensation Table
 Director Compensation
For Fiscal Year Ended December 31, 2008
 (b)Fees Earnedor Paid in
    
    (c)
    
    (d)
    
    (l)(a)
    
    Cash
    
    Option Awards
    
    Stock Awards
    
    TotalName
    
    ($)
    
    ($)
    
    ($)
    
    ($)Tommy L. Cadwell
    
    
    42,500
    
    
    
    
    
    
    
    102,214
    (2)
    
    
    144,714Allan H. Cohen
    
    
    59,000
    
    
    
    
    
    
    
    51,100
    (3)
    
    
    110,100Dr. Peter W. Cowden
    
    
    48,500
    
    
    
    
    
    
    
    107,419
    (4)
    
    
    155,919Edward C. Grady
    
    
    66,000
    
    
    
    
    
    
    
    51,100
    (5)
    
    
    117,100Dr. Susan F. Tierney
    
    
    4,500
    
    
    
    
    
    
    
    81,500
    (6)
    
    
    86,000Dr. Gerald L. Wilson (1)
    
    
    1,500
    
    
    
    
    
    
    
    62,100
    
    
    
    63,600
 
 (1)
    
    On February 1, 2008, Dr. Wilson resigned from the Board of Directors.(2)
    
    As of December 31, 2008, Mr. Cadwell held 16,270 shares of common stock underlying
unexercised options, 10,000 shares of unvested restricted stock and 5,000 shares of unvested
restricted stock units. The grant date fair value of stock awards granted to Mr. Cadwell
during 2008 was $51,500.(3)
    
    As of December 31, 2008, Mr. Cohen held 36,875 shares of common stock underlying unexercised
options, 10,000 shares of vested restricted stock and 5,000 shares of vested restricted stock
units. The grant date fair value of stock awards granted to Mr. Cohen during 2008 was
$51,500.(4)
    
    As of December 31, 2008, Dr. Cowden held 19,644 shares of common stock underlying unexercised
options, 10,000 shares of vested restricted stock and 5,000 shares of vested restricted stock
units. The grant date fair value of stock awards granted to Dr. Cowden during 2008 was
$51,500.(5)
    
    As of December 31, 2008, Mr. Grady held 28,125 shares of common stock underlying unexercised
options, 10,000 shares of vested restricted stock and 5,000 shares of vested restricted stock
units. The grant date fair value of stock awards granted to Mr. Grady during 2008 was
$51,500.(6)
    
    As of December 31, 2008, Dr. Tierney held 10,000 shares of unvested restricted stock units.
The grant date fair value of stock awards granted to Dr. Tierney during 2008 was $81,500. 68




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##### Table of Contents



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
 Equity Compensation Plan Information
  Number of SecuritiesNumber of Securities to
    
    
    
    
    
    Remaining Available forBe Issued Upon Exercise
    
    
    
    
    
    Future Issuance UnderOf Outstanding Options,
    
    Weighted-average
    
    Equity CompensationStock Awards, Stock
    
    Exercise Price of
    
    Plans (ExcludingStock Awards, Stock Units,
    
    Outstanding Options,
    
    Securities Reflected inWarrants and Rights
    
    Warrants and Rights
    
    Column (a))Plan category
    
    (a)(1)
    
    (b)(2)
    
    (c)(3)Equity compensation plans approved by
security holders
    
    
    6,849,977
    
    
    $
    4.65
    
    
    
    2,197,996Equity compensation plans not
approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    6,849,977
    
    
    $
    4.65
    
    
    
    2,197,996
 
 (1)
    
    Includes 3,162,087 shares of restricted stock awards and restricted
stock units granted under the 2000 Stock Option and Incentive Plan.
The remaining balance consists of outstanding stock option grants.(2)
    
    The weighted average exercise price does not take into account the
shares issuable upon vesting of outstanding restricted stock awards
which have no exercise price.(3)
    
    1,500,000 shares were added to the equity compensation plan and
approved by the stockholders at our 2008 annual meeting. Securities Ownership of Certain Beneficial Owners and Management
  69




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##### Table of Contents



Number of Shares
    
    Percentage ofBeneficially Owned
    
    Shares ofName and Address of Beneficial Owner
    
    (1)
    
    Common Stock (2)5% Stockholders:FMR LLC (3) 
82 Devonshire Street 
Boston, MA 02109
    
    
    18,891,778
    
    
    
    11.5
    %DC Chemical (4)
Oriental Chemical Building 
50, Sogong-dang, Jong-gu, Seoul, 100-718 Korea
    
    
    15,698,125
    
    
    
    9.5
    %Barclays PLC (5) 
1 Churchhill Place 
London, E14 5HP, England
    
    
    12,220,128
    
    
    
    7.4
    %Current Executive Officers and Directors:Richard M. Feldt (6)
    
    
    2,893,490
    
    
    
    1.7
    %Michael El-Hillow (7)
    
    
    379,291
    
    
    
    *Rodolfo Archbold (8)
    
    
    245,362
    
    
    
    *Dr. J. Terry Bailey (9)
    
    
    418,290
    
    
    
    *Richard G. Chleboski (10)
    
    
    646,534
    
    
    
    *Gary T. Pollard (11)
    
    
    311,578
    
    
    
    *Carl Stegerwald
    
    
    83,900
    
    
    
    *Dr. Brown F. Williams (12)
    
    
    475,556
    
    
    
    *Tom L. Cadwell (13)
    
    
    31,270
    
    
    
    *Allan H. Cohen (14)
    
    
    54,875
    
    
    
    *Dr. Peter W. Cowden (15)
    
    
    34,644
    
    
    
    *Edward C. Grady (16)
    
    
    60,125
    
    
    
    *Susan F. Tierney
    
    
    10,000
    
    
    
    *All current executive officers and directors as a
group (13 persons) (17)
    
    
    5,664,915
    
    
    
    3.4
    %
 
 *
    
    Less than one percent of the outstanding shares of class.(1)
    
    The persons named in the table have sole voting and investment power
with respect to all shares shown as beneficially owned by them,
except as noted in the footnotes below.(2)
    
    Applicable percentage ownership is based upon 164,877,650 shares of
common stock outstanding as of the measurement date. Beneficial
ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting and investment
power with respect to shares. Shares of common stock subject to
options currently exercisable or exercisable within 60 days after the
measurement date are deemed outstanding for computing the percentage
ownership of the person holding such options, as the case may be, but
are not deemed outstanding for computing the percentage ownership of
any other person.(3)
    
    FMR LLC reported sole voting power over 56,471 shares, shared voting
power over no shares, and sole dispositive power over 18,891,778
shares beneficially owned.(4)
    
    DC Chemical Co., Ltd. reported sole voting power and sole dispositive
power over 15,698,125 shares beneficially owned. Includes 10,750,000
shares of restricted common stock. The restrictions on these shares
will be removed when 500,000 kilograms of polysilicon are delivered
to us by DC Chemical Co., Ltd. 70




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##### Table of Contents



(5)
    
    Barclays PLC reported sole voting power over 12,220,128 shares and
sole dispositive power over all 12,220,128 shares beneficially owned.(6)
    
    Includes 2,000,500 shares of common stock issuable upon the exercise
of options that may be exercised within 60 days from the measurement
date.(7)
    
    Includes 22,442 shares of common stock issuable upon the exercise of
options that may be exercised within 60 days from the measurement
date.(8)
    
    Includes 1,000 shares of common stock held by spouse.(9)
    
    Includes 175,000 shares of common stock issuable upon the exercise of
options that may be exercised within 60 days from the measurement
date.(10)
    
    Includes 374,664 shares of common stock issuable upon the exercise of
options that may be exercised within 60 days from the measurement
date.(11)
    
    Includes 104,375 shares of common stock issuable upon the exercise of
options that may be exercised within 60 days from the measurement
date.(12)
    
    Includes 124,210 shares of common stock issuable upon the exercise of
options that may be exercised within 60 days from the measurement
date.(13)
    
    Includes 16,270 shares of common stock issuable upon the exercise of
options that may be exercised within 60 days from the measurement
date.(14)
    
    Includes 36,875 shares of common stock issuable upon the exercise of
options that may be exercised within 60 days from the measurement
date.(15)
    
    Includes 19,644 shares of common stock issuable upon the exercise of
options that may be exercised within 60 days from the measurement
date.(16)
    
    Includes 28,125 shares of common stock issuable upon the exercise of
options that may be exercised within 60 days from the measurement
date. Mr. Gradys address is 922 Tyner Way, PO Box 5998, Incline
Village, NV 89450.(17)
    
    Includes 2,902,105 shares of common stock issuable upon the exercise
of options that may be exercised within 60 days from the measurement
date and 1,000 shares of common stock held by spouse.
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 Related Party Transaction Approval Policy
  Certain Relationships and Related Party Transactions
 Transactions with Mr. Stegerwald
 71




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##### Table of Contents



Transactions with DC Chemical.
 
    
    Polysilicon Supply Agreement  Our April 2007 polysilicon supply agreement with DC
Chemical provides the general terms and conditions pursuant to which DC Chemical will
supply us with specified annual quantities of polysilicon at fixed prices beginning in 2008
and continuing through 2014. In January 2008, we entered into a second supply agreement
with DC Chemical that provides the general terms and conditions pursuant to which DC
Chemical will supply us with specified annual quantities of polysilicon at fixed prices
beginning in 2009 and continuing through 2015. The January 2008 agreement required us to
pay approximately $36.5 million in prepayments during the first year of the agreement.
Under the two supply contracts with DC Chemical, we are obligated to make cash payments to
DC Chemical of approximately $450 million, subject to certain adjustments based on market
related factors.
    
    Stock Purchase Agreement  Concurrently with the April 2007 polysilicon supply
agreement, pursuant to a stock purchase agreement, we sold DC Chemical 3 million shares of
our common stock for $12.07 per share and issued DC Chemical an additional 4.5 million
 shares of transfer restricted common stock and 625 shares of transfer restricted preferred
stock (which subsequently converted into 6.25 million shares of transfer restricted common
stock). The restrictions on the common stock will lapse upon the delivery of 500,000
kilograms of polysilicon to the Company.
    
    Stockholders Agreement  Also concurrently with the April 2007 polysilicon supply
agreement, we entered into a stockholder agreement with DC Chemical which prohibits,
without our consent, certain acquisitions of our common stock by DC Chemical, certain proxy
solicitation activities, as well as DC Chemicals ability to publicly announce or make
certain proposals regarding business combinations involving our company, among other
things. The stockholders agreement also provides DC Chemical with the right to participate
in certain of our future securities offerings in order to maintain its pro rata percentage
ownership of the Company. In addition, the stockholders agreement provides DC Chemical with
certain registration rights, including a requirement that we file a registration statement
covering the restricted stock within 15 days of when transfer restrictions on DC Chemicals
 shares lapse. Finally, the stockholders agreement prohibits, without our consent, DC
Chemical from transferring its shares of Evergreen Solar common stock to any person who,
after the transfer, would have beneficial ownership of 10% or more of the voting power of
the Company. As permitted pursuant to the stockholders agreement, DC Chemical purchased
525,000 shares of our common stock in February 2008 from our underwriters in connection
with a public offering we completed at the public offering price of $9.50 per share.
 Other Transactions
 Independence of Members of the Board of Directors and Committees
 www.evergreensolar.com
 72




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
 Audit and Related Fees for Fiscal 2007 and 2008
  2007
    
    
    2008Audit Fees (1)
    
    $
    698,824
    
    
    $
    644,333Audit-Related Fees (2)
    
    
    
    
    
    
    Tax Fees (3)
    
    
    4,841
    
    
    
    13,550All Other Fees (4)
    
    
    1,500
    
    
    
    Total
    
    $
    705,165
    
    
    $
    657,883
 
 (1)
    
    Audit Fees represent fees for professional services relating to the audit of our financial
statements and the review of the financial statements included in our quarterly reports, advice on
accounting matters directly related to the audit and audit services provided in connection with
other regulatory filings.(2)
    
    Audit-Related Fees represent fees for consultation and other attestation services and not reported
under Audit Fees.(3)
    
    Tax Fees principally represent fees for professional services for tax compliance, tax advice and
tax return preparation relating to our fiscal year end.(4)
    
    All Other Fees include licenses to technical accounting research software.  Pre-approval Policies and Procedures.
 
 PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
     73




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LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2007 and 2008
    
    
    F-3Consolidated Statements of Operations for the years ended December 31, 2006, 2007 and 2008
    
    
    F-4Consolidated Statements of Stockholders Equity for the years ended December 31, 2006, 2007 and 2008
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2007 and 2008
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7Schedule I  Condensed Financial Information of the Registrant
    
    
    F-37
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated Framework
   
 F-2




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##### Table of Contents



EVERGREEN SOLAR, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share data)
 December 31,2007
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    29,428
    
    
    $
    100,888Marketable securities
    
    
    70,275
    
    
    
    76,621Restricted cash
    
    
    41,000
    
    
    
    Accounts receivable, net of allowance for doubtful accounts of $85 and $80 at
December 31, 2007 and December 31, 2008, respectively
    
    
    9,297
    
    
    
    35,458Due from Sovello AG
    
    
    4,331
    
    
    
    1,949Inventory
    
    
    8,094
    
    
    
    23,500Prepaid cost of inventory
    
    
    
    
    
    
    11,696VAT receivable, net
    
    
    10,549
    
    
    
    1,474Other current assets
    
    
    9,216
    
    
    
    5,723Total current assets
    
    
    182,190
    
    
    
    257,309Investment in and advances to Sovello AG
    
    
    87,894
    
    
    
    115,553Restricted cash
    
    
    414
    
    
    
    212Deferred financing costs
    
    
    1,991
    
    
    
    7,494Loan receivable from silicon supplier
    
    
    21,904
    
    
    
    41,757Prepaid cost of inventory
    
    
    143,035
    
    
    
    172,193Fixed assets, net
    
    
    114,641
    
    
    
    403,664Other assets
    
    
    1,186
    
    
    
    3,579Total assets
    
    $
    553,255
    
    
    $
    1,001,761Liabilities and stockholders equityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    32,798
    
    
    $
    62,652Due to Sovello AG
    
    
    29,615
    
    
    
    22,840Accrued employee compensation
    
    
    4,875
    
    
    
    6,451Accrued interest
    
    
    1,969
    
    
    
    7,392Accrued warranty
    
    
    705
    
    
    
    1,182Total current liabilities
    
    
    69,962
    
    
    
    100,517Subordinated convertible notes
    
    
    90,000
    
    
    
    Senior convertible notes
    
    
    
    
    
    
    373,750Deferred income taxes
    
    
    
    
    
    
    7,815Total liabilities
    
    
    159,962
    
    
    
    482,082Commitments and Contingencies (Notes 7 and 20)Stockholders equity:Common stock, $0.01 par value, 150,000,000 and 250,000,000 shares authorized at
December 31, 2007 and December 31, 2008, respectively, 102,252,965 and
164,874,850 issued and outstanding at December 31, 2007 and December 31,
2008, respectively
    
    
    1,023
    
    
    
    1,649Additional paid-in capital
    
    
    521,695
    
    
    
    737,615Accumulated deficit
    
    
    (136,280
    )
    
    
    (221,215
    )Accumulated other comprehensive income
    
    
    6,855
    
    
    
    1,630Total stockholders equity
    
    
    393,293
    
    
    
    519,679Total liabilities and stockholders equity
    
    $
    553,255
    
    
    $
    1,001,761
  F-3




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##### Table of Contents



EVERGREEN SOLAR, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 For the Years Ended December 31,2006
    
    
    2007
    
    
    2008Product revenues
    
    $
    102,252
    
    
    $
    58,334
    
    
    $
    95,245Royalty and fee revenues
    
    
    
    
    
    
    11,532
    
    
    
    16,714Total revenues
    
    
    102,252
    
    
    
    69,866
    
    
    
    111,959Cost of revenues
    
    
    90,310
    
    
    
    52,838
    
    
    
    93,073Gross profit
    
    
    11,942
    
    
    
    17,028
    
    
    
    18,886Operating expenses:Research and development
    
    
    18,390
    
    
    
    20,594
    
    
    
    22,039Selling, general and administrative
    
    
    21,890
    
    
    
    20,608
    
    
    
    23,868Equipment write-offs
    
    
    1,526
    
    
    
    
    
    
    
    8,034Facility start-up
    
    
    
    
    
    
    1,404
    
    
    
    30,623Restructuring charges
    
    
    
    
    
    
    
    
    
    
    30,413Total operating expenses
    
    
    41,806
    
    
    
    42,606
    
    
    
    114,977Operating loss
    
    
    (29,864
    )
    
    
    (25,578
    )
    
    
    (96,091
    )Other income (expense):Foreign exchange gains (losses), net
    
    
    3,322
    
    
    
    444
    
    
    
    (4,078
    )Interest income
    
    
    4,613
    
    
    
    9,774
    
    
    
    12,695Interest expense
    
    
    (6,084
    )
    
    
    (3,412
    )
    
    
    (5,896
    )Other income (expense), net
    
    
    1,851
    
    
    
    6,806
    
    
    
    2,721Loss before minority interest and equity income from interest in Sovello AG
    
    
    (28,013
    )
    
    
    (18,772
    )
    
    
    (93,370
    )Minority interest in Sovello AG
    
    
    849
    
    
    
    
    
    
    
    Equity income from interest in Sovello AG
    
    
    495
    
    
    
    2,170
    
    
    
    8,435Net loss
    
    $
    (26,669
    )
    
    $
    (16,602
    )
    
    $
    (84,935
    )Net loss per share (basic and diluted)
    
    $
    (0.41
    )
    
    $
    (0.19
    )
    
    $
    (0.65
    )Weighted average shares used in computing basic and diluted
net loss per share
    
    
    65,662
    
    
    
    86,799
    
    
    
    130,675
  F-4




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##### Table of Contents



EVERGREEN SOLAR, INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 (In thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Deferred
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity
    
    
    LossBalance at January 1, 2006
    
    
    61,965
    
    
    
    620
    
    
    
    182,345
    
    
    
    (1,036
    )
    
    
    (93,009
    )
    
    
    (1,470
    )
    
    
    87,450Issuance of common stock pursuant to exercise of options
    
    
    988
    
    
    
    10
    
    
    
    2,480
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,490Issuance of common stock pursuant to exercise of warrants
    
    
    4,007
    
    
    
    40
    
    
    
    13,406
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,446Shares of common stock issued under ESPP
    
    
    45
    
    
    
    
    
    
    
    341
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    341Reclassification on adoption of SFAS No. 123R
    
    
    
    
    
    
    
    
    
    
    (1,036
    )
    
    
    1,036
    
    
    
    
    
    
    
    
    
    
    
    Gain on investment in Sovello AG by REC and Q-Cells
    
    
    
    
    
    
    
    
    
    
    8,466
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,466Compensation expense associated with equity compensation plans,
including restricted share grants
    
    
    1,061
    
    
    
    11
    
    
    
    5,051
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,062Comprehensive loss:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,669
    )
    
    
    
    
    
    
    (26,669
    )
    
    $
    (26,669
    )Unrealized gains on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    71
    
    
    
    71Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,190
    
    
    
    2,190
    
    
    
    2,190Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (24,408
    )Balance at December 31, 2006
    
    
    68,066
    
    
    
    681
    
    
    
    211,053
    
    
    
    
    
    
    
    (119,678
    )
    
    
    791
    
    
    
    92,847Issuance of common stock pursuant to exercise of options
    
    
    1,031
    
    
    
    10
    
    
    
    3,289
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,299Issuance of common stock pursuant to exercise of warrants
    
    
    256
    
    
    
    3
    
    
    
    664
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    667Shares of common stock issued under ESPP
    
    
    59
    
    
    
    1
    
    
    
    426
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    427Issuance of common stock in connection with DC Chemical Agreement
    
    
    3,000
    
    
    
    30
    
    
    
    36,180
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,210Issuance of restricted stock in connection with DC Chemical Agreement
    
    
    10,750
    
    
    
    107
    
    
    
    119,914
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,021Issuance of common stock in connection with public offering,
net of offering costs
    
    
    17,250
    
    
    
    173
    
    
    
    134,254
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134,427Compensation expense associated with equity compensation plans,
including restricted share grants
    
    
    1,841
    
    
    
    18
    
    
    
    6,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,407Gain on investment in Sovello AG by REC and Q-Cells
    
    
    
    
    
    
    
    
    
    
    9,526
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,526Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,602
    )
    
    
    
    
    
    
    (16,602
    )
    
    $
    (16,602
    )Unrealized gains on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    59
    
    
    
    59Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,005
    
    
    
    6,005
    
    
    
    6,005Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (10,538
    )Balance at December 31, 2007
    
    
    102,253
    
    
    $
    1,023
    
    
    $
    521,695
    
    
    $
    
    
    
    $
    (136,280
    )
    
    $
    6,855
    
    
    $
    393,293Issuance of common stock pursuant to exercise of options
    
    
    442
    
    
    
    4
    
    
    
    1,012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,016Issuance of common stock in connection with public offering,
net of offering costs
    
    
    18,400
    
    
    
    184
    
    
    
    166,542
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    166,726Compensation expense associated with equity compensation plans,
including restricted share grants
    
    
    634
    
    
    
    7
    
    
    
    7,686
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,693Shares of common stock issued under ESPP
    
    
    111
    
    
    
    1
    
    
    
    620
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    621Deferred tax associated with gains on investment in Sovello AG
    
    
    
    
    
    
    
    
    
    
    (7,059
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,059
    )Shares loaned in connection with share lending agreement
    
    
    30,856
    
    
    
    308
    
    
    
    (305
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Debt
conversion net of deferred financing costs write-off
    
    
    12,179
    
    
    
    122
    
    
    
    88,137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,259Capped call premium, net of financing costs
    
    
    
    
    
    
    
    
    
    
    (64,950
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,950
    )Capped call reversal
    
    
    
    
    
    
    
    
    
    
    24,237
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,237Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84,935
    )
    
    
    
    
    
    
    (84,935
    )
    
    $
    (84,935
    )Unrealized losses on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    (34
    )
    
    
    (34
    )Foreign currency translation adjustment, net of deferred taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,191
    )
    
    
    (5,191
    )
    
    
    (5,191
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (90,160
    )Balance at December 31, 2008
    
    
    164,875
    
    
    $
    1,649
    
    
    $
    737,615
    
    
    $
    
    
    
    $
    (221,215
    )
    
    $
    1,630
    
    
    $
    519,679
  F-5




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##### Table of Contents



EVERGREEN SOLAR, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 For the Years Ended December 31,2006
    
    
    2007
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (26,669
    )
    
    $
    (16,602
    )
    
    $
    (84,935
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation expense
    
    
    9,311
    
    
    
    7,418
    
    
    
    18,156Amortization of deferred grant credits
    
    
    (2,004
    )
    
    
    
    
    
    
    Loss on disposal of fixed assets
    
    
    2,383
    
    
    
    
    
    
    
    34,496Minority interest in Sovello AG
    
    
    (849
    )
    
    
    
    
    
    
    Equity income from Sovello AG
    
    
    (495
    )
    
    
    (2,170
    )
    
    
    (8,435
    )Amortization of deferred debt financing costs
    
    
    443
    
    
    
    444
    
    
    
    1,010Bad debt expense and provision for early payment discounts
    
    
    85
    
    
    
    (1
    )
    
    
    (7
    )Imputed interest and accretion of bond premiums
    
    
    (955
    )
    
    
    (1,210
    )
    
    
    (2,472
    )Accretion of caped call discount
    
    
    
    
    
    
    
    
    
    
    345Compensation expense associated with employee equity awards
    
    
    5,062
    
    
    
    6,382
    
    
    
    7,246Provision for warranty
    
    
    
    
    
    
    58
    
    
    
    585Changes in operating assets and liabilities:Accounts receivable
    
    
    (12,415
    )
    
    
    10,952
    
    
    
    (26,168
    )Grants receivable
    
    
    18,962
    
    
    
    
    
    
    
    19,908Inventory
    
    
    (10,958
    )
    
    
    (3,327
    )
    
    
    (15,406
    )Prepaid cost of inventory
    
    
    
    
    
    
    (23,121
    )
    
    
    (39,318
    )Interest receivable
    
    
    (134
    )
    
    
    13
    
    
    
    115Other current assets
    
    
    (6,652
    )
    
    
    (10,687
    )
    
    
    9,148Accounts payable
    
    
    (728
    )
    
    
    16,588
    
    
    
    5,854Other
current liabilities
    
    
    15,285
    
    
    
    1,872
    
    
    
    10,048Interest payable
    
    
    
    
    
    
    1,352
    
    
    
    2,290Other
    
    
    
    
    
    
    43
    
    
    
    1,659Net cash used in operating activities
    
    
    (10,328
    )
    
    
    (11,996
    )
    
    
    (65,881
    )Cash flows from investing activities:Purchases of fixed assets and deposits on fixed assets under construction
    
    
    (107,667
    )
    
    
    (50,744
    )
    
    
    (345,256
    )Proceeds from the disposal of fixed assets
    
    
    
    
    
    
    
    
    
    
    12Decrease in cash related to conversion of Sovello AG consolidated entity to equity method affiliate
    
    
    (22,274
    )
    
    
    
    
    
    
    Decrease (increase) in restricted cash
    
    
    891
    
    
    
    (41,000
    )
    
    
    41,178Increase in Sovello AG loan
    
    
    (389
    )
    
    
    
    
    
    
    (23,774
    )Increase in other loans
    
    
    
    
    
    
    (22,386
    )
    
    
    (22,164
    )Purchases of marketable securities
    
    
    (63,290
    )
    
    
    (108,386
    )
    
    
    (98,500
    )Proceeds from sale and maturity of marketable securities
    
    
    107,186
    
    
    
    81,975
    
    
    
    93,059Net cash used in investing activities
    
    
    (85,543
    )
    
    
    (140,541
    )
    
    
    (355,445
    )Cash flows from financing activities:Proceeds from issuances of common stock, net of offering costs
    
    
    
    
    
    
    170,637
    
    
    
    166,726Proceeds from issuance of DC Chemical restricted shares
    
    
    
    
    
    
    107
    
    
    
    Proceeds from issuance of senior convertible debt, net of offering costs
    
    
    
    
    
    
    
    
    
    
    363,963Payment of capped call up-front premium
    
    
    
    
    
    
    
    
    
    
    (39,543
    )Proceeds from share lending agreement
    
    
    
    
    
    
    
    
    
    
    3Increase in Sovello AG debt
    
    
    58,708
    
    
    
    
    
    
    
    Proceeds from exercise of stock options and warrants, and shares purchased under Employee
Stock Purchase Plan
    
    
    16,277
    
    
    
    4,393
    
    
    
    1,637Net cash flow provided by financing activities
    
    
    74,985
    
    
    
    175,137
    
    
    
    492,786Effect of exchange rate changes on cash and cash equivalents
    
    
    (3,028
    )
    
    
    
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    (23,914
    )
    
    
    22,600
    
    
    
    71,460Cash and cash equivalents at beginning of year
    
    
    30,742
    
    
    
    6,828
    
    
    
    29,428Cash and cash equivalents at end of year
    
    $
    6,828
    
    
    $
    29,428
    
    
    $
    100,888Supplemental cash flow information:Interest paid
    
    
    5,201
    
    
    
    986
    
    
    
    Gain on investment in Sovello AG by Q-Cells and REC
    
    
    8,466
    
    
    
    9,526
    
    
    
    Non-cash cost of prepaid inventory
    
    
    
    
    
    
    119,914
    
    
    
    
  F-6




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##### Table of Contents



EVERGREEN SOLAR, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. NATURE OF BUSINESS
       F-7




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##### Table of Contents




    
    possible delays in completion of the Devens plant, budget overruns or failure to
meet expected production levels;
    
    selling less than approximately 90 MW to 110 MW of Devens manufactured product at an
average selling price of $2.90 to $3.10 per watt to credit worthy customers;
    
    higher than planned manufacturing costs and failing to achieve expected Devens
operating metrics, with any delays in the Companys plan to scale capacity resulting
in increased costs that could impair business operations;
    
    further weakening of the Euro against the U.S. dollar, as a substantial portion of
the contracted sales are denominated in Euros; and
    
    increased funding requirements for Sovello to complete its third manufacturing
facility and achieve its planned manufacturing cost and operating metrics, or to
potentially address the loss of any prior or expected government grant funding for
Sovello (see Note 5 regarding the Undertaking and how Sovellos failure to meet its
business plan may require the Company to provide additional funding).
  
    
    continually monitoring its operating results against expectations and, if required,
further restrict operating costs and capital spending if events warrant;
    
    possibly hedging the Companys exposure to fluctuations in the U.S. dollar / Euro
exchange rate to limit any adverse exposure, but there can be no assurance that hedges
can be put in place at terms acceptable to us or that such hedging activities will be
effective; and
    
    negotiating with a number of banks to secure a borrowing base line of credit,
without a minimum cash requirement, as is the case with the Companys current line of
credit, supported by the expected significant increase in the Companys accounts
receivable, inventory and overall working capital.
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  BASIS OF PRESENTATION
  F-8




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##### Table of Contents



CASH AND MARKETABLE SECURITIES
    Amortized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    ValueCommercial paper
    
    $
    41,473
    
    
    $
    18
    
    
    $
    41,491Corporate bonds
    
    
    25,770
    
    
    
    32
    
    
    
    25,802Asset backed securities
    
    
    2,973
    
    
    
    9
    
    
    
    2,982Marketable Securities
    
    $
    70,216
    
    
    $
    59
    
    
    $
    70,275
 F-9




---



##### Table of Contents



UnrealizedAmortized
    
    
    Gains
    
    
    FairCost
    
    
    (Losses)
    
    
    ValueGovernment Obligations
    
    $
    9,997
    
    
    $
    3
    
    
    $
    10,000Commercial paper
    
    
    44,852
    
    
    
    24
    
    
    
    44,876Corporate bonds
    
    
    21,746
    
    
    
    (1
    )
    
    
    21,745Marketable Securities
    
    $
    76,595
    
    
    $
    26
    
    
    $
    76,621
 CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
   2006
    
    2007
    
    2008% of accounts receivableDonauer Solartechnik
    
    
    14
    %
    
    
    
    
    
    
    NVT, LLC
    
    
    33
    %
    
    
    
    
    
    
    SunPower Corporation (formerly PowerLight)
    
    
    15
    %
    
    
    27
    %
    
    
    20
    %Ralos Vertriebs GmbH
    
    
    2
    %
    
    
    
    
    
    
    13
    %Solar City
    
    
    
    
    
    
    
    
    
    
    14
    %AEE Solar
    
    
    11
    %
    
    
    4
    %
    
    
    6
    %EWS GmbH & Co. KG
    
    
    8
    %
    
    
    10
    %
    
    
    4
    %Targray
    
    
    
    
    
    
    13
    %
    
    
    Top 5 customers
    
    
    81
    %
    
    
    67
    %
    
    
    64
    %
  INVENTORY
  F-10




---



##### Table of Contents



GUARANTOR ARRANGEMENTS
 Letters of Credit
  FIXED ASSETS
   IMPAIRMENT OF LONG-LIVED ASSETS
  F-11




---



##### Table of Contents



REVENUE RECOGNITION AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
    RESEARCH AND DEVELOPMENT
  INCOME TAXES
  VALUE-ADDED TAXES
  COMPREHENSIVE LOSS
  STOCK-BASED COMPENSATION
  F-12




---



##### Table of Contents



NET LOSS PER COMMON SHARE
   SEGMENT REPORTING
  USE OF ESTIMATES
  F-13




---



##### Table of Contents



FAIR VALUE OF FINANCIAL INSTRUMENTS
  RECENT ACCOUNTING PRONOUNCEMENTS
    F-14




---



##### Table of Contents



3. INVENTORY
  December 31,2007
    
    
    2008Raw materials
    
    $
    6,468
    
    
    $
    17,928Work-in-process
    
    
    1,014
    
    
    
    3,910Finished goods
    
    
    612
    
    
    
    1,662$
    8,094
    
    
    $
    23,500Prepaid cost of inventory
    
    $
    143,035
    
    
    $
    183,889Less: current portion
    
    
    
    
    
    
    11,696Noncurrent portion
    
    $
    143,035
    
    
    $
    172,193
       F-15




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##### Table of Contents



4. FIXED ASSETS
  Useful
    
    
    December 31,Life
    
    
    2007
    
    
    2008Land
    
    
    
    
    
    $
    
    
    
    $
    119Building
    
    40 years
    
    
    
    
    
    
    97,957Laboratory and manufacturing equipment
    
    3-7 years
    
    
    53,323
    
    
    
    182,109Computer and office equipment
    
    3-7 years
    
    
    1,320
    
    
    
    4,594Leasehold improvements
    
    Lesser of 15 to 20
    
    
    13,592
    
    
    
    16,413years or lease termAssets under construction
    
    
    
    
    
    
    67,125
    
    
    
    173,353135,360
    
    
    
    474,545Less: Accumulated depreciation and fixed asset write-offs
    
    
    (20,719
    )
    
    
    (70,881
    )$
    114,641
    
    
    $
    403,664
     5. INVESTMENT IN SOVELLO AG
  F-16




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##### Table of Contents



For the Years Ended December 31,2006
    
    2007
    
    2008Revenue
    
    $
    59,295
    
    
    $
    193,613
    
    
    $
    323,911Cost of goods sold
    
    
    51,160
    
    
    
    159,781
    
    
    
    247,567Other expenses
    
    
    9,006
    
    
    
    27,320
    
    
    
    50,034Net income (loss)
    
    
    (871
    )
    
    
    6,512
    
    
    
    26,310
 As of December 31,2007
    
    2008Current assets
    
    $
    205,460
    
    
    $
    241,871Non-current assets
    
    
    350,155
    
    
    
    408,347Current liabilities
    
    
    141,068
    
    
    
    181,550Noncurrent liabilities
    
    
    282,293
    
    
    
    318,627
    Evergreen Solar Loans to Sovello
  F-17




---



##### Table of Contents



Date of Loan
    

    Principal (EUR)

    
    Principal (USD)
    
    Interest Rate
    
    Original Date DueJanuary 25, 2007
    
    
    30,000,000
    
    
    $
    41,757,000
    
    
    
    5.43
    %
    
    December 31, 2009
    *June 26, 2008
    
    
    
    
    
    $
    18,174,000
    
    
    
    6.71
    %
    
    December 31, 2009
    *December 22, 2008
    
    
    
    
    
    $
    5,600,000
    
    
    
    6.00
    %
    
    June 30, 2010
    *
 
 *
    
    Due upon the earlier of the completion of an initial public offering or other liquidity event
generating sufficient cash to repay the loan. 6. LONG TERM DEBT
 Subordinated Convertible Notes
  Senior Convertible Notes
 Capped Call
  F-18




---



##### Table of Contents



Capped Call
    Common Stock Lending Agreement
 F-19




---



##### Table of Contents



7. LINE OF CREDIT
    8. GUARANTOR ARRANGEMENTS
  Product Warranty
   F-20




---



##### Table of Contents



2007
    
    
    2008Balance at beginning of year
    
    $
    705
    
    
    $
    705Warranty costs accrued
    
    
    58
    
    
    
    585Warranty costs incurred
    
    
    (58
    )
    
    
    (108
    )Balance at end of year
    
    $
    705
    
    
    $
    1,182
 Sovello Debt Guarantee
  9. FAIR VALUE MEASUREMENTS
    Valuation Hierarchy
  F-21




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##### Table of Contents



Fair Value Measurements
Year ended December 31, 2008
 Quoted Prices
    
    Using Significant
    
    Using SignificantTotal
    
    in Active
    
    Other Observable
    
    UnobservableCarrying
    
    Markets
    
    Inputs
    
    InputsValue
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Money markets
    
    $
    65,599
    
    
    $
    65,599
    
    
    $
    
    
    
    $
    Government obligation
    
    
    10,000
    
    
    
    
    
    
    
    10,000
    
    
    
    Marketable securities
    
    
    66,621
    
    
    
    
    
    
    
    66,621
    
    
    
    
 Valuation Techniques
  10. STOCKHOLDERS EQUITY
  F-22




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##### Table of Contents



Common Stock Lending Agreement
   F-23




---



##### Table of Contents



11. STOCK BASED COMPENSATION
  For the Years ended December 31,2006
    
    
    2007
    
    
    2008Cost of revenue
    
    $
    420
    
    
    $
    617
    
    
    $
    1,214Research and development expenses
    
    
    1,562
    
    
    
    1,633
    
    
    
    1,538Selling, general and
administrative expenses
    
    
    3,080
    
    
    
    4,008
    
    
    
    3,548Facility start-up
    
    
    
    
    
    
    124
    
    
    
    946$
    5,062
    
    
    $
    6,382
    
    
    $
    7,246
  Stock Incentive Plans
  F-24




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##### Table of Contents



AverageShares
    
    
    Exercise Price(in thousands)Outstanding at January 1, 2006
    
    
    6,050
    
    
    $
    3.15Granted
    
    
    643
    
    
    
    14.42Exercised
    
    
    (988
    )
    
    
    2.51Forfeited
    
    
    (396
    )
    
    
    12.05Outstanding at December 31, 2006
    
    
    5,309
    
    
    
    4.20Granted
    
    
    16
    
    
    
    10.63Exercised
    
    
    (1,031
    )
    
    
    3.20Forfeited
    
    
    (109
    )
    
    
    6.02Outstanding at December 31, 2007
    
    
    4,185
    
    
    
    4.43Granted
    
    
    
    
    
    
    Exercised
    
    
    (442
    )
    
    
    2.38Forfeited
    
    
    (55
    )
    
    
    6.44Outstanding at December 31, 2008
    
    
    3,688
    
    
    $
    4.65
 F-25




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##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedRange of
    
    
    
    
    
    
    Remaining
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    Number
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    ExercisePrices
    
    
    Outstanding
    
    
    Life (Years)
    
    
    Price
    
    
    Exercisable
    
    
    Price(in thousands)
    
    
    
    
    
    
    
    
    
    
    (in thousands)$
    0.87
    
    
    $
    1.60
    
    
    
    37
    
    
    
    4.22
    
    
    $
    1.49
    
    
    
    37
    
    
    $
    1.491.61
    
    
    
    1.61
    
    
    
    1,638
    
    
    
    4.94
    
    
    
    1.61
    
    
    
    1,638
    
    
    
    1.611.68
    
    
    
    2.40
    
    
    
    483
    
    
    
    4.88
    
    
    
    2.12
    
    
    
    483
    
    
    
    2.122.45
    
    
    
    5.00
    
    
    
    379
    
    
    
    5.15
    
    
    
    3.65
    
    
    
    339
    
    
    
    3.535.27
    
    
    
    7.30
    
    
    
    480
    
    
    
    6.10
    
    
    
    7.01
    
    
    
    372
    
    
    
    6.997.59
    
    
    
    13.39
    
    
    
    278
    
    
    
    6.61
    
    
    
    9.83
    
    
    
    247
    
    
    
    9.9213.97
    
    
    
    13.97
    
    
    
    7
    
    
    
    7.07
    
    
    
    13.97
    
    
    
    4
    
    
    
    13.9714.00
    
    
    
    14.00
    
    
    
    35
    
    
    
    1.84
    
    
    
    14.00
    
    
    
    35
    
    
    
    14.0015.09
    
    
    
    15.09
    
    
    
    335
    
    
    
    7.15
    
    
    
    15.09
    
    
    
    167
    
    
    
    15.0919.00
    
    
    
    19.00
    
    
    
    16
    
    
    
    1.84
    
    
    
    19.00
    
    
    
    16
    
    
    
    19.003,688
    
    
    
    5.39
    
    
    $
    4.65
    
    
    
    3,338
    
    
    $
    4.00
   2006

    

    2007Expected options term (years)
    
    
    6.25
    
    
    
    6.25Risk-free interest rate
    
    
    4.9%-5.1
    %
    
    
    5.1
    %Expected dividend yield
    
    
    None
    
    
    
    NoneVolatility
    
    
    130
    %
    
    
    155
    %
 F-26




---



##### Table of Contents



Weighted-AverageGrant DateShares
    
    
    Fair Value(in thousands)Outstanding at January 1, 2006
    
    
    100
    
    
    $
    10.42Granted
    
    
    1,116
    
    
    
    14.45Vested
    
    
    (32
    )
    
    
    8.75Forfeited
    
    
    (55
    )
    
    
    14.45Outstanding at December 31, 2006
    
    
    1,129
    
    
    
    14.25Granted
    
    
    1,986
    
    
    
    9.39Vested
    
    
    (133
    )
    
    
    10.45Forfeited
    
    
    (145
    )
    
    
    14.39Outstanding at December 31, 2007
    
    
    2,837
    
    
    
    11.02Granted
    
    
    696
    
    
    
    9.21Vested
    
    
    (339
    )
    
    
    8.12Forfeited
    
    
    (62
    )
    
    
    10.64Outstanding at December 31, 2008
    
    
    3,132
    
    
    $
    10.94
   F-27




---



##### Table of Contents



12. FACILITY START-UP COSTS
  13. RESTRUCTURING CHARGES
  14. INCOME TAXES
  2006
    
    
    2007
    
    
    2008Income tax benefit at US federal statutory tax rate
    
    $
    (9,068
    )
    
    $
    (5,696
    )
    
    $
    (28,878
    )State income taxes, net of federal tax effect
    
    
    (1,844
    )
    
    
    (1,160
    )
    
    
    (9,503
    )Permanent items
    
    
    1,409
    
    
    
    1,188
    
    
    
    938Other items
 tax credits, expiration of NOLs, other
    
    
    (8,112
    )
    
    
    (207
    )
    
    
    (288
    )Change in deferred tax asset valuation allowance
    
    
    17,615
    
    
    
    5,875
    
    
    
    37,731$
    
    
    
    $
    
    
    
    $
    
 F-28




---



##### Table of Contents



2007
    
    
    2008Gross deferred tax assetsNet operating loss carryforwards
    
    $
    35,777
    
    
    $
    57,265Tax credit carryforwards
    
    
    2,771
    
    
    
    7,322Capitalized R&D expenses
    
    
    14,856
    
    
    
    18,044Accrued expenses and deferred compensation
    
    
    3,347
    
    
    
    4,882Basis difference in synthetic debt
    
    
    
    
    
    
    14,876Other, net
    
    
    
    
    
    
    3,050Total gross deferred tax assets
    
    
    56,751
    
    
    
    105,439Less: gross deferred tax liabilitiesDepreciation
    
    
    (4,301
    )
    
    
    (1,626
    )Basis difference in Sovello AG investment in
foreign partnership
    
    
    (8,504
    )
    
    
    (7,692
    )Other, net
    
    
    (556
    )
    
    
    Deferred tax asset valuation allowance
    
    
    (43,390
    )
    
    
    (103,813
    )Net deferred tax liability
    
    $
    
    
    
    $
    (7,692
    )
  F-29




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##### Table of Contents



Balance at January 1, 2008
    
    $
    Additions based on current year tax positions
    
    
    141Additions based on prior year tax positions
    
    
    1,854Reductions based on prior year tax positions
    
    
    Settlements
    
    
    Balance at December 31, 2008
    
    $
    1,995
   15. SEGMENT INFORMATION
  Segment Revenue and Gross Profit
  EvergreenSolar, Inc.
    
    Sovello AG
    
    Eliminations
    
    TotalRevenue
    
    $
    101,303
    
    
    
    54,535
    
    
    
    (52,692
    )
    
    $
    103,146Gross profit
    
    
    2,681
    
    
    
    9,261
    
    
    
    
    
    
    
    11,942Operating loss
    
    
    (29,443
    )
    
    
    (422
    )
    
    
    
    
    
    
    (29,865
    )Net loss
    
    
    (25,160
    )
    
    
    (2,358
    )
    
    
    849
    
    
    
    (26,669
    )Other supplemental informationInterest Income
    
    
    5,659
    
    
    
    291
    
    
    
    (1,337
    )
    
    
    4,613Interest expense
    
    
    4,032
    
    
    
    3,389
    
    
    
    (1,337
    )
    
    
    6,084Depreciation expense
    
    
    5,136
    
    
    
    4,175
    
    
    
    
    
    
    
    9,311Amortization of deferred
grant credits
    
    
    
    
    
    
    2,004
    
    
    
    
    
    
    
    2,004
 F-30




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##### Table of Contents



Geographic and Customer Concentration of Revenue Information
  For
the Years Ended December 31,2006
    
    2007
    
    2008By geography:United States
    
    
    37
    %
    
    
    82
    %
    
    
    58
    %Germany
    
    
    48
    %
    
    
    7
    %
    
    
    28
    %Spain
    
    
    13
    %
    
    
    
    
    
    
    7
    %All other
    
    
    2
    %
    
    
    11
    %
    
    
    7
    %100
    %
    
    
    100
    %
    
    
    100
    %By customer:SunPower Corporation
    
    
    10
    %
    
    
    31
    %
    
    
    31
    %Ralos Verriebs GmbH
    
    
    10
    %
    
    
    1
    %
    
    
    15
    %SunEdison
    
    
    
    
    
    
    14
    %
    
    
    2
    %groSolar
    
    
    6
    %
    
    
    12
    %
    
    
    4
    %Donauer Solartechnik
    
    
    13
    %
    
    
    1
    %
    
    
    All other
    
    
    61
    %
    
    
    41
    %
    
    
    48
    %100
    %
    
    
    100
    %
    
    
    100
    %
 16. RELATED PARTY TRANSACTIONS
   17. EMPLOYEE STOCK PURCHASE PLAN
  F-31




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##### Table of Contents



18. WARRANTS
   19. EMPLOYEES SAVINGS PLAN
  F-32




---



##### Table of Contents



20. COMMITMENTS
 LEASES
       2009
    
    $
    3,1912010
    
    
    2,1892011
    
    
    1,0202012
    
    
    8922013
    
    
    361Thereafter
    
    
    Total
    
    $
    7,653
  F-33




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##### Table of Contents



OTHER COMMITMENTS
  21. UNAUDITED QUARTERLY RESULTS
  QUARTERLY STATEMENT OF OPERATIONS
(In thousands, except per share data)
Unaudited
 Mar 31,
    
    
    Jun 30,
    
    
    Sept 29,
    
    
    Dec 31,
    
    
    Mar 29,
    
    
    Jun 28,
    
    
    Sept 27,
    
    
    Dec 31,2007
    
    
    2007
    
    
    2007
    
    
    2007
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    2008Revenues:Product
    
    $
    12,627
    
    
    $
    13,407
    
    
    $
    15,383
    
    
    $
    16,917
    
    
    $
    18,259
    
    
    $
    18,118
    
    
    $
    17,803
    
    
    $
    41,065Royalty and fee
    
    
    1,471
    
    
    
    1,985
    
    
    
    2,807
    
    
    
    5,269
    
    
    
    4,688
    
    
    
    4,638
    
    
    
    4,264
    
    
    
    3,124Total revenues
    
    
    14,098
    
    
    
    15,392
    
    
    
    18,190
    
    
    
    22,186
    
    
    
    22,947
    
    
    
    22,756
    
    
    
    22,067
    
    
    
    44,189Cost of revenues
    
    
    11,269
    
    
    
    11,952
    
    
    
    13,660
    
    
    
    15,957
    
    
    
    15,231
    
    
    
    14,863
    
    
    
    20,820
    
    
    
    42,159Gross profit (loss)
    
    
    2,829
    
    
    
    3,440
    
    
    
    4,530
    
    
    
    6,229
    
    
    
    7,716
    
    
    
    7,893
    
    
    
    1,247
    
    
    
    2,030Operating expenses:Research and development
    
    
    5,224
    
    
    
    5,144
    
    
    
    5,381
    
    
    
    4,845
    
    
    
    4,943
    
    
    
    5,887
    
    
    
    5,541
    
    
    
    5,668Selling, general and administrative
    
    
    4,740
    
    
    
    5,536
    
    
    
    5,079
    
    
    
    5,253
    
    
    
    4,992
    
    
    
    5,894
    
    
    
    6,174
    
    
    
    6,808Equipment write-offs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,034Facility start-up
    
    
    
    
    
    
    
    
    
    
    358
    
    
    
    1,046
    
    
    
    3,419
    
    
    
    8,573
    
    
    
    8,956
    
    
    
    9,675Restructuring
charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,862
    
    
    
    2,708
    
    
    
    2,709
    
    
    
    23,134Total operating expenses
    
    
    9,964
    
    
    
    10,680
    
    
    
    10,818
    
    
    
    11,144
    
    
    
    15,216
    
    
    
    23,062
    
    
    
    23,380
    
    
    
    53,319Operating loss
    
    
    (7,135
    )
    
    
    (7,240
    )
    
    
    (6,288
    )
    
    
    (4,915
    )
    
    
    (7,500
    )
    
    
    (15,169
    )
    
    
    (22,133
    )
    
    
    (51,289
    )Other income (expense), netForeign exchange gains (losses), net
    
    
    599
    
    
    
    145
    
    
    
    (133
    )
    
    
    (167
    )
    
    
    3,814
    
    
    
    (158
    )
    
    
    (5,017
    )
    
    
    (2,717
    )Interest income
    
    
    1,250
    
    
    
    2,160
    
    
    
    3,268
    
    
    
    3,096
    
    
    
    3,027
    
    
    
    2,735
    
    
    
    4,242
    
    
    
    2,691Interest expense
    
    
    (909
    )
    
    
    (927
    )
    
    
    (914
    )
    
    
    (662
    )
    
    
    (316
    )
    
    
    (46
    )
    
    
    (2,500
    )
    
    
    (3,034
    )Other income (expense), net
    
    
    940
    
    
    
    1,378
    
    
    
    2,221
    
    
    
    2,267
    
    
    
    6,525
    
    
    
    2,531
    
    
    
    (3,275
    )
    
    
    (3,060
    )Loss before minoritiy interest and equity income
    
    
    (6,195
    )
    
    
    (5,862
    )
    
    
    (4,067
    )
    
    
    (2,648
    )
    
    
    (975
    )
    
    
    (12,638
    )
    
    
    (25,408
    )
    
    
    (54,349
    )Minority interest in Sovello AG
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity income (loss) from interest in Sovello AG
    
    
    (24
    )
    
    
    (1,646
    )
    
    
    404
    
    
    
    3,436
    
    
    
    950
    
    
    
    3,716
    
    
    
    1,558
    
    
    
    2,211Net income (loss)
    
    $
    (6,219
    )
    
    $
    (7,508
    )
    
    $
    (3,663
    )
    
    $
    788
    
    
    $
    (25
    )
    
    $
    (8,922
    )
    
    $
    (23,850
    )
    
    $
    (52,138
    )Net income (loss) per share:Basic
    
    $
    (0.09
    )
    
    $
    (0.09
    )
    
    $
    (0.04
    )
    
    $
    0.01
    
    
    $
    (0.00
    )
    
    $
    (0.08
    )
    
    $
    (0.18
    )
    
    $
    (0.32
    )Diluted
    
    $
    (0.09
    )
    
    $
    (0.09
    )
    
    $
    (0.04
    )
    
    $
    0.01
    
    
    $
    (0.00
    )
    
    $
    (0.08
    )
    
    $
    (0.18
    )
    
    $
    (0.32
    )Weighted average shares used in computing basic and diluted
net income (loss) per share:Basic
    
    
    67,001
    
    
    
    82,562
    
    
    
    98,343
    
    
    
    98,802
    
    
    
    108,816
    
    
    
    118,327
    
    
    
    132,034
    
    
    
    161,678Diluted
    
    
    67,001
    
    
    
    82,562
    
    
    
    98,343
    
    
    
    102,656
    
    
    
    108,816
    
    
    
    118,327
    
    
    
    132,034
    
    
    
    161,678
 F-34




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##### Table of Contents



22. VALUATION AND QUALIFYING ACCOUNTS
  Balance atbeginning
    
    Charged to
    
    
    
    
    
    Balance atDescription
    
    of period
    
    operations
    
    Deductions
    
    end of periodYear ended December 31, 2006Reserves and allowances deducted from assets accounts:Income tax valuation allowance
    
    $
    28,946
    
    
    
    10,227
    
    
    
    3,621
    
    
    $
    42,794Allowance for doubtful accounts
    
    
    65
    
    
    
    35
    
    
    
    
    
    
    
    100Year ended December 31, 2007Reserves and allowances deducted from assets accounts:Income tax valuation allowance
    
    
    42,794
    
    
    
    5,875
    
    
    
    (5,279
    )
    
    
    43,390Allowance for doubtful accounts
    
    
    100
    
    
    
    (1
    )
    
    
    (14
    )
    
    
    85Year ended December 31, 2008Reserves and allowances deducted from assets accounts:Income tax valuation allowance
    
    
    43,390
    
    
    
    37,731
    
    
    
    22,692
    
    
    
    103,813Allowance for doubtful accounts
    
    
    85
    
    
    
    (5
    )
    
    
    
    
    
    
    80
 F-35




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##### Table of Contents



Schedule 1  Condensed Financial Information of the Registrant
Condensed Statement of Operations
 (In thousands, except per share data)
 For the YearEndedDecember 31,2006Product revenues
    
    $
    44,866Cost of revenues
    
    
    42,184Gross profit
    
    
    2,682Operating expenses:Research and development
    
    
    17,109Selling, general and administrative
    
    
    16,339Loss on disposal of fixed assets
    
    
    1,526Total operating expenses
    
    
    34,974Operating loss
    
    
    (32,292
    )Other income, net
    
    
    3,787Equity income from interest in Sovello AG
    
    
    495Net loss
    
    $
    (28,010
    )Net loss per share (basic and diluted)
    
    $
    (0.43
    )Weighted average shares used in computing basic and diluted
net loss per share
    
    
    65,662
 F-36




---



##### Table of Contents



Schedule 1  Condensed Financial Information of the Registrant
Condensed Statement of Cash Flows
 (In thousands)
 For the YearEndedDecember 31,2006Net cash used in operating activities
    
    $
    (17,431
    )Net cash used in investing activities
    
    
    (21,936
    )Net cash provided by financing activities
    
    
    16,277Net decrease in cash and cash equivalents
    
    
    (23,090
    )Cash and cash equivalents at beginning of year
    
    
    29,918Cash and cash equivalents at end of year
    
    $
    6,828
 F-37




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##### Table of Contents



SIGNATURES
 nd
 EVERGREEN SOLAR, INC.By:
    
    /s/ Richard M. FeldtRichard M. FeldtChief Executive Officer, President and
Chairman of the Board (Principal Executive
Officer)




---



##### Table of Contents



POWER OF ATTORNEY
   Name
    
    Title
    
    Date/s/ RICHARD M. FELDT
Richard M. Feldt
    
    Chief Executive Officer,
President and Chairman of the Board
(Principal Executive Officer)
    
    March 2, 2009/s/ MICHAEL EL-HILLOW
Michael El-Hillow
    
    Chief Financial Officer and
Secretary
(Principal Financial and Accounting
Officer)
    
    March 2, 2009/s/ ALLAN H. COHEN
    
    Director
    
    March 2, 2009Allan H. Cohen/s/ EDWARD C. GRADY
    
    Director
    
    March 2, 2009Edward C. Grady/s/ DR. PETER W. COWDEN
    
    Director
    
    March 2, 2009Dr. Peter W. Cowden/s/ TOMMY CADWELL
    
    Director
    
    March 2, 2009Tommy Cadwell/s/ DR. SUSAN F. TIERNEY
    
    Director
    
    March 2, 2009Dr. Susan F. Tierney




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##### Table of Contents



EXHIBIT INDEX
 Number
    
    Description3.1(1)
    
    Third Amended and Restated Certificate of Incorporation (Exhibit 3.2)3.2(1)
    
    Second Amended and Restated By-laws (Exhibit 3.3)3.3(2)
    
    Certificate of the Powers, Designations, Preferences and Rights of the Series
A Convertible Preferred Stock of the Registrant (Exhibit 4.4)3.4(3)
    
    Certificate of Designations of Rights, Preferences and Privileges of Series B
Preferred Stock of the Registrant (Exhibit 3.4)3.5(4)
    
    Certificate of Amendment of Third Amended and Restated Certificate of
Incorporation (Exhibit 3.1)4.1(5)
    
    Indenture between the Registrant and U.S. Bank National Association, as Trustee,
dated as of July 2, 2008 (Exhibit 4.1)4.2(5)
    
    First Supplemental Indenture between the Company and U.S. Bank National
Association, as Trustee, dated as of July 2, 2008 (Exhibit 4.2)4.3(5)
    
    Form of 4% Senior Convertible Note due 2013 (Exhibit 4.2)4.4(1)
    
    Specimen Certificate for Shares of the Registrants Common Stock (Exhibit 4.1)10.1(1)§
    
    1994 Stock Option Plan (Exhibit 10.1)10.2(4)§
    
    Amended and Restated 2000 Stock Option and Incentive Plan (Exhibit 10.1)10.3§
    
    First Amendment to Amended and Restated 2000 Stock Option and Incentive Plan10.4(6)§
    
    Amended and Restated 2000 Employee Stock Purchase Plan (Exhibit 99.2)10.5(4)§
    
    First Amendment to Amended and Restated 2000 Employee Stock Purchase Plan
(Exhibit 10.2)10.6(1)
    
    Lease Agreement between the Registrant and W9/TIB Real Estate Limited
Partnership, dated January 31, 2000, as amended (Exhibit 10.5)10.7(1)
    
    Form of Indemnification Agreement between Registrant and each of its
directors and executive officers (Exhibit 10.9)10.8(7)
    
    Stock and Warrant Purchase Agreement, dated June 16, 2004 (Exhibit 10.1)10.9(7)
    
    Warrant Agreement, dated June 21, 2004 (Exhibit 10.2)
 E-1




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##### Table of Contents



Number
    
    Description10.10(7)
    
    Form of Warrants (Exhibit 10.3)10.11(7)
    
    Registration Rights Agreement, dated June 21, 2004 (Exhibit 10.4)10.12(8)
    
    Registration Rights Agreement by and between the Registrant and SG Cowen &
Co., LLC, as representative of the Initial Purchasers, dated June 29, 2005
(Exhibit 10.21)10.13(9)
    
    Amended and Restated License and Technology Transfer Agreement by and between
the Registrant and Sovello AG (f/k/a EverQ GmbH)(Sovello), dated September
29, 2006 (Exhibit 10.18)10.14(10)
    
    Stock Purchase Agreement by and between the Registrant and DC Chemical Co.,
Ltd. (DC Chemical), dated April 17, 2007 (Exhibit 10.1)10.15(10)
    
    Stockholders Agreement by and between the Registrant and DC Chemical, dated
April 17, 2007 (Exhibit 10.2)10.16(11)
    
    Supply Agreement by and between the Registrant and DC Chemical, dated April
17, 2007 (Exhibit 10.3)10.17(12)
    
    Addendum to the Amended and Restated License and Technology Transfer
Agreement between the Registrant and Sovello, dated April 30, 2007 (Exhibit
10.2)10.18(13)
    
    Supply Agreement between the Registrant and Wacker Chemie AG, effective as of
August 31, 2007 (Exhibit 10.1)10.19(14)
    
    Supply Agreement between the Registrant and Solaricos Trading Ltd., dated as
of October 24, 2007 (Exhibit 10.34)10.20(14)
    
    Memorandum of Understanding by and among the Registrant, Sovello, Q-Cells and
REC, dated as of October 25, 2007 (Exhibit 10.35)10.21(14)
    
    Lease Agreement between the Registrant and the Massachusetts Development
Finance Agency (MDFA), dated November 20, 2007 (Exhibit 10.36)10.22(14)
    
    Project Grant Agreement between the Registrant and MDFA, dated November 20,
2007 (Exhibit 10.37)10.23(14)
    
    Project Grant Agreement between the Registrant and Massachusetts Technology
Park Corporation, dated November 20, 2007 (Exhibit 10.38)10.24(14)
    
    Agreement for the Sale and Purchase of Solar Grade Silicon between the
Registrant and Silicium de Provence S.A.S. (Silpro), dated December 7, 2007
(Exhibit 10.39)10.25(14)
    
    Subordinated Loan Agreement between the Registrant and Silpro, dated December
7, 2007 (Exhibit 10.40)10.26(14)
    
    Supply Agreement by and between the Registrant and DC Chemical, dated January
30, 2008 (Exhibit 10.41)
 E-2




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##### Table of Contents



Number
    
    Description10.27(15)
    
    Master Supply Agreement by and between the Registrant and Ralos Vertriebs GmbH,
dated May 21, 2008 (Exhibit 10.1)10.28(15)
    
    Master Supply Agreement by and between the Registrant and Wagner & Co
Solartechnik GmbH, dated June 18, 2008 (Exhibit 10.2)10.29(15)
    
    Share Lending Agreement dated as of June 26, 2008 between the Registant and
Lehman Brothers International (Europe), through Lehman Brothers Inc. (Exhibit
10.5)10.30(15)
    
    Capped Call Transaction agreement dated June 26, 2008 between the Registrant and
Lehman Brothers OTC Derivatives Inc. (Exhibit 10.6)10.31(16)
    
    Loan and Security Agreement, dated as of October 16, 2008,
 by and between the
Registrant and Silicon Valley Bank (Exhibit 10.1)10.32
    
    Master Supply Agreement by and between the Registrant and IBC Solar AG, dated
July 14, 200810.33
    
    Amended and Restated Sales Representative Agreement by and Between the
Registrant and Sovello dated October 6, 200810.34
    
    Quad Technology License Agreement by and Between the Registrant and Sovello
dated October 6, 200810.35
    
    Addendum to Quad Technology License Agreement by and Between the Registrant
and Sovello dated October 6, 200810.36
    
    Undertaking of the Registrant dated October 6, 200810.37
    
    Amended and Restated Master Joint Venture Agreement by and among the
Registrant, Q-Cells, REC and Sovello AG, dated November 6, 200810.38§
    
    Form of Amended and Restated Change of Control Severance Agreement between
the Registrant and Richard M. Feldt10.39§
    
    Form of Amended and Restated Change of Control Severance Agreement between
the Registrant and each of Michael El-Hillow and Brown Williams10.40§
    
    Form of Amended and Restated Change of Control Severance Agreement between
the Registrant and each of Rodolfo Archbold, J. Terry Bailey, Richard G.
Chleboski, Gary T. Pollard and Carl Stegerwald10.41§
    
    Amended and Restated Management Incentive Policy10.42
    
    PV License Agreement by and between ESLR1, LLC and TISICS Ltd. dated
September 5,200723.1
    
    Consent of PricewaterhouseCoopers LLP, an Independent Registered Public
Accounting Firm23.2
    
    Consent of Leipzig, Germany PricewaterhouseCoopers AG
 E-3




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##### Table of Contents



Number
    
    Description31.1
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(d) and
Rule 15d-14(d) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(d) and
Rule 15d-14(d) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 200299.1
    
    Sovello AG (f/k/a EverQ GmbH) balance sheet for the period ended December 31, 200699.2
    
    Sovello AG (f/k/a EverQ GmbH) income statement for the period December 20 to December 31, 200699.3
    
    Sovello AG (f/k/a EverQ GmbH) cash flow for the period December 20 to December 31, 200699.4
    
    Sovello AG (f/k/a EverQ GmbH) notes to the financial statements for the period December 20 to
December 31, 200699.5
    
    Sovello AG (f/k/a EverQ GmbH) Opinion Letter, Leipzig, Germany PricewaterhouseCoopers AG
 
 
    
    Confidential treatment granted as to certain portions.
    
    Confidential treatment requested as to certain portions.§
    
    Indicates a management contract or compensatory plan, contract or arrangement.(1)
    
    Incorporated herein by reference to the exhibits to the Registrants Registration Statement on Form S-1, initially filed
on August 4, 2000. The number given in parenthesis indicates the corresponding exhibit number in such Form S-1.(2)
    
    Incorporated herein by reference to the exhibits to the Registrants Registration Statement on Form S-8, dated June 9,
2003. The number given in parenthesis indicates the corresponding exhibit number in such Form S-8.(3)
    
    Incorporated herein by reference to the exhibits to the Registrants Registration Statement on Form S-3, dated May 16,
2007. The number given in parenthesis indicates the corresponding exhibit number in such Form S-3.(4)
    
    Incorporated herein by reference to the exhibits to the
Registrants Current Report on Form 8-K dated June 18, 2008 and filed
on June 23, 2008. The number given in parenthesis indicates the corresponding exhibit number in such Form 8-K. E-4




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##### Table of Contents



(5)
    
    Incorporated herein by reference to the exhibits to the
Registrants Current Report on Form 8-K dated July 2, 2008 and filed
on July 7, 2008. The number given in parenthesis indicates the corresponding exhibit number in such Form 8-K.(6)
    
    Incorporated herein by reference to the exhibits to the Registrants Current Report on Form 8-K, dated July 15, 2005 and
filed on July 21, 2005. The number given in parenthesis indicates the corresponding exhibit number in such Form 8-K.(7)
    
    Incorporated herein by reference to the exhibits to the Registrants Current Report on Form 8-K, dated June 21, 2004 and
filed on June 22, 2004. The number given in parenthesis indicates the corresponding exhibit number in such Form 8-K.(8)
    
    Incorporated herein by reference to the exhibits to the Registrants Current Report on Form 8-K, dated June 23, 2005 and
filed on June 29, 2005. The number given in parenthesis indicates the corresponding exhibit number in such Form 8-K.(9)
    
    Incorporated herein by reference by reference to exhibits to the Registrants Quarterly Report on Form 10-Q for the period
ended September 30, 2006 filed on November 7, 2006. The number given in parenthesis indicated the corresponding exhibit
number in such Form 10-Q.(10)
    
    Incorporated herein by reference to the exhibits to the Registrants Current Report on Form 8-K, dated April 17, 2007 and
filed on April 17, 2007. The number given in parenthesis indicates the corresponding exhibit number in such Form 8-K.(11)
    
    Incorporated herein by reference to the exhibits to the Registrants Current Report on Form 8-K/A, dated April 17, 2007
and filed on April 23, 2007. The number given in parenthesis indicates the corresponding exhibit number in such Form
8-K/A.(12)
    
    Incorporated herein by reference to the exhibits to the Registrants Current Report on Form 8-K, dated April 30, 2007 and
filed on May 4, 2007. The number given in parenthesis indicates the corresponding exhibit number in such Form 8-K.(13)
    
    Incorporated herein by reference by reference to exhibits to the Registrants Quarterly Report on Form 10-Q for the period
ended September 30, 2007 filed on November 8, 2007. The number given in parenthesis indicated the corresponding exhibit
number in such Form 10-Q.(14)
    
    Incorporated herein by reference to the exhibits to the Registrants Annual Report on Form 10-K for the period ended
December 31, 2007 filed on February 27, 2008. The number given in parenthesis indicates the corresponding exhibit number
in such Form 10-K.(15)
    
    Incorporated herein by reference by reference to exhibits to the Registrants Quarterly Report on Form 10-Q for the period
ended June 28, 2008 filed on August 4, 2008. The number given in parenthesis indicated the corresponding exhibit number in
such Form 10-Q.(16)
    
    Incorporated herein by reference to the exhibits to the Registrants Current Report on Form 8-K, dated October 16, 2008
and filed on October 16, 2008. The number given in parenthesis indicates the corresponding exhibit number in such Form
8-K. E-5