Table of Contents
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-193718
This preliminary prospectus
supplement and the accompanying prospectus relate to an effective registration statement under the Securities Act of 1933, as amended,
but the information in this preliminary prospectus supplement is not complete and may be changed. This preliminary prospectus supplement
and the accompanying prospectus are not an offer to sell these securities and we are not soliciting any offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.
Subject to completion, dated
December 6, 2016
PROSPECTUS SUPPLEMENT
(To Prospectus dated February
10, 2014)
Units, Class A Common Stock and Series
I Warrants to Purchase Class A Common Stock
We are offering an aggregate of up to
$_______ of units (“Units”), each consisting of (i) one share of our Class A common stock, par value $0.0001
(“Common Stock”), and (ii) a Series I Warrant to purchase up to __% of one share of Common Stock. The purchase
price for a Unit is $__. The Units will not be separately issued or certificated. The Common Stock and Series I Warrants are
immediately separable and will be issued separately, but will be purchased together as a unit in this offering. This
prospectus supplement also covers up to _____ shares of Common Stock issuable upon exercise of the Series I Warrants. We will
enter into a securities purchase agreement with investors who purchase not less than $100,000 of Units, which provides such
investors with certain representations, warranties and covenants from us which will not be available to investors purchasing
a smaller amount of Units. Such investors will also commit to certain limits on the volume of sales of our Common Stock by
them, as described under "Plan of Distribution."
The
Series I warrants are exercisable upon issuance and will remain exercisable until the fifth anniversary of the date of issuance.
The exercise price for the Series I Warrants will be $__, subject to certain adjustments.
Our Common Stock is listed on The NASDAQ Capital Market under the symbol "RGSE." On December 2, 2016, the last reported sale price of our Common Stock was $0.45 per share. There is no established public trading market for the Units or the Series I Warrants and we do not expect a market to develop. In addition, we do not intend to list the Units or the Series I Warrants on The NASDAQ Capital Market, any other national securities exchange or any other trading system.
Investing in our securities involves
a high degree of risk. Please read “
Risk Factors
”
beginning on page S-7 of this prospectus supplement, on page 3 of the accompanying prospectus and in the documents incorporated
by reference herein and therein.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved the securities or passed upon the adequacy or accuracy of the prospectus
or this prospectus supplement. Any representation to the contrary is a criminal offense.
We have engaged Roth Capital Partners,
LLC, or the “placement agent,” as our exclusive placement agent in connection with this offering. The
placement agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific
number or dollar amount of securities, but will use its best efforts to sell the securities offered. We have agreed to pay
the placement agent the placement agent fees set forth in the table below, which assumes that we sell all of the securities
we are offering. See “Plan of Distribution” beginning on page S-13 of this prospectus supplement for more
information regarding these arrangements.
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Per Share and
Related
Warrants
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Total
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Public offering price
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$
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$
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Placement agent fees (1)
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$
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$
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Proceeds, before expenses, to us (2)
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$
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$
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(1) In addition, we have agreed to reimburse the placement agent
for certain out-of-pocket expenses and issue to the placement agent a warrant to purchase Common Stock equal to 5% of the shares
of Common Stock issued as part of the Units. See “Plan of Distribution” beginning on page S-13 of this prospectus
supplement.
(2) The amount of the offering proceeds to us presented in this
table does not give effect to any exercise of the warrants being issued in this offering.
We
estimate the total expenses of this offering, including placement agent fees and expenses, will be approximately $_______. Delivery
of the Common Stock and the warrants is expected to be made on or about ____, 2016 subject to customary closing conditions.
Roth
Capital Partners
The date of this prospectus
supplement is _______ __, 20__.
Table of Contents
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first
part is this prospectus supplement, which describes the terms of this offering and also adds to, or updates, the information contained
in the accompanying prospectus and the documents incorporated by reference into this prospectus supplement and the accompanying
prospectus. The second part is the accompanying prospectus, which provides more general information about our Common Stock and
other securities that do not pertain to this offering of the Units. This prospectus supplement and the accompanying prospectus
are part of a “shelf” registration statement on Form S-3 (File No. 333-193718) that we filed with the Securities
and Exchange Commission, or the “SEC,” and that was declared effective by the SEC on February 10, 2014. To the
extent that the information contained in this prospectus supplement differs from, or is inconsistent with, any information in the
accompanying prospectus or any document incorporated by reference herein or therein, the statements made in the accompanying prospectus
and the information incorporated by reference herein and therein are deemed modified or superseded by the statements made in this
prospectus supplement.
You should read this entire prospectus
supplement, the accompanying prospectus and the documents incorporated by reference herein and therein, and any free writing prospectus
that we have authorized for use in connection with this offering, carefully before deciding whether to invest in the Units. You
also should read and consider the information in the documents we have referred you to under the headings “Incorporation
of Certain Documents by Reference” and “Where You Can Find More Information.”
You should rely only on the information
contained in or incorporated by reference into this prospectus supplement, the accompanying prospectus and any free writing prospectus
that we have authorized for use relating to this offering. Neither we nor the placement agent have authorized any other person
to provide you with different or additional information. You should not rely on any unauthorized information or representations.
We are not, and the placement agent is
not, making an offer to sell or soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not
permitted. The information contained in this prospectus supplement, the accompanying prospectus, the documents and information
incorporated by reference into this prospectus supplement and the accompanying prospectus, and any free writing prospectus that
we have authorized for use in connection with this offering, are accurate only as of their respective dates, regardless of time
of delivery of this prospectus supplement or of any sale of the Units. We further note that the representations, warranties and
covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated by reference into the accompanying
prospectus were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating
risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover,
such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties
and covenants should not be relied on as accurately representing the current state of our affairs.
Unless otherwise mentioned or unless the
context requires otherwise, all references in this prospectus supplement to “RGS Energy,” “Real Goods Solar,”
“we,” “our,” “us” or similar references mean Real Goods Solar, Inc. and its subsidiaries.
This prospectus supplement, the accompanying
prospectus and the information incorporated herein and therein by reference include trademarks, service marks and trade names owned
by us or other companies. All trademarks, service marks and trade names included or incorporated by reference into this prospectus
supplement or the accompanying prospectus are the property of their respective owners.
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights selected information contained elsewhere
or incorporated by reference in this prospectus supplement and the accompanying prospectus. This summary does not contain all the
information you should consider before investing in our securities. You should read and consider carefully the more detailed information
in this prospectus supplement and the accompanying prospectus, including the factors described under the heading “Risk Factors”
in this prospectus supplement on page S-7 and on page 3 of the accompanying
prospectus, and the financial and other information incorporated by reference in this prospectus
supplement and the accompanying prospectus, as well as the information included in any free writing prospectus that we have authorized
for use in connection with this offering, before making an investment decision.
Overview
We are a residential and small commercial
solar energy engineering, procurement and construction firm. We also perform most of our own sales and marketing activities to
generate leads and secure projects. We offer turnkey services, including design, procurement, permitting, build-out, grid connection,
financing referrals and warranty and customer satisfaction activities. Our solar energy systems use high-quality solar photovoltaic
modules. We use proven technologies and techniques to help customers achieve meaningful savings by reducing their utility costs.
In addition, we help customers lower their emissions output and reliance upon fossil fuel energy sources.
We, including our predecessors, have more than 35 years of experience
in residential solar energy and trace our roots to 1978, when Real Goods Trading Corporation sold the first solar photovoltaic
panels in the United States. We have designed and installed over 25,000 residential and commercial solar systems since our founding.
During 2014, we discontinued our entire former Commercial segment
and sold the assets associated with our catalog segment (a portion of the Other segment). As a result of this major strategic shift,
we now operate as three reportable segments: (1) Residential – the installation of solar energy systems for homeowners, including
lease financing thereof, and for small businesses (small commercial) in the continental U.S.; (2) Sunetric – the installation
of solar energy systems for both homeowners and business owners (commercial) in Hawaii; and (3) Other – catalog, for 2014,
and corporate operations.
Our executive offices are located at 833 West South Boulder
Road, Louisville, CO 80027-2452. Our telephone number is (303) 222-8300. Our website is www.rgsenergy.com. The information on our
website is not intended to be a part of this prospectus, and you should not rely on any of the information provided there in making
your decision to invest in our securities. Our website address referenced above is intended to be an inactive textual reference
only and not an active hyperlink to our website.
Recent Developments
NASDAQ Non-Compliance and Potential Future Reverse Stock Split
On April 14, 2016, we received a letter from The NASDAQ Stock
Market LLC, notifying us that we no longer complied with NASDAQ Listing Rule 5550(b)(1) due to our failure to maintain a minimum
of $2,500,000 in shareholders’ equity or meet the alternatives of market value of listed securities or net income from continuing
operations. On July 7, 2016, NASDAQ granted the Company a 180-day extension to October 11, 2016 to comply with NASDAQ Listing Rule
5550(b).
On October 17, 2016, we received a letter from
NASDAQ notifying us that we did not meet the terms of the extension and that our Common Stock would be subject to delisting
unless we request a hearing before a NASDAQ Listing Qualifications Panel (the “Panel”). Accordingly, we have
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. Our Common Stock currently
remains listed on NASDAQ under the symbol RGSE.
We are conducting this offering as a step in our efforts to
increase our shareholders' equity to regain compliance with NASDAQ Listing Rule 5550(b)(1). If after this offering we believe
that the net funds received from this offering alone are insufficient to increase our shareholders' equity sufficiently to meet
NASDAQ Listing Rule 5550(b)(1), we expect to undertake another equity offering as part of our efforts to increase our shareholders'
equity. There can be no assurance that we will be able to regain compliance with NASDAQ Listing Rule 5550(b)(1) and retain our
listing.
Beginning on November 4, 2016 and thereafter, the closing bid price for our 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 our Common
Stock continues to be below $1.00 per share for 30 consecutive business days, we will no longer be in compliance with NASDAQ Listing
Rule 5550(a)(2). If that were to occur, we expect to receive a notification from NASDAQ about non-compliance, giving us 180 calendar
days to regain compliance. We 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, we have regained
compliance with NASDAQ Listing Rule 5550(a)(2) by effecting a reverse stock split. We intend to actively monitor the bid price
for our Common Stock and, if NASDAQ notifies us that we are no longer in compliance with the minimum bid price requirement, we
will consider available options to resolve the deficiency and regain compliance with the NASDAQ minimum bid price requirement,
including a possible reverse stock split.
Conversion of Convertible Notes
As previously disclosed, on April 1, 2016, we issued an aggregate
of $10,000,000 principal amount of Senior Secured Convertible Notes due April 1, 2019, or “Convertible Notes.”
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 our 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 our board of directors. We have reduced the fixed conversion price on several occasions for limited time periods in an effort to encourage conversion to (a) increase our shareholders' equity and (b) to obtain at an earlier date additional financial capital to commence our business turnaround strategy. Between October 18 and 28, 2016 we reduced the conversion price to $1.35, between October 28 and November 1, 2016 we reduced the conversion price to $1.00 (there were no subsequent conversions at this price), between November 1 and 2, 2016 we reduced the conversion price to $0.75, between November 7 and 8, 2016, we reduced the conversion price to $0.50, between November 10 and 21, 2016 we reduced the conversion price to 50% of the lowest volume-weighted average price of our Common Stock during the five days preceding the submission of a conversion notice per share of Common Stock, and for certain time periods between November 20 and November 30, 2016 we reduced the conversion price to 0.25. In no event may the conversion price be less than the $0.25 conversion floor price. We expect 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 our interest.
As of December 2, 2016, holders of Convertible Notes have converted an aggregate of approximately $10.3 million of principal and interest under the Convertible Notes, and we have issued 14,024,082 shares of Common Stock at conversion prices between $0.25 and $1.74 per share.
After giving effect to the conversions made as of
December 2, 2016, there remains outstanding Convertible Notes with an aggregate principal amount of approximately $0.4
million. The following table updates previously reported information about the total number of shares of Common Stock
issuable under the Convertible Notes if we elect to convert all remaining principal and interest under the Convertible Notes
into shares of Common Stock in lieu of paying cash. The following table assumes that from the date hereof: (a) installment
payments of principal and interest are timely made on the last business day of every month beginning on October 31, 2016; (b)
no such regularly scheduled installment payments are accelerated or deferred; (c) the indicated conversion price remains the
same until the Convertible Notes are paid in full; (d) the holders do not convert the Convertible Notes at their election;
and (e) no event of default occurs. This table is provided for illustrative purposes only, as it is unlikely that these
assumptions will be fully accurate at all relevant times. Our ability to convert principal, interest and any other amounts
owed under the Convertible Notes into shares of Common Stock in lieu of paying cash is contingent on our satisfying certain
equity conditions set forth in the Convertible Notes. There can be no assurance that we will be able to satisfy such equity
conditions.
Assumed Conversion Price
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Approximate Number of Shares Potentially
Issuable
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$
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0.25
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1,600,000
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Update on Regrid Power, Inc. Warranty Claim
On November 22, 2016, we 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. We completed the project in December 2012, it began generating electricity in 2013, and we believe it has since that time generated electricity meeting the requirements of the project contract.
On November 30, 2016, we received a letter
from the customer in which the customer alleged that we have not completed agreed-upon remedial work to remedy alleged deficiencies
and notified us that the customer intends to perform such remedial work at our 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.
We deny these assertions and disputes that the customer is entitled to liquidated damages. We plan to avail
ourselves of all defenses and remedies available. We estimate that the range of loss related to this warranty claim is from approximately
$200,000 to a maximum of approximately $1 million. We have recorded a liability for the minimum amount of the range of loss.
The Offering
Issuer
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Real Goods Solar, Inc.
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Units offered by us
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Up to $_______ of Units, each consisting of (i) one share of Common Stock, and (ii) a Series I Warrant to purchase up to __% of one share of Common Stock.
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Common Stock offered by us
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_________ shares
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Series I Warrants offered by us
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Warrants to purchase an aggregate of up to ___ shares of Common Stock.
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The warrants will be immediately exercisable and will expire on the fifth anniversary of the date of issuance. Each warrant will have an exercise price of $_____ per share.
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For more information, see the section entitled “Description of Securities We Are Offering — Description of Series I Warrants.”
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This prospectus supplement also relates to the offering of the shares of Common Stock issuable upon exercise of the warrants.
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Securities Purchase Agreement
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Investors purchasing a minimum of $100,000 of Units in the offering will enter into a Securities Purchase Agreement with us whereas investors purchasing less than that will purchase securities solely under this prospectus supplement and the accompanying prospectus.
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Absence of Market for the Units and the Warrants
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The Units and the warrants offered by this prospectus supplement are a new issue of securities and currently there is no market for the securities. We do not intend to list or qualify for quotation the Units or any of the warrants offered by this prospectus supplement on any securities exchange or market.
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Common Stock outstanding immediately before this offering
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16,556,292 shares as of December 2, 2016
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Common Stock to be outstanding immediately after this offering
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________ shares (assuming none of the warrants issued in this offering are exercised).
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Use of proceeds
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General corporate purposes. See “Use of Proceeds.”
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NASDAQ Capital Market listing for our Common Stock
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Our common shares is listed on The NASDAQ Capital Market under the symbol “RGSE.”
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Risk Factors
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Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page S-7 of this prospectus supplement, page 3 of the accompanying prospectus and under similar headings in the other documents that are filed after the date hereof and incorporated by reference into this prospectus supplement, together with the other information included in or incorporated by reference into this prospectus supplement and the accompanying prospectus before deciding whether to invest in our securities.
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The number of shares of Common Stock to be outstanding after this offering is based on 16,556,292 shares issued and outstanding as of December 2, 2016. Except as otherwise indicated, the number of shares of Common Stock to be outstanding after this offering excludes the shares issuable upon exercise of the Series I Warrants being offered by us in this offering and also excludes:
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Approximately 1.6 million shares of our Common Stock issuable upon conversion of the remaining balance under the Convertible Notes;
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3,357 shares of our Common Stock issuable upon the exercise of options outstanding under our 2008 Long-Term Incentive Plan
at a weighted average exercise price of $510.00 per share;
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Approximately 1.6 million shares of our Common Stock available for future issuance under our 2008 Long-Term Incentive Plan;
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Approximately 1.1 million shares of our Common Stock issuable upon exercise of outstanding warrants at a weighted average exercise
price of $28.00 per share; and
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756 shares of our Common Stock currently issuable to the sellers from the Company’s purchase of Sunetric in May 2014.
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RISK FACTORS
An
investment in our securities involves a high degree of risk. Before making an investment decision you should carefully read and
consider the risks described below, together with all of the other information included or incorporated by reference in this prospectus,
including, without limitation, the risk factors in the section entitled “Risk Factors” in our most recent Annual Report
on Form 10-K and Quarterly Reports on Form 10-Q, which are on file with the SEC. If any of the risks listed in our most recent
Annual Report on Form 10-K or Quarterly Reports on Form 10-Q or any of the following risks actually occur, our business, financial
condition, and/or results of operations could suffer. In that case, the market price of our Common Stock could decline, and you
may lose all or part of your investment. You should read the section entitled “Special Note Regarding Forward-Looking Statements”
below for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements
in the context of this prospectus. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial
may also have a material adverse effect on our business.
Risks Related to this Offering
Management will have broad discretion as to the use of a
portion of the net proceeds from this offering, and we may not use the proceeds effectively.
Our management will have broad discretion
as to the application of the net proceeds from this offering. Investors in this offering and our shareholders may not agree with
the manner in which our management chooses to allocate and spend the net proceeds. Moreover, our management may use the net proceeds
for corporate purposes that may not increase our profitability or market value.
Investors in this offering will experience immediate and
substantial dilution
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The public offering price of the Units
offered pursuant to this prospectus is substantially higher than the net tangible book value per share of Common Stock. Therefore,
if you purchase Units in this offering, you will incur immediate and substantial dilution in the net tangible book value per share
of Common Stock included in the Unit (but excluding shares of Common Stock underlying the Series I Warrants) from the price per
Unit that you pay for the securities. Based on the sale of $_____ Units at a public offering price of $___ per Unit in this offering,
you will suffer immediate dilution of approximately $(___) per share in the net tangible book value of the Common Stock. Moreover,
as described under “Prospectus Supplement Summary — The Offering,” we have a substantial number of stock options
and warrants to purchase Common Stock and Convertible Notes outstanding. If the holders of outstanding options, warrants or Convertible
Notes exercise those options and warrants or convert the Convertible Notes at prices below the public offering price, you will
incur further dilution.
The offering price determined for this offering is not an
indication of our value.
The per-Unit offering price and the exercise
price of the Series I Warrants offered by this prospectus may not necessarily bear any relationship to the book value of our assets,
past operations, cash flows, losses, financial condition or any other established criteria for value. You should not consider the
offering price of the Units and the exercise price of the Series I Warrants as an indication of the value of the Common Stock included
in the Units and underlying the Series I Warrants. After the date of this prospectus, the Common Stock may trade at prices above
or below such prices.
The public trading market for the Common Stock may be limited
in the future.
The Common Stock is currently traded on
The NASDAQ Capital Market under the trading symbol “RGSE.” There has historically been a limited public trading market
for the Common Stock and management can make no assurances that trading volume will not be similarly limited in the future. Without
an active trading market, there can be no assurance of any liquidity or resale value of the Common Stock, and shareholders may
be required to hold shares of the Common Stock for an indefinite period of time.
Risk Related to the Units and the Series I Warrants
There is no public market for the Units and the Series I
Warrants offered by this prospectus in this offering.
There is no established public trading
market for the Units and the Series I Warrants offered by this prospectus and we do not expect a market to develop. In addition,
we do not intend to apply to list the Units or the Series I Warrants on any national securities exchange or other trading system,
including The NASDAQ Capital Market. Without an active market, the liquidity of the Units and the Series I Warrants offered by
this prospectus will be very limited.
As a holder of the Series I Warrants offered by this prospectus
you have no voting rights.
You will have no voting rights as a holder
of the Series I Warrants offered by this prospectus. Our Common Stock is currently the only class of our securities that carries
full voting rights.
If our Common Stock is delisted, your ability to transfer
or sell the Series I Warrants offered by this prospectus may be limited and the market value of the Series I Warrants will likely
be materially adversely affected.
We expect that the value of the Series
I Warrants offered by this prospectus to some extent is tied to the perceived value of its exercise features. If our Common Stock
is delisted from The NASDAQ Capital Market, your ability to transfer or sell the Series I Warrants offered by this prospectus may
be limited and the market value of the Series I Warrants will likely be materially adversely affected.
We expect that the market value, if any, of the Series I
Warrants offered by this prospectus will be significantly affected by changes in the market price of our Common Stock, which could
change substantially at any time.
We expect that the market value, if any,
of the Series I Warrants offered by this prospectus will depend on a variety of factors, including, without limitation, the market
price of our Common Stock. Each of these factors may be volatile, and may or may not be within our control. For example, we expect
the market value, if any, of the Series I Warrants offered by this prospectus will increase with increases in the market price
of our Common Stock. As described in another risk factor, the market price of the Common Stock has been volatile in the past and
could fluctuate widely in response to various factors.
We may issue additional shares of our Common Stock or instruments
convertible or exercisable into our Common Stock, including in connection with exercise of the Series I Warrants offered by this
prospectus, and thereby materially and adversely affect the market price of our Common Stock, and, in turn, the market value of
the Series I Warrants.
Subject to certain contractual limitations
we are under, we may offer and sell additional shares of our Common Stock or other securities convertible into or exercisable for
our Common Stock during the time you hold the shares of Common Stock or Series I Warrants offered by this prospectus. We cannot
predict the size of future issuances or the effect, if any, that they may have on the market price for our Common Stock. If we
issue additional shares of our Common Stock or instruments convertible or exercisable into our Common Stock, it may materially
and adversely affect the price of our Common Stock and, in turn, the market value, if any, of the Series I Warrants offered by
this prospectus. Furthermore, as described in a different risk factors, the conversion or exercise of some or all of our outstanding
derivative securities, including the Series I Warrants offered by this prospectus and the Convertible Notes, will dilute the ownership
interests of existing shareholders, and any sales in the public market of shares of our Common Stock issuable upon any such conversion
or exercise could adversely affect prevailing market prices of our Common Stock or the market value, if any, of the Series I Warrants.
In addition, the existence of the Series I Warrants offered by this prospectus may encourage short selling by market participants
because the exercise of the Series I Warrants could depress the price of our Common Stock.
Holders of the Series I Warrants offered by this prospectus
will be entitled to only limited rights with respect to our Common Stock, and will be subject to all changes made with respect
to our Common Stock to the extent holders receive shares of Common Stock pursuant to the terms of the Series I Warrants.
Holders of the Series I Warrants offered
by this prospectus will be entitled to only limited rights with respect to our Common Stock until the time at which they become
holders of our Common Stock pursuant to the terms of such warrants, but will be subject to all changes affecting our Common Stock
before that time. For example, if an amendment is proposed to our articles of incorporation requiring shareholder approval and
the record date for determining the shareholders of record entitled to vote on the amendment occurs before the date you are deemed
to be a record holder of our Common Stock, you generally will not be entitled to vote on the amendment, although you will nevertheless
be subject to any changes affecting our Common Stock.
The exercise price of the Series I Warrants offered by this
prospectus will not be adjusted for certain dilutive events.
The exercise prices of the Series I Warrants
is not subject to adjustment upon a future issuances of securities, including, without limitation, capital stock, options and convertible
securities. Such issuances, transactions or occurrences may adversely affect the market price of our Common Stock or the market
value, if any, of the Series I Warrants without resulting in an adjustment of the exercise prices of the Series I Warrants.
You may receive less valuable consideration than expected
because the value of our Common Stock may decline after you exercise the Series I Warrants issued in this offering but before we
settle our obligation thereunder.
An exercising holder will be exposed to
fluctuations in the value of our Common Stock during the period from the date such holder surrenders Series I Warrants for exercise
until the date we settle our exercise obligation. Upon exercise of the Series I Warrants offered by this prospectus, we will be
required to deliver the shares of our Common Stock on the third business day following the relevant exercise date. Accordingly,
if the price of our Common Stock decreases during this period, the value of the shares that you receive will be adversely affected
and would be less than the value on the exercise date.
Risks Related to our Business and Industry
We must meet The NASDAQ Capital Market continued listing requirements
or we risk delisting, which may decrease our stock price and make it harder for our shareholders to trade our stock.
Our Common Stock is currently listed for trading
on The NASDAQ Capital Market. We must continue to satisfy NASDAQ’s continued listing requirements or risk delisting of our
securities. Delisting would have an adverse effect on the price of our Common Stock and likely also on our business.
As previously disclosed and as discussed above
under “Prospectus Supplement Summary, Recent Developments, NASDAQ Non-Compliance and Potential Future Reverse Stock Split,”
we currently are not in compliance with the NASDAQ minimum stockholders’ equity requirement in Nasdaq Listing Rule 5550(b)
(nor the alternatives of market value of listed securities or net income from continuing operations). On July 7, 2016, NASDAQ granted
us a 180-day extension to October 11, 2016 to comply with NASDAQ Listing Rule 5550(b). On October 17, 2016, we received a letter
from NASDAQ notifying us that we did not meet the terms of the extension and that we would be subject to delisting unless we requested
a hearing before a NASDAQ Listing Qualifications Panel. Accordingly, we have 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.
Further, as discussed above under “Prospectus
Supplement Summary, Recent Developments, NASDAQ Non-Compliance and Potential Future Reverse Stock Split,” we may in the near
future be in violation of the NASDAQ minimum bid price requirement in NASDAQ Listing Rule 5550(a)(2).
Our Common Stock currently remains listed on The NASDAQ Capital Market under the symbol “RGSE.”
There can be no assurance that we will be able to regain or maintain compliance with the NASDAQ continued listing requirements,
or that our Common Stock will not be delisted from The NASDAQ Capital Market in the future. If our Common Stock is delisted from
NASDAQ, it may trade on the over-the-counter market, which may be a less liquid market. In such case, our shareholders’ ability
to trade, or obtain quotations of the market value of, shares of our Common Stock would be severely limited because of lower trading
volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices for
our securities.
In addition to the foregoing, if our Common Stock is delisted from NASDAQ and it trades on the over-the-counter
market, the application of the “penny stock” rules could adversely affect the market price of our Common Stock and
increase the transaction costs to sell those shares. The S
EC
has adopted regulations which generally define a “penny stock” as an equity security that has a market price of less
than $5.00 per share, subject to specific exemptions. The last reported trade of our Company Stock on The NASDAQ Capital Market
was at a price below $5.00 per share. If our Common Stock is delisted from NASDAQ and it trades on the over-the-counter market
at a price of less than $5.00 per share, our Common Stock would be considered a penny stock. The SEC’s penny stock rules
require a broker-dealer, before a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must
also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and
the salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s
account. In addition, the penny stock rules generally require that before a transaction in a penny stock occurs, the broker-dealer
must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s
agreement to the transaction. If applicable in the future, these rules may restrict the ability of brokers-dealers to sell our
Common Stock and may affect the ability of investors to sell their shares, until our Common Stock no longer is considered a penny
stock.
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus supplement, the accompanying prospectus and
the documents incorporated by reference herein and therein may contain forward-looking statements that involve risks and uncertainties.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they provide our current
beliefs, expectations, assumptions and forecasts about future events, and include statements regarding our future results of operations
and financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations.
The words “anticipate,” “believe,” “plan,” “estimate,” “expect,” “future,”
“intend,” “may,” “will” and similar expressions as they relate to us are intended to identify
such forward-looking statements. Because forward-looking statements relate to the future, they are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results
and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not
rely on any of these forward-looking statements.
Important factors that could cause our actual results and financial
condition to differ materially from those indicated in the forward-looking statements include, without limitation, the following:
our ability to operate with our existing financial resources or raise funds to meet our financial obligations and implement our
strategy; our history of operating losses; our ability to achieve profitability; our ability to generate sufficient cash flow to
fund our operations; our success in implementing our plans to increase future sales, installations and revenue; the impact of our
present indebtedness and projected future borrowings on our financial health and our ability to pay interest and principal on our
indebtedness; restrictions imposed by our current indebtedness; our ability to satisfy the conditions under the Convertible Notes
permitting release of funds from the restricted cash accounts and for payments to be made in shares of Common Stock; restrictions
on certain transactions and potential premiums and penalties under our outstanding warrants and the Convertible Notes; rules, regulations
and policies pertaining to electricity pricing and technical interconnection of customer-owned electricity generation such as net
energy metering; the continuation and level of government subsidies and incentives for solar energy, which, after the November
2016 federal and state elections may change dramatically and are difficult to predict; our failure to timely or accurately complete
financing paperwork on behalf of customers; the adoption and general demand for solar energy; the impact of a drop in the price
of conventional energy on demand for solar energy systems; existing and new regulations impacting solar installations including
electric codes; delays or cancellations for system installations where revenue is recognized on a percentage-of-completion basis;
seasonality of customer demand and adverse weather conditions inhibiting our ability to install solar energy systems; changing
and updating technologies and the issues presented by these new technologies related to customer demand and our product offering;
geographic concentration of revenue from the sale of solar energy systems in Hawaii and east coast states; loss of key personnel
and ability to attract necessary personnel; loss or suspension of licenses required for installation of solar energy systems; adverse
outcomes arising from litigation and legal disputes; our ability to continue to obtain services and components from suppliers,
installers and other vendors; disruption of our supply chain from equipment manufacturers and potential shortages of components
for solar energy systems; factors impacting the timely installation of solar energy systems; competition; costs associated with
safety and construction risks; continued access to competitive third party financiers to finance customer solar installations;
our ability to meet customer expectations; risks and liabilities associated with placing employees and technicians in our customers’
homes and businesses; product liability claims; warranty claims and failure by manufacturers to perform under their warranties
to us; increases in interest rates and tightening credit markets; continued or future non-compliance with NASDAQ’s continued
listing requirements; our inability to maintain effective disclosure controls and procedures and internal control over financial
reporting; volatile market price of our Common Stock; possibility of future dilutive issuances of securities and its impact on
our ability to obtain additional financing; the low likelihood that we will pay any cash dividends on our Common Stock for the
foreseeable future; compliance with public reporting requirements; anti-takeover provisions in our organizational documents; and
such other factors as discussed throughout Part I, Item 1A, Risk Factors and Part II, Item 7, Management’s Discussion and
Analysis of Financial Conditions and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2015
and Part I, Item 2, Management’s Discussion and Analysis of Financial Conditions and Results of Operations and Part II, Item
1A, Risk Factors included in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2016, June 30, 2016 and September
30, 2016.
Any forward-looking statement made by us in this prospectus
supplement, the accompanying prospectus and the documents incorporated by reference herein and therein is based only on information
currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any
forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information,
future developments or otherwise.
USE OF PROCEEDS
The
net proceeds from the sale of the Units in this offering are estimated to be approximately $__________, excluding the proceeds,
if any, from the exercise of the Series I Warrants offered in this offering, based on an assumed public aggregate offering price
of $__________ for the Units and after deducting placement agent fees and expenses and other estimated expenses of the offering.
We intend to use the net proceeds from this offering for
general corporate purposes, including, without limitation, for working capital purposes, to increase sales and operational
capabilities and/or for any scheduled repayment of indebtedness, but not for the redemption or repurchase of any of our or
our subsidiaries’ equity securities. As of the date of this prospectus supplement, we cannot specify with certainty all
of the particular uses for the net proceeds we will have upon completion of the offering or the order of priority in which we
may use such proceeds. Accordingly, we will retain broad discretion over the use of these proceeds.
DILUTION
Dilution is the amount by which the purchase
price paid by the purchasers for the securities offered in this offering will exceed the as-adjusted net tangible book value (deficit)
per share of our Common Stock after the offering.
Net tangible book value (deficit) per
share of our Common Stock as of a particular date represents the amount of our total tangible assets less our total
liabilities, divided by the number of shares of Common Stock outstanding as of such date. As of September 30, 2016, our net
tangible book value (deficit) was approximately $(6.9) million, or $(2.73) per share of Common Stock. Purchasers of Units in
this offering will experience substantial and immediate dilution in net tangible book value per share of our Common Stock for
financial accounting purposes immediately following the closing. The calculations below are based on there being 16,556,292
shares of our Common Stock outstanding as of December 2, 2016.
The following table illustrates this dilution
based solely on the number of shares of Common Stock issued as part of the Units at closing.
Assumed initial public offering price per share
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|
$
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|
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Net tangible book value (deficit) per share as of September 30, 2016
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$
|
(2.73
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)
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Increase in pro forma net tangible book value from
conversions of Convertible Notes into Common Stock between September 30 and December 2, 2016
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$
|
2.31
|
|
Increase in pro forma net tangible book value (deficit) per share attributable to new investors
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|
$
|
|
|
Pro forma, as-adjusted, net tangible book value (deficit) per share after this offering
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$
|
|
|
Dilution per share to investors in this offering
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|
$
|
|
|
The Units offered in this
offering also include Series I Warrants, each of which is exercisable into a number of shares of Common Stock equal to __%
of the total number of shares of Common Stock the holder purchased as part of the Units. In the tables below, we illustrate this
dilution based on (i) the offering of an aggregate of $_________ of Units at a public offering price of $___ per Unit, and
(ii) the issuance of ______ shares of Common Stock upon exercise of Series I Warrants at an exercise price of $____ per
share.
Assumed initial public offering price per share (assumed exercise of warrants as described above)
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|
$
|
|
|
Net tangible book value (deficit) per share as of September 30, 2016
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|
$
|
(2.73
|
)
|
Increase in pro forma net tangible book value from
conversions of Convertible Notes into Common Stock between September 30 and December 2, 2016
|
|
$
|
2.31
|
|
Increase in pro forma net tangible book value (deficit) per share attributable to new investors
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|
$
|
|
|
Pro forma, as-adjusted, net tangible book value (deficit) per share after this offering
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|
$
|
|
|
Dilution per share to investors in this offering
|
|
$
|
|
|
The
tables above do not take into account any shares of Common Stock issuable in the future upon the exercise or conversion of currently
outstanding derivative securities, including the Convertible Notes. We may in the future sell substantial additional amounts of
Common Stock or securities convertible into or exercisable for Common Stock. We may also choose to raise additional capital due
to market conditions or other strategic considerations even if we believe we have sufficient funds for our current or future operating
plans. The issuance of these securities could result in further dilution to our shareholders.
PLAN OF DISTRIBUTION
Roth Capital Partners, LLC, which we refer
to as the “placement agent,” has agreed to act as the exclusive placement agent in connection with this offering subject
to the terms and conditions of a placement agency agreement dated ______ __, 2016. The placement agent is not purchasing or selling
any of the Units offered by this prospectus, nor is it required to arrange the purchase or sale of any specific number or dollar
amount of the Units. The placement agent has agreed to use its reasonable best efforts to arrange for the sale of all of the Units
offered hereby. Therefore, we may not sell the entire amount of the Units offered pursuant to this prospectus supplement. The placement
agent may engage one or more sub-agents or selected dealers in connection with this offering.
We will enter into a securities purchase agreement directly with investors who purchase not less than $100,000 of Units in this offering. A form of securities purchase agreement is attached hereto as Annex A, which provides such investors with certain representations, warranties and covenants, including indemnifications, from us, which will not be available to investors purchasing a smaller amount of Units. Our obligation to issue and sell the Units to the investors who are parties to the securities purchase agreement is subject to the closing conditions set forth in the securities purchase agreement, including the absence of any material adverse change in our business and the receipt of certain opinions, letters and certificates from us or our counsel, which may be waived by the respective parties.
Investors who are parties to the securities
purchase agreement will agree, on behalf of each such investor and certain of its affiliates, to limit the volume of future sales
they make of the shares of Common Stock they purchased in this offering to their pro rata share (based on each investor’s
purchase price compared to the aggregate purchase price of all investors in this offering) of 35% of our daily trading volume on
any trading day, subject to exception.
The terms of the securities purchase agreement
provides that, from the date we enter into the securities purchase agreement until 30 days after the closing under the securities
purchase agreement, we may not issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares
of Common Stock, or any security which would entitle the holder to acquire at any time shares of Common Stock, at an effective
price per share less than the per Unit purchase price in this offering. Further, during the same period, we may not effect or enter
into an agreement to effect any issuance of shares of Common Stock or any security which would entitle the holder to acquire at
any time shares of Common Stock involving a “variable rate transaction” (as defined in the securities purchase agreement).
The term “variable rate transaction” generally means a transaction in which we (a) issue or sell 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 our business or the market for the Common Stock or (b) enter into, or effect a transaction under, any agreement, including,
but not limited to, an equity line of credit, whereby we may issue securities at a future determined price. The prohibitions described
in this paragraph do not apply to “exempt issuances” (as defined in the securities purchase agreement) so long as such
exempt issuance is not a “variable rate transaction,” subject to certain exceptions. The term “exempt issuance”
generally means the issuance of: (a) shares of Common Stock or options to our employees, officers or directors pursuant to any
stock or option plan duly adopted for such purpose, by a majority of the non-employee members of our Board of Directors or a majority
of the members of a committee of non-employee directors established for such purpose for services rendered to us; (b) the warrant
we expect to issue to the placement agent in connection with this offering; (c) securities upon the exercise, exchange or conversion
of the securities sold in this offering, the Series I Warrants, the warrant we expect to issue to the placement agent in connection
with this offering and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date we enter into the securities purchase agreement, subject to certain limitations; (d) up to 250,000 shares
of Common Stock issued to the lender, or any successor thereto, who is a party to any revolving credit facility outstanding prior
to the date of the securities purchase agreement; and (e) securities issued pursuant to acquisitions or strategic transactions
approved by a majority of our disinterested directors, subject to certain limitations.
The purchase price for the Units has been
determined based upon arm’s-length negotiations between the placement agent, the investors and us.
We currently anticipate that the sale
of the Units will be completed on or before December 13, 2016. We estimate the total offering expenses of this offering that
will be payable by us, excluding the placement agent’s fee, will be approximately $_________, which includes legal and
printing costs, various other fees and reimbursement of the placements agent’s expenses.
To comply with the NASDAQ Listing Rules, we will not issue any shares of Common Stock at the closing of this
offering to an investor if such issuance would cause the investor with such investor’s “attribution parties”
to hold in excess of 19.99% of the outstanding shares of our Common Stock.
Commissions and Expenses
We have agreed to pay the placement agent
an aggregate cash placement fee equal to 7.0% of the gross proceeds received at the closing from the sale of the Units.
The following table shows per Unit and
total cash placement agent’s fees we will pay to the placement agent in connection with the sale of the Units offered pursuant
to this prospectus assuming the purchase of all of the Units offered hereby:
Per Unit
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$____
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Total
|
$_________ (assuming all Units are sold)
|
Because there is no minimum offering amount
required as a condition to closing in this offering, the actual aggregate cash placement fee, if any, is not presently determinable
and may be substantially less than the maximum amount set forth above. In addition, subject to FINRA Rule 5110(f)(2)(d)(i), we
have agreed to reimburse the placement agent for reasonable out of pocket expenses up to a maximum of $75,000.
In addition to the cash fees set forth
above, we have agreed to issue to the placement agent a warrant to purchase up to an aggregate of 5% of the aggregate number of
shares of Common Stock sold in this offering (exclusive of any shares of Common Stock issuable upon exercise of the Series I Warrants).
The placement agent warrant will have similar terms as the Series I Warrants, other than (i) it will expire five years after the
effective date of this offering; (ii) it will be exercisable through a cashless exercise regardless of whether the shares of Common
Stock issuable upon exercise of the placement agent warrant are covered by a registration statement under the Securities Act; (iii)
the exercise price will be 125% of the public offering price per Unit; (iv) certain covenants appearing in the Series I Warrants
will be removed in the placement agent warrant; (v) the initial beneficial ownership limitation will be set at 4.99% rather than
9.99%; and (vi) pursuant to FINRA Rule 5110(g), the placement agent warrant and the underlying securities will not be transferable
for 6 months from the date of issuance, except the transfer of any security:
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·
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by operation of law or by reason of reorganization of our company;
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|
·
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to any FINRA member firm participating in the offering and the officers or partners thereof, if all securities so transferred
remain subject to the lock-up restriction set forth above for the remainder of the time period;
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|
·
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if the aggregate amount of securities of our company held by the holder of the placement agent warrant or related persons do
not exceed 1% of the securities being offered;
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·
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that is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member
manages or otherwise directs investments by the fund, and participating members in the aggregate do not own more than 10% of the
equity in the fund; or
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|
·
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the exercise or conversion of any security, if all securities received remain subject to the lock-up restriction set forth
above for the remainder of the time period.
|
The placement agent warrant and the shares
of Common Stock issuable upon exercise of the placement agent warrant are not being registered on the registration statement of
which this prospectus supplement is a part.
Our agreement with the placement agent
provides that if we have not already paid to the placement agent the contemplated transaction fee in connection with a financing
transaction, we are obligated to pay to the placement agent such transaction fee (cash only) with respect to any financing transaction
to the extent that the financing is provided to us by investors who the placement agent had introduced to us during the term of
the agreement, if the financing is consummated within three months after the termination of the placement agency agreement.
Indemnification
We have agreed to indemnify the placement
agent against liabilities under the Securities Act of 1933, as amended, or the “Securities Act.” We have also agreed
to contribute to payments the placement agent may be required to make in respect of such liabilities.
Prior Transactions With the Placement Agent
The placement agent has served as placement
agent or underwriter for us in prior securities offerings. For example, the placement agent served as the representative of the
underwriters in our September 2016 underwritten public offering of units consisting of shares of our Series A 12.5% Mandatorily
Convertible Preferred Stock and Series H Warrants. In connection with that transaction, we paid the placement agent a $56,000 non-accountable
expense reimbursement, and $75,000 as reimbursement for legal fees and disbursements incurred in the course of qualifying the offering
with certain regulatory agencies, and for certain additional fees and expenses actually incurred. The aggregate discount under
the underwriting agreement for the placement agent was $161,700. We also issued the placement agent a warrant currently exercisable
into 90,177 shares of Common Stock and Series H Warrants exercisable into approximately 25,455 shares of Common Stock.
In April 2016, we completed a private
placement in which the placement agent acted as placement agent. We paid the placement agent a cash fee of $35,625 in
connection with such private placement and the placement agent is eligible to receive additional payments of up to $544,375
as funds are released from collateral accounts associated with the private placement, of which the placement agent has
received $519,000 as of December 2, 2016.
In addition, in connection with other
prior offerings of our securities in which the placement agent acted as placement agent, we have paid cash fees and issued
warrants to the placement agent and certain of its affiliates. As of the date of this prospectus supplement, the placement
agent holds warrants to purchase 161,230 shares of our Common Stock (including the warrants described above).
Electronic Distribution
This prospectus supplement and the accompanying
prospectus may be made available in electronic format on websites or through other online services maintained by the placement
agent, or by an affiliate. Other than this prospectus supplement and the accompanying prospectus in electronic format, the information
on the placement agent’s websites and any information contained in any other website maintained by the placement agent or
by an affiliates is not part of this prospectus supplement, the accompanying prospectus or the registration statement of which
this prospectus supplement and the accompanying prospectus are a part, has not been approved and/or endorsed by us or the placement
agent, and should not be relied upon by investors.
The foregoing does not purport to be a
complete statement of the terms and conditions of the placement agency agreement or the securities purchase agreement, copies of
which are incorporated by reference into the registration statement of which this prospectus supplement is a part. See “Where
You Can Find More Information.”
Regulation M Restrictions
The placement agent may be deemed to be
an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit
realized on the resale of any shares of Common Stock or the warrants sold by it while acting as a principal might be deemed to
be underwriting discounts or commissions under the Securities Act. As an underwriter, the placement agent would be required to
comply with the requirements of the Securities Act and the Securities Exchange Act of 1934, as amended, or the “Exchange
Act,” including Rule 415(a)(4) under the Securities Act and Rule 10b-5 and Regulation M promulgated under the Exchange Act.
These rules and regulations may limit the timing of purchases and sales of shares offered hereby by any placement agent acting
as a principal. Under these rules and regulations, the placement agent:
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•
|
must not engage in any stabilization activity in connection with our securities; and
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|
•
|
must not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other
than as permitted under the Exchange Act, until it has completed its participation in the distribution.
|
Passive Market Making
In connection with this offering, the placement
agent may engage in passive market making transactions in our Common Stock on The NASDAQ Capital Market in accordance with Rule
103 of Regulation M promulgated under the Exchange Act during a period before the commencement of offers or sales of the Units
and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess
of the highest independent bid of that security. If all independent bids are lowered below the passive market maker’s bid,
however, that bid must then be lowered when specified purchase limits are exceeded.
Other
From time to time, the placement agent
and its affiliates may in the future provide various investment banking, financial advisory and other services to us and our affiliates
for which services they may receive customary fees, but we have no present arrangements to do so. Subject to Regulation M and other
applicable statutes and regulations, in the course of its businesses, the placement agent and its affiliates may actively trade
our securities or loans for their own account or for the accounts of customers, and, accordingly, the placement agent and its affiliates
may at any time hold long or short positions in such securities or loans.
Listing
Our Common Stock is listed on The NASDAQ
Capital Market under the symbol “RGSE.” There is no established trading market for the Units or the Series I Warrants
offered by this prospectus, and we do not expect a market to develop. In addition, we do not intend to apply for listing of the
Units or the Series I Warrants offered by this prospectus on any securities exchange or recognized trading system.
Participation Rights
We have granted investors in past securities
offerings the right to participate and purchase securities in future securities offerings at a fixed percentage as follows:
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·
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Pursuant to the Securities Purchase Agreement, entered into on February 23, 2015 with several institutional and accredited
investors, relating to an offering of units of our Common Stock and warrants to purchase Common Stock, the investors party to the
Securities Purchase Agreement have, in the aggregate, a right to participate in any future offering for up to 40% of any future
offering of securities, other than certain excluded securities, until June 30, 2017.
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·
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Pursuant to the Securities Purchase Agreement, entered into on June 26, 2015 with several institutional and accredited investors,
relating to an offering of units of our Common Stock and Series F Warrants to purchase Common Stock, investors who qualify as “Qualifying
Buyers” under the Securities Purchase Agreement have, in the aggregate, a right to participate in any future offering for
up to 10% of any future offering of securities, other than certain excluded securities, until June 30, 2017.
|
|
·
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Pursuant to the Securities Purchase Agreement, entered into on April 1, 2016 with several institutional and accredited investors,
relating to an offering of units of senior secured convertible notes due April 1, 2019 and Series G warrants to purchase Common
Stock, the investors party to the Securities Purchase Agreement have, in the aggregate, a right to participate in any future offering
for up to 50% of any future offering of securities, other than certain excluded securities, until December 31, 2017.
|
If all of the holders of such rights of
participation were to fully exercise such rights, no Units would be available for sale to new investors under this prospectus supplement.
DESCRIPTION OF SECURITIES WE ARE OFFERING
We are offering an aggregate of up to $_________
of Units, each consisting of (i) one share of our Common Stock, and (ii) a Series I Warrant to purchase __% of one share of our
Common Stock. The common shares and warrants are immediately separable and will be issued separately. The Units will not be issued
or certificated. The Common Stock and Series I Warrants are immediately separable and will be issued separately, but will be purchased
together as a unit in this offering. This prospectus supplement also covers up to ________ shares of Common Stock issuable upon
exercise of the Series I Warrants.
Description of Common Stock
The material
terms and provisions of our Common Stock are described under the caption “Description of Common Stock” starting on
page 5 of the accompanying prospectus.
Description of Series I Warrants
The following is a brief summary of certain
terms and conditions of the Series I Warrants offered by this prospectus supplement and is subject in all respects to the provisions
contained in the Series I Warrant, a form of which is attached to this prospectus as Annex B. You should review a copy of the attached
form of Series I Warrant for a complete description of the terms and conditions applicable to the warrant offered by this prospectus.
Form
. The Series I Warrants will
be issued as individual warrant agreements to the investors substantially in the form attached hereto as Annex B.
Amount of Series I Warrant Shares
.
Each purchaser of Units will receive a Series I Warrant exercisable into a number of shares of Common Stock equal to __% of
the total number of shares of Common Stock purchased as part of the Units. The number of shares of Common Stock will be fixed at
the closing of this offering.
Exercisability
. The Series I Warrants
will be exercisable at any time after their issuance and up to the date that is five years after their issuance. The Series I Warrants
will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice and,
at any time a registration statement registering the issuance of the shares of Common Stock underlying the Series I Warrants under
the Securities Act is effective and available for the issuance of such shares, by payment in full in immediately available funds
for the number of shares of Common Stock purchased upon such exercise. No fractional shares of Common Stock will be issued in connection
with the exercise of a Series I Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the
nearest whole number.
Registration of Series I Warrant Shares
.
The issuance of shares of Common Stock upon exercise of the Series I Warrants is registered on the registration statement of which
this prospectus is a part. If a registration statement under the Securities Act covering the exercise of the Series I Warrants
is not available in the future, then we expect that the Series I Warrants will be exercisable on a cashless basis.
Cashless Exercise.
If the issuance
of the shares of Common Stock issuable upon exercise of a Series I Warrant is not covered by a registration statement under the
Securities Act, the holder may, in its sole discretion, elect to exercise a Series I Warrant through a cashless exercise, in which
case the holder would receive upon such exercise the “net number” of shares of Common Stock determined according to
the formula set forth in the Series I Warrant.
Limitations on Exercise and Issuance
.
A holder may not exercise a Series I Warrant and we may not issue shares of Common Stock under a Series I Warrants if, after giving
effect to the exercise or issuance, the holder together with its affiliates would beneficially own in excess of a set percentage
of the outstanding shares of our Common Stock. The cap will be set on the date of issuance at either 4.99% or 9.99%, at each holder’s
election. If no election is made, the initial cap will be set at 4.99%. At each holder’s option, the cap may be increased
or decreased to any other percentage not in excess of 9.99%, except that any increase will not be effective until the 61st day
after notice to us.
Exercise Price
. The exercise price
per share of Common Stock purchasable upon exercise of the Series I Warrants is $___. The exercise price of the Series I Warrants
is subject to adjustments for stock splits or similar events. In addition, we may, with the consent of the “required holders”
(as defined in the Series I Warrants), reduce the then current exercise price to any amount and for any period of time deemed appropriate
by our board of directors.
Transferability
. Subject to applicable
laws, the Series I Warrants may be offered for sale, sold, transferred or assigned without our consent. However, there is no established
public trading market for the Series I Warrants and we do not expect one to develop.
Purchase Rights.
The holders of
the Series I Warrants are entitled to acquire options, convertible securities or rights to purchase our securities or property
granted, issued or sold pro rata to the holders of our Common Stock on an “as if exercised for Common Stock” basis.
Rights Upon Distribution
. The holders
of Series I Warrants are entitled to receive any dividend or other distribution of our assets (or rights to acquire its assets),
at any time after the issuance of the Series I Warrants, on an “as if exercised for Common Stock” basis.
Fundamental Transactions
. The Series
I Warrants prohibit us from entering into transactions constituting a “fundamental transaction” (as defined in the
Series I Warrants) unless the successor entity assumes all of our obligations under the Series I Warrants and the other transaction
documents in a written agreement approved by the “required holders” of the Series I Warrants. The definition of “fundamental
transactions” includes, but is not limited to, mergers, a sale of all or substantially all our assets, certain tender offers
and other transactions that result in a change of control.
Rights as a Shareholder
. Except
as otherwise provided in the Series I Warrants or by virtue of such holder’s ownership of shares of Common Stock, the holder
of a Series I Warrant does not have the rights or privileges of a holder of Common Stock, including any voting rights, until the
holder exercises the Warrant.
Amendment and Waiver
. The provisions
of a Series I Warrant may be amended or waived and we may take action prohibited by the Series I Warrant, or omit to perform any
act required by the Series I Warrant, only if we have obtained the written consent of the “required holders” (as defined
in the Series I Warrants).
Market and Exchange Listing
. The
Series I Warrants are a new issue of securities and currently there is no market for the securities. We do not intend to list or
qualify for quotation the Series I Warrants on any securities exchange or market.
LEGAL
MATTERS
The validity of the Common Stock issued
and issuable upon conversion of the exercise of the Series I Warrants will be passed upon for us by Brownstein Hyatt Farber Schreck,
LLP, Denver, Colorado. Ellenoff Grossman & Schole LLP, New York, New York, is counsel for the placement agent in connection
with this offering.
EXPERTS
The financial statements of Real Goods
Solar, Inc. and its subsidiaries, as of and for the year ended December 31, 2014, are incorporated herein by reference in reliance
on the report dated March 31, 2015 of EKS&H LLLP, independent registered public accounting firm, as experts in accounting and
auditing.
The consolidated financial statements of
Real Goods Solar, Inc. and its subsidiaries, as of and for the year ended December 31, 2015, incorporated in this prospectus supplement
and the accompanying prospectus by reference from the Real Goods Solar, Inc. Annual Report on Form 10-K for the year ended December
31, 2015, have been audited by Hein & Associates LLP, an independent registered public accounting firm, as stated in their
report incorporated herein by reference, and have been incorporated in reliance upon such report and upon the authority of such
firm as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We file annual, quarterly
and current reports, proxy and information statements and other information with the SEC. You may read and copy any materials we
file with the SEC at the SEC’s Public Reference Room in Washington, D.C. at 100 F Street, N.E., Washington, D.C. 20549.
You may obtain information
about the operation of the Public Reference Room by calling the SEC at 1(800) SEC-0330. The SEC also maintains a website that contains
information we file electronically with the SEC, which you can access over the Internet at http://www.sec.gov. We maintain a website
at http://www.rgsenergy.com with information about our company. Information contained on our website or any other website is not
incorporated into this prospectus and does not constitute a part of this prospectus. Our website address referenced above is intended
to be an inactive textual reference only and not an active hyperlink to our website.
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE
The SEC allows us to “incorporate by reference”
into this prospectus supplement and the accompanying prospectus the information we file with the SEC, which means that we can disclose
important information to you by referring you to other documents filed separately with the SEC. The information incorporated by
reference is considered part of this prospectus supplement and the accompanying prospectus, and any information that we file with
the SEC subsequent to this prospectus supplement and the accompanying prospectus and prior to the termination of the offering referred
to in this prospectus supplement will automatically be deemed to update and supersede this information. We incorporate by reference
into this prospectus supplement and the accompanying prospectus the documents listed below (excluding any portions of such documents
that have been “furnished” but not “filed” for purposes of the Exchange Act unless specifically incorporated
by reference herein or therein):
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Our Annual Report on Form 10-K for the year ended December 31, 2015, filed April 1, 2016, as amended by Amendment No. 1 to
Report on Form 10-K/A, filed April 24, 2016;
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Our Quarterly Reports on Form 10-Q for the three months ended March 31, 2016, filed May 12, 2016, the three months ended June
30, 2016, filed August 22, 2016, and the three months ended September 30, 2016, filed November 8, 2016;
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Our Current Reports on Form 8-K (including amendments thereto) filed January 22, 2016, February 8, 2016, March 30, 2016, April 1, 2016 (other than information furnished pursuant to Item 2.02 of Form 8-K), April 6, 2016, April 7, 2016, April 15, 2016, May 16, 2016, May 27, 2016, June 2, 2016, June 8, 2016, June 27, 2016 (other than information furnished pursuant to Item 7.01 of Form 8-K), July 12, 2016, August 24, 2016, September 13, 2016, September 14, 2016, September 23, 2016, October 3, 2016, October 21, 2016, November 3, 2016, November 17, 2016, November 21, 2016 and December 2, 2016; and
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The description of our Common Stock contained in our registration statement on Form 8-A filed May 5, 2008 including any other
amendments or reports filed for the purpose of updating such description (other than any portion of such filings that are furnished
under applicable SEC rules rather than filed).
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We also incorporate by reference all documents
we subsequently file with the SEC (other than information furnished pursuant to Item 2.02 or Item 7.01 of Form 8-K, or as otherwise
permitted by SEC rules) pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the initial filing of the registration
statement of which this prospectus supplement is a part (including prior to the effectiveness of the registration statement) and
prior to the termination of the offering. Any documents that we subsequently file with the SEC will automatically update and supersede
the information previously filed with the SEC and will be considered to be a part of this prospectus supplement and the accompanying
prospectus from the date those documents are filed. Thus, for example, in the case of a conflict or inconsistency between information
set forth in this prospectus supplement or the accompanying prospectus and information incorporated by reference into this prospectus
supplement and the accompanying prospectus, you should rely on the information contained in the document that was filed later.
This prospectus supplement is part of a
registration statement on Form S-3 that we have filed with the SEC relating to the securities. As permitted by SEC rules, this
prospectus supplement does not contain all of the information included in the registration statement and the accompanying exhibits
and schedules we file with the SEC. We have filed certain legal documents that control the terms of the Common Stock offered by
this prospectus supplement as exhibits to the registration statement. We may file certain other legal documents that control the
terms of the Common Stock offered by this prospectus supplement as exhibits to reports we file with the SEC. You may refer to the
registration statement and the exhibits and schedules for more information about us and our securities. The registration statement
and exhibits and schedules are also available at the SEC’s Public Reference Room or through its website.
We will provide, without charge and upon
oral or written request, to each person, including any beneficial owner, to whom a copies of this prospectus supplement and the
accompanying prospectus have been delivered, a copy of any of the documents referred to above as being incorporated by reference
into this prospectus supplement or the accompanying prospectus but not delivered with them. You may obtain a copy of these filings,
at no cost, by writing or calling us at Real Goods Solar, Inc., 833 West South Boulder Road, Louisville, Colorado 80027, (303)
222-8300. Exhibits to these filings will not be provided unless those exhibits have been specifically incorporated by reference
in this prospectus supplement.
Annex A
FORM OF
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT
This Securities Purchase
Agreement (this “
Agreement
”) is dated as of _______ ___, 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).
“
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 _____ __, 2016, between the Company and the Placement Agent.
“
Per
Share Purchase Price
” means $________________.
“
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.
“
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.
“
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, OTCQB or OTCQX (or any successors to any of the foregoing).
“
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 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 C
attached hereto.
“
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 $____________ of Shares for each Purchaser equal to such Purchaser’s
Subscription Amount as set forth on the signature page hereto executed by such Purchaser divided by the Per Share Purchase Price,
and Warrants 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 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:
(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;
(iii) a
Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to ___% of such Purchaser’s
Shares, with an exercise price equal to $_____
,
subject to adjustment therein; and
(iv) 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; and
(ii) 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);
(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:
(a)
Subsidiaries
. All of the direct and indirect material 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.
(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”)
.
(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 for issuance of the Warrant Shares at least equal to the number of Warrant Shares issuable on the date hereof.
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.
(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.
(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: (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, 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.
(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 in
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.
(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.
(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.
(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.
(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.
(aa)
Solvency
.
Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder: (i) the fair saleable value of the Company’s assets exceeds
the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry
on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular
capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability
thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate
all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).
The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date.
Schedule 3.1(aa)
sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which
the Company or any Subsidiary has commitments. For the purposes of this Agreement, “
Indebtedness
” means (x)
any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary
course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether
or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties
by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business;
and (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance
with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
(bb)
Tax
Status
. Except as set forth on
Schedule 3.1(bb)
and for matters that would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed
all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required
by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. Except as set forth on
Schedule 3.1(bb)
, there are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for
any such claim.
(cc)
Foreign
Corrupt Practices
. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent
or other person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns
from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person
acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material respect any provision
of FCPA.
(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.
(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 is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control
of the U.S. Treasury Department (“
OFAC
”).
(jj)
U.S.
Real Property Holding Corporation
. The Company is not and has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s
request.
(kk)
Bank
Holding Company Act
. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act
of 1956, as amended (the “
BHCA
”) and to regulation by the Board of Governors of the Federal Reserve System (the
“
Federal Reserve
”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly
or indirectly, 5% or more of the outstanding shares of any class of voting securities or 25% or more of the total equity of a bank
or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries
or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve.
(ll)
Money
Laundering
. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with
applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “
Money
Laundering Laws
”), and no Action or Proceeding by or before any court or governmental agency, authority or body or any
arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of
the Company or any Subsidiary, threatened.
3.2
Representations
and Warranties of the Purchasers
. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as
of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they
shall be accurate as of such date):
(a)
Organization;
Authority
. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability
company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary
corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.
(b)
Understandings
or Arrangements
. Such Purchaser is acquiring the Securities and the Warrant Share as principal for its own account and has
no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such
Securities or Warrant Shares (this representation and warranty not limiting such Purchaser’s right to sell the Securities
or the Warrant Shares in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities
and the Warrant Shares in the ordinary course of its business.
(c)
Purchaser
Status
. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on
which it exercises any Warrants it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a)
under the Securities Act.
(d)
Experience
of Such Purchaser
. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities and the Warrant Shares, and has so evaluated the merits and risks of such investment. Such Purchaser is able
to bear the economic risk of an investment in the Securities and the Warrant Shares and, at the present time, is able to afford
a complete loss of such investment.
(e)
Access
to Information
. Such Purchaser acknowledges that it has had the opportunity to review the Transaction
Documents (including all exhibits and schedules thereto) and the SEC Reports and has been afforded, (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities and the Warrant Shares and the merits and risks of investing in the
Securities and the Warrant Shares; (ii) access to information about the Company and its financial condition, results of
operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with respect to the investment. Such Purchaser
acknowledges and agrees that neither the Placement Agent nor any Affiliate of the Placement Agent has provided such Purchaser
with any information or advice with respect to the Securities nor is such information or advice necessary or desired.
Neither the Placement Agent nor any Affiliate has made or makes any representation as to the Company or the quality of the
Securities or the Warrant Shares and the Placement Agent and any Affiliate may have acquired non-public information with
respect to the Company which such Purchaser agrees need not be provided to it. In connection with the issuance of the
Securities and the Warrant Shares to such Purchaser, neither the Placement Agent nor any of its Affiliates has acted as a
financial advisor or fiduciary to such Purchaser.
(f)
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.
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).
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 Company, any of its Subsidiaries,
or any of their respective officers, directors, agents, employees or Affiliates, or a duty to the Company, and of it 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.
4.10
Indemnification
of Purchasers
. Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “
Purchaser Party
”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the
Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any shareholder of the Company who is not
an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless
such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party may have with any such shareholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may
be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall
have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time
to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not
be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s
prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a
loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties,
covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification
required by this Section 4.10 shall be made by periodic payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any
cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject
to pursuant to law.
4.11
Reservation
and Listing of Securities
.
(a) The
Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents
in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.
(b) The
Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading
Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Shares and Warrant
Shares on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing
or quotation on such Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing or
quotation and (iv) maintain the listing or quotation of such Common Stock on such Trading Market or another Trading Market. The
Company agrees to maintain the eligibility of the Common Stock for electronic transfer through the Depository Trust Company or
another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company
or such other established clearing corporation in connection with such electronic transfer.
4.12 [RESERVED]
4.13
Subsequent
Equity Sales.
(a)
From the date hereof until 30 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
at an effective price per share less than the Per Share Purchase Price.
(b)
From the date hereof until 30 days after the Closing Date, the Company shall be prohibited from effecting or entering into
an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents (or
a combination of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction
in which the Company (i) 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 (A) 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 (B) 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
or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit, whereby
the Company may issue securities at a future determined price. Any Purchaser shall be entitled to obtain injunctive relief against
the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.
(c) Notwithstanding the foregoing, this Section 4.13 shall not apply in respect of an Exempt Issuance, except
that no Variable Rate Transaction shall be an Exempt Issuance, other than Exempt Issuances under clause (iii) of the definition
thereof. “Exempt Issuance” means the issuance of: (i) shares of Common Stock or options to employees, officers or directors
of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of
the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose for services
rendered to the Company; (ii) the Placement Agent Warrant; (iii) securities upon the exercise, exchange or conversion of the Securities,
the Warrant Shares 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.
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.
4.16
Leak-Out
Restrictions
. Each Purchaser agrees, on behalf of itself and each Affiliate of such Purchaser which (x) had or has knowledge
of the transactions contemplated hereby, (y) has or shares discretion relating to such Purchaser’s investments or trading
or information concerning such Purchaser’s investments, including in respect of the Securities, or (z) is subject to such
Purchaser’s review or input concerning such Affiliate’s investments or trading, on any day, not to sell, dispose or
otherwise transfer more than the Purchaser’s pro-rata share of the Shares (based upon the Purchaser’s Subscription
Amount compared to the aggregate purchase price paid for Securities in the offering under the Prospectus Supplement) of 35% of
the daily trading volume of the Common Stock on any Trading Day; provided, however, that the provisions of this sentence shall
not apply to any sale, disposal or other transfer at a price at or greater than 135% of the Per Share Purchase Price (or $_______)
(appropriately adjusted for any stock split, reverse stock split, stock dividend or other reclassification or combination of the
Common Stock occurring after the date hereof). The Company shall not amend or waive this trading restriction with respect to any
Purchaser in a manner that is less restrictive than with respect to all other Purchaser(s) unless, prior to the effective time
thereof, the Company has provided written notice of such amendment or waiver to each Purchaser and the Company has agreed to similarly
and proportionally amend or waive the terms of this Section 4.16 with respect to all such Purchasers. For clarity, this restriction
shall not apply to any Warrant Shares acquired through exercise of the Warrants.
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).
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 (2
nd
) 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 at least 50.1% in interest of the Shares based on the initial Subscription Amounts
hereunder, provided that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group
of Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver
of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver
in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall
any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed
amendment or waiver that disproportionately, materially and adversely affects the rights and obligations of any Purchaser relative
to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected
Purchaser. Any amendment effected in accordance with accordance with this Section 5.5 shall be binding upon each Purchaser and
subsequent holder of Securities and Warrant Shares and the Company.
5.6
Headings
.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.7
Successors
and Assigns
. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to
whom such Purchaser assigns or transfers any Securities or Warrant Shares, provided that such transferee agrees in writing to be
bound, with respect to the transferred Securities or Warrant Shares, by the provisions of the Transaction Documents that apply
to the “Purchasers.”
5.8
No
Third-Party Beneficiaries
. The Placement Agent shall be the third party beneficiary of the representations and warranties of
the Purchasers in Section 3.2. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.10 and this Section 5.8.
5.9
Governing
Law
. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action
or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Action or Proceeding
is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such Action or Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party shall commence an Action
or Proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under
Section 4.10, the prevailing party in such Action or Proceeding shall be reimbursed by the non-prevailing party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action
or Proceeding.
5.10
Survival
.
The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.
5.11
Execution
.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.
5.12
Severability
.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
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 right;
provided
,
however
, that in the case of a rescission
of an exercise of a Warrant, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such
rescinded exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for
such shares and the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant
(including, issuance of a replacement warrant certificate evidencing such restored right).
5.14
Replacement
of Securities
. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or
in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory
to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
5.15
Remedies
.
In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
5.16
Payment
Set Aside
. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document
or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from,
disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
5.17
Independent
Nature of Purchasers’ Obligations and Rights
. The obligations of each Purchaser under any Transaction Document are several
and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance
or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers
are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser
to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate
legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each
Purchaser and its respective counsel have chosen to communicate with the Company through EGS. EGS does not represent any of the
Purchasers and only represents the Placement Agent. The Company has elected to provide all Purchasers with the same terms and Transaction
Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It
is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between
the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the
Purchasers.
5.18
Saturdays,
Sundays, Holidays, etc
. If the last or appointed day for the taking of any action or the expiration of any right required
or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next
succeeding Business Day.
5.19
Construction
.
The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.
5.20
WAIVER
OF JURY TRIAL
. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES
EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY
AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
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.
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Address for Notice:
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By:
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Fax:
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Name:
|
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Title:
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With a copy to (which shall not constitute notice):
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
[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: _____________
Shares: ____________
Warrant Shares: _________________ I elect for my Warrant to have a ____4.99% or _____9.99% initial beneficial ownership blocker (if you do not make an election your Warrant 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 (3
rd
) Trading Day following the date of this Agreement and (iii) any condition
to Closing contemplated by this Agreement (but prior to being disregarded by clause (i) above) that required delivery by the Company
or the above-signed of any agreement, instrument, certificate or the like or purchase price (as applicable) shall no longer be
a condition and shall instead be an unconditional obligation of the Company or the above-signed (as applicable) to deliver such
agreement, instrument, certificate or the like or purchase price (as applicable) to such other party on the Closing Date.
[SIGNATURE PAGES CONTINUE]
Disclosure Schedule to Securities Purchase
Agreement
Dated December 2, 2016
[NOTE: Disclosure Schedules are subject to
update in connection with signing.]
Schedule 3.1(a) Subsidiaries
Entity Name
|
|
State or country of
Incorporation or
Registration
|
|
|
|
|
|
|
|
|
|
|
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Material Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
New York
|
|
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2
|
|
|
|
|
|
|
|
|
Other entities without material assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alteris RPS, LLC
|
|
Delaware
|
|
|
3
|
|
Real Goods Syndicated, Inc.
|
|
Delaware
|
|
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1
|
|
Richmond Peck Solar Farm, LLC
|
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Delaware
|
|
|
3
|
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Sunetric Management LLC
|
|
Delaware
|
|
|
4
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Mercury Commercial Solar Fund I, LLC
|
|
New York
|
|
|
2
|
|
Mercury Solar Birch, LLC
|
|
Delaware
|
|
|
2
|
|
Mercury Solar, Cedar, LLC
|
|
Delaware
|
|
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2
|
|
Mercury Solar Pine, LLC
|
|
Delaware
|
|
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2
|
|
Mercury Residential Solar Fund I, LLC
|
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New York
|
|
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2
|
|
RGS Energy, LLC
|
|
Puerto Rico
|
|
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2
|
|
|
|
|
|
|
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1. Subsidiary of Real Goods Solar, Inc.
|
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2. Subsidiary of Mercury Energy, Inc.
|
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3. Subsidiary of Alteris Renewables, Inc.
|
|
|
|
|
|
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4. Subsidiary of Elemental Energy, LLC
|
|
|
|
|
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|
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 2, 2016
Class/Category
|
|
Authorized/ Reserved
|
|
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Outstanding
|
|
Total authorized shares
|
|
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250,000,000
|
|
|
|
-
|
|
Preferred Stock
|
|
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50,000,000
|
|
|
|
-
|
|
Class A Common Stock
|
|
|
150,000,000
|
|
|
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16,556,292
|
|
Warrants (for Class A Common Stock)
|
|
|
-
|
|
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937,695
|
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Stock Options
|
|
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1,576,068
|
|
|
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5,263
|
|
|
|
|
|
|
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17,499,250
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Rights of participation
The Company is a party to three prior Securities Purchase Agreements
noted below (the “Prior SPAs”):
SPA
Date
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Party
|
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Party
|
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Participation
Rights
|
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Prior
Consent
Required
For
S
ubs
equent
Placements
|
1-Apr-16
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Th
e
Company
|
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As designated in SPA
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Yes
|
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Yes
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26-Jun-15
|
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Th
e
Company
|
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As designated in SPA
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Yes
|
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Yes
|
23-Feb-15
|
|
Th
e
Company
|
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As designated in SPA
|
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Yes
|
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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 $0.0001 per share (“Common
Stock”) or Common Stock equivalents.
The Company intends to satisfy or obtain waivers
of these participation rights in connection with the transactions contemplated by this Agreement.
The Securities Purchase Agreement dated June 26, 2015 prohibits
the Company from, without the prior written consent of the “Required Holders” (as defined therein), issuing or selling
any rights, warrants or options to subscribe for or purchase Common Stock or directly or indirectly convertible into or exchangeable
or exercisable for Common Stock at a price which varies or may vary with the market price of the Common Stock until the two-year
anniversary of the closing date of the transaction, subject to certain conditions and exceptions.
Outstanding options, warrants
Outstanding Options, Warrants
|
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Current Exercise Price
|
|
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Outstanding
|
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Stock options
|
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$
|
47.60-$ 1,552
|
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5,263
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Options outstanding under the Company's 2008 stock option plan
|
June 2013 Warrants
|
|
$
|
9.78
|
|
|
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379,000
|
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Formula anti-dilution (shares and exercise price); purchase rights for pro-rata
issuances; redemption for fundamental transactions and going private
|
November 2013 warrants
|
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$
|
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
|
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$
|
1,276.00
|
|
|
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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
|
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$
|
200.00
|
|
|
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161
|
|
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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
|
|
|
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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
|
|
|
397,899
|
|
|
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 2, 2016, the holders of the Convertible Notes have
converted an aggregate of $10.3 million of principal and interest under the Convertible Notes, and the Company has issued 14,024,082
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 2, 2016, there remains outstanding Convertible Notes with an aggregate principal amount of approximately $0.4 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(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 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.
Annex B
FORM OF
SERIES I WARRANT TO PURCHASE COMMON STOCK
Annex B
real
goods solar, INC.
FORM OF SERIES I
Warrant
To Purchase Common Stock
Warrant No.: I-___
Number of Shares of Common Stock:
___
Date of Issuance: ________ __, 2016 (“
Issuance Date
”)
Real Goods Solar, Inc.,
a Colorado corporation (the “
Company
”), hereby certifies that, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged
, [PURCHASER]
, the registered holder
hereof or its permitted assigns (the “
Holder
”), is entitled, subject to the terms set forth below, to purchase
from the Company, at the Exercise Price (as defined in Section 1(b)) then in effect, at any time or times on or after the date
hereof (the “
Initial Exercisability Date
”), but not after 11:59 p.m., New York time, on the Expiration Date,
up to such number of fully paid and nonassessable shares of Common Stock equal to ___, subject to adjustment as provided herein
(the “
Warrant Shares
”). Except as otherwise defined herein, capitalized terms in this Warrant to Purchase Common
Stock (including any warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, this “
Warrant
”),
shall have the meanings set forth in Section 17. This Warrant is one of the Series I Warrants to purchase Common Stock (the “
Series
I Warrants
”) originally issued pursuant to Section 1 of that certain Placement Agency Agreement (the “
Placement
Agency Agreement
”), dated as of ________ __, 2016 (the “
Subscription Date
”), by and between the Company
and Roth Capital Partners, LLC (the “
Placement Agent
”).
1.
EXERCISE
OF WARRANT.
(a)
Mechanics
of Exercise
. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in
Section 1(f)), this Warrant may be exercised by the Holder at any time or times on or after the Initial Exercisability Date,
in whole or in part, by (i) delivery of a written notice, in the form attached hereto as
Exhibit A
(the
“
Exercise Notice
”), of the Holder’s election to exercise this Warrant and (ii) (A) payment to the
Company of an amount equal to the applicable Exercise Price (as defined in Section 1(b)) multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (the “
Aggregate Exercise Price
”) in cash by wire
transfer of immediately available funds or (B) if the provisions of Section 1(d) are applicable, by notifying the Company
that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)). The Holder shall not be
required to deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise
Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant
and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery
of an Exercise Notice for all of the then remaining Warrant Shares shall have the same effect as cancellation of the original
of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On or before the first
(1
st
) Trading Day following the date on which the Company has received the Exercise Notice, the Company
shall transmit by facsimile an acknowledgment of confirmation of receipt of the Exercise Notice to the Holder and the
Company’s transfer agent (the “
Transfer Agent
”). On or before the earlier of (i) the third (3rd)
Trading Day and (ii) the number of Trading Days comprising the Standard Settlement Period, following the date on which the
Company has received the Exercise Notice, so long as the Holder delivers the Aggregate Exercise Price (or notice of a
Cashless Exercise) on or prior to the second (2nd) Trading Day following the date on which the Company has received the
Exercise Notice (the “
Share Delivery Date
”) (provided that if the Aggregate Exercise Price has not been
delivered by such date, the Share Delivery Date shall be one (1) Trading Day after the Aggregate Exercise Price (or notice of
a Cashless Exercise) is delivered), the Company shall (X) provided that the Transfer Agent is participating in The Depository
Trust Company (“
DTC
”) Fast Automated Securities Transfer Program, credit such aggregate number of Warrant
Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance
account with DTC through its Deposit / Withdrawal At Custodian system, or (Y) if the Transfer Agent is not participating in
the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in
the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise. The Company agrees to
maintain a transfer agent that is a participant in the DTC Fast Automated Securities Transfer Program so long as this Warrant
remains outstanding and exercisable. The Company shall be responsible for all fees and expenses of the Transfer Agent and all
fees and expenses with respect to the issuance of Warrant Shares via DTC, if any. Upon delivery of the Exercise Notice, the
Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect
to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC
account or the date of delivery of the certificates evidencing such Warrant Shares, as the case may be. If this Warrant is
submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this
Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company
shall as soon as practicable and in no event later than three (3) Trading Days after any exercise and at its own expense,
issue a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares
issuable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this
Warrant is exercised. No fractional Warrant Shares are to be issued upon the exercise of this Warrant, but rather the number
of Warrant Shares to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all taxes
(other than the Holder’s income taxes) which may be payable with respect to the issuance and delivery of Warrant Shares
upon exercise of this Warrant. The Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms and subject to the conditions hereof are absolute and unconditional, irrespective of any action or inaction by the
Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination.
(b)
Exercise
Price
. For purposes of this Warrant, “
Exercise Price
” means $_____, subject to adjustment as provided herein.
(c)
Company’s
Failure to Timely Deliver Securities
. If the Company shall fail for any reason or for no reason to issue to the Holder on or
prior to the Share Delivery Date either (I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer
Program, a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common
Stock on the Company’s share register or if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer
Program, to credit the Holder’s balance account with DTC, for such number of shares of Common Stock to which the Holder is
entitled upon the Holder’s exercise of this Warrant, or (II) if the Registration Statement (as defined in Section 1(d)) covering
the issuance of all of the Warrant Shares that are the subject of the Exercise Notice (the “
Unavailable Warrant Shares
”)
is not available for the issuance of such Unavailable Warrant Shares and the Company fails to promptly, but in no event later than
one (1) Trading Day thereafter, (x) so notify the Holder and (y) deliver the Warrant Shares electronically without any restrictive
legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s
or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system (the event described in the
immediately foregoing clause (II) is hereinafter referred as a “
Notice Failure
” and together with the event
described in clause (I) above, an “
Exercise Failure
”), and if on or after the Share Delivery Date the Holder
(or any other Person in respect, or on behalf, of the Holder) purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of all or any portion of the number of shares of Common Stock equal
to or any portion of the number of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from
the Company (a “
Buy-In
”), then, in addition to all other remedies available to the Holder, the Company shall,
within three (3) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the
Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses,
if any) for the shares of Common Stock so purchased (the “
Buy-In Price
”), at which point the Company’s
obligation to deliver such certificate (and to issue such shares of Common Stock) or credit such Holder’s balance account
with DTC for such shares of Common Stock shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate
or certificates representing such shares of Common Stock or credit such Holder’s balance account with DTC, as applicable,
and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time
during the period beginning on the date of the applicable Exercise Notice and ending on the date of such issuance and payment under
this Section 1(c). Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law
or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares of Common
Stock) upon the exercise of this Warrant as required pursuant to the terms hereof.
(d)
Cashless
Exercise
. Notwithstanding anything contained herein to the contrary, if the Registration Statement on Form S-3 (File number
333-193718) or other applicable registration statement under the 1933 Act (the “
Registration Statement
”), covering
the issuance of the Unavailable Warrant Shares is not available for the issuance of such Unavailable Warrant Shares the Holder
may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated
to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise
the “Net Number” of shares of Common Stock determined according to the following formula (a “
Cashless Exercise
”):
Net Number
=
(A x B) - (A x C)
D
For purposes
of the foregoing formula:
A= the
total number of shares with respect to which this Warrant is then being exercised.
B= the
arithmetic average of the Closing Sale Prices of the Common Stock for the five (5) consecutive Trading Days ending on the date
immediately preceding the date of the Exercise Notice.
C= the
Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.
D= the
Closing Sale Price of the Common Stock on the date of the Exercise Notice.
If Warrant Shares are
issued in a Cashless Exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the 1933 Act, the Warrant
Shares shall take on the registered characteristics of the Warrant being exercised, and the holding period of the Warrant being
exercised may be tacked on to the holding period of the Warrant Shares. The Company agrees not to take any position contrary to
this Section 1(d).
(e)
Disputes
.
In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance
with Section 12.
(f)
Beneficial
Ownership Limitation on Exercises
. Notwithstanding anything to the
contrary contained herein, the Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not
have the right to exercise any portion of this Warrant, pursuant to the terms and conditions of this Warrant and any such
exercise shall be null and void and treated as if never made, to the extent that after giving effect to such exercise, the
Holder together with the other Attribution Parties collectively would beneficially own in excess of [4.99/9.99]% (the
“
Maximum Percentage
”) of the number of shares of Common Stock outstanding immediately after giving effect
to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned
by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and all
other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect
to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would
be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by the Holder or any
of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconverted portion of any other
securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants)
beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous
to the limitation contained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “
1934 Act
”). For
purposes of this Warrant, in determining the number of outstanding shares of Common Stock the Holder may acquire upon the
exercise of this Warrant without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of
Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Current Report on Form 8-K or other public filing with the Securities and Exchange Commission (the “
SEC
”),
as the case may be, (y) a more recent public announcement by the Company or (3) any other written notice by the Company or
the Transfer Agent setting forth the number of shares of Common Stock outstanding (the “
Reported Outstanding Share
Number
”). If the Company receives an Exercise Notice from the Holder at a time when the actual number of
outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the
Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Exercise Notice would
otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 1(f), to exceed the Maximum
Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be purchased pursuant to such
Exercise Notice (the number of shares by which such purchase is reduced, the “
Reduction Shares
”) and (ii)
as soon as reasonably practicable, the Company shall return to the Holder any exercise price paid by the Holder for the
Reduction Shares. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one
(1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this Warrant, by the Holder and any other Attribution Party
since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of
Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other Attribution Parties being deemed
to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock
(as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other
Attribution Parties’ aggregate beneficial ownership exceeds the Maximum Percentage (the “
Excess
Shares
”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to
vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been
deemed null and void, the Company shall return to the Holder the exercise price paid by the Holder for the Excess
Shares. Upon delivery of a written notice to the Company, the Holder may from time to time increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in
the Maximum Percentage will not be effective until the sixty-first (61
st
) day after such notice is delivered to
the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties and not to
any other holder of Series I Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of
Common Stock issuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be
beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act.
The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the
terms of this Section 1(f) to the extent necessary to correct this paragraph or any portion of this paragraph which may be
defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changes
or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph
may not be waived and shall apply to a successor holder of this Warrant.
(g)
Insufficient
Authorized Shares
. If at any time while this Warrant remains outstanding the Company does not have a sufficient number of authorized
and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon exercise of this Warrant at least
a number of shares of Common Stock equal to the maximum number of shares of Common Stock as shall from time to time be necessary
to effect the exercise of all of this Warrant then outstanding (the “
Required Reserve Amount
” and the failure
to have such sufficient number of authorized and unreserved shares of Common Stock, an “
Authorized Share Failure
”),
then the Company shall promptly take all action reasonably necessary to increase the Company’s authorized shares of Common
Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for this Warrant and the other Series
I Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of
the occurrence of an Authorized Share Failure, but in no event later than seventy-five (75) days after the occurrence of such Authorized
Share Failure, the Company shall either (x) obtain the written consent of its shareholders for the approval of an increase in the
number of authorized shares of Common Stock and provide each shareholder with an information statement with respect thereto or
(y) hold a meeting of its shareholders for the approval of an increase in the number of authorized shares of Common Stock. In connection
with such meeting, the Company shall provide each shareholder with a proxy statement and shall use its reasonable best efforts
to solicit its shareholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors
to recommend to the shareholders that they approve such proposal. Notwithstanding the foregoing, if any such time of an Authorized
Share Failure, the Company is able to obtain the written consent of a majority of the shares of its issued and outstanding Common
Stock to approve the increase in the number of authorized shares of Common Stock, the Company may satisfy this obligation by obtaining
such consent and submitting for filing with the SEC an Information Statement on Schedule 14C. The initial number of shares of Common
Stock reserved for exercise of this Warrant and the other Series I Warrants and each increase in the number of shares so reserved
shall be allocated pro rata among the Holder and the holders of the other Series I Warrants, based on the number of shares of Common
Stock issuable upon exercise of this Warrant (without regard to any limitations in exercise) issued to the Holder on the Issuance
Date (the “
Authorized Share Allocation
”). In the event that the Holder shall sell or otherwise transfer this
Warrant, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of
Common Stock reserved and allocated to any Person which ceases to hold any Series I Warrants shall be allocated to the Holder and
the remaining holders of Series I Warrants, pro rata based on the shares of Common Stock issuable upon exercise of the Series I
Warrants then held by such holders (without regard to any limitations on the exercise of the Series I Warrants).
2.
ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES
. The Exercise Price and the number of Warrant Shares shall be adjusted from
time to time as follows:
(a)
Voluntary
Adjustment By Company
. The Company may at any time during the term of this Warrant, with the prior written consent of the Required
Holders, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
(b)
Adjustment
Upon Subdivision or Combination of Shares of Common Stock
. If the Company at any time on or after the Subscription Date subdivides
(by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock
into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced
and the number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Subscription Date
combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into
a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased
and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(b) shall become effective
at the close of business on the date the subdivision or combination becomes effective.
(c)
Other
Events
. If any event occurs of the type contemplated by the provisions of this Section 2, but not expressly provided for by
such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company’s Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of Warrant Shares, as mutually determined by the Company’s Board of Directors and the Required Holders, so as
to protect the rights of the Holder;
provided
that no such adjustment pursuant to this Section 2(d) will increase the Exercise
Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2.
3.
RIGHTS
UPON DISTRIBUTION OF ASSETS
. If the Company shall declare or make any dividend or other distribution of its assets (or rights
to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation,
any distribution of cash, stock or other securities, property, options, evidence of indebtedness or any other assets by way of
a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “
Distribution
”),
at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution
to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant,
including without limitation, the Maximum Percentage) immediately before the date of which a record is taken for such Distribution,
or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the
participation in such Distribution (
provided
,
however
, that to the extent that the Holder’s right to participate
in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the
Holder shall not be entitled to participate in such Distribution to such extent (and shall not be entitled to beneficial ownership
of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to such extent) and the portion of such
Distribution shall be held in abeyance for the benefit of the Holder until such time or times as its right thereto would not result
in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted
such Distribution (and any Distributions declared or made on such initial Distribution or on any subsequent Distribution held similarly
in abeyance) to the same extent as if there had been no such limitation).
4.
PURCHASE
RIGHTS; FUNDAMENTAL TRANSACTIONS
.
(a)
Purchase
Rights
. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders
of any class of Common Stock (the “
Purchase Rights
”), then the Holder will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had
held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations
or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights
(
provided
,
however
, that to the extent that the Holder’s right to participate in any such Purchase Right would
result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled
to participate in such Purchase Right to such extent (and shall not be entitled to beneficial ownership of such shares of Common
Stock as a result of such Purchase Right (and beneficial ownership) to such extent) and such Purchase Right to such extent shall
be held in abeyance for the benefit of the Holder until such time or times as its right thereto would not result in the Holder
and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such right
(and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right held similarly
in abeyance) to the same extent as if there had been no such limitation).
(b)
Fundamental
Transactions
. The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity assumes
in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the
provisions of this Section 4(b) pursuant to written agreements in form and substance reasonably satisfactory to the Required Holders
and approved by the Required Holders, such approval not to be unreasonably withheld or delayed, prior to such Fundamental Transaction,
including agreements, if so requested by the Holder, to deliver to each holder of the Series I Warrants in exchange for such Series
I Warrants a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to
this Warrant, including, without limitation, an adjusted exercise price equal to the value for the shares of Common Stock reflected
by the terms of such Fundamental Transaction, and exercisable for a corresponding number of shares of capital stock equivalent
to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the
exercise of this Warrant) prior to such Fundamental Transaction, and satisfactory to the Required Holders, and with an exercise
price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of
the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such adjustments
to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this
Warrant immediately prior to the occurrence or consummation of such Fundamental Transaction). Upon the occurrence or consummation
of any Fundamental Transaction, and it shall be a required condition to the occurrence or consummation of any Fundamental Transaction
that, the Company and the Successor Entity or Successor Entities, jointly and severally, shall succeed to, and the Company shall
cause any Successor Entity or Successor Entities to jointly and severally succeed to, and be added to the term “Company”
under this Warrant (so that from and after the date of such Fundamental Transaction, and the provisions of this Warrant referring
to the “Company” shall refer instead to each of the Company and the Successor Entity or Successor Entities, jointly
and severally), and the Company and the Successor Entity or Successor Entities, jointly and severally, may exercise every right
and power of the Company prior thereto and shall assume all of the obligations of the Company prior thereto under this Warrant
with the same effect as if the Company and such Successor Entity or Successor Entities, jointly and severally, had been named as
the Company in this Warrant, and, solely at the request of the Holder, if the Successor Entity and/or Successor Entities is a publicly
traded corporation whose common stock is quoted on or listed for trading on an Eligible Market, shall deliver (in addition to and
without limiting any right under this Warrant) to the Holder in exchange for this Warrant a security of the Successor Entity and/or
Successor Entities evidenced by a written instrument substantially similar in form and substance to this Warrant and exercisable
for a corresponding number of shares of capital stock of the Successor Entity and/or Successor Entities (the “
Successor
Capital Stock
”) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction (such corresponding number of
shares of Successor Capital Stock to be delivered to the Holder shall be equal to the greater of (A) the quotient of (i) the aggregate
dollar value of all consideration (including cash consideration and any consideration other than cash (“
Non-Cash Consideration
”),
in such Fundamental Transaction, as such values are set forth in any definitive agreement for the Fundamental Transaction that
has been executed at the time of the first public announcement of the Fundamental Transaction or, if no such value is determinable
from such definitive agreement, as determined in accordance with Section 12 with the term “Non-Cash Consideration”
being substituted for the term “Exercise Price”) that the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction or the record, eligibility or other determination date for the event resulting in such Fundamental
Transaction, had this Warrant been exercised immediately prior to such Fundamental Transaction or the record, eligibility or other
determination date for the event resulting in such Fundamental Transaction (without regard to any limitations on the exercise of
this Warrant) (the “
Aggregate Consideration
”) divided by (ii) the per share Closing Sale Price of such Successor
Capital Stock on the Trading Day immediately prior to the consummation or occurrence of the Fundamental Transaction and (B) the
product of (i) the Aggregate Consideration and (ii) the highest exchange ratio pursuant to which any shareholder of the Company
may exchange Common Stock for Successor Capital Stock) (
provided
,
however
, to the extent that the Holder’s
right to receive any such shares of publicly traded common stock (or their equivalent) of the Successor Entity would result in
the Holder and its other Attribution Parties exceeding the Maximum Percentage, if applicable, then the Holder shall not be entitled
to receive such shares to such extent (and shall not be entitled to beneficial ownership of such shares of publicly traded common
stock (or their equivalent) of the Successor Entity as a result of such consideration to such extent) and the portion of such shares
shall be held in abeyance for the Holder until such time or times, as its right thereto would not result in the Holder and its
other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be delivered such shares to
the extent as if there had been no such limitation), and such security shall be reasonably satisfactory to the Holder, and with
an identical exercise price to the Exercise Price hereunder (such adjustments to the number of shares of capital stock and such
exercise price being for the purpose of protecting after the consummation or occurrence of such Fundamental Transaction the economic
value of this Warrant that was in effect immediately prior to the consummation or occurrence of such Fundamental Transaction, as
elected by the Holder solely at its option). Upon occurrence or consummation of the Fundamental Transaction, and it shall be a
required condition to the occurrence or consummation of such Fundamental Transaction that, the Company and the Successor Entity
or Successor Entities shall deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any
time after the occurrence or consummation of the Fundamental Transaction, as elected by the Holder solely at its option, shares
of Common Stock, Successor Capital Stock or, in lieu of the shares of Common Stock or Successor Capital Stock (or other securities,
cash, assets or other property purchasable upon the exercise of this Warrant prior to such Fundamental Transaction), such shares
of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights),
which for purposes of clarification may continue to be shares of Common Stock, if any, that the Holder would have been entitled
to receive upon the happening of such Fundamental Transaction or the record, eligibility or other determination date for the event
resulting in such Fundamental Transaction, had this Warrant been exercised immediately prior to such Fundamental Transaction or
the record, eligibility or other determination date for the event resulting in such Fundamental Transaction (without regard to
any limitations on the exercise of this Warrant), as adjusted in accordance with the provisions of this Warrant. In addition to
and not in substitution for any other rights hereunder, prior to the occurrence or consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive securities, cash, assets or other property with respect
to or in exchange for shares of Common Stock (a “
Corporate Event
”), the Company shall make appropriate provision
to ensure that, and any applicable Successor Entity or Successor Entities shall ensure that, and it shall be a required condition
to the occurrence or consummation of such Corporate Event that, the Holder will thereafter have the right to receive upon exercise
of this Warrant at any time after the occurrence or consummation of the Corporate Event, shares of Common Stock or Successor Capital
Stock or, if so elected by the Holder, in lieu of the shares of Common Stock (or other securities, cash, assets or other property)
purchasable upon the exercise of this Warrant prior to such Corporate Event (but not in lieu of such items still issuable under
Sections 3 and 4(a), which shall continue to be receivable on the Common Stock or on the such shares of stock, securities, cash,
assets or any other property otherwise receivable with respect to or in exchange for shares of Common Stock), such shares of stock,
securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights and any
shares of Common Stock) which the Holder would have been entitled to receive upon the occurrence or consummation of such Corporate
Event or the record, eligibility or other determination date for the event resulting in such Corporate Event, had this Warrant
been exercised immediately prior to such Corporate Event or the record, eligibility or other determination date for the event resulting
in such Corporate Event (without regard to any limitations on exercise of this Warrant). Provision made pursuant to the preceding
sentence shall be in a form and substance reasonably satisfactory to the Holder. The provisions of this Section 4(b) shall apply
similarly and equally to successive Fundamental Transactions and Corporate Events. Notwithstanding the foregoing, the Holder may
elect, in its sole discretion, by delivery of written notice to the Company, to waive this Section 4(b) and allow the Company to
enter into or be a party to a Fundamental Transaction without the assumption of this Warrant pursuant to the provisions of this
Section 4(b),
provided
,
however
, that any such waiver shall only bind the Holder with respect to this Warrant and
not the Holder with respect to any other warrant or other securities of the Company or any holder of other Series I Warrants.
(c) Notwithstanding
anything herein to the contrary, the Company shall be required to obtain the prior written consent of the Required Holders to enter
into, allow and/or consummate a Fundamental Transaction other than one in which a Successor Entity that is a publicly traded corporation
whose stock is quoted or listed for trading on an Eligible Market assumes this Warrant such that the Warrant shall be exercisable
for the publicly traded Common Stock of such Successor Entity.
5.
NONCIRCUMVENTION
. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation or Bylaws, or
through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities,
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will
at all times in good faith carry out all of the provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of
any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall
take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the Series I Warrants
are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock,
solely for the purpose of effecting the exercise of the Series I Warrants, the Required Reserve Amount to effect the exercise of
the Series I Warrants then outstanding (without regard to any limitations on exercise).
6.
WARRANT
HOLDER NOT DEEMED A SHAREHOLDER
. Except as otherwise specifically provided herein, the Holder, solely in such Person’s
capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital
of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in
such Person’s capacity as the Holder of this Warrant, any of the rights of a shareholder of the Company or any right to vote,
give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to
the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant.
In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities
(upon exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company. Notwithstanding this Section 6, the Company shall provide the Holder with copies of the same notices
and other information given to the shareholders of the Company generally, contemporaneously with the giving thereof to the shareholders.
7.
REISSUANCE
OF WARRANTS
.
(a)
Transfer
of Warrant
. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the
Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less
than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section
7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.
(b)
Lost,
Stolen or Mutilated Warrant
. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by
the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase
the Warrant Shares then underlying this Warrant.
(c)
Exchangeable
for Multiple Warrants
. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the
Company, for a new warrant or warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion
of such Warrant Shares as is designated by the Holder at the time of such surrender;
provided
,
however
, that no Series
I Warrants for fractional Warrant Shares shall be given.
(d)
Issuance
of New Warrants
. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant
(i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to
purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a)
or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying
the other new warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date,
and (iv) shall have the same rights and conditions as this Warrant.
8.
NOTICES
. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, with respect to a notice to the Company
or to a Holder that is a party to the Securities Purchase Agreement, such notice shall be given in accordance with Section 5.4
of the Securities Purchase Agreement, and, with respect to a notice to a Holder that is not a party to the Securities Purchase
Agreement, such notice shall be given in the manner set forth in and pursuant to the terms of Section 5.4 of the Securities Purchase
Agreement to Holder’s address, facsimile number or e-mail address in the Company’s records. The Company shall provide
the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description
of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice
to the Holder (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes
a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances
or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders
of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation;
provided
in each case that such information shall be made known to the public prior to or in conjunction with such notice
being provided to the Holder. It is expressly understood and agreed that the time of exercise specified by the Holder in each Exercise
Notice shall be definitive and may not be disputed or challenged by the Company.
9.
AMENDMENT
AND WAIVER
. Except as otherwise provided herein, the provisions of this Warrant may be amended or waived and the Company may
take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained
the written consent of the Required Holders.
10.
GOVERNING
LAW; JURISDICTION; JURY TRIAL
. This Warrant shall be governed by and construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws
of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State
of New York. The Company 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, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Company hereby irrevocably waives
personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof
to the Company at the address set forth in Section 5.4 of the Securities Purchase 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 manner permitted by law. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s
obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or
other court ruling in favor of the Holder.
THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,
A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
11.
CONSTRUCTION;
HEADINGS
. This Warrant shall be deemed to be jointly drafted by the Company and all the Holders and shall not be construed
against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part
of, or affect the interpretation of, this Warrant.
12.
DISPUTE
RESOLUTION
. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant
Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile or electronic mail within
two (2) Business Days after receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If the
Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within
three (3) Business Days after such disputed determination or arithmetic calculation being submitted to the Holder, then the Company
shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent,
reputable investment bank selected by the Holder and approved by the Company, such approval not to be unreasonably withheld or
delayed or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant,
approved by the Holder, such approval not to be unreasonably withheld or delayed. The Company shall cause at its expense the investment
bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder
of the results no later than ten (10) Business Days from the time it receives the disputed determinations or calculations. Such
investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties
absent demonstrable error.
13.
REMEDIES,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF
. The remedies provided in this Warrant shall be cumulative and in addition
to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual
damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate.
The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled,
in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
14.
TRANSFER
. This
Warrant and the Warrant Shares may be offered for sale, sold, transferred, pledged or assigned without the consent of the Company.
15.
SEVERABILITY
. If
any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity
or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations
of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s),
the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
16.
DISCLOSURE
.
Upon receipt or delivery by the Company of any notice in accordance with the terms of this Warrant, unless the Company has in good
faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company
or its subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery publicly disclose such material,
nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains
material, nonpublic information relating to the Company or its subsidiaries, the Company so shall indicate to such Holder contemporaneously
with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters
relating to such notice do not constitute material, nonpublic information relating to the Company or its subsidiaries.
17.
CERTAIN
DEFINITIONS
. For purposes of this Warrant, the following terms shall have the following meanings:
(a) “
1933
Act
” means the Securities Act of 1933, as amended.
(b) “
Affiliate
”
means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common
control with, such Person, it being understood for purposes of this definition that “control” of a Person means the
power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors
of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
(a) “
Attribution
Parties
” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder
funds or managed accounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by
the Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder
or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any
of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could be aggregated
with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose
of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.
(b) “
Bloomberg
”
means Bloomberg Financial Markets.
(c) “
Business
Day
” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.
(d) “
Closing
Bid Price
” and “
Closing Sale Price
” means, for any security as of any date, the last closing bid price
and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal
Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as
the case may be, then the last bid price or the last trade price, respectively, of such security prior to 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such
security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing
bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security
by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported
in the OTC Link or “pink sheets” by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing Bid Price
or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid
Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined
by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 12. All such determinations to be appropriately adjusted for any stock dividend,
stock split, stock combination, reclassification or other similar transaction during the applicable calculation period.
(e) “
Common
Stock
” means (i) the Company’s shares of Class A Common Stock, par value $0.0001 per share, and (ii) any
share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such
Common Stock.
(f) “
Convertible
Securities
” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable
or exchangeable for shares of Common Stock.
(g) “
Eligible
Market
” means the Principal Market, the NYSE MKT LLC, The NASDAQ Global Market, The NASDAQ Global Select Market, The
New York Stock Exchange, Inc., the OTC Bulletin Board, the OTC QX or the OTC QB.
(h) “
Expiration
Date
” means the date that is sixty (60) months after the Initial Exercisability Date, or, if such date falls on a day
other than a Business Day or on which trading does not take place on the Principal Market (a “
Holiday
”), the
next day that is not a Holiday.
(i) “
Fundamental
Transaction
” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or
otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving
corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of
the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation
S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be
subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange
offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding
shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated
with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number
of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party
to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934
Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or
more Subject Entities whereby such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the
outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common
Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock
purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the
Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the
outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall,
directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any
Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender,
tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization,
recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner
whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock,
(y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such
Subject Entities as of the Subscription Date calculated as if any shares of Common Stock held by all such Subject Entities were
not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common
Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger
or other transaction requiring other shareholders of the Company to surrender their shares of Common Stock without approval of
the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one
or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to
circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented
in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition
or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.
(j) “
Group
”
means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.
(k) “
Options
”
means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
(l) “
Parent
Entity
” of a Person means an entity that, directly or indirectly, controls the applicable Person, including such entity
whose common shares or common stock or equivalent equity security is quoted or listed on an Eligible Market (or, if so elected
by the Required Holders, any other market, exchange or quotation system), or, if there is more than one such Person or such entity,
the Person or such entity designated by the Required Holders or in the absence of such designation, such Person or entity with
the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
(m) “
Person
”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
any other entity and a government or any department or agency thereof.
(n) “
Principal
Market
” means The NASDAQ Capital Market.
(o) “
Required
Holders
” means the holders of the Series I Warrants representing at least a majority of the shares of Common Stock underlying
the Series I Warrants then outstanding.
(p) “
Securities
Purchase Agreement
” means the Securities Purchase Agreement, dated _____ __, 2016, entered into by the Company and the
purchasers party thereto.
(q) “
Standard
Settlement Period
” means the standard settlement period, expressed in a number of Trading Days, on the Company’s
primary trading market or quotation system from time to time, with respect to trades of the Common Stock as in effect of the date
of delivery of the Exercise Notice.
(r) “
Subject
Entity
” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.
(s) “
Successor
Entity
” means one or more Person or Persons (or, if so elected by the Holder, the Company or Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or one or more Person or Persons (or, if so elected by the Holder, the
Company or the Parent Entity) with which such Fundamental Transaction shall have been entered into.
(t) “
Trading
Day
” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common
Stock is then traded;
provided
that “Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time
of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).
[Signature Page Follows]
IN WITNESS WHEREOF,
the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.
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REAL GOODS SOLAR, INC.
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By:
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Name:
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Dennis Lacey
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Title:
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Chief Executive Officer
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EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
REAL GOODS SOLAR, INC.
The undersigned holder
hereby exercises the right to purchase _________________ of the shares of Class A Common Stock, par value $0.0001 per share (the
“
Warrant Shares
”), of Real Goods Solar, Inc., a Colorado corporation (the “
Company
”), evidenced
by the attached Series I Warrant to purchase Common Stock No. I-____ (the “
Warrant
”). Capitalized terms used
herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise
Price. The holder intends that payment of the Exercise Price shall be made as:
___________ a
“
Cash Exercise”
with respect to _________________ Warrant Shares; or
___________ a
“
Cashless Exercise
” with respect to _______________ Warrant Shares.
2. Payment of Exercise
Price. In the event that the holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance
with the terms of the Warrant.
3. Delivery of Warrant
Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant.
Please issue the Warrant Shares in the following name and to the following account:
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Facsimile Number and Electronic Mail:
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(if electronic book entry transfer)
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(if electronic book entry transfer)
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TRANSFER AGENT INSTRUCTIONS
REAL
GOODS SOLAR, INC.
____________ __, 20__
Computershare Trust Company, N.A.
8742 Lucent Blvd. Suite 225
Highlands Ranch CO 80129
Telephone: (303) 262-0684
Facsimile: (303) 226-0609
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Re:
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Order to Issue Common
Stock of Real Goods Solar, Inc.
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Ladies and Gentlemen:
Reference is made to (A) that certain Placement
Agency Agreement, dated as of _______ __, 2016, by and between Real Goods Solar, Inc., a Colorado corporation (the “
Company
”),
and Roth Capital Partners, LLC (the “
Placement Agent
”) and the Company’s Registration Statement on Form
S-3 (File No. 333-193718) and the Company’s prospectus filed on ___, 2016 pursuant to Rule 424 promulgated pursuant to the
Securities Act of 1933, as amended (the “
1933 Act
”) pursuant to which the Company is issuing to the Holders
(i) shares of Class A common stock of the Company, par value $0.0001 per share (the “
Common Stock
”), and (ii)
Series I Warrants (the “
Warrants
”), which are exercisable to purchase shares of Common Stock; (B) the related
Transfer Agent Instructions, dated _______ ___, 2016 (the “___
2016 Instruction
”
)
; (C) the exercise notice
attached hereto (the “
Exercise Notice
”); and (D) the attached copy of a written instruction from the General
Counsel of the Company (or its outside legal counsel) that a registration statement covering the issuance of the shares of Common
Stock subject to this letter has been declared effective by the Securities and Exchange Commission under the Securities Act of
1933, as amended (the “
Counsel Instruction
”).
This instruction letter shall serve as
our authorization and direction to you to issue:
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·
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to the recipient identified under “Issue to” in the Exercise Notice,
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·
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such number of shares of Common Stock as set forth under “Delivery of Warrant Shares,”
respectively, in the Exercise Notice,
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·
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out of the Transfer Agent Reserve (as defined in the ___ 2016 Instruction),
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·
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by crediting the designated recipient’s balance account with the Depository Trust Company,
identified in the Exercise Notice under “Broker Name,” “Broker DTC#,” “Account Number,” and
“Transaction Code Number” through its Deposit Withdrawal at Custodian system
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The issuance of these
shares of Common Stock have been registered pursuant to an effective registration statement as indicated in the attached Counsel
Instruction.
[
Signature Page Follows
]
Should you have any
questions concerning this matter, please contact me at 303-222-8344.
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Very truly yours,
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REAL GOODS SOLAR, INC.
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By:
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Name:
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Title:
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REAL GOODS SOLAR, INC.
$200,000,000
Class A
Common Stock
Preferred
Stock
Warrants
Rights
Debt Securities
Units
We may offer and sell from time to time,
in one or more offerings, Class A common stock, preferred stock, warrants, rights, debt securities and units (collectively,
the “securities”) of Real Goods Solar, Inc. The aggregate amount of the securities offered by us under this prospectus
will not exceed $200.0 million.
Each time we sell securities, we will provide
a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may
also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement
together with the additional information described under the heading “INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE”
before you make your investment decision.
We may sell the securities to underwriters
or dealers, through agents, or directly to investors, or a combination of these methods. We will set forth the names of any underwriters
or agents in the applicable prospectus supplement.
Our Class A common stock is quoted
on The Nasdaq Capital Market under the symbol “RSOL.” On January 30, 2014, the last reported sale price of our
Class A common stock was $4.20 per share.
Investing
in our securities involves certain risks. See “
RISK FACTORS
” beginning on page 3 of this prospectus for the
risks that you should consider. You should read this entire prospectus carefully before you make your investment decision.
NEITHER THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is February
10, 2014.
Table
of Contents
ABOUT THIS PROSPECTUS
Except where the context requires otherwise, in this prospectus
the terms “Company,” “our company,” “Real Goods Solar,” “we,” “us,”
and “our” refer to Real Goods Solar, Inc., a Colorado corporation, and where appropriate, its direct and indirect subsidiaries.
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission (the “SEC”) using a “shelf” registration process. Under
the shelf registration process, we may sell any combination of the securities described in this prospectus in one or more offerings.
This prospectus provides you with a general description of the securities that we may offer. Each time that we sell securities,
we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus
supplement also may add, update or change information contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with additional information incorporated by reference in this prospectus before making an investment
in our securities. See “WHERE YOU CAN FIND MORE INFORMATION” for more information. We may use this prospectus to sell
securities only if it is accompanied by a prospectus supplement. You should not assume that the information in this prospectus,
any accompanying prospectus supplement or any document incorporated by reference is accurate as of any date other than the date
of such document.
This prospectus contains trademarks, tradenames, service marks,
and service names of the Company.
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains forward-looking statements that involve
risks and uncertainties. Forward-looking statements provide our current expectations and forecasts about future events, and include
statements regarding our future results of operations and financial position, business strategy, budgets, projected costs, plans
and objectives of management for future operations. The words “anticipate,” “believe,” “plan,”
“estimate,” “expect,” “strive,” “future,” “intend,” “may”
and similar expressions as they relate to us are intended to identify such forward-looking statements. Readers are urged not to
place undue reliance on these forward looking statements, which speak only as of the date made. Our actual results could differ
materially from the results anticipated in these forward-looking statements as a result of certain factors set forth in the section entitled
“RISK FACTORS” and elsewhere in this prospectus and in the documents incorporated by reference in this prospectus.
Risks and uncertainties that could cause actual results to differ include, without limitation, the level of government subsidies
and economic incentives for solar energy, general economic conditions, adoption of solar energy technologies, pricing, including
pricing of conventional energy sources, construction risks, changing regulatory environment, changing energy technologies, our
geographic concentration, our business plan, acquisitions, integration of acquired businesses, insufficient cash flow, indebtedness,
loss of key personnel, brand value, litigation, merchandise and solar panel supply problems, construction costs, competition, third
party financing costs, customer satisfaction, product liabilities, warranty and service claims, credit risk, non-compliance with
Nasdaq continued listing standards, volatile market price of our Class A common stock, “penny stock” rules, security
analyst coverage of our Class A common stock, dilution for shareholders upon the exercise of warrants, limited public trading
market, the significant ownership and voting power of our Class A common stock held by Riverside Renewable Energy Investment
LLC (“Riverside”), our historical association with Gaiam, a future sale of securities by Riverside, and other risks
and uncertainties included in our filings with the SEC. We caution you that no forward-looking statement is a guarantee of future
performance, and you should not place undue reliance on these forward-looking statements which reflect our view only as of the
date of this report. We undertake no obligation to update any forward-looking information.
PROSPECTUS SUMMARY
This summary provides a brief overview
of the key aspects of Real Goods Solar and the material terms of the offered securities that are known as of the date of this prospectus.
For a more complete understanding of the terms of the offered securities, prior to making an investment decision, you should carefully
read:
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This prospectus, which explains the general terms of the securities we may offer;
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The applicable prospectus supplement, which explains specific terms of the securities being offered and updates and changes information in this prospectus; and
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The documents referred to in “WHERE YOU CAN FIND MORE INFORMATION” for information about Real Goods Solar, including our financial statements.
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Overview of our Company
We are a leading residential and commercial solar energy engineering,
procurement and construction firm. We also perform most of our own sales and marketing activities to generate leads and secure
projects. We offer turnkey services, including design, procurement, permitting, build-out, grid connection, financing referrals
and warranty and customer satisfaction activities. Our solar energy systems use high-quality solar photovoltaic modules from manufacturers
such as Canadian Solar and Trina. We use proven technologies and techniques to help customers achieve meaningful savings by reducing
their utility costs. In addition, we help customers lower their emissions output and reliance upon fossil fuel energy sources.
We have 36 years of experience in residential solar energy.
We trace our roots to 1978, when Real Goods Trading Corporation sold the first solar photovoltaic panels in the United States.
We have designed and installed over 19,000 residential and commercial solar systems since our founding. Our focused customer acquisition
approach and our efficiency in converting customer leads into sales enable us to have what we believe are competitive customer
acquisition costs that we continuously focus on improving. We believe that our Real Goods Solar brand has a national reputation
for high quality customer service in the solar energy market, which leads to a significant number of word-of-mouth referrals and
new customers.
We were incorporated in Colorado in 2008 as a successor to Gaiam
Energy Tech, Inc. Gaiam founded Gaiam Energy Tech, Inc. as its solar division in 1999. In 2001, Gaiam Energy Tech, Inc. acquired
Real Goods Trading Corporation in a merger. The combined company became Real Goods Solar when it went public in 2008. In January
2014, we rebranded our residential and commercial activities under the name “RGS Energy.”
Our executive offices are located at 833 W. South Boulder Road,
Louisville, CO 80027-2452. Our telephone number is (303) 222-8300. Our website is www.rgsenergy.com. The information on our
website is not intended to be a part of this prospectus, and you should not rely on any of the information provided there in making
your decision to invest in our securities. Our website address referenced above is intended to be an inactive textual reference
only and not an active hyperlink to our website.
The Securities We May Offer
We may use this prospectus to offer:
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Units consisting of two or more of the other securities offered hereby or under another registration statement in any combination.
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A prospectus supplement will describe the
specific types, amounts, prices and detailed terms of any of these offered securities.
RISK FACTORS
Investing in our securities involves
significant risks. You should carefully read the risk factors in the section entitled “RISK FACTORS” in our most
recent Annual Report on Form 10-K, which is on file with the SEC and is incorporated by reference in this prospectus, before
purchasing the offered securities. Before making an investment decision, you should carefully consider these risks as well as
other information we include or incorporate by reference in this prospectus and any prospectus supplement. The risks and
uncertainties we have described are not the only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also affect our business operations.
USE OF PROCEEDS
Unless otherwise specified in a prospectus
supplement accompanying this prospectus, we currently intend to use the net proceeds from the sale of the securities offered under
this prospectus for general corporate purposes, which may include additions to working capital, financing of capital expenditures,
repayment of existing or future indebtedness, and future acquisitions and strategic investment opportunities. Pending any use,
as described in the applicable prospectus supplement, we plan to invest the net proceeds in short-term, investment grade, interest-bearing
securities.
PLAN OF DISTRIBUTION
We may sell the securities being offered by this prospectus
separately or together through any of the following methods:
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Directly to investors or purchasers;
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To investors through agents;
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To or through brokers or dealers;
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To the public through underwriting syndicates led by one or more managing underwriters;
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To one or more underwriters acting alone for resale to investors or to the public;
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Through a block trade in which the broker or dealer engaged to handle the block trade will attempt to sell the securities as agent, but may position and resell a portion of the block as principal to facilitate the transaction; or
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Through a combination of any of these methods of sale.
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We may also issue securities upon exercise of warrants or as
a dividend or distribution. We reserve the right to sell securities directly to investors on our own behalf in those jurisdictions
where we are authorized to do so.
We may distribute the securities from time to time in one or
more transactions:
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At a fixed price or prices, which may be changed from time to time;
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At market prices prevailing at the times of sale;
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At prices related to such prevailing market prices; or
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Direct Sales and Sales through Agents
We may directly solicit offers to purchase
the securities offered by this prospectus. Agents designated by us from time to time may solicit offers to purchase the securities.
We will name any agent involved in the offer or sale of the securities and set forth any commissions payable by us to an agent
in the applicable prospectus supplement. Unless otherwise indicated in the applicable prospectus supplement, any agent will be
acting on a best efforts basis for the period of his or her appointment. Any agent may be deemed to be an “underwriter”
of the securities as that term is defined in the Securities Act of 1933, as amended (the “Securities Act”).
Sales Through Underwriters or Dealers
If we use an underwriter or underwriters
in the sale of securities, we will execute an underwriting agreement with the underwriter or underwriters at the time we reach
an agreement for sale. We will set forth in the applicable prospectus supplement the names of the specific managing underwriter
or underwriters, as well as any other underwriters, and the terms of the transactions, including compensation of the underwriters
and dealers. This compensation may be in the form of discounts, concessions or commissions. The maximum underwriting compensation
for any offering under the registration statement to which this prospectus relates may not exceed 8% of the offering proceeds.
Underwriters and others participating in any offering of the securities may engage in transactions that stabilize, maintain or
otherwise affect the price of the securities. We will describe any of these activities in the applicable prospectus supplement.
If a dealer is used in the sale of the
securities, we or an underwriter will sell securities to the dealer, as principal. The dealer may then resell the securities to
the public at varying prices to be determined by the dealer at the time of resale. The applicable prospectus supplement will set
forth the name of the dealer and the terms of the transactions.
We may directly solicit offers to purchase
the securities, and we may sell directly to institutional investors or others. These persons may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resale of the securities. The applicable prospectus supplement will describe
the terms of any direct sales, including the terms of any bidding or auction process.
Agreements we enter into with agents, underwriters
and dealers may entitle them to indemnification by us against specified liabilities, including liabilities under the Securities
Act, or to contribution by us to payments they may be required to make in respect of these liabilities. The applicable prospectus
supplement will describe the terms and conditions of indemnification or contribution.
Delayed Delivery Contracts
We may authorize underwriters, dealers
and agents to solicit offers by certain institutional investors to purchase offered securities under contracts providing for payment
and delivery on a future date specified in the applicable prospectus supplement. The applicable prospectus supplement will also
describe the public offering price for the securities and the commission payable for solicitation of these delayed delivery contracts.
Delayed delivery contracts will contain definite fixed price and quantity terms. The obligations of a purchaser under these delayed
delivery contracts will be subject to only two conditions:
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That the institution’s purchase of the securities at the time of delivery of the securities is not prohibited under the law of any jurisdiction to which the institution is subject; and
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That we shall have sold to the underwriters the total principal amount of the offered securities, less the principal amount covered by the delayed delivery contracts.
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“At the Market” Offerings
We may from time to time engage a firm
to act as our agent for one or more offerings of our securities. We sometimes refer to this agent as our “offering agent.”
If we reach agreement with an offering agent with respect to a specific offering, including the number of securities and any minimum
price below which sales may not be made, then the offering agent will try to sell such securities on the agreed terms. The offering
agent could make sales in privately negotiated transactions or using any other method permitted by law, including sales deemed
to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act, including sales made
directly on any national exchange upon which our securities are listed, or sales made to or through a market maker other than on
an exchange. The offering agent will be deemed to be an “underwriter” within the meaning of the Securities Act with
respect to any sales effected through an “at the market” offering.
Market Making, Stabilization and Other Transactions
To the extent permitted by and in accordance
with Regulation M promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in connection
with an offering, an underwriter may engage in over-allotments, stabilizing transactions, short covering transactions and penalty
bids. Over-allotments involve sales in excess of the offering size, which creates a short position. Stabilizing transactions permit
bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Short covering transactions
involve purchases of the securities in the open market after the distribution is completed to cover short positions. Penalty bids
permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased
in a covering transaction to cover short positions. Those activities may cause the price of the securities to be higher than it
would be otherwise. If commenced, the underwriters may discontinue any of these activities at any time.
To the extent permitted by and in accordance
with Regulation M promulgated under the Exchange Act, any underwriters who are qualified market makers on any national exchange
upon which our securities are listed may engage in passive market making transactions in the securities on such exchange during
the business day prior to the pricing of an offering, before the commencement of offers or sales of the securities. Passive market
makers must comply with applicable volume and price limitations and must be identified as passive market makers.
In general, a passive market maker must
display its bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered
below the passive market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase
limits are exceeded.
DESCRIPTION OF CLASS A COMMON STOCK
Our authorized common stock consists of
150,000,000 shares of Class A common stock, par value $.0001 per share. As of January 24, 2014, there were 44,745,180
shares of our Class A common stock outstanding. Although we believe the following summary description of our Class A
common stock set forth below is accurate, our articles of incorporation and our bylaws covers all material provisions affecting
the rights of holders of our Class A common stock. This summary is not intended to be complete and is qualified by reference
to the provisions of applicable law and to our articles of incorporation and bylaws.
Voting Rights
Each holder of shares of Class A common
stock is entitled to one vote for each share held on all matters submitted to a vote of shareholders. There are no cumulative voting
rights. All holders of shares of Class A
common stock vote as a single group on all matters that are
submitted to the shareholders for a vote. Accordingly, holders of a majority of the shares of Class A common stock entitled
to vote in any election of directors may elect all of the directors who stand for election. Our entire board of directors stands
for election each year. A required number of shareholders having the minimum number of votes that would be necessary to authorize
or take action at a meeting at which all of the shares entitled to vote thereon were present and voted may consent to an action
in writing and without a meeting under certain circumstances.
Dividends and Liquidation
Subject to any preferential rights of any
outstanding shares of preferred stock, shares of Class A common stock are entitled to receive dividends, if any, as may be
declared by our board of directors out of legally available funds. In the event of a liquidation, dissolution or winding up of
our company, the shares of Class A common stock are entitled to our assets remaining after the payment of all of our debts
and other liabilities, including preferential payments made to holders of any outstanding shares of preferred stock. Holders of
shares of Class A common stock have no preemptive, subscription or redemption rights, and there are no redemption or sinking
fund provisions applicable to the shares of Class A common stock.
Anti-Takeover Effects of Our Articles of Incorporation and
Bylaws
The following provisions, which are contained
in our articles of incorporation or bylaws, could have the effect of delaying, deferring or preventing a change in control of our
company.
Our articles of incorporation and bylaws
provide that our board may consist of any number of directors, which may be fixed from time to time by our board. Newly created
directorships resulting from any increase in our authorized number of directors may be filled by the affirmative vote of a majority
of the directors then in office or by an election at an annual meeting or special meeting of shareholders called for that purpose,
and any vacancies on our board resulting from death, resignation, retirement, disqualification, removal from office or other cause
may be filled a majority of our board then in office, even if less than a quorum is remaining in office.
We believe that Riverside holds approximately
17.5% of the total voting power of our outstanding capital stock. Further, pursuant to the terms of the Shareholders Agreement
entered into in connection with the closing of the Alteris acquisition as of December 19, 2011, Riverside has the right to
designate a certain number of individuals for appointment or nomination to our board of directors, tied to its ownership of our
Class A common stock. Consequently, Riverside is able to exert substantial influence over our company and matters requiring
approval by our shareholders, including the election of directors, increasing our authorized capital stock, financing activities,
a merger or sale of our assets and the number of shares available for issuance under our incentive plan. As a result of Riverside’s
voting power, it would be difficult to achieve a change of control of our company without their consent.
Our bylaws require advance notice by a
shareholder of any proposal to be brought before an annual meeting of shareholders by a shareholder, including any nomination for
election of directors by any shareholder entitled to vote for the election of directors at the meeting. Our bylaws also provide
that no shareholder proposal may be considered at a meeting of our shareholders unless the proposal relates to a matter on which
a shareholder vote is required by our charter, bylaws or by applicable law.
Our board of directors has the power to
issue preferred stock with designations, preferences, limitations and relative rights determined by the board of directors without
any vote or action by shareholders. The issuance of preferred stock or of rights to purchase preferred stock could have the effect
of making it more difficult for a third party to acquire Real Goods Solar, or of discouraging a third party from attempting to
acquire Real Goods Solar.
Subject to repeal or change by action of
our shareholders, our board may amend, supplement or repeal our bylaws or adopt new bylaws.
Registration Rights
On December 19, 2011, Real Goods Solar
entered into an Amended and Restated Registration Rights Agreement with Gaiam and Riverside where each (or its permitted transferee)
had the right to require Real Goods Solar to register with the SEC all or any portion of its shares of Real Goods Solar Class A
common stock so that those shares may be publicly resold, or to include such shares in any registration statement Real Goods Solar
files, subject to certain exceptions, conditions and limitations. These rights include demand registration rights, Form S-3 registration
rights and “piggyback” registration rights, in each case on and subject to the terms and conditions identified in the
Amended and Restated Registration Rights Agreement. Real Goods Solar will generally pay all expenses, other than underwriting discounts
and commissions, relating to all demand registrations, Form S-3 registrations and piggyback registrations. These registration rights
terminate as to a given holder of registrable securities, when such holder of registrable securities can sell all of such holder’s
registrable securities during any 90-day period pursuant to Rule 144 promulgated under the Securities Act, or pursuant to another
similar exception. However, if a holder owns more than 10% of Real Goods Solar’s outstanding securities, such holder shall
continue to have registration rights until such time as all of the holder’s securities may be sold pursuant to Rule 144 or
such holder owns less than 10% of Real Goods Solar’s outstanding securities. The resale of these shares in the public market
upon exercise of those registration rights could adversely affect the market price of the Real Goods Solar Class A common
stock. 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.
In connection with the closing of its June 3,
2013 private placement, Real Goods Solar entered into a Registration Rights Agreement with the investors to have their shares of
Real Goods Solar Class A common stock purchased in the private placement and issuable upon exercise of warrants purchased
in the private placement registered with the SEC for public resale under the Securities Act. On June 20, 2013, Real Goods
Solar filed a registration statement on Form S-3 to register these shares pursuant to the terms of this Registration Rights Agreement.
The SEC declared the registration statement effective on July 3, 2013. Real Goods Solar is required to maintain the effectiveness
of the registration statement until the earlier to occur of (a) the fifth anniversary of the effectiveness of the registration
statement, or (b) the date on which all of the registrable securities covered by the Registration Rights Agreement have been
sold or transferred in a manner that they may be resold without subsequent registration under the Securities Act.
On November 15, 2013, Real Goods Solar
entered into an underwriting agreement with an underwriter in connection with a registered public offering. Pursuant to the underwriting
agreement, Real Goods Solar has agreed to file a registration statement covering the issuance of the shares of Real Goods Solar
Class A common stock underlying the warrants issued in the offering on November 20, 2013 and to cause such registration
statement to be declared effective before the time the warrants become exercisable and to remain effective through the earlier
of (a) the expiration date of the warrants and (b) the date on which all of the warrants shall have been exercised in
full. The warrants are exercisable at any time on or after the one year anniversary of their original issuance and at any time
up to the date that is five and one-half years after the date of their original issuance. If a registration statement registering
the issuance of the shares of Real Goods Solar Class A common stock underlying the warrants under the Securities Act is not
effective or available and an exemption from registration under the Securities Act is not available for the issuance of such shares,
if the holder, in its sole discretion, elects to exercise a warrant, the holder shall do so through a cashless exercise, in which
case the holder would receive upon such exercise the “net number” of shares of Real Goods Solar Class A common
stock determined according to the formula set forth in the warrant.
The Registration Rights Agreement further
provides that in the event that (a) the registration statement ceases to be effective and available to the investors under
certain circumstances, or (b) Real Goods Solar fails to timely file all reports required to be filed under the Exchange Act
other than Current Reports on Form 8-K, Real Goods Solar shall pay to the holders of registrable securities, on the occurrence
of each such event and on each monthly anniversary thereof until the applicable event is cured, an amount in cash equal to 1.0%
of the aggregate
purchase price paid by an investor multiplied by the percentage
of such investor’s registrable securities that are not covered by the registration statement, up to a maximum of 10.0% of
such aggregate purchase price. The foregoing description is subject to the terms and conditions identified in the Registration
Rights Agreement.
Transfer Agent and Registrar
The transfer agent and registrar for our Class A common
stock is Computershare Trust Company.
Listing
Our Class A common stock is listed on the Nasdaq Capital
Market under the symbol “RSOL.”
DESCRIPTION OF PREFERRED STOCK
Our board of directors is authorized, subject
to any limitations prescribed by Colorado law, to issue at any time up to 50,000,000 shares of preferred stock. Our board of directors
may provide for the issuance of the preferred stock in one or more series or classes with designations, preferences, limitations
and relative rights determined by the board of directors without any vote or action by our shareholders as expressed in articles
of amendment filed with the Colorado Secretary of State. As a result, the board has the power to issue preferred stock with voting,
conversion and other rights and preferences that could adversely affect the voting power or other rights of the holders of our
common stock. Although we have no current plans to issue any preferred stock, the issuance of preferred stock or of rights to purchase
preferred stock could have the effect of making it more difficult for a third party to acquire us, or of discouraging a third party
from attempting to acquire us. Such an issuance could also dilute the voting power or other incidents of ownership of holders of
our common stock.
The issuance of preferred stock could adversely
affect the voting power of holders of our common stock, and the likelihood that preferred holders will receive dividend and liquidation
preferences may have the effect of delaying, deferring or preventing a change in control of the Company, which could depress the
market price of our common stock.
Unless otherwise indicated in the prospectus
supplement, all shares of preferred stock to be issued from time to time under this prospectus will be fully paid and nonassessable.
The prospectus supplement relating to the
preferred stock offered will contain a description of the specific terms of that series as fixed by our board of directors, including,
as applicable:
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The number of shares of preferred stock offered and the offering price of the preferred stock;
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The title and stated value of the preferred stock;
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The dividend rate(s), period(s) and/or payment date(s) or method(s) of calculation of such rates, periods or dates applicable to the preferred stock;
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The date from which dividends on the preferred stock will accumulate, if applicable;
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The liquidation rights of the preferred stock;
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The procedures for auction and remarketing, if any, of the preferred stock;
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The sinking fund provisions, if applicable, for the preferred stock;
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The redemption provisions, if applicable, for the preferred stock;
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Whether the preferred stock will be convertible into or exchangeable for other securities offered hereby or under another registration statement and, if so, the terms and conditions of the conversion or exchange, including the conversion price or exchange ratio and the conversion or exchange period (or the method of determining the same);
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Whether the preferred stock will have voting rights and the terms of any voting rights, if any;
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Whether the preferred stock will be listed on any securities exchange;
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Whether the preferred stock will be issued with any other securities offered hereby or under another registration statement and, if so, the amount and terms of these securities; and
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Any other specific terms, preferences or rights of, or limitations or restrictions on, the preferred stock.
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DESCRIPTION OF WARRANTS
We may issue warrants for the purchase
of common stock, preferred stock, debt securities or other securities offered hereby or under another registration statement. Warrants
may be issued independently or together with common stock, preferred stock, debt securities or other securities offered hereby
or under another registration statement and may be attached to or separate from any such offered securities. Series of warrants
may be issued under a separate warrant agreement entered into between us and a bank or trust company, as warrant agent, all as
will be set forth in the prospectus supplement relating to the particular issue of warrants. The warrant agent would act solely
as our agent in connection with the warrants and would not assume any obligation or relationship of agency or trust for or with
any holders of warrants or beneficial owners of warrants.
As of January 24, 2014, we had outstanding
warrants to purchase 6,700,039 shares of our Class A common stock.
The prospectus supplement relating to the
warrants offered will contain a description of the specific terms of that series as fixed by our board of directors, including,
as applicable:
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The title and aggregate number of the warrants;
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The currency or currencies, including composite currencies or currency units, in which the price of the warrants may be payable;
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The number of shares of common stock or preferred stock, or the number or amount of other securities offered hereby or under another registration statement, purchasable upon the exercise of a warrant;
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The exercise price or manner of determining the exercise price, the manner in which the exercise price may be paid, and any minimum number of warrants exercisable at one time;
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When the warrants become exercisable and the expiration date;
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The terms of any right of ours to redeem or call the warrants;
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The terms of any right of ours to accelerate the exercisability of the warrants;
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Where the warrant certificates may be transferred and exchanged;
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Whether the warrants are to be issued with common stock, preferred stock or other securities offered hereby or under another registration statement and, if so, the number and terms of any such offered securities;
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The date, if any, on and after which the warrants and the related shares of common stock, preferred stock or other securities offered hereby or under another registration statement will be separately transferable;
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United States federal income tax consequences applicable to the warrants; and
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Any other terms of the warrants, including terms, procedures and limitations relating to exchange and exercise of the warrants.
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You should refer to the provisions of the
warrant agreement that will be filed with the SEC in connection with the offering of warrants for the complete terms of the warrant
agreement.
Prior to the exercise of any warrants,
holders of such warrants will not have any rights of holders of the securities purchasable upon such exercise, including the right
to receive payments of dividends, or the right to vote such underlying securities.
DESCRIPTION OF RIGHTS
We may issue rights to purchase common
stock, preferred stock or debt securities. These rights may be issued independently or together with any other security offered
hereby and may or may not be transferable by the stockholder receiving the rights in such offering. In connection with any offering
of such rights, we may enter into a standby arrangement with one or more underwriters or other purchasers pursuant to which the
underwriters or other purchasers may be required to purchase any securities remaining unsubscribed for after such offering.
Each series of rights will be issued under
a separate rights agreement which we will enter into with a bank or trust company, as rights agent, all as set forth in the applicable
prospectus supplement. The rights agent will act solely as our agent in connection with the certificates relating to the rights
and will not assume any obligation or relationship of agency or trust with any holders of rights certificates or beneficial owners
of rights. We will file the rights agreement and the rights certificates relating to each series of rights with the SEC, and incorporate
them by reference as an exhibit to the registration statement of which this prospectus is a part on or before the time we
issue a series of rights.
The applicable prospectus supplement will
describe the specific terms of any offering of rights for which this prospectus is being delivered, including the following:
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The date of determining the stockholders entitled to the rights distribution;
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The number of rights issued or to be issued to each stockholder;
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The exercise price payable for each share of common stock, preferred stock, debt securities or other securities offered hereby or under another registration statement upon the exercise of the rights;
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The number and terms of the shares of common stock, preferred stock, debt securities or other securities offered hereby or under another registration statement which may be purchased per each right;
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The extent to which the rights are transferable;
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The date on which the holder’s ability to exercise the rights shall commence, and the date on which the rights shall expire;
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The extent to which the rights may include an over-subscription privilege with respect to unsubscribed securities;
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If applicable, the material terms of any standby underwriting or purchase arrangement entered into by us in connection with the offering of such rights; and
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Any other terms of the rights, including the terms, procedures, conditions and limitations relating to the exchange and exercise of the rights.
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The description in the applicable prospectus
supplement of any rights that we may offer will not necessarily be complete and will be qualified in its entirety by reference
to the applicable rights certificate, which will be filed with the SEC.
DESCRIPTION OF DEBT SECURITIES
We may issue senior debt securities or
subordinated debt securities. Senior debt securities will be issued under an indenture, the “senior indenture,” between
us and the trustee named in the applicable prospectus supplement, as trustee. Subordinated debt securities will be issued under
a separate indenture, the “subordinated indenture,” between us and the trustee named in the applicable prospectus supplement,
as trustee. The senior indenture and the subordinated indenture are sometimes collectively referred to in this prospectus as the
“indentures.” The indentures will be subject to and governed by the Trust Indenture Act of 1939. A copy of the form
of each of these indentures is filed as an exhibit to the registration statement of which this prospectus is a part. This
prospectus describes the general terms and provisions of the debt securities. When we offer to sell a particular series of debt
securities, we will describe the specific terms of the securities in a supplement to this prospectus. The prospectus supplement
will also indicate whether the general terms and provisions described in this prospectus apply to a particular series of debt securities.
The following briefly describes the general
terms and provisions of the debt securities and the indentures governing them which may be offered. The particular terms of the
debt securities offered, and the extent, if any, to which these general provisions may apply to the debt securities so offered,
will be described in a prospectus supplement relating to those securities. The following descriptions of the indentures are not
complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the respective indentures.
General
The indentures permit us to issue the debt
securities from time to time, without limitation as to aggregate principal amount, and in one or more series. The indentures also
do not limit or otherwise restrict the amount of other indebtedness which we may incur or other securities which we or our subsidiaries
may issue, including indebtedness which may rank senior to the debt securities. Nothing in the subordinated indenture prohibits
the issuance of securities representing subordinated indebtedness that is senior or junior to the subordinated debt securities.
Debt securities we issue may be secured or unsecured.
Unless we give you different information
in the prospectus supplement, the senior debt securities will be unsubordinated obligations and will rank equally with all of our
other unsecured and unsubordinated indebtedness. Payments on the subordinated debt securities will be subordinated to the prior
payment in full of all of our senior indebtedness, as described under “Subordination” and in the applicable prospectus
supplement. Payments on secured debt securities will be secured by the collateral described in the applicable prospectus supplement.
We may issue debt securities if the conditions
contained in the applicable indenture are satisfied. These conditions include the adoption of resolutions by our board of directors
that establish the terms of the debt securities being issued. Any resolution approving the issuance of any issue of debt securities
will include the terms of that issue of debt securities, which may include:
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The title and series designation;
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The aggregate principal amount and the limit, if any, on the aggregate principal amount or initial issue price of the debt securities which may be issued under the applicable indenture;
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The principal amount payable, whether at maturity or upon earlier acceleration;
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Whether the principal amount payable will be determined with reference to an index, formula or other method which may be based on one or more currencies, currency units, composite currencies, commodities, equity indices or other indices;
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Whether the debt securities will be issued as original issue discount securities (as defined below);
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The date or dates on which the principal of the debt securities is payable;
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Any fixed or variable interest rate or rates per annum or the method or formula for determining an interest rate;
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The date from which any interest will accrue;
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Any interest payment dates;
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Whether the debt securities are senior or subordinated, and if subordinated, the terms of the subordination;
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Whether the debt securities are secured or unsecured, and if secured, the collateral securing the debt securities;
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The price or prices at which the debt securities will be issued, which may be expressed as a percentage of the aggregate principal amount of those debt securities;
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The stated maturity date;
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Whether the debt securities are to be issued in global form;
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Any sinking fund requirements;
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Any provisions for redemption, the redemption price and any remarketing arrangements;
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The denominations of the securities or series of securities;
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Whether the debt securities are denominated or payable in U.S. dollars or a foreign currency or units of two or more foreign currencies;
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Any restrictions on the offer, sale and delivery of the debt securities;
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The place or places where payments or deliveries on the debt securities will be made and may be presented for registration of transfer or exchange;
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Whether any of the debt securities will be subject to defeasance in advance of the date for redemption or the stated maturity date;
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The terms, if any, upon which the debt securities are convertible into other securities offered hereby or under another registration statement or another issuer and the terms and conditions upon which any conversion will be effected, including the initial conversion price or rate, the conversion period and any other provisions in addition to or instead of those described in this prospectus;
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Any other terms of the debt securities which are not inconsistent with the provisions of the applicable indenture;
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A description of any documents or certificates that must be received prior to the issuance of any definitive securities;
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Whether and under what circumstances additional amounts will be paid to non-U.S. citizens in connection with any tax, assessment or governmental charge and whether securities may be redeemed in lieu of paying such additional fees;
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The identity of each security registrar or paying agent (if other than trustee);
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Any provisions granting special rights to securities holders upon the occurrence of specified events;
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Any deletions from, modifications of, or additions to any default events or covenants set forth in the form of indenture;
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The portion of the principal amount payable upon the declaration of acceleration of the maturity of any securities; and
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The date any bearer securities of or within the series and any temporary global security representing outstanding securities shall be dated, if other than date of original issuance.
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The debt securities may be issued as “original
issue discount securities” which bear no interest or interest at a rate which at the time of issuance is below market rates
and which will be sold at a substantial discount below their principal amount. If the maturity of any original issue discount security
is accelerated, the amount payable to the holder of the security will be determined by the applicable prospectus supplement, the
terms of the security and the relevant indenture, but may be an amount less than the amount payable at the maturity of the principal
of that original issue discount security. Special federal income tax and other considerations relating to original issue discount
securities will be described in the applicable prospectus supplement.
Please see the prospectus supplement or
pricing supplement you have received or will receive for the terms of the specific debt securities we are offering.
You should be aware that special U.S. federal
income tax, accounting and other considerations may apply to the debt securities. The prospectus supplement relating to an issue
of debt securities will describe these considerations.
Registration and Transfer
Unless otherwise indicated in the applicable
prospectus supplement, the debt securities will be issued in fully registered form. Holders may present debt securities in registered
form for transfer or exchange for other debt securities of the same series at the offices of the applicable indenture trustee according
to the terms of the applicable indenture and the debt securities.
Unless otherwise indicated in the applicable
prospectus supplement, the debt securities will be issued in fully registered form, and in denominations of $1,000 and any integral
multiple thereof.
No service charge will be required for
any transfer or exchange of the debt securities but we may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection with any transfer or exchange.
Payment and Place of Payment
We will pay or deliver principal and any
premium and interest in the manner, at the places and subject to the restrictions set forth in the applicable indenture, the debt
securities and the applicable prospectus supplement.
Global Securities
Each indenture provides that we may issue
debt securities in global form. If any series of debt securities is issued in global form, the prospectus supplement will describe
any circumstances under which beneficial owners of interests in any of those global debt securities may exchange their interests
for debt securities of that series and of like tenor and principal amount in any authorized form and denomination.
Events of Default
Unless otherwise indicated in the applicable
prospectus supplement, the following are events of default under the senior indenture with respect to the senior debt securities
and under the subordinated indenture with respect to the subordinated debt securities:
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Default in the payment of any principal or premium or make-whole amount, if any, on the debt securities when due;
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Default in the payment of any interest on the debt securities, or of any coupon pertaining thereto, when due, which continues for 30 days;
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Default in the performance or breach of any other obligation contained in the applicable indenture for the benefit of that series of debt securities (other than defaults or breaches otherwise specifically addressed), which continues for 90 days after written notice of the default or breach;
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Specified events in bankruptcy, insolvency or reorganization of our Company or any of our significant subsidiaries; and
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Any other event of default provided with respect to the debt securities of any series.
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If an event of default (other than an event
of default arising from specified events in bankruptcy of us or any of our significant subsidiaries) occurs and is continuing for
any series of debt securities, the indenture trustee or the holders of not less than 25% in aggregate principal amount or, under
certain circumstances, issue price of the outstanding debt securities of that series may declare all amounts, or any lesser amount
provided for in the debt securities of that series, to be immediately due and payable.
At any time after the applicable indenture
trustee or the holders have accelerated a series of debt securities, but before the applicable indenture trustee has obtained a
judgment or decree for payment of money due, the holders of a majority in aggregate principal amount of outstanding debt securities
of that series may rescind and annul that acceleration and its consequences, provided that all payments or deliveries due, other
than those due as a result of acceleration, have been made and all events of default have been remedied or waived.
The holders of a majority in principal
amount or aggregate issue price of the outstanding debt securities of any series may waive any default with respect to that series,
except a default:
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In the payment of any amounts due and payable or deliverable under the debt securities of that series; or
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In an obligation contained in, or a provision of, an indenture which cannot be modified under the terms of that indenture without the consent of each holder of each series of debt securities affected.
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The holders of a majority in principal
amount or, under certain circumstances, issue price of the outstanding debt securities of a series may direct the time, method
and place of conducting any proceeding for any remedy available to the applicable indenture trustee or exercising any trust or
power conferred on the indenture trustee with respect to debt securities of that series, provided that any direction is not in
conflict with any rule of law or the applicable indenture and the trustee may take other actions, other than those that might lead
to personal liability, not inconsistent with the direction. Subject to the provisions of the applicable indenture relating to the
duties of the indenture trustee, before proceeding to exercise any right or power under the indenture at the direction of the holders,
the indenture trustee is entitled to receive from those holders reasonable security or indemnity against the costs, expenses and
liabilities which it might incur in complying with any direction.
A holder of any debt security of any series
will have the right to institute a proceeding with respect to the applicable indenture or for any remedy under the indenture, if:
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That holder previously gives to the indenture trustee written notice of a continuing event of default with respect to debt securities of that series;
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The holders of not less than 25% in principal amount of the outstanding securities of that series have made written request and offered the indenture trustee indemnity satisfactory to the indenture trustee to institute that proceeding as indenture trustee;
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The indenture trustee will not have received from the holders of a majority in principal amount or, under certain circumstances, issue price of the outstanding debt securities of that series a direction inconsistent with the request; and
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The indenture trustee fails to institute the proceeding within 60 days.
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However, the holder of any debt security
or coupon has the right to receive payment of the principal of (and premium or make-whole amount, if any) and interest on, and
any additional amounts in respect of, such debt security or payment of such coupon on the respective due dates (or, in the case
of redemption, on the redemption date) and to institute suit for the enforcement of any such payment.
We are required to furnish to the indenture
trustees annually a statement as to the performance of our obligations under the indentures and as to any default in that performance.
Modification and Waiver
Unless otherwise indicated in the applicable
prospectus supplement, we and the applicable indenture trustee may amend and modify each indenture or debt securities under that
indenture with the consent of holders of at least a majority in principal amount or, under certain circumstances, issue price of
each series of all outstanding debt securities then outstanding under the indenture affected. However, without the consent of each
holder of any debt security issued under the applicable indenture, we may not amend or modify that indenture to:
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Change the stated maturity date of the principal of (or premium or make-whole amount, if any, on), or any installment of principal or interest on, any debt security issued under that indenture;
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Reduce the principal amount of or any make-whole amount, the rate of interest on or any additional amounts payable in respect thereof, or any premium payable upon the redemption of any debt security issued under that indenture;
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Reduce the amount of principal of an original issue discount security or make-whole amount, if any, issued under that indenture payable upon acceleration of its maturity; or provable in bankruptcy or adversely affect any right of repayment of a debt security;
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Change the place or currency of payment of principal or any premium or any make-whole amount or interest on, any debt security issued under that indenture;
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Impair the right to institute suit for the enforcement of any payment or delivery on or with respect to any debt security issued under that indenture;
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Reduce the percentage in principal amount of debt securities of any series issued under that indenture, the consent of whose holders is required to modify or amend the indenture or to waive compliance with certain provisions of the indenture; or
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Make any change that adversely affects the right to convert or exchange any security or decrease the conversion/exchange rate or increase the conversion/exchange price.
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The holders of at least a majority in principal
amount of the outstanding debt securities of any series issued under that indenture may, with respect to that series, waive past
defaults under the indenture, except as described under “Events of Default.”
Unless otherwise indicated in the applicable
prospectus supplement, we and the applicable indenture trustee may also amend and modify each indenture without the consent of
any holder for any of the following purposes:
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To evidence the succession of another person to our company;
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To add to our covenants for the benefit of the holders of all or any series of debt securities;
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To add events of default for the benefit of the holders of all or any series of debt securities;
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To surrender any right or power conferred by the applicable indenture upon our company, or to make any change that does not adversely affect the legal rights of the holder provided by the indenture in any material respect;
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To change or eliminate any of the provisions of the applicable indenture in respect of any series of debt securities, so long as any such change or elimination will become effective only in respect of any series of securities when there is no outstanding security of that series which is entitled to the benefit of that provision;
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To establish the form or terms of debt securities of any series;
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To evidence and provide for the acceptance of appointment by a successor indenture trustee;
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To cure any ambiguity or correct any defect or inconsistency in the applicable indenture;
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To provide for uncertified securities as in addition to certified securities;
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To close the indenture with respect to the authentication and delivery of additional series of securities or to qualify or maintain qualifications of the applicable indenture under the Trust Indenture Act; or
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To supplement any of the provisions of an indenture as is necessary to permit or facilitate the defeasance or discharge of any series of securities under specified provisions of the indenture, provided that any such action shall not adversely affect the interests of the holders of securities of such series or any other series of securities under the indenture in any material respect.
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Consolidation, Merger and Sale of Assets
Unless otherwise indicated in the applicable
prospectus supplement, we may consolidate or merge with or into any other corporation, and we may sell, lease or convey all or
substantially all of our assets to any corporation, provided that the resulting corporation, if other than our company, is a corporation
organized and existing under the laws of the United States or any U.S. state and assumes all of our obligations to pay or deliver
the principal and any premium or make-whole amount, if any, and any interest on, the debt securities; and perform and observe all
of our other obligations under the indentures and supplemental indentures. We are not, or any successor corporation, as the case
may be, is not, immediately after any consolidation or merger, in default under the indentures.
The indentures do not provide for any right
of acceleration in the event of a consolidation, merger, sale of all or substantially all of the assets, recapitalization or change
in our stock ownership. In addition, the indentures do not contain any provision that would protect the holders of debt securities
against a sudden and dramatic decline in credit quality resulting from takeovers, recapitalizations or similar restructurings.
Regarding the Indenture Trustee
The occurrence of any default under either
the senior indenture or the subordinated indenture could create a conflicting interest for the indenture trustee under the Trust
Indenture Act if the same entity serves as trustee under both indentures. If that default has not been cured or waived within 90
days after the indenture trustee has or acquired a conflicting interest, the indenture trustee would generally be required by the
Trust Indenture Act to eliminate that conflicting interest or resign as indenture trustee with respect to the debt securities issued
under the senior indenture or the subordinated indenture. If the indenture trustee resigns, we are required to promptly appoint
a successor trustee with respect to the affected securities.
The Trust Indenture Act also imposes certain
limitations on the right of the indenture trustee, as a creditor of ours, to obtain payment of claims in certain cases, or to realize
on certain property received in respect to any cash claim or otherwise. The indenture trustee will be permitted to engage in other
transactions with us, provided that, if it acquires a conflicting interest within the meaning of Section 310 of the Trust
Indenture Act, it generally must either eliminate that conflict or resign.
International Offering
If specified in the applicable prospectus
supplement, we may issue debt securities outside the United States. Those debt securities will be described in the applicable prospectus
supplement. In connection with any offering
outside the United States, we will designate paying agents,
registrars or other agents with respect to the debt securities, as specified in the applicable prospectus supplement.
We will describe in the applicable prospectus
supplement whether our debt securities issued outside the United States: (1) may be subject to certain selling restrictions;
(2) may be listed on one or more foreign stock exchanges; and (3) may have special U.S. tax and other considerations
applicable to an offering outside the United States.
Defeasance
We may terminate or “defease”
our obligations under the indenture with respect to the debt securities of any series by taking the following steps:
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Depositing irrevocably with the indenture trustee an amount, which through the payment of interest, principal or premium, if any, will provide an amount sufficient to pay the entire amount of the senior debt securities:
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In the case of senior debt securities denominated in U.S. dollars, U.S. dollars or U.S. government obligations;
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In the case of senior debt securities denominated in a foreign currency, of money in that foreign currency or foreign government obligations of the foreign government or governments issuing that foreign currency; or
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A combination of money and U.S. government obligations or foreign government obligations, as applicable;
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An opinion of independent counsel that the holders of the senior debt securities of that series will have no federal income tax consequences as a result of that deposit and termination;
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An opinion of independent counsel that registration is not required under Investment Company Act of 1940;
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An opinion of counsel as to certain other matters; and
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Officers’ certificates certifying as to compliance with the senior indenture and other matters; and
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Paying all amounts due under the senior indenture.
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Further, the defeasance cannot cause an
event of default under the indenture or any other agreement or instrument and no default under the indenture or any such other
agreement or instrument can exist at the time the defeasance occurs.
Subordination
The subordinated debt securities will be
subordinated in right of payment to all senior debt. In certain circumstances relating to our liquidation, dissolution, receivership,
reorganization, insolvency or similar proceedings, the holders of all senior debt will first be entitled to receive payment in
full before the holders of the subordinated debt securities will be entitled to receive any payment on the subordinated debt securities.
If the maturity of any subordinated debt
securities is accelerated, we will have to repay all senior debt before we can make any payment on the subordinated debt securities.
Unless otherwise specified in the prospectus
supplement relating to the particular series of subordinated debt securities, “senior debt” is defined as:
the principal, premium, if any, unpaid interest
(including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to us whether
or not a claim for post-filing interest is allowed in such proceeding), fees, charges, expenses, reimbursement and indemnification
obligations, and all other amounts payable under or in respect of the following indebtedness of us for money borrowed, whether
any such indebtedness exists as of the date of the indenture or is created, incurred, assumed or guaranteed after such date:
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Any debt (a) for money borrowed by us, or (b) evidenced by a bond, note, debenture, or similar instrument (including purchase money obligations) given in connection with the acquisition of any business, property or assets, whether by purchase, merger, consolidation or otherwise, but shall not include any account payable or other obligation created or assumed in the ordinary course of business in connection with the obtaining of materials or services, or (c) which is a direct or indirect obligation which arises as a result of banker’s acceptances or bank letters of credit issued to secure obligations of us, or to secure the payment of revenue bonds issued for the benefit of us whether contingent or otherwise;
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Any debt of others described in the preceding clause (1) which we have guaranteed or for which we are otherwise liable;
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The obligation of us as lessee under any lease of property which is reflected on our balance sheet as a capitalized lease; and
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Any deferral, amendment, renewal, extension, supplement or refunding of any liability of the kind described in any of the preceding clauses (1), (2) and (3).
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“Senior debt” does not include:
(i) any such indebtedness,
obligation or liability referred to in clauses (1) through (4) above as to which, in the instrument creating or evidencing
the same or pursuant to which the same is outstanding, it is provided that such indebtedness, obligation or liability is not superior
in right of payment to the subordinated debt securities, or ranks pari passu with the subordinated debt securities, (ii) any
such indebtedness, obligation or liability which is subordinated to indebtedness of us to substantially the same extent as or to
a greater extent than the subordinated debt securities are subordinated, (iii) any indebtedness to one of our subsidiaries
and (iv) the subordinated debt securities.
The subordinated indenture does not limit
or prohibit the incurrence of additional senior indebtedness, which may include indebtedness that is senior to the subordinated
debt securities, but subordinate to our other obligations. Any prospectus supplement relating to a particular series of subordinated
debt securities will set forth the aggregate amount of our indebtedness senior to the subordinated debt securities as of a recent
practicable date.
By reason of this subordination in favor
of the holders of senior indebtedness, in the event of an insolvency, our creditors who are not holders of senior indebtedness
may recover less, proportionately, than holders of senior indebtedness and may recover more, proportionately, than holders of the
subordinated debt securities.
The prospectus supplement may further describe
the provisions, if any, which may apply to the subordination of the subordinated debt securities of a particular series.
Restrictive Covenants
The subordinated indenture does not contain
any significant restrictive covenants. The prospectus supplement relating to a series of subordinated debt securities may describe
certain restrictive covenants, if any, to which we may be bound under the subordinated indenture.
DESCRIPTION OF UNITS
As specified in the applicable prospectus
supplement, we may issue units consisting of one or more shares of Class A common stock or preferred stock, debt securities,
warrants or any combination of such securities. In addition, the prospectus supplement relating to units will describe the terms
of any units we issue, including as applicable:
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The designation and terms of the units and the securities included in the units;
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Any provision for the issuance, payment, settlement, transfer or exchange of the units;
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The date, if any, on and after which the units may be transferable separately;
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Whether we will apply to have the units traded on a securities exchange or securities quotation system;
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Any material U.S. federal income tax consequences; and
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How, for U.S. federal income tax purposes, the purchase price paid for the units is to be allocated among the component securities.
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EXPERTS
The financial statements of Real Goods
Solar and its subsidiaries as of December 31, 2012 and 2011, and for the years ended December 31, 2012 and 2011 are incorporated
herein by reference in reliance on the report of EKS&H LLLP, independent registered public accounting firm, as experts in accounting
and auditing.
The financial statements of Mercury and
its subsidiaries as of December 31, 2012 and 2011, and for the years ended December 31, 2012 and 2011 are incorporated
herein by reference in reliance on the report of UHY LLP, independent registered public accounting firm, as experts in accounting
and auditing.
LEGAL MATTERS
The validity of the securities being offered
by this prospectus will be passed upon for us by Brownstein Hyatt Farber Schreck, LLP, Denver, Colorado.
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE
The SEC allows us to “incorporate
by reference” into this prospectus the information we file with the SEC, which means that we can disclose important information
to you by referring you to other documents filed separately with the SEC. The information incorporated by reference is considered
part of this prospectus and any accompanying prospectus supplement, and information filed with the SEC subsequent to this prospectus
and any accompanying prospectus supplement and prior to the termination of the particular offering referred to in a prospectus
supplement will automatically be deemed to update and supersede this information. We incorporate by reference into this prospectus
and any accompanying prospectus supplement the documents listed below (excluding any portions of such documents that have been
“furnished” but not “filed” for purposes of the Exchange Act):
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Our Annual Report on Form 10-K for the year ended December 31, 2012, filed April 1, 2013, as amended by Amendment No. 1 to Annual Report on Form 10-K/A, filed April 30, 2013;
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Our Quarterly Reports on Form 10-Q for the period ended March 31, 2013, filed May 15, 2013, the period ended June 30, 3013, filed August 13, 2013, and the period ended September 30, 2013, filed November 14, 2013;
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Our current reports on Form 8-K (including amendments thereto) filed January 11, 2013, February 5, 2013, February 22, 2013, May 24, 2013, June 3, 2013, June 13, 2013, August 9, 2013, August 12, 2013, August 21, 2013, September 9, 2013, September 10, 2013 (solely with respect to item 8.01), September 27, 2013, November 5, 2013, November 14, 2013, November 15, 2013, November 21, 2013, December 6, 2013, December 9, 2013, December 18, 2013, January 15, 2014 and January 22, 2014; and
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The description of our Class A common stock contained in our registration statement on Form 8-A filed May 5, 2008 including any other amendments or reports filed for the purpose of updating such description (other than any portion of such filings that are furnished under applicable SEC rules rather than filed).
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We also incorporate by reference all documents
we subsequently file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the initial filing of
the registration statement of which this prospectus is a part (including prior to the effectiveness of the registration statement)
and prior to the termination of the offering. Any statement in a document incorporated by reference in this prospectus will be
deemed to be modified or superseded to the extent a statement contained in this prospectus or any other subsequently filed document
that is incorporated by reference in this prospectus modifies or supersedes such statement. Unless specifically stated to the contrary,
none of the information that we disclose under Items 2.02 or 7.01 or corresponding information furnished under Item 9.01 or
related exhibits of any Current Report on Form 8-K that we may from time to time furnish to the SEC will be incorporated by reference
into, or otherwise included in, this prospectus.
This prospectus is part of a registration
statement on Form S-3 that we have filed with the SEC relating to the securities. As permitted by SEC rules, this prospectus does
not contain all of the information included in the registration statement and the accompanying exhibits and schedules we file with
the SEC. You may refer to the registration statement and the exhibits and schedules for more information about us and our securities.
The registration statement and exhibits and schedules are also available at the SEC’s Public Reference Room or through its
website.
We will provide, without charge and upon
oral or written request, to each person, including any beneficial owner, to whom a copy of this prospectus has been delivered,
a copy of any of the documents referred to above as being incorporated by reference into this prospectus but not delivered with
it. You may obtain a copy of these filings, at no cost, by writing or calling us at Real Goods Solar, Inc., 833 W. South Boulder
Road, Louisville, Colorado 80027, (303) 222-8300.
Exhibits to the filings will not be provided,
however, unless those exhibits have been specifically incorporated by reference in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports,
proxy and information statements and other information with the SEC. You may read and copy any materials we file with the SEC at
the SEC’s Public Reference Room in Washington, D.C. at 100 F Street, N.E., Room 1580, Washington, D.C. 20549.
You may obtain information about the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website that contains information we
file electronically with the SEC, which you can access over the Internet at http://www.sec.gov. We maintain a website at http://www.rgsenergy.com
with information about our company. Information contained on our website or any other website is not incorporated into this prospectus
and does not constitute a part of this prospectus. Our website address referenced above is intended to be an inactive textual reference
only and not an active hyperlink to our website.
$________Units
Consisting of
Class
A Common Shares
Series
I Warrants to Purchase ________ Shares of a Class A
Common Stock
PROSPECTUS SUPPLEMENT
Roth
Capital Partners
_______ __, 20__