Document:

Exhibit 4.1

    SECOND
      AMENDED AND RESTATED 

    CERTIFICATE
      OF DESIGNATION

    OF

    PREFERRED
      STOCK 

    OF

    LIGHTING
      SCIENCE GROUP CORPORATION

     

    To
      Be Designated 

    6%
      Convertible Preferred Stock

                                

     

    Pursuant
      to Section 151(g) of the

    General
      Corporation Law of the State of Delaware

                                

    

    The
      undersigned DOES HEREBY CERTIFY that the following resolution was duly adopted
      by the Board of Directors of Lighting Science Group Corporation, a Delaware
      corporation (the “Corporation”),
      at a
      meeting duly convened and held, at which a quorum was present and acting
      throughout:

    

    “RESOLVED,
      that pursuant to the authority conferred on the Board of Directors of the
      Corporation (the “Board
      of Directors”)
      by the
      Corporation’s Certificate of Incorporation, the issuance of a series of
      preferred stock, par value $0.001 per share, of the Corporation which shall
      consist of 2,656,250 shares of convertible preferred stock be, and the same
      hereby is, authorized; and the Chairman and Chief Executive Officer of the
      Corporation be, and he hereby is, authorized and directed to execute and file
      with the Secretary of State of the State of Delaware a Certificate of
      Designation of Preferred Stock of the Corporation fixing the designations,
      powers, preferences and rights of the shares of such series, and the
      qualifications, limitations or restrictions thereof (in addition to the
      designations, powers, preferences and rights, and the qualifications,
      limitations or restrictions thereof, set forth in the Certificate of
      Incorporation which may be applicable to the Corporation’s preferred stock), as
      follows:

     

    1. Number
      of Shares; Designation.
      A total
      of 2,656,250 shares of preferred stock, par value $0.001 per share, of the
      Corporation are hereby designated as 6% Convertible Preferred Stock (the
“Series”).
      Shares of the Series (“Preferred
      Shares”)
      will
      be issued pursuant to the terms of a Securities Purchase Agreement, dated as
      of
      May 10, 2005, by and among the Corporation and the Purchasers named therein
      (the
“Purchase
      Agreement”).
      Capitalized terms used herein and not otherwise defined have the respective
      meanings set forth in the Purchase Agreement. 

     

    2. Rank.
      The
      Series shall, with respect to payment of dividends, redemption payments and
      rights upon liquidation, dissolution or winding-up of the affairs of the
      Corporation, rank:

     

    
      	
               

            	
              (i)

            	
              Senior
                and prior to the Common
                Stock, par value $0.001 per share, of the Corporation (the “Common
                Stock”),
                and any additional series of preferred stock which may in the future
                be
                issued by the Corporation and are designated in the amendment to
                the
                Certificate of Incorporation or the certificate of designation
                establishing such additional preferred stock as ranking junior to
                the
                Preferred Shares. Any shares of the Corporation’s capital stock which are
                junior to the Preferred Shares with respect to the payment of dividends
                are hereinafter referred to as “Junior
                Dividend Shares”
                and any shares which are junior to the Preferred Shares with respect
                to
                redemption, payment and rights upon liquidation, dissolution or winding-up
                of the affairs of the Corporation are hereinafter referred to as
                “Junior
                Liquidation Shares”.
                

            

    

     

    
      	
               

            	
              (ii)

            	
              Pari
                passu with
                any additional series of preferred stock which may in the future
                be issued
                by the Corporation and are designated in the amendment to the Certificate
                of Incorporation or the certificate of designation establishing such
                additional preferred stock as ranking equal to the Preferred Shares
                or
                which do not state they are Junior Dividend Shares or Senior Dividend
                Shares (as defined below). Any shares of the Corporation’s capital stock
                which are equal to the Preferred Shares with respect to the payment
                of
                dividends are hereinafter referred to as “Parity
                Dividend Shares”
                and any shares which are equal to the Preferred Shares with respect
                to
                redemption, payment and rights upon liquidation, dissolution or winding-up
                of the affairs of the Corporation are hereinafter referred to as
                “Parity
                Liquidation Shares”.
                

            

    

     

    
      	
               

            	
              (iii)

            	 	
              Junior
                to any additional series of preferred stock which may in the future
                be
                issued by the Corporation and are designated in the amendment to
                the
                Certificate of Incorporation or the certificate of designation
                establishing such additional preferred stock as ranking senior to
                the
                Preferred Shares. Any shares of the Corporation’s capital stock which are
                senior to the Preferred Shares with respect to the payment of dividends
                are hereinafter referred to as “Senior
                Dividend Shares”
                and any shares which are senior to the Preferred Shares with respect
                to
                redemption, payment and rights upon liquidation, dissolution or winding-up
                of the affairs of the Corporation are hereinafter referred to as
                “Senior
                Liquidation Shares”.
                

            

    

     

    The
      Corporation may not issue additional shares of preferred stock which are not
      (a)
      Junior Stock (as defined in paragraph 3(c) below) or (b) both Parity Liquidation
      Shares and Parity Dividend Shares without the consent of the holders of a
      majority of the Preferred Shares.

     

    3. Dividends.
      

    

    (a) 
      The
      dividend rate on Preferred Shares shall be $0.192 per share per annum. Dividends
      on Preferred Shares shall be fully cumulative, accruing, without interest,
      from
      the date of original issuance of the Series through the date of redemption
      or
      conversion thereof, and, to the extent so declared by the Board of Directors,
      shall be payable in arrears on August 10, November 10, February 10 and May
      10 of
      each year, commencing August 10, 2005, except that if such date is not a
      Business Day then to the extent so declared by the Board of Directors the
      dividend shall be payable on the first immediately succeeding Business Day
      (as
      used herein, the term “Business
      Day”
shall
      mean any day except a Saturday, Sunday or day on which banking institutions
      are
      legally authorized to close in Dallas, Texas) (each such date being hereinafter
      referred to as a “Dividend
      Payment Date”).
      Dividends on the Preferred Shares shall be paid in cash; provided,
      however,
      if all
      of the Stock Payment Conditions are met on the applicable Dividend Payment
      Date
      and on each of the ten consecutive Trading Days immediately preceding such
      date
      (the applicable “Stock
      Payment Period”),
      the
      Corporation may pay such dividends, at the Corporation’s option, (i) in fully
      paid and nonassessable shares of Common Stock (such dividends paid in such
      form
      being herein called “PIK
      Dividends”)
      or
      (ii) in cash. PIK Dividends shall be paid by delivering to each record holder
      of
      Preferred Shares a number of shares of Common Stock (“PIK
      Dividend Shares”)
      determined by dividing (x) the total aggregate dollar amount of dividends
      accrued and unpaid with respect to Preferred Shares owned by such record holder
      on the record date for the applicable Dividend Payment Date (rounded to the
      nearest whole cent) by (y) the applicable PIK Dividend Price. In order to
      deliver PIK Dividend Shares in lieu of cash on a Dividend Payment Date, the
      Corporation must deliver, on or before the fifteenth (15th)
      calendar day immediately prior to such date, written notice to each Holder
      of
      Preferred Shares stating that the Corporation wishes to do so (a “PIK
      Stock Dividend Notice”);
      in
      the event that the Corporation does not deliver a PIK Stock Dividend Notice
      on
      or before such fifteenth (15th)
      day,
      the Corporation will be deemed to have elected to pay the related dividend
      in
      cash. Each Holder shall promptly thereafter deliver to the Corporation
      instructions designating whether such Holder wishes to receive delivery of
      its
      PIK Dividend Shares in physical certificates (and, if so, at what address)
      or
      through the Depository Trust Company (“DTC”),
      as
      long as no legend is required by the terms of the Purchase Agreement to be
      imprinted on such Shares (and, if so, the account number to be credited). If
      the
      Corporation wishes to deliver PIK Dividend Shares in lieu of cash with respect
      to accrued dividends, it must do so with respect to all (but not less than
      all)
      of such dividends. A PIK Stock Dividend Notice, once delivered by the
      Corporation, shall be irrevocable unless the Corporation ceases to satisfy
      all
      of the Stock Payment Conditions at any time after delivering such PIK Stock
      Dividend Notice, in which case such notice shall be deemed revoked and the
      dividend to which such notice relates shall be payable in cash on the Dividend
      Payment Date. The Corporation shall not issue fractional shares of Common Stock
      to which Holders may become entitled pursuant to this subparagraph, but in
      lieu
      thereof, the Corporation shall round the number of shares to be issued up to
      the
      next whole number. Each dividend shall be paid to the Holders of record of
      Preferred Shares as they appear on the stock register of the Corporation on
      the
      record date, not less than 10 nor more than 60 days preceding the applicable
      Dividend Payment Date, as shall be fixed by the Board of Directors. Dividends
      payable on each Dividend Payment Date shall be computed on the basis of a
      360-day year of twelve 30-day months and rounded to the nearest cent. Dividends
      on account of arrearages for any past Dividend Payment Date may be declared
      and
      paid at any time, without reference to any scheduled Dividend Payment Date,
      to
      holders of record on such date, not exceeding 45 days preceding the payment
      date
      thereof, as may be fixed by the Board of Directors of the Corporation. Dividends
      shall accrue regardless of whether the Corporation has earnings, whether there
      are funds legally available therefor and/or whether declared. No interest shall
      be payable with respect to any dividend payment that may be in arrears. Holders
      of Preferred Shares called for redemption between the close of business on
      a
      dividend payment record date and the close of business on the corresponding
      Dividend Payment Date shall, in lieu of receiving such dividend on the Dividend
      Payment Date fixed therefor, receive such dividend payment on the date fixed
      for
      redemption together with all other accrued and unpaid dividends to the date
      fixed for redemption. The Holders shall not be entitled to any dividends other
      than the dividends provided for in this paragraph 3.

     

    (b) No
      dividends, except as described in the next succeeding sentence, shall be
      declared or paid or set apart for payment on any Parity Dividend Shares for
      any
      period unless full cumulative dividends have been or contemporaneously are
      declared and paid or declared and set aside for payment for all accrued
      dividends with respect to the Series through the most recent Dividend Payment
      Date ending on or prior to the date of payment. Unless dividends accrued and
      payable but unpaid on Preferred Shares and any Parity Dividend Shares at the
      time outstanding have been paid in full, all dividends declared by the
      Corporation upon Preferred Shares or Parity Dividend Shares shall be declared
      pro
      rata
      with
      respect to all such shares, so that the amounts of any dividends declared on
      Preferred Shares and the Parity Dividend Shares shall in all cases bear to
      each
      other the same ratio that, at the time of the declaration, all accrued but
      unpaid dividends on Preferred Shares and the other Parity Dividend Shares,
      respectively, bear to each other.

     

    (c) If
      at any
      time the Corporation has failed to (x) pay or set apart for payment all accrued
      dividends on any Preferred Shares through the then most recent Dividend Payment
      Date and (y) set apart for payment an amount in cash equal to the scheduled
      dividend payments for each of the next two Dividend Payment Dates, the
      Corporation shall not, and shall not permit any corporation or other entity
      directly or indirectly controlled by the Corporation to:

     

    
      	
               

            	
              (i)

            	
              declare
                or pay or set aside for payment any dividend or other distribution
                on or
                with respect to any Junior Dividend Shares, whether in cash, securities,
                obligations or otherwise (other than dividends or distributions paid
                in
                shares of capital stock of the Corporation ranking junior to Preferred
                Shares both as to the payment of dividends and as to rights in
                liquidation, dissolution or winding-up of the affairs of the Corporation
                (“Junior
                Stock”),
                or options, warrants or rights to subscribe for or purchase shares
                of
                Junior Stock); or 

            

    

     

    
      	
               

            	
              (ii)

            	
              redeem,
                purchase or otherwise acquire, or pay into, set apart money or make
                available for a sinking or other analogous fund for the redemption,
                purchase or other acquisition of, any Preferred Shares (unless all
                of the
                Preferred Shares are concurrently redeemed), Parity Dividend Shares,
                Parity Liquidation Shares or shares of Junior Stock for any consideration
                (except by conversion into or exchange for Junior Stock); provided,
                however,
                that this restriction shall not apply to the repurchase of shares
                of
                Common Stock from employees, officers, directors, consultants or
                other
                persons performing services for the Corporation or any subsidiary
                pursuant
                to agreements under which the Corporation has the option to repurchase
                such shares at cost or at cost plus interest at a rate not to exceed
                nine
                percent (9%) per annum, or, if lower than cost, at fair market value,
                upon
                the occurrence of certain events, such as the termination of employment;
                and provided
                further,
                that the total amount applied to the repurchase of shares of Common
                Stock
                shall not exceed $100,000 during any twelve month period, unless,
                in each
                such case, all dividends accrued on Preferred Shares through the
                most
                recent Dividend Payment Date and on any Parity Dividend Shares have
                been
                or contemporaneously are declared and paid in
                full.

            

    

    (d) Any
      reference to “distribution”
      contained in this paragraph 3 shall not be deemed to include any distribution
      made in connection with any liquidation, dissolution or winding-up of the
      Corporation, whether voluntary or involuntary.

     

    4. Liquidation.
      

    

    (a)
       The
      liquidation value per Preferred Share, in case of the voluntary or involuntary
      liquidation, dissolution or winding-up of the affairs of the Corporation, shall
      be an amount equal to $3.20, subject to adjustment in the event of a stock
      split, stock dividend or similar event applicable to the Series (the
“Purchase
      Price”),
      plus
      an amount equal to the cash value of dividends accrued and unpaid thereon,
      whether or not declared, to the payment date (the “Liquidation
      Value”).

     

    (b) In
      the
      event of any voluntary or involuntary liquidation, dissolution or winding-up
      of
      the Corporation (a “Liquidation
      Event”),
      the
      Holders (i) shall not be entitled to receive the Liquidation Value of the shares
      held by them until the liquidation value of all Senior Liquidation Shares shall
      have been paid in full, and (ii) shall be entitled to receive the Liquidation
      Value of such shares held by them in preference to and in priority over any
      distributions upon the Junior Liquidation Shares. Upon payment in full of the
      Liquidation Value to which the Holders are entitled, the Holders will not be
      entitled to any further participation in any distribution of assets by the
      Corporation. If the assets of the Corporation are not sufficient to pay in
      full
      the Liquidation Value payable to the Holders and the liquidation value payable
      to the holders of any Parity Liquidation Shares, the holders of all such shares
      shall share ratably in such distribution of assets in accordance with the
      amounts that would be payable on the distribution if the amounts to which the
      Holders and the holders of Parity Liquidation Shares are entitled were paid
      in
      full.

     

    (c) For
      purposes of this paragraph 4, a Change of Control shall be treated as a
      Liquidation Event and shall entitle each Holder to receive, upon the
      consummation of such Change of Control, and at such Holder’s option, cash in an
      amount equal to the Liquidation Value of such Holder’s Preferred Shares.

     

    (d) The
      Corporation shall, no later than the date on which a Liquidation Event occurs
      or
      is publicly announced, deliver in accordance with the notice provisions of
      the
      Purchase Agreement written notice of any Liquidation Event, stating the payment
      date or dates when and the place or places where the amounts distributable
      in
      such circumstances shall be payable, not less than 30 days prior to any payment
      date stated therein, to each Holder.

     

    (e) Whenever
      the distribution provided for in this paragraph 4 shall be payable in securities
      or property other than cash, the value of such distribution shall be the fair
      market value of such securities or other property as determined in good faith
      by
      the Independent Directors.

     

    5. Series
      Redemption.
      The
      Corporation shall redeem, from any source of funds legally available therefor,
      all outstanding Preferred Shares on May 10, 2010 (the “Series
      Redemption Date”).
      The
      Corporation shall effect such redemption on the Series Redemption Date by paying
      in cash in exchange for the Preferred Shares to be redeemed a sum equal to
      the
      Purchase Price of the Series plus all declared or accumulated but unpaid
      dividends on such shares.

     

    6. Conversion.

     

    (a) Right
      to Convert; Forced Conversion.
      Each
      Holder shall have the right to convert, at any time and from time to time after
      the Closing Date, all or any part of the Preferred Shares held by such Holder
      into such number of fully paid and non-assessable Conversion Shares as is
      determined in accordance with the terms hereof (a “Conversion”).
      In
      addition, if all of the Forced Conversion Conditions are met, the Corporation
      shall have the right, upon written notice delivered to each Holder (the
“Forced
      Conversion Notice”),
      to
      cause all of the Holders to convert all (but not less than all) of their
      Preferred Shares into Conversion Shares. Upon a forced Conversion under this
      paragraph 6(a), the other provisions of this paragraph 6 shall apply as if
      such
      forced Conversion were a voluntary Conversion by all of the
      Holders.

     

    (b) Conversion
      Notice.
      In
      order to convert Preferred Shares, a Holder shall send to the Corporation by
      facsimile transmission, at any time prior to 3:00 p.m., central time, on the
      Business Day on which such Holder wishes to effect such Conversion (the
“Conversion
      Date”),
      a
      notice of conversion in substantially the form attached as Annex I hereto (a
      “Conversion
      Notice”),
      stating the number of Preferred Shares to be converted, the amount of dividends
      accrued (but remaining unpaid) thereon, and a calculation of the number of
      shares of Common Stock issuable upon such Conversion in accordance with the
      formula set forth in paragraph 6(c) below setting forth the basis for each
      component thereof, including the details relating to any adjustments made to
      the
      Conversion Price. The Holder shall promptly thereafter send the Conversion
      Notice and the certificate or certificates being converted to the Corporation.
      The Corporation shall issue a new certificate for Preferred Shares to the Holder
      in the event that less than all of the Preferred Shares represented by a
      certificate are converted; provided,
      however,
      that
      the failure of the Corporation to deliver such new certificate shall not affect
      the right of the Holder to submit a further Conversion Notice with respect
      to
      such Preferred Shares and, in any such case, the Holder shall be deemed to
      have
      submitted the original of such new certificate at the time that it submits
      such
      further Conversion Notice. Except as otherwise provided herein, upon delivery
      of
      a Conversion Notice by a Holder in accordance with the terms hereof, such Holder
      shall, as of the applicable Conversion Date, be deemed for all purposes to
      be
      the record owner of the Common Stock to which such Conversion Notice relates.
      In
      the case of a dispute between the Corporation and a Holder as to the calculation
      of the Conversion Price or the number of Conversion Shares issuable upon a
      Conversion (including, without limitation, the calculation of any adjustment
      to
      the Conversion Price following any adjustment thereof), the Corporation shall
      issue to such Holder the number of Conversion Shares that are not disputed
      within the time periods specified in paragraph 6(d) below and shall submit
      the
      disputed calculations to a certified public accounting firm of national
      reputation (other than the Corporation’s regularly retained accountants) within
      two (2) Business Days following the Corporation’s receipt of such Holder’s
      Conversion Notice. The Corporation shall cause such accountant to calculate
      the
      Conversion Price as provided herein and to notify the Corporation and such
      Holder of the results in writing no later than three (3) Business Days following
      the day on which such accountant received the disputed calculations (the
“Dispute
      Procedure”).
      Such
      accountant’s calculation shall be deemed conclusive absent manifest error. The
      fees of any such accountant shall be borne by the party whose calculations
      were
      most at variance with those of such accountant.

     

    (c) Number
      of Conversion Shares.
      The
      number of Conversion Shares to be delivered by the Corporation to a Holder
      pursuant to a Conversion shall be determined by dividing (i) the aggregate
      Liquidation Value of such Holder’s Preferred Shares to be converted by (ii) the
      Conversion Price in effect on the applicable Conversion Date.

     

    (d) Delivery
      of Conversion Shares.
      The
      Corporation shall, no later than the close of business on the third
      (3rd)
      Business Day following the later of the date on which the Corporation receives
      a
      Conversion Notice from a Holder by facsimile transmission pursuant to paragraph
      6(b), above, and the date on which the Corporation receives the related
      Preferred Shares certificate (such third Business Day, the “Delivery
      Date”),
      issue
      and deliver or cause to be delivered to such Holder the number of Conversion
      Shares determined pursuant to paragraph 6(c) above (without any restrictive
      legend if permitted by the terms of the Purchase Agreement); provided,
      however,
      that
      any Conversion Shares that are the subject of a Dispute Procedure shall be
      delivered no later than the close of business on the third (3rd)
      Business Day following the determination made pursuant thereto. 

     

    (e) Delivery
      Procedures.
      As long
      as the Corporation’s designated transfer agent (the “Transfer
      Agent”)
      participates in the DTC’s Fast Automated Securities Transfer program
      (“FAST”)
      and no
      restrictive legend is required pursuant to the terms of this Certificate of
      Designation or the Purchase Agreement, the Corporation shall effect delivery
      of
      Conversion Shares to the Holder by crediting the account of the Holder or its
      nominee at DTC (as specified in the applicable Conversion Notice) with the
      number of Conversion Shares required to be delivered, no later than the close
      of
      business on the applicable Delivery Date. In the event that the Transfer Agent
      is not a participant in FAST or if the Holder so specifies in its Conversion
      Notice or otherwise in writing on or before the Conversion Date, the Corporation
      shall effect delivery of Conversion Shares by delivering to the Holder or its
      nominee physical certificates representing such Conversion Shares, no later
      than
      the close of business on such Delivery Date. Conversion Shares delivered to
      the
      Holder shall not contain any restrictive legend unless such legend is required
      pursuant to the terms of the Purchase Agreement. If any Conversion would create
      a fractional Conversion Share, such fractional Conversion Share shall be
      disregarded and the number of Conversion Shares issuable upon such Conversion,
      in the aggregate, shall be the next closest number of Conversion
      Shares. 

     

    (f) Failure
      to Deliver Conversion Shares. 

    

    
      	 	
              (i)
                

            	
              In
                the event that, for any reason, a Holder has not received certificates
                representing the number of Conversion Shares specified in the applicable
                Conversion Notice, without any restrictive legend (except to the
                extent a
                restrictive legend is required by the terms of the Purchase Agreement)
                on
                or before the Delivery Date therefor (a “Conversion
                Default”),
                and such failure to deliver certificates continues for two (2) Business
                Days following the delivery of written notice thereof from such Holder
                (such second Business Day following such written notice being referred
                to
                herein as the “Conversion
                Default Date”),
                the Corporation shall pay to such Holder payments (“Conversion
                Default Payments”)
                in the amount of (A) “N” multiplied
                by
                (B) the aggregate Liquidation Value of the Preferred Shares which
                are the
                subject of such Conversion Default multiplied
                by
                (C) one percent (1%), where “N” equals the number of days elapsed between
                the Conversion Default Date and the date on which all of the certificates
                representing such Conversion Shares (without any restrictive legend
                to the
                extent permitted by the terms of the Purchase Agreement) are issued
                and
                delivered to such Holder. Amounts payable hereunder shall be paid
                to the
                Holder in immediately available funds on or before the fifth
                (5th)
                Business Day of the calendar month immediately following the calendar
                month in which such amounts have
                accrued.

            

    

     

    
      	 	
              (ii)

            	
              In
                the event of a Conversion Default, a Holder may, upon written notice
                to
                the Corporation, regain on the date of such notice the rights of
                such
                Holder under the Preferred Shares that are the subject of such Conversion
                Default. In such event, such Holder shall retain all of such Holder’s
                rights and remedies with respect to the Corporation’s failure to deliver
                such Conversion Shares (including without limitation the right to
                receive
                the cash payments specified in paragraph 6(f)(i) above through the
                date of
                such written notice).

            

    

    

    
      	 	
              (iii)
                

            	
              The
                Holders’ rights and remedies hereunder are cumulative, and no right or
                remedy is exclusive of any other. In addition to any other remedies
                provided herein, each Holder shall have the right to pursue actual
                damages
                for the Corporation’s failure to issue and deliver Conversion Shares
                timely after the applicable Delivery Date, including, without limitation,
                damages relating to any purchase of shares of Common Stock by or
                on behalf
                of such Holder in order to make delivery on a sale effected in
                anticipation of receiving Conversion Shares, such damages to be in
                an
                amount equal to (A) the aggregate amount paid by such Holder for
                the
                shares of Common Stock so purchased minus
                (B) the aggregate amount received by such Holder upon the sale of
                such
                Conversion Shares, and such Holder shall have the right to pursue
                all
                other remedies available to it at law or in equity (including, without
                limitation, a decree of specific performance and/or injunctive
                relief).

            

    

     

    (g) Adjustments.
      The
      Conversion Price shall be subject to adjustment from time to time as follows:
      

     

    
      	
               

            	
              (i)

            	
              In
                the event that the Corporation shall (A) pay a dividend or make a
                distribution, in shares of Common Stock, on any class of Capital
                Stock of
                the Corporation or any subsidiary which is not directly or indirectly
                wholly owned by the Corporation, (B) split or subdivide its outstanding
                Common Stock into a greater number of shares, or (C) combine its
                outstanding Common Stock into a smaller number of shares, then in
                each
                such case the Conversion Price in effect immediately prior thereto
                shall
                be adjusted so that the holder of each share of the Series thereafter
                surrendered for conversion shall be entitled to receive the number
                of
                shares of Common Stock that such holder would have owned or have
                been
                entitled to receive after the occurrence of any of the events described
                above had such share of the Series been converted immediately prior
                to the
                occurrence of such event. An adjustment made pursuant to this paragraph
                6(g)(i) shall become effective immediately after the close of business
                on
                the record date in the case of a dividend or distribution (except
                as
                provided in paragraph 6(l) below) and shall become effective immediately
                after the close of business on the effective date in the case of
                such
                subdivision, split or combination, as the case may be. Any shares
                of
                Common Stock issuable in payment of a dividend shall be deemed to
                have
                been issued immediately prior to the close of business on the record
                date
                for such dividend for purposes of calculating the number of outstanding
                shares of Common Stock under clauses (ii) and (iii) below.
                

            

    

     

    
      	
               

            	
              (ii)

            	
              In
                the event that the Corporation shall issue or distribute New Securities,
                in any such case at a price per share less than $0.30 or that would
                entitle the holders of the New Securities to subscribe for or purchase
                shares of Common Stock at less than $0.30 per share (provided that
                the
                issuance of Common Stock upon the exercise of New Securities that
                are
                rights, warrants, options or convertible or exchangeable securities
                (“New
                Derivative Securities”)
                will not cause an adjustment in the Conversion Price if no such adjustment
                would have been required at the time such New Derivative Security
                was
                issued), then the Conversion Price in effect immediately prior thereto
                shall be adjusted so that the Conversion Price shall equal the price
                at
                which the Corporation issues or distributes such New Securities (or
                the
                price at which the holders of the New Securities are entitled to
                subscribe
                for or purchase shares of Common Stock). Each such adjustment shall
                be
                made successively whenever any such New Securities are issued. In
                determining whether any New Derivative Securities entitle the holders
                to
                subscribe for or purchase shares of Common Stock at less than $0.30
                per
                share, there shall be taken into account any consideration received
                by the
                Corporation for such New Derivative Securities, the value of such
                consideration, if other than cash, to be determined in good faith
                by the
                Independent Directors, whose determination shall be conclusive and
                described in a certificate filed with the records of corporate proceedings
                of the Corporation. Notwithstanding the foregoing, in no event shall
                an
                adjustment be made under this clause (ii) if such adjustment would
                result
                in raising the then-effective Conversion
                Price.

            

    

     

    
      	
               

            	
              (iii)

            	
              No
                adjustment in the Conversion Price shall be required unless the adjustment
                would require an increase or decrease of at least 1% in the Conversion
                Price then in effect; provided,
                however,
                that any adjustments that by reason of this paragraph 6(g)(iii) are
                not
                required to be made shall be carried forward and taken into account
                in any
                subsequent adjustment. All calculations under this paragraph 6(g)
                shall be
                made to the nearest cent or nearest 1/100th of a share.
                

            

    

     

    
      	
               

            	
              (iv)

            	
              Notwithstanding
                anything to the contrary set forth in this paragraph 6(g), no adjustment
                shall be made to the Conversion Price upon any issuance that is not
                included within the definition of “New Securities” under Section 3.7 of
                the Purchase Agreement. 

            

    

     

    
      	
               

            	
              (v)

            	
              The
                Corporation from time to time may reduce the Conversion Price by
                any
                amount for any period of time in the discretion of the Board of Directors.
                

            

    

     

    
      	
              (vi)  

            	
              In
                the event that, at any time as a result of an adjustment made pursuant
                to
                paragraph 6(g)(i) through 6(g)(iii) above, the holder of any share
                of the
                Series thereafter surrendered for conversion shall become entitled
                to
                receive any shares of the Corporation other than shares of the Common
                Stock, thereafter the number of such other shares so receivable upon
                conversion of any share of the Series shall be subject to adjustment
                from
                time to time in a manner and on terms as nearly equivalent as practicable
                to the provisions with respect to the Common Stock contained in paragraphs
                6(g)(i) through 6(g)(v) above, and the other provisions of this paragraph
                6(g)(vi) with respect to the Common Stock shall apply on like terms
                to any
                such other shares.

            

    

     

    (h) In
      case
      of any reclassification of the Common Stock (other than in a transaction to
      which paragraph 6(g)(i) applies), any consolidation of the Corporation with,
      or
      merger of the Corporation into, any other entity, any merger of another entity
      into the Corporation (other than a merger that does not result in any
      reclassification, conversion, exchange or cancellation of outstanding shares
      of
      Common Stock of the Corporation), any sale or transfer of all or substantially
      all of the assets of the Corporation or any compulsory share exchange, pursuant
      to which share exchange the Common Stock is converted into other securities,
      cash or other property, then lawful provision shall be made as part of the
      terms
      of such transaction whereby the holder of each share of the Series then
      outstanding shall have the right thereafter, during the period such share shall
      be convertible, to convert such share only into the kind and amount of
      securities, cash and other property receivable upon the reclassification,
      consolidation, merger, sale, transfer or share exchange by a holder of the
      number of shares of Common Stock of the Corporation into which a share of the
      Series might have been converted immediately prior to the reclassification,
      consolidation, merger, sale, transfer or share exchange assuming that such
      holder of Common Stock failed to exercise rights of election, if any, as to
      the
      kind or amount of securities, cash or other property receivable upon
      consummation of such transaction, subject to adjustment as provided in paragraph
      6(g) above following the date of consummation of such transaction. As a
      condition to any such transaction, the Corporation or the person formed by
      the
      consolidation or resulting from the merger or which acquires such assets or
      which acquires the Corporation’s shares, as the case may be, shall make
      provisions in its certificate or articles of incorporation or other constituent
      document to establish such right. The certificate or articles of incorporation
      or other constituent document shall provide for adjustments which, for events
      subsequent to the effective date of the certificate or articles of incorporation
      or other constituent document, shall be as nearly equivalent as may be
      practicable to the adjustments provided for in this paragraph 6. The provisions
      of this paragraph 6(h) shall similarly apply to successive reclassifications,
      consolidations, mergers, sales, transfers or share exchanges.

     

    (i)  If:

     

    
      	
               

            	
              (i) 

            	
              the
                Corporation shall take any action which would require an adjustment
                in the
                Conversion Price pursuant to Section 6(g); or

            

    

     

    
      	
               

            	
              (ii)

            	
              the
                Corporation shall authorize the granting to the holders of its Common
                Stock generally of rights, warrants or options to subscribe for or
                purchase any shares of any class or any other rights, warrants or
                options;
                or 

            

    

     

    
      	
               

            	
              (iii)

            	
              there
                shall be any reclassification or change of the Common Stock (other
                than a
                subdivision or combination of its outstanding Common Stock or a change
                in
                par value) or any consolidation, merger or statutory share exchange
                to
                which the Corporation is a party and for which approval of any
                stockholders of the Corporation is required, or the sale or transfer
                of
                all or substantially all of the assets of the Corporation; or
                

            

    

     

    
      	
               

            	
              (iv)

            	
              there
                shall be a voluntary or involuntary dissolution, liquidation or winding-up
                of the Corporation; 

            

    

     

    then,
      the
      Corporation shall cause to be filed with the transfer agent for the Series
      and
      shall cause to be delivered to each Holder in accordance with the notice
      provisions of the Purchase Agreement, as promptly as possible, but at least
      20
      days prior to the applicable date hereinafter specified, a notice stating (A)
      the date on which a record is to be taken for the purpose of such dividend,
      distribution or granting of rights, warrants or options or, if a record is
      not
      to be taken, the date as of which the holders of Common Stock of record to
      be
      entitled to such dividend, distribution or rights, warrants or options are
      to be
      determined, or (B) the date on which such reclassification, change,
      consolidation, merger, statutory share exchange, sale, transfer, dissolution,
      liquidation or winding-up is expected to become effective or occur, and the
      date
      as of which it is expected that holders of Common Stock of record shall be
      entitled to exchange their shares of Common Stock for securities or other
      property deliverable upon such reclassification, change, consolidation, merger,
      statutory share exchange, sale, transfer, dissolution, liquidation or
      winding-up. Failure to give such notice or any defect therein shall not affect
      the legality or validity of the proceedings described in this paragraph 6(i).
      

     

    (j) Whenever
      the Conversion Price is adjusted as herein provided, the Corporation shall
      promptly file with the transfer agent for the Series a certificate of an officer
      of the Corporation setting forth the Conversion Price after the adjustment
      and
      setting forth a brief statement of the facts requiring such adjustment and
      a
      computation thereof. The Corporation shall promptly cause a notice of the
      adjusted Conversion Price to be delivered to each Holder.

     

    (k) In
      any
      case in which paragraph 6(g) provides that an adjustment shall become effective
      immediately after a record date for an event and the date fixed for such
      adjustment pursuant to paragraph 6(g) occurs after such record date but before
      the occurrence of such event, the Corporation may defer until the actual
      occurrence of such event issuing to the holder of any Preferred Shares converted
      after such record date and before the occurrence of such event the additional
      shares of Common Stock issuable upon such conversion by reason of the adjustment
      required by such event over and above the Common Stock issuable upon such
      conversion before giving effect to such adjustment. 

     

    (l) In
      case
      the Corporation shall take any action affecting the Common Stock, other than
      actions described in this paragraph 6, which in the opinion of the Board of
      Directors would materially adversely affect the conversion right of the Holders,
      the Conversion Price may be adjusted, to the extent permitted by law, in such
      manner, if any, and at such time, as the Board of Directors may determine to
      be
      equitable in the circumstances; provided,
      however,
      that in
      no event shall (i) the Board of Directors be required to take any such action
      and (ii) any such action result in an increase in the Conversion Price.

     

    (m) The
      Corporation shall list the shares of Common Stock required to be delivered
      upon
      conversion of Preferred Shares, prior to delivery, upon each national securities
      exchange or any similar system of automated dissemination of securities prices,
      if any, upon which the Common Stock is listed at the time of
      delivery.

     

    7. Status
      of Shares.
      All
      Preferred Shares that are at any time redeemed or converted pursuant to
      paragraph 5 or 6 above, and all Preferred Shares that are otherwise reacquired
      by the Corporation and subsequently canceled by the Board of Directors, shall
      be
      retired and shall not be subject to reissuance.

     

    8. Voting
      Rights.
      Each
      holder of shares of the Series shall be entitled to the number of votes equal
      to
      the number of shares of Common Stock into which such shares of the Series could
      be converted and shall have voting rights and powers equal to the voting rights
      and powers of the Common Stock (except as otherwise expressly provided herein
      or
      as required by law), voting together with the Common Stock as a single class
      and
      shall be entitled to notice of any stockholders’ meeting in accordance with the
      Bylaws of the Corporation. Fractional votes shall not, however, be permitted
      and
      any fractional voting rights resulting from the above formula (after aggregating
      all shares into which shares of the Series held by each holder could be
      converted) shall be rounded to the nearest whole number (with one-half being
      rounded upward).

     

    9. Restrictions
      and Limitations.
      So long
      as any Preferred Shares remain outstanding, the Corporation, shall not, without
      the vote or written consent by the holders of at least a majority of the
      outstanding Preferred Shares, voting together as a single class:

     

    
      	
               

            	
              (i)

            	
              Redeem,
                purchase or otherwise acquire for value (or pay into or set aside
                for a
                sinking or other analogous fund for such purpose) any share or shares
                of
                its Capital Stock, except for (a) a transaction in which all outstanding
                shares of preferred stock are concurrently redeemed, purchased or
                otherwise acquired, (b) conversion into or exchange for Junior Stock,
                or
                (c) redemption in accordance with paragraph 5 hereof; provided,
                however,
                that this restriction shall not apply to the repurchase of shares
                of
                Common Stock from employees, officers, directors, consultants or
                other
                persons performing services for the Corporation or any subsidiary
                pursuant
                to agreements under which the Corporation has the option to repurchase
                such shares at cost or at cost plus interest at a rate not to exceed
                nine
                percent (9%) per annum, or, if lower than cost, at fair market value,
                upon
                the occurrence of certain events, such as the termination of employment;
                and provided
                further,
                that the total amount applied to the repurchase of shares of Common
                Stock
                shall not exceed $100,000 during any twelve month period;
                

            

    

     

    (ii) alter,
      modify or amend the terms of the Series in any way;

     

    
      	
               

            	
              (iii)

            	
              create
                any new series or class of capital stock having a preference over
                the
                Series as to payment of dividends, redemption or distribution of
                assets
                upon a Liquidation Event or any other liquidation, dissolution or
                winding
                up of the Corporation;

            

    

     

    (iv) increase
      the authorized number of shares of the Series;

     

    
      	
               

            	
              (v)

            	
              re-issue
                any Preferred Shares which have been converted or redeemed in accordance
                with the terms hereof; 

            

    

     

    
      	
               

            	
              (vi)

            	
              issue
                any securities of the Corporation ranking senior to Preferred Shares
                either as to the payment of dividends or as to rights in liquidation,
                dissolution or winding-up of the affairs of the Corporation;
                

            

    

     

    
      	
               

            	
              (vii)

            	
              issue
                any shares of the Series except pursuant to the terms of the Purchase
                Agreement;

            

    

     

    
      	
               

            	
              (viii)

            	
              enter
                into any definitive agreement or commitment (which would be consummated
                before the Series Redemption Date) with respect to any of the foregoing;
                or

            

    

     

    
      	
               

            	
              (ix)

            	
              cause
                or permit any Subsidiary to engage in or enter into any definitive
                agreement or commitment (which would be consummated before the Series
                Redemption Date) with respect to any of the
                foregoing.

            

    

     

    In
      the
      event that the Holders of at least a majority of the outstanding Preferred
      Shares agree to allow the Corporation to alter or change the rights, preferences
      or privileges of the Series pursuant to applicable law, no such change shall
      be
      effective to the extent that, by its terms, such change applies to less than
      all
      of the Preferred Shares then outstanding.

     

    10. Certain
      Definitions.
      As used
      in this Certificate, the following terms shall have the following respective
      meanings:

     

    “Affiliate”
of
      any
      specified person means any other person directly or indirectly controlling
      or
      controlled by or under common control with such specified person. For purposes
      of this definition, “control”
when
      used with respect to any person means the power to direct the management and
      policies of such person, directly or indirectly, whether through the ownership
      of voting securities or otherwise; and the term “controlling”
and
      “controlled”
having
      meanings correlative to the foregoing.

     

    “Capital
      Stock”
of
      any
      person or entity means any and all shares, interests, rights to purchase,
      warrants, options, participations or other equivalents of or interests in the
      common stock or preferred stock of such person or entity, including, without
      limitation, partnership and membership interests.

     

    “Change
      of Control”
means
      the existence or occurrence of any of the following: (a) the sale, conveyance
      or
      disposition of all or substantially all of the assets of the Corporation; (b)
      the effectuation of a transaction or series of related transactions in which
      more than fifty percent (50%) of the voting power of the Corporation 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 Corporation with or into any other entity, immediately
      following which the prior stockholders of the Corporation 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
      Corporation; (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).

     

    “Conversion
      Price”
means
      $0.30, as adjusted from time to time pursuant to the terms of paragraph
      6.

     

    “Current
      Market Price”
means,
      when used with respect to any security as of any date, the volume weighted
      average price of such security on the ten (10) consecutive Trading Days
      immediately preceding (but not including) such date as reported for consolidated
      transactions with respect to securities listed on the principal national
      securities exchange on which such security is listed or admitted to trading
      or,
      if such security is not listed or admitted to trading on any national securities
      exchange, the volume weighted average price of such security on the ten (10)
      consecutive Trading Days immediately preceding (but not including) such date
      in
      the over-the-counter market, as reported by the National Association of
      Securities Dealers, Inc. Automated Quotations System or such other system then
      in use or, if such security is not quoted by any such organization, the volume
      weighted average price of such security as of the ten (10) consecutive Trading
      Days immediately preceding (but not including) such date furnished by a New
      York
      Stock Exchange member firm selected by the Corporation, or if such security
      is
      not quoted by any such organization and no such New York Stock Exchange member
      firm is able to provide such prices, such price as is determined by the
      Independent Directors in good faith. 

     

    “Forced
      Conversion Conditions”
means
      all of the following:

     

    (i)
       the
      Registration Statement (as defined in the Registration Rights Agreement) shall
      have been  declared
      effective and shall continue to be effective and available to each Holder on
      the
      date of the  Forced
      Conversion Notices, and is expected to remain effective and available for use
      for at least  30
      days
      thereafter, and shall cover the number of shares of Common Stock required by
      the
 Registration
      Rights Agreement; 

    

    
      	 	
              (ii)
                

            	
              (x)
                the Common Stock shall be listed on the American Stock Exchange,
                the New
                York Stock Exchange, or the Nasdaq National Market, or shall be quoted
                on
                the OTC Bulletin Board or in the “Pink Sheets”, and trading in the Common
                Stock on such market or exchange shall not then be suspended, (y)
                the
                Corporation shall be in compliance, in all material respects, with
                each of
                the quantitative and qualitative listing standards and requirements
                (without regards to any specified grace periods) of such market,
                and (z)
                the Corporation shall not have received any notice from such market
                that
                the Corporation may not be in such
                compliance;

            

    

    

    
      	 	
              (iii)

            	
              after
                the Closing Date, the closing price of the Common Stock (as reported
                for
                consolidated transactions with respect to securities listed on the
                principal national securities exchange on which the Common Stock
                is listed
                or admitted to trading or, if the Common Stock is not listed or admitted
                to trading on any national securities exchange, then in the
                over-the-counter market, as reported by the National Association
                of
                Securities Dealers, Inc. Automated Quotations System or such other
                system
                then in use or, if the Common Stock is not quoted by any such
                organization, then as furnished by a New York Stock Exchange member
                firm
                selected by the Corporation) shall have equaled or exceeded $1.00
                for a
                period of no less than 20 out of any 30 consecutive Trading
                Days;

            

    

    

    
      	 	
              (iv)

            	
              the
                average daily trading volume of the Common Stock shall have exceeded
                150,000 shares for the 20 consecutive Trading Days immediately preceding
                (but not including) the date of the Forced Conversion Notices;
                and

            

    

    

    
      	 	
              (v)

            	
              a
                Fundamental Change, or an event that with the giving of notice or
                lapse of
                time (or both) would constitute a Fundamental Change, shall not have
                occurred and be continuing.

            

    

     

    “Fundamental
      Change”
means
      any of the following events or circumstances: (i) any representation or warranty
      of the Corporation (as deemed revised by any changes of which the Corporation
      notified the Holders before the Closing) set forth in the Purchase Agreement
      or
      the other Transaction Documents fails to be true and correct in all material
      respects as of the date when made or as of the Closing Date as if made on the
      Closing Date; (ii) the Corporation fails at any time to comply with or perform
      in all material respects all of the agreements, obligations and conditions
      set
      forth in the Purchase Agreement, this Certificate or the other Transaction
      Documents that are required to be complied with or performed by the Corporation;
      (iii) a Change of Control occurs; or (iv) a Liquidation Event occurs or is
      publicly announced by or with respect to the Corporation.

     

    “Holder”
means
      any holder of Preferred Shares, all of such holders being the “Holders”.

     

    “Independent
      Directors”
means
      directors that (i) are not 5% or greater stockholders of the Corporation or
      the
      designee of any such stockholder; (ii) are not officers or employees of the
      Corporation, any of its subsidiaries or of a stockholder referred to above
      in
      clause (i); (iii) are not Related Persons; and (iv) do not have relationships
      that, in the opinion of the Board of Directors, would interfere with their
      exercise of independent judgment in carrying out the responsibilities of the
      directors. 

     

    “PIK
      Dividend Price”
means
      0.85 multiplied by the Current Market Price as of the applicable Dividend
      Payment Date.

     

    “Purchase
      Agreement”
means
      that certain Securities Purchase Agreement dated as of May 10, 2005, by and
      among the Corporation and the Purchasers named therein.

     

    “Registration
      Rights Agreement”
means
      that certain Registration Rights Agreement dated as of May 10, 2005, by and
      among the Corporation and the Purchasers named therein.

     

    “Related
      Person”
means
      an individual related to an officer, director or employee of the Corporation
      or
      any of its Affiliates which relation is by blood, marriage or adoption and
      not
      more remote than first cousin. 

     

    “Stock
      Payment Conditions”
means
      all of the following:

     

    
      	 	
              (i)
                

            	
              the
                Registration Statement shall have been declared effective and shall
                continue to be effective and available to each Holder for the duration
                of
                the applicable Stock Payment Period, and shall cover the number of
                shares
                of Common Stock required by the Registration Rights Agreement;
                

            

    

    

    
      	 	
              (ii)
                

            	
              (x)
                the Common Stock shall be listed on the American Stock Exchange,
                the New
                York Stock Exchange, or the Nasdaq National Market, or shall be quoted
                on
                the OTC Bulletin Board or in the “Pink Sheets”, and trading in the Common
                Stock on such market or exchange shall not then be suspended, (y)
                the
                Corporation shall be in compliance, in all material respects, with
                each of
                the quantitative and qualitative listing standards and requirements
                (without regards to any specified grace periods) of such market,
                and (z)
                the Corporation shall not have received any notice (which has not
                subsequently been resolved before the applicable Stock Payment Period)
                from such market that the Corporation may not be in such compliance;
                and
                

            

    

    

    
      	 	
              (iii)
                

            	
              a
                Fundamental Change, or an event that with the giving of notice or
                lapse of
                time (or both) would constitute a Fundamental Change, shall not have
                occurred and be continuing.”

            

    

    

    [Missing
      Graphic Reference]

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the Corporation has caused this Certificate to be duly executed
      on its behalf by its undersigned Chairman and Chief Executive Officer as of
      December 30, 2006.

    

    By: /s/
      Ronald E. Lusk   

    Name: Ronald
      E. Lusk    

    Title: Chairman,
      Chief Executive Officer  

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ANNEX
      I

    

    CONVERSION
      NOTICE

    

    The
      undersigned hereby elects to convert shares of 6% Convertible Preferred Stock
      (the “Preferred
      Stock”),
      represented by stock certificate No(s).  
      , into
      shares of common stock (“Common
      Stock”)
      of
      Lighting Science Group Corporation (the “Company”)
      according to the terms and conditions of the Certificate of Designation relating
      to the Preferred Stock (the “Certificate
      of Designation”),
      as of
      the date written below. Capitalized terms used herein and not otherwise defined
      shall have the respective meanings set forth in the Certificate of
      Designation.

    

    Conversion
      Date:

    

    Number
      of
      Shares of Preferred Stock to be Converted:

    

    Amount
      of
      Accrued Dividends: 

    

    Applicable
      Conversion Price:

    

    Number
      of
      Shares of Common Stock to be Issued:

    

    Name
      of
      Holder:

    

    Address: 

    

    

    Signature: 

    Name:

    Title:

    

    The
      Holder represents to the Company that the resale or transfer of the Conversion
      Shares represented hereby was effected via delivery of a prospectus pursuant
      to
      the registration statement and was in compliance with any applicable state
      securities or blue sky laws. (check box if applicable) ‮

    

    Holder
      Requests Delivery to be made:
      (check
      one)

     

            By
      Delivery of
      Physical Certificates to the Above Address

                
        Through
      Depoitory Trust Corporation (Account)Exhibit 10.1

     

    
       

       

       
[BANK
      OF
      TEXAS LETTERHEAD]

     

     

    December
      __, 2006

     

    

    Lighting
      Science Group Corporation

    2100
      McKinney Ave., Suite 1555

    Dallas,
      Texas 75201

    Attention:
      Steve Hamilton

    

    LETTER
      AGREEMENT

    

    Ladies
      and Gentlemen:

    

    Reference
      is hereby made to that certain Loan Agreement dated as of June 29, 2006 (as
      may
      be amended from time to time, the “Loan
      Agreement”)
      by and
      between Lighting Science Group Corporation, a Delaware corporation
      (“Borrower”),
      and
      Bank of Texas, N.A. (“Bank”).
      Capitalized terms not otherwise defined herein have the meaning given to such
      terms in the Loan Agreement.

    

    Borrower
      has requested that Bank amend the Loan Documents to increase the amount of
      the
      Revolving Loan from $2,000,000.00 to $2,300,000.00. Bank consents to such
      amendment subject to the terms and conditions set forth herein.

    

    1.  Amendment
      to Loan Agreement.
      Section
      1.1
      of the
      Loan Agreement is hereby amended by amending and restating in its entirety
      the
      definition listed below as follows:

    

    “’Committed
      Sum’
means
      $2,300,000.00.”

    

    2.  Conditions
      Precedent.
      The
      effectiveness of this Letter Agreement is subject to the satisfaction of the
      following conditions precedent, unless specifically waived in writing by
      Bank:

    

    (a)  The
      representations and warranties contained in the Loan Agreement and in all other
      Loan Documents shall be true and correct as of the date hereof as if made on
      the
      date hereof;

    

    (b)  Bank
      shall have received this Letter Agreement, agreed to, acknowledged and duly
      executed by Borrower;

    

    (c)  Bank
      shall have received an amended and restated Guaranty Agreement duly executed
      for
      the benefit of Bank by such Guarantors as Bank may require, in form and
      substance satisfactory to Bank;

    

    (d)  Borrower
      shall have executed and delivered to Bank an amended and restated revolving
      promissory note in form and substance satisfactory to the Bank; and

    

    (e)  Borrower
      shall execute a Certificate of Corporate Resolutions in form and substance
      satisfactory to the Bank.

    

    3.  Ratifications,
      Representations, and Warranties.

    

    (a)  Ratifications
      and Acknowledgements by Borrower.
      Borrower ratifies and confirms that (i) each of the Loan Agreement, the Note
      and
      the other Loan Documents, as may be amended, is and remains in full force and
      effect in accordance with its respective terms; and (ii) each of the Loan
      Documents, as may be amended, is and shall continue to be legal, valid, binding
      and enforceable in accordance with its respective terms. The undersigned officer
      of Borrower executing this Letter Agreement represents and warrants that he
      has
      full power and authority to execute and deliver this Letter Agreement on behalf
      of Borrower and that such execution and delivery has been duly authorized by
      the
      Board of Directors of Borrower. Any reference in any of the Loan Documents
      to
      the “Loan Agreement” or “Note” shall be deemed to include references to the Loan
      Agreement and Note as amended through the date hereof.

    

    (b)  Renewal
      of Security Interests.
      Borrower renews, regrants and affirms the liens and security interests created
      and granted in the Security Agreement and all other Loan Documents. Borrower
      agrees that this Letter Agreement shall in no manner affect or impair the liens
      and security interests securing the indebtedness evidenced by the Note and
      the
      other Loan Documents and that such liens and security interests shall not in
      any
      manner be waived, the purposes of this Letter Agreement being to modify the
      Loan
      Documents as herein provided, and to carry forward all liens and security
      interests securing same, which are acknowledged by Borrower to be valid,
      subsisting and continuing.

    

    (c)  Representations
      and Warranties of Borrower.
      Borrower represents and warrants to Bank as follows: (i) the execution, delivery
      and performance of this Letter Agreement and any and all other Loan Documents
      executed and/or delivered in connection herewith have been authorized by all
      requisite corporate action on the part of Borrower; (ii) the representations
      and
      warranties contained in the Loan Agreement, as amended hereby, and the other
      Loan Documents are true and correct on and as of the date hereof as though
      made
      on and as of the date hereof; (iii) no default or Event of Default under the
      Loan Agreement or other Loan Documents has occurred; (iv) Borrower is in full
      compliance with all covenants and agreements contained in the Loan Documents;
      (v) Borrower
      has not granted or suffered to exist any security interest, lien or encumbrance
      on the assets of Borrower other than Bank’s first priority liens; and (vi)
      Borrower shall pay promptly when due all amounts owed under the Loan Agreement,
      the Note and the other Loan Documents.

    

    4.  Loan
      Document.
      This
      Letter Agreement shall constitute a Loan Document under the Loan
      Agreement.

    

    5.  Governing
      Law.
      THIS
      LETTER AGREEMENT AND THE OTHER LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH
      SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
      OF
      TEXAS (WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES).

    

    6.  Counterparts.
      This
      Letter Agreement may be executed in any number of counterparts and by the
      different parties hereto on separate counterparts, each of which when so
      executed and delivered shall be deemed an original for all purposes, and all
      of
      which together shall constitute one and the same instrument. Each counterpart
      hereof may be transmitted via facsimile and a facsimile of a counterpart signed
      by one or more of the parties shall be deemed an original for all purposes
      and
      have the same force and effect as a manually signed original.

    

    7.  Loan
      Agreement Remains in Effect; No Waiver.
      Except
      as expressly provided herein or amended through the date hereof, all terms
      and
      provisions of the Loan Agreement, Security Agreement and the other the Loan
      Documents shall remain unchanged and in full force and effect and are hereby
      ratified and confirmed. No waiver by the Bank of any Event of Default shall
      be
      deemed to be a waiver of any other Event of Default. No delay or omission by
      Bank in exercising any power, right or remedy shall impair such power, right
      or
      remedy or be construed as a waiver thereof or an acquiescence therein, and
      no
      single or partial exercise of any such power, right or remedy shall preclude
      other or further exercise thereof or the exercise of any other power, right
      or
      remedy under the Loan Agreement, the Loan Documents or otherwise.

    

    8.  Survival
      of Representations and Warranties.
      All
      representations and warranties made in this Letter Agreement or any other Loan
      Document shall survive the execution and delivery of this Letter Agreement
      and
      the other Loan Documents, and no investigation by Bank or any closing shall
      affect such representations and warranties or the right of Bank to rely upon
      such representations and warranties.

    

    9.  Severability.
      Any
      provision of this Letter Agreement held by a court of competent jurisdiction
      to
      be invalid or unenforceable shall not impair or invalidate the remainder of
      this
      Letter Agreement and the effect thereof shall be confined to the provision
      so
      held to be invalid or unenforceable.

    

    10.  Successors
      and Assigns.
      This
      Letter Agreement is binding upon and shall inure to the benefit of the Bank
      and
      Borrower and their respective successors and assigns; provided, however, that
      Borrower may not assign or transfer any of its rights or obligations hereunder
      without the prior written consent of Bank.

    

    11.  Headings.
      The
      headings, captions and arrangements used in this Letter Agreement are for
      convenience only and shall not affect the interpretation of this Letter
      Agreement.

    

    [Remainder
      of page intentionally left blank.]

    

    

    Sincerely,

    

    BANK
      OF
      TEXAS, N.A.

    

    

    By:      

    Ben
      Parkey, Assistant Vice President

    

    

    ACCEPTED,
      ACKNOWLEDGED, AND AGREED TO 

    EFFECTIVE
      AS OF THE DATE FIRST WRITTEN ABOVE:

    

    BORROWER:

    

    LIGHTING
      SCIENCE GROUP CORPORATION,

    a
      Delaware corporation

    

    

    By:
            

    Name:
            

    Title:

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