EXHIBIT 10.1


 


SECURITIES PURCHASE AGREEMENT


 


This Securities Purchase
Agreement (this “Agreement”) is dated as of December 8, 2016, 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.


 


“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.


 




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


 


“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
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, dated December 8, 2016, between the Company and the Placement Agent.


 


“Per
Share Purchase Price” means $0.22.


 


“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.


 




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“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
I Warrants” means Series I 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
J Warrants” means Series J Prepaid 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 J Warrant shall be the Per Share Purchase Price
minus one cent.


 


“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).


 




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“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 I Warrants and the Series J 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) $4,070,000 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 I Warrants and Series J 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. The Company shall deliver to each Purchaser its respective Shares, and a Series
I Warrant Series and, if applicable, a Series J 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 EGS 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.


 


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:


 




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(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 I 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
J Warrant, if applicable, with an exercise price equal to $0.35, subject to adjustment therein;



 


(iv)        for
those Purchasers purchasing Series J Warrants, Series J 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.


 


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);


 




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(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:


 




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(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.


 




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(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 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(g) (collectively, the “Required Approvals”).


 




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(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 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.


 


(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 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. 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. 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.


 




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(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.


 




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(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.


 




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(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 of
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.


 




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(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 described in the SEC Reports as necessary or required for use in connection with their respective businesses
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.


 




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(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.


 




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(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.


 




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(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.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, 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.


 




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(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.


 




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(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.


 


(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 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
private placement 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.


 




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(gg)        Regulation
M Compliance.  The Company has not, and to its knowledge no one acting on its behalf has, within the restricted period
required by Regulation M, (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) 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.


 




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(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.


 


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.


 




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(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.


 


(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.


 




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(f)           Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not directly
or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases
or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser
first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material
pricing terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall
only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement or the Warrant Shares. Other than to other Persons party to this Agreement or to such
Purchaser’s representatives, including, without limitation, its officers, directors, partners, legal and other advisors,
employees, agents and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to it in connection
with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of
doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification
of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the
future.


 


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.


 




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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.


 


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 Trading Day immediately following
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 connection with the transactions contemplated by the Transaction
Documents. 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).


 




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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. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents,
which shall be disclosed pursuant to Section 4.4, 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.


 




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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.


 




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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.


 


4.12       [RESERVED]


 


4.13       Subsequent
Equity Sales.


 


(a)          From
the date hereof until 30 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.   From the 31st calendar day after the Closing Date and
ending on February 15, 2017, 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 at an effective price
per share less than 110% of the Per Share Purchase Price.


 


(b)          From
the date hereof until January 27, 2017, 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.


 




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(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 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 not 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.


 


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.


 




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4.15       Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on its behalf or pursuant to any understanding with it, will execute any purchases or sales, including
Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending
at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release
as described in Section 4.6.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such
time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release
as described in Section 4.6, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and
the information included in the Transaction Documents and the Disclosure Schedules. Notwithstanding the foregoing, and notwithstanding
anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes
any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company
after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press
release as described in Section 4.6, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any
securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated
by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6 and (iii) no Purchaser
shall have any duty of confidentiality or duty not to trade in the securities of the Company to the Company or its Subsidiaries
after the issuance of the initial press release as described in Section 4.6.  Notwithstanding the foregoing, in the case of
a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s
assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing
other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement or the
Warrant Shares.


 


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 December 15, 2016; provided, however, that such termination will not affect
the right of any party to sue for any breach by any other party (or parties).


 




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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.


 


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.


 




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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.


 


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.


 




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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.


 


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.


 




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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.


 


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.


 




     33


     


    

 


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)


 




     34


     


    

 


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:

        Real Goods Solar, Inc.

        833 West South Boulder Road

        Louisville, Colorado 80207



 


	By:	/s/ Dennis Lacey	 	Fax:
	 	Name: Dennis Lacey	 	(877) 835-4834
	 	Title:   CEO	 	 


 


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


 


Brownstein Hyatt Farber Schreck, LLP


410 Seventeenth Street, Suite 2200,


Denver, CO 80202


Fax: (303) 223-1111


Attention: Rikard D. Lundberg


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR PURCHASER FOLLOWS]



 




     35


     


    

 


[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 J Warrants:________________ Number
of Series J Warrants:_________


 


Series I 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: _______________________


 


 ̈
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 CONTINUED]


 




     36


     


    

 


EXHIBIT A


FORM OF  LEAKOUT AGREEMENT


[Filed as Exhibit 10.2 to this Current Report
on Form 8-K]


 




     


     


    

 


EXHIBIT B-1


FORM OF SERIES I WARRANT


[Filed as Exhibit 4.1 to this Current Report
on Form 8-K]


 




     


     


    

 


EXHIBIT B-2


FORM OF SERIES J WARRANT


[Filed as Exhibit 4.2 to this Current Report
on Form 8-K]


 




     


     


    

 





Disclosure Schedule to Securities Purchase
Agreement


Dated December 7, 2016


 


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.


 






    


     


    

  


Schedule 3.1(g) Capitalization


 


Capitalization schedule – Authorized and outstanding as
of December 7, 2016 


 


	Class/Category		Authorized/ Reserved			Outstanding	
	Total authorized shares			250,000,000				-	
	Preferred Stock			50,000,000				-	
	Class A Common Stock			150,000,000				16,772,721	
	Warrants (for Class A Common Stock)			-				937,695	
	Stock Options			1,576,068				5,263	
				 				17,715,679	


 


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		
        Prior Consent

        Required For

        Subsequent

        Placements

	1-Apr-16		The Company		As designated in SPA		Yes		Yes
	26-Jun-15		The Company		As designated in SPA		Yes		Yes
	23-Feb-15		The Company		As designated in SPA		Yes		No


 


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.


 


The Securities Purchase Agreement dated June 26, 2015 prohibits
the Company from, without the prior written consent of the “Required Holders” (as defined therein), issuing or selling
any rights, warrants or options to subscribe for or purchase Common Stock or directly or indirectly convertible into or exchangeable
or exercisable for Common Stock at a price which varies or may vary with the market price of the Common Stock until the two-year
anniversary of the closing date of the transaction, subject to certain conditions and exceptions.


 






    


     


    




 


Outstanding options, warrants 


 


	Outstanding Options, Warrants		Current Exercise Price			Outstanding			
	Stock options		$	47.60-$ 1,552				5,263			Options outstanding under the Company’s 2008 stock option plan
	June 2013 Warrants		$	9.78				379,000			Formula anti-dilution (shares and exercise price); purchase rights for pro-rata issuances; redemption for fundamental transactions and going private
	November 2013 warrants		$	1,364.00				12,538			Adjustment of shares and exercise price for splits; purchase rights for pro-rata issuances; redemption for fundamental transactions and going private
	June, 2014 Warrants		$	1,276.00				2,251			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		$	200.00				161			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		$	200.00				1,400			Adjustment of shares and exercise price for splits; purchase rights for pro-rata issuances; redemption in certain circumstances in fundamental transactions
	SVB Warrants		$	324-$ 944				1,247			Ratchet for 12 months (expired); Adjustment of shares and exercise price for splits
	June 2015 Series F warrants		$	24.80				20,548			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		$	24.80				5,479			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		$	16.56				248,973			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		$	16.56				42,325			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		$	5.50				223,632			One time adjustment of exercise price on date all Convertible Notes are paid-off; adjustment of shares and exercise price for splits; purchase rights for pro-rata issuances
	September 2016 Underwriter Warrants		$	1,000.00				140			Includes 90,177 Class A Common shares, and 25,454 Series H Warrants (see above)


 


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 379,000 shares of Common Stock issuable upon the exercise of the June 2013 Warrants
at an exercise price of $9.78 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.


 


In addition, there are warrants to purchase 161 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			332,899			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 Class A common stock at the lower of a fixed and floating conversion
price. The fixed conversion price is currently $16.07 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 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 $0.25 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 December 7, 2016, the holders of the Convertible Notes have
converted an aggregate of $10.4 million of principal and interest under the Convertible Notes, and the Company has issued 14,240,511
shares of Class A common stock at conversion prices between $0.25 and $1.74 per share. After giving effect to the conversions made
as of December 7, 2016, there remains outstanding Convertible Notes with an aggregate principal amount of approximately $0.3 million.


 


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).


 


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.


 


Lock-Up and Shareholder Agreements


 


90-day Lock-Up Agreement, dated September 14, 2016, entered into
by each of the directors, officers, and Riverside Renewable Energy Investments, LLP, in connection with the September 14, 2016
public unit offering.


 


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


 


Pursuant to the Underwriting Agreement, dated September 9, 20 16,
among the Company and the underwriters named in Schedule I hereto, for whom Roth Capital Partners, LLC acted as representative,
the Company has agreed not to (i) offer, pledge, issue, sell, contract to sell, purchase, contract to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any
of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of shares of Common Stock or such other securities, in cash or otherwise, or (iii) file any registration
statement with the SEC relating to the offering of any shares of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock for 90 days after the date of the Underwriting Agreement without first obtaining the written consent
of Roth Capital Partners, LLC, subject to certain exceptions.


 






    


     


    

  


Schedule 3.1(i) Compliance


 


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


 


Schedule 3.1(j) Litigation


 


On July 9, 2014, the Company completed a private offering of approximately
$7.0 million of its Class A 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 our subsidiary Regrid Power, Inc. completed in 2012. As previously disclosed, the customer
has raised warranty claims pertaining to the project and we currently maintain a specific warranty liability for the project of
approximately $200,000. The Company completed the project in December 2012, the project began generating electricity in 2013, and
the Company believes it has since that time generated electricity meeting the requirements of the project contract. 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 ourselves 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.


 


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.


 






    


     


    

  


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.


 


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.


 


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 Class A 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.


 


Schedule 3.1(w) Listing and Maintenance Requirements


 


On December 23, 2015, the Company received a letter from the Nasdaq
Stock Market (“NASDAQ”) notifying the Company that for the last 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. The Company disclosed this notification on
a Form 8-K filed on December 24, 2015. The Company completed a one-for-twenty reverse stock split of its Common Stock on June 2,
2016, and as a result the Company’s stock price closed above the minimum $1.00 per share requirement beginning on that date
bringing the Company back into compliance.


 



    


     


    




 


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
Class A common stock, par value $0.0001 per share and the Class A 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 has requested a hearing,
currently set for December 15, 2016. As a result, any suspension or delisting action will be stayed pending the issuance of the
Panel decision and the expiration of any extension granted by the Panel. The Common Stock currently remains listed on NASDAQ under
the symbol RGSE. There can be no assurance that the Company will be able to regain compliance with NASDAQ Listing Rule 5550(b)(1)
and retain its listing.


 


Beginning on November 4, 2016 and thereafter, the closing bid price
for the Common Stock has been below the minimum $1.00 per share requirement for continued inclusion on NASDAQ in NASDAQ Listing
Rule 5550(a)(2). If the closing bid price for the Common Stock continues to be below $1.00 per share for 30 consecutive business
days, the Company will no longer be in compliance with NASDAQ Listing Rule 5550(a)(2). If that were to occur, the Company expects
to receive a notification from NASDAQ about non-compliance, giving the Company 180 calendar days to regain compliance. The Company
can regain compliance by meeting the minimum bid price for a minimum of 10 consecutive business days during the compliance period,
unless NASDAQ exercises its discretion to extend this 10-day period. In the past, the Company has regained compliance with NASDAQ
Listing Rule 5550(a)(2) by effecting a reverse stock split. The Company intends to actively monitor the bid price for the Common
Stock and, if NASDAQ notifies the Company that it is no longer in compliance with the minimum bid price requirement, the Company
will consider available options to resolve the deficiency and regain compliance with the NASDAQ minimum bid price requirement,
including a possible reverse stock split.


 



    


     


    




 


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 December 7, 2016:


 


	Vendor		Type		Indebtedness					
	Solar Solutions and Distribution, LLC		Line of Credit		$	1,162,419				Secured	
	Hudson Bay Capital		Convertible Notes		$	10,000				Secured	
	Alto Opportunity		Convertible Notes		$	322,899				Secured	
	California Board of Equalization		Sales tax audit		$	168,877				Unsecured	
	CNA Insurance		Legal fees paid		$	1,503,609				Unsecured	


 


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 December 7, 2016 is $168,877.


 


Schedule 3.1(dd) Accountants


 


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




     


     


    

 


The Notice had no immediate effect on the listing of the Company’s
Class A common stock, par value $0.0001 per share and the Class A 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 has requested
a hearing, currently set for December 15, 2016. As a result, any suspension or delisting action will be stayed pending the issuance
of the Panel decision and the expiration of any extension granted by the Panel. The Common Stock currently remains listed on NASDAQ
under the symbol RGSE. There can be no assurance that the Company will be able to regain compliance with NASDAQ Listing Rule 5550(b)(1)
and retain its listing.


 


Beginning on November 4, 2016 and thereafter, the closing bid
price for the Common Stock has been below the minimum $1.00 per share requirement for continued inclusion on NASDAQ in NASDAQ Listing
Rule 5550(a)(2). If the closing bid price for the Common Stock continues to be below $1.00 per share for 30 consecutive business
days, the Company will no longer be in compliance with NASDAQ Listing Rule 5550(a)(2). If that were to occur, the Company expects
to receive a notification from NASDAQ about non-compliance, giving the Company 180 calendar days to regain compliance. The Company
can regain compliance by meeting the minimum bid price for a minimum of 10 consecutive business days during the compliance period,
unless NASDAQ exercises its discretion to extend this 10-day period. In the past, the Company has regained compliance with NASDAQ
Listing Rule 5550(a)(2) by effecting a reverse stock split. The Company intends to actively monitor the bid price for the Common
Stock and, if NASDAQ notifies the Company that it is no longer in compliance with the minimum bid price requirement, the Company
will consider available options to resolve the deficiency and regain compliance with the NASDAQ minimum bid price requirement,
including a possible reverse stock split.


 


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 December 2, 2016:


 


	Vendor	 	Type	 	Indebtedness	 	 	 	 	 
	Solar Solutions and Distribution, LLC	 	Line of Credit	 	 	1,361,932	 	 	 	Secured	 
	Hudson Bay Capital	 	Convertible Notes	 	 	75,000	 	 	 	Secured	 
	Alto Opportunity	 	Convertible Notes	 	 	322,899	 	 	 	Secured	 
	California Board of Equalization	 	Sales tax audit	 	 	168,877	 	 	 	Unsecured	 
	CNA Insurance	 	Legal fees paid	 	 	1,503,609	 	 	 	Unsecured	 





 


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 December 2, 2016 is $168,877.


 


Schedule 3.1(dd) Accountants


 


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