exv10w2






Exhibit 10.2



LIGHTING SCIENCE GROUP CORPORATION

2100 McKinney Ave., Suite 1515

Dallas, Texas 75201




February 13, 2009




Pegasus Partners IV, L.P.

505 Park Avenue, 22nd Floor

New York, New York 10022





			
	RE:	 	Promissory Note in Favor of Pegasus Partners IV, L.P.





Ladies and Gentlemen:



This letter agreement (this “Letter Agreement”) is delivered to Pegasus Partners IV, L.P., a
Delaware limited partnership (“Pegasus”), in connection with the making of that certain Promissory
Note, executed as of the date hereof by Lighting Science Group Corporation, a Delaware corporation
(the “Company”), and payable to the order of Pegasus (the “Promissory Note”).



In connection with, and in consideration of, the agreements contained herein and in the Promissory
Note, the Company and Pegasus hereby agree as follows:





	 	1.	 	The Company agrees to use its best efforts to conduct a rights offering during the
second fiscal quarter of 2009 (the “Offering”) for preferred or common stock of the
Company, the net proceeds of which would raise approximately Thirty Million Dollars ($30
million), upon the terms in that certain Summary of Terms attached hereto as Exhibit
A. The parties acknowledge and agree that the bracketed items and blanks contained in
the attached Summary of Terms will be completed in good faith based upon market conditions
at the time of the Offering.
	 
	 	2.	 	Subject to Paragraph 16 of the Promissory Note, the net cash proceeds of any Offering
shall be applied to payment of: (i) the unpaid principal amount of the Promissory Note,
together with accrued interest thereon; (ii) the unpaid principal amount of the Company’s
outstanding unsecured bridge loans, together with accrued interest thereon; (iii) the
anticipated cash needs of the Company during 2009, net of other available financings; and
(iv) the Company’s outstanding borrowings that are guaranteed by Pegasus or an affiliate of
Pegasus.




This Letter Agreement may be executed by facsimile signature and in any number of counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument.





 









 







If the above correctly sets forth the parties’ agreement, please execute this Letter Agreement in
the space provided below.




	 	 	 	 	 
	 	Very truly yours,



LIGHTING SCIENCE GROUP CORPORATION

 	 
	 
	 	By:  	/s/ Stephen Hamilton
 	 
	 	 	Name:  	Stephen Hamilton 	 
	 	 	Title:  	Vice President — Finance 	 
	 


ACCEPTED AND AGREED THIS 13th DAY OF FEBRUARY, 2009




	 	 	 	 	 
	PEGASUS PARTNERS IV, L.P.

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



Signature Page to Letter Agreement










 






	 	 	 	 	 



Exhibit A




Summary of Terms





 











 





SUMMARY OF TERMS




RIGHTS OFFERING OF SERIES D PREFERRED STOCK

OF

LIGHTING SCIENCE GROUP CORPORATION (the “Company”)

FEBRUARY 13, 2009




I. SUMMARY OF TERMS OF RIGHTS TO BE OFFERED




	 	 	 
	Term of Offering:

	 	The offering will remain open for a
period of 30 days. The offering
will commence upon the effectiveness
of a registration statement filed
pursuant to the Securities Act of
1933, as amended.
	 
	 	 
	Type of Security Underlying
Subscription Right:

	 	Series D Non-Convertible Preferred
Stock (the “Series D Preferred”) and
attached Warrants (the “Warrants”).
	 
	 	 
	Purchase Price:

	 	Each whole subscription right will
entitle the holder to purchase one
share of Series D Preferred and one
Warrant to purchase Common Stock for
$[___] (the “Original Purchase
Price”).
	 
	 	 
	Eligible Participants:

	 	Holders of record of the Company’s
(i) Common Stock, (ii) 6%
Convertible Preferred Stock, (iii)
Series B Preferred Stock, and (iv)
Warrants will receive one
subscription right for every one
share of Common Stock issued or
issuable to such holder on the
record date. In addition, each
employee of the Company will be
entitled to participate in the
offering for an amount of up to 10%
(in the aggregate) of the rights
offered to the above security
holders; provided, that the source
of the allocation of these rights
would be determined at the time of
the offering. Each Eligible
Participant will also have the right
to subscribe for an over-allocation
of up 200% of the original number of
rights issued to such Eligible
Participant. Eligible Participants
that subscribe for any shares
pursuant to such over-allocation
right will receive compensation
customary to that payable pursuant
to a back stop arrangement.
	 
	 	 
	Transfer of Subscription Right:

	 	Except with respect to transfers by
Eligible Participants to their
respective affiliates, the
subscription rights will not be
transferable.






 









 






II. SUMMARY OF TERMS OF SERIES D PREFERRED STOCK




	 	 	 
	Dividends:

	 	The Series D Preferred will be
entitled to a cumulative annual
dividend of 25%. 17% of such
dividend (the “Exercise Price
Accrual”) will be credited for the
account of the holder and would be
available at any time to the holder
solely for purposes of satisfying
the exercise price payable upon
exercise of the Warrants issued in
conjunction therewith.
Notwithstanding the foregoing, in no
event will the holders of Series D
Preferred be entitled to an
aggregate Exercise Price Accrual
that is greater than 100% of the
aggregate exercise price of the
Warrants. In the event that all or
any portion of the Warrants are
exercised by a holder thereof prior
to the eighth anniversary of the
date of issuance (the “Redemption
Date”), the cumulative annual
dividend on an equal number of
shares of Series D Preferred held by
such holder would immediately be
reduced to 8% (the “Liquidation
Preference Accrual”).
	 
	 	 
	Liquidation Preference:

	 	In the event of any liquidation,
dissolution, winding up or Change of
Control (as defined below) of the
Company (a “Liquidation Event”),
holders of the Series D Preferred
will be subordinated to the
liquidation preferences of the
holders of the Company’s 6%
Convertible Preferred Stock, Series
B Preferred Stock and Series C
Preferred Stock but will be entitled
to receive, in preference to the
holders of Common Stock, an amount
for each share of Series D Preferred
(the “Liquidation Amount”) equal to
the Original Purchase Price plus the
accrued and unpaid Liquidation
Preference Accrual as if such holder
had held the Series D Preferred
until the Redemption Date. If,
after payment of the full amount of
the liquidation preferences of the
holders of the 6% Convertible
Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock,
the assets of the Company are
insufficient to permit payment of
the full Liquidation Amount to all
holders of Series D Preferred, then
the available assets will be
distributed ratably to the holders
of the Series D Preferred in
proportion to the Liquidation Amount
each such holder would otherwise be
entitled to receive. In addition,
upon the occurrence of a Liquidation
Event,






 









 






	 	 	 
	 

	 	the accrued and unaccrued
Exercise Price Accrual (reduced by
any amounts applied by the holder to
the payment of the exercise price in
conjunction with any Warrants
exercised by such holder prior to
the date of the Liquidation Event)
will be credited for the account of
each holder of Series D Preferred as
if such holder had held the Series D
Preferred until the Redemption Date.
	 
	 	 
	 

	 	“Change of Control” means (a) the
sale, conveyance or disposition of
all or substantially all of the
assets of the Company (other than
pursuant to a joint venture
arrangement or other transaction in
which the Company receives at least
fifty percent (50%) of the voting
equity in another entity or a
general partnership); (b) the
effectuation of a transaction or
series of related transactions in
which more than fifty percent (50%)
of the voting power of the Company
is disposed of (other than as a
direct result of normal,
uncoordinated trading activities in
the Common Stock generally); (c) the
consolidation, merger or other
business combination of the Company
with or into any other entity,
immediately following which the
prior stockholders of the Company
fail to own, directly or indirectly,
at least fifty percent (50%) of the
voting equity of the surviving
entity; (d) a transaction or series
of transactions in which any Person
or “group” (as such term is used in
Sections 13(d) and 14(d) of the
Exchange Act) acquires more than
fifty percent (50%) of the voting
equity of the Company; (e) the
replacement of a majority of the
Board of Directors with individuals
who were not nominated or elected by
at least a majority of the directors
at the time of such replacement; or
(f) a transaction or series of
transactions that constitutes or
results in a “going private
transaction” (as defined in Section
13(e) of the Exchange Act and the
regulations of the Commission issued
thereunder).
	 
	 	 
	Redemption:

	 	The Series D Preferred will not be
callable by the Company prior to the
Redemption Date. Upon the
Redemption Date, the Series D
Preferred will be redeemed by the
Company, and the Company will pay
each holder of Series D Preferred an
amount equal to the Original
Purchase Price plus the Liquidation
Preference Accrual (reduced by any
amounts applied by the holder to the
payment of the exercise price in






 









 






	 	 	 
	 

	 	conjunction with any Warrants
exercised by such holder prior to
the Redemption Date). Upon any
Change of Control occurring prior to
the Redemption Date, the Series D
Preferred will be redeemed by the
Company, and the Company will pay
each holder of Series D Preferred
the Liquidation Amount.
	 
	 	 
	 

	 	Upon any such redemption, the
aggregate amount of the Exercise
Price Accrual (reduced by any
amounts applied by the holder to the
payment of the exercise price in
conjunction with any Warrants
exercised by such holder prior to
the Redemption Date) will remain
credited for the account of the
holder and all unexercised Warrants
held by such holder will remain
outstanding.
	 
	 	 
	Conversion:

	 	The Series D Preferred will not be
convertible into any other
securities of the Company.
	 
	 	 
	Voting Rights

	 	Except as required by law, the
holders of the Series D Preferred
will not have voting rights.






III. SUMMARY OF TERMS OF WARRANTS




	 	 	 
	Exercise Price:

	 	$6.00 per share of Common Stock.
	 
	 	 
	Term:

	 	Warrants will be exercisable at any
time after the date of issuance and
will have a term of 12 years.
	 
	 	 
	Exercise:

	 	Warrants will be exercisable by
paying an amount equal to the
Exercise Price multiplied by the
number of Warrant Shares. The
Exercise Price will be payable by
means of a cash payment; provided,
that the aggregate amount payable
upon exercise of the Warrants will
be reduced by: (i) the Exercise
Price Accrual that is credited to
the account of the holder as of the
date of exercise, if any; (ii) at
the holder’s option, any portion of
the Liquidation Preference Accrual
otherwise payable to the holder as
of the date of exercise; and (iii)
at the holder’s option and upon
surrender of a certificate or
certificates representing shares of
Series D Preferred Stock, the
Original Purchase Price multiplied
by the number of shares of Series D
Preferred Stock surrendered.






 









 






	 	 	 
	Transfer:

	 	The Warrants will only be
transferable if the corresponding
shares of Series D Preferred are
also transferred.