Exhibit 10.3

 

 

FOURTH AMENDMENT TO TERM LOAN AGREEMENT

 

This FOURTH AMENDMENT TO TERM LOAN AGREEMENT (this “Amendment”), is entered into
as of July 19, 2016, by and among Lighting Science Group Corporation, a Delaware
corporation (the “Borrower”), the Lenders (as defined below) signatory hereto,
and Medley Capital Corporation, a Delaware corporation (“Medley”), as
administrative agent for the Lenders (in such capacity, together with its
successors and assigns in such capacity, the “Agent”).

 

W I T N E S S E T H:

 

WHEREAS, the Borrower, the lenders from time to time party thereto (“Lenders”)
and the Agent are parties to that certain Term Loan Agreement dated as of
February 19, 2014, (as amended hereby and as may be further amended, restated,
supplemented or otherwise modified from time to time, the “Loan Agreement”);

 

WHEREAS, the Borrower has informed the Agent and the Lenders that it intends to
issue additional units of its Series J Convertible Preferred Stock for net cash
proceeds of $5,000,000 (the “Specified Equity Issuance”), which is prohibited by
Section 6.12 of the Loan Agreement because such Equity Interests constitute
Disqualified Equity Interests under the Loan Agreement;

 

WHEREAS, the Borrower has requested that (w) it be permitted to make the
Specified Equity Issuance, to retain the net cash proceeds thereof (the
“Specified Net Cash Proceeds”) for working capital and for other general
corporate purposes that are not prohibited by the Loan Agreement, (x) the full
amount of the Specified Net Cash Proceeds be added to EBITDA for the purpose of
determining compliance with Section 7.6 (Minimum Fixed Charge Coverage Ratio)
for the twelve month period ending on each of June 30, 2016, September 30, 2016,
December 31, 2016, and March 30, 2017 (the “Specified Covenant Periods”) (y) the
Specified Net Cash Proceeds be added to EBITDA for the Specified Covenant
Periods, and (z) the Minimum EBITDA levels set forth in Section 7.1 be amended
with respect to each of the Specified Covenant Periods;

 

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

 

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

 

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

 

 
 

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2.     Limited Consent. Upon satisfaction of the conditions to effectiveness set
forth in Section 5 below and notwithstanding Section 6.12 of the Loan Agreement,
Agent and the Lenders hereby consent (i) to the Borrower making the Specified
Equity Issuance plus an additional amount not to exceed an aggregate of
$2,500,000 from and including the Fourth Amendment Effective Date to and
including March 30, 2017 pursuant to the documentation attached hereto as
Exhibit B, (ii) retaining the Specified Net Cash Proceeds and such additional
amount not to exceed an aggregate of $2,500,000 for working capital and for
other general corporate purposes that are not prohibited by the Loan Agreement
and (iii) adding the full amount of the Specified Net Cash Proceeds to EBITDA,
as necessary, for the purpose of determining compliance with Section 7.6
(Minimum Fixed Charge Coverage Ratio) for the Specified Covenant Periods.
Notwithstanding anything herein or in the Loan Documents or the Intercreditor
Agreement to the contrary, Agent and Lenders agree and acknowledge that the
Specified Net Cash Proceeds shall be first applied to the obligations arising
under the Revolving Loan Agreement (but not in permanent reduction of the
maximum revolving amount under the Revolving Loan Documents). The Revolving
Agent shall be entitled to rely on the consent provided herein and the foregoing
agreement and acknowledgment by Agent and the Lenders. The foregoing is a
limited consent, and shall not, except as otherwise expressly provided in this
Agreement, constitute (a) a modification or alteration of the terms, conditions
or covenants of the Loan Agreement or any other Loan Document or (b) a waiver,
release, or limitation upon the exercise by Agent or any Lender of any of its
rights, legal or equitable, thereunder

 

3.     Amendments to Loan Agreement. Upon satisfaction of the conditions to
effectiveness set forth in Section 5 below, the Loan Agreement is hereby amended
as follows:

 

(a)     Schedule 1.1 of the Loan Agreement is hereby amended by deleting the
period at the end of the end of the definition of “EBITDA” and adding the
following as clause (l):

 

“plus (l) the amount of cash equity contributions, other than the Fourth
Amendment Equity Contribution, permitted hereunder in an amount not to exceed an
aggregate of $2,500,000 that is contributed to the Borrower from the Sponsor
from and including the Fourth Amendment Effective Date to and including March
30, 2017, solely for purposes of determining compliance with Section 7.1 and
Section 7.6 during the relevant fiscal quarters.”

 

(b)     Schedule 1.1 of the Loan Agreement is further amended by adding the
following definitions in the correct alphabetical order as follows:

  

““Fourth Amendment” means that certain Fourth Amendment to Loan Agreement, dated
as of the Fourth Amendment Effective date, by and among the Borrower, Agent and
the Lenders party thereto.”

 

““Fourth Amendment Effective Date” means July 19, 2016.”

 

““Fourth Amendment Equity Contribution” means the cash equity contribution
related to the issuance of Series J Convertible Preferred Stock on the Fourth
Amendment Effective Date in an amount not to exceed $5,000,000, made by Sponsor
to Borrower and immediately contributed to the capital of the Borrower in
connection with the Fourth Amendment on or prior to the Fourth Amendment
Effective Date.”

 

 
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(c)     Section 5.2 of the Loan Agreement is hereby amended and restated in its
entirety as follows:

 

“5.2     Thirteen-Week Cash Flow Forecast. The Borrower agrees to deliver to the
Administrative Agent a thirteen-week cash flow projection in form and substance
reasonably satisfactory to the Administrative Agent within five (5) Business
Days of such request.”

 

(d)     Article 5 of the Loan Agreement is hereby amended by adding the
following Section 5.18 to the Loan Agreement:

 

“5.18     Appointment of Consultant. The Borrower agrees that (i) the Agent may
appoint and engage a consultant to perform an on-site assessment and analyze the
operations of the Loan Parties and other analyses as the Agent may authorize and
provide a report of such assessment and analysis to the Agent and (ii) the
Borrower shall pay all reasonable and documented costs and expenses of such
consultant in connection with the analysis and assessment. In order to
facilitate such consultant’s assessment and analysis, the Loan Parties shall
provide full and unfettered access, at reasonable times and upon reasonable
prior notice, to their assets, books and records, and officers and employee.”

 

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

 

Fiscal Quarter

Minimum EBITDA

June 30, 2016

EBITDA projected for such fiscal quarter in Borrower’s Projections delivered in
accordance with clause (e) of Schedule 5.1(a) to the extent reasonably
satisfactory to Agent; less an amount equal to 25% of such projected EBITDA for
such fiscal quarter; provided, that for the twelve-month period ending on June
30, 2016, EBITDA, for the purposes of calculating compliance with this Section
7.1 and Section 7.6 and for no other purpose, shall be increased by Four Million
Dollars ($4,000,000) and the amount of the Fourth Amendment Equity Contribution

September 30, 2016

($3,750,000); provided, that for the twelve-month period ending on September 30,
2016, EBITDA, for the purposes of calculating compliance with this Section 7.1
and Section 7.6 and for no other purpose, shall be increased by the amount of
the Fourth Amendment Equity Contribution.

December 31, 2016

$500,000; provided, that for the twelve-month period ending on December 31,
2016, EBITDA, for the purposes of calculating compliance with this Section 7.1
and Section 7.6 and for no other purpose, shall be increased by the amount of
Fourth Amendment Equity Contribution

March 31, 2017

EBITDA projected for such fiscal

quarter in Borrower’s Projections

delivered in accordance with clause (e)

of Schedule 5.1(a) to the extent

reasonably satisfactory to Agent; less

an amount equal to 25% of such

projected EBITDA for such fiscal quarter; provided, that for the twelve-month
period ending on March 31, 2017, EBITDA, for the purposes of calculating
compliance with this Section 7.1 and Section 7.6 and for no other purpose, shall
be increased by the amount of Fourth Amendment Equity Contribution

Each fiscal quarter thereafter

EBITDA projected for such fiscal

quarter in Borrower’s Projections

delivered in accordance with clause (e)

of Schedule 5.1(a) to the extent

reasonably satisfactory to Agent; less

an amount equal to 25% of such

projected EBITDA for such fiscal quarter

 

 
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(f)     Section 7.6 of the Loan Agreement is hereby amended by replacing the
table set forth in such Section with the following table in lieu thereof:

 

Period

Ratio

For the twelve months ending September 30, 2016

-0.75 to 1.00

For the twelve months ending December 31, 2016

0.05 to 1.00

For the twelve months then ending for each quarter end thereafter

1.00 to 1.00

 

(g)     Section 8.2(a)(i) of the Loan Agreement is hereby amended by adding
“5.2” immediately after the reference to “5.1”

 

4.     Disclosure Updates. Pursuant to Section 5.10 of the Loan Agreement, each
of Schedule A-2, Schedule 4.1(b), Schedule 4.1(c), Schedule 4.6(b), Schedule
4.23 and Schedule 4.26 to the Loan Agreement, are hereby amended and replaced by
the applicable Schedules attached hereto as Exhibit A (collectively, the
“Specified Disclosure Updates”).

 

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

 

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

 

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

 

(c)     Borrower shall have delivered to the Agent evidence satisfactory to it
in its sole discretion that Specified Equity Issuance has been consummated;

 

(d)     Borrower shall have delivered to the Agent true, correct and complete
executed copies of all material documentation related to the Specified Equity
Issuance, which is attached hereto as Exhibit B;

 

(e)     Borrower shall have entered into an amendment and waiver with the
Revolving Agent in form and substance satisfactory to the Agent, a true correct
and complete copy of which shall be provided to the Agent promptly upon
execution; and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 
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14.     Acknowledgment of Obligations. The Borrower hereby acknowledges,
confirms and agrees that as of the close of business on July 19, 2016, the
Borrower is indebted to the Lenders in respect of the Term Loans in the
principal amount of $31,996,638.81, with accrued and outstanding cash interest
in the amount of $170,079.73 and accrued and outstanding Closing Date PIK
Interest in the amount of $31,996.64. The Borrower hereby acknowledges, confirms
and agrees that all such Term Loans, together with interest accrued and accruing
thereon, and all fees, costs, expenses and other charges now or hereafter
payable by the Borrower to the Agent and Lenders, are unconditionally owing by
the Borrower to the Agent and Lenders, as applicable, without offset, defense or
counterclaim of any kind, nature or description whatsoever.

 

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

 

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

 

 

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

 

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

 

 

BORROWER:

 

LIGHTING SCIENCE GROUP CORPORATION,
a Delaware corporation

 

By:      /s/Ed Bednarcik     

     Ed Bednarcik
     Chief Executive Officer

 

 

[Fourth Amendment to Term Loan Agreement]

 

 

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AGENT:

 

MEDLEY CAPITAL CORPORATION,
a Delaware corporation

 

 

By: /s/ Richard T. Allorto     
Name: Richard T. Allorto
Title: Chief Financial Officer

 

 

LENDERS:

 

MEDLEY CAPITAL CORPORATION,
a Delaware corporation

 

 

By: /s/ Richard T. Allorto     
Name: Richard T. Allorto
Title: Chief Financial Officer

 

 

MEDLEY OPPORTUNITY FUND II LP,
a Delaware limited partnership

 

 

By: /s/ Richard T. Allorto     
Name: Richard T. Allorto
Title: Chief Financial Officer

 

 

[Fourth Amendment to Term Loan Agreement]

 

 
 

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EXHIBIT A

 

Disclosure Schedule Updates