Exhibit 10.7

 

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September 11, 2015

 

Medley Capital Corporation

375 Park Avenue, Suite 3304

New York, NY 10152

Attn: Brian Dohmen and Gregory Richards

Fax: (212) 759-0091

 

RE:

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

 

Ladies and Gentlemen:

 

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

 

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

 

1830 Penn Street | Melbourne, FL 32901 USA | www.lsgc.com

P 321.779.5520 | F 321.779.5521 

 

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September 11, 2015

Medley Capital Corporation

Page 2 

 

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

 

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

 

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

 

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

 

 
 

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September 11, 2015

Medley Capital Corporation

Page 3

  

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

 

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

 

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

 

 
 

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September 11, 2015

Medley Capital Corporation

Page 4 

 

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

 

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

 

[Remainder of Page Intentionally Left Blank;

Signature Page Follows.]

 

 
 

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Very Truly Yours,

 

        LIGHTING SCIENCE GROUP CORPORATION  

 

 

 

 

       

 

 

 

 

 

By:

/s/ Ed Bednarcik 

 

 

 

Name:  Ed Bednarcik  

 

 

 

Title:    Chief Executive Officer     

 

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