Document:

exv10w1

Exhibit 10.1

GOVERNING AGREEMENT AND COMPLETE RELEASES

This is a Governing Agreement and Complete Releases (the “Governing Agreement”) by and between:

Koninklijke Philips Electronics N.V. (“Philips N.V.”), Philips Electronics North America
Corporation (“PENAC”) and Philips Solid-State Lighting Solutions, Inc. (“PSSLS”; together with
Philips N.V. and PENAC, “Philips”), on the one hand; and,

Lighting Science Group Corporation (“LSG”), LED Holdings, LLC (“LEH”) and LED Effects, Inc.
(“LEI”; together with LSG and LEH, the “LED Group”);

and Pegasus Capital Advisors, L.P. (“Pegasus Capital”) and Pegasus Partners IV, L.P. (“Pegasus
Partners”; together with Pegasus Capital, “Pegasus”), on the other.

WHEREAS:

A. PENAC and LEI entered into an Agreement for Use and Disclosure of Confidential Technical
and/or Business Information, dated February 23, 2006 (the “2006 Confidentiality Agreement”);

B. PENAC and LEI entered into a Joint Development Agreement, dated as of March 14, 2006 (the
“JDA”);

C. PENAC and LEI entered into a Common Interest Agreement, dated December 16, 2006 (the “Common
Interest Agreement”);

D. PENAC and LEI entered into a Distributor Agreement, dated January 27, 2007 (the “Distributor
Agreement”);

E. PENAC and LEI entered into a Value Added Reseller Agreement, dated February 2, 2007 (the “VAR
Agreement”);

F. LEI, Philips N.V. and Pegasus Capital entered into a letter agreement, dated February 14,
2007 (the “LOI”);

G. Pegasus Capital and Philips N.V. entered into an agreement, dated March 15, 2007 (the “IP Due
Diligence Confidentiality Agreement”);

H. Philips owns certain intellectual property and/or trade secrets related to LED lighting,
including, but not limited to, U.S. Patent Numbers 6,788,011, 6,150,774, 6,806,659, 6,016,038,
7,221,104, 6,967,448 and 6,250,774 (collectively, “Philips IP”);

I. The LED Group owns certain intellectual property and/or trade secrets related to LED lighting
(collectively, “LED Group IP”);

J. On February 19, 2008, Philips Solid-State Lighting Solutions, Inc. filed a Complaint against
the LED Group in the U.S. District Court for the District of Massachusetts, captioned

Page  1 of 10

 

Philips Solid-State Lighting Solutions, Inc., et al. v. Lighting Science Group Corp., et al.,
No. 08-CV-10289-RWZ (the “First Massachusetts Action”);

K. On March 7, 2008, the LED Group filed a Complaint against Philips in the Superior Court of
California, Sacramento County, captioned Lighting Science Group Corp., et al. v. Koninklijke
Philips Electronics, N.V., et al., No. 34-2008-5454 (the “California Action”);

L. On March 14, 2008, Pegasus Partners filed a Complaint against Philips in Texas District
Court, County of Dallas, captioned Pegasus Partners IV, L.P. v. Koninklijke Philips Electronics
N.V., et al., No. 08-2848 (the “Texas Action”);

M. On April 11, 2008, Philips filed a Complaint against Pegasus in the Supreme Court of New
York, County of New York, captioned Koninklijke Philips Electronics N.V., et al. v. Pegasus
Capital Advisors, L.P., et al., No. 601090/08 (the “New York Action”);

N. On September 24, 2008, LSG filed a Complaint against U.S. Philips Corporation in U.S.
District Court for the Eastern District of California, captioned Lighting Science Group
Corporation v. U.S. Philips Corporation, No. 08-2238-FCD (the “Second California Action”),
which was dismissed on February 4, 2009;

O. On September 26, 2008, Philips filed a Complaint against the LED Group in the U.S. District
Court for the District of Massachusetts, captioned Koninklijke Philips Electronics, N.V. v.
Lighting Science Group Corp., et al., No. 08-11650 (D. Mass.) (the “Second Massachusetts
Action”);

P. On October 7, 2008, the court in the California Action entered a preliminary injunction
against Philips (the “Preliminary Injunction”);

Q. On February 4, 2009, the Texas District Court dismissed the Texas Action as to PENAC and
PSSLS on February 4, 2009 and on March 13, 2009, the action was non-suited against Philips N.V.;

R. LSG, PENAC, PSSLS, Philips N.V., Pegasus Capital and Pegasus Advisors entered into a
Confidentiality Agreement, effective as of March 23, 2009 (the “2009 Confidentiality
Agreement”), which has subsequently been amended (the “2009 Amended Confidentiality Agreement”);
and,

S. Without addressing the merits of any party’s claims or defenses and without any admission of
liability of any sort on the part of any party, Philips, LED Group and Pegasus (collectively,
the “parties”) have decided to resolve and settle fully, finally and completely any and all
claims or disputes relating to any matter or occurrence regarding any of the events preceding
this Agreement, including disputes arising out of or related to the 2006 Confidentiality
Agreement, the JDA, the Common Interest Agreement, the Distributor Agreement, the IP Due
Diligence Confidentiality Agreement, the VAR Agreement, the LOI, Philips IP, LED Group IP, the
First Massachusetts Action, the California Action, the Preliminary Injunction, the Texas Action,
the New York Action, the Second California Action and the Second Massachusetts Action.

Page  2 of 10

 

NOW, THEREFORE, in consideration of the foregoing, and the mutual promises and conditions contained
herein, the parties agree as follows:

     1. Effective Date. This Agreement shall be effective as of 27 August 2009 (the
“Effective Date”).

     2. Consideration.

     a. On the Effective Date, the parties shall deliver the following executed agreements
(collectively, the “Related Agreements”):

          i. The Convertible Note, dated as of 27 August 2009 by and among Lighting Science Group
Corporation and Koninklijke Philips Electronics N.V.

          ii. The Patent License Agreement, dated as of 27 August 2009 by and between Koninklijke
Philips Electronics N.V. and Lighting Science Group Corporation;

          iii. The Commercial Framework Agreement, dated as of 27 August 2009 by and between
Philips Lighting N.V. and Lighting Science Group Corporation.

     b. The execution and delivery of the Related Agreements identified in sub-section a above
shall be deemed to be contemporaneous with the execution and delivery of this Governing
Agreement.

     c. Although the Related Agreements are referenced in this Governing Agreement, their terms
and provisions are not a part of this Governing Agreement and those terms and provisions have
not been incorporated herein by reference.

     3. Prior Agreements.

     a. IP Due Diligence Confidentiality Agreement. Notwithstanding anything in this Governing
Agreement, the IP Due Diligence Confidentiality Agreement shall continue in full force and
effect in accordance with its terms. To avoid any further assertion of breach or other claims,
within ten (10) business days after the Effective Date, Pegasus and LSGC shall destroy or return
to PENAC all tangible copies of the Confidential Information (as defined in the IP Due Diligence
Confidentiality Agreement) provided and certify, in writing, (i) that all such Confidential
Information has been destroyed or returned and, to the extent that such Confidential Information
resides in readily accessible electronic form, that it has been deleted, or to the extent that
such Confidential Information resides in backup electronic form, that it will be maintained as
confidential in accordance with the terms of the IP Due Diligence Confidentiality Agreement, and
(ii) that at the time the material was provided, a common interest existed, as specified in the
IP Due Diligence Confidentiality Agreement. Notwithstanding the foregoing, LSGC’s and Pegasus’
outside counsel each may retain a copy of the Confidential Information subject to maintaining
such copies as confidential in accordance with the terms of the IP Due Diligence Confidentiality
Agreement.

     b. Common Interest Agreement. Notwithstanding anything in this Governing Agreement, the
Common Interest Agreement shall continue in full force and effect in

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accordance with its terms until 27 August 2011 and thereafter the materials disclosed pursuant
to the Common Interest Agreement shall be considered non-confidential.

     c. The 2006 Confidentiality Agreement. Notwithstanding anything in this Governing
Agreement, the 2006 Confidentiality Agreement shall continue in full force and effect in
accordance with its terms.

     d. Other Agreements. The LOI, the Distributor Agreement, the VAR Agreement, and the JDA
shall be considered terminated and/or expired according to their respective terms.

     4. Releases.

     a. Effective on the Effective Date, Philips, on behalf of themselves, their present and
former officers, directors, employees, parent and subsidiary entities, affiliates, and assigns
(the “Philips Releasors”), do hereby forever release the LED Group, their present and former
officers and directors, employees, agents, stockholders, affiliates, subsidiary or parent
corporations, members, representatives, insurers, attorneys, advisors, successors, assigns, or
anyone acting on their behalf (the “LED Group Releasees”), from any liability, whether known or
unknown, suspected or unsuspected, concealed or hidden, accrued or unaccrued, from the beginning
of time through the Effective Date, which against the LED Group Releasees (or any of them), the
Philips Releasors (or any of them) ever had, or now have, including, but not limited to, claims
in connection with, arising out of or in any way related to (i) the 2006 Confidentiality
Agreement, the JDA, the Common Interest Agreement, the Distributor Agreement, the VAR Agreement,
the IP Due Diligence Confidentiality Agreement, and the LOI; (ii) use of Philips IP; (iii) the
allegations in the First Massachusetts Action, the California Action, the Second Massachusetts
Action and the Second California Action; and (iv) the LED Group’s litigation conduct.

     b. Effective on the Effective Date, the Philips Releasors do hereby forever release
Pegasus, their present and former officers and directors, employees, agents, stockholders,
affiliates, subsidiary or parent corporations, members, representatives, insurers, attorneys,
advisors, successors, assigns, or anyone acting on their behalf (the “Pegasus Releasees”), from
any liability, whether known or unknown, suspected or unsuspected, concealed or hidden, accrued
or unaccrued, from the beginning of time through the Effective Date, which against the Pegasus
Releasees (or any of them), the Philips Releasors (or any of them) ever had, or now have,
including, but not limited to, claims in connection with, arising out of or in any way related
to (i) the LOI, the IP Due Diligence Confidentiality Agreement, and the Common Interest
Agreement, (ii) the allegations in the Texas Action and the New York Action, and (iii) Pegasus’
litigation conduct.

     c. Effective on the Effective Date, the LED Group, on behalf of themselves, their present
and former officers, directors, employees, parent and subsidiary entities, affiliates, and
assigns (the “LED Group Releasors”), do hereby forever release Philips, their present and former
officers and directors, employees, agents, stockholders, affiliates, subsidiary or parent
corporations, members, representatives, insurers, attorneys, advisors, successors, assigns, or
anyone acting on their behalf (the “Philips Releasees”), from any liability, whether known or
unknown, suspected or unsuspected, concealed or hidden, accrued or

Page  4 of 10

 

unaccrued, from the beginning of time through the Effective Date, which against the Philips
Releasees (or any of them), the LED Group Releasors (or any of them) ever had, or now have,
including, but not limited to, claims in connection with, arising out of or in any way related
to (i) the 2006 Confidentiality Agreement, the JDA, the Common Interest Agreement, the
Distributor Agreement, the VAR Agreement, the IP Due Diligence Confidentiality Agreement, or the
LOI; (ii) use of LED Group IP; (iii) the allegations in the First Massachusetts Action, the
California Action, the Second Massachusetts Action, and the Second California Action; (iv)
conduct following the issuance of the Preliminary Injunction and (v) Philips’ litigation
conduct.

     d. Effective on the Effective Date, Pegasus, on behalf of themselves, their present and
former officers, directors, employees, parent and subsidiary entities, affiliates, and assigns
(the “Pegasus Releasors”), do hereby forever release the Philips Releasees from any liability,
whether known or unknown, suspected or unsuspected, concealed or hidden, accrued or unaccrued,
from the beginning of time through the Effective Date, which against the Philips Releasees (or
any of them), the Pegasus Releasors (or any of them) ever had, or now have, including, but not
limited to, claims in connection with, arising out of or in any way related to (i) the LOI, the
IP Due Diligence Confidentiality Agreement, and the Common Interest Agreement, (ii) the
allegations in Texas Action and the New York Action, and (iii) Philips’ litigation conduct.

     e. Nothing in this Section 4 shall amend or modify the terms, or impact the existence of,
or limit the effect of, the Related Agreements.

     f. Nothing in this Section 4 shall terminate the 2009 Confidentiality Agreement or the 2009
Amended Confidentiality Agreement.

     g. To ensure that the releases provided in sub-sections a, b, c, and d above are fully
enforceable in accordance with their terms, the parties each hereby waive any benefits under,
and any protection that each may have by virtue of, Section 1542 of the California Civil Code,
which provides:

A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release, which if
known by him or her must have materially affected his or her settlement with the
debtor.

In addition, the parties each hereby knowingly and voluntarily waive any protection that may
exist under any comparable or similar statutes and principles of common law of any and all
states of the United States or of the United States.

     5. Dismissals and Further Orders.

     a. Within five (5) business days of the Effective Date, the parties shall take all
necessary steps to dismiss the First Massachusetts Action, the California Action, the New York
Action and the Second Massachusetts Action, with prejudice, each party to bear its own costs.

Page  5 of 10

 

     b. Within five (5) business days of the Effective Date, the parties shall take all
necessary steps to dissolve the preliminary injunction entered in the California Action on
October 7, 2008.

     c. Any fees related to the Discovery Referee in the California Action which have not yet
been paid shall be split equally between the LED Group and Philips.

     d. Each party shall return, destroy or maintain documents designated as confidential in the
First Massachusetts Action, the California Action, the New York Action, or the Second
Massachusetts Action, according to the terms of the respective Protective Order in each of the
foregoing actions. The Parties agree that outside counsel in the Actions may maintain more than
a single copy of pleadings, memoranda or notes, even if such document contains confidential
information as defined in the applicable Protective Order.

     6. Confidentiality. This Governing Agreement shall not be confidential and the
parties may freely disclose this Agreement and the terms and conditions herein. The Related
Agreements shall be confidential according to the terms and conditions contained in each of them
respectively.

     7. Press Release. On or after the effective date of this Agreement, the parties shall
issue the joint press release attached hereto as Exhibit A (the “Joint Press Release”).

     8. Discovery. In the event that any party hereto is requested or required by
deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar
legal, judicial or regulatory process to disclose the existence of or any of the terms of the
Related Agreements or information or documents produced in any of the cases, such party shall
(i) provide the other parties hereto with prompt prior written notice of such request or
requirement, and (ii) cooperate with such other parties, at such other parties’ cost and expense,
so that such other parties may seek a protective order or other appropriate remedy. In the event
that such protective order or other remedy is not obtained, or the other parties waive compliance
with the terms and provisions hereof, the party that is required or requested to disclose such
information may disclose only those portions of the Related Agreements that such party is advised
by legal counsel it is legally required to be disclosed.

     9. Disclosure For Enforcement. Nothing contained in this Agreement shall be deemed to
prohibit or in any way limit the disclosure by any party hereto of the existence of or any of the
terms of this Governing Agreement or the Related Agreements in connection with the enforcement of
such party’s rights under this Agreement or the Related Agreements against any of the other parties
hereto.

     10. Integration; Modification. This Governing Agreement and the Related Agreements
contain the entire and only understanding among the parties relating to the subject matter of this
Agreement and the Related Agreements and supersedes all prior written and oral representations or
discussions between the parties. This Governing Agreement and the Related Agreements may not be
altered or amended, nor may any of its provisions be waived, except by a writing executed by the
party to be charged. The Parties hereby agree not to claim or contend that any non-written
statement, not specified in this Governing Agreement, operates as a modification or waiver of any
term of this Governing Agreement.

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     11. Representations and Warranties.

     a. In connection with this Governing Agreement and the Related Agreements, Philips N.V.,
PENAC and PSSLS each represents and warrants to the other parties hereto that (i) it has the
authority to execute, deliver and perform this Governing Agreement and the Related Agreements
and the individual executing the Governing Agreement and the Related Agreements is authorized to
do so on its behalf; (ii) it has not sold, assigned, transferred or otherwise disposed of any of
the claims, demands or rights that are the subject of this Governing Agreement or the Related
Agreements; and (iii) it has not commenced any pending legal action against any other party
hereto and thereto, other than the legal actions identified in the recitals of this Governing
Agreement.

     b. In connection with this Governing Agreement and the Related Agreements, LSG, LEH and LEI
each represents and warrants to the other parties hereto and thereto that (i) it has the
authority to execute, deliver and perform this Governing Agreement and the Related Agreements
and the individual executing the Governing Agreement and the Related Agreements is authorized to
do so on its behalf; (ii)  it has not sold, assigned, transferred or otherwise disposed of any
of the claims, demands or rights that are the subject of this Governing Agreement or the Related
Agreements; and (iii) it has not commenced any pending legal action against any other party
hereto and thereto, other than the legal actions identified in the recitals of this Governing
Agreement.

     c. In connection with this Governing Agreement and the Related Agreements, Pegasus Partners
and Pegasus Advisors each represents and warrants to the other parties hereto and thereto that
(i) it has the capacity to execute, deliver and perform this Governing Agreement and the Related
Agreements; (ii) it has not sold, assigned, transferred or otherwise disposed of any of the
claims, demands or rights that are the subject of this Governing Agreement or the Related
Agreements; and (iii) it has not commenced any pending legal action against any other party
hereto and thereto, other than the legal actions identified in the recitals of this Governing
Agreement.

     12. Compromise. This Governing Agreement is a compromise of matters that are in
dispute between the parties and neither the execution of this Agreement nor any acts undertaken
pursuant to this Governing Agreement, including conduct taken in connection with the Related
Agreements, shall be construed as an admission or evidence of any liability or wrongdoing
whatsoever on the part of any party, which liability or wrongdoing is hereby expressly denied and
disclaimed by each party. Neither this Governing Agreement, nor the fact of its execution, nor any
of its provisions, shall be used, offered or received into evidence in any action or proceeding of
any nature or otherwise referred to in any manner in any court or other tribunal by the parties
hereto, except in a proceeding to enforce the terms of this Agreement.

     13. Language. The parties each acknowledge that it and/or its legal counsel fully
understands this Governing Agreement, even though it is in the English language and the English
language may not be its native language or familiar to it. The parties acknowledge that they have
had an opportunity to have this Governing Agreement translated into a more familiar language and
for their counsel to review this Governing Agreement in a more familiar language. The
parties acknowledge that they are fully aware of the contents of this Governing Agreement and the
legal effect of this Governing Agreement.

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     14. Notice. All formal notices and other communications required or permitted
hereunder shall be in writing, and shall be sent by international courier, certified or registered
mail (postage prepaid), addressed as set forth below or at such other address as either party shall
have furnished to the other in writing and all such notices and other written communications shall
be effective upon receipt or upon refusal of delivery by the intended recipient.

	 	 	 	 	 	 	 
	If to Philips NV:

	 	Philips Lighting B.V.

Legal Department

Attn. Mr. Karsten Schwennesen

General Counsel

P.O. Box 80020 

Mathildelaan 1

5611 BD EINDHOVEN

The Netherlands

Tel. +31 40 27 57490
	 	With a copy to:
	 	Michael H. Steinberg, Esq.

Sullivan & Cromwell

1888 Century Park East

Suite 2100

Los Angeles, CA 90067

Tel. (310) 712-6600
	 
	 	 	 	 	 	 
	To PENAC and/or 

PSSLS:

	 	Joseph Innamorati

Senior Vice President &
Chief
Legal Officer

Philips Electronics North

America Corporation

3000 Minuteman Road 

Building One, MS 109

Andover, MA 01810

Tel. 978-659-4636

	 	With a copy to:
	 	Michael H. Steinberg, Esq.

Sullivan & Cromwell

1888 Century Park East

Suite 2100

Los Angeles, CA 90067

Tel. (310) 712-6600
	 
	 	 	 	 	 	 
	To any of the LED
Group:

	 	General Counsel

Lighting Science Group 

Corporation

Building 2A

1227 South Patrick Drive

Satellite Beach, FL 32937 USA

Tel. 321-779-5520
	 	With a copy to:
	 	Gregory R. Samuel

Haynes and Boone, LLP

Suite 3100

901 Main Street

Dallas, Texas 75202 USA

Tel. 214.651.5645
	 
	 	 	 	 	 	 
	To Pegasus:

	 	Steven Wacaster

Vice President

Pegasus Capital Advisors, L.P.

505 Park Avenue, 21st floor

New York, NY 10022 USA

Tel. (212) 710-2500
	 	With a copy to:
	 	Stephen M. Baldini, Esq.

Akin Gump Strauss Hauer &

Feld LLP

One Bryant Park

New York, NY 10036

USA

Tel. 212.872.1062

Page  8 of 10

 

     15. Waiver of Breach. A breach of any provision of this Governing Agreement may only
be waived in writing and the waiver of such breach shall not operate or be construed as a waiver of
any subsequent breach.

     16. Dispute Resolution. If any dispute arises under this Governing Agreement, the
parties shall make a good faith effort to resolve the dispute before initiating litigation. The
parties shall meet to discuss the dispute no later than ten (10) business days after either party
gives written notice to the other party that such a dispute exists. Such meeting may be held
telephonically if travel is impractical for either party. At such meeting, and to the extent the
scope of the dispute is known, duly authorized representatives of each party having authority to
resolve the dispute shall be in attendance. No action, suit, arbitration or other proceeding may
be commenced before the parties have met pursuant to this Section, unless immediate injunctive
relief is sought, in which case the noted meeting shall take place at the earliest opportunity
after immediate injunctive relief is sought.

     17. Prevailing Party. In any legal action or proceeding to enforce any element of
this Governing Agreement, the prevailing party shall be entitled to its or their attorneys’ fees
and costs incurred, in addition to any relief to which such party may otherwise be entitled.

     18. Assignment & Transfer. This Governing Agreement may not be assigned or
transferred.

     19. Bind & Benefit. In addition to third-parties mentioned or described by category
in this Governing Agreement, this Governing Agreement shall bind and benefit the successors and
permitted assigns of the parties.

     20. Headings. Headings and subheadings in this Governing Agreement are included
solely for the convenience of reference and will not be considered to be a part of, or affect the
interpretation of, this Governing Agreement.

     21. Electronic Signature. The parties agree to accept facsimile, scanned or copied
signatures of their respective authorized representatives as original signatures for the purposes
of executing this Governing Agreement as specified below and further agree to accept copied,
scanned, electronic, or printed versions of this Governing Agreement fully signed and/or executed
as if it was an original.

     22. Governing Law; Jurisdiction.

     a. This Governing Agreement shall be governed by, construed, interpreted and enforced in
accordance with the laws of New York, without regard to choice or conflict of laws principles
that would defer to the substantive laws of any other jurisdiction.

     b. Each of the parties hereto hereby irrevocably consents and submits to the exclusive
jurisdiction of the State and Federal courts of the state of New York in connection with any
suit, action or other proceeding arising out of or related to this Agreement or the transactions
contemplated herein, and hereby unconditionally and irrevocably waives any objection to venue or
jurisdiction in New York, and agrees that service of any summons,

Page  9 of 10

 

complaint, notice or other process relating to such suit, action or other proceeding may be
effected by certified, first class mail to the addresses identified in Section 14 herein.

     c. Each of the parties hereto unconditionally and irrevocably waives any right such party
may have to seek a jury trial in connection with any suit, action or other proceeding arising
out of or related to this Agreement or the transactions contemplated herein.

IN WITNESS WHEREOF, the parties have caused this Governing Agreement to be executed by their duly
authorized representatives, as of the Effective Date.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Printed Name	 	 	 	 
	Party	 	Signature	 	 	Title	 	 	Date	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Lighting Science Group Corporation
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	LED Holdings, LLC
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	LED Effects, Inc.
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Pegasus Capital Advisors, L.P.
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Pegasus Partners IV, L.P.*
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Philips Electronics North America
Corporation
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Philips Solid-State Lighting
Solutions, Inc.
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Koninklijke Philips Electronics N. V.
	 	 	 	 	 	 	 	 	 	 	 	 

 

			
	*	 	By Pegasus Investors IV, L.P., its general partner, by Pegasus Investors IV GP, L.L.C., its
general partner.

Page  10 of 10exv10w2

Exhibit 10.2

CONVERTIBLE NOTE

	 	 	 
	$5,000,000.00
	 	 
	New York, New York

	 	August 27, 2009

     FOR VALUE RECEIVED, the undersigned, LIGHTING SCIENCE GROUP CORPORATION, a Delaware
corporation (“Borrower”), promises to pay to the order of KONINKLIJKE PHILIPS ELECTRONICS N.V.
(“Lender”), on the Maturity Date the sum of FIVE MILLION DOLLARS ($5,000,000.00) or so much thereof
as may be outstanding hereunder, together with interest.

     1. Interest Rate. Interest shall accrue on the unpaid principal balance of this Note
from the date hereof at 14% per annum.

     2. Default Rate. All past due principal of and accrued interest on this Note shall
bear interest from maturity (stated, by acceleration, or otherwise) until paid at the rate of 18%
per annum.

     3. No Prepayment. The principal amount of this Note may not be prepaid.

     4. Repayments. The principal and interest of this Note shall be due and payable on
the Maturity Date. As used herein, “Maturity Date” shall mean the earlier of (a) July 31, 2010 or
(b) the Effective Date (as hereinafter defined).

     5. Events of Default and Remedies. The entire unpaid principal balance of and all
accrued interest on this Note shall immediately become due and payable, without notice or demand
which are hereby waived, upon the occurrence of any one or more of the following events of default
(individually or collectively, herein called a “Default”):

     (a) The failure or refusal of Borrower to pay all or any part of the principal of or
accrued interest on this Note as and when same becomes due and payable in accordance with
the terms hereof; or

     (b) Borrower shall: (i) become insolvent within the meaning of the Bankruptcy Code of
the United States, as amended, (ii) admit in writing its inability to pay or otherwise fail
to pay its or his or her debts generally as they become due, (iii) voluntarily seek consent
to, or acquiesce in the benefit or benefits of any Debtor Relief Law, or (iv) be made the
subject of any proceeding provided for by any Debtor Relief Law that could suspend or
otherwise affect any of the rights of the holder hereof. As used herein, “Debtor Relief
Laws” means the Bankruptcy Code of the United States, as amended and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization or similar debtor relief laws from time to time in effect
affecting the rights of creditors generally; or

     (c) The nonpayment when due of any material indebtedness owed by Borrower, or the
occurrence of any event under any document or instrument evidencing, securing, or executed
in connection with any such indebtedness which could give the holder thereof the right to
declare such indebtedness or any part thereof due prior to its scheduled maturity; or

 

 

     (d) The discovery by the holder hereof that any statement, representation, or warranty
made by Borrower in any writing, document, or instrument ever delivered to the holder hereof
in connection herewith was at the time made false, misleading, or erroneous in any material
respect.

     Upon the occurrence of a Default, the holder of this Note may: (a) offset against this Note
any sum or sums owed by the holder hereof to Borrower and (b) proceed to protect and enforce its
rights either by suit in equity and/or by action at law, or by other appropriate proceedings,
whether for the specific performance of any covenant or agreement contained in this Note or any
document or instrument executed and delivered by Borrower in connection with this Note or in aid of
the exercise of any power or right granted by this Note or any document or instrument executed and
delivered by Borrower in connection with this Note or to enforce any other legal or equitable right
of the holder of this Note.

     6. Cumulative Rights. No delay on the part of the holder of this Note in the
exercise of any power or right under this Note, or under any document or instrument executed in
connection herewith, shall operate as a waiver thereof, nor shall a single or partial exercise of
any other power or right. Enforcement by the holder of this Note of any security for the payment
hereof shall not constitute an election by it of remedies so as to preclude the exercise of any
other remedy available to it.

     7. Waiver. Borrower, and each surety, endorser, guarantor, and other party ever
liable for the payment of any sum of money payable on this Note jointly and severally waive
demand, presentment, protest, notice of nonpayment, notice of intention to accelerate, notice of
acceleration, notice of protest, and any and all lack of diligence or delay in collection or the
filing of suit hereon which may occur, and agree that their liability on this Note shall not be
affected by any renewal or extension in the time of payment hereof, by any indulgences, or by any
release or change in any security for the payment of this Note, and hereby consent to any and all
renewals, extensions, indulgences, releases, or changes, regardless of the number of such
renewals, extensions, indulgences, releases, or changes.

     8. Attorneys’ Fees and Costs. In the event that a Default shall occur, and in the
event that thereafter this Note is placed in the hands of an attorney for collection, or in the
event this Note is collected in whole or in part through legal proceedings of any nature, then and
in any such case Borrower promises to pay all costs of collection, including, but not limited to,
reasonable attorneys’ fees incurred by the holder hereof on account of such collection, whether or
not suit is filed.

     9. Notices. Any notice or demand given hereunder by the holder shall be deemed to
have been given and received (a) when actually received by Borrower, if delivered in person or by
courier or messenger, or (b) two (2) Business Days (as hereinafter defined) after a letter
containing such notice, certified or registered, with postage prepaid, addressed to Borrower, is
deposited in the United States Mail. The address of Borrower is 1227 South Patrick Drive,
Building 2A, Satellite Beach, Florida 32937 or such other address as Borrower shall advise the
holder hereof by certified or registered letter.

     10. Governing Law. The laws of New York shall govern the construction, validity,
enforcement and interpretation of this Note, except to the extent federal laws otherwise govern
the validity, construction, enforcement and interpretation hereof.

     11. Headings. The headings of the sections of this Note are inserted for convenience
only and shall not be deemed to constitute a part hereof.

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     12. Successors and Assigns. All of the covenants, stipulations, promises and
agreements contained in this Note by or on behalf of Borrower shall bind its successors and
assigns, whether so expressed or not; provided, that Borrower may not, without the prior written
consent of the holder hereof, assign any rights, duties, or obligations under this Note.

     13. Maximum Interest Rate. Regardless of any provision contained herein, or in any
other document executed in connection herewith, the holder hereof shall never be entitled to
receive, collect or apply, as interest hereon, any amount in excess of the maximum rate of
interest permitted to be charged from time to time by applicable law, and in the event the holder
hereof ever receives, collects or applies, as interest, any such excess, such amount which would
be excessive interest shall be deemed a partial prepayment of the principal hereof and treated
hereunder as such; and, if the principal hereof is paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether or not the interest paid or payable, under
any specified contingency, exceeds the highest lawful rate, Borrower and the holder hereof shall,
to the maximum extent permitted under applicable law, (a) characterize any nonprincipal payment as
an expense, fee, or premium rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, and (c) spread the total amount of interest throughout the entire contemplated
term hereof; provided, that if the indebtedness evidenced hereby is paid and performed in full
prior to the end of the full contemplated term thereof, and if the interest received for the
actual period of existence thereof exceeds the maximum lawful rate, the holder hereof shall refund
to Borrower the amount of such excess or credit the amount of such excess against the principal
hereof, and in such event, the holder hereof shall not be subject to any penalties provided by any
laws for contracting for, charging, or receiving interest in excess of the maximum lawful rate.

     14. Business Day; Payments. As used herein, (a) “Business Day” means any day other
than Saturday, Sunday or other day on which the Federal Reserve Bank of New York is closed and
(b) “Nonbusiness Day” means every day that is not a Business Day. The principal of, or accrued
interest on, this Note shall be due and payable in lawful money of the United States of America,
in Andover, Massachusetts at the office of Lender, 3000 Minuteman Road, Andover, Massachusetts
01810 in funds which are or will be available for immediate use by Lender at such office at or
before 12:00 p.m., Eastern time (daylight or standard, as applicable) on the day payment hereof is
due. In any case where a payment of principal or interest hereon is due on a Nonbusiness Day,
Borrower shall be entitled to delay such payment until the next succeeding Business Day, but
interest shall continue to accrue until the payment is, in fact, made.

     15. Offering. Borrower will use its commercially reasonable efforts to conduct a
rights offering (the “Offering”) as soon as is reasonably practical, which Offering shall consist
of the offering of approximately 13,000,000 Units (as hereinafter defined, which number of Units
excludes the number of Units that may be acquired pursuant to this Note) at a price of $1.006 per
Unit. Each unit (a “Unit”) will consist of one share (a “Series D Preferred Share”) of Borrower’s
newly designated Series D Non-Convertible Preferred Stock, which Preferred Shares shall have the
designations, powers, preferences and rights set forth in the form of Certificate of Designation
attached hereto as Exhibit A (the “Series D Certificate of Designation”), and that portion
of a Warrant representing the right to purchase one share of Borrower’s common stock for $6.00 per
share, which Warrant shall be substantially in the form of Exhibit B attached hereto (the
“Warrant”). Borrower will use its commercially reasonable efforts to cause the Series D
Certificate of Designation to be filed with the Delaware Secretary of State in substantially the
form attached hereto as Exhibit A as soon as is reasonably practical.

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     16. Automatic Conversion; Purchase Option.

     (a) If: (i) the registration statement for the Offering is declared effective by the
Securities and Exchange Commission prior to the Maturity Date, or (ii) Pegasus Partners IV,
L.P. (“Pegasus IV”) voluntarily converts the outstanding principal and interest outstanding
under that certain Convertible Note Agreement, dated as of August 28, 2009 (the “Pegasus
Note”), by and between Pegasus IV and Borrower (the “Pegasus Conversion”) into a number of
Units equal to one Unit for each $1.006 of the then outstanding principal and interest under
the Pegasus Note, then Lender shall be deemed to have converted all of the then outstanding
principal balance and accrued and unpaid interest of this Note (the “Convertible Debt”),
into a number of Units equal to one Unit for each $1.006 of Convertible Debt (the “Automatic
Conversion”). Notwithstanding anything herein to the contrary, Lender agrees and
acknowledges that any Warrants issued to Lender pursuant to this Note shall be in the form
of Exhibit B attached hereto; provided, that the exercise price of such Warrants
shall be equal to $12.00 per share.

     (b) The Automatic Conversion shall be deemed to occur on the earlier of: (i) the date
the Offering is consummated or (ii) the first Business Day immediately following the date on
which Borrower provides Lender with written notice that the Pegasus Conversion has occurred
(in either case, the “Effective Date”). The Automatic Conversion shall constitute a binding
agreement between Lender and Borrower, in which Lender shall be deemed, without further
action on its part, to subscribe for the number of Units it is entitled to receive upon such
conversion (which number of Units shall be reduced by the number of Units, if any, Lender
receives in accordance with paragraph 0 hereof), and in payment and satisfaction of such
subscription, to release Borrower from all liability hereon in respect of the repayment of
principal and/or accrued and unpaid interest hereof being converted.

     (c) Borrower shall not be required to issue fractions of Units upon conversion of this
Note (or portion thereof). If any fractional interest in a Unit would be delivered upon the
conversion of this Note, Borrower shall purchase such fractional interest for an amount in
cash equal to $1.006 multiplied by the amount of such fractional interest.

     (e) As soon as practicable after the Effective Date, and in any event, within five (5)
Business Days thereafter, Borrower shall issue and deliver to the Lender: (i) a certificate
or certificates for the number of Series D Preferred Shares and a Warrant or Warrants
issuable upon the conversion of this Note in accordance with the provisions hereof, and (ii)
a check or cash in respect of any fraction of a Unit.

     17. Optional Conversion. Paragraph 0 notwithstanding, at any time after the Series D
Certificate of Designation is filed and becomes effective, Lender may, at its option, convert all
or a portion of the Convertible Debt into a number of Units equal to one Unit for each $1.006 of
Convertible Debt (with such conversion first being applied to the portion of Convertible Debt
consisting of accrued interest and then being applied to the portion of Convertible Debt
consisting of principal) (the “Optional Conversion”). Borrower shall not be required to issue
fractions of Units pursuant to the Optional Conversion. If any fractional interest in a Unit
would be delivered pursuant to the Optional Conversion, Borrower shall purchase such fractional
interest for an amount in cash equal to $1.006 multiplied by the amount of such fractional
interest. In the event that (i) Lender exercises its option pursuant to the Optional Conversion
prior to the record date of the Offering or (i) Lender is forced to convert all or a portion of
the Convertible Debt as a result of the Pegasus Conversion prior to the record date of the
Offering, Lender shall not receive any rights in the Offering with respect to the securities of
Borrower underlying the Units issued to Lender pursuant to such conversion. Conversion pursuant
to

4

 

this paragraph 0 shall release Borrower from liability to the extent of the repayment of
principal and/or accrued and unpaid interest being converted upon payment in satisfaction of the
subscription for the number of Units Lender is entitled to receive pursuant to such conversion.

     18. Legends. Each Series D Preferred Share issuable upon conversion of this Note
shall bear the legend set forth below:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS UNLESS SOLD
PURSUANT TO RULE 144 UNDER THE SECURITIES ACT. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF, AND MAY ONLY BE TRANSFERRED
IN ACCORDANCE WITH, THE CERTIFICATE OF DESIGNATION OF SERIES D NON-CONVERTIBLE
PREFERRED STOCK. COPIES OF SUCH CERTIFICATE OF DESIGNATION OF SERIES D
NON-CONVERTIBLE PREFERRED STOCK MAY BE OBTAINED UPON WRITTEN REQUEST TO THE COMPANY.

     19. Representations and Warranties of Borrower. Borrower hereby represents and
warrants to Lender that: (a) Borrower is a corporation duly organized, validly existing, and in
good standing under the laws of the state of Delaware; (b) the execution, delivery, and
performance by Borrower of this Note has been duly authorized by all necessary corporate action,
and does not contravene the Company’s certificate of incorporation or bylaws or any law affecting
Borrower; (c) this Note, when executed and delivered by Borrower, will be Borrower’s legal, valid,
and binding obligation enforceable against Borrower in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
state or federal debtor relief laws from time to time in effect which affect the enforcement of
creditors’ rights in general and the availability of equitable remedies; and (d) as of their
respective dates, none of the documents filed by Borrower under the Securities Exchange Act of
1934, as amended, on or following January 1, 2008 and on or prior to the date of this Note
contained an untrue statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.

     20. Consent to Jurisdiction. BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S
SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY ARISING OUT OF, FROM OR RELATED
TO THIS NOTE WILL BE LITIGATED IN COURTS HAVING SITUS WITHIN NEW YORK, NEW YORK. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY COURT LOCATED WITHIN NEW YORK, NEW YORK, WAIVES
PERSONAL SERVICE OF PROCESS UPON BORROWER AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE
BY CERTIFIED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED IN PARAGRAPH 0 HEREOF AND SERVICE SO
MADE WILL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT.

5

 

     21. Waiver of Jury Trial. BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS NOTE OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THIS NOTE, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING WILL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY. BORROWER AGREES THAT IT WILL NOT ASSERT ANY CLAIM AGAINST LENDER ON
ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES.

     22. ENTIRETIES. THIS NOTE, TOGETHER WITH THE OTHER DOCUMENTS AND INSTRUMENTS
EXECUTED AND DELIVERED IN CONNECTION HEREWITH, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.

[Remainder of page intentionally left blank. Signature page to follow]

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     IN WITNESS WHEREOF, the undersigned has executed this Note as of the day and year first above
written.

	 	 	 	 	 
	 	LIGHTING SCIENCE GROUP CORPORATION

 	 
	 	By:  	/s/
Kathryn L. Reynolds
 	 
	 	Name:  	Kathryn L. Reynolds 	 
	 	Title:  	Chief Financial Officer 	 
	 

ACCEPTED AND AGREED AS OF THE DAY AND YEAR FIRST ABOVE WRITTEN.

	 	 	 	 	 
	 	KONINKLIJKE PHILIPS ELECTRONICS N.V.

 	 
	 	By:  	/s/
K. Schwennesen
 	 
	 	Name:  	Karsten Schwennesen 	 
	 	Title:  	General Counsel 	 
	 

Signature Page to Lighting Science Group Convertible Note

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