Exhibit 10.1

PREFERRED STOCK SUBSCRIPTION AGREEMENT

THIS PREFERRED STOCK SUBSCRIPTION AGREEMENT (as may be amended or modified from
time to time in accordance with the terms hereof, this “Agreement”) is entered
into on September 25, 2012, by and among LIGHTING SCIENCE GROUP CORPORATION, a
Delaware corporation (the “Company”) and Portman Limited, a Cayman Islands
exempted company (“Purchaser”).

WHEREAS, the Company has authorized two series of preferred shares designated
the “Series H Convertible Preferred Stock” (“Series H Preferred Stock”) and
“Series I Convertible Preferred Stock” (“Series I Preferred Stock” and together
with the Series H Preferred Stock, the “Preferred Shares”), which are
convertible into shares of common stock, $0.001 par value per share, of the
Company (“Common Stock”) in accordance with the terms of the Certificate of
Designation governing the Series H Preferred Stock, in the form attached hereto
as Exhibit A (the “Series H Certificate of Designation”), or the Series I
Preferred Stock, in the form attached hereto as Exhibit B (the “Series I
Certificate of Designation”), as applicable;

WHEREAS, the Company has delivered that certain Preemptive Rights Notice in
accordance with the Series H Certificate of Designation and the Series I
Certificate of Designation pursuant to which the Company provided each holder
(collectively, the “Holders”) of shares of Series H Preferred Stock and Series I
Preferred Stock the right to purchase: (i) a Pro Rata Share (as defined in the
Series H Certificate of Designation and the Series I Certificate of Designation,
as applicable) of 51,000 shares of Series H Preferred Stock (the “Offered
Shares”) at a purchase price of $1,000 per share of Series H Preferred Stock and
(ii) provided that such Holder elects to purchase 95% of its Pro Rata Share of
the Offered Shares, a warrant (the “Offered Warrants”) to purchase 163.2653
shares (rounded to the nearest whole share) of Common Stock with respect to each
Offered Share purchased by such Holder (such offering of Offered Shares and
Offered Warrants being referred to herein as the “Offering”);

WHEREAS, Holders holding rights to purchase 24,500 Offered Shares and Offered
Warrants to purchase 4,000,000 shares of Common Stock previously assigned
Purchaser their respective rights to purchase a Pro Rata Share of the Offered
Shares and the Offered Warrants (the “Assignment”) and Purchaser has separately
elected to exercise such rights;

WHEREAS, the Company desires to sell to Purchaser and Purchaser desires to buy
from the Company directly pursuant to this Agreement and pursuant to the
Assignment and the related notice of exercise: (i) 24,500 shares of Series H
Preferred Stock (the “Purchased Shares”), each at a purchase price of $1,000 per
share and a stated value of $1,000 per share, for total consideration of
$24,500,000 (the “Purchase Price”) and (ii) a warrant (the “Warrant”) to
purchase 4,000,000 shares of Common Stock, which Warrant shall have the terms
and conditions set forth in the Warrant to Purchase Common Stock issued by the
Company to Purchaser on the date hereof;

WHEREAS, contemporaneous with the execution of this Agreement, the Company has
entered into that certain Preferred Stock Subscription Agreement, dated as of
the date hereof, between the Company, Cleantech Europe II (A) LP, a limited
partnership established under the laws of England (“Cleantech A”) and Cleantech
Europe II (B) LP, a limited partnership established under the laws of England
(“Cleantech B” and together with Cleantech A, “Zouk”), pursuant to which the
Company has agreed to sell, and Zouk has agreed to purchase: (i) an aggregate of
24,500 shares of Series H Preferred Stock (the “Zouk Shares”) and (ii) warrants
to purchase an aggregate of 4,000,000 shares of Common Stock; and

 

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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 Shares.

(a) Payment for Purchased Shares; Delivery of Certificates. Subject to the
provisions of this Agreement, and relying upon the representations, warranties
and covenants set forth herein, Purchaser hereby agrees to purchase from the
Company, and the Company hereby agrees to sell to Purchaser, the Purchased
Shares, free and clear of all Liens (other than restrictions on transfer or
Liens under the applicable state and federal securities Laws and pursuant to the
Series H Certificate of Designation), for aggregate consideration equal to the
Purchase Price, which shall be paid in United States dollars. The closing of the
purchase and sale of the Purchased Shares by Purchaser (the “Closing”) shall
occur concurrently with the execution hereof. At the Closing: (i) 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 attached hereto as Annex A, an amount equal to the Purchase Price,
(ii) the Company will deliver to Purchaser certificates representing Purchaser’s
Purchased Shares in accordance with this Agreement, registered in the name of
Purchaser in such denominations as Purchaser shall request, (iii) Purchaser
shall deliver to the Company each of the Transaction Documents to which
Purchaser is a party, duly executed by Purchaser, (iv) the Company shall deliver
or cause to be delivered to Purchaser each of the Transaction Documents to which
the Company and Purchaser is a party, duly executed by each party thereto other
than Purchaser, (v) the Company shall cause to be delivered to Purchaser an
opinion of Haynes and Boone, LLP, counsel for the Company, in the form attached
hereto as Exhibit C and (vi) the Company shall cause to be delivered to
Purchaser an opinion of Morris, Nichols, Arsht & Tunnell LLP, special counsel
for the Company, in the form attached hereto as Exhibit D.

(b) Use of Purchase Price. The proceeds of the Purchase Price paid by Purchaser
shall be used by the Company for general corporate purposes.

2. Company Representations and Warranties. The Company hereby represents and
warrants to Purchaser as of the date hereof as follows, qualified by any
specific disclosures made by the Company in the disclosure schedule of even date
herewith delivered by the Company to Purchaser simultaneously with the execution
hereof, referencing the particular subsection of this Section 2 (the “Disclosure
Schedule”). The disclosures in any section or subsection of the Disclosure
Schedule shall qualify each of the other sections and subsections in this
Section 2 only to the extent it is readily apparent from a reading of the
disclosure that such disclosure is applicable to such other sections and
subsections; provided that no disclosures in the Disclosure Schedule shall be
deemed to qualify Section 2(h) unless referenced in Section 2(h) of the
Disclosure Schedule:

(a) Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State
of Delaware. The Company has all licenses, Permits and authorizations necessary
to own its properties, rights and assets and carry on its business as presently
conducted and 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. The Company is not in violation of its Certificate of
Incorporation or Bylaws.

 

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(b) Company Power. 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 Company has the requisite corporate
power and authority under the Laws of the State of Delaware to own its
properties and carry on its business as presently conducted.

(c) Subsidiaries. Section 2(c) of the Disclosure Schedule lists all Subsidiaries
of the Company and their respective jurisdictions of incorporation
(collectively, the “Company Subsidiaries” and each, a “Company Subsidiary”). The
Company owns, directly or indirectly, all the shares of outstanding Capital
Stock of each Company Subsidiary. There are no outstanding securities or rights
convertible into or exchangeable for shares of any Capital Stock of any Company
Subsidiary and there are no Contracts by which any Company Subsidiary is bound
to issue additional shares of Capital Stock. Except as set forth in Section 2(c)
of the Disclosure Schedule, all of the shares of Capital Stock of each of the
Company Subsidiaries are duly and validly authorized, fully paid and
non-assessable and are owned by the Company free and clear of any Lien with
respect thereto. Each Company Subsidiary is duly organized, validly existing and
in good standing under the Laws of its jurisdiction of organization and has all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, in each case except where the failure to be so licensed or
qualified in any such jurisdiction would, individually or in the aggregate, have
or reasonably be expected to have a Material Adverse Effect. No Company
Subsidiary is subject to any restriction on its ability to make distributions to
its owners.

(d) Authorization; Governmental Approvals.

 

  i.

The execution and delivery of this Agreement and the other Transaction
Documents, the consummation by the Company of the transactions herein and
therein contemplated to be consummated by the Company, the issuance, sale and
delivery of the Purchased Shares to Purchaser in accordance with this Agreement
and the issuance and delivery of the shares of Common Stock issuable upon
conversion of the Purchased

 

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  Shares (the “Conversion Shares”) in accordance with the terms of the Series H
Certificate of Designation have each been duly authorized by all necessary
corporate action on the part of the Company.

 

  ii. Except as required by the Series H Certificate of Designation and the
Series I Certificate of Designation and for filings necessary for the sale of
the Purchased Shares to qualify for certain exemptions from the registration
requirements under state blue sky Laws and federal securities Laws, no
authorization, consent, approval, license or exemption of, and no registration,
qualification, designation, declaration or filing with, any court or
Governmental Body, and no vote, authorization, consent or approval of the
stockholders of the Company, is necessary for (A) the valid execution and
delivery of this Agreement by the Company, (B) the execution, issuance and
delivery of the Purchased Shares or Conversion Shares, (C) the execution and
delivery by the Company of the other Transaction Documents or (D) the
consummation by the Company of the transactions herein and therein contemplated
to be consummated by the Company.

(e) Capital. The Purchased Shares will have the voting powers, designation,
preferences, rights and privileges, and the qualifications, limitations and
restrictions thereof, set forth in the Series H Certificate of Designation. The
Company has reserved for issuance the Conversion Shares. The Purchased Shares
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 and fully paid, and will be free of restrictions on use, voting
or transfer or Liens other than restrictions on transfer or Liens under the
applicable state and federal securities Laws and pursuant to the Series H
Certificate of Designation. Except as set forth in Section 2(e) of the
Disclosure Schedule, the issuance and sale of the Purchased Shares is not
subject, and will not be subject, to any preemptive rights. The Conversion
Shares have been duly authorized, validly reserved for issuance upon conversion
of the Purchased Shares, and upon issuance in accordance with the terms hereof
and the provisions of the Series H Certificate of Designation, will be duly
authorized, validly issued and fully paid, and will be free of restrictions on
use, voting or transfer or Liens other than the restrictions on transfer or
Liens under the applicable state and federal securities Laws and pursuant to the
Series H Certificate of Designation, and will not be subject to any preemptive
rights.

(f) Validity and Binding Effect; No Conflicts. This Agreement and each of the
other Transaction Documents to which the Company is a party have been duly and
validly executed and delivered by the Company and constitute the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with their respective terms. The execution, delivery and performance
of this Agreement and the other Transaction Documents by the Company does not
(i) conflict with, violate or cause a breach, termination, acceleration or
modification of (with or without the giving of notice or the lapse of time, or
both) any of the terms, conditions or provisions of or constitute a default
under (A) any provision of the Certificate of Incorporation, other
organizational documents or Bylaws of the Company or any Company Subsidiary;
(B) any Contract, Permit or Order to which the Company or any Company Subsidiary
is a party or by which the Company or any Company Subsidiary or any of their
respective

 

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properties is bound; (C) any Law to which the Company or any Company Subsidiary
is subject or by which the Company or any Company Subsidiary or any of their
respective properties is bound or; (ii) result in the creation or imposition of
any Lien upon the properties or assets of the Company or any Company Subsidiary;
other than in the case of the foregoing clauses (i)(B), (i)(C) and (iii), such
requirements, conflicts, violations, breaches or rights which would not,
individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect. Except as set forth in Section 2(f) of the Disclosure
Schedule and other than those which have been obtained or made, no Consent of
any other Person is required on the part of the Company or the Company
Subsidiaries in connection with the execution and delivery of this Agreement or
the Transaction Documents, or the compliance by the Company with any of the
provisions hereof or thereof, or the consummation of the transactions
contemplated hereby.

(g) Capitalization.

 

  i.

Section 2(g)(i) of the Disclosure Schedule sets forth, a true, complete and
correct listing of the following, immediately prior to the open of business on
the date hereof: (i) the authorized capitalization of the Company, the number of
shares of each class of Capital Stock of the Company issued and outstanding and
the number of shares reserved for issuance in connection with the Company’s
stock option plans or otherwise, and (ii) all options, warrants, rights to
subscribe to, calls, contracts, undertakings, arrangements, Contracts and
commitments to issue which may result in the issuance of Capital Stock of the
Company or other securities convertible into or exchangeable for shares of
Capital Stock (the “Derivative Securities”), including the applicable exercise
price of such Derivative Securities. Except as set forth in Section 2(g)(i) of
the Disclosure Schedule, as of the open of business on the date hereof, there
are (A) no outstanding shares of Capital Stock of, or other equity or voting
interest in, the Company, (B) no outstanding Derivative Securities, (C) no
obligations of the Company to grant, extend or enter into any subscription,
warrant, right, convertible or exchangeable security or other similar Contract
or commitment relating to any Capital Stock of, or other equity or voting
interest (including any voting debt) in, the Company (the items in clauses (A),
(B) and (C), together with the Capital Stock of the Company, being referred to
collectively as “Company Securities”) and (D) no other obligations by the
Company or any of Company Subsidiary to make any payments based on the price or
value of any Company Securities. Except as set forth in Section 2(g)(i) of the
Disclosure Schedule, there are no outstanding Contracts of any kind which
obligate the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any Company Securities. All of the issued and outstanding
shares of the Company’s Capital Stock have been and all shares reserved for
issuance will on issuance be, duly authorized, validly issued, fully paid and
non-assessable. Except as set forth in Section 2(g)(i) of the Disclosure
Schedule, neither the Company nor any Company Subsidiary is subject to any
obligation (contingent or otherwise)

 

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  to repurchase or otherwise acquire or retire any of its Capital Stock. Except
as set forth in Section 2(g)(i) of the Disclosure Schedule, neither the Company
nor any Company Subsidiary is a party to any agreement relating to the voting
of, transfer of, requiring registration of, or granting any preemptive rights,
anti-dilutive rights or rights of first refusal or other similar rights with
respect to any securities of the Company, including any Contract granting any
Person the right to require the Company to file a registration statement under
the 1933 Act (as defined below) or to require the Company to include any
securities in any other registration statement filed by the Company under the
1933 Act.

 

  ii. After giving pro forma effect to the purchase and sale of the Purchased
Shares and the Zouk Shares, Section 2(g)(ii) of the Disclosure Schedule sets
forth, as of the close of business on the Business Day immediately preceding the
date hereof, a true, complete and correct listing of all the Company’s
outstanding: (i) shares of the Common Stock and (ii) 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.

 

  iii. Other than (i) Company Securities that may have been issued pursuant to
Derivative Securities outstanding immediately prior to the open of business on
the date hereof, (ii) the Offered Shares and (iii) the Offered Warrants, the
Company has not issued or agreed to issue any Company Securities since the open
of business on the date hereof and prior to the execution of this Agreement.

(h) SEC Reports; Financial Statements.

 

  i.

As of its filing date, the Form 10-K filed by the Company with the Securities
and Exchange Commission (the “SEC”) on April 16, 2012, as amended by the Form
10-K/As filed with the SEC on April 30, 2012, and May 3, 2012 (the “2011 Form
10-K”), complied in all material respects with the applicable requirements of
the Securities Act of 1933, as amended (the “1933 Act”), the Securities Exchange
Act of 1934, as amended (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. The Company has filed all other reports, registration statements,
proxy statements and other materials, together with any amendments required to
be made with respect thereto, that were required to be filed with the SEC under
the 1933 Act or the 1934 Act prior to the date hereof (all such reports and
statements required to be filed on or after January 1, 2011 are collectively
referred to herein together with the 2011 Form 10-K as the “Company SEC
Documents”). As of their respective dates, the Company SEC Documents, including
the financial statements contained therein, complied in all material respects
with all of the statutes and published rules and regulations enforced or
promulgated

 

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  by the regulatory authority with which the Company SEC Documents were filed,
and, except to the extent that information contained in any Company SEC Document
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. None of the Company Subsidiaries is
required to file any forms, reports or other documents with the SEC. No
executive officer of the Company has failed to make the certifications required
of him or her under Section 302 or 906 of the Sarbanes-Oxley Act with respect to
any Company SEC Document. Neither the Company nor any of its executive officers
has received notice from any Governmental Body challenging or questioning the
accuracy, completeness, form or manner of filing of such certifications.

 

  ii. (A) The financial statements (including the notes related thereto)
included in the Company SEC Documents, including the 2011 Form 10-K, 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 United States generally accepted accounting
principles (“GAAP”) (except, in the case of unaudited statements, as permitted
by the SEC) 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 the Company
Subsidiaries as of the dates thereof and their respective consolidated results
of operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal and recurring year-end audit adjustments that
were not, or are not expected to be, material in amount), all in accordance with
GAAP and the applicable rules and regulations promulgated by the SEC. Since
December 31, 2011, 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.
(B) The consolidated balance sheet of the Company and the Company Subsidiaries
as of December 31, 2011 included in the 2011 Form 10-K, and the consolidated
balance sheet of the Company and the Company Subsidiaries as of June 30, 2012
included in the Company SEC Documents reflect, in each case as of December 31,
2011 and June 30, 2012, respectively, all amounts borrowed and indebtedness
incurred under the Debt Facilities or otherwise by the Company or any Company
Subsidiary, and all loans or advances made by the Company or any Company
Subsidiary to any Person as of such dates.

 

  iii.

The Company has established and maintains a system of internal accounting
controls designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial

 

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  statements in accordance with GAAP, including policies and procedures that are
designed to (A) require the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the assets of
the Company and the Company Subsidiaries, (B) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and expenditures of the
Company and the Company Subsidiaries are being made only in accordance with
appropriate authorizations of management and the Company’s Board of Directors
(the “Board”) and (C) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the assets
of the Company and the Company Subsidiaries. Except as set forth in
Section 2(h)(iii) of the Disclosure Schedule or disclosed in the Company SEC
Documents, neither the Company nor, to the knowledge of the Company, the
Company’s independent auditors, has identified or been made aware of (1) any
significant deficiency or material weakness, in each case which has not been
subsequently remediated, in the system of internal accounting controls utilized
by the Company and the Company Subsidiaries, taken as a whole, or (2) any fraud
that involves the Company’s management or other employees who have a role in the
preparation of financial statements or the internal accounting controls utilized
by the Company.

(i) Absence of Certain Developments. Except as disclosed in the Company SEC
Documents or as set forth in Section 2(i) of the Disclosure Schedule, since
December 31, 2011:

 

  i. neither the Company nor any Company Subsidiary has borrowed any amount,
incurred any indebtedness under the Debt Facilities or otherwise or become
subject to any contingent obligations, or made any loans or advances to any
Person;

 

  ii. no change, development, event, effect, condition or contingency has
occurred which, individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect;

 

  iii. neither the Company nor any Company Subsidiary has transferred, issued,
sold, encumbered, pledged, or disposed of any shares of their Capital Stock or
granted any options, warrants, calls or other rights to purchase or otherwise
acquire shares of their Capital Stock other than under the Company’s employee
stock option plans, or declared or made any payment or distribution of cash or
other property with respect to shares of their Capital Stock, or purchased or
redeemed any shares of Capital Stock;

 

  iv. there has not been any damage, destruction or loss, whether or not covered
by insurance, with respect to the property of the Company or any Company
Subsidiary which, individually or in the aggregate, has had or would reasonably
be expected to have a Material Adverse Effect;

 

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  v. neither the Company nor any Company Subsidiary has entered into, modified
or amended any Material Contract, or terminated any Contract that would have
been a Material Contract if such Contract were in effect as of the date hereof
other than as disclosed by the Company in the Company SEC Documents; and

 

  vi. neither the Company nor any Company Subsidiary has amended its Certificate
of Incorporation, Bylaws or other organizational documents except as
contemplated by this Agreement.

(j) Preferred Stock Exemption. The offer and sale of the Purchased Shares by the
Company to Purchaser pursuant to and in the manner contemplated by this
Agreement will be exempt from the registration requirements of the 1933 Act.
Neither the Company nor any Person acting at its direction has taken any action
(including any offering of any securities or Capital Stock of the Company under
circumstances which would require the integration of such offering with the
offering of any of the Purchased Shares pursuant to this Agreement under the
1933 Act and the rules and regulations of the SEC thereunder) which would
subject the offering, issuance, exchange or sale of any of the Purchased Shares
to Purchaser pursuant to this Agreement to the registration requirements of the
1933 Act.

(k) Debt Facility Compliance. 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 Loan Security
Agreement, dated as of November 22, 2010, by and among the Company, the
guarantors and lenders from time to time party thereto, Wells Fargo Bank,
National Association, as agent, and Wells Fargo Capital Finance, LLC, as sole
lead arranger, manager and bookrunner (the “Credit Facility”), including without
limitation Section 4 thereof, and (ii) that certain Second Lien Letter of
Credit, Loan and Security Agreement, dated September 20, 2011, by and among the
Company, as borrower, the guarantors and lenders party from time to time thereto
and Ares Capital Corporation, as agent (the “LC Facility” and together with the
Credit Facility, the “Debt Facilities”). 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.
Immediately following the deposit of the Purchase Price required under
Section 9.7(b)(iii)(D) of the Credit Facility, the Company will be able to
redraw amounts equal to at least the Purchase Price.

(l) No Brokers. Except as set forth in Section 2(l) of the Disclosure Schedule,
no agent, broker, investment banker, finder, financial advisor or other Person
is or will be entitled to any broker’s or finder’s fee or any other commission
or similar fee as a result of actions taken by the Company or its Affiliates,
directly or indirectly, as a result of, or in connection with the transactions
contemplated by this Agreement.

(m) Litigation. There are no Legal Proceedings pending or, to the knowledge of
the Company, threatened, that question the validity of this Agreement or the
Transaction Documents or any action taken or to be taken by the Company or any
Company Subsidiary in connection with the consummation of the transactions
contemplated hereby. Except as disclosed in the Company SEC Documents or

 

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Section 2(m) of the Disclosure Schedule, there are no Legal Proceedings pending
or, to the knowledge of the Company, threatened, against the Company or any
Company Subsidiary or any of their respective properties or assets, at Law or in
equity, involving claims of more than $50,000 or that if determined adversely to
the Company or any Company Subsidiary would, individually or in the aggregate,
have or would reasonably be expected to have a Material Adverse Effect. There is
no outstanding or, to the knowledge of the Company, threatened, Order of any
Governmental Body against the Company or any Company Subsidiary or any of their
respective properties or assets. Except as set forth in Section 2(m) of the
Disclosure Schedule, there is no action, suit, proceeding or investigation by
the Company currently pending or that the Company currently intends to initiate.

(n) Employee Benefit Plans.

 

  i. With respect to any Benefit Plan, no Legal Proceeding has been asserted,
instituted, or, to the knowledge of the Company, is threatened or anticipated
(other than routine claims for benefits, and appeals of such claims) that would,
individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect.

 

  ii. Each Benefit Plan has been established and administered in all material
respects in accordance with its terms, and is in material compliance with the
applicable provisions of ERISA, the Code and all other applicable Laws, rules
and regulations.

 

  iii. Neither the Company, any Company Subsidiary, nor any other entity which,
together with the Company or any Company Subsidiary would be treated as a single
employer under Section 4001 of ERISA or Section 414 of the Code (each such
entity, an “ERISA Affiliate”) sponsors, maintains, contributes to, or has had an
obligation at any time to sponsor, maintain or contribute to, or has had or has
any liability in respect of any “employee benefit plan” (as defined in
Section 3(3) of ERISA) subject to Section 412 of the Code or Section 302 of
ERISA or Title IV of ERISA, including any “multiemployer plan” (as defined in
Section 4001(a)(15) of ERISA), or any other plan which is subject to
Section 4063, 4064 or 4069 of ERISA. Neither the Company nor any Company
Subsidiary has any material liability under any “employee pension benefit plan”
(within the meaning of Section 3(2) of ERISA) that is not intended to be
qualified under Section 401(a) of the Code. Except as required by Section 4980B
of the Code or any similar state or local Law, no Benefit Plan provides any
post-retirement or post-employment medical, disability or life insurance
benefits or coverage to any Person.

 

  iv.

Except as would not, individually or in the aggregate, have or reasonably be
expected to have a Material Adverse Effect, with respect to any Benefit Plan,
(i) there has been no non-exempt prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) with respect to any Benefit
Plan that would reasonably be expected to subject

 

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  the Company or any Company Subsidiary to any tax or penalty imposed by
Section 502 of ERISA, Section 4975 of the Code or otherwise, and (ii) no event
has occurred and no condition exists that would reasonably be expected to
subject the Company or any Company Subsidiary, either directly or by reason of
their affiliation with any ERISA Affiliate, to any tax, fine, Lien, penalty or
liability imposed by or under any applicable Laws, rules and regulations,
including ERISA and the Code.

 

  v. Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby, whether alone or in combination with any other
event, and thereby will (i) accelerate the time of payment or vesting or
increase the amount of compensation or benefits due to any Company Employee, or
(ii) give rise to any other liability or funding obligation under any Benefit
Plan or otherwise, including liability for severance pay, unemployment
compensation or termination pay.

 

  vi. Except as would not, individually or in the aggregate, have or reasonably
be expected to have a Material Adverse Effect, neither the Company nor any
Company Subsidiary has any plan, contract or commitment, whether legally binding
or not, to create any additional employee benefit or compensation plans,
policies or arrangements or, except as may be required by Law, to modify any
Benefit Plan.

(o) Labor Relations.

 

  i. Except as set forth in Section 2(o) of the Disclosure Schedule (A) no
current Company Employee is represented by a union; (B) to the knowledge of the
Company, no union organizing efforts have been conducted within the last three
years or are now being conducted; (C) neither the Company nor any of the Company
Subsidiaries is a party to any collective bargaining agreement or other labor
contract; and (D) to the knowledge of the Company, neither the Company nor any
of the Company Subsidiaries currently is subject to or threatened by, a strike,
picket, work stoppage, work slowdown or other material labor dispute.

 

  ii. Except as would not, individually or in the aggregate, have or reasonably
be expected to have a Material Adverse Effect, to the knowledge of the Company,
(A) each of the Company and each of the Company Subsidiaries is in material
compliance with all applicable Laws relating to employment and (B) neither the
Company nor any of the Company Subsidiaries has incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act or any
similar state or local Law within the last six months which remains unsatisfied.

(p) Compliance with Laws; Certain Operations. The Company and the Company
Subsidiaries are in compliance in all material respects with all material Laws
and Orders promulgated by any Governmental Body applicable to the Company and
the Company Subsidiaries or to the conduct of the business or operations of the
Company

 

11

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and the Company Subsidiaries or the use of their rights, properties (including
any leased properties) and assets. Neither the Company nor any Company
Subsidiary has received any written notice of violation or alleged material
violation of any such Law or Order by any Governmental Body in any material
respect that has not been resolved. Neither the Company nor any Company
Subsidiary has received written notice that it is the subject of an
investigation by any Governmental Body which would, individually or in the
aggregate, have or reasonably be expected to have a Material Adverse Effect. The
Company and each of the Company Subsidiaries have all Permits necessary for the
conduct of their business, except where the failure to have such Permits would
not, individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect.

(q) Real Property and Assets. Except as set forth in Section 2(q) of the
Disclosure Schedule, the Company or a Company Subsidiary has good and valid
title to, or has a valid leasehold interest in, or has a valid license to use,
the real property, tangible properties and physical assets used by it and
necessary for the conduct of its business as presently conducted, located on its
premises or shown on the consolidated balance sheet of the Company and the
Company Subsidiaries as of December 31, 2011 as included in the 2011 Form 10-K
or acquired thereafter (except for properties and assets disposed of in the
ordinary course of business since December 31, 2011), free and clear of all
Liens that would materially affect the value thereof or materially interfere
with the use made thereof.

(r) Tax Matters. There are no material Taxes due and payable by the Company or
any Company Subsidiary which have not been timely paid. All Tax Returns required
to be filed by, or on behalf of, the Company and the Company Subsidiaries have
been timely filed, and all such Tax Returns were true, correct and complete in
all material respects. The unpaid Taxes of the Company and the Company
Subsidiaries (i) did not as of the filing date of the 2011 Form 10-K exceed the
reserve for Taxes (excluding any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth in the 2011
Form 10-K and (ii) will not exceed that reserve in accordance with the past
custom and practice of the Company and the Company Subsidiaries in filing Tax
Returns. Each of the Company and each Company Subsidiary has duly and timely
withheld and paid over to the appropriate Governmental Body all material Taxes
and other amounts required to be so withheld and paid over for all periods under
all applicable Laws. Except for Liens for Taxes not yet due and payable, no
Liens for Taxes exist upon the assets of the Company or any of the Company
Subsidiaries. Except as set forth in Section 2(r) of the Disclosure Schedule, no
material audits, investigations or other proceedings are pending or being
conducted with respect to Taxes of the Company or the Company Subsidiaries.
Except as set forth in Section 2(r) of the Disclosure Schedule, there are in
effect no waivers of applicable statutes of limitations with respect to Taxes
for any year. As of the date hereof, neither the Company nor any of the Company
Subsidiaries (i) has ever been a member of an affiliated group filing a
consolidated Tax Return (other than an affiliated or consolidated group of which
the Company was the parent) or (ii) has any liability for Taxes of any Person
arising from the application of Treasury Regulation section 1.1502-6 or any
analogous provision of state, local or foreign Law, or as a transferee or
successor, by contract, or otherwise. Neither

 

12

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the Company nor any of the Company Subsidiaries will be required to include
amounts in income, or exclude items of deduction, in a taxable period beginning
after the date of the Closing as a result of (i) a change in method of
accounting occurring prior to the date of the Closing; (ii) an installment sale
or open transaction arising in a taxable period (or portion thereof) ending on
or before the date of the Closing; (iii) a prepaid amount received, or paid,
prior to the date of the Closing; (iv) deferred gains arising prior to the date
of the Closing; or (v) an election under Section 108(i) of the Code. Neither the
Company nor any Company Subsidiary is a party to, or is bound by or subject to
any obligation under any Tax sharing or Tax indemnity agreement or similar
contract or arrangement. Neither the Company nor any Company Subsidiary has
engaged in any “listed transaction” within the meaning of Treasury Regulation
Section 1.6011-4(b)(2).

(s) Material Contracts. The Company and the Company Subsidiaries are not a party
to or bound by any of the following Contracts except as set forth in
Section 2(s) of the Disclosure Schedule or described in or filed as an exhibit
to the Company SEC Documents (each, including any such Contracts listed in the
Company SEC Documents, a “Material Contract,” and collectively, the “Material
Contracts”):

 

  i. any mortgages, indentures, guarantees, loans or credit agreements, security
agreements or other Contracts relating to the borrowing of money or extension of
credit to or by the Company, other than accounts receivables and payables in the
ordinary course of business and travel and similar advances to employees in the
ordinary course of business consistent with past practice;

 

  ii. any joint venture, partnership, limited liability company, strategic
alliance or other similar Contract relating to the formation, creation,
operation, management or control of any partnership or joint venture;

 

  iii. any Contracts relating to all mergers, consolidations, recapitalizations,
reorganizations or similar transactions, or any acquisitions or dispositions
material to the Company, currently contemplated by the Company or that provide
any ongoing material liabilities for payment of money, retention of liabilities,
assets sold, indemnification or otherwise;

 

  iv. any Contract providing for the payment by the Company or the Company
Subsidiaries of an amount in excess of $150,000 or to the Company or the Company
Subsidiaries of an amount in excess of $150,000;

 

  v. non-competition, non-solicitation or exclusive dealing Contracts or other
Contracts that restrict or limit or purport to restrict or limit in any material
respect the ability of the Company or any of its Affiliates to solicit
customers, potential employees or the manner or location in which the business
of the Company or any of its Affiliates may be conducted;

 

  vi. any Contract the benefits of which will be increased by the consummation
of the transactions contemplated hereby or the value of any of the benefits of
which will be calculated on the basis of any of the transactions contemplated by
this Agreement; or

 

13

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  vii. any other Contract the termination of which, or default under which,
would, individually or in the aggregate, have or reasonably be expected to have
a Material Adverse Effect.

Each of the Material Contracts to which the Company or any Company Subsidiary is
a party is in full force and effect and is a valid and binding obligation of the
Company or such Company Subsidiary, and to the knowledge of the Company, the
other party thereto, enforceable against the Company or such Company Subsidiary,
and to the knowledge of the Company, enforceable against the other party thereto
in accordance with its terms. Neither the Company, nor to the knowledge of the
Company, any other party to a Material Contract to which the Company or any
Company Subsidiary is a party, is in breach or violation of, or in default
under, any such Material Contract to which it is a party and no event has
occurred that, individually or in the aggregate, with the lapse of time or the
giving of notice or both would constitute a default thereunder by the Company,
the Company Subsidiaries or, to the knowledge of the Company, by any other party
thereto.

(t) Intellectual Property. Except as set forth in Section 2(t) of the Disclosure
Schedule, the Company and the Company Subsidiaries own, have the right to use or
can acquire on commercially reasonable terms, all patents, inventions,
trademarks, trade names, domain names, trade secrets, know-how, copyrights,
software, code, systems, websites, networks, databases and all other
intellectual property rights (“Intellectual Property”) necessary to carry on its
business as currently conducted. All registered or currently applied for
Intellectual Property owned by the Company or any Company Subsidiary is
subsisting and unexpired, and to the knowledge of the Company, valid and
enforceable. The Company and the Company Subsidiaries own or have the right to
use, all Intellectual Property necessary for the conduct of its business as
presently conducted. The conduct of the Company’s and the Company Subsidiaries’
business does not infringe, misappropriate or violate (“Infringe”) the
Intellectual Property of any Person, there are no claims (including cease and
desist letters or invitations to take a patent license) alleging the same. To
the knowledge of the Company, no Person is Infringing any Intellectual Property
of the Company and the Company Subsidiaries. The Company and the Company
Subsidiaries have taken reasonable security measures to protect and maintain
their material Intellectual Property, and all Persons who have created, invented
or contributed to material Intellectual Property of the Company and any Company
Subsidiary have assigned to the Company or a Company Subsidiary all of their
rights therein.

(u) Illegal Payments. The Company has never made any illegal payment of any
kind, directly or indirectly, including, without limitation, payments, gifts or
gratuities, to the United States or any foreign national, state or local
Governmental Body, employees or agents.

(v) Related Party Transactions. No transaction has occurred or relationship
exists between or among the Company or any Company Subsidiary, on the one hand,
and

 

14

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any of their respective related persons or Affiliates, on the other hand, that
is required under Item 404 of Regulation S-K of the 1933 Act to be described in
the Company SEC Documents that is not so described therein. Section 2(v) of the
Disclosure Schedule sets forth any Contracts or other transactions (i) between
Pegasus and any of its Affiliates (other than the Company and the Company
Subsidiaries), on the one hand, and the Company or any Company Subsidiary or any
other Affiliate or related person of the Company, on the other hand; and
(ii) between Pegasus and any of its Affiliates (other than the Company and the
Company Subsidiaries), on the one hand, and any other Person to the extent such
Contract is on behalf of or for the benefit of the Company or any Company
Subsidiary, and to the extent not described in the 2011 Form 10-K. As used in
this Section 2(v), “related person” shall have the meaning set forth in Item 404
of Regulation S-K promulgated under the 1933 Act.

(w) Insurance. Section 2(w) of the Disclosure Schedule provides a complete list
of the Company’s fire and casualty, errors and omissions, directors and
officers, or any other material insurance policy, currently in effect. The
policies listed in Section 2(w) of the Disclosure Schedule are in full force and
effect, all premiums thereon have been paid when due, and, to the knowledge of
the Company, the Company is otherwise in compliance in all material respects
with the terms and provisions of such policies. The Company has not received any
notice of default, cancellation or non-renewal with respect to any such policy
or arrangement nor, to the knowledge of the Company, has the termination of any
such policy or arrangement been threatened.

(x) Not an “Investment Company.” The Company and the Company Subsidiaries are
not, nor are they directly or indirectly controlled by or acting on behalf of
any Person that is, an investment company within the meaning of the Investment
Company Act of 1940, as amended.

(y) Anti-takeover Provisions Not Applicable. No “moratorium,” “control share,”
“fair price,” “takeover,” “business combination” or “interested shareholder” or
other similar anti-takeover statute or regulation (including any provision of
the Company’s Certificate of Incorporation or Bylaws) is applicable to the
transactions contemplated by (and the Company and the Board have taken all
necessary action, if any, in order to render any such statute, regulation or
provision inapplicable to Purchaser) this Agreement and/or the Transaction
Documents.

(z) U.S. Real Property Holding Corporation. The Company is not, nor has it ever
been, a U.S. real property holding corporation within the meaning of Section 897
of the Code.

(aa) Organizational Documents. Except as set forth in Section 2(s) of the
Disclosure Schedule, as of the date hereof, the Company’s Certificate of
Incorporation, Bylaws, Series H Certificate of Designation and Series I
Certificate of Designation currently on file with the SEC are true, accurate and
complete in all respects, and, except as contemplated by this Agreement and the
transactions contemplated hereby, no modifications thereto are currently
contemplated by the Company or its Board of Directors.

 

15

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3. Purchaser Representations and Warranties. Purchaser represents and warrants
with respect to itself to the Company as follows:

(a) 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 Shares.

(b) The Purchased Shares are being acquired for 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) Purchaser is knowledgeable in financial matters and is able to evaluate the
risks and benefits of an investment in the Purchased Shares. 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.
Purchaser has carefully considered and has, to the extent Purchaser deems
necessary, discussed with Purchaser’s professional legal, tax, accounting and
financial advisers the suitability of its investment in the Purchased Shares.

(d) Purchaser is able to bear the economic risk of its investment in the
Purchased Shares for an indefinite period of time because the Purchased Shares
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. Purchaser: (i) understands and acknowledges that the
Purchased Shares being issued to 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 Purchaser or the fairness of
the terms of its investment in the Purchased Shares.

(e) Purchaser has had an opportunity to ask questions and receive answers
concerning the terms and conditions of the offering of the Purchased Shares 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
Purchaser, enforceable against Purchaser in accordance with its terms, and the
execution, delivery and performance of this Agreement by Purchaser does not and
will not conflict with, violate or cause a breach of any agreement, contract or
instrument to which Purchaser is a party or any judgment, Order or decree to
which Purchaser is subject.

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

(h) 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.

 

16

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(i) 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 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 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.

4. Additional Agreements.

(a) Compliance with Laws. Purchaser agrees, severally and not jointly as to
itself, not to make any sale, transfer or other disposition of the Purchased
Shares 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 Purchaser intend that for U.S. federal, state
and local income tax purposes, the Series H Preferred Stock will be treated as
equity and each of the Company and Purchaser agrees that it will not take any
position to the contrary with respect to any Purchased Shares it acquires
pursuant to the terms of this Agreement.

(c) Purchaser Expenses. The Company shall pay up to $75,000 of Purchaser’s
reasonable and documented out-of-pocket fees and expenses, including the fees
and expenses of attorneys, accountants and consultants employed by Purchaser to
the extent that such fees and expenses relate to services rendered in
conjunction with Purchaser’s investment in the Series H Preferred Stock.

(d) Purchaser Information Rights. For so long as Purchaser owns in the aggregate
at least 10,000 shares of Series H Preferred Stock (or the equivalent amount of
Conversion Shares), during normal business hours, the Company shall provide to
Purchaser reasonable access to customary information, access and inspection
rights, including delivering to Purchaser the following information
(collectively, the “Public Company Information”):

 

17

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  i. on an annual basis and promptly after it has been made available (but no
later than thirty (30) days before the beginning of each fiscal year), (A) an
annual budget of the Company, (B) a business plan of the Company, and
(C) financial forecasts for the next fiscal year of the Company, in each case to
the extent and in such manner and form prepared by or for the Company’s Board;

 

  ii. on an annual basis and promptly after it has been made available (but no
later than seventy-five (75) days after the end of each fiscal year), annual
unaudited financial and operating reports of the Company, to the extent and in
such manner and form prepared by or for the Board;

 

  iii. on a quarterly basis and promptly after it has been made available (but
in no event later than forty (40) days after the end of each quarter), unaudited
quarterly financial and operating reports of the Company, to the extent and in
such manner and form prepared by or for the Board;

 

  iv. final drafts of monthly management and operating reports of the Company as
reasonably requested by Purchaser to the extent and in such manner and form
prepared by or for the Company’s chief executive officer and/or provided to the
Board; and

 

  v. such other financial, management and operating reports and information
reasonably requested by Purchaser, including all such information as required
for customary reporting to the limited partners of Purchaser’s Affiliates and
for tax reporting purposes.

In addition, in the event that the Company is no longer obligated to file an
annual report on Form 10-K or quarterly report on Form 10-Q with the SEC, the
Company shall also deliver the following to Purchaser (collectively, the
“Private Company Information” and together with the Public Company Information
and the Late Company Information (as defined below), the “Company Information”):

 

  vi. as soon as practicable after the end of each fiscal year of the Company,
and in any event within ninety (90) days thereafter (to the extent practicable),
a consolidated balance sheet of the Company and the Company Subsidiaries as of
the end of such fiscal year and consolidated statements of income and cash flows
of the Company and the Company Subsidiaries for such year, prepared in
accordance with GAAP and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and followed
promptly thereafter (to the extent it shall be available) with the opinion of
the independent registered public accounting firm selected by the Company’s
Audit Committee with respect to such financial statements; and

 

  vii.

in lieu of providing the information required under the foregoing
Section 4(d)(iii), as soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company,

 

18

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  and in any event within forty-five (45) days thereafter (to the extent
practicable), an unaudited consolidated balance sheet of the Company and the
Company Subsidiaries as of the end of each such quarterly period, and unaudited
consolidated statements of income and cash flows of the Company and the Company
Subsidiaries for such period and for the current fiscal year to date, prepared
in accordance with GAAP and setting forth in comparative form the figures for
the corresponding periods of the previous fiscal year, subject to changes
resulting from normal year-end audit adjustments, all in reasonable detail,
except that such financial statements need not contain the notes required by
GAAP.

 

  viii. if Purchaser no longer owns an aggregate of at least 10,000 shares of
Series H Preferred Stock (or the equivalent amount of Conversion Shares) but
owns an aggregate of at least 5,000 shares of Series H Preferred Stock (or the
equivalent amount of Conversion Shares), the Company shall provide Purchaser
with the following information:

 

  A. in the event the Company is obligated to file an annual report on Form 10-K
or quarterly report on Form 10-Q with the SEC and fails to file any such Form
10-K or Form 10-Q within sixty (60) days of the then-applicable filing deadline
(as extended by Rule 12b-25 of the 1934 Act), then upon the written request of
Purchaser, the Company shall promptly provide Purchaser (collectively, the “Late
Company Information”):

 

  B. in the case of a late Form 10-K, annual unaudited financial and operating
reports of the Company, to the extent and in such manner and form prepared by or
for the Board; and

 

  C. in the case of a late Form 10-Q, unaudited quarterly financial and
operating reports of the Company, to the extent and in such manner and form
prepared by or for the Board;

 

  ix. in the event the Company is no longer obligated to file an annual report
on Form 10-K or quarterly report on Form 10-Q with the SEC, the Company shall
deliver the Late Company Information to Purchaser.

(e) Redemption.

 

  i. Subject to this Section 4(e), Purchaser and Zouk shall have the right,
within ten (10) Business Days following September 25, 2015 (the “Redemption
Trigger Date”), to require the Company to redeem (a “Redemption”) all or a
portion of the Purchased Shares for an amount in cash equal to the Redemption
Repurchase Amount of such Purchased Shares submitted for redemption.

 

  ii.

Purchaser and Zouk shall effect a Redemption of the Purchased Shares pursuant to
this Section 4(e) by providing the Company with a written

 

19

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  Redemption notice, executed by both Purchaser and Zouk (a “Redemption
Notice”), specifying: (A) the number of Purchased Shares and Zouk Shares to be
redeemed and (B) subject to Section 4(e)(iii) below, the date on which such
Redemption is to be effected (the “Redemption Date”), which Redemption Date and
time shall not be prior to one hundred eighty (180) days after the Redemption
Trigger Date; provided, that (x) within twenty four (24) hours of receiving a
Redemption Notice, the Company shall provide each of the applicable Primary
Investors (as defined in the Series H Certificate of Designation and the Series
I Certificate of Designation, respectively) written notice of its receipt of
such a Redemption Notice, together with a copy of such Redemption Notice and all
related documentation included therewith, and (y) notwithstanding anything
herein to the contrary, a Redemption Notice shall only become effective on the
fifth (5th) Business Day after receipt by the Company of such Redemption Notice.
To effect a Redemption of the Purchased Shares, Purchaser shall surrender the
certificate(s) representing such Purchased Shares to the Company. On the
Redemption Date, the Company shall pay the Redemption Repurchase Amount by check
to the order of Purchaser or, if instructions are provided therefore in the
Redemption Notice, by wire transfer of immediately available funds. Unless all
of the Purchased Shares are redeemed on the Redemption Date, the Company shall,
as soon as practicable and in no event later than one hundred eighty (180) days
after the Redemption Notice and at its own expense, issue a new certificate
evidencing the number of Purchased Shares owned by Purchaser after giving effect
to the Purchased Shares redeemed on the Redemption Date. Any Purchased Shares
redeemed pursuant to the terms hereof shall be canceled and shall not be
reissued.

 

  iii. Any Redemption of Purchased Shares pursuant to this Section 4(e) shall be
payable only to the extent permitted under applicable Delaware law.
Notwithstanding anything to the contrary herein, the Company shall not be
permitted or required to redeem any Purchased Shares for so long as such
Redemption would result in an event of default under (A) the Debt Facilities; or
(B) any amendments or restatements of, supplements to, or new facility or
facilities entered into in replacement of, the Debt Facilities.

 

  iv. Purchaser hereby acknowledges and agrees that any Redemption hereunder
will be on a pari passu basis with the rights of the Holders under Section 5(a)
of the Series H Certificate of Designation and Section 5(a) of the Series I
Certificate of Designation.

(f) Board Observer and Agreement to Vote.

 

  i.

For so long as Purchaser beneficially owns at least 2,500 Purchased Shares (as
adjusted for any Reclassification of the Preferred Shares), Purchaser shall have
the right to designate one non-voting board observer who will be entitled to
attend all meetings of the Board, participate in all deliberations of the Board
and receive copies of all materials provided to

 

20

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  the Board; provided, that such observer shall have no voting rights with
respect to actions taken or elected not to be taken by the Board; provided,
further, that the Company shall be entitled to exclude such observer from such
portions of a meeting of the Board to the extent such observer’s presence would
be reasonably likely to result in the waiver of attorney-client privilege or if
the matter to be discussed at such Board meeting is one in which such observer
or its Affiliates has a conflict of interest with the Company. Notwithstanding
anything to the contrary herein, this Section 4(f)(i) shall terminate
automatically and be of no further force or effect upon: (A) the consummation of
a Qualified Public Offering, (B) the conversion or redemption of all outstanding
Purchased Shares pursuant to (1) Section 4(c) of the Series H Certificate of
Designation or (2) Section 4(e) above.

 

  ii. Purchaser hereby covenants and agrees to vote all shares of Capital Stock
owned by Purchaser and its Affiliates in favor of any proposal to approve
(A) the Amended and Restated Certificate of Designation of Series H Preferred
Stock, substantially in the form attached hereto as Exhibit E, and (B) the
Amended and Restated Certificate of Designation of Series I Preferred Stock
substantially in the form attached hereto as Exhibit F. Purchaser further agrees
that any breach of this Section 4(f) may result in irreparable damage to the
Company for which the Company will not have an adequate remedy at law.
Accordingly, in addition to any other remedies and damages available, Purchaser
acknowledges and agrees that the Company may immediately seek enforcement of
this Section 4(f) by means of specific performance or injunction, without any
requirement to post a bond or other security

(g) Confidentiality. Purchaser, and each Affiliate of Purchaser, receiving
Company Information hereunder shall keep such Company Information confidential
and shall not provide access to such Company Information to any other Person;
provided, that 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 Purchaser in the ordinary
course of Purchaser’s business; (B) to prospective transferees or purchasers of
any of the Purchased Shares held by 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
required by Law, subpoena, judicial Order or similar legal process; provided,
that 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 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 Purchaser or
with respect to a request from any Governmental Body having jurisdiction over
Purchaser. The foregoing confidentiality restriction shall not apply to any
Company Information that is in the public domain, becomes part of the public
domain after disclosure to Purchaser

 

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other than due to a breach by Purchaser of this Section 4, was within
Purchaser’s possession or developed by it prior to being furnished with such
information as evidenced by Purchaser’s records, or becomes available to
Purchaser on a non-confidential basis from a source other than the Company.

(h) Freedom to Pursue Corporate Opportunities. The Company expressly
acknowledges and agrees that for so long as Purchaser beneficially owns any
Purchased Shares or any shares of Common Stock issued upon conversion thereof:
(i) Purchaser and each director of the Company who is a member, director,
officer, employee or Affiliate of Purchaser (an “Affiliated Person”) has the
right to, and shall have no duty (contractual or otherwise) not to, directly or
indirectly engage in the same or similar business activities or lines of
business as the Company or any of its Subsidiaries, including those deemed to be
competing with the Company or any of its Subsidiaries; and (ii) in the event
that Purchaser or such Affiliated Person acquires knowledge of a potential
transaction or matter that may be a corporate opportunity for the Company,
Purchaser or such Affiliated Person shall have no duty (contractual or
otherwise) to communicate or present such corporate opportunity to the Company
or any of its Subsidiaries, as the case may be, and, notwithstanding any
provision of any agreement to the contrary, shall not be liable to the Company
or its Affiliates or stockholders or creditors for breach of any duty
(contractual or otherwise) by reason of the fact that Purchaser or such
Affiliated Person, directly or indirectly, pursues or acquires such opportunity
for itself, directs such opportunity to another person, or does not present such
opportunity to the Company or any of its Subsidiaries; provided, that the
provisions of this Section 4(h) shall not apply with respect to the actions of
any individual while serving in an operational capacity as an officer or other
employee of the Company. Purchaser agrees on behalf of itself and each
Affiliated Person to keep confidential all proprietary and non-public
information regarding the Company received in such capacity to the same extent
as Company Information is required to be kept confidential in accordance with
Section 4(g) hereof. Purchaser further agrees on behalf of itself and each
Affiliated Person not to use such proprietary and non-public information for any
purpose other than in connection with evaluating, monitoring or taking any other
action with respect to the investment by Purchaser in the Purchased Shares (or
any shares of Common Stock issued upon conversion thereof).

(i) Terms of the Preferred Shares. Each of the parties hereto acknowledges that
the Series H Preferred Stock shall have the powers, preferences and rights, and
be subject to the qualifications, limitations or restrictions set forth in the
Series H Certificate of Designation, including those set forth in the last
sentence of Section 5(c) thereof.

(j) Current Public Information. The Company agrees to use its commercially
reasonable efforts to make and keep current public information available, within
the meaning of Rule 144 or any similar or analogous rule promulgated under the
1933 Act, at all times after the Closing.

(k) 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.

 

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(l) Enforcement of Voting Agreements. The Company agrees to take all action
necessary to enforce and exercise its rights under the Voting Agreements.

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

(n) Company Consent to Affiliate Transfers. The Company hereby agrees that,
notwithstanding the definition of “Permitted Transfer” in the Series H
Certificate of Designation, on or after the date on which Purchaser has paid the
Company the Purchase Price in full, Purchaser shall be permitted to Transfer (as
defined in the Series H Certificate of Designation) all or any portion of the
Purchased Shares to any of its Affiliates or any direct or indirect equityholder
of Purchaser.

(o) Preemptive Rights. Notwithstanding the consummation of the transactions
contemplated hereby, Purchaser hereby acknowledges that the Company is obligated
to, and the Company agrees that it shall (to the extent that it has not
already), comply with the terms of Section 14 of the Series H Certificate of
Designation and Section 14 of the Series I Certificate of Designation, as each
such section applies to the Offering.

5. Indemnification by the Company.

(a) Subject to the limitations and other provisions of this Section 5, the
Company shall save, defend, indemnify and hold harmless Purchaser and its
affiliates and the respective representatives, directors, officers, employees,
members, managers, partners, stockholders, controlling Persons, agents,
representatives, successors and assigns of each of the foregoing from and
against any and all losses, damages, liabilities, deficiencies, claims,
interest, awards, judgments, penalties, costs and expenses (including reasonable
out-of-pocket attorneys’ fees, costs and other out-of-pocket expenses incurred
in investigating, preparing or defending the foregoing), asserted against,
incurred, sustained or suffered by any of the foregoing as a result of, arising
out of or relating to the Excluded Liabilities or any breach of any
representation, warranty or covenant made by the Company and contained in this
Agreement and the Disclosure Schedule.

(b) Purchaser shall give notice to the Company promptly after Purchaser has
actual knowledge of any claim as to which indemnity may be sought, and to the
extent such claim is a third party claim, shall permit the Company to assume the
defense of any such third party claim or any litigation resulting therefrom;
provided, that counsel for the Company who shall conduct the defense of such
third party claim or any litigation resulting therefrom shall be approved by
Purchaser (which approval shall not unreasonably be withheld, conditioned or
delayed), and Purchaser may participate in such defense at its expense (other
than as provided below), and provided further, that the failure of Purchaser to
give notice as provided herein shall not relieve the Company of its

 

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obligations under this Agreement, except to the extent that the Company is
actually and materially prejudiced thereby. Purchaser, at the Company’s cost and
expense, shall furnish such information regarding itself or the claim in
question as the Company may reasonably request and as shall be reasonably
required in connection with the defense of any such third party claim and/or
litigation resulting therefrom. Purchaser shall have the right to retain its own
counsel, with the fees and expenses to be paid by the Company, if (i) the
Company fails to prosecute the applicable third party claim or litigation
resulting therefrom in a prompt and timely fashion and/or (ii) representation of
Purchaser by the counsel retained by the Company would be inappropriate due to
actual or potential differing interests between Purchaser and any other party
represented by such counsel in such proceeding; provided, that in no event shall
the Company be required to pay the fees and expenses of more than one such
separate counsel (other than foreign counsel) for Purchaser unless and to the
extent that representation of Purchaser by the counsel retained by the Company
would be inappropriate due to actual or potential differing interests between or
among the Company and Purchaser. Notwithstanding anything in this Section 5(b)
to the contrary, neither the Company nor Purchaser shall, without the prior
written consent of the other party, settle or compromise any third party claim
as to which indemnity may be sought or permit a default or consent to entry of
any judgment unless the claimant (or claimants) and such party provide to such
other party an unqualified release from all liability in respect of such third
party claim. If the Company makes any payment on any claim, the Company shall be
subrogated, to the extent of such payment, to all rights and remedies of
Purchaser to any insurance benefits or other claims of Purchaser with respect to
such claim.

(c) Survival. The representations and warranties of the parties set forth in
this Agreement and the other Transaction Documents shall survive for a period of
eighteen (18) months following the Closing and thereafter shall be of no further
force or effect; provided, that the representations and warranties set forth in
Sections 2(h)(ii)(B) (Balance Sheet Indebtedness), 2(i)(i) (Absence of Changes
in Indebtedness), 2(r) (Tax Matters), 2(t) (Intellectual Property) and 2(v)
(Related Party Transactions) shall survive for the applicable period of the
statute of limitations and the representations and warranties set forth in
Sections 2(a) (Organization), 2(b) (Power), 2(c) (Subsidiaries), 2(d)(i)
(Authorization), 2(e) (Capital), 2(g) (Capitalization) shall survive
indefinitely (or if indefinite survival is not permitted by Law, then for the
maximum period permitted by applicable Law). Following the expiration of the
periods set forth above with respect to any particular representation or
warranty, no party hereto shall have any further liability with respect to such
representation or warranty. Except as set forth herein, all of the covenants,
agreements and obligations of the parties hereto shall survive the Closing
indefinitely (or if indefinite survival is not permitted by Law, then for the
maximum period permitted by applicable Law). Anything herein to the contrary
notwithstanding, any claim for indemnification that is asserted by written
notice within the survival period shall survive until resolved pursuant to a
final non-appealable judicial determination or a written agreement between the
Company and Purchaser.

6. General Provisions.

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

“1933 Act” shall have the meaning set forth in Section 2(h)(i).

 

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“1934 Act” shall have the meaning set forth in Section 2(h)(i).

“2011 Form 10-K” shall have the meaning set forth in Section 2(h)(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, however, 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.

“Assignment” shall have the meaning set forth in the recitals.

“Benefit Plan” shall mean each “employee benefit plan” (within the meaning of
Section 3(3) of ERISA), and each stock purchase, stock option, severance,
employment, change-in-control, retention, fringe benefit, collective bargaining,
bonus, incentive, deferred compensation, employee loan and all other similar
employee benefit plans, agreements, programs, policies or other arrangements,
whether or not subject to ERISA, under which any Company Employee has any
present or future right to benefits and which are contributed to, sponsored by
or maintained by the Company or any Company Subsidiary for such Company
Employee.

“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.

“Capital Stock” shall mean, with respect to any Person, any and all shares,
shares of beneficial interest, interests, participations, rights in or other
equivalents (however designated and whether voting or non-voting) of such
Person’s capital stock or any form of membership, ownership or participation
interests, as applicable, including partnership interests, whether now
outstanding or hereafter issued and any and all securities, debt instruments,
rights, warrants or options exercisable or exchangeable for or convertible into
such capital stock.

“Certificate of Incorporation” shall mean, when used with respect to a specified
Person, the articles or certificate of incorporation or other applicable
organizational document of such Person, including any certificate of
designation, as currently in effect.

“Cleantech A” shall have the meaning set forth in the recitals.

 

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“Cleantech B” shall have the meaning set forth in the recitals.

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

“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 Employee” shall mean each current or former employee, director or
individual independent contractor of the Company or any Company Subsidiary.

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

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

“Company Subsidiary” and “Company Subsidiaries” shall have the meaning set forth
in Section 2(c).

“Consents” shall mean all governmental and third party consents, approvals,
filings, authorizations, qualifications and waivers necessary to be received or
made by a Person.

“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 have the meaning set forth in Section 2(d)(i).

“Credit Facility” shall have the meaning set forth in Section 2(k).

“Debt Facilities” shall have the meaning set forth in Section 2(k).

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

“Disclosure Schedule” shall have the meaning set forth in Section 2.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Excluded Liabilities” means all liabilities of the Company set forth on
Section 5(a) of the Disclosure Schedule.

 

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“GAAP” shall have the meaning set forth in Section 2(h)(ii).

“Governmental Body” shall mean any government or governmental or
quasi-governmental authority including, without limitation, any federal, state,
territorial, county, municipal or other governmental or quasi-governmental
agency, board, branch, bureau, commission, court, arbitral body (public or
private), department or other instrumentality or political unit or subdivision,
whether located in the United States or abroad.

“Infringe” shall have the meaning set forth in Section 2(t).

“Intellectual Property” shall have the meaning set forth in Section 2(t).

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

“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.

“LC Facility” shall have the meaning set forth in Section 2(k).

“Legal Proceeding” shall mean any judicial, administrative or arbitral actions,
suits, claims, charges, complaints, demands, mediations, investigations or
proceedings (public or private), governmental proceedings or stockholder
actions, suits, claims, charges, complaints, demands, mediations, investigations
or proceedings.

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

“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 United 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

 

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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.

“Material Contract” or “Material Contracts” shall have the meaning set forth in
Section 2(s).

“Offered Shares” shall have the meaning set forth in the recitals.

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

“Offering” shall have the meaning set forth in the recitals.

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

“Pegasus” shall mean Pegasus Capital Advisors, L.P.

“Permits” shall mean any approvals, authorizations, licenses, permits, consents
or certificates by or of any Governmental Body.

“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.

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

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

“Purchase Price” shall have the meaning set forth in the recitals.

“Purchased Shares” shall have the meaning set forth in the recitals.

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

“Qualified Public Offering” shall mean a firmly committed underwritten public
offering of the Common Stock on The NASDAQ Stock Market or the New York Stock
Exchange pursuant to an effective registration statement filed under the 1933
Act, where (a) the gross proceeds received by the Company and any selling
stockholders in the offering are no less than $100 million and (b) the market
capitalization of the Company immediately after consummation of the offering is
no less than $500 million.

“Reclassification” shall mean any reclassification, stock split, reverse stock
split, stock dividend, subdivision, combination, consolidation,

 

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recapitalization or any similar proportionately-applied change of outstanding
shares of Common Stock (other than a change in, of, or from par value) while
Purchaser holds any Purchased Shares.

“Redemption Date” shall have the meaning set forth in Section 4(e)(ii).

“Redemption Notice” shall have the meaning set forth in Section 4(e)(ii).

“Redemption Repurchase Amount” shall mean an amount equal to the product
obtained by multiplying (A) the stated value of $1,000, (B) the number of
Purchased Shares to be redeemed and (C) 1.5.

“Registration Rights Agreement” shall mean the Amended and Restated Registration
Rights Agreement by and among the Company, RW LSG Holdings LLC, RW LSG
Management Holdings LLC, Purchaser and Zouk to be dated the date hereof,
substantially in the form of Exhibit G hereto.

“Riverwood” shall mean RW LSG Holdings LLC.

“SEC” shall have the meaning set forth in Section 2(h)(i).

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

“Series H Preferred Stock” shall have the meaning set forth in the recitals.

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

“Series I Preferred Stock” shall have the meaning set forth in the recitals.

“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.

“Tax Return” shall mean any return, report, estimate, declaration, information
return or other document (including any related, attached or supporting
information) filed or required to be filed with any taxing authority with
respect to Taxes.

“Taxes” shall mean all taxes, charges, fees, levies, penalties or other
assessments imposed by any United States federal, state, local or foreign taxing
authority, including, but not limited to, profits, estimated, gross receipts,
windfall

 

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profits, severance, property, intangible property, occupation, production,
sales, use, license, excise, emergency excise, franchise, capital gains, capital
stock, employment, withholding, transfer, stamp, escheat payroll, goods and
services, value added, alternative or add-on minimum tax, or any other tax,
custom, duty or governmental fees or other taxes, including any interest,
penalties, fines or additions attributable thereto, whether disputed or not.

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

“Voting Agreements” shall mean, collectively, that certain Voting Agreement,
dated as of the date hereof, between the Company and Pegasus and that certain
Voting Agreement, dated as of the date hereof, between the Company and
Riverwood.

“Warrant” shall have the meaning set forth in the recitals.

“Zouk” shall have the meaning set forth in the recitals.

“Zouk Shares” shall have the meaning set forth in the recitals.

(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. The provisions of this Agreement may be amended and
waived only with the prior written consent of the Company and Purchaser,
provided, that it is understood and agreed that no amendment or waiver of this
Agreement shall be applicable to, or with respect to, Purchaser without
Purchaser’s prior written consent. No delay or failure of 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 Purchaser are cumulative and not exclusive
of any rights or remedies which it would otherwise have. Any waiver, permit,
consent or approval of any kind or character on the part of Purchaser of any
breach or default under this Agreement or any such waiver of any provision or
condition of this Agreement must be in writing by Purchaser and shall be
effective only to the extent in such writing specifically set forth.

(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.

 

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(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 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 Purchaser.
Notwithstanding the foregoing, the rights of Purchaser set forth herein shall
inure to the benefit of 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 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.

(h) Notices. All notices and other communications required or permitted to be
delivered hereunder shall be in writing and will be deemed properly given (a) on
the date of delivery if delivered personally, or if by facsimile, upon written
confirmation of receipt by facsimile, electronic mail or otherwise (including
electronic confirmation of successful transmission generated by the facsimile
machine of the sender), (b) on the first Business Day following the date of
dispatch if delivered utilizing a next-day service by a recognized next-day
courier service or (c) on the earlier of confirmed receipt or the fifth
(5th) Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid; provided, that
regardless of the method of delivery selected by the Company, any notices or
communications transmitted to Purchaser hereunder shall also be sent by
electronic mail, as follows:

If to Purchaser, at such address as confirmed in writing by Purchaser to the
Company, it being understood that email confirmation would constitute such a
writing.

If to the Company:

Lighting Science Group Corporation

1227 South Patrick Drive

Building 2A

Satellite Beach, FL 32937

Attention: Thomas C. Shields, Chief Financial Officer

Tel: (321) 779-5520

Fax: (321) 779-5521

Email: tom.shields@lsgc.com

 

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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: Greg R. Samuel, Esq.

Tel: (214) 651-5645

Fax: (214) 200-0577

Email: greg.samuel@haynesboone.com

Either 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.

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

(j) Arbitration. Any and all disputes which cannot be settled amicably,
including any ancillary claims of any party, arising out of, relating to or in
connection with the validity, negotiation, execution, interpretation,
performance or non-performance of this Agreement (including the validity, scope
and enforceability of this arbitration provision) shall be finally settled by
binding arbitration conducted by a single arbitrator in New York, New York in
accordance with the then-existing Rules of Arbitration of the International
Chamber of Commerce. If the parties to the dispute fail to agree on the
selection of an arbitrator within 30 days of the receipt of the request for
arbitration, the International Chamber of Commerce shall make the appointment.
The arbitrator shall be a lawyer and shall conduct the proceedings in the
English language. Except as required by Law or as may be reasonably required in
connection with ancillary judicial proceedings to compel arbitration, to obtain
temporary or preliminary judicial relief in aid of arbitration, or to confirm or
challenge an arbitration award, the arbitration proceedings, including any
hearings, shall be confidential, and the parties shall not disclose any awards,
any materials in the proceedings created for the purpose of the arbitration, or
any documents produced by another party in the proceedings not otherwise in the
public domain. Judgment on any award rendered by an arbitration tribunal may be
entered in any court having jurisdiction thereover. PURCHASER AND THE COMPANY
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE U.S. FEDERAL AND STATE
COURTS LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING
ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR
RELATING TO OR CONCERNING THIS AGREEMENT.

(k) 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

 

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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”.

(l) 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.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date first written above.

 

COMPANY: LIGHTING SCIENCE GROUP CORPORATION By:  

/s/ Thomas C. Shields

Name:   Thomas C. Shields Title:   Chief Financial Officer

Signature Page to Preferred Stock Subscription Agreement

--------------------------------------------------------------------------------

PURCHASER: PORTMAN LIMITED By:  

/s/ Mohamed Ali Al Dhaheri

Name:   Mohamed Ali Al Dhaheri Title:   Director By:  

/s/ Salem Mohamed Al Ameri

Name:   Salem Mohamed Al Ameri Title:   Director

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