UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): July 2, 2014
REAL GOODS SOLAR, INC.
(Exact Name of Registrant as Specified in its Charter)
Colorado | 001-34044 | 26-1851813 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
833 W. South Boulder Road, Louisville, CO 80027-2452
(Address of Principal Executive Offices, Including Zip Code)
Registrants telephone number, including area code: (303) 222-8400
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01. Entry into a Material Definitive Agreement.
On July 2, 2014, Real Goods Solar, Inc., a Colorado corporation (the Company), entered into a Securities Purchase Agreement (the Securities Purchase Agreement) with unaffiliated investors identified therein (each, an Investor and collectively, the Investors), relating to a private placement by the Company of units consisting of an aggregate of 2,919,351 shares of the Companys Class A common stock (Common Stock) and Common Stock Purchase Warrants (Warrants) to purchase up to 1,313,708 shares of Common Stock, at a purchase price of $2.40 per unit, or approximately $7.0 million in the aggregate. Each unit consists of one share of Common Stock and a warrant to purchase 0.45 shares of Common Stock at an exercise price of $3.19 per share underlying the Warrants. Eight of the Investors are affiliated with the lead placement agent the Company retained for the Private Placement (as defined below). The transactions contemplated by the Securities Purchase Agreement (collectively, the Private Placement), including the issuance of the Common Stock and the Warrants, are not a public offering as defined in Section 4(a)(2) of the Securities Act of 1933, as amended (the Securities Act), and meet the requirements to qualify for exemption under Regulation D promulgated under the Securities Act. The closing of the Private Placement is subject to customary closing conditions and the Company and each Investor has a right to terminate the Securities Purchase Agreement if the closing has not occurred within 5 business days after execution of the Securities Purchase Agreement. There can be no assurance that the Company will successfully close the Private Placement.
Roth Capital Partners, LLC served as lead placement agent and Maxim Group LLC served as co-placement agent in connection with the Private Placement.
Upon closing of the Private Placement, the Company will issue the Warrants. The Warrants will be exercisable, in whole or in part, at an initial exercise price per share of $3.19 and may be exercised in a cashless exercise. The exercise price and number of shares of Common Stock issuable under the Warrants are subject to anti-dilutive adjustments upon the occurrence of certain events, such as stock splits. The Warrants may be exercised upon the election of the holder at any time beginning six months after issuance and for a period of five years thereafter. The Company may not issue any shares of Common Stock upon exercise of the Warrants if the issuance would exceed the aggregate number of shares of Common Stock the Company may issue in the Private Placement under applicable NASDAQ rules unless the Company first obtains shareholder approval to such issuance. The Warrants contain provisions concerning the assumption of the Warrants in connection with a Fundamental Transaction (as defined in the Warrant), and mandatory and voluntary redemption of the Warrants under certain circumstances.
Upon closing of the Private Placement, the Company will enter into a Registration Rights Agreement (the Registration Rights Agreement) with the Investors, which sets forth the rights of the Investors to have their shares of Common Stock purchased in the Private Placement and shares of Common Stock issuable upon exercise of the Warrants registered with the Securities and Exchange Commission (the SEC) for public resale under the Securities Act.
Pursuant to the Registration Rights Agreement, the Company is required to file a registration statement with the SEC (the Registration Statement) within 35 days after the closing of the Private Placement, registering the total number of shares of Common Stock purchased in the Private Placement and the shares of Common Stock issuable upon exercise of the Warrants. The Company will be required to have the Registration Statement declared effective within 90 days after the date of the closing of the Private Placement. The Company will also be required to maintain the effectiveness of the Registration Statement until the earlier to occur of (i) the fifth anniversary of the effectiveness of the Registration Statement or (ii) 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.
The Registration Rights Agreement further provides that in the event that (i) the Company has not filed the Registration Statement or a final prospectus within the prescribed time period, (ii) the SEC has not declared effective the Registration Statement within the prescribed time period, (iii) the Registration Statement ceases to be effective and available to the investors under certain circumstances, and (iv) the Company fails to timely file all reports required to be filed by the Company under the Securities Exchange Act of 1934, as amended, other than Current Reports on Form 8-K, the Company 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 such Investor multiplied by the percentage of such Investors registrable securities that are not covered by the Registration Statement, up to a maximum of 10.0% of such aggregate purchase price.
The Securities Purchase Agreement, the Registration Rights Agreement and the Warrants contain ordinary and customary provisions for agreements of this nature, such as representations, warranties, covenants, and indemnification obligations, as applicable. The foregoing descriptions of the Securities Purchase Agreement, the Warrants and the Registration Rights Agreement do not purport to describe all of the terms and provisions thereof and are qualified in their entirety by reference to the Securities Purchase Agreement, the form of Warrant and the form of Registration Rights Agreement which are filed as Exhibits 10.1, 4.1 and 10.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
The disclosures set forth in Item 3.02 of this Current Report on Form 8-K are hereby incorporated by reference into this Item 1.01.
Item 3.02. Unregistered Sales of Equity Securities.
The disclosures set forth in Item 1.01 of this Current Report on Form 8-K are hereby incorporated by reference into this Item 3.02.
On July 2, 2014, the Company agreed, subject to satisfaction of certain conditions contained in the Securities Purchase Agreement, to issue and sell an aggregate of 2,919,351 shares of Common Stock and Warrants to purchase an aggregate of 1,313,708 shares of Common Stock for an aggregate purchase price of approximately $7.0 million in cash.
Investors represented in writing that they were accredited investors and acquired the securities for their own accounts. A legend will be placed on the stock certificates stating that the securities have not been registered under the Securities Act and cannot be sold or otherwise transferred without registration or an exemption therefrom.
Item 7.01. Regulation FD Disclosure.
Attached as Exhibit 99.2 to this Current Report on Form 8-K and incorporated by reference herein is a compilation of presentation materials made available to the Investors for discussion purposes in connection with the Private Placement discussed in Item 1.01 of this Current Report on Form 8-K.
In accordance with General Instruction B.2 of Form 8-K, the information in this Section 7.01 of this Current Report on Form 8-K shall not be deemed filed for the purpose of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing.
Item 9.01. Financial Statements and Exhibits.
(d) | Exhibits. |
Exhibit No. |
Description of Exhibit | |
Exhibit 4.1 | Form of Warrant to be issued to the Investors under the Securities Purchase Agreement, dated July 2, 2014, among Real Goods Solar, Inc. and such Investors | |
Exhibit 10.1 | Securities Purchase Agreement, dated July 2, 2014, among Real Goods Solar, Inc. and the Investors thereunder | |
Exhibit 10.2 | Form of Registration Rights Agreement to be entered into among Real Goods Solar, Inc. and the Investors under the Securities Purchase Agreement, dated July 2, 2014, among Real Goods Solar, Inc. and such Investors | |
Exhibit 99.1 | Press Release, issued by Real Goods Solar, Inc. on July 3, 2014 | |
Exhibit 99.2 | Presentation Materials |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
REAL GOODS SOLAR, INC. | ||
By: | /s/ Anthony DiPaolo | |
Anthony DiPaolo | ||
Chief Financial Officer |
Date: July 3, 2014
EXHIBIT INDEX
Exhibit No. |
Description of Exhibit | |
Exhibit 4.1 | Form of Warrant to be issued to the Investors under the Securities Purchase Agreement, dated July 2, 2014, among Real Goods Solar, Inc. and such Investors | |
Exhibit 10.1 | Securities Purchase Agreement, dated July 2, 2014, among Real Goods Solar, Inc. and the Investors thereunder | |
Exhibit 10.2 | Form of Registration Rights Agreement to be entered into among Real Goods Solar, Inc. and the Investors under the Securities Purchase Agreement, dated July 2, 2014, among Real Goods Solar, Inc. and such Investors | |
Exhibit 99.1 | Press Release, issued by Real Goods Solar, Inc. on July 3, 2014 | |
Exhibit 99.2 | Presentation Materials |
Exhibit 4.1
Exhibit B
[FORM OF WARRANT]
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
REAL GOODS SOLAR, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.:
Date of Issuance: , 2014 (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, , 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 below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the Warrant), at any time or times on or after the date that is six months from the Issuance Date (the Initial Exercisability Date), but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), (subject to adjustment as provided herein) fully paid and non-assessable shares of Common Stock (as defined below) (the Warrant Shares). Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 15. Capitalized terms used and not otherwise defined herein that are defined in the Securities Purchase Agreement (as defined below) will have the respective meanings given such terms in the Securities Purchase Agreement. This Warrant is one of the Warrants to Purchase Common Stock (the SPA Warrants) issued pursuant to that certain Securities Purchase Agreement, dated as of July 2, 2014, by and among the Company and the investors (the Buyers) referred to therein, as amended from time to time (the Securities Purchase Agreement).
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 on any day on or after the Initial Exercisability Date, in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the Exercise Notice), of the Holders election to exercise this Warrant. Within one (1) Trading Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the Aggregate Exercise Price) in cash or via wire transfer of immediately available funds unless the Holder notifies the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (as defined in Section 1(d)) to the extent permitted by Section 1(d). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this 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 (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Companys transfer agent (the Transfer Agent). On or before the later of (i) the third (3rd) Trading Day following the date on which the Company has received such Exercise Notice (or second (2nd) Trading Day if required by a change to Rule 15c6-1 of the Securities Exchange Act of 1934, as amended, or other rule relating to settlement cycle), and (ii) the second (2nd) Trading Day following the date on which the Company has received the Aggregate Exercise Price, the Company shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (DTC) Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holders or its designees 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 deliver to the Holder or, at the Holders instruction pursuant to the Exercise Notice, the Holders agent or designee, in each case, sent by reputable overnight courier to the address as specified in the applicable Exercise Notice, a certificate, registered in the Companys share register in the name of the Holder or its designee (as indicated in the applicable Exercise Notice), for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of an 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 Holders 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, at the request of the Holder, the Company shall as soon as practicable and in no event later than three (3) Business Days after any exercise
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and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with Section 6(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all taxes and fees which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant. The Company shall not, however, be required to pay any such tax which may be payable in respect of any transfer involved in the issuance and delivery of Common Stock in any name other than that of the Holder of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly made pursuant to a Cashless Exercise (as defined in Section 1(d)), the Companys failure to deliver Warrant Shares to the Holder on or prior to the second (2nd) Trading Day after the Companys receipt of the Aggregate Exercise Price shall not be deemed to be a breach of this Warrant. Notwithstanding any provision of this Warrant to the contrary, no more than the number of Warrant Shares eligible to be issued pursuant to the limitation in Section 1(f) below shall be exercisable hereunder.
(b) Exercise Price. For purposes of this Warrant, Exercise Price means $3.19, subject to adjustment as provided herein.
(c) Companys Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, to issue to the Holder within the later of (i) three (3) Trading Days after receipt of the applicable Exercise Notice and (ii) two (2) Trading Days after the Companys receipt of the Aggregate Exercise Price (or valid notice of a Cashless Exercise) (such later date, the Share Delivery Deadline), 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 Companys share register or to credit the Holders balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holders exercise of this Warrant (as the case may be, and if on or after such Share Delivery Deadline 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, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, issuable upon such exercise that the Holder so anticipated receiving from the Company, then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Business Days after the Holders request and in the Holders discretion, either (i) pay cash to the Holder in an amount equal to the Holders total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the Buy-In Price), at which point the Companys obligation to so issue and deliver such certificate or credit the Holders balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holders exercise hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holders balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holders exercise hereunder (as the case may be) and pay cash to the Holder in
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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 multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date of the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii).
(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at any time of exercise hereof a Registration Statement (as defined in the Registration Rights Agreement) is not effective (or the prospectus contained therein is not available for use on a continuous basis) for the resale by the Holder of the Warrant Shares then being exercised at market prices from time to time, then 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 quotient of (x) the sum of the VWAP of the Common Stock of each of the five (5) Trading Days ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice, divided by (y) five (5).
C= the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.
D= as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicable Exercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of regular trading hours (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holders execution of the applicable Exercise Notice if such Exercise Notice is executed during regular trading hours on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a Trading Day and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of regular trading hours on such Trading Day.
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(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issued pursuant to the terms hereof, 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) Limitations on Exercises.
(i) Notwithstanding anything to the contrary contained in this Warrant, this Warrant shall not be exercisable by the Holder hereof, to the extent (but only to the extent) that after giving effect to such exercise the Holder (together with any of its affiliates) would beneficially own in excess of 4.99% (the Maximum Percentage) of the Common Stock. To the extent the above limitation applies, the determination of whether this Warrant shall be exercisable (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as the case may be, as among all such securities owned by the Holder) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to exercise this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Warrant. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not waive this paragraph without the consent of holders of a majority of its Common Stock. 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 to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation, pursuant to this Warrant or securities issued pursuant to the Securities Purchase Agreement. At any time the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in a written notice by the Holder to the Company (subject to the Companys consent to any such increase, not to be unreasonably withheld); provided that (i) any such increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder sending such notice and not to any other holder of SPA Warrants.
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(ii) Principal Market Regulation. The Company shall not issue any shares of Common Stock upon the exercise of this Warrant if the issuance of such shares of Common Stock (taken together with the Shares and the issuance of such shares of Common Stock upon exercise of the SPA Warrants) would exceed the aggregate number of shares of Common Stock which the Company may issue upon exercise of the SPA Warrants without breaching the Companys obligations under the rules or regulations of the Principal Market (the number of shares which may be issued without violating such rules and regulations, the Exchange Cap), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of shares of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the Holder. Until such approval or such written opinion is obtained, no Buyer shall be issued in the aggregate, upon exercise of the Warrants, shares of Common Stock in an amount greater than the product of (i) the Exchange Cap as of the Issuance Date multiplied by (ii) the quotient of (1) the number of Shares issued to such Buyer pursuant to the Securities Purchase Agreement on the Closing Date (as defined in the Securities Purchase Agreement) divided by (2) the aggregate number of Shares issued to all Investors pursuant to the Securities Purchase Agreement on the Closing Date (with respect to each Buyer, the Exchange Cap Allocation). In the event that any Buyer shall sell or otherwise transfer any of such Buyers SPA Warrants, the transferee shall be allocated a pro rata portion of such Buyers Exchange Cap Allocation with respect to such portion of such SPA Warrants so transferred, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation so allocated to such transferee. Upon exercise in full of a holders SPA Warrants, the difference (if any) between such holders Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder upon such holders exercise in full of such SPA Warrants shall be allocated to the respective Exchange Cap Allocations of the remaining holders of SPA Warrants on a pro rata basis in proportion to the shares of Common Stock underlying the SPA Warrants then held by each such holder of SPA Warrants. In the event that the Company is prohibited from issuing any shares of Common Stock pursuant to this Section 1(f)(ii) (the Exchange Cap Shares), in lieu of issuing and delivering such Exchange Cap Shares to the Holder, the Company shall pay cash to the Holder in exchange for the cancellation of such portion of this Warrant exercisable into such Exchange Cap Shares at a price equal to the sum of (x) the product of (A) such number of Exchange Cap Shares and (B) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder delivers the applicable Exercise Notice with respect to such Exchange Cap Shares to the Company and ending on the date of such payment under this Section 1(f)(ii) and (y) to the extent 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 Exchange Cap Shares, any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith.
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(g) Insufficient Authorized Shares. The Company shall at all times keep reserved for issuance under this Warrant a number of shares of Common Stock at least equal to 135% of the maximum number of shares of Common Stock as shall be necessary to satisfy the Companys obligation to issue shares of Common Stock hereunder (without regard to any limitation otherwise contained herein with respect to the number of shares of Common Stock that may be acquirable upon exercise of this Warrant). If, notwithstanding the foregoing, and not in limitation thereof, at any time while any of the SPA Warrants remain 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 the SPA Warrants at least a number of shares of Common Stock (the Required Reserve Amount) equal to the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of all of the SPA Warrants then outstanding (an Authorized Share Failure), then the Company shall promptly take all action reasonably necessary to increase the Companys authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for all the SPA 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 sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall 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. In the event that the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the Authorization Failure Shares), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for the cancellation of such portion of this Warrant exercisable into such Authorized Failure Shares at a price equal to the sum of (i) the product of (x) such number of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date of such issuance and payment under this Section 1(g) and (ii) to the extent 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 Authorization Failure Shares, any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 2.
(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), or Section 3, if the Company, at any time on or after the Issuance Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of
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Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately` after the record date for the determination of shareholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflect such event. Simultaneously with any adjustment to the Exercise Price pursuant to this paragraph, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard to any limitations on exercise contained herein).
(b) Other Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions, then the Companys board of directors shall in good faith determine and implement an appropriate adjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 2(b) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2.
(c) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.
3. 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 the 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 on exercise hereof, 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, to the extent that the Holders right to participate in any such Purchase Right would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).
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(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 3(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, which is 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 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 consummation of such Fundamental Transaction). Upon the consummation of each Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the Company shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after consummation of the applicable Fundamental Transaction, in lieu of the share of Common Stock (or other securities, cash, assets or other property (except such items still issuable under Section 3(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of common stock (or its equivalent) of the Successor Entity which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), as adjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 3(b) to permit the Fundamental Transaction without the assumption of this Warrant.
(c) Black Scholes Value.
(i) Fundamental Transaction Redemption by the Holder. Notwithstanding the provisions of Section 3(b) above, at the request of the Holder delivered at any time commencing on the earliest to occur of (x) the public disclosure of any person or group (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act and the rules and regulations promulgated thereunder) becoming the
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beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company (a Change of Control), (y) the consummation of any Change of Control and (z) the Holder first becoming aware of any Change of Control, through the date that is twenty (20) days after the public disclosure of the consummation of such Change of Control by the Company pursuant to a Current Report on Form 8-K filed with the Securities and Exchange Commission (SEC), the Company or the Successor Entity (as the case may be) shall purchase this Warrant from the Holder on the date of such request by paying to the Holder cash in an amount equal to the Black Scholes Value.
(ii) Going Private Redemption by the Company. Notwithstanding the foregoing and the provisions of Section 3(b) above, at any time after the date of the public disclosure of a Fundamental Transaction in which neither the Successor Entity nor its Parent Entity in such Fundamental Transaction is a publicly traded corporation with common equity that is quoted on or listed for trading on an Eligible Market (a Going Private Transaction), the Company may, at its option, redeem this Warrant in full, not in part, from the Holder on the date of consummation of such Going Private Transaction (the Going Private Date) by paying to the Holder cash in an amount equal to the Going Private Black Scholes Value (the Going Private Redemption Amount, and such redemption, a Going Private Redemption). The Company may exercise its right to require redemption under this Section 3(c)(ii) by delivering an irrevocable written notice thereof by facsimile and overnight courier to all, but not less than all, of the holders of SPA Warrants (the Going Private Redemption Notice and the date all of the holders of SPA Warrants received such notice is referred to as the Going Private Redemption Notice Date). The Company may deliver only one Going Private Redemption Notice in any sixty (60) day period. The Going Private Redemption Notice shall (x) state the date on which the Going Private Redemption shall occur (the Going Private Redemption Date) which date shall not be less than thirty (30) calendar days nor more than sixty (60) calendar days following the Going Private Redemption Notice Date and (y) state the Going Private Redemption Amount (with back-up calculations) which is being redeemed in such Going Private Redemption from the Holder and all of the other holders of the SPA Warrants pursuant to this Section 3(c)(ii) (and analogous provisions under the other SPA Warrants) on the Going Private Redemption Date. Until the Going Private Redemption Amount is paid in full, this Warrant may be exercised, in whole or in part, by the Holder into Common Stock pursuant to Section 1. In the event the Holder elects to exercise any portion of this Warrant after the Going Private Redemption Notice Date, the Going Private Black Scholes Value of the portion so exercised shall be deducted from the Going Private Redemption Amount the Company shall pay to the Holder on the Going Private Date.
(d) Application. The provisions of this Section 3 shall apply similarly and equally to successive Fundamental Transactions and shall be applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant (provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registered under the Exchange Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).
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4. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its articles of incorporation, 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 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 non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, in accordance with Section 1(g) above, so long as any of the SPA 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 SPA Warrants, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the SPA Warrants then outstanding (without regard to any limitations on exercise).
5. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically provided herein, the Holder, solely in its 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 its 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 it 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 5, the Company shall provide the Holder with copies of the same notices and other information (that are not filed with or furnished to the SEC) given to the shareholders of the Company generally, contemporaneously with the giving thereof to the shareholders.
6. 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 6(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 6(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.
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(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 (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable 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 6(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 6(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, no warrants for fractional shares of Common Stock 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 6(a) or Section 6(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.
7. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 6.3 of the Securities Purchase Agreement. 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 each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) 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 and (iii) at least five (5) Trading Days prior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of its Subsidiaries, the Company shall simultaneously file such notice with the SEC pursuant to a Current Report on Form 8-K. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.
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8. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended 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 Holder. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.
9. 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).
10. GOVERNING LAW. 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. 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 Companys obligations to the Holder or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, 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.
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11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company and the Holder 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, the Closing Sale Price, the Bid Price or fair market value or the arithmetic calculation of the number of Warrant Shares (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to agree upon such determination or calculation (as the case may be) of the Exercise Price, the Closing Sale Price, the Bid Price or fair market value or the number of Warrant Shares (as the case may be) within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Company or the Holder (as the case may be), then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price, the Closing Sale Price, the Bid Price or fair market value (as the case may be) to an independent, reputable investment bank selected by the Company and reasonably acceptable to the Holder or (b) the disputed arithmetic calculation of the number of Warrant Shares to the Companys independent, outside accountant. The Company shall cause the investment bank or the accountant (as the case may be) to perform the determinations or calculations (as the case may be) and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations (as the case may be). Such investment banks or accountants determination or calculation (as the case may be) shall be binding upon all parties absent manifest error. The loser of the dispute shall pay the fees and out of pocket expenses of such investment bank or accountant.
13. REMEDIES, CHARACTERIZATION, 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 covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). 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. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Companys compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). The issuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made
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without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.
14. TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company, except as may otherwise be required by Section 2(c) of the Securities Purchase Agreement.
15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) Bid Price means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported by Bloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time of determination, or if the foregoing does not apply, the bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the average of the bid prices of any market makers for such security as reported in the pink sheets by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time of determination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of such security as of such time of determination 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 in accordance with the procedures in Section 12. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
(b) Black Scholes Value means the value of the unexercised portion of this Warrant remaining on the date of the Holders request pursuant to Section 3(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the OV function on Bloomberg utilizing (i) an underlying price per share equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding the announcement of the Change in Control (or the consummation of the Change in Control, if earlier) and ending on the Trading Day of the Holders request pursuant to Section 3(c) and (2) the sum of the price per share being offered in cash in the Change in Control (if any) plus the value of the non-cash consideration being offered in the Change in Control (if any), (ii) a strike price equal to the Exercise Price in effect on the date of the Holders request pursuant to Section 3(c), (iii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of (1) the remaining term of this Warrant as of the date of the Holders request pursuant to Section 3(c) and (2) the remaining term of this Warrant as of the date of consummation of the Change in Control or as of the date of the Holders request pursuant to Section 3(c) if such request is prior to the date of the consummation of the Change in Control, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately after the date of public announcement of the Change in Control.
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(c) Bloomberg means Bloomberg, L.P.
(d) 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.
(e) Closing Sale Price means, for any security as of any date, the last closing trade price 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 trade price, then the last trade price 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 trade price 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 does not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no last trade price is reported for such security by Bloomberg, the average of the ask prices of any market makers for such security as reported in the pink sheets by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price 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 in accordance with the procedures in Section 12. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
(f) Common Stock means (i) the Companys shares of class A common stock, $0.0001 par value per share, and (ii) any capital stock into which such class A common stock shall have been changed or any share capital resulting from a reclassification of such common stock.
(g) Convertible Securities means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.
(h) Eligible Market means The New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market or the Principal Market.
(i) Expiration Date means the date that is the fifth (5th) anniversary of 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 date that is not a Holiday.
(j) Fundamental Transaction means (i) a transaction or series of related transactions pursuant to which the Company (1) consolidates or merges with or into (whether or not the Company is the surviving corporation) any other Person, or (2) sells, leases, licenses,
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assigns, transfers, conveys or otherwise disposes of all or substantially all of the Companys properties or assets to any other Person, determined on either a quantitative or qualitative basis, or (3) allows any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (ii) any person or group (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act and the rules and regulations promulgated thereunder) is or shall become the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.
(k) Going Private Black Scholes Value means the value of the unexercised portion of this Warrant remaining on the Going Private Redemption Notice Date, which value is calculated using the Black Scholes Option Pricing Model obtained from the OV function on Bloomberg utilizing (i) an underlying price per share equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding the announcement of the applicable Going Private Transaction (or the consummation of the applicable Going Private Transaction, if earlier) and ending on the Going Private Redemption Notice Date and (2) the sum of the price per share being offered in cash in the applicable Going Private Transaction (if any) plus the value of the non-cash consideration being offered in the applicable Going Private Transaction (if any), (ii) a strike price equal to the Exercise Price in effect on the Going Private Redemption Notice Date, (iii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of (1) the remaining term of this Warrant as of the Going Private Redemption Notice Date and (2) the remaining term of this Warrant as of the Going Private Redemption Notice Date, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately after the date of public announcement of the applicable Going Private Transaction.
(l) Options means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
(m) Parent Entity of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
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(n) Person means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.
(o) Principal Market means The Nasdaq Capital Market.
(p) Registration Rights Agreement means that certain registration rights agreement, dated as of the Closing Date, by and among the Company and the initial Holder relating to, among other things, the registration of the resale of the shares of Common Stock issuable upon exercise of the SPA Warrants, as it may be amended from time to time.
(q) Successor Entity means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.
(r) 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) unless such day is otherwise designated as a Trading Day in writing by the Holder.
(s) Voting Stock of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
(t) VWAP means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its Volume at Price function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the pink sheets by OTC Markets Group Inc. (formerly Pink Sheets LLC). If VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP 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 in accordance with the procedures in Section 12. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
[signature page follows]
18
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.
REAL GOODS SOLAR, INC. | ||
By: | ||
Name: Title: |
19
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 Common Stock (Warrant Shares) of Real Goods Solar, Inc., a Colorado corporation (the Company), evidenced by Warrant to Purchase Common Stock No. (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; and/or |
___________ | ||
___________ | a Cashless Exercise with respect to Warrant Shares. |
___________ |
In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder hereby represents and warrants that (i) this Exercise Notice was executed by the Holder at [a.m.][p.m.] on the date set forth below and (ii) if applicable, the Bid Price as of such time of execution of this Exercise Notice was $ .
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 Holder, or its designee or agent as specified below, Warrant Shares in accordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, to the following address:
_____________________________ |
_____________________________ |
_____________________________ |
_____________________________ |
Date: _____________ __, ___
________________________
Name of Registered Holder
20
By: | ||
Name: | ||
Title: |
21
EXHIBIT B
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated , 20__, from the Company and acknowledged and agreed to by .
REAL GOODS SOLAR, INC. | ||
By: | ||
Name: Title: |
Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this Agreement) is dated as of July 2, 2014, by and among Real Goods Solar, Inc., a Colorado corporation (the Company), and the investors listed on the Schedule of Buyers attached hereto as Annex A and identified on the signature pages hereto (each, an Investor and collectively, the Investors).
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act (as defined below) and Rule 506 promulgated thereunder (Rule 506), the Company desires to issue and sell to each Investor, and each Investor, severally and not jointly, desires to purchase from the Company certain 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 the Investors agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1:
Action means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or, to the applicable partys knowledge, threatened in writing against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign), stock market, stock exchange or trading facility.
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 144.
Business Day means any day except Saturday, Sunday and any day which is a federal legal holiday or a day on which banking institutions in the State of Colorado are authorized or required by law or other governmental action to close.
Buy-In has the meaning set forth in Section 4.1(c).
Closing means the closing of the purchase and sale of the Shares and the Warrants pursuant to Article II.
Closing Date means the Business Day on which all of the conditions set forth in Sections 5.1 and 5.2 hereof are satisfied, or such other date as the parties may agree.
Commission means the Securities and Exchange Commission.
Common Stock means the Class A common stock of the Company, par value $0.0001 per share, and any securities into which such common stock may hereafter be reclassified.
Common Stock Equivalents means any securities of the Company or any Subsidiary which entitle the holder thereof to acquire Common Stock at any time, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock.
Company Counsel means Brownstein Hyatt Farber Schreck, LLP.
Company Deliverables has the meaning set forth in Section 2.2(a).
Disclosure Materials has the meaning set forth in Section 3.1(h).
Disqualification Event has the meaning set forth in Section 3.1(d).
Effective Date means the date that the Registration Statement required by Section 2(a) of the Registration Rights Agreement is first declared effective by the Commission.
Evaluation Date has the meaning set forth in Section 3.1(s).
Exchange Act means the Securities Exchange Act of 1934, as amended.
GAAP means U.S. generally accepted accounting principles.
Insiders means, each director, executive officer, other officer of the Company participating in the Offering, any beneficial owner(as defined in Rule 13d-3 of the Exchange Act) of 20% or more of the Companys outstanding voting equity securities, calculated on the basis of voting power and any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale.
Intellectual Property Rights has the meaning set forth in Section 3.1(p).
Investment Amount means, with respect to each Investor, the product of (i) the number of Shares being purchased pursuant to this Agreement and (ii) the Per Share Purchase Price.
Investor Deliverables has the meaning set forth in Section 2.2(b).
Investor Party has the meaning set forth in Section 4.7.
Lien means any lien, charge, encumbrance, security interest, right of first refusal or other restrictions of any kind.
Losses has the meaning set forth in Section 4.7.
Material Adverse Effect means any of (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material and adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) material and adverse impairment to the Companys ability to perform on a timely basis its obligations under any Transaction Document, but shall not include the effect of any circumstance, change, development or event arising out of or attributable to (a) the market in which the Company and its Subsidiaries operates generally, (b) general economic or political conditions, (c) the public announcement of this Agreement or of the consummation of the transactions contemplated hereby, (d) any change arising in connection with acts of war (whether or not declared), sabotage or terrorism, military actions or the escalation thereof or other force majeure events occurring after the date hereof or (e) any changes in governmental regulations or accounting rules, except that, in the case of the foregoing clauses (d) and (e), only to the extent such circumstance, change, development or event does not disproportionately impact the Company relative to other companies in the industry in which the Company operates.
Money Laundering Laws has the meaning set forth in Section 3.1(ee).
New York Courts means the state and federal courts sitting in the City of New York, Borough of Manhattan.
OFAC has the meaning set forth in Section 3.1(dd).
Outside Date means the fifth (5th) Business Day following the date of this Agreement.
Per Share Purchase Price equals $2.40.
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.
Placement Agent has the meaning set forth in Section 3.1(u).
Proceeding means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.
Registration Rights Agreement means the Registration Rights Agreement, dated as of the date of this Agreement, among the Company and the Investors, in the form of Exhibit A hereto.
Registration Statement means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Investors of the Shares and the Warrant Shares.
Rule 144 means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
SEC Reports has the meaning set forth in Section 3.1(h).
Securities means the Shares, the Warrants and the Warrant Shares.
Securities Act means the Securities Act of 1933, as amended.
Share Delivery Date has the meaning set forth in Section 4.1(c).
Shares means the shares of Common Stock issued or issuable to the Investors at Closing pursuant to this Agreement.
Short Sales include, without limitation, all short sales as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, swaps and similar arrangements (including on a total return basis), and sales and other transactions through non-US broker dealers or foreign regulated brokers.
Subsidiary means, as to the Company, any subsidiary as defined in Rule 1-02(x) of the Regulation S-X promulgated by the Commission under the Exchange Act.
Trading Day means (i) a day on which the Common Stock is traded or quoted on a Trading Market, or (ii) if the Common Stock is not traded or quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not traded or quoted as set forth in (i) and (ii) hereof, then Trading Day shall mean a Business Day.
Trading Market means whichever of the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.
Transaction Documents means this Agreement, the Warrants, the Registration Rights Agreement, and any other documents or agreements executed in connection with the transactions contemplated hereunder.
Warrants means the Common Stock purchase warrants in the form of Exhibit B, which are issuable to the Investors at the Closing.
Warrant Shares means the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE 2.
PURCHASE AND SALE
2.1. Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to each Investor, and each Investor shall, severally and not jointly, purchase from the Company, the Shares and the Warrants representing such Investors Investment Amount. The Closing shall take place at the offices of Goodwin Procter LLP, counsel to Roth Capital Partners, LLC, at The New York Times Building, 620 Eighth Avenue, New York, New York 10018, on the Closing Date or at such other location or time as the parties may agree.
2.2. Closing Deliveries. (a) At the Closing, the Company shall deliver or cause to be delivered to each Investor the following (the Company Deliverables):
(i) a certificate evidencing the number of Shares set forth on such Investors signature page hereto, registered in the name of such Investor;
(ii) a Warrant, registered in the name of such Investor, pursuant to which such Investor shall have the right to acquire the number of shares of Common Stock equal to 45% of the number of Shares issuable to such Investor pursuant to Section 2.2(a)(i); and
(iii) the legal opinion of Company Counsel, in agreed form, addressed to the Placement Agent and Investors.
(b) By the Closing, each Investor shall deliver or cause to be delivered the agreements specified in Section 5.2(f), each duly signed by such Investor (collectively, the Investor Deliverables).
(c) Within one Business Day following the date of this Agreement, each Investor shall cause to be delivered to the Company, its Investment Amount, in United States dollars and in immediately available funds, by wire transfer to an account designated in writing by the Company for such purpose.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to each Investor:
(a) Subsidiaries. Except as specified in Schedule 3.1(a), the Company has no direct or indirect Subsidiaries. Except as disclosed in the SEC Reports, the Company owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of any and all Liens, and all 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.
(b) Organization and Qualification. The Company and each Subsidiary are duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), 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 of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents except, with respect to the Subsidiaries, for violations which would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. The Company and each Subsidiary are duly qualified to conduct its respective businesses and are 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, would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.
(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company or any Subsidiary in connection therewith. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors rights and remedies or by other equitable principles of general application.
(d) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of the Companys or any Subsidiarys certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) after complying with NASDAQ Rule 5250(e)(2), conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, 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) 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, assuming (A) the correctness of the representations and warranties made by the Investors in this Agreement, (B) none of the Insiders or the Placement Agent is subject to any Bad Actor disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a Disqualification Event), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) and (C) the Insiders and the Placement Agent have complied with the bad actor disclosure requirements set forth in Rule 506(e) of Regulation D, 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 would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. Neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any United States 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 filing with the Commission of one or more Registration Statements in accordance with the requirements of the Registration Rights Agreement, (ii) filings required by state securities laws, (iii) the filing of a Notice of Sale of Securities on Form D with the Commission under Regulation D of the Securities Act, (iv) the filings required in accordance with Section 4.5 hereof, (v) the notice required under NASDAQ Rule 5250(e)(2), (vi) any notice required under the warrants, dated June 3, 2013, issued to the investors party to the Securities Purchase Agreement, dated May 24, 2013, and under the warrant, dated June 6, 2014, issued to Silicon Valley Bank, and (vi) those that have been made or obtained prior to the date of this Agreement.
(f) Issuance of the Securities. The Securities have been duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens. The Company has reserved from its duly authorized capital stock the shares of Common Stock issuable pursuant to this Agreement and the Warrants in order to issue the Shares and the Warrant Shares.
(g) Capitalization. As of June 30, 2014, the number of shares and type of all authorized, issued and outstanding capital stock of the Company, and all shares of Common Stock authorized for issuance under the Companys various option and incentive plans, are specified in Schedule 3.1(g). Except as specified in Schedule 3.1(g), no securities of the Company are entitled to preemptive or similar rights, and 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 specified in Schedule 3.1(g), 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 exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, 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 securities or rights convertible or exchangeable into shares of Common Stock. Except as specified in Schedule 3.1(g), the issue and sale of the Securities will not, immediately or with the passage of time, obligate the Company to issue shares of Common Stock or Common Stock Equivalents to any Person (other than the Investors) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities. With respect to securities issued under the Companys various option and incentive plans, the representations and warranties set forth in this Section and Schedule 3.1(g) are accurate as of June 30, 2014.
(h) SEC Reports; Financial Statements. The Company has filed all reports required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof (or such shorter
period as the Company was required by law to file such reports) (the foregoing materials being collectively referred to herein as the SEC Reports and, together with the Schedules to this Agreement (if any), the Disclosure Materials) on a timely basis or has timely filed 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 and the rules and regulations of the Commission promulgated thereunder, 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 light of the circumstances under which they were made, not misleading. 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 GAAP applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto, 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) Press Releases. 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.
(j) Material Changes. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) neither the Company nor any Subsidiary has incurred any liabilities (direct, indirect, contingent, or otherwise) other than (A) trade payables, accrued expenses and other liabilities incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Companys financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, (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 Company or Subsidiary 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.
(k) Litigation. There is no Action which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) except as specifically disclosed in the SEC Reports, would, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof (in his or her capacity as such), 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 specifically disclosed in the SEC Reports. There has not been, and to the knowledge of the Company, there is not pending any investigation by the Commission involving the Company or any current or former director or officer of the Company (in his or her capacity as such). 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.
(l) Labor Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company or any Subsidiary.
(m) Compliance. 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 (a) any order of any court, arbitrator or (b) governmental body, or (iii) is or has been in violation of any statute, rule 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 under (i) through (iii) as would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. The Company is in compliance with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations thereunder, that are applicable to it, except where such noncompliance would not have or reasonably be expected to result in a Material Adverse Effect.
(n) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate United States 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 would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such permits.
(o) Title to Assets. Except as disclosed in the SEC Reports, the Company and the Subsidiaries have valid land use rights for all real property that is material to their respective businesses and good and marketable title in all personal property owned by them that is material to their respective businesses, in each case free and clear of all Liens, except for 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. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance, except as would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.
(p) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have would, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect (collectively, the Intellectual Property Rights). Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person. Except as set forth in the SEC Reports and other than with respect to maters that would not, individually or in the aggregate, have or reasonably be expected to result in 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.
(q) Insurance. 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. The Company has no reason to believe that it will not be able to renew its and the Subsidiaries 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 on terms consistent with market for the Companys and such Subsidiaries respective lines of business.
(r) Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees or significant shareholders of the Company 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, or otherwise requiring payments to or from any officer, director, employee or such shareholder 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 or partner.
(s) Internal Accounting Controls. 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 managements 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 managements 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 has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is made known to the certifying officers by others within those entities, particularly during the period in which the Companys Form 10-K or 10-Q, as the case may be, is being prepared. The Companys certifying officers have evaluated the effectiveness of the Companys disclosure controls and procedures in accordance with Item 307 of Regulation S-K
under the Securities Act for the Companys most recently ended fiscal quarter or fiscal year-end (such date, the Evaluation Date). The Company presented in its most recently filed Form 10-K or Form 10-Q 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 significant changes in the Companys internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) or, to the Companys knowledge, in other factors that would materially affect the Companys internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)).
(t) Solvency. Based on the financial condition of the Company as of the Closing Date (and assuming that the Closing shall have occurred), (i) the Companys fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Companys existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Companys assets do not constitute unreasonably small capital to carry on its business for the current fiscal year 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, 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 debt 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).
(u) Certain Fees. Except for fees payable to Roth Capital Partners, LLC (the Placement Agent) in connection with the transaction contemplated by this Agreement, no brokerage or finders fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Investors shall have no obligation with respect to any fees or with respect to any claims made by the Placement Agent or by or on behalf of any other Person other than the Placement Agent for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement unless such Investor shall have entered into a written agreement with such Person regarding such fees.
(v) Certain Registration Matters. Assuming (i) the accuracy of the Investors representations and warranties set forth in Section 3.2(b)-(e), and (ii) none of the Insiders or the Placement Agent is subject to any Disqualification Event except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) and (iv) the Insiders and the Placement Agent have complied with the bad actor disclosure requirements set forth in Rule 506(e) of Regulation D, no registration under the Securities Act is required for the offer and sale of the Shares and Warrants and the offer of the Warrant Shares by the Company to the Investors under the Transaction Documents. Subject to Schedule 3.1(v), the Company is eligible to register its Common Stock for resale by the Investors under Form S-3 promulgated under the Securities Act. Except as specified in the SEC reports, the Company has not granted or agreed to grant to any Person other than the Investors pursuant to the Registration Rights Agreement any rights (including piggy-back registration rights) to have any securities of the Company registered with the Commission or any other governmental authority that have not been satisfied through an effective registration statement or by waiver of such rights.
(w) Listing and Maintenance Requirements. The Company has not, in the two years preceding the date hereof, received notice from any Trading Market to the effect that the Company is not in compliance with the listing or maintenance requirements thereof. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with the listing and maintenance requirements for continued listing of the Common Stock on the Trading Market on which the Common Stock is currently listed or quoted. After complying with NASDAQ Rule 5250(e)(2), the issuance and sale of the Securities under the Transaction Documents does not contravene the rules and regulations of the Trading Market on which the Common Stock is currently listed or quoted, and no approval of the shareholders of the Company thereunder is required for the Company to issue and deliver to the Investors the Shares and Warrants at Closing.
(x) Investment Company. The Company is not, and is not an Affiliate of, and immediately following the Closing will not have become, an investment company within the meaning of the Investment Company Act of 1940, as amended.
(y) Application of Takeover Protections. The Company has 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 Companys Articles of Incorporation (or similar charter documents) or the laws of its state of incorporation that is or would become applicable to the Investors as a result of the Investors and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation the Companys issuance of the Securities and the Investors ownership of the Securities.
(z) No Additional Agreements. The Company does not have any agreement or understanding with any Investor with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.
(aa) Accountants. There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the accountants formerly or presently employed by the Company, that would, individually or in the aggregate, have or reasonably be expected to result in, a Material Adverse Effect.
(bb) Foreign Corrupt Practices Act. Neither the Company nor any Subsidiary, nor to the knowledge of the Company, any agent or other person acting on behalf of any of the Company or any Subsidiary, has, directly or indirectly, (i) used any funds, or will use any proceeds from the sale of the Securities, 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 their behalf of which the Company is aware) which is in violation of law, or (iv) has violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.
(cc) PFIC. Neither the Company nor any Subsidiary is or intends to become a passive foreign investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.
(dd) OFAC. Neither the Company nor any Subsidiary nor, to the knowledge of the Company, any director, officer, agent, employee, Affiliate or Person acting on behalf of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (OFAC); and the Company will not directly or indirectly use the proceeds of the sale of the Securities, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person or entity, towards any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC.
(ee) Money Laundering Laws. The operations of each of the Company and any Subsidiary are and have been conducted at all times in compliance with the money laundering statutes of applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any applicable governmental agency (collectively, the Money Laundering Laws) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company and/or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(ff) Disclosure. The Company confirms that neither it nor any Person acting on its behalf has provided any Investor or its respective agents or counsel with any information that the Company believes constitutes material, non-public information concerning the Company, the Subsidiaries or their respective businesses, except insofar as the existence and terms of the proposed transactions contemplated hereunder may constitute such information. The Company understands and confirms that the Investors will rely on the foregoing representations and covenants in effecting transactions in securities of the Company. All disclosure provided to the Investors regarding the Company, the Subsidiaries or their respective businesses and the transactions contemplated hereby, furnished by or on behalf of the Company (including the Companys representations and warranties set forth in this Agreement and any investor presentation provided by the Company or any Person acting on the Companys behalf) are true and correct in all material respects and do 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.
(gg) No Disqualification Events. None of the Company, any of its predecessors, any affiliated issuer, or any Insider is subject to any Disqualification Event except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care, including without limitation, conducting a factual inquiry that is appropriate in light of the circumstances, into whether any Insider is subject to a Disqualification Event. The Company has furnished to each Investor, a reasonable time prior to the date hereof, a description
in writing of any matters relating to the Company or any Insider that would have triggered disqualification under Rule 506(d) but which occurred before September 23, 2013, in each case, in compliance with the disclosure requirements of Rule 506(e). Except for sale of the Shares and Warrants pursuant to this Agreement, no securities of the Company (of any kind or nature) have been issued in reliance on Rule 506 at any time on or after September 23, 2013.
3.2. Representations and Warranties of the Investors. Each Investor hereby, for itself and for no other Investor, represents and warrants to the Company as follows:
(a) Organization; Authority. Such Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate, partnership, limited liability company or other applicable like power and authority to enter into and to consummate the transactions contemplated by the applicable Transaction Documents and otherwise to carry out its obligations thereunder. The execution, delivery and performance by such Investor of the applicable Transaction Documents and the transactions contemplated by this Agreement has been duly authorized by all necessary corporate or, if such Investor is not a corporation, such partnership, limited liability company or other applicable like action, on the part of such Investor. Each of this Agreement and the Registration Rights Agreement has been duly executed by such Investor, and when delivered by such Investor in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Investor, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors rights and remedies or by other equitable principles of general application.
(b) Investment Intent. Such Investor is acquiring the Securities for its own account and not with a view to or for distributing or reselling such Securities or any part thereof, without prejudice, however, to such Investors right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws. Subject to the immediately preceding sentence, nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time. Such Investor is acquiring the Securities hereunder in the ordinary course of its business. Such Investor does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities.
(c) Investor Status. At the time such Investor was offered the Securities, it was, and at the date hereof it is, and on each date on which it exercises Warrants it will be, an accredited investor as defined in Rule 501(a) under the Securities Act. Such Investor is not a registered broker-dealer under Section 15 of the Exchange Act. Such Investor has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities. Such Investor acknowledges that an investment in the Securities is speculative and involves a high degree of risk.
(d) General Solicitation. Such Investor is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.
(e) Access to Information. Such Investor acknowledges that it has reviewed the Disclosure Materials 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 merits and risks of investing in the Securities; (ii) access to information about the Company and the Subsidiaries and their respective 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. Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or affect such Investors right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Companys representations and warranties contained in the Transaction Documents.
(f) Certain Trading Activities. Such Investor has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Investor, engaged in any transactions in the securities of the Company (including, without limitations, any Short Sales involving the Companys securities) since the time that such Investor was first contacted by the Company or the Placement Agent regarding the transactions contemplated by this Agreement. Such Investor covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with it will engage in any transactions in the securities of the Company (including Short Sales) prior to the time that the transactions contemplated by this Agreement are publicly disclosed on the Trading Day following the execution of this Agreement in accordance with Section 4.5.
(g) Limited Ownership. The purchase by such Investor of the Shares and Warrants issuable to it at the Closing will not result in such Investor (individually or together with any other Person with whom such Investor has identified, or will have identified, itself as part of a group in a public filing made with the Commission involving the Companys securities) acquiring, or obtaining the right to acquire, in excess of 19.999% of the outstanding shares of Common Stock or the voting power of the Company on a post transaction basis that assumes that the Closing shall have occurred. Such Investor does not presently intend to, alone or together with others, make a public filing with the Commission to disclose that it has (or that it together with such other Persons have) acquired, or obtained the right to acquire, as a result of the Closing (when added to any other securities of the Company that it or they then own or have the right to acquire), in excess of 19.999% of the outstanding shares of Common Stock or the voting power of the Company on a post transaction basis that assumes that the Closing shall have occurred.
(h) Independent Investment Decision. Such Investor has independently evaluated the merits of its decision to purchase Securities pursuant to the Transaction Documents, and such Investor confirms that it has not relied on the advice of any other Investors business and/or legal counsel in making such decision. Such Investor has not relied on the business or legal advice of Roth Capital Partners, LLC or any other placement agent or any of their respective agents, counsel or Affiliates in making its investment decision hereunder, and confirms that none of such Persons has made any representations or warranties to such Investor in connection with the transactions contemplated by the Transaction Documents.
(i) No Disqualification Events. Neither the Investor nor, to the extent it has them, any of its shareholders, members, managers, general or limited partners, directors, affiliates or executive officers, are subject to any Disqualification Event, except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The purchase of the Securities by the Investor will not subject the Company to any Disqualification Event.
The Company acknowledges and agrees that no Investor has made or makes any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE 4.
OTHER AGREEMENTS OF THE PARTIES
4.1. (a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of the Securities other than pursuant to an effective registration statement, to the Company, to an Affiliate of an Investor or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act.
(b) Certificates evidencing Securities will contain the following legend, until such time as they are not required under Section 4.1(c):
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. [THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES] [THESE SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that an Investor may from time to time pledge, and/or grant a security interest in some or all of the Securities pursuant to a bona fide margin agreement in connection with a bona fide margin account and, if required under the terms of such agreement or account, such Investor may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval or consent of the Company and no legal opinion of legal counsel to the pledgee, secured party or pledgor shall be required in connection with the pledge, but such legal opinion may be required in connection with a subsequent transfer following default by the Investor transferee of the pledge. No notice shall be required of such pledge. At the appropriate Investors expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer thereof including the preparation and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling shareholders thereunder. Except as otherwise provided in Section 4.1(c), any Securities subject to a pledge or security interest as contemplated by this Section 4.1(b) shall continue to bear the legend set forth in this Section 4.1(b) and be subject to the restrictions on transfer set forth in Section 4.1(a).
(c) Certificates evidencing Shares and Warrant Shares shall not contain any legend (including the legend set forth in Section 4.1(b)): (i) while a registration statement (including the Registration Statement) covering such Shares and Warrant Shares is then effective, or (ii) following a sale or transfer of such Shares or Warrant Shares pursuant to Rule 144 (assuming the transferee is not an Affiliate of the Company), or (iii) after a period of six months has elapsed since the later of the date the securities were acquired from the Company or from an Affiliate of the Company, while such Shares or Warrant Shares are eligible for sale by the selling Investor without volume restrictions under Rule 144, subject to receipt from such Investor requesting removal of such legends of a representation letter, in a form reasonably acceptable to the Company, subject to the requirement, to the extent then required for such Shares or Warrant Shares to be resold by such Investor under Rule 144, that the adequate current public information requirement of Rule 144(c) is met at the time of sale. The transfer agents fees and any fees of the Companys legal counsel associated with removal of such legend shall be borne by the Company. In the event the legend set forth in Section 4.1(b) has been removed pursuant to clause (i) above, each Investor agrees to sell such Shares or Warrant Shares only pursuant to an effective registration statement (including the Registration Statement), or in a transaction not subject to the registration requirement of the Securities Act and in accordance with applicable state securities laws as evidenced by a legal opinion of counsel to the Investor to such effect, the substance of which shall be reasonably acceptable to the Company. Each investor acknowledges and agrees that the Shares and the Warrant Shares remain restricted securities as such term is defined in Rule 144 notwithstanding removal of the legend set forth in Section 4.1(b) until such Shares and Warrant Shares are sold or transferred under an effective registration statement (including the Registration Statement) or under Rule 144. The Company agrees that following the Effective Date or such other time as legends are no longer required to be set forth on certificates representing Shares and Warrant Shares under this Section 4.1(c), it
will, no later than three Trading Days following the delivery by an Investor to the Company or the transfer agent of a certificate representing such Shares or Warrant Shares containing a restrictive legend, deliver or cause to be delivered to such investor Shares or Warrant Shares which are free of all restrictive and other legends. If the Company is then eligible, certificates for Shares and Warrant Shares subject to legend removal hereunder shall be transmitted by the transfer agent to an Investor by crediting the prime brokerage account of such Investor with the Depository Trust Company System as directed by such Investor. If an Investor shall make a sale or transfer of Shares or Warrant Shares either (x) pursuant to Rule 144 or (y) pursuant to a registration statement and in each case shall have delivered to the Company or the Companys transfer agent the certificate representing the applicable Shares or Warrant Shares containing a restrictive legend which are the subject of such sale or transfer and a representation letter in customary form (the date of such sale or transfer and Shares or Warrant Share delivery being the Share Delivery Date) and (1) the Company shall fail to deliver or cause to be delivered to such Investor a certificate representing such Shares or Warrant Shares that is free from all restrictive or other legends by 6:00 p.m. (New York City time) on the third Trading Day following the Share Delivery Date and (2) following such third Trading Day after the Share Delivery Date and prior to the time such Shares or Warrant Shares are received free from restrictive legends, the Investor, or any third party on behalf of such Investor, purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Investor of such Shares or Warrant Shares (a Buy-In), then, in addition to any other rights available to the Investor under the Transaction Documents and applicable law, the Company shall pay in cash to the Investor (for costs incurred either directly by such Investor or on behalf of a third party) the amount by which the total purchase price paid for Common Stock as a result of the Buy-In (including brokerage commissions, if any) exceed the proceeds received by such Investor as a result of the sale to which such Buy-In relates. The Investor shall provide the Company written notice indicating the amounts payable to the Investor in respect of the Buy-In. The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section.
4.2. Furnishing of Information. As long as any Investor owns any Securities, the Company covenants 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. As long as any Investor owns Securities, if the Company is not required to file reports pursuant to such laws, it will prepare and furnish to the Investors and make publicly available in accordance with Rule 144(c) such information as is required for the Investors to sell the Securities under Rule 144. The Company further covenants that it will take such further action as any holder of Securities may reasonably request, all to the extent required from time to time to enable such Person to sell the Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144.
4.3. Integration. The Company shall not, and shall use its best efforts to ensure that no Affiliate of the Company shall, 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 in a manner that would require the registration under the Securities Act of the sale of the Securities to the Investors, or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market in a manner that would require shareholder approval of the sale of the securities to the Investors.
4.4. Subsequent Registrations. Other than a Registration Statement pursuant to the Registration Rights Agreement, prior to the first to occur of (a) the Effective Date of a Registration Statement resulting in all Registrable Securities (as defined in the Registration Rights Agreement) other than Cut Back Shares (as defined in the Registration Rights Agreement) being registered for resale pursuant to one or more effective Registration Statements or (b) such time as all Registrable Securities may be sold by the Investors without volume restrictions pursuant to Rule 144, the Company may not file any registration statement (other than on Form S-8, S-4 or any registration statement filed pursuant to the agreements specified in Schedule 4.4) with the Commission with respect to any securities of the Company; provided, however, that, for the avoidance of doubt, so long as all Registrable Securities other than Cut Back Shares are registered for resale pursuant to one or more effective Registration Statements, the Company may file a registration statement of any type with the Commission with respect to securities of the Company notwithstanding that any Cut Back Shares have not been registered for resale pursuant to one or more effective Registration Statements.
4.5. Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York City time) on the Trading Day following the execution of this Agreement, and by 9:00 a.m. (New York City time) on the Trading Day following the Closing Date, the Company shall issue press releases disclosing the transactions contemplated hereby and the Closing, respectively. On the Trading Day following the execution of this Agreement the Company will file a Current Report on Form 8-K disclosing the material terms of the Transaction Documents (and attach as exhibits thereto the Transaction Documents), and on the Trading Day following the Closing Date the Company will file an additional Current Report on Form 8-K to disclose the Closing. Following the public disclosure referenced above, in each case, after the Company has issued both a press release and filed a Current Report on Form 8-K, no Investor will be in possession of material, non-public information provided to such Investor by the Company or anyone acting on behalf of the Company and no Investor will have a duty of confidentiality with respect to such information. In addition, the Company will make such other filings and notices in the manner and time required by the Commission and the Trading Market on which the Common Stock is listed, including, without limitation, a NASDAQ Listing of Additional Shares Notification (if required). Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Investor, or include the name of any Investor in any filing with the Commission (other than a Registration Statement and any exhibits to filings made in respect of this transaction in accordance with periodic filing requirements under the Exchange Act) or any regulatory agency or Trading Market, without the prior written consent of such Investor, except to the extent such disclosure is required by law or Trading Market regulations.
4.6. Limitation on Issuance of Future Priced Securities. From the date hereof until the date that is 6 months after the Effective Date, the Company shall not issue any Future Priced Securities as such term is described by NASDAQ IM-5635-4.
4.7. Indemnification of Investors. In addition to the indemnity provided in the Registration Rights Agreement, the Company will indemnify and hold the Investors and their respective directors, officers, shareholders, partners, employees and agents (each, an Investor Party) harmless from any and all out of pocket 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 (collectively,
Losses) that any such Investor Party may suffer or incur as a result of or relating to any material breach of any representation, warranty, covenant or agreement made by the Company in any Transaction Document. In addition to the indemnity contained herein, the Company will reimburse each Investor Party for its reasonable legal and other expenses (including the cost of any investigation, preparation and travel in connection therewith) incurred in connection therewith, as such expenses are incurred. Except as otherwise set forth herein, the mechanics and procedures with respect to the rights and obligations under this Section 4.7 shall be the same as those set forth in Section 5 of the Registration Rights Agreement.
4.8. Non-Public Information. The Company covenants and agrees that neither it nor any other Person acting on its behalf will provide any Investor or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Investor shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Investor shall be relying on the foregoing representations in effecting transactions in securities of the Company.
4.9. Listing of Shares and Warrant Shares. The Company agrees, (i) if the Company applies to have the Common Stock traded on any Trading Market other than the Trading Market on which the Common Stock is traded as of the date of this Agreement, it will include in such application the Shares and Warrants Shares, and will take such other action as is necessary or desirable to cause the Shares and Warrants Shares to be listed on such other Trading Market as promptly as possible, and (ii) it will take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market and will comply in all material respects with the Companys reporting, filing and other obligations under the bylaws or rules of the Trading Market.
4.10. Use of Proceeds. The Company will use the net proceeds from the sale of the Securities to repay existing debt, for working capital purposes and the development of a residential leasing platform, and not for the redemption of any Common Stock or Common Stock Equivalents.
4.11. Subsequent Equity Sales. From the date hereof until the date that is 30 days after the Effective Date, without the prior written consent of the Placement Agent, the Company shall not issue shares of Common Stock or Common Stock Equivalents; provided, however, the 30-day period set forth in this Section 4.11 shall be extended for the number of Trading Days during such period in which (i) trading in the Common Stock is suspended by any Trading Market within such 30-day period, or (ii) within 30 days after the Effective Date of the Initial Registration Statement, the Registration Statement is not effective or the prospectus included in the Registration Statement may not be used by the Investors for the resale of the Shares and Warrant Shares (other than Cut Back Shares). Notwithstanding the foregoing, in no event shall this Section 4.11 prohibit the Company from issuing shares of Common Stock or Common Stock Equivalents (i) in connection with acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, including, without limitation, acquisitions and strategic transaction disclosed in the SEC Reports as of the date hereof, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives 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, (ii) upon the exercise of any options or warrants outstanding on the date hereof, (iii) upon the exercise of the Warrants, (iv) to employees, directors or consultants pursuant to any stock option or equity incentive or employee stock purchase plan, or (v) upon the conversion of any indebtedness owed to Riverside Renewable Energy Investments, LLC or its affiliates outstanding on the date hereof, whether convertible or not on the date hereof, provided that any Common Stock issued upon such conversion shall be valued at no less than the Per Share Purchase Price.
ARTICLE 5.
CONDITIONS PRECEDENT TO CLOSING
5.1. Conditions Precedent to the Obligations of the Investors to Purchase Securities. The obligation of each Investor to acquire Shares and Warrants at the Closing is subject to the satisfaction or waiver by such Investor, at or before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respect as of such specific date);
(b) Performance. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents;
(d) Adverse Changes. Since the date of execution of this Agreement, no event or series of events shall have occurred that has had or that would reasonably be expected to result in a Material Adverse Effect;
(e) No Suspensions of Trading in Common Stock; Listing. Trading in the Common Stock shall not have been suspended by the Commission or any Trading Market (except for any suspensions of trading of not more than one Trading Day solely to permit dissemination of material information regarding the Company) at any time since the date of execution of this Agreement, and the Common Stock shall have been at all times since such date listed for trading on a Trading Market;
(f) Company Agreement. The Company shall have delivered:
(i) the Registration Rights Agreement, duly executed by the Company;
(ii) a copy of irrevocable transfer agent instructions, which instructions shall have been delivered to and acknowledged in writing by the Companys transfer agent; and
(iii) a certificate, executed by the Secretary of the Company and dated as of the Closing Date, as to (i) resolutions as adopted by the Companys board of directors in connection with the transactions contemplated by this Agreement, (ii) the Articles of Incorporation of the Company and (iii) the Bylaws of the Company, each as in effect at the Closing;
(g) [Reserved];
(h) [Reserved];
(i) Company Deliverables. The Company shall have delivered the Company Deliverables in accordance with Section 2.2(a); and
(j) Termination. This Agreement shall not have been terminated as to such Investor in accordance with Section 6.5.
5.2. Conditions Precedent to the Obligations of the Company to sell Securities. The obligation of the Company to sell the Shares and the Warrants at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of such Investor shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such specific date);
(b) Performance. Each Investor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by such Investor at or prior to the Closing;
(c) Bad Actor Certifications. On or prior to the Closing Date, each Insider and the Placement Agent shall have provided to the Company evidence reasonably satisfactory to the Company and its counsel that (A) it is not subject to any bad actor disqualification specified in Rule 506(d) of Regulation D, and (B) prior to the Closing Date it has complied with the bad actor disclosure requirements set forth in Rule 506(e) of Regulation D;
(d) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents;
(e) [Reserved].
(f) Investor Deliverables. Each Investor shall have delivered the Registration Rights Agreement, duly executed by such Investor; and
(g) Termination. This Agreement shall not have been terminated as to such Investor in accordance with Section 6.5.
ARTICLE 6.
MISCELLANEOUS
6.1. Fees and Expenses. 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 the Transaction Documents. The Company shall pay all transfer agent fees, stamp and other taxes and duties levied in connection with the issuance of the Shares and the Warrants.
6.2. Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
6.3. 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 (provided the sender receives a machine-generated confirmation of successful transmission) at the facsimile number specified in this Section 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 at the facsimile number specified in this Section 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 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 for such notices and communications shall be as follows:
If to the Company: | Real Goods Solar, Inc. 833 W. South Boulder Road Louisville, Colorado 80027 Facsimile: (303) 648-5464 Attn: Chief Financial Officer | |||
With a copy to: | Brownstein Hyatt Farber Schreck, LLP 410 Seventeenth Street, Suite 2200 Denver, CO 80202-4432 Facsimile: (303) 223-1111 Attn: Rikard D. Lundberg, Esq. | |||
If to an Investor: | To the address set forth under such Investors name on the signature pages hereof; |
or such other address as may be designated in writing hereafter, in the same manner, by such Person.
6.4. Amendments; Waivers; No Additional Consideration. No provision of this Agreement may be waived or amended except in a written instrument signed by the Company and the Investors holding a majority of the then issued and outstanding aggregate number of Shares and Warrant Shares and any amendment to any provision of this Agreement made in accordance with this Section shall be binding on all Investors and holders of Securities, as applicable. 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 either party to exercise any right hereunder in any manner impair the exercise of any such right. No consideration shall be offered or paid to any Investor to amend or consent to a waiver or modification of any provision of any Transaction Document unless the same consideration is also offered to all Investors who then hold Securities. Without the written consent or the affirmative vote of each Investor affected thereby, an amendment or waiver under this Section 6.4 may not waive or amend any Transaction Document the effect of which would be to permit the Company to (1) name any Investor as an underwriter in a Registration Statement without such Investors specific written consent thereto, or to (2) extend the Outside Date or amend or waive Sections 5.1 or 6.5. Further, Section 6.8 may not be amended without the prior written consent of the Placement Agent.
6.5. Termination. This Agreement may be terminated prior to Closing:
(a) by written agreement of the Investors who subscribed for a majority of the Securities (on an as-converted basis) and the Company; and
(b) by the Company or an Investor (as to itself but no other Investor) upon written notice to the other, if the Closing shall not have taken place by 5:30 p.m. Eastern time on the Outside Date; provided, that the right to terminate this Agreement under this Section 6.5(b) shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such time.
In the event of a termination pursuant to this Section, the Company shall promptly notify all non-terminating Investors. Upon a termination in accordance with this Section 6.5, the Company and the terminating Investor(s) shall not have any further obligation or liability (including as arising from such termination) to the other and no Investor will have any liability to any other Investor under the Transaction Documents as a result therefrom.
6.6. Construction. 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. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any of the Transaction Documents.
6.7. 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 the Investors. Any Investor may assign any or all of its rights under this Agreement to any Person to whom such Investor assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the Investors.
6.8. No Third-Party Beneficiaries. 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 4.7 (as to each Investor Party) and that Roth Capital Partners, LLC is a third party beneficiary of the Companys and Investors representations and warranties contained herein.
6.9. Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement 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 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, employees or agents) shall be commenced exclusively in the New York Courts. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts 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 the any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such 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 manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. If either party hereto shall commence a Proceeding to enforce any provisions of a Transaction Document, then the prevailing party in such Proceeding shall be reimbursed by the other party for its reasonable attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding.
6.10. Survival. The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery of the Securities.
6.11. 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 the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, 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 signature page were an original thereof.
6.12 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.
6.13. Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Investor 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 Investor may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.
6.14. 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, 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 and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities. If a replacement certificate or instrument evidencing any Securities is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement. Notwithstanding the foregoing, the terms of the Warrants shall govern the replacement, exchange and substitution of the Warrants.
6.15. Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Investors and the Company will be entitled to specific performance under the Transaction Documents. The parties hereto agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
6.16. Payment Set Aside. To the extent that the Company makes a payment or payments to any Investor pursuant to any Transaction Document or an Investor 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.
6.17. Independent Nature of Investors Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document. The decision of each Investor to purchase Securities pursuant to the Transaction Documents has been made by such Investor independently of any other Investor. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors 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 Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring its investment in the Securities or enforcing its rights under the Transaction Documents. Each Investor 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 Investor to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that each of the Investors has been provided with the same Transaction Documents for the purpose of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor.
6.18. Limitation of Liability. Notwithstanding anything herein to the contrary, the Company acknowledges and agrees that the liability of an Investor arising directly or indirectly, under any Transaction Document of any and every nature whatsoever shall be satisfied solely out of the assets of such Investor, and that no trustee, officer, other investment vehicle or any other Affiliate of such Investor or any investor, shareholder or holder of shares of beneficial interest of such an Investor shall be personally liable for any liabilities of such Investor.
6.19. Further Assurances. Each party hereto shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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. | ||
By: | /s/ Kam Mofid | |
Name: Kam Mofid | ||
Title: CEO |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR INVESTORS 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.
NAME OF INVESTOR | ||||
By: | ||||
Name: | ||||
Title: |
Number of Shares being purchased:
Tax ID No.:
ADDRESS FOR NOTICE
c/o:
Street:
City/State/Zip:
Attention:
Tel:
Fax:
DELIVERY INSTRUCTIONS
(if different from above)
c/o:
Street:
City/State/Zip:
Attention:
Tel:
Annex A
SCHEDULE OF BUYERS
(1) Buyer |
(2) Address and Facsimile Number | |||
Schedule 3.1(a)
Subsidiaries
Real Goods Energy Tech, Inc.
Real Goods Trading Corporation
Alteris Renewables, Inc.
RGS Energy Asset Management I, LLC (f/k/a Alteris Project Finance Company, LLC) (Inactive)
Mercury Energy, Inc.
Real Goods Solar, Inc.- Mercury Solar
Mercury Solar Cedar, LLC (Inactive)
Mercury Solar Pine, LLC (Inactive)
Mercury Solar Birch, LLC (Inactive)
Mercury Residential Solar Fund I, LLC (Inactive)
Real Goods Syndicated, Inc.
Elemental Energy, LLC
Sunetric Management LLC
Schedule 3.1(g)
Capitalization
# |
Type of capital stock |
Authorized, as of June 30, 2014 |
Issued and outstanding, as of June 30, 2014 |
|||||||
1 |
Class A Common Stock, par value $0.0001 per share | 150,000,000 | 48,955,158 | |||||||
2 |
Class B Common Stock, par value $0.0001 per share | 50,000,000 | 0 | |||||||
3 |
Preferred Stock, par value $0.0001 per share | 50,000,000 | 0 |
1. | 6,704,237 shares of Common Stock common stock authorized for issuance pursuant to the Real Goods Solar, Inc. 2008 Long-Term Incentive Plan, as amended and restated from time to time (the Incentive Plan). |
2. | Registration rights granted pursuant to 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. |
3. | Registration rights granted pursuant to the Registration Rights Agreement, dated as of June 3, 2013, by and between the Company and the investors party thereto. |
4. | Registration rights granted pursuant to the Underwriting Agreement, dated as of November 15, 2013, by and between the Company and Cowen and Company, LLC, as underwriter. |
5. | As of June 30, 2014, 3,332,790 options to purchase shares of Common Stock granted pursuant to the Incentive Plan. |
6. | As of June 30, 2014, 300,000 options to purchase shares of Common Stock granted pursuant to the Employee Stock Option Agreement, dated as of July 30, 2012, by and between the Company and Kamyar Mofid. |
7. | Warrant to purchase 40,000 shares of Common Stock, dated as of November 1, 2007, granted to Roy and Jan Phillips. |
8. | Warrant to purchase 30,000 shares of Common Stock, dated as of January 1, 2008, granted to Carlson Solar, Inc. |
9. | Warrant to purchase 5,015,000 shares of Common Stock, issued as of November 20, 2013 granted pursuant to the Underwriting Agreement dated as of November 15, 2013, by and between the Company and Cowen and Company, LLC, as underwriter. |
10. | Warrants to purchase 1,487,841 shares of Common Stock, each dated as of June 3, 2013 granted pursuant to the Securities Purchase Agreement, dated June 3, 2013, to the investors party thereto. The exercise price and the number of shares of Common Stock underlying the warrants may be adjusted depending on the purchase price for the securities sold pursuant to this Agreement. |
11. | Warrant to purchase 82,627 shares of Common Stock, dated as of June 6, 2014, grated to Silicon Valley Bank. The exercise price of the warrant may be adjusted depending on the purchase price for the securities sold pursuant to this Agreement. |
12. | Agreement and Plan of Merger, dated August 8, 2013, among Real Goods Solar, Inc., Real Goods Mercury, Inc. and Mercury Energy, Inc. |
13. | Membership Interest Purchase Agreement, dated March 26, 2014, by and among Real Goods Solar, Inc., Elemental Energy LLC, Sean Mullen, Beth-Ann Mullen, and Alexander Tiller, as amended by the First Amendment to Membership Purchase Agreement, dated May 14, 2014. |
Schedule 3.1(v)
Certain Registration Matters
1. | On May 14, 2014, the Company completed an acquisition described in its Form 8-K filed May 16, 2014. As a result of the acquisition, the Company is required to file financial statements and pro forma financial information pursuant to Item 9.01 of Form 8-K. The Company has elected to file the required financial statements and pro forma financial information with an amendment to its original Form 8-K pursuant to Item 9.01(a)(4) and Item 9.01(b)(2) of Form 8-K, respectively, which provide that the financial statements and pro forma financial information required under Item 9.01 may be filed with the initial Form 8-K reporting the acquisition or by amendment no later than 71 calendar days after the initial Form 8-K. The instruction to Item 9.01 of Form 8-K provides that the Commission will not declare effective a registration statement filed under the Securities Act before the financial statements required pursuant to Item 9.01(a) of Form 8-K have been filed. As a result, the Commission will not declare effective any registration statement the Company files under the Securities Act after the date of this Agreement until the Company has filed the financial statements required pursuant to Item 9.01(a) of Form 8-K. The 71 day period will end July 30, 2014. |
2. | On January 14, 2014, the Company completed an acquisition described in its Form 8-K filed January 15, 2014. Any registration statement filed by the Company with the Commission after the date of this Agreement must include updated financial statements and financial information meeting the requirement of Regulation S-X at effectiveness. As a result of the acquisition, the Company is obligated to include certain financial statements and financial information of the target of that acquisition in any such registration statement. |
Schedule 4.4
Subsequent Registrations
1. | Registration Rights Agreement, dated as of June 3, 2013, by and between the Company and the investors party thereto. |
2. | Underwriting Agreement, dated as of November 20, 2013, be and between the Company and Cowen and Company, LLC, as underwriter. |
Exhibit A
Registration Rights Agreement
[Included as exhibit 10.2 to this Current Report on Form 8-K]
Exhibit B
Common Stock Purchase Warrant
[Included as exhibit 4.1 to this Current Report on Form 8-K]
Exhibit 10.2
Exhibit A
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this Agreement) is made and entered into as of July __, 2014, by and among Real Goods Solar, Inc., a Colorado corporation (the Company), and the investors listed on the Schedule of Buyers attached hereto as Annex A and identified on the signature pages hereto (each a Investor and collectively, the Investors).
This Agreement is made in connection with the Securities Purchase Agreement, dated July 2, 2014 among the Company and the Investors (the Purchase Agreement).
The Company and the Investors hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement will have the respective meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms have the respective meanings set forth in this Section 1:
Advice has the meaning set forth in Section 6(d).
Commission Comments means written comments pertaining solely to Rule 415 (or which challenge the right of an Investor to have its Registrable Securities included in a Registration Statement filed hereunder without being deemed an underwriter) which are received by the Company from the Commission to a filed Registration Statement, a copy of which shall have been provided by the Company to the Holders, which either (i) requires the Company to limit the number of Registrable Securities which may be included therein to a number which is less than the number sought to be included thereon as filed with the Commission or (ii) requires the Company to either exclude Registrable Securities held by specified Holders or deem such Holders to be underwriters with respect to Registrable Securities they seek to include in such Registration Statement.
Cut Back Shares has the meaning set forth in Section 2(b).
Effective Date means, as to a Registration Statement, the date on which such Registration Statement is first declared effective by the Commission.
Effectiveness Date means (a) with respect to the initial Registration Statement required to be filed pursuant to Section 2(a), the earlier of: (i) the 90th day following the Closing Date and (ii) the fifth Trading Day following the date on which the Company is notified by the Commission that the initial Registration Statement will not be reviewed or is no longer subject to further review and comments; (b) with respect to any additional Registration Statements required to be filed pursuant to Section 2(a), the earlier of: (i) the 90th day following the applicable Filing Date for such additional Registration Statement(s) and (ii) the fifth Trading Day following the date on which the Company is notified by the Commission that the such additional Registration Statement(s) will not be reviewed or is no longer subject to further review; and (c) with respect to any additional Registration Statements required to be filed solely due to SEC Restrictions, the earlier of: (i) the 90th day following the applicable Restriction Termination Date and (ii) the fifth Trading Day following the date on which the Company is notified by the Commission that such Registration Statement will not be reviewed or is no longer subject to further review and comments.
Effectiveness Period means, as to any Registration Statement required to be filed pursuant to this Agreement, the period commencing on the Effective Date of such Registration Statement and ending on the earliest to occur of (a) the fifth anniversary of such Effective Date and (b) such time as there shall cease to be any Registrable Securities covered by any such Registration Statement.
Filing Date means (a) with respect to the initial Registration Statement required to be filed pursuant to Section 2(a), the 35th day following the Closing Date; (b) with respect to any additional Registration Statements required to be filed pursuant to Section 2(a), the 15th day following the Effective Date for the last Registration Statement filed pursuant to this Agreement under Section 2(a); and (c) with respect to any additional Registration Statements required to be filed due to SEC Restrictions, the 15th day following the applicable Restriction Termination Date.
Holder or Holders means the holder or holders, as the case may be, from time to time of Registrable Securities.
Indemnified Party has the meaning set forth in Section 5(c).
Indemnifying Party has the meaning set forth in Section 5(c).
Losses has the meaning set forth in Section 5(a).
New York Courts means the state and federal courts sitting in the City of New York, Borough of Manhattan.
Proceeding means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.
Prospectus means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.
Registrable Securities means: (i) the Shares, (ii) the Warrant Shares and (iii) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event, or any price adjustment as a result of such stock splits, reverse stock splits or similar events with respect to any of the securities referenced in (i) or (ii) above. As to any particular Registrable Securities, such securities shall cease to be Registrable securities
2
when (i) a Registration Statement covering such securities has been declared effective by the Commission and such securities have been disposed of pursuant to such effective Registration Statement, (ii) such securities are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) are met, (iii) such securities are otherwise transferred and such securities may be resold without subsequent registration under the Securities Act, or (iv) such securities shall have ceased to be outstanding.
Registration Statement means the initial registration statement required to be filed in accordance with Section 2(a) and any additional registration statements required to be filed under this Agreement, including in each case the Prospectus, amendments and supplements to such registration statements or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference therein.
Restriction Termination Date has the meaning set forth in Section 2(b).
Rule 144 means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
Rule 415 means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
Rule 424 means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
SEC Restrictions has the meaning set forth in Section 2(b).
2. Registration.
(a) On or prior to its applicable Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all Registrable Securities not already covered by an existing and effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415. Each Registration Statement required to be filed under this Agreement shall be filed on Form S-3 (or if the Company is not then eligible to utilize such form of registration, it shall utilize such other available form appropriate for such purpose) and contain (except if otherwise required pursuant to written comments received from the Commission upon a review of such Registration Statement, other than as to the characterization of any Holder as an underwriter, which shall not occur without such Holders written consent) the Plan of Distribution attached hereto as Annex B. The Company shall cause each Registration Statement required to be filed under this Agreement to be declared effective under the Securities Act as soon as possible but, in any event, no later than its Effectiveness Date, and shall use its reasonable best efforts to keep each such Registration Statement continuously effective during its entire Effectiveness Period. By 5:00 p.m. (New York City time) on the Business Day immediately following the Effective Date of each Registration Statement, the Company shall file with the Commission in accordance with Rule 424 the final
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prospectus to be used in connection with sales pursuant to such Registration Statement (whether or not such filing is technically required under such Rule). If for any reason other than due solely to SEC Restrictions, a Registration Statement is effective but not all outstanding Registrable Securities are registered for resale pursuant thereto, then the Company shall prepare and file by the applicable Filing Date an additional Registration Statement to register the resale of all such unregistered Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415.
(b) Notwithstanding anything to the contrary contained in this Section 2, if the Company receives Commission Comments, and following discussions with and responses to the Commission in which the Company uses its reasonable best efforts and time to cause as many Registrable Securities for as many Holders as possible to be included in the Registration Statement filed pursuant to Section 2(a) without characterizing any Holder as an underwriter (and in such regard uses its reasonable best efforts to cause the Commission to permit the affected Holders or their respective counsel to participate in Commission conversations on such issue together with Company Counsel, and timely conveys relevant information concerning such issue with the affected Holders or their respective counsel), the Company is unable to cause the inclusion of all Registrable Securities, then the Company may, following not less than three Trading Days prior written notice to the Holders (i) remove from the Registration Statement such Registrable Securities (the Cut Back Shares) and/or (ii) agree to such restrictions and limitations on the registration and resale of the Registrable Securities, in each case as the Commission may require in order for the Commission to allow such Registration Statement to become effective; provided, that in no event may the Company name any Holder as an underwriter without such Holders prior written consent (collectively, the SEC Restrictions). Unless the SEC Restrictions otherwise require, any cut-back imposed pursuant to this Section 2(b) shall be allocated among the Registrable Securities of the Holders on a pro rata basis. No registration delay payments under Section 2(c) shall accrue on or as to any Cut Back Shares, and the required Effectiveness Date for such Registration Statement will be tolled, until such time as the Company is able to effect the registration of the Cut Back Shares in accordance with any SEC Restrictions (such date, the Restriction Termination Date). From and after the Restriction Termination Date, all provisions of this Section 2 (including, without limitation, the registration delay payment provisions, subject to tolling as provided above) shall again be applicable to the Cut Back Shares (which, for avoidance of doubt, retain their character as Registrable Securities) so that the Company will be required to file with and cause to be declared effective by the Commission such additional Registration Statements in the time frames set forth herein as necessary to ultimately cause to be covered by effective Registration Statements all Registrable Securities.
(c) If: (i) a Registration Statement is not filed on or prior to its Filing Date covering the Registrable Securities required under this Agreement to be included therein (if the Company files a Registration Statement without affording the Holders the opportunity to review and comment on the same as required by Section 3(a) hereof, the Company shall not be deemed to have satisfied this clause (i)), or (ii) a Registration Statement is not declared effective by the Commission on or prior to its required Effectiveness Date or if by the Business Day immediately following the Effective Date, the Company shall not have filed a final prospectus for the Registration Statement with the Commission under Rule 424(b) in accordance with the terms hereof (whether or not such a prospectus is technically required by such Rule), or (iii) after its
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Effective Date, without regard for the reason thereunder or efforts therefor, such Registration Statement ceases for any reason to be effective and available to the Holders as to all Registrable Securities to which it is required to cover at any time prior to the expiration of its Effectiveness Period for more than an aggregate of 30 Trading Days (which need not be consecutive), or (iv) the Company fails, during the period from the six month anniversary of the Closing Date to the one year anniversary of the Closing Date, 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 pursuant to the Exchange Act, other than Form 8-K reports (any such failure or breach being referred to as an Event, and for purposes of clauses (i), (ii), or (iv) the date on which such Event occurs, or for purposes of clause (iii) the date which such 30 Trading Day-period is exceeded, being referred to as Event Date), then in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial registration delay payments and not as a penalty, equal to the product of (x) the product of (A) 1.0% multiplied by (B) the quotient of (i) the number of such Holders Registrable Securities that are not then covered, but are required to be covered, by a Registration Statement that is then effective and available for use by such Holder divided by (ii) the total number of such Holders Registrable Securities multiplied by (y) the aggregate Investment Amount paid by such Holder for the Shares pursuant to the Purchase Agreement. The parties hereto agree that in no event will the Company be liable for any registration delay payments under this Agreement in excess of 1.0% of the aggregate Investment Amount of the Holders in any 30-day period and the maximum aggregate registration delay payments payable to a Holder under this Agreement shall be 10% of the aggregate Investment Amount paid by such Holder pursuant to the Purchase Agreement. The partial registration delay payments pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a month prior to the cure of an Event (except in the case of the first Event Date), and shall cease to accrue (unless earlier cured) upon the expiration of the Effectiveness Period. For the avoidance of doubt, in no event shall the Company be liable for registration delay payments with respect to Cut Back Shares.
(d) Each Holder agrees to furnish to the Company a completed Questionnaire in the form attached to this Agreement as Annex C (a Selling Holder Questionnaire). The Company shall not be required to include the Registrable Securities of a Holder in a Registration Statement and shall not be required to pay any registration delay payments under Section 2(c) to any Holder who fails to furnish to the Company a fully completed Selling Holder Questionnaire at least two Trading Days prior to the Filing Date (subject to the requirements set forth in Section 3(a)).
3. Registration Procedures.
In connection with the Companys registration obligations hereunder, the Company shall:
(a) (i) Not less than four Trading Days prior to the filing of a Registration Statement or any related Prospectus or any amendment or supplement thereto, the Company shall furnish to each Holder copies of the Selling Stockholders section of such document, the Plan of Distribution and any risk factor contained in such document that addresses specifically this
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transaction or the Selling Stockholders, as proposed to be filed, which documents will be subject to the review of such Holder. Subject to Section 3(a)(ii) below, the Company shall not file a Registration Statement, any Prospectus or any amendments or supplements thereto in which the Selling Stockholder section thereof differs from the disclosure received from a Holder in its Selling Holder Questionnaire (as amended or supplemented). The Company shall not file a Registration Statement, any Prospectus or any amendments or supplements thereto in which it (a) characterizes any Holder as an underwriter, (b) excludes a particular Holder due to such Holder refusing to be named as an underwriter, or (c) reduces the number of Registrable Securities being registered on behalf of a Holder except pursuant to, in the case of subsections (b) or (c), the Commission Comments, without, in each case, such Holders express written authorization.
(ii) Each Holder acknowledges that the Commissions staff takes the position that any selling stockholder who is a broker-dealer or an affiliate of a broker dealer must be identified as an underwriter in a resale registration statement. Notwithstanding anything to the contrary in this Agreement, upon receipt by the Company of Commission Comments requiring the Company to either exclude Registrable Securities held by a Holder or deem such Holder to be an underwriter with respect to Registrable Securities they seek to include in such Registration Statement, the Company shall not be required to include the Registrable Securities of such Holder in a Registration Statement and shall not be required to pay any registration delay payments under Section 2(c) to any such Holder that refuses to be identified as an underwriter in a Registration Statement. Notwithstanding the foregoing, a Holder that is an affiliate of a broker-dealer shall not be identified as an underwriter in a Registration Statement so long as the Holder represents to the Company that such holder (y) purchased the Registrable Securities being registered for resale in the ordinary course of business and (x) at the time of the purchase, the Holder had no agreements or understanding, directly or indirectly, with any person to distribute such Registrable Securities.
(b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement continuously effective as to the applicable Registrable Securities for its Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably possible provide the Holders true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that would not result in the disclosure to the Holders of material and non-public information concerning the Company; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the Registration Statement(s) and the disposition of all Registrable Securities covered by each Registration Statement.
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(c) Notify the Holders as promptly as reasonably possible (and, in the case of (i)(A) below, not less than three Trading Days prior to such filing and, in the case of (v) below, not less than three Trading Days prior to the financial statements in any Registration Statement becoming ineligible for inclusion therein) and (if requested by any such Person) confirm such notice in writing no later than one Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a review of such Registration Statement and whenever the Commission comments in writing on such Registration Statement (the Company shall provide true and complete copies thereof and all written responses thereto to each of the Holders that pertain to the Holders as a Selling Stockholder or to the Plan of Distribution, but not information which the Company believes would constitute material and non-public information); and (C) with respect to each Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or the Prospectus, as the case may be, it 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, in light of the circumstances under which they were made, not misleading.
(d) Use its reasonable best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.
(e) Furnish to each Holder, upon request and without charge, at least one conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such Person (including those previously furnished) promptly after the filing of such documents with the Commission unless a requested document is available on EDGAR.
(f) Promptly deliver to each Holder, upon request and without charge, as many copies of each Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request unless a requested document is available on EDGAR. The Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto.
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(g) Prior to any public offering of Registrable Securities, register or qualify such Registrable Securities for offer and sale under the securities or Blue Sky laws of all jurisdictions within the United States as any Holder may request, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the Registration Statement(s).
(h) Cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Registration Statement(s), which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may request.
(i) Upon the occurrence of any event contemplated by Section 3(c)(v), as promptly as reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to the affected Registration Statements or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, no Registration Statement nor any Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
4. Registration Expenses. All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, and (B) in compliance with applicable state securities or Blue Sky laws), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by the holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.
5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents, investment advisors, partners, members and employees of each of them, each
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Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all out of pocket losses, claims, damages, liabilities, costs (including, without limitation, reasonable costs of preparation and reasonable attorneys fees) and expenses (collectively, Losses), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (1) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holders proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex B hereto for this purpose) or (2) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of an Advice or an amended or supplemented Prospectus, but only if and to the extent that following the receipt of the Advice or the amended or supplemented Prospectus the misstatement or omission giving rise to such Loss would have been corrected. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising solely out of or based solely upon: (x) such Holders failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading to the extent, but only to the extent that, (1) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holders proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement (it being understood that the Holder has approved Annex B hereto for this purpose), such Prospectus or such form of Prospectus or in any amendment or supplement thereto or (2) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or
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defective and prior to the receipt by such Holder of an Advice or an amended or supplemented Prospectus, but only if and to the extent that following the receipt of the Advice or the amended or supplemented Prospectus the misstatement or omission giving rise to such Loss would have been corrected. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an Indemnified Party), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the Indemnifying Party) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder).
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(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 5(c), any reasonable attorneys or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.
The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.
6. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a Holder, of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.
(b) No Piggyback on Registrations. Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in a Registration Statement other than the Registrable Securities.
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(c) Compliance. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement.
(d) Discontinued Disposition. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c), such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holders receipt of the copies of the supplemented Prospectus and/or amended Registration Statement or until it is advised in writing (the Advice) by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. The Company may provide appropriate stop orders to enforce the provisions of this paragraph.
(e) Piggy-Back Registrations. If at any time during the Effectiveness Period there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, or a registration statement filed pursuant to either the Registration Rights Agreement, dated June 3, 2013, between the Company and the investors party thereto or the Underwriting Agreement, dated November 20, 2013, between the Company and the underwriter party thereto, then the Company shall send to each Holder written notice of such determination and, if within fifteen calendar days after receipt of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such holder requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights and subject to the applicable terms of such registration rights.
(f) Amendments and Waivers. The provisions of this Agreement, including the provisions of this Section 6(f), may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of no less than a majority in interest of the then outstanding Registrable Securities, and any amendment to any provision of this Agreement made in accordance with this Section shall be binding on all Investors and Holders, as applicable. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of certain Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such waiver or consent relates; provided, further that no amendment or waiver to any provision of this Agreement relating to naming any Holder or requiring the naming of any Holder as an underwriter may be effected in any manner without such Holders prior written consent. Section 2(a) may not be amended or waived except by written consent of each Holder affected by such amendment or waiver.
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(g) 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 (provided the sender receives a machine-generated confirmation of successful transmission) at the facsimile number specified in this Section 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 at the facsimile number specified in this Section 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 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 for such notices and communications shall be as follows:
If to the Company: |
Real Goods Solar, Inc. 833 W. South Boulder Road Louisville, Colorado 80027 Facsimile: (303) 648-5464 Attn: Chief Financial Officer
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With a copy to: |
Brownstein Hyatt Farber Schreck, LLP 410 Seventeenth Street, Suite 2200 Denver, CO 80202-4432 Facsimile: (303) 223-1111 Attn.: Rikard D. Lundberg, Esq.
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If to an Investor: |
To the address or facsimile number set forth under such Investors name on the signature pages hereto.
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If to any other Person who is then the registered Holder:
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To the address or facsimile number of such Holder as it appears in the stock transfer books of the Company |
or such other address or facsimile number as may be designated in writing hereafter, in the same manner, by such Person.
(h) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign its rights or obligations hereunder without the prior written consent of each Holder. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement.
(i) Execution and Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.
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(j) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement 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 Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, employees or agents) will be commenced in the New York Courts. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts 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 Proceeding, any claim that it is not personally subject to the jurisdiction of any New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such 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 manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. If either party shall commence a Proceeding to enforce any provisions of this Agreement, then the prevailing party in such Proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding.
(k) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.
(l) 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 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.
(m) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(n) Independent Nature of Investors Obligations and Rights. The obligations of each Investor under this Agreement are several and not joint with the obligations of each other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under this Agreement. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute
14
the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement or any other Transaction Document. Each Investor acknowledges that no other Investor will be acting as agent of such Investor in enforcing its rights under this Agreement. Each Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Investor to be joined as an additional party in any Proceeding for such purpose. The Company acknowledges that each of the Investors has been provided with the same Registration Rights Agreement for the purpose of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.
REAL GOODS SOLAR, INC. | ||
By: | ||
Name: Title: |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF INVESTORS TO FOLLOW]
IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.
NAME OF INVESTING ENTITY
| ||
By: | ||
Name: | ||
Title: | ||
ADDRESS FOR NOTICE
| ||
c/o:
Street:
City/State/Zip:
Attention:
Tel:
Fax:
Email: |
Annex A
SCHEDULE OF BUYERS
(1) | (2) | |||
Buyer |
Address and Facsimile Number | |||
|
|
Annex B
Plan of Distribution
The Selling Stockholders and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of Common Stock on any stock exchange, market or trading facility on which the shares are traded or quoted or in private transactions. These sales may be at fixed or negotiated prices. The Selling Stockholders may use any one or more of the following methods when selling shares:
| ordinary brokerage transactions and transactions in which the broker-dealer solicits Investors; |
| block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| an exchange distribution in accordance with the rules of the applicable exchange; |
| privately negotiated transactions; |
| to cover short sales made after the date that this Registration Statement is declared effective by the Commission; |
| broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share; |
| a combination of any such methods of sale; and |
| any other method permitted pursuant to applicable law. |
The Selling Stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The Selling Stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a security interest in some or all of the Shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell shares of Common Stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.
Upon the Company being notified in writing by a Selling Stockholder that any material arrangement has been entered into with a broker-dealer for the sale of Common Stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such Selling Stockholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the shares of Common Stock were sold, (iv) the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and (vi) other facts material to the transaction. In addition, upon the Company being notified in writing by a Selling Stockholder that a donee or pledgee intends to sell more than 500 shares of Common Stock, a supplement to this prospectus will be filed if then required in accordance with applicable securities law.
The Selling Stockholders also may transfer the shares of Common Stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
The Selling Stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be underwriters within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of Securities will be paid by the Selling Stockholder and/or the purchasers. Each Selling Stockholder has represented and warranted to the Company that it acquired the securities subject to this Registration Statement in the ordinary course of such Selling Stockholders business and, at the time of its purchase of such securities such Selling Stockholder had no agreements or understandings, directly or indirectly, with any person to distribute any such securities.
The Company has advised each Selling Stockholder that it is the view of the Commission that it may not use shares registered on this Registration Statement to cover short sales of Common Stock made prior to the date on which this Registration Statement shall have been declared effective by the Commission. If a Selling Stockholder uses this prospectus for any sale of the Common Stock, it will be subject to the prospectus delivery requirements of the Securities Act. The Selling Stockholders will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such Selling Stockholders in connection with resales of their respective shares under this Registration Statement.
The Company is required to pay all fees and expenses incident to the registration of the shares, but the Company will not receive any proceeds from the sale of the Common Stock. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
Annex C
REAL GOODS SOLAR, INC.
Selling Securityholder Notice and Questionnaire
The undersigned beneficial owner of common stock (the Common Stock), of Real Goods Solar, Inc., a Colorado corporation (the Company), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the Commission) a Registration Statement for the registration and resale of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement, dated as of , , 2014 (the Registration Rights Agreement), among the Company and the Investors named therein. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms used and not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.
The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:
QUESTIONNAIRE
1. | Name. |
(a) | Full Legal Name of Selling Securityholder | |
| ||
(b) | Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities Listed in Item 3 below are held: | |
| ||
(c) | Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by the questionnaire): | |
|
2. | Address for Notices to Selling Securityholder: |
Telephone: |
Fax: |
Contact Person: |
3. | Beneficial Ownership of Registrable Securities: |
Type and Principal Amount of Registrable Securities beneficially owned:
|
4. | Broker-Dealer Status: |
(a) | Are you a broker-dealer? |
Yes ¨ No ¨
Note: | If yes, the Commissions staff has indicated that you should be identified as an underwriter in the Registration Statement. |
(b) | Are you an affiliate of a broker-dealer? |
Yes ¨ No ¨
(c) | If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities? |
Yes ¨ No ¨
Note: | If no, the Commissions staff has indicated that you should be identified as an underwriter in the Registration Statement. |
5. | Beneficial Ownership of Other Securities of the Company Owned by the Selling Securityholder. |
Except as set forth below in this Item 5, the undersigned is not the beneficial or registered owner of any securities of the Company other than the Registrable Securities listed above in Item 3.
Type and Amount of Other Securities beneficially owned by the Selling Securityholder:
|
6. | Relationships with the Company: |
Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:
|
7. The Company has advised each Selling Stockholder that it is the view of the Commission that it may not use shares registered on the Registration Statement to cover short sales of Common Stock made prior to the date on which the Registration Statement is declared effective by the Commission, in accordance with 1997 Securities and Exchange Commission Manual of Publicly Available Telephone Interpretations Section A.65. If a Selling Stockholder uses the prospectus for any sale of the Common Stock, it will be subject to the prospectus delivery requirements of the Securities Act. The Selling Stockholders will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such Selling Stockholders in connection with resales of their respective shares under the Registration Statement.
The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof and prior to the Effective Date for the Registration Statement.
By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 6 and the inclusion of such information in the Registration Statement and the related prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.
Dated: |
Beneficial Owner: | |||||
By: | ||||||
Name: | ||||||
Title: |
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
Brownstein Hyatt Farber Schreck, LLP
410 Seventeenth Street, Suite 2200
Denver, CO 80202-4432
Facsimile: (303) 223-1111
Attn.: Rikard D. Lundberg, Esq.
Exhibit 99.1
RGS Energy Prices Equity Offering
LOUISVILLE, Colo. July 3, 2014 RGS Energy (NASDAQ: RGSE) has entered into a definitive agreement to raise approximately $7.0 million in a private placement financing transaction. Under the terms of the agreement, RGS Energy will issue units consisting of an aggregate of 2,919,351 shares of its Class A common stock and warrants to purchase up to 1,313,708 additional shares of Class A common stock, at a price of $2.40 per unit.
Each unit consists of one share of Class A common stock and a warrant to purchase 0.45 shares of Class A common stock at an exercise price of $3.19 per share. The warrants are exercisable beginning six months after issuance and for a period of five years thereafter.
After the company pays the placement agent fees and estimated offering expenses, the company expects to receive net proceeds of approximately $6.4 million. The company plans to use the net proceeds to support the launch of its residential leasing platform and for general working capital purposes, including debt repayment. The offering is expected to close no later than July 10, 2014, subject to customary closing conditions.
Roth Capital Partners is serving as lead placement agent and Maxim Group LLC as co-placement agent in connection with the transaction.
The securities offered in the private placement have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws. Accordingly, the securities may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. RGS Energy has agreed to file a registration statement covering the resale of the shares of Class A common stock sold in the transaction as well as the shares of Class A common stock issuable upon the exercise of the warrants.
This notice does not constitute an offer to sell or the solicitation of an offer to buy the securities, nor shall there be any sale of the securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such state or jurisdiction.
About RGS Energy
RGS Energy (NASDAQ: RGSE) is one of the nations pioneering solar energy companies serving commercial, residential, and utility customers. Beginning with one of the very first photovoltaic panels sold to the public in the U.S. in 1978, the company has installed more than 22,500 solar power systems representing over 235 megawatts of 100% clean renewable energy. RGS Energy makes it very convenient for customers to save on their energy bills by providing a comprehensive solar solution, from design, financing, permitting and installation to ongoing monitoring, maintenance and support.
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As one of the nations largest and most experienced solar power players, the company has 20 offices across the West and the Northeast. For more information, visit RGSEnergy.com, on Facebook at www.facebook.com/rgsenergy and on Twitter at https://twitter.com/rgsenergy. RGS Energy is a trade name and RGS Energy makes filings with the Securities and Exchange Commission under its official name Real Goods Solar, Inc.
Cautionary Statement Regarding Forward-Looking Statements
This communication includes forward-looking statements relating to matters that are not historical facts. Forward-looking statements may be identified by the use of words such as expect, intend, believe, will, should or comparable terminology or by discussions of strategy. While RGS Energy believes its assumptions and expectations underlying forward-looking statements are reasonable, there can be no assurance that actual results will not be materially different. Risks and uncertainties that could cause materially different results include, among others, failure to close the above-reference sale of securities, the possibility of negative impact from weather conditions, introduction of new products and services, completion and integration of acquisitions, the possibility of negative economic conditions, and other risks and uncertainties included in RGS Energys filings with the Securities and Exchange Commission. RGS Energy assumes no duty to update any forward-looking statements.
Media and Investor Relations Contact for RGS Energy:
Ron Both
Liolios Group, Inc.
Tel 1-949-574-3860
RGSE@liolios.com
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Exhibit 99.2
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Exhibit EX99_2
SERVING SOLAR SINCE 1978
Corporate Presentation
June 2014
NASDAQ: RGSE
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
Important Cautions Regarding Forward Looking Statements
This communication includes forward-looking statements relating to matters that are not historical facts.
Forward-looking statements may be identified by the use of words such as expect, intend, believe, will, should or comparable terminology or by discussions of strategy. While RGS Energy believes its assumptions and expectations underlying forward-looking statements are reasonable, there can be no assurance that actual results will not be materially different. Risks and uncertainties that could cause materially different results include, among others, completion and integration of acquisitions, realizing synergies and other benefits from acquisitions, the possibility of negative impact from weather conditions, introduction of new products and services, supplier delivery disruption, the possibility of negative economic conditions and other risks and uncertainties included in RGS Energys filings with the Securities and Exchange Commission. RGS Energy assumes no duty to update any forward-looking statements.
© 2014 RGS Energy. All Rights Reserved.
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
Key Stats: RGSE (NASDAQ)
Stock Price (6/20/2014) $2.65 Net Revenue (ttm) $106.7M Annual Megawatts Installed
50-55
52 Week Low-High $1.70-$5.65 EPS (ttm) $(0.58)
Avg. Daily Vol. (3 mo.) 1,231,560 Cash (mrq) $11.1M
Shares Outstanding 1 49.0M Total Assets (mrq) $72.3M
Insider Holdings ~16% Total Debt (mrq) $6.2M
8.6 49%+ CAGR-2008-2014E
Total Liabilities (mrq) $50.6M 5.0
Market Cap $129.9M
Employees ~600 2008 2009 2010 2011 2012 2013 2014E
1) Guidance issued and only effective on May 14, 2014
Data source: S&P Capital IQ
(ttm) trailing twelve months as of Mar. 31, 2014 (mrq) most recent quarter as of Mar. 31, 2014
1) Company estimate as of May 29, 2014.
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
Investment Highlights
Established in 1978, RGS Energy is one of the nations largest and most innovative solar energy providers
Company has grown at ~50% CAGR from 2008-2014E through acquisition and organically with 235MW installed at ~22,500 sites
Fifth largest residential installer nationally1 with record backlog
Solar is the fastest growing energy source in the US with >40% growth in 2014 and nearly 30% growth expected through 20162
With ~2,000 US solar installers1, access to public-market capital provides substantial differentiator
Provide fully integrated, end-to-end solutions with 19 offices nationwide and residential and commercial operations
Capabilities from lead generation and project development to design, construction, commissioning, monitoring, operations and maintenance
Planned internally-sponsored residential financing is expected to enable greater value retention and longer term shareholder value
1. GTM Research U.S. PV Leaderboard, Q3 2013
2. U.S Solar Market Insight: Year-in-review 2013 Report, SEIA/GTM Research
4
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
Executive Management Team
Kam Mofid, Chief Executive Officer
Tony DiPaolo, Chief Financial Officer
Timothy Seamans, Chief Operating Officer
Dennis Lacey, President of Residential Solar Division
Joined the company in July 2012, with nearly 20 Joined the company in February 2013, with over years executive management experience 20 years of collective financial and executive Previously General Manager of Global management experience Residential and Light Commercial Systems at SunEdison; President of Mainstream Energy (parent company Previously President and Chief Financial Officer of of REC Solar and AEE Solar); and President of Incentra Solutions (now Presilient); Chief Financial Teleflex Power Systems; Prior to Teleflex, an Officer and Chief Accounting Officer of Roomlinx; executive at United Technologies and other finance and accounting positions with public and private companies Bachelor of Science in Electrical Engineering from the University of Waterloo; Master of Science degree in Manufacturing Management from Bachelor of Science in Accounting from the Kettering University; and Master of Science degree University of Denver from Georgia Institute of Technologys School of
Industrial & Systems Engineering
Joined the company in December 2011 through Joined the company in March 2014, with more than the acquisition of Alteris Renewables with over 25 25 years of executive leadership experience. years management experience Previously served as Executive Vice President and Previously Chief Operating Officer at Alteris Chief Financial Officer at Imperial Bancorp; President Renewables and Vice President of Technology at and CEO of Capital Associates; CFO for CKE
Pitney Bowes Restaurants and TeleTech; and as head of capital markets for a private alternative asset investment and management firm.
Bachelor of Science in Computer Science with a minor in Accounting from Bryant University
Bachelor of Arts in Accounting from University of West Florida
5
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
Longstanding Commitment to the Sector and Deep Knowledge of Solar
1978 Real Goods Solar Trading Company opens first store; sold the first solar panels in retail at over $100/W
1982 First Solar Living Source Book printed*
1986 Launched mail order catalog (95% customers off grid) 1991 Public offering directly to customers 1992 Launched National Tour of solar homes 1996 Opened Solar Living Center 2001 Merged with Gaiam 2003 Launched residential division
2008 IPO
2008-09 Acquired Marin Solar, Carlson Solar, IES, Regrid Power
2011 Acquired Alteris became a major national residential/commercial solar company
2012 Mid 2012, new CEO hired to address key challenges post Alteris and to restore profitability and growth
2013 Surpassed 15,500 installations/100+ MW of solar energy deployed since inception Aug-13 Acquired Syndicated Solar Jan-14 Acquired Mercury Energy and rebranded Real Goods Solar as RGS Energy
May-14 Acquired Sunetric one of the largest and most established local solar developers and installers in Hawaii
*Currently in 13th edition with over 500,000 sold.
6
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
Market Opportunity: Bright Future for Solar Power
Solar is the fastest growing energy source in the U.S. Strong Outlook for Growth in Solar Power1 with market expected to reach $1 trillion over the next Actual & Projected, Giga Watts (GW) in U.S. decade1
12.0
U.S. solar installations grew 41% to a record 4.8 GW in 2013 vs. 2012, representing 29% of new U.S.
2 10.0 electricity capacity in 2013
U.S. solar market forecasted to grow 26% in 2014, 8.0 with installations reaching ~6 GW2
Residential expected to grow 47% to 1.2 GW
6.0
~28% CAGR 2013-2016E
Commercial expected to grow 40% to 1.6 GW
4.0
2.0
06 07 08 09 10 11 12 13 14E 15E 16E
1. Enerdata; McKinsey Global Solar Initiative
2. U.S Solar Market Insight: Year-in-review 2013 Report, SEIA/GTM Research
7
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
Key Market Drivers: Rising Electric Bills & Declining Solar-PV Module Prices
Availability of zero?down financing Federal mandates:
As part of the Energy Policy Act of 2005, all public electric utilities are now required to offer net metering on request $0.13
$2.31
Public Utility Regulatory Policies Act: utilities must allow homes that produce their own energy to connect to the energy grid
? Utility rates rising in key Solar states: average QTA cost per kWh up ~74% to ~$0.13 from 1999 to 20121
? Solar significantly reduces short and long?term customer utility costs with ROI as high as 30%+
? Total system material and deployment costs are expected to continue their downward trajectory
? Solar equipment manufacturing capacity $0.69 expected to double over the next 3?5 years 2
$0.08
99 00 01 02 03 04 05 06 07 08 09 10 11 12 09 10 11 12 13
1) Energy Information Administration (EIA), historical data for CA, CO, HI, NJ, NY & VT. Released Dec. 12, 2013.
2) McKinsey Report: Solar Power: Darkest before dawn. April 2012. Source: US Energy Information Administration Source: GTM Research and U.S. Solar Market Insight
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
Cost of Electricity High in Key U.S. Solar States
March 2014 vs. March 2013:
U.S. Electric Industry Average Cents per kWh Average electricity costs across the U.S. March 2014 up 6.3% to 10.3 cents per kWh
Average cost per kWh levels were highest in Hawaii
47 States saw average electricity costs increase, with increases 10%+ clustered in the Northeast
7.338.30 ¢/kWh 8.759.36 ¢/kWh 9.4311.23 ¢/kWh 12.4234.80 ¢/kWh
Source: Energy Information Administration, Electricity Monthly Update. Released May 21, 2014. Next update: June 20, 2014.
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
Turnkey Solutions Across Multiple Market Segments
RGS Energy
~50% of sales Commercial ~50% of sales
Residential Utility
Solar for Governments Solar for Schools
Solar for Businesses
22,500+ Installations Nationwide, Representing 235+ Megawatts
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
Selective Acquisitions Can be a Strong Source of Value Creation
Industry is still immature and very fragmented with more than 2,000 residential installers
Top five players represent over 50% of the market
Most players in the downstream market have limited
access to growth or project finance capital with no real value creation option RGS Energy has the platform and public currency to pursue highly selective acquisitions to strategically accelerate growth and to increase the overall depth, breadth, and performance of the company
U.S. Residential Solar Installers Market Share in Q3 2013
RGS Energy 3%
REC Solar 3%
Verengo 5% Vivint Solar
All Others 9% 48%
Solar City 32%
RGS Energy is the 5th largest residential installer among more than 2,000 nationwide
Source: GTM Research U.S. PV Leaderboard, Q3 2013
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
National Footprint and Capabilities via a Disciplined Acquisition Strategy
Acquired August 2013
Strengthened residential division
Expanded footprint to Missouri and enhanced presence in Colorado and California
Created much improved front-end capabilities, with strong sales talent and know-how
Acquired January 2014
Expanded northeast commercial & residential customer base and capabilities
~2,000 installations (50MW+)
Revenue: $250M+ since inception
Added ~$10M in cash without adding debt
Acquired May 2014
Provided entry into one of the nations largest and most lucrative solar markets, Hawaii
Since its formation in 2004, 3,500+ installations (65MW+)
Strong backlog of commercial, residential and government projects, with revenue topping $38M in 2013
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
Provide a Comprehensive End-to-End Solution
RGS Energy operates as a turnkey solar solution provider in addition to its extensive
EPC (Engineering, Procurement and Construction) capabilities
1 Operations
Origination Engineering Financing Construction Performance Maintenanc
Site evaluation Engineering Consumer Permitting Site Monitoring Production Specification financing Guarantee
Financing Construction Preventative sourcing and Custom Design Maintenance Optimize ROI
Zero-money evaluation Utility
Incentive down, leases Warranty
Processing & PPAs Integration Management
Contracting
Product Commercial System Customer &
Selection Commissioning Partner Financing Integration
Project development
Single point of contact simplifies communication for the customers Benefits of being a Full Ensures quality and reduces risks Turnkey Solar Provider Project costs are well-defined and tightly-managed
Improved customer experience and confidence
1 Current financing is all third-party, but intend to provide internally sourced financing by 3Q14
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
Commercial Business Unit Impeccable Credentials
Internal professional project development, sales, project management and deployment staff of 100+ personnel on both coasts including HI
Excellent in-house electrical and mechanical engineering capabilities Capable of handling complex and demanding requirements NABCEP and Diamond Certified installation professionals OSHA certified technicians Award-winning engineering designs Strong relationship with major commercial financiers and developers
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SERVING SOLAR SINCE 1978 NASDAQ: RGSE
Connecting the Dots in the Commercial Value Chain
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SERVING SOLAR SINCE 1978
Marquee Customers
NASDAQ: RGSE
We have successfully provided solar solutions to many key commercial customers across the country such as
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NASDAQ: RGSE
SERVING SOLAR SINCE 1978
Deep Capabilities in Residential with Broad Market Reach
?A top ranking national player with highly experienced team members in key US solar markets with local operations in CA, HI, MA, NY, CO, CT, VT, NH
?Full turnkey end-to-end offer from sales, to engineering, procurement, construction, customer service, financing (currently through third parties), and post-sales support
?A flexible residential construction model built upon a strong internal construction team and augmented by external integrators as needed to maximize capacity utilization
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NASDAQ: RGSE
SERVING SOLAR SINCE 1978
Improving Sales and Operational Productivity and Creating Scale
?A clear roadmap that is being executed to improve sales productivity and reduce cost of acquisition
Much improved sales training and sales management
Regionally focused and optimized marketing and lead generation activities
Investment in e-sales which in a short period of time has already contributed to significant uptick in sales
Excellent results with community solarize programs allowing for rapid and efficient customer acquisition within specific geographical areas; these programs have resulted in record monthly sales performance in the North East
?Implementation of an operational roadmap that is resulting in improved lead-times and is expected to support a clear path towards improved margins
?Addition of a very seasoned executive talent to lead the residential business to accelerate performance improvements and to deploy an internal financing solution
Hired Dennis Lacey in March 2014 to help transform the residential business model; Lacey has 25 years of executive management experience and was the CEO of Capital Associates, a publicly traded leasing company, and started the leasing division for Imperial Bancorp, a $6 billion publicly traded commercial bank. He was also CFO of one of the largest customer service/call centers in the country.
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NASDAQ: RGSE
SERVING SOLAR SINCE 1978
In-House Financing:
Commercial
?Formed RGS Energy Asset Management as a joint venture with Altus Power America Management to develop, finance & manage up to $150M of commercial solar projects
?Joint development agreements in key solar states enables RGS to participate in management fees (through carried interest) and long-term ownership of commercial systems
Residential
?Mosaic Home Solar Loan, crowd sourced loan product to homeowners
?Expect to begin sales of systems for RGSs own portfolio in third quarter 2014
Significant Investment & Development in Financing Capabilities
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NASDAQ: RGSE
SERVING SOLAR SINCE 1978
?Residential solar provides two opportunities for profit: Dealer (installer) profit and financing profit
?Today, RGSE realizes profit from system installation onlythird party finance partners provide financing
?RGSE has both the substantial sales engine and critical back office competence to establish an in-house residential leasing platform
?In 4Q13, RGS began to invest in the infrastructure (technology and people) to support its own in-house leasing fund in order to unlock long-term value of sales and installation platform
?Hired new and redeployed key talent into the leasing development and launch activities
Executive leadership
Financial analytics and back-office processing
Marketing launch material and support
Extensive sales training development
Value CreationIn-House Residential Financing Capabilities
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NASDAQ: RGSE
SERVING SOLAR SINCE 1978
Monetizing Rents Outside of Tax Equity Structure Creates Substantial Retained Value
Target RGSE ITC Self utilized Cash flow timing Model
NPV of a residential system
Residual Value At end of lease term $ 0.60 Contracted Power Purchase Payments Monthly over 20 year life of lease $ 2.80 Construction and Customer Acquisition Cost Up front cost to develop and construct system $ (3.20)
NPV of residentila solar system $ 0.20
Construction and Customer Acquisition Cost Up front cost to develop and construct system $ (3.20) Depreciation and ITC * $ 2.00 NPV of debt ** Monetization of contractual cash flows $ 2.00
Net financing gain available to offset G&A $ 0.80
*$2.00 retained value reflects 25% discount rate **5% debt rate and 60% advance rate
This information is provided for example purposes only, to present possible economics of a residential lease financed without tax equity. The information provided does not reflect any historical data or information that has been verified with a third party source.
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NASDAQ: RGSE
SERVING SOLAR SINCE 1978
?Not a typical tax equity fund like those managed by SolarCity or SunRun and CPF (Clean Power Finance), which RGSE currently uses for lease financing
?Existing scale of EPC operations supports path to near-term profitability and creation of federal tax liability
?Lower after tax cost of capitalRGSE will hold leases on its own balance sheet and use the available 30% ITC (investment tax credit)
?Lease ownership provides numerous near/long-term benefits, including retained value, which has driven valuation in the public market
Sales-type lease accounting for GAAP purposes:
?Up- front EPC system sale revenue no change from current SEC reporting
?Capitalizing lease-origination costs e.g. sales commissions, which reduces SG&A
?NPV of 20 year lease payments and residual value booked as receivable on balance sheet
?Conservative residual value avoiding tax equity facilitates conservative residual assumption
Use of 30% ITC, accelerated depreciation, and deduction of debt interest expense (lowers cost of capital), once reach profitability
Near and long-term cash flows get 100% of lease payments from day 1 versus just years 6-20 under typical tax equity fund structure
Book of leases will be leveraged (up to 80%) and combined with future equity to fund additional leases
Portfolio profits from early cash flow can be reinvested in new leases, reducing need for equity sales
RGSE Clean Slate Allows a More Advanced Approach
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NASDAQ: RGSE
SERVING SOLAR SINCE 1978
In Q4 and Q1, began investing in residential inside sales call center, surpassed $1 million per month sales bookings
Invested in residential and commercial development and origination capabilities, and in a residential leasing solution
Entered Q1 2014 with highest residential backlog in company history and increased it in Q1 2014
Recent Foundational Improvements
Over the past 12+ months, management has executed three corporate-wide initiatives, setting the stage for expected profitable growth
Enhanced discipline in working capital management and reduced lead times
At March 31, 2014, $11.1 million in cash and $14.5 million in working capital
Ended Q1 2014 with zero drawn against line of credit
Made significant productivity improvements in all key functions
Integrated technology, streamlined sales, eliminated resource redundancies and flattened management structure
In 2013, reduced operating expenses by 20% or $5.9 million
Focus On Growth & Long Term Market Diversification
Aggressively Improve Cash Flow & Liquidity Dynamics
Reduce Operating Expenses & Enhance Productivity
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NASDAQ: RGSE
SERVING SOLAR SINCE 1978
Use of Proceeds
In-house Leasing Launch
?Completion of back off implementation
FICO scoring
State consumer lending compliance
Commercial banking grade documentation and underwriting standards
In-house lease servicing
End-to-end integration with marketing and sales function
?Warehouse of residential solar system leases
Initial trial in a single office with staged roll-out nationally
?Initial warehoused portfolio provides clearer picture for sourcing permanent financing
Working Capital
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NASDAQ: RGSE
SERVING SOLAR SINCE 1978
Income Statement March 31, 2014
For the Fiscal Period Ending
Mar-31-2014 Dec-31-2013 Dec-31-2012
Net Revenue $ 22,143 $ 101,342 $ 92,891 Cost of goods sold 18,852 79,032 69,859 Gross Profit 3,291 22,310 23,032 Expenses: Selling and operating 8,168 25,667 29,807 General and administrative 2,756 6,973 8,909 Acquisition costs 2,301 2,010 -Goodwill and other asset impairments 22,012 Total Expenses 13,225 34,650 60,728 Loss from operations (9,934) (12,340) (37,696) Interest and other income (expense) (221) 1,098 (790) Interest expense arising from valuation of warrants (4,667) Income tax expense (benefit) 6 58 8,720 Net loss $ (14,828) $ (11,300) $ (47,206) Net loss per share: Basic $ (0.34) $ (0.38) $ (1.77) Diluted $ (0.34) $ (0.38) $ (1.77) Weighted-average shares outstanding Basic 43,600 29,486 26,673 Diluted 43,600 29,486 26,673
(In thousands, except per share data)
50 Revenue | Quarterly
40 30 20 10 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2011 2012 2013 2014
Figures in In USD Millions
Adjusted EBITDA1 | Quarterly
0.5 -1 -2.5 -4 -5.5 -7
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2011 2012 2013 2014
Figures in In USD Millions
2014 MWs sold are estimated to be in the range of 55-65MW, including Sunetric EBITDA breakeven is expected to be reached in Q4 2014
1. See slide 27 for presentation of Adjusted EBITDA
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NASDAQ: RGSE
SERVING SOLAR SINCE 1978
Balance Sheet March 31, 2014
March 31st, Decemeber 31st, Decemeber 31st, 2014 2013 2012
Assets
Current Assets:
Cash $ 11,111 $ 12,449 $ 10,390 Accounts receiveable net 15,441 11,926 13,902 Cost in excess of billings on uncompleted contracts 6,001 4,556 5,288 Inventory, net 6,740 6,715 5,711 Deferred costs on uncompleted contracts 2,072 1,421 896 Other current assets: 1,528 1,270 2,130
Total Current Assets 42,893 38,337 38,317 Property and equipment, net 3,541 3,084 3,991 Intangible assets 22,496 480 -Goodwill 1,867 1,867 -Other assets 1,455
Total Assets $ 72,252 $ 43,768 $ 42,308
Liabilities and Shareholders Equity
Current Liabilities:
Line of credit $ 6,498 Accounts payable 16,516 14,059 15,951 Accrued liabilities 5,212 3,611 5,156 Billings in excess of costs on uncompleted contracts 1,730 395 2,975 Term loan 2,000 2,000 -Related party debt 4,150 4,150 6,850 Other current liabilities 886 787 510
Total Current Liabilities 30,494 25,002 37,940 Accrued liabilities 989 446 443 Common stock warrant liability 19,117 15,071 -
Total Liabilities 50,600 40,519 38,383
Shareholders Equity:
Class A common stock, $.0001 par value, 150,000 shares authorized, 30,232,946 and 26,693,696 shares issued and outstanding at September 30,2013 and December 31, 2012 respectively 5 4 3 Additional paid-in capital 126,038 92,808 82,185 Accumulated deficit (104,391) (89,563) (78,263)
Total Shareholders Equity 21,652 3,249 3,925 Total Liabilities and Shareholders Equity $ 72,252 $ 43,768 $ 42,308
(in thousands, except share and per share data)
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NASDAQ: RGSE
Conclusions
SERVING SOLAR SINCE 1978
?Long history in the industry with substantial depth and breadth of capabilities: Proven execution across residential and commercial markets
?Large and Fast-Growing Market with Favorable Dynamics: The fastest growing energy source in the U.S. with market expected to reach $1 trillion over the next decade1
?Diversified, Nationwide Platform with Efficient and Scalable Processes: 19 offices strategically located in key solar geographies across the U.S. with strong back-office support functions
?Integrated End-to-End Solution: From lead generation and project development to design, construction, commissioning, monitoring, operations and maintenance
?Primed for Strong Growth: Record residential backlog, with strong contribution expected from recent strategic acquisitions in residential and commercial
?Growth acceleration and value creation through the newly developed residential leasing solution
1.Source Enerdata; McKinsey Global Solar Initiative
49%+ CAGR-2008-2014E
5.0
8.6
10.7
20.2
26.6
29.7
55-65
2008
2009
2010
2011
2012
2013
2014E
Annual Megawatts Installed
Guidance issued and only effective as of June 23, 2014 and includes Sunetric
|
SERVING SOLAR SINCE 1978
NASDAQ: RGSE
Appendix
28
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NASDAQ: RGSE
SERVING SOLAR SINCE 1978
About Presentation of Adjusted EBITDA
About Presentation of Adjusted EBITDA Beginning with the reporting of results for the third quarter of 2013, the company began to report the measures of adjusted EBITDA. Adjusted EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. The company defines adjusted EBITDA as income or loss from operations before interest, depreciation, taxes, non-cash stock-based compensation and the one-time charges (acquisition costs and other one-time charges as included in the table above). Other companies (including competitors) may define adjusted EBITDA differently. The company presents adjusted EBITDA because management believes it is an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of Real Goods Solar Inc. nor is it intended to be predictive of potential future results. Investors should not consider adjusted EBITDA in isolation or as a substitute for analysis of the companys results as reported under GAAP.
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NASDAQ: RGSE
SERVING SOLAR SINCE 1978
Capital vs. Operating Lease
Income Statement
Capital Lease
Operating Lease
Revenue
NPV of cash flows day one
Lease payments on straight-line
Depreciation
None
Recorded over life of asset
Initial Direct Costs
None
Amortize over lease life
Interest Income
Over life of lease
None
Balance Sheet
Record NPV as A/R
Record as asset, net of depreciation
Pros
Cons
RGS tax advantage
Capital intensive requires greater sponsor equity
RGS residual value
No step-up on FMV calculation (for ITC)
GAAP income
More efficient borrower
Higher leverage eliminates complications around tax equity
Improve RGS sales close rate more flexibility
30
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