Exhibit 10.1
CONVERTIBLE NOTE

$31,649,999.39     New York, New York   May 15, 2009

     FOR VALUE RECEIVED, the undersigned, LIGHTING SCIENCE GROUP CORPORATION, a
Delaware corporation (“Borrower”), promises to pay to the order of PEGASUS
PARTNERS IV, L.P., a Delaware limited partnership (“Lender”), the sum of THIRTY
ONE MILLION SIX HUNDRED FORTY NINE THOUSAND NINE HUNDRED NINETY NINE DOLLARS AND
THIRTY NINE CENTS ($31,649,999.39) or so much thereof as may be outstanding
hereunder, together with interest.
          1. Interest Rate. Interest shall accrue on the unpaid principal
balance of this Note from the date hereof at 14% per annum.
          2. Default Rate. All past due principal of and accrued interest on
this Note shall bear interest from maturity (stated, by acceleration, or
otherwise) until paid at the rate of 18% per annum.
          3. Advances.
     (a) On the date hereof, Lender will loan Borrower $13,150,761.11 (the
“First Term Advance”).
     (b) On or before the tenth (10th) Business Day after the date hereof (such
date to be determined by Lender in its reasonable discretion), Lender will loan
Borrower $18,499,238.28 (the “Second Term Advance” and, together with the First
Term Advance, the “Term Advances”). The Term Advances may not be prepaid.
          4. Use of Proceeds.
     (a) The proceeds of the First Term Advance will be used to: (i) pay in full
that certain Promissory Note dated December 18, 2008, executed by Borrower and
made payable to the order of Lender in the original principal amount of
$1,950,000.00, (ii) pay in full that certain Promissory Note dated February 13,
2009, executed by Borrower and made payable to the order of Lender in the
original principal amount of $7,000,000.00, (iii) pay in full that certain
Promissory Note dated April 17, 2009, executed by Borrower and made payable to
the order of Lender in the original principal amount of $2,000,000.00, (iv) pay
in full that certain Promissory Note dated May 11, 2009, executed by Borrower
and made payable to the order of Lender in the original principal amount of
$500,000.00, and (v) pay $1,500,000.00 of the principal amount outstanding under
that certain Loan Authorization Agreement (the “Revolver”), dated July 25, 2008,
between Borrower and Bank of Montreal.
     (b) The proceeds of the Second Term Advance will be used to pay principal
amounts outstanding under the Revolver.
          5. Repayments. The principal and interest of this Note shall be due
and payable on the Maturity Date. As used herein, “Maturity Date” shall mean the
earlier of (a) July 31, 2009 or (b) the Closing Date (as hereinafter defined);
provided, that if the registration statement for the Offering (as hereinafter
defined) of Borrower (the “Registration Statement”) is declared effective by the
Securities and Exchange Commission (the “SEC”) prior to July 31, 2009, the
Maturity Date shall be the Closing

 

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Date (as hereinafter defined); provided further, that in no event shall the
Maturity Date be later than September 3, 2009.
          6. Events of Default and Remedies. The entire unpaid principal balance
of and all accrued interest on this Note shall immediately become due and
payable, without notice or demand which are hereby waived, upon the occurrence
of any one or more of the following events of default (individually or
collectively, herein called a “Default”):
     (a) The failure or refusal of Borrower to pay all or any part of the
principal of or accrued interest on this Note as and when same becomes due and
payable in accordance with the terms hereof; or
     (b) Borrower shall: (i) become insolvent within the meaning of the
Bankruptcy Code of the United States, as amended, (ii) admit in writing its
inability to pay or otherwise fail to pay its or his or her debts generally as
they become due, (iii) voluntarily seek consent to, or acquiesce in the benefit
or benefits of any Debtor Relief Law, or (iv) be made the subject of any
proceeding provided for by any Debtor Relief Law that could suspend or otherwise
affect any of the rights of the holder hereof. As used herein, “Debtor Relief
Laws” means the Bankruptcy Code of the United States, as amended and all other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization or similar debtor relief laws from time
to time in effect affecting the rights of creditors generally; or
     (c) The nonpayment when due of any material indebtedness owed by Borrower,
or the occurrence of any event under any document or instrument evidencing,
securing, or executed in connection with any such indebtedness which could give
the holder thereof the right to declare such indebtedness or any part thereof
due prior to its scheduled maturity; or
     (d) The discovery by the holder hereof that any statement, representation,
or warranty made by Borrower in any writing, document, or instrument ever
delivered to the holder hereof in connection herewith was at the time made
false, misleading, or erroneous in any material respect.
          Upon the occurrence of a Default, the holder of this Note may:
(a) offset against this Note any sum or sums owed by the holder hereof to
Borrower and (b) proceed to protect and enforce its rights either by suit in
equity and/or by action at law, or by other appropriate proceedings, whether for
the specific performance of any covenant or agreement contained in this Note or
any document or instrument executed and delivered by Borrower in connection with
this Note or in aid of the exercise of any power or right granted by this Note
or any document or instrument executed and delivered by Borrower in connection
with this Note or to enforce any other legal or equitable right of the holder of
this Note.
          7. Cumulative Rights. No delay on the part of the holder of this Note
in the exercise of any power or right under this Note, or under any document or
instrument executed in connection herewith, shall operate as a waiver thereof,
nor shall a single or partial exercise of any other power or right. Enforcement
by the holder of this Note of any security for the payment hereof shall not
constitute an election by it of remedies so as to preclude the exercise of any
other remedy available to it.
          8. Waiver. Borrower, and each surety, endorser, guarantor, and other
party ever liable for the payment of any sum of money payable on this Note
jointly and severally waive demand, presentment, protest, notice of nonpayment,
notice of intention to accelerate, notice of acceleration, notice of protest,
and any and all lack of diligence or delay in collection or the filing of suit
hereon which may occur, and agree that their liability on this Note shall not be
affected by any renewal or

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extension in the time of payment hereof, by any indulgences, or by any release
or change in any security for the payment of this Note, and hereby consent to
any and all renewals, extensions, indulgences, releases, or changes, regardless
of the number of such renewals, extensions, indulgences, releases, or changes.
          9. Attorneys’ Fees and Costs. In the event that a Default shall occur,
and in the event that thereafter this Note is placed in the hands of an attorney
for collection, or in the event this Note is collected in whole or in part
through legal proceedings of any nature, then and in any such case Borrower
promises to pay all costs of collection, including, but not limited to,
reasonable attorneys’ fees incurred by the holder hereof on account of such
collection, whether or not suit is filed.
          10. Notices. Any notice or demand given hereunder by the holder shall
be deemed to have been given and received (a) when actually received by
Borrower, if delivered in person or by courier or messenger, or (b) two
(2) Business Days (hereinafter defined) after a letter containing such notice,
certified or registered, with postage prepaid, addressed to Borrower, is
deposited in the United States Mail. The address of Borrower is 120 Hancock
Lane, Westampton, New Jersey 08060 or such other address as Borrower shall
advise the holder hereof by certified or registered letter.
          11. Governing Law. The laws of New York shall govern the construction,
validity, enforcement and interpretation of this Note, except to the extent
federal laws otherwise govern the validity, construction, enforcement and
interpretation hereof.
          12. Headings. The headings of the sections of this Note are inserted
for convenience only and shall not be deemed to constitute a part hereof.
          13. Successors and Assigns. All of the covenants, stipulations,
promises and agreements contained in this Note by or on behalf of Borrower shall
bind its successors and assigns, whether so expressed or not; provided, that
Borrower may not, without the prior written consent of the holder hereof, assign
any rights, duties, or obligations under this Note.
          14. Maximum Interest Rate. Regardless of any provision contained
herein, or in any other document executed in connection herewith, the holder
hereof shall never be entitled to receive, collect or apply, as interest hereon,
any amount in excess of the maximum rate of interest permitted to be charged
from time to time by applicable law, and in the event the holder hereof ever
receives, collects or applies, as interest, any such excess, such amount which
would be excessive interest shall be deemed a partial prepayment of the
principal hereof and treated hereunder as such; and, if the principal hereof is
paid in full, any remaining excess shall forthwith be paid to Borrower. In
determining whether or not the interest paid or payable, under any specified
contingency, exceeds the highest lawful rate, Borrower and the holder hereof
shall, to the maximum extent permitted under applicable law, (a) characterize
any nonprincipal payment as an expense, fee, or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) spread the
total amount of interest throughout the entire contemplated term hereof;
provided, that if the indebtedness evidenced hereby is paid and performed in
full prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence thereof exceeds the maximum lawful
rate, the holder hereof shall refund to Borrower the amount of such excess or
credit the amount of such excess against the principal hereof, and in such
event, the holder hereof shall not be subject to any penalties provided by any
laws for contracting for, charging, or receiving interest in excess of the
maximum lawful rate.
          15. Business Day; Payments. As used herein, (a) “Business Day” means
any day other than Saturday, Sunday or other day on which the Federal Reserve
Bank of New York is closed and (b) “Nonbusiness Day” means every day that is not
a Business Day. The principal of, or accrued

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interest on, this Note shall be due and payable in lawful money of the United
States of America, in New York, New York at the office of Lender, 505 Park
Avenue, 21st Floor, New York, New York 10022, in funds which are or will be
available for immediate use by Lender at such office at or before 12:00 p.m.,
Eastern time (daylight or standard, as applicable) on the day payment hereof is
due. In any case where a payment of principal or interest hereon is due on a
Nonbusiness Day, Borrower shall be entitled to delay such payment until the next
succeeding Business Day, but interest shall continue to accrue until the payment
is, in fact, made.
          16. Offering. Borrower will use its best efforts to conduct a rights
offering (the “Offering”) during the second fiscal quarter of 2009, which shall
consist of the offering of at least 38,916,295 Units (as hereinafter defined and
including the number of Units that may be acquired pursuant to this Note) at a
price of $1.006 per Unit. As used herein “Unit” means, collectively: (i) 1.006
shares of Borrower’s newly designated Series D Non-Convertible Preferred Stock,
which shall have the designations, powers, preferences and rights set forth in
the form of Certificate of Designation attached hereto as Exhibit A (the
“Series D Preferred Shares”), and (ii) a Warrant to purchase one share of
Borrower’s common stock for $6.00, which Warrant shall be substantially in the
form of Exhibit B attached hereto (the “Warrant”). Borrower will use its
reasonable best efforts to cause the Registration Statement for the Offering to
be declared effective by the SEC as soon as reasonably possible, but in no event
later than July 31, 2009.
          17. Automatic Conversion; Purchase Option.
     (a) If the Registration Statement for the Offering is declared effective by
the SEC prior to July 31, 2009, then Lender shall be deemed to have converted
all of the then outstanding principal balance and accrued and unpaid interest of
this Note (the “Convertible Debt”), into a number of Units equal to one Unit for
each $1.006 of Convertible Debt (the “Automatic Conversion”).
     (b) The Automatic Conversion shall occur on the date the Offering is
consummated (the “Closing Date”) and shall constitute a binding agreement
between Lender and Borrower, in which Lender shall be deemed, without further
action on its part, to subscribe for the number of Units it is entitled to
receive upon such conversion (which number of Units shall be reduced by the
number of Units, if any, Lender receives in accordance with paragraph 18
hereof), and in payment and satisfaction of such subscription, to release
Borrower from all liability hereon in respect of the repayment of principal
and/or accrued and unpaid interest hereof being converted. If Lender’s
acquisition of Units pursuant to this Note would result in Lender receiving more
than its pro rata allocation of Units (such allocation to be determined in
conjunction with the Offering), then Borrower hereby agrees to increase the size
of the Offering to accommodate such additional Units if necessary such that
other securityholders participating in the Offering are able to purchase their
allocation of Units.
     (c) Borrower and Lender hereby agree that Lender will have the right to
acquire any Units not otherwise subscribed for pursuant to the terms of the
Offering (the “Purchase Option”). In addition, Borrower understands and agrees
that Lender shall cause LED Holdings, LLC to distribute its rights pursuant to
the Offering to its members, including Lender.
     (d) Borrower shall not be required to issue fractions of Units upon
conversion of this Note (or portion thereof) or acquisitions of any additional
Units by Lender pursuant to the Purchase Option. If any fractional interest in a
Unit would be delivered upon the conversion of this Note and acquisition of
additional Units by Lender pursuant to the Purchase Option,

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Borrower shall purchase such fractional interest for an amount in cash equal to
$1.006 multiplied by the amount of such fractional interest.
     (e) As soon as practicable after the Closing Date, and in any event, within
five (5) Business Days thereafter, Borrower shall issue and deliver to the
Lender: (i) a certificate or certificates for the number of Series D Preferred
Shares and Warrants issuable upon the conversion of this Note in accordance with
the provisions hereof, and (ii) a check or cash in respect of any fraction of a
Unit.
          18. Optional Conversion. Paragraph 17 notwithstanding, at any time
after the expiration of the notice period prescribed by SEC Rule 14c-2, Lender
may, at its option, convert all or a portion of the Convertible Debt into a
number of Units equal to one Unit for each $1.006 of Convertible Debt (with such
conversion first being applied to the portion of Convertible Debt consisting of
accrued interest and then being applied to the portion of Convertible Debt
consisting of principal) (the “Optional Conversion”). Borrower shall not be
required to issue fractions of Units pursuant to the Optional Conversion. If any
fractional interest in a Unit would be delivered pursuant to the Optional
Conversion, Borrower shall purchase such fractional interest for an amount in
cash equal to $1.006 multiplied by the amount of such fractional interest. In
the event that Lender exercises its option pursuant to the Optional Conversion
prior to the record date of the Offering, Lender shall not receive any rights in
the Offering with respect to the securities of Borrower underlying the Units
issued to Lender pursuant to such conversion. Conversion pursuant to this
paragraph 18 shall release Borrower from all liability in respect of the
repayment of principal and/or accrued and unpaid interest being converted upon
payment in satisfaction of the subscription for the number of Units Lender is
entitled to receive pursuant to such conversion.
          19. Borrowings from Bank of Montreal. After the date hereof and so
long as any amount remains outstanding under this Note, Borrower shall obtain
the prior written consent of Lender (which consent may be withheld in Lender’s
sole discretion for any reason or no reason) prior to borrowing more than
$5,000,000 in the aggregate pursuant to the Revolver. By way of example only, if
Borrower has previously borrowed $4,500,000 pursuant to the Revolver, and seeks
to borrow another $600,000, Borrower will need the prior written consent of
Lender because it will be seeking to borrow an aggregate amount that is greater
than $5,000,000.
          20. Legends. Each Series D Preferred Share issuable upon conversion of
this Note shall bear the legend set forth below:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES
LAWS UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF, AND
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH, A CONVERTIBLE NOTE BETWEEN THE
RECORD HOLDER OF THIS CERTIFICATE AND THE COMPANY. COPIES OF SUCH

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CONVERTIBLE NOTE MAY BE OBTAINED UPON WRITTEN REQUEST TO THE COMPANY.
          21. Consent to Jurisdiction. BORROWER IRREVOCABLY AGREES THAT, SUBJECT
TO LENDER’S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY
ARISING OUT OF, FROM OR RELATED TO THIS NOTE WILL BE LITIGATED IN COURTS HAVING
SITUS WITHIN NEW YORK, NEW YORK. BORROWER HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY COURT LOCATED WITHIN NEW YORK, NEW YORK, WAIVES PERSONAL
SERVICE OF PROCESS UPON BORROWER AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY
BE MADE BY CERTIFIED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED IN
PARAGRAPH 10 HEREOF AND SERVICE SO MADE WILL BE DEEMED TO BE COMPLETED UPON
ACTUAL RECEIPT.
          22. Waiver of Jury Trial. BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS NOTE OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THIS NOTE,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING WILL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY. BORROWER AGREES THAT IT WILL NOT ASSERT ANY CLAIM AGAINST
LENDER ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL,
INCIDENTAL OR PUNITIVE DAMAGES.
          23. ENTIRETIES. THIS NOTE, TOGETHER WITH THE OTHER DOCUMENTS AND
INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH, REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
[Remainder of page intentionally left blank. Signature page to follow]

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     IN WITNESS WHEREOF, the undersigned has executed this Note as of the day
and year first above written.

            LIGHTING SCIENCE GROUP CORPORATION
      By:   /s/ Stephen Hamilton       Name:   Stephen Hamilton        Title:  
Vice President — Finance     

          ACCEPTED AND AGREED THIS 15th DAY OF MAY, 2009

PEGASUS PARTNERS IV, L.P.
      By:   PEGASUS INVESTORS IV, LP,         its general partner               
    By:   PEGASUS INVESTORS IV GP, L.L.C.,         its general partner         
          By:   /s/ Richard Weinberg        Name:   Richard Weinberg       
Title:   Vice President       

Signature Page to Lighting Science Group Convertible Note

 

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EXHIBIT A
SERIES D NON-CONVERTIBLE PREFERRED STOCK
(see attached)
Exhibit A

 

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EXHIBIT B
WARRANT
(see attached)
Exhibit B