Payable to Gaiam

12 Months Ended

Dec. 31, 2013

Payable to Gaiam

8. Related Party Debt

Related party debt consists of the following (in thousands):

	December 31,
Related Party	2013		2012
Riverside	$	4,150	$	4,150
Gaiam		—		2,700
Total	$	4,150	$	6,850

Related party debt at December 31, 2013 consisted of $4.15 million owed to Riverside. At December 31, 2012, the Company’s related party debt was comprised of $2.7 million owed to Gaiam and $4.15 million owed to Riverside. As of December 31, 2013, the Riverside loans were due as follows: $1.0 million by April 26, 2014, $3.0 million by September 3, 2014, and $150,000 by October 29, 2014. These loans bear interest at an annual rate of 10%. The accrued interest on the amounts owed to Riverside will be waived if the Company repays the $3.0 million and $150,000 loans owed to Riverside on or before their respective maturity date. As conditions for Gaiam extending the maturity date of its then existing $1.7 million loan to RGS from December 30, 2012 to April 30, 2013 and loaning RGS an additional $1.0 million, the Company had to pay all interest owed on the then existing Gaiam loan of $1.7 million, execute and deliver to Gaiam in the near future an option agreement, reasonably acceptable to both parties, permitting Gaiam to purchase for $200,000 all tenant improvements constructed by RGS in its principal office space leased from Gaiam; and amend the Company’s facility lease with Gaiam to cancel, effective December 31, 2012, the $3 per square foot credit set forth in the then current lease. On April 23, 2013, Gaiam converted $100,000 of the then outstanding $2.7 million into 62,111 shares of the Company’s Class A common stock. The $2.6 million remaining amount due to Gaiam was repaid on November 5, 2013; $2.1 million in cash, $200,000 of tenant improvements transferred to Gaiam and a discount for early repayment of $300,000. The discount is included in other accrued liabilities to reflect the above market lease with Gaiam for the Company’s headquarters office space.

The $1.0 million promissory note entered into with Riverside during December 2012 included certain customary language making the loan payable upon the occurrence of certain events, such as insolvency or bankruptcy. Also, if the Company completes a sale of at least $50,000 of capital stock, then Riverside has the option of converting all or any portion of the principal and interest owing on the loan in question into securities in such sale at the same purchase price as paid by other purchasers in such sale. If RGS fails to make payment of the principal and all interest owing the loan within 10 days of when due, Riverside has the option to acquire an undivided 50% interest in our real property located in Hopland, California (including all land and buildings) in exchange for cancellation of such principal and interest. This option is conditioned upon (1) the approval of the transaction by the Company’s disinterested directors, and (2) the consent of the Company’s senior creditor, Silicon Valley Bank. The loans are unsecured and subordinated to the Company’s indebtedness to unaffiliated creditors. Subject to the rights of senior debt, RGS has the right to prepay the loans at any time without premium or penalty.

Accrued interest on related party debt is $664,000 and $200,000 at December 31, 2013 and 2012, respectively, and is reported in accrued liabilities on the consolidated balance sheet.

Riverside owns approximately 22% of the Company’s currently outstanding Class A common stock and is one of its creditors. Pursuant to the terms of a Shareholders Agreement, Riverside has the right to designate a certain number of individuals for appointment or nomination to the Board of Directors, tied to its respective ownership of the Company’s Class A common stock.

Payable to Gaiam

Payable to Gaiam

7. Payable to Gaiam

The Company is engaged in several related party transactions with Gaiam. During 2013, through open market sales of shares by Gaiam, its ownership declined to less than 10% of the Company’s issued and outstanding shares of Class A common stock.

Historically, the Company has had a need for certain services to be provided by Gaiam under the Intercorporate Services Agreement and Industrial Building Lease Agreement for the Company’s corporate headquarters. These services may include, but are not limited to, administrative, technical accounting advisory, public financial reporting and certain occupancy and related office services as required from time to time. Previously, the Company determined that it was not cost effective to obtain and separately maintain the personnel and infrastructure associated with these services with a complement of full time, skilled employees. Also see Note 9. Commitments and Contingencies – Operating Leases.

The Company significantly reduced its reliance on Gaiam to provide services under the Intercorporate Services Agreement during 2013. The agreement terminated was on December 19, 2013.

During 2011, the Company completed a project for its then Chairman to design and install an upgrade to an existing solar power system originally built in 1997 for his residence. The contract price, or revenue recognized, was $244,000, which was priced at a customary rate for work performed for the Company’s employees.

Consideration payable to Gaiam and expensed during 2011 for additional services under the Intercorporate Services Agreement and agreeing to amend the existing Intercorporate Services Agreement and Tax Sharing Agreement totaled $672,000.