LSCG Lighting Science Group Corporation (CE)

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)  September 11, 2015
Lighting Science Group Corporation (Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation)	000-20354 (Commission File Number)	23-2596710 (IRS Employer Identification No.)
1830 Penn Street, Melbourne, FL 32901 (Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (321) 779-5520
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 (see General Instruction A.2. below):

 

☐ 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 communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Section 1 - Registrant’s Business and Operations

 

Item 1.01 Entry into a Material Definitive Agreement.

 

Subscription and Support Transaction

 

On September 11, 2015, Lighting Science Group Corporation (the “Company”) entered into a Preferred Stock Subscription and Support Agreement (the “Subscription Agreement”) with LSGC Holdings III LLC (“Holdings III”) and Pegasus Partners IV, L.P. (“Pegasus Fund IV”) pursuant to which, among other things, the Company issued 10,000 units of its securities (the “Series J Securities”) to Holdings III for $1,000 per Series J Security, or aggregate consideration of $10,000,000 (the “September 2015 Offering”). Each Series J Security consists of (a) one share of Series J Convertible Preferred Stock of the Company, par value $0.001 per share (the “Series J Preferred Stock”), and (b) a warrant to purchase 2,650 shares of common stock of the Company, par value $0.001 per share (the “Common Stock”), at an exercise price of $0.001 per share (the “Series J Warrant”). The Series J Warrant issued to Holdings III as part of the Series J Securities contains substantially identical terms as the warrants previously issued to PCA LSG Holdings, LLC on January 3, 2014 and filed as Exhibit 4.5 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on January 8, 2014.

 

In connection with the September 2015 Series J Offering, on September 11, 2015, the Company filed a Certificate of Increase of Series J Preferred Stock (the “Certificate of Increase”) with the Secretary of State of the State of Delaware increasing the number of authorized shares of Series J Preferred Stock from 70,000 to 85,100 shares. Pursuant to the terms of the Subscription Agreement, the Company may issue up to an additional 5,000 Series J Securities to approved purchasers between September 11, 2015 and March 31, 2016.

  

As contemplated by the Subscription Agreement and to facilitate support for the Appeal Bond (as defined below), on September 15, 2015, the Company also filed a Certificate of Designation with the Secretary of State of the State of Delaware designating 40,000 shares of its preferred stock as Series K Preferred Stock (the “Series K Preferred Stock”) having the designations, preferences, voting rights and other special rights set forth therein (the “Series K Certificate of Designation”). The Series K Preferred Stock is senior to the Company’s Series H Convertible Preferred Stock (the “Series H Preferred Stock”), the Company’s Series I Convertible Preferred Stock (the “Series I Preferred Stock”), the Series J Preferred Stock and the Common Stock with respect to the payment of dividends and distribution of assets upon liquidation, dissolution or winding up of the Company. Depending on whether the Appeal Bond has been drawn or fully released, the Series K Certificate of Designation requires the Company to redeem the outstanding shares of Series K Preferred Stock in the event of a liquidation, dissolution or winding up of the Company or an earlier change of control or “junior security redemption,” which includes events triggering a redemption of the outstanding shares of Series H Preferred Stock, Series I Preferred Stock or Series J Preferred Stock. The September 2015 Series J Offering, the designation of the Series K Preferred Stock and the proposed issuance of Series K Securities in connection with entering into the Appeal Bond Agreements (as defined below) are collectively referred to as the “Subscription and Support Transaction.”

 

As disclosed in the Company’s Current Report on Form 8-K filed with the SEC on September 3, 2014, the Company is, together with several of its affiliates and equity holders and certain other persons, a defendant in securities litigation brought by Geveran Investments Limited (the “Geveran Case”), and on August 28, 2014, an Order Granting Plaintiff’s Motion for Partial Summary Judgment Under its First Cause of Action for Violation of the Florida Securities and Investment Protection Act (the “August 28 Order”) was granted by the Circuit Court of the Ninth Judicial Circuit in and for Orange County, Florida. As of the date of this Current Report on Form 8-K, the August 28 Order has not been entered. The Company intends to post an appeal bond in support of its appeal of the August 28 Order upon entry thereof and, pursuant to the Subscription Agreement, Pegasus Fund IV has agreed to assist the Company in securing an appeal bond in the amount of up to $25,000,000 (the “Appeal Bond”) on the terms set forth in a proposed General Indemnity Agreement and related side letter to be entered into by and among the Company, Pegasus Fund IV and the issuer of the Appeal Bond (the “Appeal Bond Agreements”). In consideration of Pegasus Fund IV’s entry into the Appeal Bond Agreements and as security for the potential payments to be made to the issuer of the Appeal Bond for draws upon the Appeal Bond, the Company agreed, pursuant to the Subscription Agreement, to issue to Pegasus Fund IV units of the Company’s securities (the “Series K Securities”), with each Series K Security consisting of (a) one share of Series K Preferred Stock and (b) a warrant to purchase 735 shares of Common Stock (the “Appeal Bond Warrant”). The number of Series K Securities to be issued to Pegasus Fund IV will be determined upon entry into the Appeal Bond Agreements and will be equal to the quotient obtained by dividing (x) the aggregate amount of the bonds, undertakings, guarantees and/or contractual obligations underlying Pegasus Fund IV’s initial commitment with respect to the Appeal Bond by (y) $1,000.

 

  

Pursuant to the Subscription Agreement, the Company also agreed to commence a rights offering of the Series K Securities pursuant to which it will offer all holders of Common Stock and securities convertible into Common Stock (other than derivative securities issued pursuant to the Company’s equity-based compensation plan and employee stock purchase plan) the right to purchase a pro rata share of a like number of Series K Securities as the number issued to Pegasus Fund IV upon entry into the Appeal Bond Agreements (the “Rights Offering”). The Series K Securities offered pursuant to the Rights Offering will be issued in exchange for a commitment from any exercising holder to fund an amount equal to the product obtained by multiplying (i) the number of Series K Securities to be acquired by such holder by (ii) $1,000, with such commitment to be payable when, as and if the Appeal Bond is drawn upon. If an exercising holder fails to fund its obligations in accordance with the terms of the Series K Certificate of Designation, Pegasus Fund IV will remain obligated to fund the applicable amount of the Appeal Bond. The Company agreed to use its reasonable best efforts to file and have declared effective a registration statement relating to the Rights Offering as soon as reasonably practicable after the entry of the August 28 Order.

 

THIS DESCRIPTION OF THE RIGHTS OFFERING SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.

 

Pursuant to the Series K Certificate of Designation, in the event of a claim on the Appeal Bond resulting in a payment by Pegasus Fund IV to the issuer of the Appeal Bond, such as a loss on appeal and collection of the bond amount from Pegasus Fund IV pursuant to the Appeal Bond Agreements, the outstanding shares of Series K Preferred Stock will be retained by the holders who have satisfied their obligations to fund their portion of the Appeal Bond in accordance with the terms of the Series K Certificate of Designation (the “Funding Series K Holders”). The Series K Certificate of Designation provides that, following the release or satisfaction in full of the commitments under the Appeal Bond, the Company will cancel for no additional consideration all of the shares of Series K Preferred Stock issued to Pegasus Fund IV and the Funding Series K Holders except a number of shares equal to the product of (x) the number of shares of Series K Preferred Stock held by such holder and (y) a fraction, the numerator of which is the aggregate amount of payments made by such holder with respect to funding the Appeal Bond and the denominator of which is the aggregate liquidation value (calculated by multiplying the number of shares held by such holder by $1,000) of such shares of Series K Preferred Stock, rounded down to the nearest whole share. In the event that the Company wins the appeal of the August 28 Order, upon the expiration or termination of the Appeal Bond, all shares of Series K Preferred Stock will be cancelled for no consideration.

 

The Appeal Bond Warrant will be exercisable for ten years or upon an earlier change of control or qualified public offering and will have an exercise price equal to the closing sales price of the Common Stock on the trading day immediately preceding the date of issuance. Pegasus Fund IV and any Funding Series K Holders will retain the Appeal Bond Warrant(s) issued to such holders as consideration for their agreement to support the Appeal Bond regardless of whether such holders are required to make payments with respect to funding the Appeal Bond.

 

The foregoing descriptions of the Subscription Agreement, the Certificate of Increase and the Series K Certificate of Designation do not purport to be complete and are qualified in their entirety by reference to the full text of each of the Subscription Agreement, the Certificate of Increase and the Series K Certificate of Designation, which are filed as Exhibits 10.1, 4.1 and 4.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

 

  

Amendment to Preferred Stock Subscription Agreement

 

On September 11, 2015, and in connection with the Subscription and Support Transaction, the Company entered into Amendment No. 2 to Preferred Stock Subscription Agreement (the “Subscription Agreement Amendment”) with Cleantech Europe II (A) LP and Cleantech Europe II (B) LP (collectively, “Zouk”) in order to, among other things, extend the date on which such holders will have the right to require the Company to redeem all or a portion of their shares of Series H Preferred Stock.

 

The foregoing description of the Subscription Agreement Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Subscription Agreement Amendment, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Mutual General Release Agreement

 

On September 11, 2015, and in connection with the Subscription and Support Transaction, the Company entered into a Mutual General Release Agreement (the “Release Agreement”) with RW LSG Holdings LLC (“Riverwood”) pursuant to which the Company, on behalf of itself and each and all of its affiliates, irrevocably and unconditionally released and forever discharged (in such capacity, a “Releasor”) Riverwood and Riverwood’s predecessors and representatives (in such capacity, each, a “Releasee”), and Riverwood, on behalf of itself and each and all of its affiliates, irrevocably and unconditionally released and forever discharged (in such capacity, a “Releasor”) the Company and the Company’s predecessors and representatives (in such capacity, each, a “Releasee”) from any and all claims which such Releasor had, owned or held, or claimed to have, owned or held against any Releasee at the time of the Release Agreement, in each case related to or arising from actions or omissions occurring prior to the date of the Release Agreement and related to or arising from (1) any agreements, arrangements and understandings between Riverwood and the Company in addition to those entered into by Riverwood in its capacity as a holder of the Company’s securities or (2) such Releasor’s or Releasee’s interests in the Company or any of the Company’s securities.

 

The foregoing description of the Release Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Release Agreement, which is filed as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Third Letter Amendment to ACF Loan and Security Agreement; ACF Consent

 

On September 11, 2015, the Company entered into a Third Letter Amendment to Loan and Security Agreement (the “Third ACF Amendment”) by and among the Company, BioLogical Illumination, LLC (“BioLogical” and, together with the Company, “Borrowers”), the financial institutions from time to time party thereto as lenders (the “ACF Lenders”) and ACF FinCo I LP, as assignee of FCC, LLC, d/b/a First Capital, in its capacity as agent for the ACF Lenders (“Ares”), which amends that certain Loan and Security Agreement dated April 25, 2014 by and among Borrowers, the ACF Lenders and Ares (as amended from time to time and as the same may be further amended, modified or supplemented from time to time, the “ACF Loan Agreement”).

 

Among other things, the Third ACF Amendment (1) increases the interest margin payable under the ACF Loan Agreement by 150 basis points, such that the interest accrues on the outstanding borrowings at a rate equal to LIBOR plus 5.5%, (2) provides for a mandatory repayment in full of the obligations under the ACF Loan Agreement if the Company redeems the Series K Preferred Stock, (3) allows the Company to enter into the Appeal Bond Agreements without further consent or approval from Ares, (4) provides that the Company must notify Ares and each ACF Lender of entry of the August 28 Order within two business days of the entry thereof, and (5) adds certain events of default relating to the Geveran Case, including if (a) a judgment is ordered and (i) 45 days passes without appeal, discharge or a stay of enforcement, (ii) enforcement proceedings are commenced, (iii) the judgment debtor is a “lien creditor” or (iv) liens in favor of Ares are subordinated; (b) Ares’s collateral is impacted by the posting of the Appeal Bond; (c) BioLogical or LSGC, LLC (“LSGC”) become liable for the Appeal Bond; (d) the surety for the Appeal Bond makes any payment with respect to the Appeal Bond and is not reimbursed in full for such payment by Pegasus Fund IV or its affiliates within five business days of making such payment; (e) the Company pays more than the annual premium of up to $200,000 in respect of the Appeal Bond; or (f) any person has recourse against the Company, BioLogical or LSGC that is senior to or pari passu with the interests of Ares for amounts that are to be reimbursed by Pegasus Fund IV or its affiliates.

 

  

In connection with the Subscription and Support Transaction and the Third ACF Amendment, Borrowers and Ares also executed a consent (the “ACF Consent”) pursuant to which, among other things, Ares and the ACF Lenders (1) consented to the issuance of up to 15,000 Series J Securities pursuant to the Subscription Agreement as well as any Series J Securities that may be issued upon the exercise of preemptive rights by holders of outstanding shares of Series H Preferred Stock, Series I Preferred Stock and Series J Preferred Stock, (2) consented to the issuance of Series K Securities to Pegasus Fund IV pursuant to the Subscription Agreement and to participating holders in the Rights Offering, (3) agreed that the results of a periodic product line review conducted by The Home Depot, Inc. (the “Home Depot”), the Company’s largest customer, and any direct or indirect impact of such results on the ongoing operations of the Company’s business, will not, in and of itself, constitute a default pursuant to in the ACF Loan Agreement and (4) acknowledged and agreed that the Company has fulfilled certain related disclosure obligations under the ACF Loan Agreement. The ACF Consent also provides that the cash proceeds from the September 2015 Offering and from the issuance of up to 5,000 additional Series J Securities between September 11, 2015 and March 31, 2016 will be included in the calculation of EBITDA for purposes of determining compliance with the fixed charge coverage ratio covenant with respect to any period of determination ending on or before December 31, 2016.

 

The foregoing descriptions of the Third ACF Amendment and the ACF Consent do not purport to be complete and are qualified in their entirety by reference to the full text of each of the Third ACF Amendment and the ACF Consent, which are filed as Exhibit 10.4 and Exhibit 10.5, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

 

Third Amendment to Medley Term Loan Agreement; Medley Consent

 

On September 11, 2015, the Company also entered into a Third Amendment to Term Loan Agreement (the “Third Medley Amendment”) by and among the Company, Medley Capital Corporation (“Medley”) and the lenders from time to time party thereto (the “Medley Lenders”), which amends that certain Term Loan Agreement dated February 19, 2014 by and among the Company, Medley and the Medley Lenders (as amended from time to time and as the same may be further amended, modified or supplemented from time to time, the “Medley Term Loan Agreement”). Among other things, the Third Medley Amendment (1) amends the minimum EBITDA covenant levels with respect to each of the twelve-month period ending September 30, 2015, the twelve-month period ending December 31, 2015, the twelve-month period ending March 31, 2016 and the twelve-month period ending June 30, 2016 (collectively, the “Specified Covenant Periods”) to provide that a portion of the cash proceeds from the September 2015 Offering will be included in the calculation of EBITDA for such periods, (2) amends the definition of “Fixed Charge Coverage Ratio” in the Medley Term Loan Agreement to provide that $10,000,000 of the cash proceeds from the September 2015 Offering will be included in EBITDA for purposes of calculating the “Fixed Charge Coverage Ratio” for each of the Specified Covenant Periods, (3) allows the Company to enter into the Appeal Bond Agreements without further consent or approval from Medley and (4) adds certain events of default relating to the Geveran Case including if (a) a judgment is ordered and (i) 45 days passes without appeal, discharge or a stay of enforcement, (ii) enforcement proceedings are commenced, (iii) the judgment debtor is a “lien creditor” or (iv) liens in favor of Medley are subordinated; (b) Medley’s collateral is impacted by the posting of the Appeal Bond; (c) the surety for the Appeal Bond makes any payment with respect to the Appeal Bond and is not reimbursed in full for such payment by Pegasus Fund IV or its affiliates within 5 business days; (d) the Company pays more than the annual premium of up to $200,000 in respect of the Appeal Bond; or (e) any person has recourse against the Company or any collateral that is senior to or pari passu with the interests of Medley or any Medley Lender for amounts that are to be reimbursed by Pegasus Fund IV or its affiliates.

 

  

In connection with the Subscription and Support Transaction and the Third Medley Amendment, the Company and Medley also executed a consent (the “Medley Consent”) pursuant to which, among other things, Medley and the Medley Lenders (1) consented to the issuance of up to 15,000 Series J Securities pursuant to the Subscription Agreement as well as any Series J Securities that may be issued upon the exercise of preemptive rights by holders of outstanding shares of Series H Preferred Stock, Series I Preferred Stock and Series J Preferred Stock, (2) consented to the issuance of Series K Securities to Pegasus Fund IV pursuant to the Subscription Agreement and to participating holders in the Rights Offering, (3) agreed that the results of a periodic product line review conducted by Home Depot and any direct or indirect impact of such results on the ongoing operations of the Company’s business, will not, in and of itself, constitute a default pursuant to in the Medley Term Loan Agreement and (4) acknowledged and agreed that the Company has fulfilled certain related disclosure obligations under the Medley Loan Agreement.

 

The foregoing descriptions of the Third Medley Amendment and the Medley Consent do not purport to be complete and are qualified in their entirety by reference to the full text of each of the Third Medley Amendment and the Medley Consent, which are filed as Exhibit 10.6 and Exhibit 10.7, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

 

Section 3 – Securities and Trading Markets

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The information contained in Item 1.01 of this Current Report on Form 8-K under the heading “Subscription and Support Transaction” is incorporated by reference into this Item 3.02.

 

Pursuant to the September 2015 Offering, the Company issued 10,000 Series J Securities to Holdings III for aggregate proceeds of $10,000,000.

 

Each share of Series J Preferred Stock is convertible at any time, at the election of the holder thereof, into the number of shares of Common Stock (the “Optional Conversion Shares”) equal to the quotient obtained by dividing (i) $1,000 by (ii) the $0.95 conversion price of the Series J Preferred Stock, subject to adjustment in accordance with the terms set forth in the Amended and Restated Certificate of Designation of Series J Preferred Stock (as amended from time to time, the “Series J Certificate of Designation”).

 

Upon the consummation of a qualified public offering (“QPO”) where (i) the gross proceeds received by the Company and any selling stockholders in the offering are no less than $100 million and (ii) the market capitalization of the Company immediately after consummation of the offering is no less than $500 million, each outstanding share of Series J Preferred Stock will automatically convert into the number of shares of Common Stock equal to the greater of (a) the number of Optional Conversion Shares or (b) the quotient obtained by dividing (x) $2,000 (subject to adjustment in accordance with the terms set forth in the Series J Certificate of Designation) by (y) the price per share of Common Stock paid by the public in the QPO.

 

  

The shares of Series J Preferred Stock and the Series J Warrant issued pursuant to the September 2015 Offering were issued by the Company pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and the safe harbors for sales provided by Regulation D promulgated thereunder.

 

Section 5 – Corporate Governance and Management

 

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

 

The information contained in Item 1.01 of this Current Report on Form 8-K under the heading “Subscription and Support Transaction” is incorporated by reference into this Item 5.03.

 

On September 11, 2015, the Company filed a Certificate of Increase of Series J Preferred Stock with the Secretary of State of the State of Delaware.

 

On September 15, 2015, the Company filed the Series K Certificate of Designation with the Secretary of State of the State of Delaware.

 

Section 8 – Other Events

 

Item 8.01 Other Events.

 

On September 11, 2015, each of Riverwood and affiliates of Pegasus Capital Advisors, L.P. (collectively, “Pegasus”), as the “Primary Investor” of the Series H Preferred Stock and Series I Preferred Stock, respectively, and together as the “Primary Investors” of the Series J Preferred Stock, (1) agreed that from September 11, 2015 through March 27, 2017, it will not to exercise its rights pursuant to the Amended and Restated Certificate of Designation of Series H Preferred Stock or the Amended and Restated Certificate of Designation of Series I Preferred Stock, as the case may be, to require the Company to redeem all or a portion of its shares of Series H Preferred Stock (in the case of Riverwood) or Series I Preferred Stock (in the case of Pegasus), and (2) waived the Company’s compliance with certain minimum thresholds related to the Company’s consolidated earnings before interest, taxes, depreciation and amortization (“Consolidated EBITDA”) for the fiscal years ending December 31, 2015 and December 31, 2016, and agreed to exercise such waiver upon determination of minimum Consolidated EBITDA for the applicable fiscal year. Zouk also agreed, in its capacity as a holder of Series H Preferred Stock, to waive the Company’s compliance with the minimum Consolidated EBITDA thresholds for the fiscal years ending December 31, 2015 and December 31, 2016, and agreed to exercise such waiver upon determination of minimum Consolidated EBITDA for the applicable fiscal year.

 

Section 9 – Financial Statements and Exhibits

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

The information in the Exhibit Index of this Current Report is incorporated into this Item 9.01(d) by reference.

 

 

SIGNATURES

 

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.

 

	Lighting Science Group Corporation
Date: September 17, 2015	By:	/s/ Philip J. Ragona
	Name:	Philip J. Ragona
	Title:	Executive Vice President, General Counsel and Secretary

 

 

EXHIBIT INDEX

 

Number		Description of Exhibit
4.1		Certificate of Increase of Series J Preferred Stock filed with the Secretary of State of the State of Delaware on September 11, 2015.
4.2		Certificate of Designation of Series K Preferred Stock filed with the Secretary of State of the State of Delaware on September 15, 2015.
10.1		Preferred Stock Subscription and Support Agreement dated September 11, 2015 by and among Lighting Science Group Corporation, Pegasus Partners IV, L.P. and LSGC Holdings III LLC.
10.2		Amendment No. 2 to Preferred Stock Subscription Agreement dated September 11, 2015 by and among Lighting Science Group Corporation, Cleantech Europe II (A) LP and Cleantech Europe II (B) LP.
10.3		Mutual General Release Agreement dated September 11, 2015, by and between Lighting Science Group Corporation and RW LSG Holdings LLC.
10.4		Third Letter Amendment to Loan and Security Agreement dated September 11, 2015 by and among Lighting Science Group Corporation, BioLogical Illumination, LLC, the financial institutions from time to time party thereto as lenders and ACF FinCo I LP, as assignee of FCC, LLC, d/b/a First Capital.
10.5		Consents regarding issuance of Series J Convertible Preferred Stock and Series K Preferred Stock and amendments to the Amended and Restated Series H Certificate of Designation, the Amended and Restated Series I Certificate of Designation, and the Amended and Restated Series J Certificate of Designation; Agreements with respect to Specified Customer provisions in Loan Agreement, dated September 11, 2015, by and between Lighting Science Group Corporation and ACF FinCo I LP.
10.6		Third Amendment to Term Loan Agreement dated September 11, 2015 by and among Lighting Science Group Corporation, Medley Capital Corporation and the lenders party thereto.
10.7		Consents regarding issuance of Series J Convertible Preferred Stock and Series K Preferred Stock and amendment to the Amended and Restated Series J Certificate of Designation; Confirmation with respect to Customer 1 and related provisions in Loan Agreement, dated September 11, 2015, by and between Lighting Science Group Corporation and Medley Capital Corporation.

 

Exhibit 4.1

 

CERTIFICATE OF INCREASE

OF

SERIES J CONVERTIBLE PREFERRED STOCK

OF

LIGHTING SCIENCE GROUP CORPORATION

 

---

 

Pursuant to Section 151(g) of the

General Corporation Law of the State of Delaware

 

---

 

Lighting Science Group Corporation, a corporation organized and existing under the Delaware General Corporation Law (the “Corporation”) DOES HEREBY CERTIFY:

 

That pursuant to the authority expressly granted and vested in the Board of Directors of the Corporation (the “Board”) by the Certificate of Incorporation of the Corporation, the Board has adopted the following resolutions increasing the number of authorized shares of Series J Convertible Preferred Stock (“Series J Preferred Stock”) of the Corporation:

 

RESOLVED, that pursuant to the Certificate of Designation of Series J Convertible Preferred Stock of the Corporation (as amended from time to time, the “Series J Certificate of Designation”), the Corporation was authorized to issue 70,000 shares of Series J Preferred Stock as a series of the Corporation’s authorized Preferred Stock, par value $0.001 per share; and, be it

 

FURTHER RESOLVED, that pursuant to the authority expressly granted and vested in the Board in accordance with the provisions of the Certificate of Incorporation of the Corporation and the consent of the holders of a majority of the outstanding shares of Series J Preferred Stock, as required by the Series J Certificate of Designation, the number of shares of Preferred Stock of the Corporation designated as Series J Preferred Stock be, and hereby is, increased from 70,000 shares to 85,100 shares; and, be it

 

FURTHER RESOLVED, that each of the Chief Executive Officer and the Secretary of the Corporation be and hereby are authorized and directed in the name and on behalf of the Corporation to execute and file a Certificate (the “Certificate of Increase”) with the Secretary of State of the State of Delaware increasing the number of shares constituting the Series J Preferred Stock from 70,000 shares to 85,100 shares and to take any and all other actions deemed necessary or appropriate to effectuate this resolution; and, be it

 

FURTHER RESOLVED, that any officer of the Corporation be, and each hereby is, authorized and directed for and in the name of and on behalf of the Corporation to prepare, file and deliver any and all notices or other filings that may be required by applicable law, the Series J Certificate of Designation or the Certificate of Increase.

 

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Increase to be duly executed on its behalf by its undersigned Chief Executive Officer as of September 11, 2015.

 

	By:	/s/ Ed Bednarcik
	Name:	Ed Bednarcik
	Title:	Chief Executive Officer

 

Exhibit 4.2

 

 

CERTIFICATE OF DESIGNATION
OF
SERIES K PREFERRED STOCK
OF
LIGHTING SCIENCE GROUP CORPORATION 

 

 

---

 

Pursuant to Section 151 of the

General Corporation Law of the State of Delaware 

 

---

 

Lighting Science Group Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), in accordance with the provisions of Section 103 thereof, hereby certifies as follows:

 

WHEREAS, the Amended and Restated Certificate of Incorporation of the Corporation, as amended (the “Certificate of Incorporation”), authorizes the issuance of up to 25,000,000 shares of preferred stock, par value $0.001 per share, of the Corporation (“Preferred Stock”) in one or more series, and expressly authorizes the Board Directors of the Corporation (the “Board”), subject to limitations prescribed by law, to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock, and, with respect to each such series, to establish and fix the number of shares to be included in any series of Preferred Stock and the designation, rights, preferences, powers, restrictions and limitations of the shares of such series; and

 

WHEREAS, it is the desire of the Board to establish and fix the number of shares to be included in a new series of Preferred Stock and the designation, rights, preferences and limitations of the shares of such new series.

 

NOW, THEREFORE, BE IT RESOLVED, that the Board does hereby provide for the issue of a series of Preferred Stock and does hereby in this Certificate of Designation (the “Certificate of Designation”) establish and fix and herein state and express the designation, rights, preferences, powers, restrictions and limitations of such series of Preferred Stock as follows:

 

1.     Designation. There shall be a series of Preferred Stock that shall be designated as “Series K Preferred Stock” (the “Series K Preferred Stock”) and the number of Preferred Shares constituting such series shall be 40,000. The rights, preferences, powers, restrictions and limitations of the Series K Preferred Stock shall be as set forth herein.

 

2.     Defined Terms. For purposes hereof, the following terms shall have the following meanings:

 

  

“Affiliate” of, or a Person or entity “Affiliated” with, a specified Person or entity, is a Person or entity that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person or entity specified. Notwithstanding the foregoing, for purposes hereof, the Corporation, its Subsidiaries and its other controlled Affiliates shall not be considered Affiliates of any Holder by reason of such Person being a Holder.

 

“Appeal” has the meaning set forth in Section 7.4(a).

 

“Appeal Bond” has the meaning set forth in Section 7.4(a).

 

“Reorganization” has the meaning set forth in Section 5.1(c).

 

“Board” has the meaning set forth in the Recitals.

 

“Certificate of Designation” has the meaning set forth in the Recitals.

 

“Certificate of Incorporation” has the meaning set forth in the Recitals.

 

“Change of Control” means (a) the sale, conveyance, transfer or disposition, directly or indirectly, including but not limited to any spin-off or in-kind distribution (a “Divestiture”), of all or substantially all of the assets of the Corporation or any successor (on a consolidated basis), other than to the Corporation or its wholly-owned Subsidiaries; (b) the effectuation of a transaction or series of related transactions in which, directly or indirectly, more than thirty-five percent (35%) of the voting power of the outstanding shares of Voting Stock of the Corporation (or ultimate parent thereof) is disposed of (other than (i) as a direct result of normal, uncoordinated trading activities in the Common Stock generally or (ii) solely as a result of the disposition by a stockholder of the Corporation to an Affiliate of such stockholder); (c) any merger, consolidation, stock or asset purchase, recapitalization or other business combination transaction (or series of related transactions) immediately following which the Persons that beneficially owned or controlled, directly or indirectly, all of the voting power of the outstanding shares of Voting Stock of the Corporation immediately prior to such transaction (or series of related transactions), beneficially own or control, in the aggregate (together with Affiliates of such stockholders), less than sixty-five percent (65%) of the voting power of the outstanding shares of Voting Stock of the entity surviving or resulting from such transaction (or ultimate parent thereof); (d) a transaction (or series of transactions) in which any Person, entity or “group” (as such term is used in Sections 13(d) of the Exchange Act), other than Pegasus, acquires, directly or indirectly, more than thirty-five percent (35)% of the voting power of the outstanding shares of Voting Stock of the Corporation (or ultimate parent thereof) or control of the Board (excluding, in the case of control of the Board only, as a result of the occurrence of a Control Event (as defined in the Series H Certificate of Designation)), or (e) Pegasus ceases to beneficially own and control at least ten percent (10%) of the voting power of the outstanding shares of Voting Stock and at least twenty-five (25%) of the economic interests in the outstanding shares of Capital Stock of the Corporation, on a fully-diluted basis.

 

“Common Stock” means the common stock, par value $0.001 per share, of the Corporation.

 

“Conversion Note” has the meaning set forth in Section 7.3.

 

  

“Corporation” has the meaning set forth in the Preamble.

 

“Credit Facilities” has the meaning set forth in Section 7.2.

 

“Date of Issuance” means, for any Preferred Share, the date on which the Corporation initially issues such Preferred Share (without regard to any subsequent Transfer of such Preferred Share or reissuance of the certificate(s) representing such Preferred Share).

 

“Deemed Liquidation” has the meaning set forth in Section 5.1(b).

 

“Draw Notice” has the meaning set forth in Section 7.4(b).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Holder” means any holder of Preferred Shares, all of such holders being the “Holders.”

 

“Initial Pegasus Preferred Shares” has the meaning set forth in Section 7.4(a).

 

“Junior Securities” means, collectively, (a) the Common Stock, (b) the Series H Preferred Stock, (c) the Series I Preferred Stock, (d) the Series J Preferred Stock and (e) any other class of securities that is not specifically designated as senior to, or pari passu with, the Series K Preferred Stock.

 

“Junior Securities Distribution” means the declaration or payment on account of, or setting apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any Junior Liquidation Securities, or any dividend or distribution in respect thereof, either directly or indirectly, and whether in cash, obligations, securities or other property, or the purchase or redemption by any entity directly or indirectly controlled by the Corporation of any of the Junior Liquidation Securities.

 

“Junior Securities Redemption Event” means the earlier of (a) the Corporation’s receipt of written notice of a request for any Junior Security Redemption (made in accordance with the certificate of designation (or the equivalent thereof) governing the terms of such Junior Securities), other than a Permitted Junior Security Redemption or (b) the redemption or repurchase of any Junior Securities, other than in a Permitted Junior Security Redemption.

 

“Junior Security Redemption” means the redemption, repurchase, acquisition or similar purchase by the Corporation or by any entity directly or indirectly controlled by the Corporation of any shares of any Junior Securities.

 

“Liquidation” has the meaning set forth in Section 5.1(a).

 

“Liquidation Value” means, with respect to any Preferred Share on any given date, $1,000 (as adjusted for any stock splits, stock dividends, recapitalizations or similar transaction with respect to the Series K Preferred Stock).

 

“Note Conversion Event” has the meaning set forth in Section 7.3.

 

  

“Pegasus” means Pegasus Capital Advisors, L.P. and its Affiliates.

 

“Permitted Junior Security Redemption” shall have the meaning ascribed to such term in the Series J Certificate of Designation.

 

“Permitted Transferee” means, with respect to any Person, (a) any Affiliate of such Person, (b) a donee who is a member of the immediate family of such Person or any trust exclusively for the benefit of the Person or any such immediate family members, (c) a Transferee of a Person by will or the laws of descent and distribution who is a member of the immediate family of such Person or (d) with respect to any trust, any successor trustee to that trust (provided there is no Transfer of a beneficial interest in such trust as a result of such succession).

 

“Person” means an individual, corporation, partnership, joint venture, limited liability company, governmental authority, unincorporated organization, trust, association or other entity.

 

“Preferred Stock” has the meaning set forth in the Recitals.

 

“Preferred Share” means a share of Series K Preferred Stock.

 

“Remaining Shares” has the meaning set forth in Section 7.3.

 

“Rights Offering Preferred Shares” has the meaning set forth in Section 7.4(a).

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Series H Certificate of Designation” means the Certificate of Designation of Series H Convertible Preferred Stock, as filed with the Secretary of State of the State of Delaware and as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Series H Preferred Stock” means the Series H Convertible Preferred Stock of the Corporation, par value $0.001 per share.

 

“Series I Preferred Stock” means the Series I Convertible Preferred Stock of the Corporation, par value $0.001 per share.

 

“Series J Certificate of Designation” means the Certificate of Designation of Series J Convertible Preferred Stock, as filed with the Secretary of State of the State of Delaware and as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Series J Preferred Stock” means the Series J Convertible Preferred Stock, par value $0.001 per share.

 

“Series K Preferred Stock” has the meaning set forth in Section 1.

 

“Series K Redemption” has the meaning set forth in Section 7.2.

 

“Series K Redemption Notice” has the meaning set forth in Section 7.1.

 

  

“Series K Redemption Price” has the meaning set forth in Section 7.1.

 

“Special Redemption Date” shall have the meaning ascribed to such term in the Series J Certificate of Designation.

 

“Subsidiary” means any corporation, partnership, trust, association, limited liability company or other entity owned or controlled by the Corporation, or in which the Corporation, directly or indirectly, owns a majority of the Capital Stock or similar interest that would be disclosable pursuant to Regulation S-K, Item 601(b)(21).

 

“Transfer” means, as a noun, any voluntary or involuntary transfer, sale, pledge or hypothecation or other disposition, whether directly or indirectly and whether through one or a series of transactions, and, as a verb, voluntarily or involuntarily to transfer, sell, pledge or hypothecation or otherwise dispose of, whether directly or indirectly and whether through one or a series of transactions.

 

“Voting Stock” shall mean (a) one (1) or more classes of Capital Stock having the right to vote in the election of directors (or otherwise control the appointment of directors) generally, and (b) any Capital Stock convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock described in clause (a) of this definition.

 

3.     Rank. With respect to payment of dividends and distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, all Preferred Shares shall rank senior to all Junior Securities.

 

4.     Dividends and Distributions.

 

4.1     No Holder shall be entitled to receive any dividends in respect of its Preferred Shares.

 

4.2     For so long as any Preferred Shares remain outstanding (regardless of whether they remain subject to cancellation in accordance with this Certificate of Designation), the Corporation shall not, and shall not cause or permit any of its controlled Affiliates to, make any Junior Securities Distribution.

 

5.     Liquidation.

 

5.1     Liquidation; Deemed Liquidation

 

(a)     Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation (a “Liquidation”):

 

(i)

To the extent the Appeal Bond has been drawn on or prior to such Liquidation, without limiting their rights pursuant to Section 5.1(a)(ii), the Holders of Preferred Shares then outstanding that satisfied their obligations to fund their portion of the Appeal Bond in accordance with the terms of this Certificate of Designation shall (except in the case of a Deemed Liquidation, for so long as the redemption of Preferred Shares as a result of such Deemed Liquidation is prohibited by Section 7.2) be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders an amount equal to the amount drawn, if any (to be distributed on a pro rata basis to the Holders of Preferred Shares based on number of Preferred Shares), before any payment shall be made to the holders of Junior Securities by reason of their ownership thereof, and a number of Preferred Shares held by each Holder having a Series K Redemption Price equal to the amount of the distribution made to such Holder pursuant to this Section 5.1(a)(i) shall be cancelled.

  

 

(ii)

Notwithstanding any distributions pursuant to Section 5.1(a)(i), to the extent that the Appeal Bond has not been fully drawn or the remaining commitments thereunder fully released and before any payment shall be made to the holders of Junior Securities by reason of their ownership thereof, the Corporation shall place into escrow, for the benefit of the Holders of Preferred Shares, an amount equal to the amount of remaining commitments, if any, under the Appeal Bond. Upon the final disposition of the Appeal Bond, such escrow shall be distributed either to the Holders of Preferred Shares (on a pro rata basis based on number of Preferred Shares), to the extent the Appeal Bond is drawn, or to the holders of Junior Securities to the extent the Appeal Bond is not drawn in accordance with the plan of Liquidation.

 

(b)     Deemed Liquidation.

 

(i)

The occurrence of a Change of Control or of a Junior Securities Redemption Event (either such event, a “Deemed Liquidation”) shall be deemed a Liquidation for purposes of this Section 5 except as expressly provided by this Section 5.1(b). Subject to Section 7.2, upon the occurrence of any such Deemed Liquidation, the Holders of the Series K Preferred Stock shall, in consideration for cancellation of their Preferred Shares, be entitled to the same rights such Holders are entitled to under this Section 5 upon the occurrence of a Liquidation, including the right to receive the full preferential payment from the Corporation of the amounts payable with respect to the Series K Preferred Stock under Section 5.1(a) hereof. Notwithstanding the foregoing, nothing in this Section 5.1(b) shall limit in any respect the right of any holder of Series K Preferred Stock to elect the benefits of this Section 5 in connection with any Change of Control.

 

(ii)

To the extent any Preferred Shares are redeemed due to the occurrence of a Junior Securities Redemption Event in accordance with this Section 5.1, payment of the preferential payment in respect of such Preferred Shares shall be senior to and payable in full prior to the payment of any amounts pursuant to any Junior Security Redemption (including, without limitation, with respect to the Junior Security Redemption that triggered such redemption). The redemption date for such redemption of Preferred Shares shall be the earliest redemption date specified in the notice for the triggering Junior Security Redemption. If, for any or no reason at all, the triggering Junior Security Redemption is withdrawn or if the Corporation satisfies or cures, or the applicable holders of the Junior Securities waive, the obligation or obligations giving rise to such Junior Security Redemption, in each case, prior to the scheduled redemption date for the Preferred Shares, or any other action is taken such that there is no longer an obligation on the part of the Corporation to consummate the Junior Security Redemption at such time, and no Junior Securities are to be redeemed or repurchased in any such Junior Security Redemption, then the Corporation shall no longer have the obligation to consummate the redemption of the Series K Preferred Stock triggered thereby in accordance with this Section 5.1(b).

  

 

(iii)

To the extent any Preferred Shares are redeemed due to the occurrence of a Change of Control in accordance with this Section 5.1, payment of the preferential payment in respect of such Preferred Shares shall be senior to and payable in full prior to the payment of any amounts due with respect to any Junior Securities. The redemption date for such redemption of Preferred Shares shall be the earliest redemption date specified in the notice of such Change of Control.

 

(iv)

Notwithstanding the foregoing, to the extent that the Appeal Bond has not been fully drawn or the remaining commitments thereunder fully released, in the event of a Change of Control, prior to the consummation thereof, the Corporation shall make provisions for the surviving or resulting entity to assume all of the obligations of the Corporation under this Certificate of Designation with respect to an amount of Liquidation Value (having the same priority set forth in Section 3) equal to such undrawn and unreleased amount, with all references to the Corporation herein becoming references to the surviving or resulting entity, as applicable.

 

(c)     Reorganization. If the Corporation enters into in any insolvency or proceeding under Chapter 11 of the Bankruptcy Reform Act of 1978 (or any equivalent thereof), as amended, or other applicable bankruptcy or insolvency laws (a “Reorganization”), to the extent that the Appeal Bond has not been fully drawn or the remaining commitments thereunder fully released, in lieu of the rights the Holders otherwise would have in such Reorganization with respect to an amount of the liquidation preference of the Preferred Shares in the aggregate equal to such undrawn and unreleased amount of the Appeal Bond, prior to emergence from such proceedings the Corporation shall make provisions for the post-emergent entity or entities that succeed to the assets of the Corporation to assume all of the obligations of the Corporation under this Certificate of Designation with respect to an amount of Liquidation Value (having the same priority set forth in Section 3) equal to such undrawn and unreleased amount, with all references to the Corporation herein becoming references to such successor entity.

 

  

5.2     Insufficient Assets. If upon any Liquidation (or Deemed Liquidation) the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the Holders of the Preferred Shares the full preferential amount to which they are entitled under Section 5.1, (a) the Holders of the Preferred Shares shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective full preferential amounts which would otherwise be payable in respect of the Series K Preferred Stock in the aggregate upon such Liquidation (or Deemed Liquidation) if all amounts payable on or with respect to such Preferred Shares were paid in full, and (b) the Corporation shall not make or agree to make any payments to the holders of Junior Securities in respect of such Junior Securities.

 

5.3     Notice. In the event of any Liquidation (or Deemed Liquidation), the Corporation shall, no later than ten (10) days after the date the Board approves such action, or no later than twenty (20) days after any stockholders' meeting called to approve such action or the execution of a written resolution of the stockholders approving such action, or no later than twenty (20) days after the commencement of any involuntary proceeding, whichever is earlier, give each Holder of Preferred Shares written notice of the proposed action. Such written notice shall describe the material terms and conditions of such proposed action, including a description of the stock, cash and property to be received by the Holders of Preferred Shares upon consummation of the proposed action and the date of delivery thereof. If any material change in the terms and conditions set forth in the initial notice shall occur, the Corporation shall promptly give written notice to each Holder of Preferred Shares of such material change.

 

6.     Voting.

 

6.1     Generally. Unless otherwise provided by any Federal or State law, the Corporation’s Certificate of Incorporation, the Corporation’s Bylaws or this Section 6 hereof, the Holders shall not have the right to vote for the election of directors or on any other matters presented to the Corporation’s stockholders for action by their written consent or at any annual or special meeting of stockholders. On any matter on which the Holders are entitled by any Federal or State law, under the Corporation’s Certificate of Incorporation or Bylaws or pursuant to this Section 6 hereof to vote separately as a class, each such Holder shall be entitled to one vote for each Preferred Share held and such matter shall be determined by a majority of the Preferred Shares voting on such matter. Notwithstanding the foregoing, this Certificate of Designation shall not be amended, without the consent of each adversely affected Holder, so as to alter the terms of the Preferred Shares of any Holder in a manner different from the other Holders with respect to their Preferred Shares or otherwise specifically targeting and materially and adversely affecting any such Holder with respect to its Preferred Shares in a manner different from the other Holders with respect to their Preferred Shares. The foregoing sentence may not be amended without the consent of each Holder of Preferred Shares.

 

6.2     Waivers. Any provision of this Certificate of Designation may be waived with respect to a given party in a written instrument executed by the waiving party.

 

  

7.     Redemption and Mandatory Cancellation.

 

7.1     Redemption at the Option of the Corporation.

 

(a)     At any time and from time to time on or after the Date of Issuance, the Corporation shall have the right to redeem, out of funds legally available therefor, all or any portion of the then outstanding Preferred Shares for a price per share equal to the Liquidation Value for such Preferred Share (the “Series K Redemption Price”) by giving written notice thereof (a “Series K Redemption Notice”) to each Holder of Preferred Shares to be redeemed. Except as set forth in Section 7.3, to the extent the Corporation does not elect to redeem all of the then outstanding Preferred Shares, the Corporation shall redeem Preferred Shares from each Holder on a pro rata basis based on the total number of Preferred Shares held.

 

(b)     Any such Series K Redemption shall be effective upon the Corporation’s payment to each Holder of redeemed Preferred Shares of the Series K Redemption Price in respect of such Preferred Shares, which payment shall occur not more than sixty (60) days following delivery of the Series K Redemption Notice, regardless of whether a Holder surrenders for cancellation its certificate, if any, representing such Preferred Shares.

 

(c)     Upon the payment of the Series K Redemption Price in respect of any redeemed Preferred Shares, such Preferred Shares shall be cancelled and retired as authorized and issued shares of capital stock of the Corporation.

 

7.2     Limitations on Redemption. Any redemption of Preferred Shares pursuant to Section 5 or this Section 7 (a “Series K Redemption”) shall be payable out of any cash or surplus available therefor under applicable Delaware law, and if there is not a sufficient amount of cash or surplus available, then out of the remaining assets of the Corporation available therefor under applicable Delaware law (valued at the fair market value thereof on the date of payment, as determined by the Board). Notwithstanding anything to the contrary herein, the Corporation shall not be permitted or required to redeem any Preferred Shares for so long as such Series K Redemption would result in an event of default under: (x) that certain Term Loan Agreement, dated as of February 19, 2014, by and among the Corporation, the lenders party thereto, and Medley Capital Corporation, as administrative agent for the lenders party thereto, as amended from time to time; (y) that certain Loan and Security Agreement, dated as of April 25, 2014, by and among the Corporation, BioLogical Illumination, LLC, the financial institutions from time to time party thereto as lenders, and ACF FINCO I LP, as assignee of FCC, LLC, as amended from time to time (together, (x) and (y), the “Credit Facilities”); or (z) any amendments or restatements of, supplements to, or new facility or facilities entered into in replacement of, the Credit Facilities.

 

  

7.3     Special Redemption Event.

 

(a)     If the Special Redemption Date shall have occurred and any holder of Series J Preferred Stock has delivered notice to the Corporation requesting redemption of any of its Series J Preferred Stock in accordance with the provisions of Section 5(d) of the Series J Certificate of Designation, the Corporation shall (i) redeem all of the outstanding Preferred Shares for an amount per share in cash equal to the Series K Redemption Price out of cash and cash equivalents available to the Corporation to the fullest extent permitted by Delaware law governing distributions to stockholders, and (ii) if less than all of the Preferred Shares have been redeemed pursuant to the immediately preceding clause (i), then, to the fullest extent that further redemptions would not be prohibited by Delaware law governing distributions to stockholders but cash or cash equivalents are not immediately available therefor, the Corporation shall ratably redeem the maximum number of Preferred Shares that have not been redeemed pursuant to the immediately preceding clause (i) (hereinafter, the “Remaining Shares”) that it may redeem consistent with such Delaware law governing distributions to stockholders in exchange for one or more non-interest bearing notes, substantially in the form attached hereto as Exhibit A, which shall be due and payable in full 180 days following the redemption date (each, a “Conversion Note”) payable in the principal amount equal, with respect to the Conversion Note or Notes issuable to each Holder, to the aggregate Series K Redemption Price applicable to the Remaining Shares of such Holder so redeemed (the “Note Conversion Event”) and which Conversion Note shall be senior in right of repayment to the Conversion Note described in Section 5 of the Series J Certificate of Designation; provided, that for so long as any Conversion Notes are outstanding, the Corporation shall not, and shall not cause or permit any of its Subsidiaries to, make any distributions to stockholders other than distributions made pursuant to this Section 7.3 (and such limitation shall be included as a covenant in each Conversion Note), and it shall be a breach of this Section 7.3 if a Holding Company (as defined in the Series J Certificate of Designation) makes any distributions in any manner that would constitute a breach of this Section 7.3 if done by the Corporation or any of its Subsidiaries. At the time of the initial Note Conversion Event, the Corporation shall ratably redeem the maximum number of shares of the Remaining Shares that it may redeem in exchange for Conversion Notes in the amounts and on the terms set forth in the immediately preceding sentence, and thereafter shall ratably redeem the maximum number of shares of the Remaining Shares as soon as it may lawfully do so under Delaware law governing distributions to stockholders (for the Liquidation Amount using funds legally available therefor, if immediately available, or otherwise by exchange for additional Conversion Notes) (each such subsequent redemption is referred to as a Note Conversion Event). On the date of the applicable Note Conversion Event, the applicable Remaining Shares shall be redeemed for the Series K Redemption Price and/or exchanged for Conversion Notes, as applicable, for all purposes, notwithstanding the failure of any Holder thereof to surrender any certificate representing such shares on or prior to such date.

 

(b)     For the avoidance of doubt and notwithstanding anything to the contrary, the redemption rights of the Holders pursuant to this Section 7.3 shall be senior in all respects to the redemption rights of the holders of Series J Preferred Stock set forth in Section 5 of the Series J Certificate of Designation.

 

  

7.4     Mandatory Cancellation.

 

(a)     (i) All of the Preferred Shares issued to Pegasus Partners IV, L.P. (“Pegasus Fund IV” and such shares the “Initial Pegasus Preferred Shares”) in connection with the securing of an appeal bond (the “Appeal Bond”) by the Corporation and Pegasus Fund IV in support of the Corporation’s appeal of the Order Granting Plaintiff’s Motion for Partial Summary Judgment Under its First Cause of Action for Violation of the Florida Securities and Investment Protection Act, dated August 27, 2014 (the “Appeal”) and (ii) all of the Preferred Shares issued to Holders that elect to participate in the contemplated rights offering (“Rights Offering Preferred Shares”), shall be subject to cancellation for no additional consideration in accordance with the terms of this Section 7.4.

 

(b)     Promptly following notice to the Corporation by the issuer of the Appeal Bond of any draws upon the Appeal Bond, the Corporation shall provide each Holder of Rights Offering Preferred Shares with prompt written notice (a “Draw Notice”) of its obligation to fund the portion of the Appeal Bond corresponding to the Series K Redemption Price of the Rights Offering Preferred Shares purchased by such Holder, which notice shall include wire transfer or other payment instructions. Notwithstanding anything herein to the contrary, the Corporation shall cancel for no additional consideration all Rights Offering Preferred Shares held by Holders that fail to satisfy their obligation to fund their portion of the Appeal Bond within ten (10) Business Days following delivery by the Corporation of the Draw Notice, to the extent of such failure to fund. In the event that any Holders of Rights Offering Preferred Shares fund their portion of the Appeal Bond in compliance with this Section 7.4(b) but such funding occurs after Pegasus Fund IV has reimbursed the issuer of the Appeal Bond for draws upon the Appeal Bond, the Corporation shall use its best efforts to apply such funds to the Appeal Bond and to reimburse Pegasus Fund IV for any amounts paid as reimbursement to the issuer of the Appeal Bond and to thereafter cancel the appropriate number of Initial Pegasus Preferred Shares in accordance with the first sentence of Section 7.4(d).

 

(c)     Following the release or satisfaction in full of the commitments under the Appeal Bond, the Corporation shall cancel for no additional consideration all of the Rights Offering Preferred Shares held by each Holder except an amount of Preferred Shares equal to the product of (x) the number of the Rights Offering Preferred Shares held by such Holder and (y) a fraction, the numerator of which is the aggregate amount of payments made by such Holder in accordance with Section 7.4(b) and the denominator of which is the aggregate Series K Redemption Price of the Rights Offering Preferred Shares held by such Holder, rounded down to the nearest whole Preferred Share; provided, that no such cancellation of Rights Offering Preferred Shares shall occur unless and until the Appeal Bond has been fully drawn or the remaining commitments thereunder fully released.

 

(d)     Subject to the last sentence of Section 7.4(b), following the release or satisfaction in full of the commitments under the Appeal Bond, the Corporation shall cancel for no additional consideration all of the Initial Pegasus Preferred Shares except an amount of Preferred Shares equal to the product of (x) the number of Initial Pegasus Preferred Shares and (y) a fraction, the numerator of which is the aggregate amount of payments made by Pegasus Fund IV as reimbursement to the issuer of the Appeal Bond for draws upon the Appeal Bond and the denominator of which is the aggregate Series K Redemption Price of the Initial Pegasus Preferred Shares, rounded down to the nearest whole Preferred Share; provided, that no such cancellation of Initial Pegasus Preferred Shares shall occur unless and until the Appeal Bond has been fully drawn or the remaining commitments thereunder fully released.

 

  

(e)     The Corporation shall cancel for no additional consideration an aggregate number of the Initial Pegasus Preferred Shares equal to the quotient obtained by dividing (i) the aggregate amount that is actually recovered by Pegasus Fund IV under the Corporation’s insurance policy, net of any taxes payable in respect thereof and the reasonable costs and expenses incurred in obtaining such recovery (including any increase in insurance premiums related to such recovery), by (ii) the Series K Redemption Price.

 

(f)     If the Appeal Bond is cancelled and released without being drawn upon, the Corporation shall cancel for no additional consideration all of the issued and outstanding Initial Pegasus Preferred Shares and Rights Offering Preferred Shares.

 

8.     Reissuance of Series K Preferred Stock. Any Preferred Shares that are redeemed, converted or otherwise acquired by the Corporation or any Subsidiary shall be cancelled and retired as authorized and issued shares of capital stock of the Corporation and no such Preferred Shares shall thereafter be reissued, sold or Transferred.

 

9.     Transfers.

 

(a)      Preferred Shares may not be Transferred by any Holder, except to a Permitted Transferee of such Holder, without the prior written consent of the Corporation.

 

(b)     All Transfers of Preferred Shares must also be made in accordance with the Securities Act, and applicable state securities laws. Any attempted Transfer of Preferred Shares in violation of this Section 9 shall be null and void ab initio.

 

(c)     Notwithstanding any actual or purported Transfer of Preferred Shares, the Person to whom Preferred Shares are originally issued shall remain directly and primarily liable to fund its portion of the Appeal Bond when, if and as drawn.

 

10.     Notices. Except as otherwise provided herein, all notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent (a) to the Corporation, at its principal executive offices and (b) to any stockholder, at such stockholder's address at it appears in the stock records of the Corporation (or at such other address for a stockholder as shall be specified in a notice given in accordance with this Section 10).

 

11.     Amendment and Waiver. No provision of this Certificate of Designation may be amended, modified or waived except by an instrument in writing executed by the Corporation and the Holders of at least a majority of the issued and outstanding Preferred Shares, and any such written amendment, modification or waiver will be binding upon the Corporation and each Holder; provided, further, that no amendment, modification or waiver of the terms or relative priorities of the Series K Preferred Stock may be accomplished by the merger, consolidation or other transaction of the Corporation with another corporation or entity unless the Corporation has obtained the prior written consent of the holders in accordance with this Section 11.

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS WHEREOF, this Corporation has caused this Certificate of Designation to be duly executed on its behalf by the undersigned as of September 11, 2015.

 

	LIGHTING SCIENCE GROUP CORPORATION
	By:	/s/ Ed Bednarcik
	Name:	Ed Bednarcik
	Title:	Chief Executive Officer

 

Exhibit 10.1

 

PREFERRED STOCK SUBSCRIPTION AND SUPPORT AGREEMENT

 

THIS PREFERRED STOCK SUBSCRIPTION AND SUPPORT AGREEMENT (as may be amended or modified from time to time in accordance with the terms hereof, this “Agreement”) is entered into on September 11, 2015, by and among LIGHTING SCIENCE GROUP CORPORATION, a Delaware corporation (the “Company”), Pegasus Partners IV, L.P. (“Pegasus Fund IV”) and the person(s) (the “Purchasers”) listed on the Schedule of Purchasers attached hereto as Exhibit A (the “Schedule of Purchasers”).

 

WHEREAS, on September 11, 2013, the Company authorized a series of preferred shares designated the “Series J Convertible Preferred Stock” (“Series J Preferred Shares”), which are convertible into shares of common stock, $0.001 par value per share, of the Company (“Common Stock”);

 

WHEREAS, the terms and conditions of the Series J Preferred Shares are governed in accordance with the Amended and Restated Series J Certificate of Designation attached hereto as Exhibit B (the “Series J Certificate of Designation”);

 

WHEREAS, the Company desires to sell to each Purchaser, and each Purchaser desires to buy from the Company, the number of units of the Company’s securities (the “Series J Securities”) set forth opposite such Purchaser’s name on the Schedule of Purchasers at a purchase price of $1,000 per Series J Security. Each Series J Security shall consist of (i) one Series J Preferred Share and (ii) a warrant to purchase 2,650 shares of Common Stock (the “Series J Warrants”) on the terms set forth in the form of warrant attached hereto as Exhibit C;

 

WHEREAS, the Company is authorized to sell: (i) 15,000 Series J Securities in a series of transactions commencing September 11, 2015 and ending on the earlier of (A) the sale of 15,000 Series J Securities to purchasers designated by the Chief Executive Officer, Chief Financial Officer or Secretary of the Company or (B) March 31, 2016 and (ii) such number of additional Series J Securities as are purchased pursuant to Section 14 of each of the Series H Certificate of Designation, the Series I Certificate of Designation and the Series J Certificate of Designation as a result of the sale of the Series J Securities to be issued as described in clause (i) above (such issuances described in clause (i) and (ii) above being collectively referred to as the “Series J Securities Offering”);

 

WHEREAS, the Company is, together with several of its Affiliates, equity holders and other Persons, a defendant in securities litigation brought by Geveran Investments Limited, and on August 28, 2014, an Order Granting Plaintiff’s Motion for Partial Summary Judgment Under its First Cause of Action for Violation of the Florida Securities and Investment Protection Act (the “August 28 Order”) was granted by the Circuit Court of the Ninth Judicial Circuit in and for Orange County, Florida;

 

WHEREAS, the Company desires to post an appeal bond in support of its appeal of the August 28 Order immediately upon entry thereof, and Pegasus Fund IV has agreed to assist the Company in securing an appeal bond in the amount of up to $25,000,000 (the “Appeal Bond”) on the terms set forth in the General Indemnity Agreement and related side letter attached hereto as Exhibit D (the “Appeal Bond Agreements”);

 

  

WHEREAS, in consideration of Pegasus Fund IV’s entry into the Appeal Bond Agreements and as security for the potential payments to be made to the issuer of the Appeal Bond for draws upon the Appeal Bond, subject to the conditions set forth in this Agreement, the Company desires to issue Pegasus Fund IV units of the Company’s securities (the “Series K Securities”), with each such Series K Security consisting of (i) one share of a newly designated series of preferred stock designated the “Series K Preferred Stock” (a “Series K Preferred Share”), the terms and conditions of which shall be governed in accordance with the Series K Certificate of Designation attached hereto as Exhibit E (the “Series K Certificate of Designation”), and (ii) a warrant to purchase 735 shares of Common Stock (the “Series K Warrants”) on the terms set forth in the form of warrant attached hereto as Exhibit F; and

 

WHEREAS, certain capitalized terms as used herein shall have the meaning set forth in Section 6(a) hereof.

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto hereby agree as follows:

 

1.     Purchase and Sale of Purchased Series J Securities.

 

(a)     Payment for Securities; Delivery of Certificates. Subject to the provisions of this Agreement, and relying upon the representations, warranties and covenants set forth herein, each Purchaser hereby agrees to purchase from the Company, and the Company hereby agrees to sell to each Purchaser, the number of Series J Securities set forth opposite such Purchaser’s name on the Schedule of Purchasers (the “Purchased Series J Securities” and together with the Purchased Series K Securities (as defined in Section 5(b)), the “Purchased Securities”), free and clear of all Liens (other than restrictions on transfer or Liens under applicable state and federal securities Laws and, with respect to the Purchased Series J Shares (as defined below), pursuant to the Series J Certificate of Designation), for a purchase price of $1,000 per Series J Security. The aggregate consideration payable by each Purchaser shall equal to the amount set forth opposite such Purchaser’s name on the Schedule of Purchasers (the “Purchase Price”), which shall be paid in United States dollars.

 

(b)     Closing.

 

(i)     The purchase, sale and issuance of the Purchased Series J Securities shall take place at one or more closings (each of which is referred to in this Agreement as a “Closing”). The initial closing (the “Initial Closing”) shall occur concurrently with the execution hereof. Subject to the terms and conditions of this Agreement, the Company may sell and issue Series J Securities at a price per Series J Security no less than $1,000 at one or more subsequent closings (each, a “Subsequent Closing”), to such Persons (the “Additional Purchasers”) as may be approved by the Company. All such sales made at any Subsequent Closing shall be made on the terms and conditions set forth in this Agreement, the representations and warranties of the Company set forth in Section 2 hereof (and Schedule 2(d)) shall speak as of such Subsequent Closing, and the representations and warranties of the Additional Purchasers in Section 3 hereof shall speak as of such Subsequent Closing. The Schedule of Purchasers may be amended by the Company without the consent of the Purchasers to include any Additional Purchasers upon the execution by such Additional Purchasers of a counterpart signature page hereto. Any Series J Securities sold pursuant to this Section 1(b)(i) shall be deemed to be “Purchased Series J Securities” for all purposes under this Agreement and any Additional Purchasers thereof shall be deemed to be “Purchasers” for all purposes under this Agreement. Such Persons shall, upon execution and delivery of a signature page hereto, become parties to, and be bound by, this Agreement without the need for an amendment to this Agreement except to add such Person’s name to the Schedule of Purchasers, and shall have the rights and obligations hereunder as of the date of the applicable Subsequent Closing.

 

  

(ii)     At the Closing: (i) each Purchaser shall transmit, or cause to be transmitted, by wire transfer of immediately available funds to the Company, in accordance with the wire transfer instructions provided by the Company, an amount equal to such Purchaser’s Purchase Price; (ii) the Company will deliver to each Purchaser certificates representing such Purchaser’s Series J Preferred Shares (the “Purchased Series J Shares” and together with the Purchased Series K Shares (as defined in Section 5(b)), the “Purchased Shares”) and Series J Warrants (the “Purchased Series J Warrants” and together with the Purchased Series K Warrants (as defined in Section 5(b)), the “Purchased Warrants”), registered in the name of each Purchaser in such denominations as such Purchaser shall request; (iii) each Purchaser shall deliver to the Company each of the Transaction Documents to which such Purchaser is a party, duly executed by such Purchaser, as applicable; (iv) the Company shall deliver or cause to be delivered to each Purchaser each of the Transaction Documents to which the Company and such Purchaser is a party, duly executed by each party thereto other than such Purchaser; and (v) the Company shall cause to be delivered to each Purchaser an opinion of Haynes and Boone, LLP, counsel for the Company, in the form attached hereto as Exhibit G.

 

(c)     Use of Purchase Price. The proceeds of the aggregate Purchase Price paid by all Purchasers shall be used by the Company for general corporate purposes.

 

2.      Company Representations and Warranties. The Company hereby represents and warrants to each Purchaser as of the date hereof (or, with respect to each Subsequent Closing, as of the date of such Subsequent Closing) as follows:

 

(a)     The Company is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware and has the requisite corporate power to carry on its business as presently conducted. The Company is duly qualified to do business as a foreign entity and in good standing in each state or country, if any, in which failure to be so qualified would, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect.

 

(b)     The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under the Transaction Documents and all other instruments, documents and agreements contemplated or required by the provisions of any of the Transaction Documents to be executed, delivered or carried out by the Company hereunder. The Purchased Securities have been duly authorized and, when issued, sold, and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be validly issued, fully paid and nonassessable.

 

  

(c)     This Agreement constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by the Company does not and will not conflict with, violate or cause a breach of any Contract to which the Company is a party or any Order to which the Company is subject.

 

(d)     Schedule 2(d) attached hereto sets forth, a true, complete and correct listing, as of September 10, 2015, of all of the Company’s outstanding (i) shares of Common Stock and (ii) securities convertible into or exchangeable for shares of Common Stock (the “Derivative Securities”), including the applicable exercise price of such Derivative Securities, other than any Derivative Securities issued pursuant to the Company’s Amended and Restated Equity-Based Compensation Plan or the Company’s 2011 Employee Stock Purchase Plan (the “Management Equity”). Except as set forth in Schedule 2(d) and except for any Management Equity, the Company has no other outstanding equity securities.

 

(e)     (i) As of its respective filing date, the Form 10-K filed by the Company with the SEC on March 31, 2015 and the Form 10-Q filed by the Company with the SEC on August 12, 2015 (such filings, collectively, the “Company SEC Documents”) complied in all material respects with the applicable requirements of the 1933 Act, the 1934 Act, and the Sarbanes-Oxley Act of 2002, as the case may be, including, in each case, the rules and regulations promulgated thereunder.

 

(ii)     Except to the extent that information contained in the Company SEC Documents has been revised or superseded by a document the Company subsequently filed with the SEC, the Company SEC Documents 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, not misleading.

 

(iii)     The financial statements (including the related notes thereto) included in the Company SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the dates thereof and their respective consolidated results of operations and cash flows for the periods then ended, all in accordance with GAAP and the applicable rules and regulations promulgated by the SEC. Since August 12, 2015, the Company has not made any change in the accounting practices or policies applied in the preparation of its financial statements, except as required by GAAP, the rules of the SEC or policy or applicable Law.

 

  

(iv)     Except as set forth on Schedule 2(e)(iv) attached hereto, subsequent to the filing of the Company SEC Documents with the SEC, there has been no material and adverse change or development, or event involving such a prospective change, in the condition, business, properties or results of operations of the Company and its Subsidiaries.

 

(f)     Subject to the accuracy of Purchasers’ representations and warranties in Section 3, the offer and sale of the Purchased Securities by the Company to each Purchaser pursuant to and in the manner contemplated by this Agreement will be exempt from the registration requirements of the 1933 Act.

 

(g)     The Company agrees and acknowledges that the Purchased Securities to be acquired by LSGC Holdings III LLC, Pegasus Fund IV or any of their Affiliates pursuant to this Agreement are subject to the Registration Rights Agreement and that all Conversion Shares issuable to such Purchasers shall be deemed “Registrable Securities” pursuant to the Registration Rights Agreement.

 

(h)     Except to the extent waived or otherwise cured in accordance with the terms thereof, the Company has complied in all material respects with the covenants set forth in (i) that certain Term Loan Agreement by and among the Company, the lenders party thereto, and Medley Capital Corporation, as administrative agent for the lenders party thereto, as amended from time to time, and (ii) that certain Loan and Security Agreement by and among the Company, BioLogical Illumination, LLC, the financial institutions from time to time party thereto as lenders, and ACF FINCO I LP, as assignee of FCC, LLC (d/b/a First Capital), as amended from time to time (collectively, the “Debt Facilities”). Immediately prior to and immediately following the consummation of the transactions contemplated hereby, the Company will be in compliance in all material respects with the covenants set forth in the Debt Facilities.

 

3.      Purchaser Representations and Warranties. Each Purchaser, severally and not jointly, hereby represents and warrants with respect to itself to the Company as follows:

 

(a)     Such Purchaser has the full power and authority to execute and deliver this Agreement and to perform all of its obligations hereunder and thereunder, and to purchase, acquire and accept delivery of the Purchased Securities.

 

(b)     The Purchased Securities are being acquired for such Purchaser’s own account and not with a view to, or intention of, distribution thereof in violation of the 1933 Act, or any applicable state securities Laws.

 

(c)     Such Purchaser is knowledgeable in financial matters and is able to evaluate the risks and benefits of an investment in the Purchased Securities. Such Purchaser understands and acknowledges that such investment is a speculative venture, involves a high degree of risk and is subject to complete risk of loss. Such Purchaser has carefully considered and has, to the extent such Purchaser deems necessary, discussed with such Purchaser’s professional legal, tax, accounting and financial advisers the suitability of its investment in the Purchased Securities.

 

  

(d)     Such Purchaser is able to bear the economic risk of its investment in the Purchased Securities for an indefinite period of time because the Purchased Securities have not been registered under the 1933 Act and, therefore, cannot be sold unless subsequently registered under the 1933 Act or an exemption from such registration is available. Such Purchaser: (i) understands and acknowledges that the Purchased Securities being issued to such Purchaser have not been registered under the 1933 Act, nor under the securities Laws of any state, nor under the Laws of any other country and (ii) recognizes that no public agency has passed upon the accuracy or adequacy of any information provided to such Purchaser or the fairness of the terms of its investment in the Purchased Securities.

 

(e)     Such Purchaser has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of the Purchased Securities and has had full access to such other information concerning the Company as has been requested.

 

(f)     This Agreement constitutes the legal, valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, and the execution, delivery and performance of this Agreement by such Purchaser does not and will not conflict with, violate or cause a breach of any Contract to which such Purchaser is a party or any Order to which such Purchaser is subject.

 

(g)     Such Purchaser became aware of the offering of the Purchased Securities other than by means of general advertising or general solicitation.

 

(h)     Such Purchaser is an “accredited investor” as that term is defined under the 1933 Act and Regulation D promulgated thereunder, as amended by Section 413 of the Private Fund Investment Advisers Registration Act of 2010 and any applicable rules or regulations or interpretations thereof promulgated by the SEC or its staff.

 

(i)     Such Purchaser acknowledges that the certificates for the Purchased Shares will contain a legend substantially as follows:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.”

 

Subject to any lock-up or other similar agreement that may apply to the Purchased Shares as may be specifically agreed to with an applicable Purchaser, the requirement that the Purchased Shares contain the legend set forth in clause (i) above shall cease and terminate when such shares are transferred pursuant to Rule 144 promulgated under the 1933 Act. Upon the consummation of an event described in the immediately preceding sentence, the Company, upon surrender of certificates containing such legend, shall, at its own expense (without the need for any opinion of counsel for a Purchaser), deliver to the holder of any such securities as to which the requirement for such legend shall have terminated, one or more new certificates evidencing such securities not bearing such legend.

 

  

(j)     Each Purchaser holding 20% or more of the Company’s voting equity securities (as used in Rule 506(d)(1) of the 1933 Act) represents that neither (i) such Purchaser, (ii) any of its directors, executive officers, other officers that may serve as a director or officer of any company in which it invests, general partners or managing members, nor (iii) any beneficial owner of the Company’s voting equity securities (in accordance with Rule 506(d) of the 1933 Act) held by such Purchaser is subject to any Disqualification Event, except for Disqualification Events covered by Rule 506(d)(2) or (d)(3) under the 1933 Act and disclosed reasonably in advance of the Closing in writing in reasonable detail to the Company.

 

4.      Additional Agreements.

 

(a)     Purchaser Covenant. Each Purchaser agrees, severally and not jointly, not to make any sale, transfer or other disposition of the Purchased Securities in violation of the 1933 Act, the 1934 Act, the rules and regulations promulgated thereunder or any applicable securities Laws.

 

(b)     Tax Provision. The Company and each Purchaser intend that for U.S. federal, state and local income tax purposes, the Purchased Securities will be treated as equity.

 

(c)     Terms of the Preferred Shares. Each of the parties hereto acknowledges that the Series J Preferred Shares shall have the powers, preferences and rights, and be subject to the qualifications, limitations or restrictions set forth in the Series J Certificate of Designation, and the Series K Preferred Shares shall have the powers, preferences and rights, and be subject to the qualifications, limitations or restrictions set forth in the Series K Certificate of Designation.

 

(d)     Certain Actions. Promptly following the date hereof, the Company shall take all actions required to promptly prepare and file any required notice of exempt offering of securities, including a Form D, with the SEC pursuant to the 1933 Act and/or other comparable form with state securities regulators with respect to any applicable “blue sky” laws, in each such case, with respect to the transactions contemplated hereby.

 

(e)      U.S. Real Property Holding Corporation Status. So long as any Purchaser beneficially owns any Purchased Shares or any shares of Common Stock issued upon conversion of Series J Purchased Shares or upon exercise of the Purchased Warrants, the Company shall not become a U.S. real property holding corporation within the meaning of Section 897 of the Code.

 

  

(f)     Preemptive Rights.

 

(i)     Promptly following consummation of the transactions contemplated by clause (i) of the definition of “Series J Securities Offering” the Company shall deliver an Issuance Notice (as defined in the Certificates of Designation) to the holders of the Company’s outstanding shares of Series H Convertible Preferred Stock, the holders of the Company’s outstanding shares of Series I Convertible Preferred Stock and the holders of the Company’s outstanding Series J Preferred Shares and each such holder shall thereafter have the right, in accordance with Section 14 of the Certificates of Designation (as applicable) to purchase at least a “pro rata share” (as such term is defined in the applicable Certificate of Designation) of the aggregate amount of Series J Securities issued pursuant to clause (i) of the definition of “Series J Securities Offering,” (such offering, the “Series J Preemptive Rights Offering”). For the avoidance of doubt, the Series J Preemptive Rights Offering shall take into account all Series J Securities issued pursuant to all Closings effected pursuant to Section 1(b) of this Agreement.

 

(ii)     Promptly following issuance of the Purchased Series K Securities, the Company shall deliver an Issuance Notice (as defined in the Certificates of Designation) to the holders of the Company’s outstanding shares of Series H Convertible Preferred Stock, the holders of the Company’s outstanding shares of Series I Convertible Preferred Stock and the holders of the Company’s outstanding Series J Preferred Shares and each such holder shall thereafter have the right, in accordance with Section 14 of the Certificates of Designation (as applicable) to purchase at least a “pro rata share” (as such term is defined in the applicable Certificate of Designation) of the aggregate amount of Series K Securities issued pursuant to Section 5(b) (such offering, the “Series K Preemptive Rights Offering” and together with the Series J Preemptive Rights Offering, the “Preemptive Rights Offerings”).

 

(iii)     Each Purchaser (i) hereby expressly and irrevocably waives any rights pursuant to the Certificates of Designation to purchase any Series J Securities or Series K Securities, as applicable, in connection with the Preemptive Rights Offerings with respect to the Series J Securities or Series K Securities purchased by it hereunder and (ii) hereby expressly agrees that the amount of Series J Securities or Series K Securities such Purchaser may acquire pursuant to any rights to acquire such securities under the Certificates of Designations shall be reduced by the amount of Series J Securities or Series K Securities purchased by it hereunder.

 

(g) Information Rights. For so long as a Purchaser continues to beneficially own, together with its Affiliates, in the aggregate, at least 10,000 Series J Preferred Shares (or the equivalent amount of Conversion Shares), during normal business hours, the Company shall provide to such Purchaser or its designated representative, to the extent not prohibited by Law or any applicable rules or regulations, with (1) reasonable access to customary information, access and inspection rights, including delivering to such Purchaser such financial, management and operating reports and information reasonably requested by such Purchaser, including all such information as required for customary reporting to the limited partners of such Purchaser’s Affiliates and for tax reporting purposes, (2) copies of all materials provided to the Company’s board of directors (“Board”) and (3) reasonable access during normal business hours to the officers of the Company with knowledge of the material business and affairs of the Company, including, without limitation, management personnel and compensation of employees, new products or new lines of business, significant research and development programs, proposed commencement or compromise of significant litigation, purchasing or selling or creation or loss of important trademarks, licenses or concessions; provided, however, that the Company shall not be required to violate any written obligation of confidentiality to which the Company is subject or to waive any privilege which it may possess in discharging their obligations pursuant to this Section 4(g). Such Purchaser hereby agrees that such access, information and inspection rights shall be conducted in a manner so as to not, and the Company’s obligations to respond thereto shall not, interfere unreasonably with the operations of the Company.

 

  

(h) Confidentiality. Each Purchaser, individually (and not jointly or jointly and severally), who receives any information from the Company, its officers, directors, representatives or Affiliates pursuant to any rights of such Purchaser pursuant to (x) Section 4(g) of this Agreement, (y) the Certificates of Designation, including, without limitation, in accordance with such Purchaser’s preemptive rights, consent rights, rights to demand or request information and (z) any other rights of such Purchaser to receive information in the capacity as a holder of Purchased Shares or Conversion Shares (collectively, the “Company Information”) agrees that it shall keep such Company Information confidential and shall not provide access to such Company Information to any other Person; provided, that a Purchaser may provide access to such Company Information (A) to its agents, employees, directors, officers, trustees, partners, Affiliates, attorneys, accountants, advisors, auditors, portfolio management services and investors having an obligation of confidentiality to such Purchaser in the ordinary course of such Purchaser’s business; (B) to prospective transferees or purchasers of any of the Purchased Shares held by such Purchaser; provided, that any such prospective transferee or purchaser shall have agreed to keep the same confidential in accordance with the provisions of this Section 4; (C) as may be required by Law, subpoena, judicial or administrative Order or similar legal process; provided, that such Purchaser shall notify the Company prior to disclosure if permitted by Law; (D) in connection with any litigation related to any Transaction Document or other agreement between such Purchaser or any of its Affiliates and the Company or any of its Affiliates or in connection with the exercise of any right or remedy under any such Transaction Document or agreement; and (E) as may be required in connection with the examination, audit or similar investigation of such Purchaser or as requested or required by any Governmental Body having jurisdiction over such Purchaser. The foregoing confidentiality restriction shall not apply to any Company Information that is in the public domain, becomes part of the public domain (other than due to a breach by such Purchaser of this Section 4), was within such Purchaser’s possession or developed by it prior to being furnished with such information as evidenced by Purchaser’s records, or becomes available to such Purchaser on a non-confidential basis from a source other than the Company.

 

  

5.     Agreements Relating to the Appeal Bond.

 

(a)     Appeal Bond Agreements. Within two (2) Business Days following the entry of the August 28 Order, Pegasus Fund IV agrees to enter into the Appeal Bond Agreements in form and substance reasonably acceptable to Pegasus Fund IV.

 

(b)     Series K Securities. Subject to but concurrently with the execution by Pegasus Fund IV of the Appeal Bond Agreements, the Company shall issue to Pegasus Fund IV that number of Series K Securities (the “Purchased Series K Securities”) equal to the quotient obtained by dividing (i) the aggregate amount of the bonds, undertakings, guarantees and/or contractual obligations underlying Pegasus Fund IV’s initial commitment with respect to the Appeal Bond by (ii) $1,000. All such Purchased Series K Securities issued to Pegasus Fund IV shall be free and clear of all Liens (other than restrictions on transfer or Liens under applicable state and federal securities Laws and pursuant to the terms of the Series K Certificate of Designation or the Series K Warrant). The Company shall deliver or cause to be delivered to Pegasus Fund IV certificate(s) evidencing the number of Series K Preferred Shares (the “Purchased Series K Shares”) and Series K Warrants (the “Purchased Series K Warrants”) calculated in accordance with this Section 5(b), registered in the name of Pegasus Fund IV in such denominations as Pegasus Fund IV shall request.

 

(c)     Rights Offering. As promptly as practical following entry of the August 28 Order, the Company shall use its reasonable best efforts to conduct a rights offering providing the holders of record of Common Stock and Derivative Securities (other than Management Equity) as of the close of business on a designated record date the right to purchase Series K Securities (the “Rights Offering”). The Series K Securities offered pursuant to the Rights Offering will be issued in exchange for a commitment from any exercising holder to fund an amount equal to the product obtained by multiplying (i) the number of Series K Securities to be acquired by such holder by (ii) $1,000. Such commitment shall be payable by any exercising holder when, as and if the Appeal Bond is drawn upon, as further described in the documents to be prepared and filed with the SEC in connection with the Rights Offering. The Company shall use its reasonable best efforts to file and have declared effective the registration statement relating to the Rights Offering as soon as reasonably practicable after the entry of the August 28 Order. The Rights Offering shall offer the right to purchase a pro rata share of the number of Series K Securities (if any) issued to Pegasus Fund IV pursuant to Section 5(b) of this Agreement (on a pro rata basis, based on such person’s fully-diluted Common Stock ownership). To the extent the consent of Pegasus Fund IV or any Purchaser would be required pursuant to the terms of any of the Certificates of Designation with respect to the Rights Offering, Pegasus Fund IV and such Purchaser hereby agrees to consent to the Rights Offering. Pegasus Fund IV shall not have, and hereby expressly and irrevocably waive on its own behalf and on behalf of its Affiliates, any right to participate in the Rights Offering and further agrees to not exercise any rights that Pegasus Fund IV or its Affiliates may receive pursuant to the Rights Offering.

 

6.      General Provisions.

 

(a)     Definitions. As used herein, the following terms shall have the following meanings:

 

“1933 Act” shall mean the Securities Act of 1933, as amended.

 

  

“1934 Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Additional Purchasers” shall have the meaning set forth in Section 1(b)(i).

 

“Affiliate” shall mean any Person which directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person or entity; provided, that for purposes of the definition of “Affiliate,” Purchaser shall not be deemed an “Affiliate” of the Company.

 

“Agreement” shall have the meaning set forth in the preamble.

 

“Appeal Bond” shall have the meaning set forth in the recitals.

 

“Appeal Bond Agreements” shall have the meaning set forth in the recitals.

 

“August 28 Order” shall have the meaning set forth in the recitals.

 

“Board” shall have the meaning set forth in Section 4(g).

 

“Business Day” shall mean any day other than a Saturday, Sunday or a day on which the banks in New York or Florida are authorized by Law to be closed; provided, that with respect to any notice period that is shorter than ten (10) Business Days and includes a Friday, such period shall be extended for one (1) additional Business Day.

 

“Bylaws” shall mean, when used with respect to a specified Person, the bylaws of a Person, as the same may be amended from time to time.

 

“Certificates of Designation” shall mean, collectively, the Series H Certificate of Designation, the Series I Certificate of Designation and the Series J Certificate of Designation.

 

“Closing” shall have the meaning set forth in Section 1(b)(i).

 

“Code” shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

 

“Common Stock” shall have the meaning set forth in the recitals.

 

“Company” shall have the meaning set forth in the preamble.

 

“Company Information” shall have the meaning set forth in Section 4(h).

 

“Company SEC Documents” shall have the meaning set forth in Section 2(e).

 

“Company Subsidiary” shall mean any Subsidiary of the Company.

 

  

“Contract” shall mean any legally binding contract, agreement, mortgage, deed of trust, bond, loan, indenture, lease, license, note, option, warrant, right, instrument, commitment or other similar document, arrangement or agreement, whether written or oral, together with all amendments, modifications and/or supplements thereof.

 

“Conversion Shares” shall mean shares of Common Stock or other securities issuable upon conversion of the Purchased Series J Shares or exercise of the Purchased Warrants.

 

“Derivative Securities” shall have the meaning set forth in Section 2(d).

 

“Disqualification Event” shall mean any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) through (viii) under the 1933 Act.

 

“GAAP” shall mean United States generally accepted accounting principles.

 

“Governmental Body” shall mean any government of any nation or any political subdivision or unit thereof, whether at the federal, state, territorial, provincial, county, municipal or any other level, and any agency, authority, regulatory body, board, branch, bureau, commission, court, arbitral body (public or private), department, instrumentality or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of, or pertaining to, government (including any supra-national bodies such as the European Union or the European Central Bank), whether located in the United States or abroad.

 

“Initial Closing” shall have the meaning set forth in Section 1(b)(i).

 

“Law” shall mean any treaty, statute, ordinance, code, rule, regulation, Order or other legal requirement enacted, adopted, promulgated, applied or followed by any Governmental Body.

 

“Lien” shall mean any mortgage, pledge, Lien (statutory or otherwise), security interest, hypothecation, conditional sale agreement, encumbrance or similar restriction or agreement.

 

“Management Equity” shall have the meaning set forth in Section 2(d).

 

“Material Adverse Effect” shall mean any event, change, effect, condition or contingency that has a material adverse effect on the business, assets, liabilities (including contingent liabilities), results of operations or financial condition of the Company and the Company Subsidiaries, taken as a whole, other than to the extent resulting from: (i) changes in general business or economic conditions affecting the industry generally in which the Company and the Company Subsidiaries operate, (ii) changes in national or international political or social conditions, including the engagement by the United States of America in hostilities, whether or not pursuant to a declaration of a national emergency or war, or any escalation thereof, or the occurrence of any military or terrorist attack upon the Unites States of America or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States of America, (iii) changes generally affecting financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index), (iv) changes in GAAP, or (v) changes in applicable Laws (including any changes in interpretations thereof), in each case in the foregoing clauses (i) through (v), inclusive, which do not disproportionately affect the Company or the Company Subsidiaries as compared to other similarly situated participants in the industry in which the Company and the Company Subsidiaries operate.

 

  

“Order” shall mean any order, injunction, judgment, decree, ruling, writ, assessment, mediation or arbitration award (whether temporary, preliminary or permanent).

 

“Pegasus Fund IV” shall have the meaning set forth in the preamble.

 

“Person” shall mean any individual, corporation, partnership, firm, limited liability company, joint venture, trust, association, unincorporated organization, group, joint stock company, Governmental Body or other entity.

 

“Preemptive Rights Offerings” shall have the meaning set forth in Section 4(f)(ii).

 

“Purchase Price” shall have the meaning set forth in Section 1(a).

 

“Purchased Securities” shall have the meaning set forth in Section 1(a).

 

“Purchased Series J Securities” shall have the meaning set forth in Section 1(a).

 

“Purchased Series J Shares” shall have the meaning set forth in Section 1(a).

 

“Purchased Series J Warrants” shall have the meaning set forth in Section 1(b)(ii).

 

“Purchased Series K Securities” shall have the meaning set forth in Section 5(b).

 

“Purchased Series K Shares” shall have the meaning set forth in Section 5(b).

 

“Purchased Series K Warrants” shall have the meaning set forth in Section 5(b).

 

 

“Purchased Shares” shall have the meaning set forth in Section 1(b)(ii).

 

“Purchased Warrants” shall have the meaning set forth in Section 1(b)(ii).

 

“Purchasers” shall have the meaning set forth in the preamble.

 

“Registration Rights Agreement” shall mean that certain Amended and Restated Registration Rights Agreement, dated as of January 23, 2009, by and between the Company and Pegasus Partners IV, L.P., as amended by that certain Amendment No. 1 to Amended and Restated Registration Rights Agreement, dated as of May 25, 2012, by and between the Company and Pegasus Partners IV, L.P.

 

“Rights Offering” shall have the meaning set forth in Section 5(c).

 

“Schedule of Purchasers” shall have the meaning set forth in the preamble.

 

“SEC” shall mean the Securities and Exchange Commission.

 

“Series H Certificate of Designation” shall mean the Amended and Restated Certificate of Designation governing the Company’s Series H Convertible Preferred Stock.

 

“Series I Certificate of Designation” shall mean the Amended and Restated Certificate of Designation governing the Company’s Series I Convertible Preferred Stock.

 

“Series J Certificate of Designation” shall mean have the meaning set forth in the recitals.

 

“Series J Preemptive Rights Offering” shall have the meaning set forth in Section 4(f)(i).

 

“Series J Preferred Shares” shall have the meaning set forth in the recitals.

 

“Series J Securities” shall have the meaning set forth in the recitals.

 

“Series J Warrants” shall have the meaning set forth in the recitals.

 

“Series K Certificate of Designation” shall have the meaning set forth in the recitals.

 

“Series K Preemptive Rights Offering” shall have the meaning set forth in Section 4(f)(ii).

 

  

“Series K Preferred Shares” shall have the meaning set forth in the recitals.

 

“Series K Securities” shall have the meaning set forth in the recitals.

 

“Series K Warrants” shall have the meaning set forth in the recitals.

 

“Subsequent Closing” shall have the meaning set forth in Section 1(b)(i).

 

“Subsidiary” shall mean (i) as to any Person, any other Person more than 50% of the shares of the voting stock, voting interests, membership interests or partnership interests of which are owned or controlled, or the ability to select or elect more than 50% of the directors or similar managers is held, directly or indirectly, by such first Person or one or more of its Subsidiaries or by such first Person and one or more of its Subsidiaries and/or (ii) any Person with respect to which the Company or a Company Subsidiary is a general partner or managing member.

 

“Transaction Documents” shall mean this Agreement, the schedules and exhibits hereto, the Series J Certificate of Designation, the Series K Certificate of Designation, the Purchased Warrants, the certificates evidencing the Purchased Shares, the Registration Rights Agreement and any certificate or other document required to be delivered by or on behalf of the Company or any Purchaser pursuant to this Agreement or in connection with the transactions contemplated by this Agreement.

 

(b)     Choice of Law. The Laws of the State of New York without reference to any conflict of Laws provisions thereof that would result in the application of the Law of a different jurisdiction, will govern all questions concerning the construction, validity and interpretation of this Agreement.

 

(c)     Amendment and Waiver. Except as expressly provided in Section 1(b)(i), neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument referencing this Agreement and signed by the Company, Pegasus Fund IV and the Purchasers holding a majority of the Purchased Series J Securities issued pursuant to this Agreement (excluding any of such shares that have been sold to the public or pursuant to Rule 144); provided, that Additional Purchasers purchasing Series J Securities in a Subsequent Closing may become parties to this Agreement in accordance with Section 1(b)(i) without any amendment of this Agreement pursuant to this paragraph or any consent or approval of any other Purchaser. Any such amendment, waiver, discharge or termination effected in accordance with this paragraph shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding (including securities into which such securities have been converted or exchanged or for which such securities have been exercised) and each future holder of all such securities. Each Purchaser acknowledges that by the operation of this paragraph, the holders of a majority of the shares of Common Stock issued or issuable upon conversion of the Series J Securities issued pursuant to this Agreement (excluding any of such shares that have been sold to the public or pursuant to Rule 144) will have the right and power to diminish or eliminate all rights of such Purchaser under this Agreement. No delay or failure of any Purchaser in exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof, nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any other right, power or remedy. The rights and remedies hereunder of each Purchaser are cumulative and not exclusive of any rights or remedies which it would otherwise have.

 

  

(d)     Counterparts. This Agreement may be executed in counterparts (including via facsimile or e-mail in .pdf format), each of which shall be an original and all of which shall constitute a single agreement.

 

(e)     Effectiveness. It is understood that this Agreement is not effective and binding upon any of the parties hereto until executed and delivered by each of the parties hereto.

 

(f)     Headings. The headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement.

 

(g)     Benefit of Agreement, Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and each Purchaser and their respective successors and assigns, heirs, executors and personal representative, as applicable, except that the Company shall not have the right to assign any of its rights under this Agreement without the prior written consent of each Purchaser. Notwithstanding the foregoing, the rights of each Purchaser set forth herein shall inure to the benefit of such Purchaser and its transferees. This Agreement is made solely for the benefit of the parties hereto and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person, and no other Person shall have any rights, interest or claims hereunder or otherwise be entitled to any benefits under or on account of this Agreement as a third-party beneficiary or otherwise.

 

(h)     Notices. Any and all notices or other communications required or permitted to be delivered hereunder shall be deemed properly delivered if (i) delivered personally, (ii) mailed by first class, registered or certified mail, return receipt requested, postage prepaid, (iii) sent by next day or overnight mail or delivery or (iv) sent by electronic mail, facsimile transmission or other electronic means of transmitting written documents (with a follow up copy under (iii) above), to the parties as set forth below:

 

If to the Company:

 

Lighting Science Group Corporation
1830 Penn Street

Melbourne, FL 32901
Attention: Philip J. Ragona, General Counsel
Tel: (321) 779-5520
Fax: (321) 779-5521
Email: phil.ragona@lsgc.com

 

  

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

 

Haynes and Boone, LLP
2323 Victory Avenue, Suite 700
Dallas, TX 75219
Attention: Ryan R. Cox, Esq.
Tel: (214) 651-5273
Fax: (214) 200-0534
Email: ryan.cox@haynesbooone.com

 

If to a Purchaser:

 

The address of such Purchaser as it appears on the Schedule of Purchasers.

 

Any party may change the name and address of the designee to whom notice shall be sent by giving written notice of such change to the other party. All notices or other communications to be, or otherwise, provided by a Purchaser or the Company must be sent to the Company or the Purchasers, respectively, in accordance with the procedures set forth in this Section 6(h) in order to be deemed properly delivered.

 

(i)     Entire Agreement. This Agreement, the Transaction Documents and all Exhibits and Schedules attached hereto or thereto constitute the entire agreement and understanding between the Company and the Purchasers and the final expression thereof and supersede any and all prior agreements and understandings, written or oral, formal or informal, between the Company and the Purchasers relating to the subject matter hereof and thereof.

 

(j)     Venue. Each of the parties hereto irrevocably consents to the exclusive jurisdiction and venue of any state or federal court located within New York, New York in connection with any matter based upon or arising out of this Agreement or the transactions contemplated hereby, agrees that process may be served upon them in any manner authorized by the Laws of the State of New York for such Persons and waives and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction, venue and process. Each party hereto hereby agrees not to commence any legal proceedings relating to or arising out of this Agreement or the transactions contemplated hereby in any jurisdiction or courts other than as provided herein.

 

(k)     WAIVER OF JURY TRIAL. EACH PURCHASER AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PURCHASER OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

 

  

(l)     Rules of Construction. Words such as “herein,” “hereunder,” “hereof” and the like shall be deemed to refer to this Agreement as a whole and not to any particular document or Article, Section or other portion in which such words appear. If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb). Any reference to any federal, state, local or foreign statute, Law or other legal regulation shall be deemed to also to refer to all rules and regulations promulgated thereunder. References herein to “$” shall be references to United States Dollars. The words “include” and “including” shall be deemed to mean “include, without limitation,” and “including, without limitation”.

 

(m)     Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable Law in any jurisdiction, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating any other provision of this Agreement. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement and the other Transaction Documents be consummated as originally contemplated to the greatest extent possible.

 

(n)     Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as, and the Company acknowledges that the Purchasers do not so constitute, a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group, and the Company shall not assert any such claim with respect to such obligations or the transactions contemplated by the Transaction Documents and the Company acknowledges that the Purchasers are not acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. The Company acknowledges and each Purchaser confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. A default by any Purchaser of its obligations pursuant to this Agreement shall not constitute a default by any other Purchaser under this Agreement and, except with respect to such defaulting Purchaser, shall not relieve the Company of any of its obligations to any other Purchaser under this Agreement. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents to which it is a party, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.

 

[Remainder of page intentionally left blank]

 

  

The parties hereto have executed this Agreement to be effective as of the date first written above.

 

	COMPANY:
	Lighting Science Group Corporation
	By:	/s/ Ed Bednarcik
		Name: Ed Bednarcik
		Title:   Chief Executive Officer

 

	PEGASUS FUND IV:
	Pegasus Partners IV, L.P.
	By:	PEGASUS INVESTORS IV, L.P.,
	its general partner
	By:	PEGASUS INVESTORS IV (GP), L.L.C.,
	its general partner

 

	By:	/s/ Daniel Stencel
	Name:	Daniel Stencel
	Title:	Chief Financial Officer

 

	PURCHASER:
	LSGC Holdings III LLC
	By:	PEGASUS PARTNERS V, L.P.,
	its sole member
	By:	PEGASUS INVESTORS V, L.P.,
	its general partner
	By:	PEGASUS INVESTORS V (GP), L.L.C.,
	its general partner

 

	By:	/s/ Daniel Stencel
	Name:	Daniel Stencel
	Title:	Chief Financial Officer

 

  

Exhibit A

 

Schedule of Purchasers

 

Name and Address	Number of Purchased Series J Securities	Purchase Price	Date of Closing
LSGC Holdings III LLC c/o Pegasus Capital Advisors, L.P. 99 River Road Cos Cob, CT 06807 Attn: Chief Financial Officer Fax: Email: dstencel@pcalp.com	10,000	$10,000,000	September 11, 2015

 

Exhibit 10.2

 

September 11, 2015

 

 

Cleantech Europe II (A) LP

Cleantech Europe II (B) LP

c/o Zouk Ventures Limited

100 Brompton Road

London, SW3 1 ER

United Kingdom 

Attention: Dominique Burgauer

 

 

RE:     Amendment No. 2 to Preferred Stock Subscription Agreement

 

Ladies and Gentlemen:

 

This Amendment No. 2 (this “Amendment”) is made to that certain Preferred Stock Subscription Agreement (as amended from time to time, the “Subscription Agreement”), dated as of September 25, 2012, by and among Lighting Science Group Corporation (the “Company”) Cleantech Europe II (A) LP (“Cleantech A”) and Cleantech Europe II (B) LP (“Cleantech B” and, together with Cleantech A, “Zouk”). This Amendment shall be effective with respect to Zouk upon execution by the Company and Zouk (the “Amendment Effective Date”).

 

In consideration of the premises and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.

Interpretation. All capitalized terms used herein shall have the meanings assigned thereto in the Subscription Agreement, unless otherwise defined herein.

 

2.

Amendments to Subscription Agreement.

 

a.

Additional Definitions. The definition of “Amendment Effective Date” in Section 6(a) of the Subscription Agreement is hereby amended and restated in its entirety to read as follows:

 

“Amendment Effective Date” shall have the meaning set forth in Amendment No. 2 to this Agreement dated September 11, 2015.

 

b.

Redemption. Section 4(e)(i) of the Subscription Agreement is hereby amended and restated in its entirety to read as follows:

 

(e)     Redemption.

 

i.

Subject to this Section 4(e), Purchasers and the Fund shall have the right to require the Company to redeem (a “Redemption”) all or a portion of the Purchasers’ Purchased Shares for an amount in cash equal to the Redemption Repurchase Amount of such Purchased Shares submitted for redemption, as follows:

  

 

A.

In the event that (1) Pegasus exercises its option to purchase the Membership Interests (as defined in the Pegasus Call Option) and Purchasers sell any Purchased Shares to Pegasus or any of its Affiliates pursuant to the Equity Put Option or (2) Purchasers sell any Purchased Shares to Pegasus or any of its Affiliates pursuant to any other transaction whereby at least 12,250 of Purchasers’ Purchased Shares are sold to Pegasus or any of its Affiliates, then Purchasers and the Fund shall have the right at any time after the Subsequent Redemption Trigger Date to exercise their right to a Redemption; provided, however, in the event that any Purchaser (1) sells any Purchased Shares to Pegasus or any of its Affiliates pursuant to the Equity Put Option or (2) sells any Purchased Shares to Pegasus or any of its Affiliates pursuant to any other transaction whereby at least 12,250 of Purchasers’ Purchased Shares are sold to Pegasus or any of its Affiliates, then during the Executory Period for any such sale transaction, Purchaser will not exercise its Redemption right under this Agreement.

 

B.

In the event that Pegasus exercises its option to purchase the Membership Interests and Purchasers do not exercise their right to sell any Purchased Shares to Pegasus or any of its Affiliates pursuant to the Equity Put Option, then Purchasers and the Fund shall have (I) the right within ten (10) Business Days after the Initial Redemption Date to exercise its right to a Redemption and (II) the right at any time after the Subsequent Redemption Trigger Date to exercise its right to a Redemption.

 

C.

In the event that Pegasus does not exercise its option to purchase the Membership Interests on or prior to the Initial Redemption Trigger Date, then Purchasers and the Fund shall have the right within ten (10) Business Days after the Initial Redemption Trigger Date to exercise its right to a Redemption.

 

c.

Definitions. Section 6(a) of the Subscription Agreement is hereby amended to insert the following definition:

  

“Equity Put Option” shall mean that certain Equity Put Option, dated as of September 11, 2015, by and among LSGC Holdings III LLC and Purchasers. 

 

“Executory Period” shall mean (i) with respect to a sale of Purchased Shares pursuant Section 4(e)(v)(A) of the Subscription Agreement, the period between the delivery of a Put Notice (as defined in the Equity Put Option) and the earlier of (A) the Closing Date (as defined in the Equity Put Option) and (B) termination of the proposed sale transaction for any reason other than a breach by the Purchasers and (ii) with respect to a sale of Purchased Shares pursuant Section 4(e)(v)(B) of the Subscription Agreement, the period between the execution and delivery by the Purchaser and Pegasus or any of its Affiliates of definitive documents for such sale transaction and the earlier of (A) the consummation of such sale transaction and (B) termination of the proposed sale transaction for any reason other than a breach by the Purchaser.

 

  

“Initial Redemption Trigger Date” shall mean March 27, 2017. 

 

“Pegasus Call Option” shall mean that certain Membership Interest Purchase Option, dated as of September 11, 2015, by and between Riverwood Capital Partners, L.P. and the LSGC Holdings III LLC, RW LSG Holdings, LLC and RW LSG Management Holdings, LLC. 

 

“Subsequent Redemption Trigger Date” shall mean September 27, 2018. 

 

d.

Assignment. Section 6(g) of the Subscription Agreement is hereby amended and restated in its entirety to read as follows:

  

Benefit of Agreement, Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and Purchaser and their respective successors and assigns, heirs, executors and personal representative, as applicable. The foregoing notwithstanding, neither party shall have the right to assign any of its rights under this Agreement without the prior written consent of the other party, and for the avoidance of doubt, no transferee of the Purchased Shares shall have any rights under this Agreement. This Agreement is made solely for the benefit of the parties hereto and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person other than any Person entitled to indemnity under Section 5 or as set forth above, and no other Person shall have any rights, interest or claims hereunder or otherwise be entitled to any benefits under or on account of this Agreement as a third-party beneficiary or otherwise. 

 

3.

Except as specifically amended herein, the Subscription Agreement shall continue in full force and effect in accordance with its original terms.

 

4.

This Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement. Delivery of executed counterparts of this Amendment by telecopy or by e-mail transmission of an Adobe portable document file (also known as a “PDF” file) shall be effective as originals. This Amendment shall be governed by the internal laws of the State of New York.

 

*     *     *     *     *

 

  

IN WITNESS WHEREOF, the parties hereto have executed this Amendment to be effective as of the Amendment Effective Date.

 

	COMPANY:
	Lighting Science Group Corporation
	By:	/s/ Ed Bednarcik
		Name:  Ed Bednarcik
		Title:    Chief Executive Officer
	ZOUK:
	Cleantech Europe II (a), L.P.
	By: Zouk Captial LLP, its manager
	By:	/s/ Samer Salty
		Name: Samer Salty
		Title:    CEO
	Cleantech Europe II (B), L.P.
	By: Zouk Captial LLP, its manager
	By:	/s/ Samer Salty
		Name: Samer Salty
		Title:    CEO

 

Exhibit 10.3

 

MUTUAL GENERAL RELEASE AGREEMENT

 

This MUTUAL GENERAL RELEASE AGREEMENT (the “Agreement”) is made and entered into as of September 11, 2015, by and between each of the undersigned (each, a “Party” and collectively, the “Parties”).

 

WHEREAS, RW LSG Holdings LLC (“RW LSG”) has previously, from time to time, purchased from Lighting Science Group Corporation, a Delaware corporation (the “Company”) various securities of the Company pursuant to various agreements (“Company Securities”), and certain affiliates of the RW LSG have from time to time performed certain services and entered into various other agreements, arrangements and understandings with the Company in addition to those entered into by RW LSG in its capacity as a holder of Company Securities (“Additional Arrangements”); and

 

WHEREAS, the Company has requested that RW LSG agree to amend the terms of certain of the Company Securities, and consent to certain other actions being taken by the Company, and in connection with and as a condition to such amendment and consent, the Parties have agreed to enter into this Agreement.

 

NOW THEREFORE, for and in consideration of the mutual covenants and promises expressed herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and subject to the terms and conditions set forth herein, the Parties hereby agree as follows:

 

1.     Release of Known and Unknown Claims.

 

(a)     Each Party, on behalf of itself and each and all of its affiliates (including without limitation (i) in the case of the Company, Pegasus Capital Advisors L.P. and its affiliates, and (ii) in the case of RW LSG, Riverwood Capital Partners, L.P. and its affiliates) and their current or former officers, directors, managers, partners, equityholders, employees, agents, successors and assigns (collectively, “Representatives”) hereby irrevocably and unconditionally releases and forever discharges (in such capacity, a “Releasor”) each other Party, such other Party’s predecessors and their respective Representatives (in such capacity, each, a “Releasee”), from any and all charges, complaints, claims, liabilities, controversies, damages, actions, causes of action, suits, rights, demands, costs, attorneys’ fees, losses, penalties, fines, and expenses of any nature whatsoever, known or unknown, suspected or unsuspected, including without limitation claims under any Federal, state or foreign securities laws and the rules and regulations promulgated thereunder (each a “Claim”) which such Releasor now has, owns or holds, or claims to have, own or hold, or at any time heretofore had, owned or held, or claimed to have, owned or held against any Releasee, in each case related to or arising from actions or omissions occurring prior to the date hereof and related to or arising from any Additional Arrangements or such Releasor’s or Releasee’s interests in the Company or any Company Securities (each a “Released Claim”).

 

(b)     Notwithstanding the foregoing, “Released Claim” shall not include any claim by a Releasor solely in its individual capacity as a director or officer of the Company or any of its Subsidiaries, and this Agreement shall in no way limit the rights or obligations of any director or officer of the Company or any of its subsidiaries with respect to the exercise by such individual of his or her fiduciary duties solely in such individual capacity, nor affect (i) any right of any director or officer of the Company or any of its subsidiaries solely in its individual capacity as such to insurance, indemnification, expense reimbursement or similar compensation and benefits, (ii) any Claim that is the subject of a currently pending litigation (including any litigation where the current judgment is subject to appeal), insurance, indemnification or expense reimbursement claim, or (iii) the rights and obligations of the parties under the Equity Purchase Agreement, dated September 11, 2015 between LSGC Holdings III LLC and RW LSG, and the Membership Purchase Option, dated September 11, 2015, between LSGC Holdings III LLC and Riverwood Capital Partners, L.P..

 

  

(c)     As used herein: “affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise; and “Person” means any individual, corporation, partnership, limited liability company, joint venture or other entity.

 

2.     Non-Interference Covenant. For a period of three years after the date hereof, each Party agrees not to, and to cause their respective affiliates (including without limitation (i) in the case of the Company, Pegasus Capital Advisors L.P. and its affiliates, and (ii) in the case of RW LSG, Riverwood Capital Partners, L.P. and its affiliates) not to, cause, induce or encourage any supplier, distributor, customer, consultant, vendor, retailer or other entity that performs a similar function for, or any other person or entity who has a material business relationship with, the other Party and its controlled affiliates, to terminate or materially adversely modify any such relationship, including without limitation by publicly making or publishing negative or disparaging remarks that are known or intended to have such effect.

 

3.     Right to Consult an Attorney. Each Party expressly acknowledges and agrees that it: (i) has been advised to consult with an attorney (who is familiar with the provisions of California Civil Code Section 1542) before signing this Agreement; (ii) has carefully read this Agreement in its entirety, (iii) fully understands the significance of all of the terms and conditions of this Agreement and has discussed them with its independent legal counsel, or has had a reasonable opportunity to do so; (iv) has had answered to its satisfaction by its independent legal counsel any questions it has asked with regard to the meaning and significance of any of the provisions of this Agreement; and (v) is signing this Agreement voluntarily and of its own free will and agrees to abide by all the terms and conditions contained herein.

 

4.

Waiver of California Civil Code Section 1542.

 

(a)     Each Party hereby expressly waives and relinquishes all rights and benefits afforded by California Civil Code Section 1542 and does so understanding and acknowledging the significance and consequences of such specific waiver of California Civil Code Section 1542.

 

(b)     Each Party acknowledges and understands that California Civil Code Section 1542 provides as follows:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

 

  

Thus, notwithstanding the provisions of Section 1542, each Party expressly acknowledges and agrees that the release set forth in Section 1 above is intended to include and does include in its effect, without limitation, all such claims which such Party does not know or suspect to exist at the time of the execution of this Agreement, and that this Agreement contemplates the extinguishment of those claims.

 

5.     Series H Preferred Stock Rights. The Company has been informed and provided a copy of that certain Membership Interest Purchase Option (the “Pegasus Call Option”), dated as of the date hereof, by and between Riverwood Capital Partners, L.P. and the LSGC Holdings III LLC (“Holdings III”). As additional consideration for entering into this Agreement, RW LSG agrees that if Holdings III has properly delivered an exercise notice pursuant to the Pegasus Call Option, RW LSG shall not exercise the “Optional Redemption Right” as defined in and pursuant to the Certificate of Designation of Series H Convertible Preferred Stock (as may be amended from time to time, the “Series H Certificate of Designation), or otherwise submit any shares of Series H Convertible Preferred Stock to the Company for “Redemption” as defined in and pursuant to the terms of the Series H Certificate of Designation, or initiate or exercise rights with respect to a “Control Event” as defined in and pursuant to the Series H Certificate of Designation, in each case from the time of such exercise through the Closing (as defined in the Pegasus Call Option) (unless such exercise is abandoned or terminated).

 

6.     Representations and Warranties of the Parties. Each Party hereby represents and warrants to the other Releasees that such Party has not assigned, transferred, subrogated, purported to assign any Released Claim.

 

7.     Non-Assistance. Each Party agrees that it will not, and will not cause any of its Representatives to, voluntarily promote, assist, or participate in any other Claims against the other Releasees with respect to the Company or the Company Securities unless compelled to do so by court order, duly authorized subpoena, or order of a valid governmental authority.

 

8.     No Admissions. Nothing contained herein is an admission of wrongdoing or liability by any of the Parties, their Representatives or the other respective Releasees.

 

9.     Miscellaneous.

 

(a)     This Agreement shall be binding on the Parties and, as applicable, upon their heirs, administrators, Representatives, executors, successors and assigns, and shall inure to their benefit and to that of their heirs, administrators, representatives, executors, successors and assigns.

 

(b)     The Parties acknowledge that the Parties and, if represented, their counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto.

 

(c)     As used in this Agreement, the term “or” shall be deemed to include the term “and/or” and the singular or plural number shall be deemed to include the other whenever the context so indicates or requires.

 

  

(d)     No waiver by any of the Parties of any term or provision of this Agreement shall be a waiver of any preceding, concurrent or succeeding breach of this Agreement or of any other term or provision of this Agreement. No waiver shall be binding on the part of, or on behalf of, any other party entering into this Agreement.

 

(e)     If any provision of this Agreement is deemed to be illegal, invalid, or unenforceable, such portion shall be deemed modified in such manner as to render such portion valid, legal and enforceable to the fullest extent permitted by law in such jurisdiction. The legality, validity and enforceability of the remaining parts shall not be affected.

 

(f)     Any amendment or modification of this Agreement must be in writing, and signed by each Party.

 

(g)     This Agreement, together with the documents expressly referenced herein, contains all of the terms and conditions agreed upon by the Parties regarding the subject matter of this Agreement. Any prior agreements, promises, negotiations or representations, either oral or written, relating to the subject matter of this Agreement are of no force or effect.

 

(h)     For the purpose of this Agreement, all communications provided for in this Agreement, shall be in writing and shall be deemed to have been duly given if delivered personally, if delivered by overnight courier service, or if mailed by registered mail, return receipt requested, postage prepaid, addressed to the respective addresses, sent via electronic mail to the respective email address or sent via facsimile to the respective facsimile numbers, as the case may be, as set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt; provided, however, that (i) notices sent by personal delivery, electronic mail or overnight courier shall be deemed given when delivered; (ii) notices sent by facsimile transmission shall be deemed given upon the sender’s receipt of confirmation of complete transmission, and (iii) notices sent by registered mail shall be deemed given two days after the date of deposit in the mail.

 

If to RW LSG Holdings, LLC, to:

 

c/o Riverwood Capital Management L.P.

70 Willow Road, Suite 100  

Menlo Park, CA 94025  

Attention: Jeffrey T. Parks  

Tel: (650) 618-7300

Fax:  (650) 618-7114  

Email: jeff@rwcm.com

 

with a copy (which shall not constitute notice or constructive notice) to:

 

Simpson Thacher & Bartlett LLP

2550 Hanover Street

Palo Alto, CA 94304

Attention: Kirsten Jensen

Tel: (650) 251-5000
Fax: (650) 251-5002

Email: kjensen@stblaw.com

 

  

If to the Company:

 

Lighting Science Group Corporation
1830 Penn Street
Melbourne, FL 32901
Attention: Philip J. Ragona, General Counsel
Tel: (321) 779-5520
Fax: (321) 779-5521
Email: phil.ragona@lsgc.com

 

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

 

Haynes and Boone, LLP
2323 Victory Avenue, Suite 700
Dallas, TX 75219
Attention: Ryan R. Cox
Tel: (214) 651-5273
Fax: (214) 200-0534
Email: ryan.cox@haynesboone.com

 

 

(i)     This Agreement and the rights, duties and obligations of the parties hereto shall be interpreted, construed, performed, and enforced in accordance with and shall be governed by the laws of the State of Delaware, without giving effect to its conflict of law provisions.

 

(j)     This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, all of which shall constitute one and the same instrument together. Delivery of an executed signature page to this Agreement by facsimile or other electronic transmission (including documents in Adobe PDF format) will be effective as delivery of a manually executed counterpart to this Agreement

 

 

*     *     *     *     *

 

 

IN WITNESS WHEREOF, the parties have executed this Mutual General Release Agreement on the dates set forth below.

 

 

 

	Lighting Science Group Corporation
	By:	/s/ Ed Bednarick
	Name:	Ed Bednarcik
	Title:	Chief Executive Officer
	RW LSG HOLDINGS LLC
	By: Riverwood Capital Management, L.P.,
	its Managing Member
	By: Riverwood Capital Management Ltd.,
	its General Partner
	By:	/s/ Thomas J. Smach
	Name:	Thomas J. Smach

Exhibit 10.4

 

 

 

 

September 11, 2015

 

 

Lighting Science Group Corporation

BioLogical Illumination, LLC

1830 Penn Street

Melbourne, Florida 32901

Attn.: Chief Financial Officer

Facsimile No.:      (321) 779-5521

 

 

Ladies and Gentlemen:

 

Reference is hereby made to that certain Loan and Security Agreement dated as of April 25, 2014 (as at any time amended, restated, supplemented or otherwise modified, the "Loan Agreement"), among LIGHTING SCIENCE GROUP CORPORATION, a Delaware corporation ("LSG"), BIOLOGICAL ILLUMINATION, LLC, a Delaware limited liability company ("BioLogical"; LSG and BioLogical are hereinafter referred to collectively as "Borrowers" and each individually as a "Borrower"), the various financial institutions from time to time party thereto as lenders (collectively, "Lenders") and ACF FINCO I LP, as assignee of FCC, LLC, in its capacity as agent for Lenders (together with its successors and assigns in such capacity, "Agent"). Each capitalized term used herein, unless otherwise defined herein, shall have the meaning ascribed to such term in the Loan Agreement.

 

Borrowers, Agent and Lenders desire to amend the Loan Agreement, on the terms and subject to the conditions hereinafter set forth.

 

NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby severally acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

 

The Loan Agreement is hereby amended as follows:

 

(a)     By deleting clause (b) from the definition of "Permitted Liens" set forth in Section 1 of the Loan Agreement and by substituting in lieu thereof the following:

 

(b)     deposits or pledges to secure (i) statutory obligations, (ii) surety or appeal bonds, or (iii) bonds for release of attachment, stay of execution or injunction; provided, that no deposit or pledge to secure a Geveran Appeal Bond shall constitute a Permitted Lien;

 

(b)     By adding the following definitions of "Geveran Appeal Bond", "Geveran Indemnitor", "Geveran Subordinated Creditor", "Geveran Surety", "Specified Appeal Bond Documents", "Specified Geveran Documents", "Specified Geveran Intercreditor Amendment", "Third Amendment", and "Third Amendment Date" to Section 1 of the Loan Agreement in alphabetical order:

 

  

"Geveran Appeal Bond" shall mean any bond posted in connection with the Geveran Case, including the Appeal Bond (as defined in the Second Amendment).

 

"Geveran Indemnitor" shall mean any obligor or indemnitor under a Geveran Appeal Bond.

 

"Geveran Subordinated Creditor" shall mean any Person that is a "Sponsor Affiliate" under (and as defined in) the Geveran Appeal Bond Rights Subordination Agreement or that otherwise is a holder of "Subordinated Obligations" (as defined in the Geveran Appeal Bond Rights Subordination Agreement).

 

"Geveran Surety" shall mean any surety with respect to a Geveran Appeal Bond.

 

"Specified Appeal Bond Documents" shall mean documentation executed in connection with the Order Entry (as defined in the Second Amendment) that is identical in form to the drafts of such documentation that are attached as Exhibit A to the Third Amendment, other than changes that solely consist of inserting the dates of such documents and confirming the final "Bond Amount" (as defined in such documentation).

 

"Specified Geveran Documents" shall mean the Specified Appeal Bond Documents, the Specified Geveran Intercreditor Amendment, the Geveran Appeal Bond Rights Subordination Agreement and the Second Lien Geveran Appeal Bond Rights Subordination Agreement.

 

"Specified Geveran Intercreditor Amendment" shall mean an agreement in the form attached as Exhibit D to the Third Amendment.

 

"Third Amendment" means that certain letter amendment to this Agreement dated the Third Amendment Date among Obligors, Agent and Lenders.

 

"Third Amendment Date" means September 11, 2015.

 

(c)     By deleting the definitions of "Certificates of Designation", "Change of Control", "Geveran Appeal Bond Rights", "Geveran Appeal Bond Rights Subordination Agreement" and "Second Lien Geveran Appeal Bond Rights Subordination Agreement" from Section 1 of the Loan Agreement and by substituting the following in lieu thereof, respectively:

 

"Certificates of Designation" means, collectively, the Certificates of Designation filed with the Delaware Secretary of State with respect to the Series H Preferred Shares of LSG, the Series I Preferred Shares of LSG, the Series J Preferred Shares of LSG and the Series J Preferred Shares of LSG, in each case as in effect on the Third Amendment Date.

 

"Change of Control" means (a) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of any Borrower or any other Obligor to any Person or group (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as in effect from time to time), other than as permitted in Section 8(a) hereof; (b) the liquidation or dissolution of any Borrower or any other Obligor or the adoption of a plan by the stockholders of any Borrower or any other Obligor relating to the dissolution or liquidation of such Borrower or such Obligor; (c) the acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as in effect from time to time), except for Sponsor, of beneficial ownership, directly or indirectly, of a greater share of the voting power of the total outstanding voting stock of any Borrower or any Guarantor or the board of directors of any Borrower than is held by the Sponsor at such time; (d) (i) Sponsor fails to (i) own and control, directly or indirectly, more than 35.0% of the equity interests of any Borrower having the right to vote for the election of members of the board of directors of such Borrower or (ii) own and control, directly or indirectly, more than 35.0% of the economic interests in respect of the equity interests of any Borrower; (e) the failure of LSG to own directly or indirectly one hundred percent (100.0%) of the voting power of the total outstanding voting stock of any other Obligor, except as expressly permitted under Section 8(a) hereof; or (f) a Change of Control as defined in any Certificate of Designation.

 

  

"Geveran Appeal Bond Rights" has the meaning set forth in Section 13(a)(xxvi).

 

"Geveran Appeal Bond Rights Subordination Agreement" shall mean an agreement in the form attached as Exhibit B to the Third Amendment.

 

"Second Lien Geveran Appeal Bond Rights Subordination Agreement" shall mean an agreement identical in form (other than changes that solely consist of inserting the date of such agreement) to the draft of such agreement attached as Exhibit C to the Third Amendment, as long as such agreement does not become effective prior to the effectiveness of the Geveran Appeal Bond Rights Subordination Agreement or the Specified Geveran Intercreditor Amendment.

 

(d)     By deleting the word "not" after the phrase "No Borrower will" in Section 8(a) of the Loan Agreement.

 

(e)     By deleting Section 8(c)(i)(D) of the Loan Agreement in its entirety and by substituting in lieu thereof the following:

 

(D)     LSG may effect a redemption of its Series H Preferred Shares, Series I Preferred Shares, Series J Preferred Shares and Series K Preferred Shares, in each case pursuant to the terms of the applicable Certificates of Designation; provided, that, in all events Borrowers shall indefeasibly repay the Obligations in full and cause all Letters of Credit to be cancelled and returned (or cash collateralized pursuant to Section 17(c)) at least 1 Business Day prior to the date on which LSG effects such redemption as permitted by this Section 8(c).

 

(f)     By deleting Section 8(h) of the Loan Agreement in its entirety and by substituting the following in lieu thereof:

 

(h)     Notice of Geveran Litigation. Borrowers' Agent shall notify Agent and each Lender promptly (and in any event within two (2) Business Days) of the Order Entry (as defined in the Second Amendment);

 

(g)     By deleting clauses (xviii) and (xix) of Section 13(a) of the Loan Agreement and by substituting the following in lieu thereof:

 

(xviii) entry or filing of any one or more judgments, orders, or awards for the payment of money in the Geveran Case involving an aggregate amount of $250,000 or more, against a Borrower or any of its subsidiaries, or with respect to any of their respective assets, if either:

 

  

(A)     there is a period of forty-five (45) consecutive days at any time after the entry of any such judgment, order, or award during which (1) the same is not discharged, satisfied, vacated, or bonded pending appeal, or (2) a stay of enforcement thereof is not in effect;

 

(B)     enforcement proceedings are commenced with respect to any such judgment, order, or award against any Obligor, any subsidiary of an Obligor, or any property of an Obligor or a subsidiary of an Obligor;

 

(C)     any Person becomes a lien creditor (as defined in the Uniform Commercial Code as in effect from time to time in any applicable jurisdiction) as a result of or based upon any such judgment, order or award entered or rendered in the Geveran Case; or

 

(D)     as a result of the entry or rendition of any such judgment, order or award, any Lien in favor of Agent is (or with the passage of time, may become) subordinate in priority to any Lien arising from or created by such judgment, order or award;

 

(xix) any Lien with respect to any of the Collateral shall exist in favor of any Person (including, without limitation, Sponsor, any of Sponsor's Affiliates, any Geveran Surety or any Geveran Indemnitor) with respect to or otherwise in connection with a Geveran Appeal Bond,

 

(xx) any Obligor other than LSG shall agree to become liable for any obligations with respect to a Geveran Appeal Bond, whether as a guarantor, indemnitor or otherwise,

 

(xxi) any payment by any Obligor shall become due with respect to a Geveran Appeal Bond (unless such payment is paid in full by a Geveran Subordinated Creditor when it becomes due); provided, that this clause (xxi) shall not prohibit LSG from paying premium payments to one or more Geveran Sureties in connection with the posting of one or more Geveran Appeal Bonds, as long as the aggregate amount of all such premium payments paid by LSG does not exceed $200,000,

 

(xxii) any Geveran Surety shall make any payment with respect to a Geveran Appeal Bond and shall not be reimbursed in full for such payment by a Geveran Subordinated Creditor within five (5) Business Days thereafter,

 

(xxiii) any Borrower, Obligor, Sponsor or Affiliate of Sponsor shall execute any agreement other than the Second Lien Geveran Appeal Bond Rights Subordination Agreement in favor of the Term Loan Parties (or any of them) that provides for the subordination of any Geveran Appeal Bond Rights,

 

(xxiv) any Obligor shall enter into any documentation in respect of a Geveran Appeal Bond without Agent's written consent (not to be unreasonably withheld or delayed) other than (A) the Specified Geveran Documents, and (B) corporate or other company authorization documentation that does not alter the Specified Geveran Documents or otherwise contravene the provisions of this Agreement, as long as the form of such authorization documentation is provided to Agent prior to the execution thereof,

 

  

(xxv) Sponsor, any of Sponsor’s Affiliates, or any Obligor shall enter into any Specified Appeal Bond Documents unless:

 

(A)     concurrently with the execution of such Specified Appeal Bond Documents, Borrowers' Agent shall provide Agent with true, correct and complete copies of such Specified Appeal Bond Documents, together with a certification from an authorized officer of Borrowers' Agent that such copies are true, correct and complete;

 

(B)     prior to the execution of such Specified Appeal Bond Documents, Borrowers' Agent shall have provided to Agent fully executed copies of the Geveran Appeal Bond Rights Subordination Agreement and, if a Second Lien Geveran Appeal Bond Rights Subordination Agreement is executed in connection with such documents, (1) a true, correct and complete copy of such Second Lien Geveran Appeal Bond Rights Subordination Agreement, and (2) a fully executed copy of the Specified Geveran Intercreditor Amendment;

 

(C)     the "Bond Amount" (as defined in the Specified Appeal Bond Documents) is not greater in the aggregate than the lesser of (A) $25,000,000, and (B) 50% of the amount of the judgment, order or award entered or rendered in the Geveran Case pursuant to the Order Entry (as defined in the Second Amendment); and

 

(xxvi) whether pursuant to the Specified Geveran Documents or otherwise in connection with a Geveran Appeal Bond, any Person (including, without limitation, Sponsor, any of Sponsor's Affiliates, any Geveran Surety or any Geveran Indemnitor) shall have recourse against any Obligor or any Collateral that is in either case senior to or pari passu with the interests of Agent or any Lender (other than pari passu recourse with respect to LSG (but not to any other Obligor or any Collateral) for amounts that are to be reimbursed by a Geveran Subordinated Creditor in accordance with Section 13(a)(xxii), as long as such amounts are actually reimbursed by a Geveran Subordinated Creditor in accordance with Section 13(a)(xxii) and not reimbursed by LSG or any other Obligor); provided, that it is understood and agreed that certain Persons who procure or participate in the procurement of a Geveran Appeal Bond may have rights of contribution or indemnification from LSG or other Obligors and any such rights of contribution or indemnification (collectively, "Geveran Appeal Bond Rights") in favor of the Sponsor or any of Sponsor’s Affiliates shall be subject to the Geveran Appeal Bond Rights Subordination Agreement.

 

(h)     By deleting Item 8 of the Schedule in its entirety and by substituting in lieu thereof the following:

 

8.     Interest Margin:     5.50%

 

(i)     By deleting the section entitled "If to Agent or Lenders:" from Item 31 of the Schedule and by substituting in lieu thereof the following:

 

  

If to Agent or Lenders:                                                       ACF FinCo I LP

580 White Plains Road, Suite 610

Tarrytown, NY 10580

Attn.: Oleh Szczupak

Facsimile No.: (914) 418-1217

 

In consideration of the foregoing amendments, Borrowers agree to deliver to the Agent true, correct and complete executed copies of all Specified Appeal Bond Documents within ten (10) Business Days after the Order Entry (as defined in the Second Amendment), or such later date to which the Agent may consent in its sole discretion.

 

The effectiveness of the amendments contained herein is subject to Agent's receipt of (a) a duly executed amendment to the Term Loan Agreement in form and substance satisfactory to Agent, and (b) a duly executed secretary's or manager's certificate of resolutions with respect to each Borrower, in each case in form and substance satisfactory to Agent.

 

By its signature hereto, each Borrower hereby (a) ratifies and reaffirms the Obligations, each of the Loan Documents and all of such Borrower's covenants, duties, indebtedness and liabilities under the Loan Documents; (b) acknowledges and stipulates that the Loan Agreement and the other Loan Documents executed by such Borrower are legal, valid and binding obligations of such Borrower that are enforceable against such Borrower in accordance with the terms thereof; all of the Obligations are owing and payable without defense, offset or counterclaim (and to the extent there exists any such defense, offset or counterclaim on the date hereof, the same is hereby waived by each Borrower); and the security interests and liens granted by such Borrower in favor of Agent are duly perfected, first priority security interests and liens; (c) represents and warrants to Agent and Lenders, to induce Agent and Lenders to enter into this agreement, that (i) no Default exists on the date hereof or would result from the effectiveness of this agreement, (ii) the execution, delivery and performance of this agreement have been duly authorized by all requisite company action on the part of such Borrower and this agreement has been duly executed and delivered by such Borrower, and (iii) all of the representations and warranties made by such Borrower in the Loan Agreement are true and correct on and as of the date hereof; and (d) acknowledges that LIBOR is presently 0.20% per annum and, therefore, the rate of interest in effect on the date hereof, expressed in simple interest terms, is 5.70% per annum with regard to any loans outstanding under the Loan Agreement bearing interest based upon LIBOR.

 

In consideration of Agent's and Lenders' willingness to enter into this agreement, Borrowers jointly and severally agree to pay to Agent and Lenders, on demand, all costs and expenses (including taxes and legal fees and expenses) incurred by Agent and Lenders in connection with the preparation, negotiation and execution of this agreement and any other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto. Except as otherwise expressly provided in this agreement, nothing herein shall be deemed to amend or modify any provision of the Loan Agreement or any of the other Loan Documents, each of which shall remain in full force and effect. This agreement is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction, and the Loan Agreement as herein modified shall continue in full force and effect. This agreement shall be governed by and construed in accordance with the internal laws of the State of Georgia and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This agreement may be executed in any number of counterparts and by different parties to this agreement on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any manually executed signature page hereto that is delivered by facsimile or other electronic transmission shall be deemed to be an original signature hereto. To the fullest extent permitted by applicable law, the parties hereto each hereby waives the right to trial by jury in any action, suit, counterclaim or proceeding arising out of or related to this agreement.

 

  

To induce Agent and Lenders to enter into this Amendment, each Borrower hereby RELEASES, ACQUITS AND FOREVER DISCHARGES Agent and each Lender, and all officers, directors, agents, employees, successors and assigns of Agent or any Lender, from any and all liabilities, claims, demands, actions or causes of action of any kind or nature (if there be any), whether absolute or contingent, disputed or undisputed, at law or in equity, or known or unknown, that any Borrower now has or ever had against Agent or any Lender arising under or in connection with any of the Loan Documents or otherwise. Each Borrower represents and warrants to Agent and Lenders that such Borrower has not transferred or assigned to any Person any claim that such Borrower ever had or claimed to have against Agent or any Lender.

 

[Signatures appear on following page]

 

  

The parties hereto have caused this agreement to be duly executed under seal and delivered by their respective duly authorized officers on the date first written above.

 

	AGENT AND SOLE LENDER:
	ACF FINCO I LP, as assignee of FCC, LLC
	By:	/s/ Oleh Szczupak

Name:

Oleh Szczupak

Title:

Vice President

 

 

Accepted and agreed to:

 

BORROWERS:

 

LIGHTING SCIENCE GROUP CORPORATION

 

By: /s/ Ed Bednarcik                                                   

Name: Ed Bednarcik                                                    

Title: Chief Executive Officer                                     

 

 

BIOLOGICAL ILLUMINATION, LLC

 

By: /s/ Phil Ragona                                                      

Name: Phil Ragona                                                       

Title: Executive Vice President and Secretary          

 

 

Consented to by Guarantor:

 

 

LSGC, LLC

 

By: /s/ Phil Ragona                                                          

Name: Phil Ragona                                                           

Title: Executive Vice President and Secretary              

  

Exhibit 10.5

 

 

September 11, 2015

 

 

ACF FinCo I LP, as assignee of FCC, LLC

580 White Plains Road, Suite 610

Tarrytown, NY 10580

Attn: Oleh Szczupak

Fax: (914) 418-1217

 

RE:	Consents regarding issuance of Series J Convertible Preferred Stock and Series K Preferred Stock and amendment to the Amended and Restated Series J Certificate of Designation; Agreements with respect to Specified Customer provisions in Loan Agreement

 

Ladies and Gentlemen:

 

Reference is made to that certain Loan and Security Agreement dated as of April 25, 2014, as amended by that certain First Amendment to Loan and Security Agreement dated as of September 19, 2014, that certain Second Amendment to Loan and Security Agreement dated January 30, 2015, and that certain Third Amendment to Loan and Security Agreement dated September 11, 2015 (the “Third Amendment” and as amended, the “Loan Agreement”; capitalized terms used herein but not defined shall have the meanings assigned to such terms in the Loan Agreement), among Lighting Science Group Corporation, a Delaware corporation (“LSG”), BioLogical Illumination, LLC, a Delaware limited liability company (“BioLogical”; LSG and BioLogical are hereinafter referred to collectively as “Borrowers”), the various financial institutions from time to time party thereto as lenders (collectively, the “Lenders”) and ACF FinCo I LP, as assignee of FCC, LLC, in its capacity as agent for Lenders (in such capacity, “Agent”). Capitalized terms used herein shall, unless otherwise provided herein, have the respective meanings set forth in the Loan Agreement.

 

Borrowers hereby advise Agent and Lenders that LSG desires to issue and sell additional Equity Interests pursuant to the terms of the Preferred Stock Subscription and Support Agreement, in the form attached hereto as Schedule I (the “Subscription and Support Agreement”), which Equity Interests shall consist of (a) one share of LSG’s Series J Convertible Preferred Stock (the “Series J Preferred Shares”), which are convertible into shares of common stock, $0.001 par value per share, of LSG (“Common Stock”), and which shall be governed by the Amended and Restated Certificate of Designation of Series J Convertible Preferred Stock, in the form attached hereto as Schedule II-A (as amended through the date hereof, the “Amended Series J Certificate of Designation”), and (b) a warrant to purchase 2,650 shares of Common Stock at an exercise price of $0.001 per share of Common Stock in the form attached hereto as Schedule III (the “Series J Warrants” and together with the Series J Preferred Shares, collectively the “Series J Securities”). The issuance and sale of Series J Securities shall take place at one or more closings to certain investors approved by LSG from the period commencing on or about September 11, 2015 through March 31, 2016 (the “Series J Securities Issuance Period”), the aggregate amount of Series J Securities issued and sold from time to time during the Securities J Issuance Period shall not exceed 15,000 Series J Securities, and the gross cash proceeds of each Series J Security shall equal or exceed $1,000 (the “Initial Series J Issuance”). In addition, pursuant to Section 14 of the Amended and Restated Certificate of Designation of Series H Convertible Preferred Stock (the “Series H Certificate of Designation”), the Amended and Restated Certificate of Designation of Series I Convertible Preferred Stock (the “Series I Certificate of Designation”) and the Amended Series J Certificate of Designation (collectively, the “Certificates of Designation”), LSG is required to issue and sell Series J Securities to Exercising Holders (as defined in the Certificates of Designation) on the terms and conditions set forth in the Certificates of Designation (the “Preemptive Rights Provisions”). Further, pursuant to the Preemptive Rights Provisions in Section 14 of the Certificates of Designation, Borrowers hereby advise Agent and Lenders that it intends to issue and sell Series J Securities to each of LJH Partners, L.P. and The Moelis Family Trust of not greater than 62 Series J Securities in exchange for gross cash proceeds of not less than $62,000.00, as a result of the issuance of certain Series J Securities in January 2015 (the “Preemptive Rights Sale”). The Initial Series J Issuance, the Preemptive Rights Sale and the future issuance of Series J Securities pursuant to the Preemptive Right Provisions in Section 14 of the Certificates of Designation as a result of the Initial Series J Issuance, are collectively the “Series J Issuance”.

 

 

In addition, as consideration for the posting of the Geveran Appeal Bond by Pegasus Fund IV, L.P. (“Pegasus IV”), Borrowers hereby advise Agent and Lenders that LSG desires to issue to Pegasus IV Equity Interests pursuant to the terms of the Subscription and Support Agreement, which Equity Interests shall consist of (a) one share of LSG’s Series K Preferred Stock (the “Series K Preferred Shares”), which shall be governed by the Certificate of Designation of Series K Preferred Stock, in the form attached hereto as Schedule IV (the “Series K Certificate of Designation”), and (b) a warrant to purchase 735 shares of Common Stock at an exercise price per share of Common Stock equal to the closing sales price of Common Stock as quoted on the OTC Bulletin Board, OTC pink markets or similar quotation service on the date immediately prior to the date of issuance, in the form attached hereto as Schedule V (the “Series K Warrants” and together with the Series K Preferred Shares, collectively the “Series K Securities”). Up to 25,000 Series K Securities shall be issued to Pegasus IV substantially concurrently with the execution of the Specified Appeal Bond Documents (the “Initial Series K Issuance”). In addition, pursuant to the Subscription and Support Agreement, LSG has agreed to conduct a rights offering that provides the holders of record of Common Stock and securities convertible into or exchangeable for shares of Common Stock the right to purchase a pro rata share of the number of Series K Securities issued to Pegasus IV (the “Rights Offering”). The Initial Series K Issuance and the issuance of Series K Securities pursuant to the Rights Offering, is collectively the “Series K Issuance”).

 

In addition, Borrowers hereby advise Agent and Lenders that LSG desires to amend the Amended Series J Certificate of Designation to increase the authorized number of Series J Preferred Shares from 70,000 Series J Preferred Shares to 85,100 Series J Preferred Shares, pursuant to the form of Certificate of Increase attached hereto as Schedule II-B (the “Series J Certificate of Increase”).

 

Borrowers hereby request that, and subject to the satisfaction of the conditions set forth below, Agent and Lenders hereby: (a) waive the requirements of Sections 8(n)(b) of the Loan Agreement with respect to the Series J Issuance and the Series K Issuance, (b) consent to the Series K Issuance and the adoption of the Series K Certificate of Designation in accordance with Section 8(h) of the Loan Agreement, (c) consents to the adoption of the Series J Certificate of Increase and the Series K Certificate of Designation in accordance with Section 8(i) of the Loan Agreement, and (e) with respect to any Series J Securities or Series K Securities issued as part of the Series J Issuance or the Series K Issuance, respectively, on or after the date hereof, agree to receive less than five (5) Business Days’ prior written notice of any such issuance, notwithstanding Section 8(n)(a) of the Loan Agreement; provided however that, LSG shall provide at least one (1) Business Day prior written notice of such issuance, which notice shall specify the parties to whom such securities are to be issued, and the total amount (if applicable) which shall be realized from the issuance of such securities.

 

   

Borrowers also hereby advise Agent and Lenders that the preliminary results of a periodic product line review conducted by Specified Customer (the “Line Review”) indicate that Specified Customer may significantly reduce its business with Borrowers, which may include ceasing to purchase certain items from Borrowers, in the future. Notwithstanding the final results of the Line Review (“Line Review Result”) which is expected to be disclosed in an award letter (the “Award Letter”) delivered to Borrowers by Specified Customer, each of Agent and the Lenders hereby acknowledges and agrees that the Line Review Result described in the Award Letter, and any direct or indirect impact of such Line Review Result on the ongoing operations of the Obligors’ business, shall not (a) constitute a material adverse change in any Borrower’s business, any Borrower’s financial or operational condition or any Borrower’s business prospects as described in Section 4(a)(viii) and/or Section 9(d)(viii) of the Loan Agreement, (b) cause the representation to be made by Borrowers under Section 4(a)(viii) of the Loan Agreement to be untrue in any material respect, (c) trigger any obligation of Borrowers to notify Agent pursuant to Section 9(d)(viii) of the Loan Agreement, (d) constitute a material adverse change in any Borrower’s financial condition or operations or in any Borrower’s business prospects as compared to the state of facts existing on the Agreement Date, pursuant to Section 2(e)(ii) of the Loan Agreement, (e) constitute an act, omission, event or circumstance which has or could reasonably be expected to have a materially adverse effect on any Borrower or any other Obligor pursuant to Section 13(a)(xv) of the Loan Agreement, or (f) constitute a Specified Customer Default. Each of Agent and Lenders hereby further acknowledges and agrees that Borrowers’ Agent has fulfilled its obligations under Section 9(b)(x) of the Loan Agreement with respect to the preliminary results of the Line Review. Notwithstanding the foregoing, Borrowers hereby agree to provide Agent with a copy of the Award Letter within two (2) Business Days’ of Borrowers’ receipt thereof. The waivers set forth herein shall not establish any course of dealing regarding, support any expectation on the part of any Obligor regarding, nor affect the interpretation of, any provision of the Loan Agreement with respect to any matter other than, to the limited extent described above, the Line Review Result described in the Award Letter.

 

Borrowers, Agent and Lenders also hereby agree that, notwithstanding any other provision of the Loan Agreement to the contrary, the issuance and sale of any Series J Securities during the Series J Securities Issuance Period shall constitute a single Curative Equity Contribution under the Loan Agreement and the cash proceeds of each such Series J Issuance shall be included in the calculation of EBITDA for purposes of determining compliance with the Fixed Charge Coverage Ratio covenant set forth in Item 21(b) of the Schedule with respect to any period of determination ending on or before December 31, 2016; provided, that such cash proceeds are forwarded directly to a lockbox designated by Agent and applied to the Obligations, and provided, further that, to the extent such cash proceeds exceed the amount of the outstanding Obligations as of the date of such application, the excess amount of cash proceeds shall be used by Borrowers for general working capital purposes. For the avoidance of doubt, (a) in no event shall any cash proceeds from any Series J Issuance be used for repayment of the Term Loan Debt, (b) in no event shall the application of cash proceeds received from any Series J Issuance permanently reduce the Maximum Line Amount under the Loan Agreement, and (c) the application of cash proceeds from any Series J Issuance during the Series J Securities Issuance Period shall be deemed to constitute a single Curative Equity Contribution under the Loan Agreement.

 

 

None of the foregoing waivers is intended to be, and none shall be deemed to be, a waiver or modification of any provision of the Loan Agreement except as expressly set forth herein (for the avoidance of doubt, including without limitation, a waiver of any Default that may arise under clause (a)(i), (a)(ii), (a)(v), (a)(vi), (a)(vii) or (a)(xiii) of Section 13 of the Loan Agreement, following receipt of the final results of the Line Review) Without limiting the generality of the foregoing, this letter agreement shall in no way modify the provisions of Section 8(c) of the Loan Agreement, Section 8(i) of the Loan Agreement or Section 8(n) of the Loan Agreement, other than to the extent that Agent has provided its consent to certain items as set forth herein. For the avoidance of doubt, Borrowers and Guarantor hereby acknowledge that any future issuance of Series J Preferred Shares or Series K Preferred Shares, except to the extent expressly permitted hereunder, shall not be permitted by Section 8(n) of the Loan Agreement without the consent of Agent and Lenders, as the terms of the Series J Preferred Shares and Series K Preferred Shares are more restrictive or burdensome to LSG than the terms of any equity interests in effect on the Agreement Date. The effectiveness of the consent and waivers contained herein is subject to Agent's receipt of (i) a duly executed consent and waiver with respect to the Term Loan Agreement in form and substance satisfactory to Agent with respect to the consent items described herein, (ii) a duly executed Third Amendment among Borrowers, Agent and Lenders with respect to the Loan Agreement, in form and substance satisfactory to Agent, and (iii) an opinion letter (in form and substance satisfactory to Agent) from counsel to Borrowers addressing such matters as Agent shall request in connection with the Series J Issuance and the Series K Issuance. In consideration of Agent's and Lenders' willingness to enter into this agreement, Borrowers hereby agree to promptly (but in any event within one (1) Business Day after receipt of the file stamped copy thereof) provide Agent with a recorded copy of each of the Amended Series J Certificate of Designation, the Series K Certificate of Designation, and the Series J Certificate of Increase, as certified by the Secretary of State of the State of Delaware.

 

By its signature hereto, each Borrower and Guarantor hereby (a) ratifies and reaffirms the Obligations, each of the Loan Documents and all of such Borrower's or Guarantor's covenants, duties, indebtedness and liabilities under the Loan Documents; (b) acknowledges and stipulates that: the Loan Agreement and the other Loan Documents executed by such Borrower or Guarantor are legal, valid and binding obligations of such Borrower or Guarantor that are enforceable against such Borrower or Guarantor in accordance with the terms thereof; all of the Obligations are owing and payable without defense, offset or counterclaim (and to the extent there exists any such defense, offset or counterclaim on the date hereof, the same is hereby waived by each Borrower and Guarantor); and the security interests and liens granted by such Borrower or Guarantor in favor of Agent are duly perfected, first priority security interests and liens; and (c) represents and warrants to Agent and Lenders, to induce Agent and Lenders to enter into this agreement, that (i) no Default exists on the date hereof or would result from the effectiveness of this agreement or the consummation of the actions described herein, (ii) the execution, delivery and performance of this agreement have been duly authorized by all requisite company action on the part of such Borrower or Guarantor and this agreement has been duly executed and delivered by such Borrower or Guarantor, (iii) all of the representations and warranties made by such Borrower or Guarantor in the Loan Documents are true and correct on and as of the date hereof, and (iv) Borrowers have provided a copy of the Loan Agreement to each of LSGC Holdings III LLC and Pegasus IV which are, as of the date hereof, the anticipated initial investors of the Series J Securities and the Series K Securities, respectively, and have discussed the provisions (including, without limitation, restrictions upon redemptions, distributions and issuance of Equity Interests) of the Loan Agreement with such Persons.

 

 

In consideration of Agent's and Lenders' willingness to enter into this agreement, Borrowers jointly and severally agree to pay to Agent and Lenders, on demand, all costs and expenses (including, without limitation, taxes and legal fees and expenses) incurred by Agent and Lenders in connection with the preparation, negotiation and execution of this agreement and any other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto. Except as otherwise expressly provided in this agreement, nothing herein shall be deemed to amend or modify any provision of the Loan Agreement or any of the other Loan Documents, each of which shall remain in full force and effect. This agreement is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction, and the Loan Agreement shall continue in full force and effect. This agreement shall be governed by and construed in accordance with the internal laws of the State of Georgia and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This agreement may be executed in any number of counterparts and by different parties to this agreement on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any manually executed signature page hereto that is delivered by facsimile or other electronic transmission shall be deemed to be an original signature hereto. To the fullest extent permitted by applicable law, the parties hereto each hereby waives the right to trial by jury in any action, suit, counterclaim or proceeding arising out of or related to this agreement.

 

To induce Agent and Lenders to enter into this letter agreement, each Borrower and Guarantor hereby RELEASES, ACQUITS AND FOREVER DISCHARGES Agent and each Lender, and all officers, directors, agents, employees, successors and assigns of Agent or any Lender, from any and all liabilities, claims, demands, actions or causes of action of any kind or nature (if there be any), whether absolute or contingent, disputed or undisputed, at law or in equity, or known or unknown, that any Borrower or Guarantor now has or ever had against Agent or any Lender arising under or in connection with any of the Loan Documents or otherwise. Each Borrower and Guarantor represents and warrants to Agent and Lenders that such Borrower or Guarantor has not transferred or assigned to any Person any claim that such Borrower or Guarantor ever had or claimed to have against Agent or any Lender.

 

 

[Remainder of Page Intentionally Left Blank;

Signature Page Follows.]

 

 

	Very Truly Yours,
	LIGHTING SCIENCE GROUP CORPORATION
	By:	/s/ Ed Bednarcik
		Name:      Ed Bednarcik
		Title:        Chief Executive Officer
	BIOLOGICAL ILLUMINATION, LLC
	By:	/s/ Phil Ragona
		Name:      Phil Ragona
		Title:        Executive Vice President and Secretary
	LSGC, LLC
	By:	/s/ Phil Ragona
		Name:      Phil Ragona
		Title:        Executive Vice President and Secretary
	Accepted and Agreed as of September 11, 2015
	ACF FINCO I LP, as assignee of FCC, LLC, as a Lender
	and Agent for the Lenders
	By:	/s/ Oleh Szczupak
		Name:      Oleh Szczupak
		Title:        Vice President

 

Exhibit 10.6

 

THIRD AMENDMENT TO TERM LOAN AGREEMENT

 

This THIRD AMENDMENT TO TERM LOAN AGREEMENT (this “Amendment”), is entered into as of September 10, 2015, by and among Lighting Science Group Corporation, a Delaware corporation (the “Borrower”), the Lenders (as defined below) signatory hereto, and Medley Capital Corporation, a Delaware corporation (“Medley”), as administrative agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, the “Agent”).

 

W I T N E S S E T H:

 

WHEREAS, the Borrower, the lenders from time to time party thereto (“Lenders”) and the Agent are parties to that certain Term Loan Agreement dated as of February 19, 2014, as amended by the First Amendment to Term Loan Agreement dated as of April 25, 2014 and by the Limited Consent and Second Amendment to Term Loan Agreement dated as of January 30, 2015 (as amended hereby and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”);

 

WHEREAS, Borrower, Agent and Lender desire to amend the Loan Agreement, on the terms and subject to the conditions set forth.

 

NOW, THEREFORE, in consideration of the foregoing and for other good and valid consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

1.     Defined Terms. Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Loan Agreement.

 

2.     Amendments to Loan Agreement. Upon satisfaction of the conditions to effectiveness set forth in Section 4 below, the Loan Agreement is hereby amended as follows:

 

(a)     Section 2.4(e)(vi)(B) of the Loan Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following:

 

“(B)      At least one (1) Business Day prior to the date that Borrower redeems any Equity Interests permitted by Section 6.7(a)(ii), Borrower shall prepay the outstanding principal of the Obligations in accordance with Section 2.4(f) in an amount equal to the outstanding Obligations.”

 

(b)     Section 7.1 of the Loan Agreement is hereby amended by replacing the table set forth in such Section with the following table in lieu thereof: 

 

  

Fiscal Quarter	Minimum EBITDA
September 30, 2015	-($4,800,000); provided, that for the twelve-month period ending on September 30, 2015, EBITDA, for the purposes of calculating compliance with this Section 7.1 and for no other purpose, shall be increased by Eight Million Thirty Three Thousand and Seven Hundred and Fifty Dollars ($8,033,750)
December 31, 2015	$5,200,000; provided, that for the twelve-month period ending on December 31, 2015, EBITDA, for the purposes of calculating compliance with this Section 7.1 and for no other purpose, shall be increased by Ten Million Five Hundred Thirty Three Thousand and Seven Hundred and Fifty Dollars ($10,533,750)
March 31, 2016	EBITDA projected for such fiscal quarter in Borrower’s Projections delivered in accordance with clause (e) of Schedule 5.1(a) to the extent reasonably satisfactory to Agent; less an amount equal to 25% of such projected EBITDA for such fiscal quarter; provided, that for the twelve-month period ending on March 31, 2016, EBITDA, for the purposes of calculating compliance with this Section 7.1 and for no other purpose, shall be increased by Four Million Dollars ($4,000,000)
June 30, 2016	EBITDA projected for such fiscal quarter in Borrower’s Projections delivered in accordance with clause (e) of Schedule 5.1(a) to the extent reasonably satisfactory to Agent; less an amount equal to 25% of such projected EBITDA for such fiscal quarter; provided, that for the twelve-month period ending on June 30, 2016, EBITDA, for the purposes of calculating compliance with this Section 7.1 and for no other purpose, shall be increased by Four Million Dollars ($4,000,000)
Each fiscal quarter thereafter	EBITDA projected for such fiscal quarter in Borrower’s Projections delivered in accordance with clause (e) of Schedule 5.1(a) to the extent reasonably satisfactory to Agent; less an amount equal to 25% of such projected EBITDA for such fiscal quarter

 

 

 

(c)     Section 8.3 of the Loan Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following:

 

 

“8.3     Judgments. If one or more judgments, orders, or awards for the payment of money involving an aggregate amount of $250,000, or more (except to the extent covered (other than to the extent of customary deductibles) by insurance pursuant to which the insurer has not denied coverage) is entered or filed against a Loan Party or any of its Subsidiaries, or with respect to any of their respective assets, and either:

 

(a)      there is a period of forty-five (45) consecutive days at any time after the entry of any such judgment, order, or award during which (1) the same is not discharged, satisfied, vacated, or bonded pending appeal, or (2) a stay of enforcement thereof is not in effect;

 

(b)      enforcement proceedings are commenced with respect to any such judgment, order, or award against any Loan Party, any subsidiary of a Loan Party, or any property of a Loan Party or a subsidiary of a Loan Party;

 

(c)     any Person becomes a lien creditor (as defined in the Code) as a result of or based upon any such judgment, order or award entered or rendered in the Geveran Litigation; or

 

(d)     as a result of the entry or rendition of any such judgment, order or award, any Lien in favor of Agent is (or with the passage of time, may become) subordinate in priority to any Lien arising from or created by such judgment, order or award.”

 

(b)     Article 8 of the Loan Agreement is hereby amended by adding the following provision as Section 8.12:

 

  

“8.12     Geveran Defaults

 

(a)     If any Lien with respect to any of the Collateral shall exist in favor of any Person (including, without limitation, Sponsor, any of Sponsor's Affiliates, any Geveran Surety or any Geveran Indemnitor) with respect to or otherwise in connection with a Geveran Appeal Bond;

 

(b)     If any Loan Party other than LSGC shall agree to become liable for any obligations with respect to a Geveran Appeal Bond, whether as a guarantor, indemnitor or otherwise;

 

(c)     If any payment by any Loan Party shall become due with respect to a Geveran Appeal Bond (unless such payment is paid in full by a Geveran Subordinated Creditor when it becomes due); provided, that this clause (xxi) shall not prohibit LSGC from paying premium payments to one or more Geveran Sureties in connection with the posting of one or more Geveran Appeal Bonds, as long as the aggregate amount of all such premium payments paid by LSGC does not exceed $200,000;

 

(d)     If any Geveran Surety shall make any payment with respect to a Geveran Appeal Bond and shall not be reimbursed in full for such payment by a Geveran Subordinated Creditor within five (5) Business Days thereafter;

 

(e)     If any Loan Party, Sponsor or Affiliate of Sponsor shall execute any agreement other than the Second Lien Geveran Appeal Bond Rights Subordination Agreement in favor of the Loan Parties (or any of them) that provides for the subordination of any Geveran Appeal Bond Rights;

 

(f)     If any Loan Party shall enter into any documentation in respect of a Geveran Appeal Bond without Agent's written consent (not to be unreasonably withheld or delayed) other than (A) the Specified Geveran Documents, and (B) corporate or other company authorization documentation that does not alter the Specified Geveran Documents or otherwise contravene the provisions of this Agreement, as long as the form of such authorization documentation is provided to Agent prior to the execution thereof;

 

(g)     If Sponsor, any of Sponsor’s Affiliates, or any Loan Party shall enter into any Specified Appeal Bond Documents unless:

 

(i)     concurrently with the execution of such Specified Appeal Bond Documents, LSGC shall provide Agent with true, correct and complete copies of such Specified Appeal Bond Documents, together with a certification from an authorized officer of LSGC that such copies are true, correct and complete;

 

  

(ii)     prior to the execution of such Specified Appeal Bond Documents, LSGC shall have provided to Agent fully executed copies of the Geveran Appeal Bond Rights Subordination Agreement and, if a Second Lien Geveran Appeal Bond Rights Subordination Agreement is executed in connection with such documents, (1) a true, correct and complete copy of such Second Lien Geveran Appeal Bond Rights Subordination Agreement, and (2) a fully executed copy of the Specified Geveran Intercreditor Amendment; and

 

(iii)     the “Bond Amount” (as defined in the Specified Appeal Bond Documents) is not greater than the lesser of (A) $25,000,000, and (B) 50% of the amount of the judgment, order or award entered or rendered in the Geveran Litigation pursuant to the Order Entry; or

 

(h)     whether pursuant to the Specified Geveran Documents or otherwise in connection with a Geveran Appeal Bond, any Person (including, without limitation, Sponsor, any of Sponsor's Affiliates, any Geveran Surety or any Geveran Indemnitor) shall have recourse against any Loan Party or any Collateral that is in either case senior to or pari passu with the interests of Agent or any Lender (other than pari passu recourse with respect to LSGC (but not to any other Loan Party or any Collateral) for amounts that are to be reimbursed by a Geveran Subordinated Creditor in accordance with Section 8.12(d), as long as such amounts are actually reimbursed by a Geveran Subordinated Creditor in accordance with Section 8.12(d) and not reimbursed by LSGC or any other Loan Party); provided, that it is understood and agreed that certain Persons who procure or participate in the procurement of a Geveran Appeal Bond may have rights of contribution or indemnification from LSGC or other Loan Parties and any such rights of contribution or indemnification (collectively, “Geveran Appeal Bond Rights”) in favor of the Sponsor or any of Sponsor’s Affiliates shall be subject to the Geveran Appeal Bond Rights Subordination Agreement.” 

 

3.     The definition of “Change of Control” set forth in Schedule 1.1 of the Loan Agreement is hereby amended by deleting the reference to “or (e) the failure of Borrower to own directly or indirectly one hundred percent (100.0%) of the voting power of the total outstanding Voting Stock of any other Loan Party, except as expressly permitted under Section 6.3 hereof.” and replacing it with the following:

 

“(e) the failure of Borrower to own directly or indirectly one hundred percent (100.0%) of the voting power of the total outstanding Voting Stock of any other Loan Party, except as expressly permitted under Section 6.3 hereof; or (f) a Change of Control as defined in any Certificate of Designation.”

 

  

4.     Schedule 1.1 of the Loan Agreement is hereby amended by deleting the following definitions of “Certificates of Designation” and “Fixed Charge Coverage Ratio” and by substituting the following in lieu thereof:

 

“Certificates of Designation” shall mean, collectively, the Certificates of Designation filed with the Delaware Secretary of State with respect to the Series H Preferred Shares of Borrower, the Series I Preferred Shares of Borrower, the Series J Preferred Shares of Borrower and the Series K Preferred Shares of Borrower, in each case as in effect on the Third Amendment Date.

 

“Fixed Charge Coverage Ratio” means a ratio of (i) EBITDA, to (ii) for Revolving Borrowers on a consolidated basis, interest expense (but excluding interest paid in property other than cash and any other interest expense not paid in cash during such period), plus payments of principal actually made or scheduled to be made with respect to indebtedness (other than scheduled but unpaid payments on indebtedness subordinated to the Obligations and principal payments on the revolving loans under the Revolving Loan Agreement), plus payments with respect to capitalized leases, plus payments with respect to taxes, plus dividends and distributions, plus unfinanced capital expenditures; provided, that for the purposes of calculating Fixed Charge Coverage Ratio (A) for each of the twelve-month periods ending on September 30, 2015 and December 31, 2015, clause (i) of this definition shall be increased by Twenty One Million Five Hundred Thousand Dollars ($21,500,000), and (B) for each of the twelve-month periods ending on March 31, 2016 and June 30, 2016, clause (i) of this definition shall be increased by Ten Million Dollars ($10,000,000).

 

5.     Schedule 1.1 of the Loan Agreement is hereby amended by adding the following definitions in the correct alphabetical order as follows:

 

“Cash Equity Contribution” shall mean a cash equity contribution on or about the Third Amendment Date in the form of Series J Convertible Preferred Stock.

 

“Geveran Appeal Bond” shall mean any bond posted in connection with the Geveran Litigation, including the Appeal Bond.

 

“Geveran Appeal Bond Rights” shall have the meaning set forth in Section 8.12(h).

 

“Geveran Appeal Bond Rights Subordination Agreement” shall mean an agreement in the form attached as Exhibit B to the Third Amendment.

 

“Geveran Indemnitor” shall mean any obligor or indemnitor under a Geveran Appeal Bond.

 

  

“Geveran Subordinated Creditor” shall mean any Person that is a "Sponsor Affiliate" under (and as defined in) the Geveran Appeal Bond Rights Subordination Agreement or that otherwise is a holder of "Subordinated Obligations" (as defined in the Geveran Appeal Bond Rights Subordination Agreement).

 

“Geveran Surety” shall mean any surety with respect to a Geveran Appeal Bond.

 

“Second Lien Geveran Appeal Bond Rights Subordination Agreement” shall mean an agreement identical in form (other than changes that solely consist of inserting the date of such agreement) to the draft of such agreement attached as Exhibit C to the Third Amendment, as long as such agreement does not become effective prior to the effectiveness of the Geveran Appeal Bond Rights Subordination Agreement or the Specified Geveran Intercreditor Amendment.

 

“Specified Appeal Bond Documents” shall mean documentation identical in form to the drafts of such documentation that are attached as Exhibit A to the Third Amendment, among Loan Parties, Agent and Lenders, other than changes that solely consist of inserting the dates of such documents and confirming the final "Bond Amount" (as defined in such documentation).

 

“Specified Geveran Documents” shall mean the Specified Appeal Bond Documents, the Specified Geveran Intercreditor Amendment, the Geveran Appeal Bond Rights Subordination Agreement and the Second Lien Geveran Appeal Bond Rights Subordination Agreement.

 

“Specified Geveran Intercreditor Amendment” shall mean an agreement in the form attached as Exhibit D to the Third Amendment.

 

“Third Amendment” means that certain Third Amendment to this Agreement dated September 10, 2015, among Borrower, Agent and Lenders.

 

“Third Amendment Date” means September 10, 2015.

 

6.     Affirmative Covenant. Within ten (10) Business Days after the Order Entry, or such later date to which the Agent may consent in its sole discretion, Borrower shall have delivered to the Agent true, correct and complete executed copies of the Specified Appeal Bond Documents, in the form of Exhibit A attached hereto. For avoidance of doubt, compliance with this Section 4 shall be deemed to satisfy Section 5.18 of the Loan Agreement. 

 

7.     Conditions. The effectiveness of this Amendment is subject to the following conditions:

 

  

(a)     the execution and delivery of this Amendment by the Borrower, Agent, and each of the Lenders;

 

(b)     after giving effect to this Amendment, the representations and warranties set forth herein shall be true and correct and no Default or Event of Default shall exist and be continuing;

 

(c)     Borrower shall have delivered to the Agent substantially final forms of the Geveran Appeal Bond Rights Subordination Agreement, which is attached hereto as Exhibit B, the Second Lien Geveran Appeal Bond Rights Subordination Agreement, which is attached hereto as Exhibit C, and the Specified Geveran Intercreditor Amendment, which is attached hereto as Exhibit D; and

 

(d)     Borrower shall have paid all fees, costs and expenses of the Agent and Lenders in connection with this Amendment, including, without limitation, reasonable fees, costs and expenses of the Agent’s and Lenders’ counsel.

 

8.     Representations and Warranties. The Borrower hereby represents and warrants to the Agent and each Lender as follows:

 

(a)     Borrower is a corporation, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation;

 

(b)     Borrower has the power and authority to execute, deliver and perform its obligations under this Amendment;

 

(c)     the execution, delivery and performance by the Borrower of this Amendment has been duly authorized by all necessary action and does not and will not require any registration with, consent or approval of, notice to or action by, any Person (including any Governmental Authority);

 

(d)     this Amendment constitutes the legal, valid and binding obligation of the Borrower, enforceable against Borrower in accordance with its terms;

 

(e)     immediately before and after giving effect to this Amendment, no Default or Event of Default exists or shall exist immediately following the consummation of the changes contemplated hereby;

 

(f)     all representations and warranties contained in the Loan Agreement are true and correct as of the date hereof, except to the extent made as of a specific date, in which case each such representation and warranty is true and correct as of such date; and

 

(g)     by its signature below, Borrower agrees that it shall constitute an Event of Default if any representation or warranty made herein is untrue or incorrect in as of the date when made or deemed made.

 

  

9.     Agreement in Full Force and Effect as Amended. Except as specifically amended hereby, the Loan Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed as so amended. Except as expressly set forth herein, this Amendment shall not be deemed to be an amendment or modification of any provisions of the Loan Agreement or any other Loan Document or any right, power or remedy of the Lenders, nor constitute a waiver of any provision of the Loan Agreement, any other Loan Document, or any other document, instrument and/or agreement executed or delivered in connection therewith or of any Default or Event of Default under any of the foregoing, in each case, whether arising before or after the date hereof or as a result of performance hereunder or thereunder. This Amendment also shall not preclude the future exercise of any right, remedy, power, or privilege available to the Lenders whether under the Loan Agreement, the other Loan Documents, at law or otherwise and nothing contained herein shall constitute a course of conduct or dealing among the parties hereto. All references to the Loan Agreement shall be deemed to mean the Loan Agreement as modified hereby. This Amendment shall not constitute a novation or satisfaction and accord of the Loan Agreement or the other Loan Documents, but shall constitute an amendment thereof. The parties hereto agree to be bound by the terms and conditions of the Loan Agreement and the Loan Documents as amended by this Amendment, as though such terms and conditions were set forth herein. Each reference in the Loan Agreement to “this Amendment,” “hereunder,” “hereof,” “herein” or words of similar import shall mean and be a reference to the Loan Agreement as amended by this Amendment, and each reference herein or in any other Loan Document to the “Loan Agreement” shall mean and be a reference to the Loan Agreement as amended and modified by this Amendment.

 

10.     Counterparts. This Amendment may be executed by one or more of the parties to this Amendment and any number of separate counterparts, each of which when so executed, shall be deemed an original and all said counterparts when taken together shall be deemed to constitute but one and the same instrument.

 

11.     Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of each party hereto and their respective successors and assigns.     

 

12.     Further Assurance. Borrower hereby agrees from time to time, as and when requested by the Agent or any Lender, to execute and deliver or cause to be executed and delivered, all such documents, instruments and agreements and to take or cause to be taken such further or other action as the Agent or such Lender may reasonably deem necessary or desirable in order to carry out the intent and purposes of this Amendment, the Loan Agreement, and the Loan Documents.

 

13.     GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS.

 

14.     Severability. Wherever possible, each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Amendment.

 

  

15.     Reaffirmation. Borrower as debtor, grantor, pledgor, or in any other similar capacity hereby ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under each of the Loan Documents to which it is a party. Borrower hereby consents to this Amendment and acknowledges that each of the Loan Documents remains in full force and effect and is hereby ratified and reaffirmed. Except as expressly set forth herein, the execution of this Amendment shall not operate as a waiver of any right, power or remedy of the Agent or any Lender, constitute a waiver of any provision of any of the Loan Documents or serve to effect a novation of the Obligations.

 

16.     Acknowledgment of Obligations. The Borrower hereby acknowledges, confirms and agrees that as of the close of business on September 10, 2015, the Borrower is indebted to the Lenders in respect of the Term Loans in the principal amount of $31,461,238.29, with accrued and outstanding cash interest in the amount of $63,187.28 and accrued and outstanding Closing Date PIK Interest in the amount of $12,234.93. The Borrower hereby acknowledges, confirms and agrees that all such Term Loans, together with interest accrued and accruing thereon, and all fees, costs, expenses and other charges now or hereafter payable by the Borrower to the Agent and Lenders, are unconditionally owing by the Borrower to the Agent and Lenders, as applicable, without offset, defense or counterclaim of any kind, nature or description whatsoever.

 

17.     Acknowledgment of Rights; Release of Claims. Borrower hereby acknowledges that: (a) it has no defenses, claims or set-offs to the enforcement by any Lender or the Agent of Borrower’s liabilities, obligations and agreements on the date hereof; (b) to its knowledge, each Lender and the Agent have fully performed all undertakings and obligations owed to it as of the date hereof; and (c) except to the limited extent expressly set forth in this Amendment, each Lender and the Agent do not waive, diminish or limit any term or condition contained in the Loan Agreement or any of the other Loan Documents. Borrower hereby remises, releases, acquits, satisfies and forever discharges the Lenders and Agent, their agents, employees, officers, directors, predecessors, attorneys and all others acting or purporting to act on behalf of or at the direction of the Lenders and Agent (“Releasees”), of and from any and all manner of actions, causes of action, suit, debts, accounts, covenants, contracts, controversies, agreements, variances, damages, judgments, claims and demands whatsoever, in law or in equity, which any of such parties ever had, now has or, to the extent arising from or in connection with any act, omission or state of facts taken or existing on or prior to the date hereof, may have after the date hereof against the Releasees, for, upon or by reason of any matter, cause or thing whatsoever through the date hereof. Without limiting the generality of the foregoing, Borrower waives and affirmatively agrees not to allege or otherwise pursue any defenses, affirmative defenses, counterclaims, claims, causes of action, setoffs or other rights they do, shall or may have as of the date hereof, including, but not limited to, the rights to contest: (a) the right of Agent and each Lender to exercise its rights and remedies described in this Amendment; (b) any provision of this Amendment or the Loan Documents; or (c) any conduct of the Lenders or other Releasees relating to or arising out of the Loan Agreement or the other Loan Documents on or prior to the date hereof.

 

  

18.     Tax Treatment. The Loan Parties do not believe that the amendments made pursuant to this Amendment shall be treated as a “significant modification” of the Term Loans under Treasury Regulation 1.1001-3. 

 

[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

 

  

IN WITNESS WHEREOF, each of the undersigned has executed this Amendment as of the date set forth above.

 

	BORROWER:
	LIGHTING SCIENCE GROUP CORPORATION,
	a Delaware corporation
	By:	/s/ Edward D. Bednarcik
		Name: Edward D. Bednarcik
		Title: Chief Executive Officer
	AGENT:
	MEDLEY CAPITAL CORPORATION,
	a Delaware corporation
	By:	/s/ Richard T. Allorto
	Name:	Richard T. Allorto
	Title:	Chief Financial Officer
	LENDERS:
	MEDLEY CAPITAL CORPORATION,
	a Delaware corporation
	By:	/s/ Richard T. Allorto
	Name:	Richard T. Allorto
	Title:	Chief Financial Officer
	MEDLEY OPPORTUNITY FUND II LP,
	a Delaware limited partnership
	By:	/s/ Richard T. Allorto
	Name:	Richard T. Allorto
	Title:	Chief Financial Officer

 

Exhibit 10.7

 

 

September 11, 2015

 

Medley Capital Corporation

375 Park Avenue, Suite 3304

New York, NY 10152

Attn: Brian Dohmen and Gregory Richards

Fax: (212) 759-0091

 

RE:	Consents regarding issuance of Series J Convertible Preferred Stock and Series K Preferred Stock and amendment to the Amended and Restated Series J Certificate of Designation; Confirmation with respect to Customer 1 and related provisions in Loan Agreement

 

Ladies and Gentlemen:

 

Reference is made to that certain Term Loan Agreement dated as of February 19, 2014, as amended by that certain First Amendment to Term Loan Agreement dated as of April 25, 2014, that certain Limited Consent and Second Amendment to Term Loan Agreement dated as of January 30, 2015, and that certain Third Amendment to Term Loan Agreement dated as of September 11, 2015 (the “Third Amendment” and, as amended, the “Loan Agreement”), among Lighting Science Group Corporation, a Delaware corporation (“LSG” or “Borrower”), the various financial institutions from time to time party thereto as lenders (collectively, the “Lenders”) and Medley Capital Corporation, in its capacity as agent for Lenders (in such capacity, “Agent”). Capitalized terms used herein shall, unless otherwise provided herein, have the respective meanings set forth in the Loan Agreement.

 

LSG hereby advises Agent and Lenders that LSG desires to issue and sell additional Equity Interests pursuant to the terms of the Preferred Stock Subscription and Support Agreement, in the form attached hereto as Schedule I (the “Subscription and Support Agreement”), which Equity Interests shall consist of (a) one share of LSG’s Series J Convertible Preferred Stock (the “Series J Preferred Shares”), which are convertible into shares of common stock, $0.001 par value per share, of LSG (“Common Stock”), and which shall be governed by the Amended and Restated Certificate of Designation of Series J Convertible Preferred Stock, in the form attached hereto as Schedule II-A (as amended through the date hereof, the “Amended Series J Certificate of Designation”), and (b) a warrant to purchase 2,650 shares of Common Stock at an exercise price of $0.001 per share of Common Stock in the form attached hereto as Schedule III (the “Series J Warrants” and together with the Series J Preferred Shares, collectively the “Series J Securities”). The issuance and sale of Series J Securities shall take place at one or more closings to certain investors approved by LSG from the period commencing on or about September 11, 2015 through March 31, 2016 (the “Series J Securities Issuance Period”), and the aggregate amount of Series J Securities issued and sold from time to time during the Securities J Issuance Period shall not exceed 15,000 Series J Securities. In addition, pursuant to Section 14 of the Amended and Restated Certificate of Designation of Series H Convertible Preferred Stock (the “Series H Certificate of Designation”), the Amended and Restated Certificate of Designation of Series I Convertible Preferred Stock (the “Series I Certificate of Designation”) and the Amended Series J Certificate of Designation (collectively, the “Certificates of Designation”), LSG is required to issue and sell Series J Securities to Exercising Holders (as defined in the Certificates of Designation) on the terms and conditions set forth in the Certificates of Designation; the issuance of all such Series J Securities, including pursuant to the preemptive right provisions in Section 14 of the Certificates of Designation, is collectively the “Series J Issuance”.

 

 

In addition, as consideration for the posting of the Geveran Appeal Bond by Pegasus Fund IV, L.P. (“Pegasus IV”), LSG hereby advises Agent and Lenders that LSG desires to issue to Pegasus IV Equity Interests pursuant to the terms of the Subscription and Support Agreement, which Equity Interests shall consist of (a) one share of LSG’s Series K Preferred Stock (the “Series K Preferred Shares”), which shall be governed by the Certificate of Designation of Series K Preferred Stock, in the form attached hereto as Schedule IV (the “Series K Certificate of Designation”), and (b) a warrant to purchase 735 shares of Common Stock at an exercise price per share of Common Stock equal to the closing sales price of Common Stock as quoted on the OTC Bulletin Board, OTC pink markets or similar quotation service on the date immediately prior to the date of issuance, in the form attached hereto as Schedule V (the “Series K Warrants” and together with the Series K Preferred Shares, collectively the “Series K Securities”). Up to 25,000 Series K Securities shall be issued to Pegasus IV substantially concurrently with the execution of the Specified Appeal Bond Documents. In addition, pursuant to the Subscription and Support Agreement, LSG has agreed to conduct a rights offering that provides the holders of record of Common Stock and securities convertible into or exchangeable for shares of Common Stock the right to purchase a pro rata share of the number of Series K Securities issued to Pegasus IV (the “Rights Offering”). The issuance of all such Series K Securities, including pursuant to the Rights Offering, is collectively the “Series K Issuance”).

 

In addition, LSG hereby advises Agent and Lenders that LSG desires to amend the Amended Series J Certificate of Designation to increase the authorized number of Series J Preferred Shares from 70,000 Series J Preferred Shares to 85,100 Series J Preferred Shares, pursuant to the form of Certificate of Increase attached hereto as Schedule II-B (the “Series J Certificate of Increase”).

 

LSG hereby requests that, and subject to the satisfaction of the conditions set forth below, Agent and Lenders hereby: (a) waive the requirements of Sections 6.12(b) of the Loan Agreement with respect to the Series J Issuance and the Series K Issuance, (b) consent to the Series K Issuance and the adoption of the Series K Certificate of Designation in accordance with Section 5.18 of the Loan Agreement, (c) confirm that the adoption of the Series J Certificate of Increase and the Series K Certificate of Designation are not materially adverse in the interests of the Lenders, and are permitted pursuant to the terms of Section 6.6(b) of the Loan Agreement, and (d) with respect to any Series J Securities or Series K Securities issued as part of the Series J Issuance or the Series K Issuance, respectively, on or after the date hereof, agree to receive less than five (5) Business Days’ prior written notice of any such issuance, notwithstanding Section 6.12(a) of the Loan Agreement; provided however that, LSG shall provide at least one (1) Business Day prior written notice of such issuance, which notice shall specify the parties to whom such securities are to be issued, and the total amount (if applicable) which shall be realized from the issuance of such securities.

 

LSG also hereby advises Agent and Lenders that the preliminary results of a periodic product line review conducted by Customer 1 (the “Line Review”) indicate that Customer 1 may significantly reduce its business with LSG, which may include ceasing to purchase certain items from LSG, in the future. Notwithstanding the final results of the Line Review (“Line Review Result”) which is expected to be disclosed in an award letter (the “Award Letter”) delivered to LSG by Customer 1, each of Agent and the Lenders hereby acknowledges and agrees that the Line Review Result described in the Award Letter and any direct or indirect impact of such Line Review Result on the ongoing operations of the Obligors’ business shall not constitute a Material Adverse Effect nor cause the representation to be made by LSG under Section 4.8 of the Loan Agreement to be untrue in any material respect. Each of Agent and Lenders hereby further acknowledges and agrees that LSG has fulfilled its obligations under Section 5.10 of the Loan Agreement with respect to disclosing any potential amendment to the Customer 1 Material Contract resulting from the Line Review. Notwithstanding the foregoing, LSG hereby agrees to provide Agent with a copy of the Award Letter within two (2) Business Days’ of receipt by LSG thereof.

 

  

The waivers set forth herein shall not establish any course of dealing regarding, support any expectation on the part of any obligor regarding, nor affect the interpretation of, any provision of the Loan Agreement with respect to any matter other than, to the limited extent described above, the Line Review Result described in the Award Letter.

 

None of the foregoing waivers is intended to be, and none shall be deemed to be, a waiver or modification of any provision of the Loan Agreement except as expressly set forth herein (for the avoidance of doubt, including without limitation, a waiver of any Default that may arise under Section 7 of the Loan Agreement, following receipt of the final results of the Line Review). Without limiting the generality of the foregoing, this letter agreement shall in no way modify the provisions of Sections 6.6(b), 6.10 or 6.12 of the Loan Agreement (other than to the extent that Agent has provided its consent to certain items set forth herein. For the avoidance of doubt, LSG hereby acknowledges that any future issuance of Series J Preferred Shares or Series K Preferred Shares, solely to the extent such issuance is in excess of the aggregate amount of Series J Securities and Series K Securities issuable pursuant to the Series J Issuance and the Series K Issuance, respectively, shall not be permitted by Section 6.12 of the Loan Agreement without the consent of Agent and Lenders, as the terms of the Series J Preferred Shares and the Series K Preferred Shares are more restrictive or burdensome to LSG than the terms of any Equity Interests in effect on the Closing Date. The effectiveness of the consent and waivers contained herein is subject to Agent's receipt of (i) a duly executed consent and waiver with respect to the Revolving Loan Agreement in form and substance satisfactory to Agent with respect to the consent items described herein, (ii) a duly executed Third Amendment among Borrower, Agent, and Lenders with respect to the Loan Agreement, in form and substance satisfactory to Agent, and (iii) an opinion letter (in form and substance satisfactory to Agent) from counsel to Borrowers addressing such matters as Agent shall request in connection with the Series J Issuance and the Series K Issuance. In consideration of Agent's and Lenders' willingness to enter into this agreement, LSG hereby agrees to promptly (but in any event within one (1) Business Day of receipt of the filed stamped copy thereof) provide Agent with a recorded copy of the Amended Series J Certificate of Designation, the Series K Certificate of Designation, and the Series J Certificate of Increase, as certified by the Secretary of State of the State of Delaware.

 

By its signature hereto, Borrower and Guarantor hereby (a) ratifies and reaffirms the Obligations, each of the Loan Documents and all of Borrower’s and Guarantor’s respective covenants, duties, indebtedness and liabilities under the Loan Documents; (b) acknowledges and stipulates that: the Loan Agreement and the other Loan Documents executed by Borrower and Guarantor are legal, valid and binding obligations of Borrower and Guarantor that are enforceable against Borrower and Guarantor in accordance with the terms thereof; all of the Obligations are owing and payable without defense, offset or counterclaim (and to the extent there exists any such defense, offset or counterclaim on the date hereof, the same is hereby waived by Borrower and Guarantor); and the security interests and liens granted by Borrower and Guarantor in favor of Agent are duly perfected, first priority security interests and liens; and (c) represents and warrants to Agent and Lenders, to induce Agent and Lenders to enter into this agreement, that (i) no Default exists on the date hereof or would result from the effectiveness of this agreement or the consummation of the actions described herein, (ii) the execution, delivery and performance of this agreement have been duly authorized by all requisite company action on the part of Borrower and Guarantor and this agreement has been duly executed and delivered by Borrower and Guarantor, (iii) all of the representations and warranties made by Borrower and Guarantor in the Loan Documents are true and correct on and as of the date hereof, and (iv) LSG has provided a copy of the Loan Agreement to each of LSGC Holdings III LLC and Pegasus IV which are, as of the date hereof, the anticipated initial investors of the Series J Securities and the Series K Securities, respectively, and have discussed the provisions (including, without limitation, restrictions upon redemptions, distributions and issuance of Equity Interests) of the Loan Agreement with such Persons.

 

 

.     In consideration of Agent’s and Lenders’ willingness to enter into this agreement, Borrower agrees to pay to Agent and Lenders, on demand, all costs and expenses (including, without limitation, taxes and legal fees and expenses) incurred by Agent and Lenders in connection with the preparation, negotiation and execution of this agreement and any other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto. Except as otherwise expressly provided in this agreement, nothing herein shall be deemed to amend or modify any provision of the Loan Agreement or any of the other Loan Documents, each of which shall remain in full force and effect. This agreement is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction, and the Loan Agreement shall continue in full force and effect. This agreement shall be governed by and construed in accordance with the internal laws of the State of New York and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This agreement may be executed in any number of counterparts and by different parties to this agreement on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any manually executed signature page hereto that is delivered by facsimile or other electronic transmission shall be deemed to be an original signature hereto. To the fullest extent permitted by applicable law, the parties hereto each hereby waives the right to trial by jury in any action, suit, counterclaim or proceeding arising out of or related to this agreement.

 

To induce Agent and Lenders to enter into this letter agreement, Borrower and Guarantor hereby RELEASE, ACQUIT AND FOREVER DISCHARGE Agent and each Lender, and all officers, directors, agents, employees, successors and assigns of Agent or any Lender, from any and all liabilities, claims, demands, actions or causes of action of any kind or nature (if there be any), whether absolute or contingent, disputed or undisputed, at law or in equity, or known or unknown, that Borrower or Guarantor now has or ever had against Agent or any Lender arising under or in connection with any of the Loan Documents or otherwise. Borrower and Guarantor represent and warrant to Agent and Lenders that Borrower and Guarantor have not transferred or assigned to any Person any claim that Borrower or Guarantor ever had or claimed to have against Agent or any Lender.

 

[Remainder of Page Intentionally Left Blank;

Signature Page Follows.]

 

 

	Very Truly Yours,
	LIGHTING SCIENCE GROUP CORPORATION
	By:	/s/ Ed Bednarcik
		Name:  Ed Bednarcik
		Title:    Chief Executive Officer
	BIOLOGICAL ILLUMINATION, LLC
	By:	/s/ Phil Ragona
		Name:   Phil Ragona
		Title:     Executive Vice President and Secretary
	LSGC, LLC
	By:	/s/ Phil Ragona
		Name:   Phil Ragona
		Title:     Executive Vice President and Secretary
	Accepted and Agreed as of September 11, 2015
	MEDLEY CAPITAL CORPORATION, as Agent for
	the Lenders
	By:	/s/ Richard T. Allorto
		Name:  Richard T. Allorto
		Title:    Chief Financial Officer