--------------------------------------------------------------------------------

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of February 1,
2017, between, Real Goods Solar, Inc., a Colorado corporation (the “Company”),
and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and collectively, the “Purchasers”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the “Securities Act”), the Company desires to issue and sell
to each Purchaser, and each Purchaser, severally and not jointly, desires to
purchase from the Company, securities of the Company as more fully described in
this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:

ARTICLE I. 

DEFINITIONS

1.1           Definitions. In addition to the terms defined elsewhere in this
Agreement the following terms have the meanings set forth in this Section 1.1:

“Acquiring Person” shall have the meaning ascribed to such term in Section 4.7.

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.

“Closing Date” means the Trading Day on which all conditions precedent to (i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities, in each case, have been
satisfied or waived, but in no event later than the third Trading Day following
the date hereof.

“Commission” means the United States Securities and Exchange Commission.

 1 

“Common Stock” means the Class A common stock of the Company, par value $0.0001
per share, and any other class of securities into which such securities may
hereafter be reclassified or changed.

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

“Company Counsel” means Brownstein Hyatt Farber Schreck, with offices located at
410 Seventeenth Street, Suite 2200, Denver, CO 80202.

“Convertible Notes” means one or more of the Company’s Senior Secured
Convertible Notes due April 1, 2019 in the aggregate original principal amount
of $10,000,000.

“Disclosure Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.

 

“EGS” means Ellenoff Grossman & Schole LLP, with offices located at 1345 Avenue
of the Americas, New York, New York 10105-0302.

“Evaluation Date” shall have the meaning ascribed to such term in Section
3.1(s).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Exempt Issuance” shall have the meaning ascribed to such term in Section
4.13(c).

 

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(aa).

“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(p).

“Leakout Agreement” means the letter agreement in the form of Exhibit A attached
hereto.

“Liens” means a lien, charge, pledge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction.

 2 

“Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).

“Material Permits” shall have the meaning ascribed to such term in Section
3.1(n).

“Placement Agency Agreement” means the Placement Agency Agreement, dated
February 1, 2017, between the Company and the Placement Agent.

“Placement Agent” means Roth Capital Partners, LLC.

“Placement Agent Warrant” means the warrant to purchase Common Stock to be
issued by the Company to the Placement Agent pursuant to the terms of the
Placement Agency Agreement.

“Per Share Purchase Price” means $3.10.

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.

“Prospectus” means the final base prospectus filed for the Registration
Statement.

“Prospectus Supplement” means the supplement to the Prospectus complying with
Rule 424(b) of the Securities Act that is filed with the Commission and
delivered by the Company to each Purchaser at the Closing.

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.

“Registration Statement” means the effective registration statement with the
Commission file No. 333-193718 which registers the sale of the Shares, the
Warrants and the Warrant Shares.

“Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.

 3 

 

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

“Securities” means the Shares and the Warrants.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

“Series K Warrants” means Series K Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which
warrants shall be exercisable immediately and have a term of exercise equal to
five years, in the form of Exhibit B-1 attached hereto.

“Series L Warrants” means Prepaid Series L Common Stock purchase warrants
delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof, which warrants shall be exercisable immediately and have a term of
exercise equal to five years, in the form of Exhibit B-2 attached hereto. The
purchase price per Series L Warrant shall be the Per Share Purchase Price minus
$0.01.

“Shares” means the shares of Common Stock issuable to each Purchaser pursuant to
this Agreement.

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for the Shares and Warrants purchased hereunder as specified below such
Purchaser’s name on the signature page of this Agreement and next to the heading
“Subscription Amount,” in United States dollars and in immediately available
funds; which shall not be less than $100,000.

“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a)
and shall, where applicable, also include any direct or indirect subsidiary of
the Company formed or acquired after the date hereof.

“Trading Day” means a day on which the principal Trading Market is open for
trading.

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange, the OTCQB or OTCQX (or any
successors to any of the foregoing).

 4 

“Transaction Documents” means this Agreement, the Warrants, all exhibits and
schedules thereto and hereto and any other documents or agreements executed in
connection with the transactions contemplated hereunder.

“Transfer Agent” means Computershare Trust Company, N.A., the current transfer
agent of the Company, with a mailing address of 8742 Lucent Boulevard, Suite
225, Highlands Ranch, CO 80129 and a facsimile number of 303-226-0609, and any
successor transfer agent of the Company.

“Variable Rate Transaction” shall have the meaning ascribed to such term in
Section 4.13(b).

“Warrants” means, collectively, the Series K Warrants and the Series L Warrants
delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof.

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.

ARTICLE II. 

PURCHASE AND SALE

2.1              Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, the Company agrees to sell, and the Purchasers,
severally and not jointly, agree to purchase, up to an aggregate of (i)
$11,500,000 of Shares for each Purchaser equal to such Purchaser’s Subscription
Amount for Shares as set forth on the signature page hereto executed by such
Purchaser divided by the Per Share Purchase Price, and (ii) Series K Warrants
and Series L Warrants, if applicable, as determined pursuant to Section 2.2(a).
Each Purchaser’s Subscription Amount as set forth on the signature page hereto
executed by such Purchaser shall be made available for “Delivery Versus Payment”
settlement with the Company or its designee. The Company shall deliver to each
Purchaser its respective Shares, and a Series K Warrant Series and, if
applicable, a Series L Warrant as determined pursuant to Section 2.2(a), and the
Company and each Purchaser shall deliver the other items set forth in Section
2.2 deliverable at the Closing. Upon satisfaction of the covenants and
conditions set forth in Section 2.3, the Closing shall occur at the offices of
the Placement Agent or such other location as the parties shall mutually agree.
Unless otherwise directed by the Placement Agent, settlement of the Shares shall
occur via “Delivery Versus Payment” (i.e., on the Closing Date, the Company
shall issue the Shares registered in the Purchasers’ names and addresses and
released by the Transfer Agent directly to the account(s) at the Placement Agent
identified by each Purchaser; upon receipt of such Shares, the Placement Agent
shall promptly electronically deliver such Shares to the applicable Purchaser,
and payment therefor shall be made by the Placement Agent (or its clearing firm)
by wire transfer to the Company. The Company covenants that, if the Purchaser
delivers an Exercise Notice (as defined in the Warrants) to exercise Warrants
between the date hereof and the Closing Date, the Company shall deliver Warrant
Shares to the Purchaser on the Closing Date in connection with such Exercise
Notice, provided that the Company shall be obligated to deliver Warrant Shares
on the Closing Date only in connection with Exercise Notice(s) that are
delivered to the Company at or prior to 12:00 p.m. (New York City time) on the
Trading Day immediately prior to Closing Date.

 5 

2.2           Deliveries.

(a)           On or prior to the Closing Date, the Company shall deliver or
cause to be delivered to each Purchaser the following:

(i)                this Agreement duly executed by the Company;

(ii)               a legal opinion of Company Counsel, substantially in the form
delivered to the Placement Agent pursuant to the terms of the Placement Agency
Agreement and reasonably acceptable to the Purchasers;

(iii)             a Series K Warrant registered in the name of such Purchaser to
purchase up to a number of shares of Common Stock equal to 100% of the sum of
such Purchaser’s Shares plus the shares of Common Stock issuable upon exercise
of such Purchaser’s Series L Warrant, if applicable, with an exercise price
equal to $3.10, subject to adjustment therein;

(iv)             for those Purchasers purchasing Series L Warrants, Series L
Warrants to purchase the number of shares of Common Stock set forth on the
Purchaser’s signature page hereto;

(v)               the Purchaser’s respective Leakout Agreement substantially in
the form of Exhibit A, duly executed by the Company; and

(vi)             the Prospectus and Prospectus Supplement (which may be
delivered in accordance with Rule 172 under the Securities Act).

(b)           On or prior to the Closing Date, each Purchaser shall deliver or
cause to be delivered to the Company, as applicable, the following:

(i)                this Agreement duly executed by such Purchaser;

(ii)               the Purchaser’s duly executed Leakout Agreement substantially
in the form of Exhibit A; and

(iii)             such Purchaser’s Subscription Amount which shall be made
available for “Delivery Versus Payment” settlement with the Company or its
designee.

2.3              Closing Conditions.

(a)           The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:

(i)               the accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or Material Adverse
Effect, in all respects) on the Closing Date of the representations and
warranties of the Purchasers contained herein (unless as of a specific date
therein in which case they shall be accurate as of such date);

 6 

(ii)              all obligations, covenants and agreements of each Purchaser
required to be performed at or prior to the Closing Date shall have been
performed; and

(iii)             the delivery by each Purchaser of the items set forth in
Section 2.2(b) of this Agreement.

(b)           The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being met:

(i)                 the accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or Material Adverse
Effect, in all respects) when made and on the Closing Date of the
representations and warranties of the Company contained herein (unless as of a
specific date therein in which case they shall be accurate as of such date);

(ii)               all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date shall have been
performed;

(iii)             the delivery by the Company of the items set forth in Section
2.2(a) of this Agreement;

(iv)             there shall have been no Material Adverse Effect with respect
to the Company since the date hereof; and

(v)               from the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission or the Company’s
principal Trading Market, and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg L.P. shall not have been suspended
or limited, or minimum prices shall not have been established on securities
whose trades are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of such Purchaser, makes
it impracticable or inadvisable to purchase the Securities at the Closing.

ARTICLE III. 

REPRESENTATIONS AND WARRANTIES

3.1           Representations and Warranties of the Company. Except as set forth
in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation made herein to the extent of the
disclosure contained in the corresponding section of the Disclosure Schedules,
the Company hereby makes the following representations and warranties to each
Purchaser:

 7 

(a)            Subsidiaries. All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3.1(a). Except as set forth on Schedule
3.1(a), the Company owns, directly or indirectly, all of the capital stock or
other equity interests of each Subsidiary free and clear of any Liens, and all
of the issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities. If the Company has no
subsidiaries, all other references to the Subsidiaries or any of them in the
Transaction Documents shall be disregarded.

(b)            Organization and Qualification. The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation nor default of
any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
in: (i) a material adverse effect on the legality, validity or enforceability of
any Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

(c)           Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and each of the other Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of this Agreement and each of the other Transaction Documents by
the Company and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company, the Board of Directors
or the Company’s shareholders in connection herewith or therewith other than in
connection with the Required Approvals. This Agreement and each other
Transaction Document to which it is a party has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

 8 

(d)            No Conflicts. The execution, delivery and performance by the
Company of this Agreement and the other Transaction Documents to which it is a
party, the issuance and sale of the Securities and the issuance and sale of the
Warrant Shares in accordance with the terms of the Warrants and the consummation
by it of the transactions contemplated hereby and thereby do not and will not:
(i) conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, (ii) after obtaining the Required Approvals, conflict with,
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not have or reasonably be expected to result in a Material Adverse
Effect.

(e)            Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than: (i) the filings required pursuant to Section 4.6 of this Agreement,
(ii) the filing with the Commission of the Prospectus Supplement, (iii) the
notice and/or application(s) to each applicable Trading Market for the issuance
and sale of the Securities and the listing of the Warrant Shares for trading
thereon in the time and manner required thereby, (iv) any such consent, waiver,
authorization or order of, notice to, or filing or registration with the
Financial Industry Regulatory Authority, Inc., or under state securities or Blue
Sky laws, and (v) as set forth in Schedule 3.1(e) (collectively, the “Required
Approvals”).

(f)             Issuance of the Securities; Registration. The Securities are
duly authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company. The Warrant
Shares, when issued in accordance with the terms of the Warrants, will be
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock issuable pursuant to this
Agreement and the maximum number of shares of Common Stock issuable upon

 9 

exercise of the Warrants. The Company has prepared and filed the Registration
Statement in conformity with the requirements of the Securities Act, which
became effective on February 10, 2014 (the “Effective Date”), including the
Prospectus, and such amendments and supplements thereto as may have been
required to the date of this Agreement. The Registration Statement is effective
under the Securities Act and no stop order preventing or suspending the
effectiveness of the Registration Statement or suspending or preventing the use
of the Prospectus has been issued by the Commission and no proceedings for that
purpose have been instituted or, to the knowledge of the Company, are threatened
by the Commission. The Company, if required by the rules and regulations of the
Commission, shall file the Prospectus Supplement with the Commission pursuant to
Rule 424(b). At the time the Registration Statement and any amendments thereto
became effective, at the date of this Agreement and at the Closing Date, the
Registration Statement and any amendments thereto conformed and will conform in
all material respects to the requirements of the Securities Act and did not and
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Prospectus and any amendments or supplements
thereto, at the time the Prospectus or any amendment or supplement thereto was
issued and at the Closing Date, conformed and will conform in all material
respects to the requirements of the Securities Act and did not and will not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.

 10 

(g)            Capitalization. The capitalization of the Company is as set forth
on Schedule 3.1(g). The Company has not issued any capital stock since its most
recently filed periodic report under the Exchange Act, other than pursuant to
the public offering of shares and warrants on or about December 8, 2016, the
exercise of employee stock options under the Company’s stock option plans, the
issuance of shares of Common Stock to employees pursuant to the Company’s
employee stock purchase plans and pursuant to the conversion and/or exercise of
Common Stock Equivalents outstanding as of the date of the most recently filed
periodic report under the Exchange Act. Except as set forth in Schedule 3.1(g),
no Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents that has not been validly waived or
satisfied. Except as set forth in Schedule 3.1(g) and as a result of the
purchase and sale of the Securities, there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire any shares of Common Stock or the capital stock of any Subsidiary, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents or capital stock of any Subsidiary. Except as set
forth in Schedule 3.1(g), the issuance and sale of the Securities will not
obligate the Company or any Subsidiary to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. Except as set forth in
Schedule 3.1(g), there are no outstanding securities or instruments of the
Company or any Subsidiary that contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to redeem a security of the
Company or such Subsidiary. Except as set forth in Schedule 3.1(g), the Company
does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement. All of the outstanding shares of
capital stock of the Company are duly authorized, validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase securities.
Except as set forth in Schedule 3.1(g), no further approval or authorization of
any shareholder, the Board of Directors or others is required for the issuance
and sale of the Securities. Except as set forth in Schedule 3.1(g), there are no
shareholders’ agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
shareholders.

(h)           SEC Reports; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by the Company under the Securities Act and the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof
(or such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, together with the Prospectus and
the Prospectus Supplement, being collectively referred to herein as the “SEC
Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act, as applicable, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
Company has never been an issuer subject to Rule 144(i) under the Securities
Act. The financial statements of the Company included in the SEC Reports comply
in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.

 11 

(i)             Material Changes; Undisclosed Events, Liabilities or
Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC
Report filed prior to the date hereof or as set forth in Schedule 3.1(i): (i)
there has been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its shareholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
The Company does not have pending before the Commission any request for
confidential treatment of information. Except with respect to the material terms
and conditions of the transactions contemplated by the Transaction Documents, no
event, liability, fact, circumstance, occurrence or development has occurred or
exists or is reasonably expected to occur or exist with respect to the Company
or its Subsidiaries or their respective businesses, prospects, properties,
operations, assets or financial condition, that would be required to be
disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is made.

(j)            Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents,
the Securities or the Warrant Shares or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse Effect.
Except as set forth in Schedule 3.1(j), neither the Company nor any Subsidiary,
nor any director or officer thereof, is or has been the subject of any Action
involving a claim of violation of or liability under federal or state securities
laws or a claim of breach of fiduciary duty. Except as set forth in Schedule
3.1(j), there has not been, and to the knowledge of the Company, there is not
pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.

 12 

(k)           Labor Relations. No labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company,
which could reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a member of a union that
relates to such employee’s relationship with the Company or such Subsidiary, and
neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good. To the knowledge of the Company, no
executive officer of the Company or any Subsidiary, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters. The Company and its
Subsidiaries are in compliance with all U.S. federal, state, local and foreign
laws and regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.

(l)             Compliance. Except as set forth on Schedule 3.1(l), neither the
Company nor any Subsidiary: (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgment, decree or
order of any court, arbitrator or other governmental authority or (iii) is or
has been in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not have or reasonably be expected to result in a Material
Adverse Effect.

(m)           Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with all federal, state, local and foreign laws relating to pollution
or protection of human health or the environment (including ambient air, surface
water, groundwater, land surface or subsurface strata), including laws relating
to emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands, or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations, issued, entered, promulgated or approved thereunder (“Environmental
Laws”); (ii) have received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective businesses;
and (iii) are in compliance with all terms and conditions of any such permit,
license or approval other than with respect to such non-compliance or failure to
receive permits, licenses or other approvals that could not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect.

 13 

(n)           Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Material Permit.

(o)            Title to Assets. Except as set forth on Schedule 3.1(o), the
Company and the Subsidiaries have good and marketable title in fee simple to all
real property owned by them and good and marketable title in all personal
property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as
do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and the Subsidiaries and (ii) Liens for the payment of federal, state or
other taxes, for which appropriate reserves have been made therefor in
accordance with GAAP and, the payment of which is neither delinquent nor subject
to penalties. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable
leases with which the Company and the Subsidiaries are in compliance other than
with respect to such non-compliance that could not be reasonably expected to
have a Material Adverse Effect.

(p)            Intellectual Property. The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights as necessary
or required for use in connection with their respective businesses as described
in the SEC Reports and which the failure to so have could have a Material
Adverse Effect (collectively, the “Intellectual Property Rights”). None of, and
neither the Company nor any Subsidiary has received a notice (written or
otherwise) that any of, the Intellectual Property Rights has expired, terminated
or been abandoned, or is expected to expire or terminate or be abandoned, within
two (2) years from the date of this Agreement. Neither the Company nor any
Subsidiary has received, since the date of the latest audited financial
statements included within the SEC Reports, a written notice of a claim or
otherwise has any knowledge that the Intellectual Property Rights violate or
infringe upon the rights of any Person, except as could not have or reasonably
be expected to have a Material Adverse Effect. To the knowledge of the Company,
all such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 14 

(q)           Insurance. Except as set forth on Schedule 3.1(q), the Company and
the Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent and customary
in the businesses in which the Company and the Subsidiaries are engaged,
including, but not limited to, directors and officers insurance coverage at
least equal to the aggregate Subscription Amount. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.

(r)             Transactions With Affiliates and Employees. Except as set forth
in the SEC Reports, none of the officers or directors of the Company or any
Subsidiary and, to the knowledge of the Company, none of the employees of the
Company or any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, providing for the borrowing of money from or lending of
money to or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee, shareholder, member or partner, in each case in
excess of $120,000 other than for: (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.

(s)           Sarbanes-Oxley; Internal Accounting Controls. The Company and the
Subsidiaries are in compliance with any and all applicable requirements of the
Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and
all applicable rules and regulations promulgated by the Commission thereunder
that are effective as of the date hereof and as of the Closing Date. The Company
and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company and the Subsidiaries have
established disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the disclosure controls and procedures of
the Company and the Subsidiaries as of the end of the period covered by the most
recently filed periodic report under the Exchange Act (such date, the
“Evaluation Date”). The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no changes in the internal control over financial reporting (as such term
is defined in the Exchange Act) of the Company and its Subsidiaries that have
materially affected, or is reasonably likely to materially affect, the internal
control over financial reporting of the Company and its Subsidiaries.

 15 

(t)            Certain Fees. Except as set forth in the Prospectus Supplement,
no brokerage or finder’s fees or commissions are or will be payable by the
Company or any Subsidiary to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by the Transaction Documents. The Purchasers shall
have no obligation with respect to any fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in this Section
that may be due in connection with the transactions contemplated by the
Transaction Documents.

(u)           Investment Company. The Company is not, and is not an Affiliate
of, and immediately after receipt of payment for the Securities, will not be or
be an Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become an “investment company” subject to
registration under the Investment Company Act of 1940, as amended.

(v)           Registration Rights. Except as set forth on Schedule 3.1(v), no
Person has any right to cause the Company or any Subsidiary to effect the
registration under the Securities Act of any securities of the Company or any
Subsidiary.

(w)          Listing and Maintenance Requirements. The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act nor has the Company received any notification that the Commission
is contemplating terminating such registration. Except as set forth on Schedule
3.1(w), the Company has not, in the 12 months preceding the date hereof,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. Except as set forth
on Schedule 3.1(w), the Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements. The Common Stock is currently eligible for
electronic transfer through the Depository Trust Company or another established
clearing corporation and the Company is current in payment of the fees to the
Depository Trust Company (or such other established clearing corporation) in
connection with such electronic transfer.

 16 

(x)            Application of Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s certificate of incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company’s
issuance of the Securities and the Warrant Shares and the Purchasers’ ownership
of the Securities and the Warrant Shares.

(y)           Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that it believes constitutes or might constitute
material, non-public information which is not otherwise disclosed in the
Prospectus Supplement. The Company understands and confirms that the Purchasers
will rely on the foregoing representation in effecting transactions in
securities of the Company. All of the disclosure furnished by or on behalf of
the Company to the Purchasers regarding the Company and its Subsidiaries, their
respective businesses and the transactions contemplated hereby, including the
Disclosure Schedules to this Agreement, is true and correct and does not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The press releases
disseminated by the Company during the twelve months preceding the date of this
Agreement taken as a whole do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made and when made, not misleading. The Company acknowledges and
agrees that no Purchaser makes or has made any representations or warranties
with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 hereof.

(z)           No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of any applicable shareholder approval provisions of any Trading
Market on which any of the securities of the Company are listed or designated.

 17 

(aa)          Solvency. Based on the consolidated financial condition of the
Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder: (i) the fair
saleable value of the Company’s assets exceeds the amount that will be required
to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital to carry on its
business as now conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of the business
conducted by the Company, consolidated and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its liabilities when such
amounts are required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt). The
Company has no knowledge of any facts or circumstances which lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Closing Date.
Schedule 3.1(aa) sets forth as of the date hereof all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” means (x) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than trade accounts payable incurred in the ordinary
course of business), (y) all guaranties, endorsements and other contingent
obligations in respect of indebtedness of others, whether or not the same are or
should be reflected in the Company’s consolidated balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(z) the present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor any Subsidiary is in default with respect to any Indebtedness.

(bb)         Tax Status. Except as set forth on Schedule 3.1(bb) and for matters
that would not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect, the Company and its Subsidiaries each
(i) has made or filed all United States federal, state and local income and all
foreign income and franchise tax returns, reports and declarations required by
any jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations and (iii) has set
aside on its books provision reasonably adequate for the payment of all material
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. Except as set forth on Schedule 3.1(bb), there are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company or of any Subsidiary know of no
basis for any such claim.

(cc)          Foreign Corrupt Practices. Neither the Company nor any Subsidiary,
nor to the knowledge of the Company or any Subsidiary, any agent or other person
acting on behalf of the Company or any Subsidiary, has: (i) directly or
indirectly, used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses related to foreign or domestic political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or campaigns from
corporate funds, (iii) failed to disclose fully any contribution made by the
Company or any Subsidiary (or made by any person acting on its behalf of which
the Company is aware) which is in violation of law or (iv) violated in any
material respect any provision of FCPA.

 18 

(dd)         Accountants. The Company’s accounting firm is set forth on Schedule
3.1(dd) of the Disclosure Schedules. To the knowledge and belief of the Company,
such accounting firm: (i) is a registered public accounting firm as required by
the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company’s Annual Report for the
fiscal year ending December 31, 2016.

(ee)          Acknowledgment Regarding Purchasers’ Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is acting solely in
the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice given by any
Purchaser or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is
merely incidental to the Purchasers’ purchase of the Securities. The Company
further represents to each Purchaser that the Company’s decision to enter into
this Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.

(ff)           Acknowledgment Regarding Purchaser’s Trading Activity. Anything
in this Agreement or elsewhere herein to the contrary notwithstanding (except
for the Leakout Agreements and Sections 3.2(f) and 4.15 hereof), it is
understood and acknowledged by the Company that: (i) none of the Purchasers has
been asked by the Company to agree, nor has any Purchaser agreed, to desist from
purchasing or selling, long and/or short, securities of the Company, or
“derivative” securities based on securities issued by the Company or to hold the
Securities or Warrant Shares for any specified term, (ii) past or future open
market or other transactions by any Purchaser, specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the
closing of this or future securities offering transactions, may negatively
impact the market price of the Company’s publicly-traded securities, (iii) any
Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, may presently have a “short”
position in the Common Stock and (iv) each Purchaser shall not be deemed to have
any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction. The Company further understands and acknowledges that
(y) one or more Purchasers may engage in hedging activities at various times
during the period that the Securities and the Warrant Shares are outstanding,
and (z) such hedging activities (if any) could reduce the value of the existing
shareholders’ equity interests in the Company at and after the time that the
hedging activities are being conducted. The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.

 19 

(gg)         Regulation M Compliance. The Company has not, and to its knowledge
no one acting on its behalf has (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Securities and the Warrant Shares, (ii) sold, bid for, purchased, or paid any
compensation for soliciting purchases of, any of the Securities or Warrant
Shares, or (iii) within the restricted period required by Regulation M, paid or
agreed to pay to any Person any compensation for soliciting another to purchase
any other securities of the Company, other than, in the case of clauses (ii) and
(iii), compensation paid to the Company’s placement agent in connection with the
placement of the Securities.

(hh)         Stock Option Plans. Each stock option granted by the Company under
the Company’s stock option plan was granted (i) in accordance with the terms of
the Company’s stock option plan and (ii) with an exercise price at least equal
to the fair market value of the Common Stock on the date such stock option would
be considered granted under GAAP and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The Company has not
knowingly granted, and there is no and has been no Company policy or practice to
knowingly grant, stock options prior to, or otherwise knowingly coordinate the
grant of stock options with, the release or other public announcement of
material information regarding the Company or its Subsidiaries or their
financial results or prospects.

(ii)            Office of Foreign Assets Control. Neither the Company nor any
Subsidiary nor, to the Company’s knowledge, any director, officer, agent,
employee or affiliate of the Company or any Subsidiary is currently subject to
any U.S. sanctions administered by the Office of Foreign Assets Control of the
U.S. Treasury Department (“OFAC”).

(jj)           U.S. Real Property Holding Corporation. The Company is not and
has never been a U.S. real property holding corporation within the meaning of
Section 897 of the Internal Revenue Code of 1986, as amended, and the Company
shall so certify upon Purchaser’s request.

(kk)          Bank Holding Company Act. Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956,
as amended (the “BHCA”) and to regulation by the Board of Governors of the
Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of
its Subsidiaries or Affiliates owns or controls, directly or indirectly, 5% or
more of the outstanding shares of any class of voting securities or 25% or more
of the total equity of a bank or any entity that is subject to the BHCA and to
regulation by the Federal Reserve. Neither the Company nor any of its
Subsidiaries or Affiliates exercises a controlling influence over the management
or policies of a bank or any entity that is subject to the BHCA and to
regulation by the Federal Reserve.

(ll)           Money Laundering. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance with
applicable financial record-keeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, applicable money
laundering statutes and applicable rules and regulations thereunder
(collectively, the “Money Laundering Laws”), and no Action or Proceeding by or
before any court or governmental agency, authority or body or any arbitrator
involving the Company or any Subsidiary with respect to the Money Laundering
Laws is pending or, to the knowledge of the Company or any Subsidiary,
threatened.

 20 

3.2           Representations and Warranties of the Purchasers. Each Purchaser,
for itself and for no other Purchaser, hereby represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows (unless as of a
specific date therein, in which case they shall be accurate as of such date):

(a)           Organization; Authority. Such Purchaser is either an individual or
an entity duly incorporated or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with full
right, corporate, partnership, limited liability company or similar power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the
Transaction Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as applicable, on the
part of such Purchaser. Each Transaction Document to which it is a party has
been duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

(b)           Understandings or Arrangements. Such Purchaser is acquiring the
Securities and the Warrant Share as principal for its own account and has no
direct or indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities or Warrant Shares
(this representation and warranty not limiting such Purchaser’s right to sell
the Securities or the Warrant Shares in compliance with applicable federal and
state securities laws). Such Purchaser is acquiring the Securities and the
Warrant Shares in the ordinary course of its business.

(c)            Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and as of the date hereof it is, and on each date on which
it exercises any Warrants it will be either: (i) an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act.

(d)           Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities and the
Warrant Shares, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and the Warrant Shares and, at the present time, is able to afford a
complete loss of such investment.

 21 

(e)            Access to Information. Such Purchaser acknowledges that it has
had the opportunity to review the Transaction Documents (including all exhibits
and schedules thereto) and the SEC Reports and has been afforded, (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the Warrant Shares and the merits and
risks of investing in the Securities and the Warrant Shares; (ii) access to
information about the Company and its financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Such Purchaser acknowledges and agrees
that neither the Placement Agent nor any Affiliate of the Placement Agent has
provided such Purchaser with any information or advice with respect to the
Securities nor is such information or advice necessary or desired. Neither the
Placement Agent nor any Affiliate has made or makes any representation as to the
Company or the quality of the Securities or the Warrant Shares and the Placement
Agent and any Affiliate may have acquired non-public information with respect to
the Company which such Purchaser agrees need not be provided to it. In
connection with the issuance of the Securities and the Warrant Shares to such
Purchaser, neither the Placement Agent nor any of its Affiliates has acted as a
financial advisor or fiduciary to such Purchaser.

(f)           [RESERVED]

 22 

The Company acknowledges and agrees that the representations contained in this
Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on
the Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transactions contemplated hereby.

 

ARTICLE IV. 

OTHER AGREEMENTS OF THE PARTIES

4.1              Warrant Shares. If all or any portion of a Warrant is exercised
at a time when there is an effective registration statement to cover the
issuance or resale of the Warrant Shares or if the Warrant is exercised via
cashless exercise, the Warrant Shares issued pursuant to any such exercise shall
be issued free of all legends. If at any time following the date hereof the
Registration Statement (or any subsequent registration statement registering the
sale or resale of the Warrant Shares) is not effective or is not otherwise
available for the sale or resale of the Warrant Shares, the Company shall
immediately notify the holders of the Warrants in writing that such registration
statement is not then effective and thereafter shall promptly notify such
holders when the registration statement is effective again and available for the
sale or resale of the Warrant Shares (it being understood and agreed that the
foregoing shall not limit the ability of the Company to issue, or any Purchaser
to sell, any of the Warrant Shares in compliance with applicable federal and
state securities laws). The Company shall use best efforts to keep a
registration statement (including the Registration Statement) registering the
issuance or resale of the Warrant Shares effective during the term of the
Warrants.

4.2              Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Securities and the Warrant Shares may result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligations
under the Transaction Documents, including, without limitation, its obligation
to issue the Warrant Shares pursuant to exercise of the Warrants, are
unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other
shareholders of the Company.

4.3              Furnishing of Information; Public Information. Until the
earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants
have expired, the Company covenants to maintain the registration of the Common
Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act even if the Company is not then subject to the
reporting requirements of the Exchange Act.

 23 

4.4              Integration. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is obtained before
the closing of such subsequent transaction.

4.5              Exercise Procedures. The Warrants set forth the totality of the
procedures required of the Purchasers in order to exercise the Warrants. Without
limiting the preceding sentences, no ink-original Notice of Exercise shall be
required, nor shall any medallion guarantee (or other type of guarantee or
notarization) of any Notice of Exercise form be required in order to exercise
the Warrants. No additional legal opinion, other information or instructions
shall be required of the Purchasers to exercise their Warrants. The Company
shall honor exercises of the Warrants and shall deliver Warrant Shares in
accordance with the terms, conditions and time periods set forth in the
Transaction Documents.

4.6              Securities Laws Disclosure; Publicity. The Company shall: (a)
by 9:00 a.m. (New York City time) on the date hereof, issue a press release
disclosing the material terms of the transactions contemplated hereby; and (b)
file a Current Report on Form 8-K, including the Transaction Documents as
exhibits thereto, with the Commission within the time required by the Exchange
Act. From and after the issuance of such press release, the Company represents
to the Purchasers that it shall have publicly disclosed all material, non-public
information delivered to any of the Purchasers by the Company or any of its
Subsidiaries, or any of their respective officers, directors, employees or
agents. In addition, effective upon the issuance of such press release, the
Company acknowledges and agrees that any and all confidentiality or similar
obligations under any agreement, whether written or oral, between the Company,
any of its Subsidiaries or any of their respective officers, directors, agents,
employees or Affiliates on the one hand, and any of the Purchasers or any of
their Affiliates on the other hand, shall terminate. The Company and each
Purchaser shall consult with each other in issuing any other press releases with
respect to the transactions contemplated hereby, and neither the Company nor any
Purchaser shall issue any such press release nor otherwise make any such public
statement without the prior consent of the Company, with respect to any press
release of any Purchaser, or without the prior consent of each Purchaser, with
respect to any press release of the Company, which consent shall not
unreasonably be withheld or delayed, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except: (a) as required by federal securities law in connection with
the filing of final Transaction Documents with the Commission; and (b) to the
extent such disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Purchasers with prior notice of such
disclosure permitted under this clause (b).

 24 

4.7              Shareholder Rights Plan. No claim will be made or enforced by
the Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or similar anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities or Warrant
Shares under the Transaction Documents or under any other agreement between the
Company and the Purchasers.

4.8              Non-Public Information. The Company covenants and agrees that
neither it, nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that constitutes, or the Company
reasonably believes constitutes, material non-public information, unless prior
thereto such Purchaser shall have consented to the receipt of such information
and agreed with the Company to keep such information confidential. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the Company. To the extent
that the Company delivers any material, non-public information to a Purchaser
without such Purchaser’s consent, the Company hereby covenants and agrees that
such Purchaser shall not have any duty of confidentiality to the Company, any of
its Subsidiaries, or any of their respective officers, directors, agents,
employees or Affiliates, or a duty to the Company, or any of its Subsidiaries or
any of their respective officers, directors, agents, employees or Affiliates not
to trade on the basis of, such material, non-public information, provided that
the Purchaser shall remain subject to applicable law. To the extent that any
notice provided pursuant to any Transaction Document constitutes, or contains,
material, non-public information regarding the Company or any Subsidiaries, the
Company shall simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Company understands and confirms that each
Purchaser shall be relying on the foregoing covenant in effecting transactions
in securities of the Company.

4.9             Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder as described in the Prospectus Supplement under
“Use of Proceeds” and shall not use such proceeds in violation of FCPA or OFAC
regulations.

 25 

4.10          Indemnification of Purchasers. Subject to the provisions of this
Section 4.10, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against the
Purchaser Parties in any capacity, or any of them or their respective
Affiliates, by any shareholder of the Company who is not an Affiliate of such
Purchaser Party, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such
Purchaser Party’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party may have with
any such shareholder or any violations by such Purchaser Party of state or
federal securities laws or any conduct by such Purchaser Party which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action shall
be brought against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall promptly notify
the Company in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party. Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Purchaser Party
except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company and the
position of such Purchaser Party, in which case the Company shall be responsible
for the reasonable fees and expenses of no more than one such separate counsel.
The Company will not be liable to any Purchaser Party under this Agreement (y)
for any settlement by a Purchaser Party effected without the Company’s prior
written consent, which shall not be unreasonably withheld or delayed; or (z) to
the extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by such Purchaser Party in this
Agreement or in the other Transaction Documents. The indemnification required by
this Section 4.10 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or are incurred. The indemnity agreements contained herein shall be in
addition to any cause of action or similar right of any Purchaser Party against
the Company or others and any liabilities the Company may be subject to pursuant
to law.

4.11          Reservation and Listing of Securities.

(a)               The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents in
such amount as may then be required to fulfill its obligations in full under the
Transaction Documents.

(b)               The Company shall, if applicable: (i) in the time and manner
required by the principal Trading Market, prepare and file with such Trading
Market an additional shares listing application covering a number of shares of
Common Stock at least equal to the Shares and Warrant Shares on the date of such
application, (ii) take all steps necessary to cause such shares of Common Stock
to be approved for listing or quotation on such Trading Market as soon as
possible thereafter, (iii) provide to the Purchasers evidence of such listing or
quotation and (iv) maintain the listing or quotation of such Common Stock on
such Trading Market or another Trading Market. The Company agrees to maintain
the eligibility of the Common Stock for electronic transfer through the
Depository Trust Company or another established clearing corporation, including,
without limitation, by timely payment of fees to the Depository Trust Company or
such other established clearing corporation in connection with such electronic
transfer.

 26 

4.12          [RESERVED]

4.13          Subsequent Equity Sales.

(a)                From the date hereof until 90 calendar days after the Closing
Date, neither the Company nor any Subsidiary shall issue, enter into any
agreement to issue or announce the issuance or proposed issuance of any shares
of Common Stock or Common Stock Equivalents.

(b)               From the date hereof until 90 calendar days after the Closing
Date, the Company shall be prohibited from effecting or entering into an
agreement to effect any issuance by the Company or any of its Subsidiaries of
Common Stock or Common Stock Equivalents (or a combination of units thereof)
involving a Variable Rate Transaction. “Variable Rate Transaction” means a
transaction in which the Company issues or sells any debt or equity securities
that are convertible into, exchangeable or exercisable for, or include the right
to receive, additional shares of Common Stock either (i) at a conversion price,
exercise price or exchange rate or other price that is based upon, and/or varies
with, the trading prices of or quotations for the shares of Common Stock at any
time after the initial issuance of such debt or equity securities or (ii) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock. For a period
of one year from the Closing Date, the Company shall be prohibited from
effecting or entering into an agreement to effect any issuance by the Company or
any of its Subsidiaries of Common Stock or Common Stock Equivalents (or a
combination of units thereof) involving an equity line of credit, at-the-market
offering (as defined in SEC Rule 415) or similarly structured transaction,
whereby the Company may issue securities at a future determined price. Any
Purchaser shall be entitled to obtain injunctive relief against the Company to
preclude any such issuance, which remedy shall be in addition to any right to
collect damages.

(c)                Notwithstanding the foregoing, this Section 4.13 shall not
apply in respect of an Exempt Issuance, except that no Variable Rate Transaction
shall be an Exempt Issuance, other than Exempt Issuances under clause (iii) of
the definition thereof. “Exempt Issuance” means the issuance of: (i) shares of
Common Stock or options to employees, officers or directors of the Company
pursuant to any stock or option plan duly adopted for such purpose, by a
majority of the non-employee members of the Board of Directors or a majority of
the members of a committee of non-employee directors established for such
purpose for services rendered to the Company; (ii) the Placement Agent Warrant;
(iii) securities upon the exercise, exchange or conversion of the Securities,
the Warrant Shares and/or the Placement Agent Warrant and/or other securities
exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of this Agreement (including, but not limited
to, the Convertible Notes); provided that such securities have not been amended
since the date of this Agreement to increase the number of such securities or to
decrease the exercise price, exchange price or conversion price of such
securities (other than in connection with stock splits or combinations; for the
avoidance of doubt, a voluntary reduction of the conversion price of the
Convertible Notes pursuant to Section 7(b) of the Convertible Notes shall
constitute such a prohibited amendment) or to extend the term of such
securities; (iv) up to 250,000 shares of Common Stock issued pursuant to an
exemption from registration under the Securities Act to the lender, or any
successor thereto, who is a party to any revolving credit facility outstanding
prior to the date of this Agreement; and (v) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person (or to the equityholders of a Person) which is, itself or
through its subsidiaries, an operating company or an owner of an asset in a
business synergistic with the business of the Company and shall provide to the
Company additional benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities.

 27 

4.14          Equal Treatment of Purchasers. No consideration (including any
modification of any Transaction Document) shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of the
Transaction Documents unless the same consideration is also offered to all of
the parties to such Transaction Documents. For clarification purposes, this
provision constitutes a separate right granted to each Purchaser by the Company
and negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of the Securities or Warrant Shares or otherwise.

4.15          [RESERVED]

 28 

ARTICLE V. 

MISCELLANEOUS

5.1              Termination. This Agreement may be terminated by any Purchaser,
as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by
written notice to the other parties, if the Closing has not been consummated on
or before February 6, 2017; provided, however, that such termination will not
affect the right of any party to sue for any breach by any other party (or
parties).

5.2              Fees and Expenses. Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees (including, without limitation, any fees
required for same-day processing of any instruction letter delivered by the
Company and any conversion or exercise notice delivered by a Purchaser), stamp
taxes and other taxes and duties levied in connection with the delivery of any
Securities or Warrant Shares to the Purchasers.

5.3              Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, the Prospectus and the Prospectus Supplement,
contain the entire understanding of the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters, which the parties acknowledge
have been merged into such documents, exhibits and schedules.

5.4              Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via facsimile or
email attachment at the facsimile number or email address as set forth on the
signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on
a Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile or email attachment at the
facsimile number or email address as set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City
time) on any Trading Day, (c) the second (2nd) Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service or (d)
upon actual receipt by the party to whom such notice is required to be given.
The address, facsimile number and email address for such notices and
communications shall be as set forth on the signature pages attached hereto. To
the extent that any notice provided pursuant to any Transaction Document
constitutes, or contains, material, non-public information regarding the Company
or any Subsidiaries, the Company shall simultaneously file such notice with the
Commission pursuant to a Current Report on Form 8-K.

 29 

5.5              Amendments; Waivers. No provision of this Agreement may be
waived, modified, supplemented or amended except in a written instrument signed
by the Company and Purchasers which purchased (or prior to the Closing Date,
agreed to purchase) at least 50.1% in interest of the Shares based on the
initial Subscription Amounts hereunder, provided that if any amendment,
modification or waiver disproportionately and adversely impacts a Purchaser (or
group of Purchasers), the consent of such disproportionately impacted Purchaser
(or group of Purchasers) shall also be required. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right. Any proposed amendment or waiver
that disproportionately, materially and adversely affects the rights and
obligations of any Purchaser relative to the comparable rights and obligations
of the other Purchasers shall require the prior written consent of such
adversely affected Purchaser. Any amendment effected in accordance with
accordance with this Section 5.5 shall be binding upon each Purchaser and
subsequent holder of Securities and Warrant Shares and the Company.

5.6              Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

5.7              Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each Purchaser (other than by
merger). Any Purchaser may assign any or all of its rights under this Agreement
to any Person to whom such Purchaser assigns or transfers any Securities or
Warrant Shares, provided that such transferee agrees in writing to be bound,
with respect to the transferred Securities or Warrant Shares, by the provisions
of the Transaction Documents that apply to the “Purchasers.”

5.8              No Third-Party Beneficiaries. The Placement Agent shall be the
third party beneficiary of the representations and warranties of the Purchasers
in Section 3.2. This Agreement is intended for the benefit of the parties hereto
and their respective successors and permitted assigns and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.10 and this Section 5.8.

 30 

5.9              Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced exclusively in the
state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Action or Proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such
Action or Proceeding is improper or is an inconvenient venue for such
Proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such Action or Proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law. If any party shall commence an Action or Proceeding to enforce
any provisions of the Transaction Documents, then, in addition to the
obligations of the Company under Section 4.10, the prevailing party in such
Action or Proceeding shall be reimbursed by the non-prevailing party for its
reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Action or Proceeding.

5.10          Survival. The representations and warranties contained herein
shall survive the Closing and the delivery of the Securities.

5.11          Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to each other party, it being understood that the
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature page were an original
thereof.

5.12          Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

 31 

5.13          Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; provided,
however, that in the case of a rescission of an exercise of a Warrant, the
applicable Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded exercise notice concurrently with the return to
such Purchaser of the aggregate exercise price paid to the Company for such
shares and the restoration of such Purchaser’s right to acquire such shares
pursuant to such Purchaser’s Warrant (including, issuance of a replacement
warrant certificate evidencing such restored right).

5.14          Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof (in the case of mutilation), or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction. The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.

5.15          Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree to waive and
not to assert in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.

5.16          Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

 32 

5.17          Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
Proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in its review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, each Purchaser and
its respective counsel have chosen to communicate with the Company through EGS.
EGS does not represent any of the Purchasers and only represents the Placement
Agent. The Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by any of the Purchasers. It is expressly
understood and agreed that each provision contained in this Agreement and in
each other Transaction Document is between the Company and a Purchaser, solely,
and not between the Company and the Purchasers collectively and not between and
among the Purchasers.

5.18          Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.

5.19          Construction. The parties agree that each of them and/or their
respective counsel have reviewed and had an opportunity to revise the
Transaction Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of the Transaction Documents or any
amendments thereto. In addition, each and every reference to share prices and
shares of Common Stock in any Transaction Document shall be subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.

5.20          WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.

 

(Signature Pages Follow)

 33 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

real goods solar, inc.

 

 

Address for Notice:

 

RGS Energy

110 16th Street, 3rd Floor

Denver, CO 80202

Attn: Tyler Clarke

By: /s/ Dennis Lacey                                    

Name: Dennis Lacey

Title: Chief Executive Officer

 

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

Fax: (303) 648-5464

Email: investorrelations@rgsenergy.com

 

Rikard Lundberg

Brownstein Hyatt Farber Schreck, LLP

410 Seventeenth Street, Suite 2200

Denver, CO 80202

Fax: (303) 223-8032

Email: RLundberg@BHFS.com

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 34 

[PURCHASER SIGNATURE PAGES TO rgse SECURITIES PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

Name of Purchaser: ________________________________________________________

 

Signature of Authorized Signatory of Purchaser:
__________________________________

 

Name of Authorized Signatory:
____________________________________________________

 

Title of Authorized Signatory:
_____________________________________________________

 

Email Address of Authorized Signatory:
_____________________________________________

 

Facsimile Number of Authorized Signatory:
__________________________________________

 

Address for Notice to Purchaser:

 

 

Address for Delivery of Warrants to Purchaser (if not same as address for
notice):

 

 

DWAC for Shares: _____________

 

Subscription Amount for Shares: _____________ Number of Shares:______________

 

Subscription Amount for Series L Warrants:________________ Number of Series L
Warrants:_________

 

Series K Warrant Shares: _________________

 

I elect for my Warrants to have a ____4.99% or _____9.99% initial beneficial
ownership blocker (if you do not make an election your Warrants will have a
4.99% blocker)

 

EIN Number: _______________________

 

o Notwithstanding anything contained in this Agreement to the contrary, by
checking this box (i) the obligations of the above-signed to purchase the
securities set forth in this Agreement to be purchased from the Company by the
above-signed, and the obligations of the Company to sell such securities to the
above-signed, shall be unconditional and all conditions to Closing shall be
disregarded, (ii) the Closing shall occur on the third (3rd) Trading Day
following the date of this Agreement and (iii) any condition to Closing
contemplated by this Agreement (but prior to being disregarded by clause (i)
above) that required delivery by the Company or the above-signed of any
agreement, instrument, certificate or the like or purchase price (as applicable)
shall no longer be a condition and shall instead be an unconditional obligation
of the Company or the above-signed (as applicable) to deliver such agreement,
instrument, certificate or the like or purchase price (as applicable) to such
other party on the Closing Date.

 

[SIGNATURE PAGES CONTINUE]

 35 

Disclosure Schedule to Securities Purchase Agreement

Dated February 1, 2017

 

Schedule 3.1(a) Subsidiaries

 

Entity Name   State or country of
Incorporation or
Registration           Alteris Renewables, Inc.   Delaware 1 Elemental Energy
LLC   Hawaii 1 Real Goods Energy Tech, Inc.   Colorado 1 Real Goods Solar, Inc.
  Colorado   RGS Financing, Inc.   Colorado 1 Mercury Energy, Inc.   Delaware 1
Real Goods Solar, Inc. – Mercury Solar   New York 2         Other entities
without material assets           Alteris RPS, LLC   Delaware 3 Real Goods
Syndicated, Inc.   Delaware 1 Richmond Peck Solar Farm, LLC   Delaware 3
Sunetric Management LLC   Delaware 4 Mercury Commercial Solar Fund I, LLC   New
York 2 Mercury Solar Birch, LLC   Delaware 2 Mercury Solar Cedar, LLC   Delaware
2 Mercury Solar Pine, LLC   Delaware 2 Mercury Residential Solar Fund I, LLC  
New York 2 RGS Energy, LLC   Puerto Rico 2 RGS Energy Asset Management, LLC  
Delaware 1 RGS Capital, Inc.   Delaware 1         1. Subsidiary of Real Goods
Solar, Inc.       2. Subsidiary of Mercury Energy, Inc.       3. Subsidiary of
Alteris Renewables, Inc.       4. Subsidiary of Elemental Energy,  LLC      

 

The Company has granted a security interest in substantially all its and its
subsidiaries’ assets to Solar Solutions Distribution, LLC to secure obligations
under the Company’s revolving line of credit.

 36 

Schedule 3.1(e) Filings, Consents and Approvals 

The Prior SPAs (as defined in Schedule 3.1(g)) contain participation rights, as
discussed in Schedule 3.1(g) and incorporated herein by reference. The Company
intends to satisfy or obtain waivers of these participation rights in connection
with the transactions contemplated by this Agreement.

The Securities Purchase Agreement dated as of December 8, 2016 provides that
from the 31st calendar day after the closing date and ending on February 15,
2017, neither the Company nor any subsidiary of the Company shall issue, enter
into any agreement to issue, or announce the issuance or proposed issuance of
any shares of Common Stock or securities directly or indirectly convertible into
or exchangeable or exercisable for Common Stock at an effective price per share
of at least 110% of the per share purchase price. The Company intends to obtain
a waiver of this covenant in connection with the transactions contemplated by
this Agreement.

 

 37 

Schedule 3.1(g) Capitalization

 

Capitalization schedule – Authorized and outstanding as of January 31, 2017
(reflecting 1 for 30 reverse stock split)

Class/Category  Authorized/Reserved  Outstanding Total authorized shares 
 250,000,000    -  Preferred Stock   50,000,000    -  Class A Common Stock 
 150,000,000    1,360,169  Warrants (for Class A Common Stock)   -    652,704 
Stock Options   52,536    200           2,013,073 

Rights of participation

The Company is a party to three prior Securities Purchase Agreements noted below
(the “Prior SPAs”):

SPA Date  Party  Party  Participation Rights 1-Apr-16  The Company  As
designated in SPA  Yes 26-Jun-15  The Company  As designated in SPA  Yes
23-Feb-15  The Company  As designated in SPA  Yes

 

Each of the Prior SPAs contain “participation rights” requiring the Company to
offer the counter parties the right to participate, to defined participation
levels, in any “Subsequent Placement.” Generally, Subsequent Placements are
defined as:

Directly or indirectly, offering, selling, granting any option to purchase, or
otherwise disposing of (or announcing any offering, sale, granting or any option
to purchase or other disposition of) any of the Company’s or its subsidiaries’
equity or equity equivalent securities, including without limitation any debt,
preferred stock or other instrument or security that is, at any time during its
life and under any circumstances, convertible into or exchangeable or
exercisable for shares of the Company’s Class A common stock, par value $0.0001
per share (“Common Stock”) or Common Stock equivalents.

The Company intends to satisfy or obtain waivers of these participation rights
in connection with the transactions contemplated by this Agreement.

 38 

Outstanding options, warrants

Outstanding Options, Warrants  Current Exercise Price  Outstanding    Stock
options   $1,428-$46,560    176   Options outstanding under the Company’s 2008
Long-Term Incentive Plan. June 2013 Warrants  $275.00    13,667   Formula
anti-dilution (shares and exercise price); purchase rights for pro-rata
issuances; redemption for fundamental transactions and going private November
2013 warrants  $40,920    418   Adjustment of shares and exercise price for
splits; purchase rights for pro-rata issuances; redemption for fundamental
transactions and going private June, 2014 Warrants  $38,280    76   Adjustment
of shares and exercise price for splits; purchase rights for pro-rata issuances;
redemption for fundamental transactions and going private Feb 2015 A & C
Warrants  $6,000    6   full ratchet anti-dilution (exercise price); purchase
rights for pro-rata issuances; adjustment of shares and exercise price for
splits; redemption in certain circumstances in fundamental transactions Feb 2015
Westpark warrants  $6,000    47   Adjustment of shares and exercise price for
splits; purchase rights for pro-rata issuances; redemption in certain
circumstances in fundamental transactions. SVB Warrants   $9,720-$28,320    42  
Ratchet for 12 months (expired); adjustment of shares and exercise price for
splits; June 2015 Series F warrants  $744.00    685   One time adjustment of
exercise price on July 9, 2015; adjustment of shares and exercise price for
splits; purchase rights for pro-rata issuances; June 2015 Westpark warrants 
$744.00    183   Adjustment of shares and exercise price for splits; purchase
rights for pro-rata issuances; adjustment of exercise price for splits; purchase
rights for pro-rata issuances; April 2016 Series G Warrants  $496.80    8,300  
One time adjustment of exercise price on April 1, 2017; adjustment of shares and
exercise price for splits; purchase rights for pro-rata issuances; April 2016
Roth Warrants  $496.80    1,411   One time adjustment of exercise price on April
1, 2017; adjustment of shares and exercise price for splits; purchase rights for
pro-rata issuances; September 2016 Series H Warrants  $165.00    7,455   One
time adjustment of exercise price on date all Notes are paid-off; adjustment of
shares and exercise price for splits; purchase rights for pro-rata issuances;
September 2016 Underwriter Warrants  $30,000    5   Includes 90,177 Class A
Common shares, and 25,454 Series H Warrants (see Series H Warrants above);
December 2016 Series I Warrants  $10.50    616,667   One time adjustment of
exercise price on April 1, 2017; adjustment of shares and exercise price for
splits; purchase rights for pro-rata issuances. December 2016 Roth Warrants 
$10.50    30,834   Adjustment of shares and exercise price for splits; purchase
rights for pro-rata issuances.

In June 2013 the Company issued warrants originally exercisable to purchase
1,683,488 shares (pre reverse stock splits) of Common Stock (the “June 2013
Warrants), which contain a “formula” anti-dilution provision as well as a
provision adjusting the shares and conversion price for stock splits, reverse
stock splits and the like. There are currently a total of 14,000 shares of
Common Stock issuable upon the exercise of the June 2013 Warrants at an exercise
price of $275.00 per share, after adjusting for the applicable reverse stock
splits and subsequent issuances of securities but prior to giving effect to the
securities issuable under this Agreement.

 39 

In addition, there are warrants to purchase 6 shares of Common Stock issued in
February 2015 currently outstanding with the right to have their exercise price
adjusted to the price of the securities issued under this Agreement.

Convertible Notes

Outstanding Convertible Notes  Current Conversion Price  Note Payable    April
2016 Senior Secured Convertible Notes  see below  $1,000.00   Redemption
features

 

As previously disclosed, on April 1, 2016, the Company issued an aggregate of
$10,000,000 principal amount of Senior Secured Convertible Notes due April 1,
2019. The Convertible Notes are convertible at any time, at the option of the
holders, into shares of Common Stock at the lower of a fixed and floating
conversion price. The fixed conversion price is currently $482.10 per share,
subject to adjustment for stock splits and similar events. The floating
conversion price is equal to the lowest of (i) 85% of the arithmetic average of
the five lowest volume-weighted average prices of the Common Stock during the 20
consecutive trading day period ending on the trading day immediately preceding
the delivery of the applicable conversion notice by such holder of Convertible
Notes, (ii) 85% of the volume-weighted average price of the Common Stock on the
trading day immediately preceding the delivery of the applicable conversion
notice by such holder of Convertible Notes, and (iii) 85% of the volume-weighted
average price of the Common Stock on the trading day of the delivery of the
applicable conversion notice by such holder of Convertible Notes. The terms of
the Convertible Notes permit the Company’s board of directors, with the prior
consent of the “required holders” (as defined in the Convertible Notes), to
reduce the then current conversion price to any amount and for any period of
time deemed appropriate by the Company’s board of directors. In no event may the
conversion price be less than $0.25 per share.

In accordance with the terms of the Convertible Notes, the Company has reduced
the conversion price under the Convertible Notes for certain time periods at
different prices. Most recently, the Company reduced the conversion price to
$7.50 for November 22, 2016, November 25, 2016, and November 28 through November
30, 2016. The Company expects to continue to offer the holders of the
Convertible Notes the ability to convert the remaining amounts owed under the
Convertible Notes at a reduced conversion price as deemed appropriate and in the
Company’s interest.

As of January 31, 2017, the holders of the Convertible Notes have converted an
aggregate of $10.5 million of principal and interest under the Convertible
Notes, and the Company has issued 659,095 shares of Common Stock at conversion
prices between $2.82 and $52.21 per share. After giving effect to the
conversions made as of January 31, 2017, there remains outstanding Convertible
Notes with an aggregate principal amount of approximately $1,000.

The Convertible Notes contain certain redemption rights upon, among other
things, the occurrence of an event or default or a “fundamental transaction” (as
defined in the Convertible Notes).

 

 40 

Stock Appreciation Rights

Under the 2008 Long-Term Incentive Plan (amended and restated November 16, 2016)
the Company may grant Stock Appreciation Rights either alone, or in conjunction
with other awards, either at the time of grant or by amendment thereafter. 

Additional Consent

The Securities Purchase Agreement dated as of December 8, 2016 provides that
from the 31st calendar day after the closing date and ending on February 15,
2017, neither the Company nor any subsidiary of the Company shall issue, enter
into any agreement to issue, or announce the issuance or proposed issuance of
any shares of Common Stock or securities directly or indirectly convertible into
or exchangeable or exercisable for Common Stock at an effective price per share
of at least 110% of the per share purchase price. The Company intends to obtain
a waiver of this covenant in connection with the transactions contemplated by
this Agreement. 

Shareholder Agreement

Shareholders Agreement, dated as of December 19, 2011, between the Company and
Riverside Renewable Energy Investments, LLC.

 

 41 

Schedule 3.1(j) Litigation 

On July 9, 2014, the Company completed a private offering of approximately $7.0
million of its Common Stock and warrants (the “July 2014 PIPE Offering”). Five
of the investors that participated in the offering (out of approximately 20
total investors that participated in the offering) asserted claims against the
Company in three separate lawsuits alleging certain misrepresentations and
omissions in the offering. The Company subsequently reached settlements with all
five investors. The Company recorded a charge to operations of $0.5 million as
of June 30, 2015, in recognition of the loss contingency for the July 2014 PIPE
offering. That charge was equal to the retention under the Company’s 2014-15
Officers and Directors liability insurance policy as the Company expects the
insurance policy will cover any future claims in excess of the retention limit.

The Company received a subpoena from the U.S. Securities and Exchange Commission
(“SEC”) requesting certain information pertaining to the Company’s 2014 PIPE
Offering. The Company established a special committee of the board of directors
to review the facts and circumstances surrounding the PIPE offering and engaged
outside counsel to assist it with its review. On May 11, 2016, the Company was
advised by the staff of SEC (the “Staff”) that the Staff did not intend to
recommend any enforcement action against the Company with respect to the
investigation commenced by the Staff in June 2015.

On November 22, 2016, the Company provided the remaining cash collateral to
Argonaut Insurance Company to fully secure the full amount of the $624,000 Final
Acceptance Payment and Performance Bond for a large commercial photovoltaic
project the Company’s subsidiary Regrid Power, Inc. completed in 2012. As
previously disclosed, the customer has raised warranty claims pertaining to the
project and the Company currently maintains a specific warranty liability for
the project of approximately $200,000. On November 30, 2016, the Company
received a letter from the customer in which the customer alleged that the
Company has not completed agreed-upon remedial work to remedy alleged
deficiencies and notified the Company that the customer intends to perform such
remedial work at the Company’s expense using a third-party contractor. The
customer also requested that the owner of the project demand the full amount of
the performance bond. In addition, the customer demanded an aggregate of
approximately $400,000 as liquidated damages under the terms of the project
contract. The Company denies these assertions and disputes that the customer is
entitled to liquidate damages. The Company plans to avail itself of all defenses
and remedies available. The Company estimates that the range of loss related to
this warranty claim is from approximately $200,000 to a maximum of approximately
$1 million. The Company has recorded a liability for the minimum amount of the
range of loss.

 42 

Schedule 3.1(l) Compliance 

The disclosure about the Regrid Power, Inc. warranty claim and Final Acceptance
Payment and Performance Bond set forth under schedule 3.1(j) above is
incorporated by reference herein.

 

 43 

Schedule 3.1(o) Title to Assets

The Company has granted a security interest in substantially all its and its
subsidiaries’ assets to Solar Solutions Distribution, LLC to secure obligations
under the Company’s revolving line of credit.

The Company has granted a security interest in certain cash collateral accounts
to the holders of the Company’s Senior Secured Convertible Notes due April 1,
2019.

 

 44 

Schedule 3.1(q) Insurance 

The Company carries directors’ and officers’ liability insurance for the annual
period ending on May 8th. Under the terms of the current policy, which expires
on May 8, 2017, the Company has coverage limits of $3,000,000 maximum aggregate
limit of liability with retentions ranging from $750,000 to $1,000,000 depending
on the claim made. Additionally, the Company has “Excess D&O” coverage in the
amount of $3,000,000 but has no right to renew this claims-made policy. The
Company may acquire a run off period for another 12 months upon payment of an
additional premium.

 

 45 

Schedule 3.1(v) Registration Rights 

The Company has granted registration rights under the following:

The Amended and Restated Registration Rights Agreement, dated as of December 19,
2011, by and among the Company, Gaiam, Inc., and Riverside Renewable Energy
Investments, LLC. [Note: On November 5, 2013, Gaiam ceased to be a party to the
Amended and Restated Registration Rights Agreement pursuant to the terms of an
Agreement, dated November 5, 2013, among the parties.]

The Registration Rights Agreement, dated as of June 3, 2013, by and among the
Company and the investors party thereto.

The Warrants to purchase the Company’s Common Stock, issued November 20, 2013.

The Registration Rights Agreement, dated as of July 9, 2014, by and among the
Company and the investors party thereto.

The Conversion Agreement dated as of June 24, 2015 by and between the Company
and Riverside Fund III, L.P.

Registration right granted to the Placement Agent.

Pursuant to Section 4.1 of the Securities Purchase Agreement, dated as of
December 8, 2016, by and among the Company and the investors party thereto, the
Company has agreed to use its best efforts to keep a registration statement
effective registering the issuance or resale of the shares of Common Stock
issuable upon exercise of the Company’s Series I Warrants, during the term of
the Series I Warrants.

 

 46 

Schedule 3.1(w) Listing and Maintenance Requirements 

The Company received written notice (the “Notice”) from Nasdaq on April 14,
2016, indicating that, based on the stockholders’ equity reported in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as
filed with the SEC on April 1, 2016, the Company was not in compliance with the
minimum stockholders’ equity requirement for continued listing on the Nasdaq
Capital Market. As set forth in Nasdaq Listing Rule 5550(b)(1) (the “Minimum
Stockholders’ Equity Requirement”), listed companies are required to maintain
stockholders’ equity of at least $2,500,000.

The Notice had no immediate effect on the listing of the Company’s Common Stock,
par value $0.0001 per share and the Common Stock continues to trade on the
Nasdaq Capital Market under the symbol “RGSE.” The Company had a period of 45
calendar days, or until May 31, 2016, to submit a plan to regain compliance with
the Minimum Stockholders’ Equity Requirement. In the Notice, Nasdaq indicated
that, if the Company’s plan is accepted, Nasdaq may grant an extension of up to
180 calendar days, or until October 11, 2016, to evidence compliance. The
Company initially submitted its plan to regain compliance with the Minimum
Stockholders’ Equity Requirement to Nasdaq on May 31, 2016 and provided Nasdaq
with supplemental information in June 2016.

On July 7, 2016, based on the information the Company submitted to Nasdaq,
Nasdaq granted the Company the maximum allowable 180-day extension to October
11, 2016 to evidence compliance with the Minimum Stockholders’ Equity
Requirement.

On October 17, 2016, the Company received a letter from NASDAQ notifying the
Company that it did not meet the terms of the extension and that the Common
Stock would be subject to delisting unless it requests a hearing before a NASDAQ
Listing Qualifications Panel (the “Panel”). Accordingly, the Company requested a
hearing, and on December 15, 2016, members of the Company’s management attended
a hearing before the Panel. On January 26, 2017, the Company received a
determination letter from the Panel, dated January 25, 2017, providing notice
that it had regained compliance with Nasdaq’s minimum shareholders’ equity
requirement and as such are eligible for continued listing on Nasdaq.

The Company will remain subject to a “Panel Monitor” as that term is defined
under Nasdaq Listing Rule 5815(d)(4)(A), through January 15, 2018. Under the
terms of the Panel Monitor, in the event the Company’s shareholders’ equity
falls below the $2,500,000 threshold (or any other requirement that would
ordinarily require the Company to submit a compliance plan to the Nasdaq Staff)
during the monitor period and the Company does not qualify for continued listing
under an alternative to the shareholders’ equity requirement, the Panel will
promptly conduct a hearing with respect to the shareholders’ equity deficiency.

On December 20, 2016, the Company received a letter from Nasdaq notifying it
that for the prior 30 consecutive business days, the bid price of the Company’s
Common Stock had closed below the minimum $1.00 per-share requirement for
continued inclusion on Nasdaq based on Listing Rule 5550(a)(2), and describing a
timetable for bringing the Company into compliance with that rule. Under Listing
Rule 5810(c)(3)(A), the Company has 180 calendar days, or until June 19, 2017,
to regain compliance. If at any time before then, the Company’s Common Stock has
a closing bid price of $1.00 or more for a minimum of 10 consecutive business
days, Nasdaq staff will provide the Company with notice that it has have
regained compliance. If the Company does not meet the requirements of Rule
5550(a)(2) by June 19, 2017, but meet the continued listing requirement for
market value of publicly held shares and all other applicable standards for
initial listing on The Nasdaq Capital Market (other than the minimum bid price
requirement), the Company may be eligible for an additional 180-day compliance
period.

 47 

Schedule 3.1(aa) Solvency 

Outstanding secured and unsecured Indebtedness owed in excess of $50,000 (other
than trade accounts payable incurred in the ordinary course of business) as of
January 26, 2017: 

Vendor  Type  Indebtedness     Hudson Bay Capital   Convertible Notes  $1,000  
  Secured    California Board of Equalization   Sales tax audit  $82,071  
  Unsecured    CNA Insurance   Legal fees paid  $1,503,609     Unsecured  

 48 

Schedule 3.1(bb) – Tax Status

 

On October 13, 2015 the California Board of Equalization issued a determination
that the Company owes $272,333 in past due sales taxes for the period from
October 1, 2011 to March 31, 2014. The Company has booked this liability on its
financial statements for the year ended December 31, 2015. The Company intends
to pay this assessment in monthly installments through February 28, 2017 and
evaluate this determination and the opportunity to obtain a refund of some or
all of this amount. The balance due as of January 31, 2017 is $82,071.

 

 49 

Schedule 3.1(dd) Accountants

 

The Company’s accounting firm for its 2016 financial statements is Hein &
Associates, LLP

 

 

 50