Document:

AMENDED
      AND RESTATED REVOLVING PROMISSORY NOTE

     

    $2,300,000.00    December
      __, 2006

     

    FOR
      VALUE
      RECEIVED, LIGHTING SCIENCE GROUP CORPORATION, a Delaware corporation (whether
      one or more, “Borrower”),
      having an address at 2100 McKinney Ave., Suite 1555, Dallas, Texas 75201, hereby
      promises to pay to the order of BANK OF TEXAS, N.A., a national banking
      association (together with its successors and assigns and any subsequent holders
      of this Promissory Note, the “Lender”),
      as
      hereinafter provided, the principal sum of TWO MILLION THREE HUNDRED THOUSAND
      AND NO/100 DOLLARS ($2,300,000.00) or so much thereof as may be advanced by
      Lender from time to time hereunder to or for the benefit or account of Borrower,
      together with interest thereon at the Note Rate (as hereinafter defined), and
      otherwise in strict accordance with the terms and provisions
      hereof.

     

    ARTICLE
      I  

     

    DEFINITIONS

     

    Section
      1.1  Definitions.
      As used
      in this Promissory Note, the following terms shall have the following
      meanings:

     

    Applicable
      Margin:
      One
      percent (1%).

     

    Applicable
      Rate:
      The
      Base Rate plus the Applicable Margin.

     

    Base
      Rate:
      For any
      day, a rate of interest equal to the Prime Rate for such day.

     

    Charges:
      All
      fees, charges and/or any other things of value, if any, contracted for, charged,
      taken, received or reserved by Lender in connection with the transactions
      relating to this Note and the other Loan Documents, which are treated as
      interest under applicable law.

     

    Default
      Interest Rate:
      A rate
      per annum equal to the Note Rate plus four percent (4%), but in no event in
      excess of the Maximum Lawful Rate.

     

    Event
      of Default:
      Any
      event or occurrence described under Section
      3.1
      hereof.

     

    Loan
      Agreement:
      The
      certain Loan Agreement dated June 29, 2006 between Borrower and Lender, as
      amended of even date herewith and as may be further amended from time to
      time.

     

    Loan
      Documents:
      As
      defined in the Loan Agreement.

     

    Maturity
      Date:
      June
      28, 2007.

     

    Maximum
      Lawful Rate:
      The
      maximum lawful rate of interest which may be contracted for, charged, taken,
      received or reserved by Lender in accordance with the applicable laws of the
      State of Texas (or applicable United States federal law to the extent that
      such
      law permits Lender to contract for, charge, take, receive or reserve a greater
      amount of interest than under Texas law), taking into account all Charges made
      in connection with the transaction evidenced by this Note and the other Loan
      Documents.

     

    
      Dallas
        1193263_1 4827.85
Note:
      This
      Promissory Note, as may be amended from time to time.

     

    Note
      Rate:
      The
      rate equal to the lesser of (a) the Maximum Lawful Rate or (b) the Applicable
      Rate.

     

    Payment
      Date:
      The
      earlier of the 30th
      day and
      last day of each and every calendar month during the term of this
      Note.

     

    Prime
      Rate:
      The
      rate of interest set by BOK Financial Corporation, in its sole discretion,
      on a
      daily basis as published by BOK Financial Corporation from time to time, which
      Borrower hereby acknowledges and agrees may not be the lowest interest rate
      charged by Lender, and which rate shall change as said prime rate
      changes.

     

    Any
      capitalized term used in this Note and not otherwise defined herein shall have
      the meaning ascribed to each such term in the Loan Agreement. All terms used
      herein, whether or not defined in Section
      1.1
      hereof,
      and whether used in singular or plural form, shall be deemed to refer to the
      object of such term whether such is singular or plural in nature, as the context
      may suggest or require.

     

    ARTICLE
      II  

     

    PAYMENT
      TERMS

     

    Section
      2.1  Payment
      of Principal and Interest.
      All
      accrued but unpaid interest on the principal balance of this Note outstanding
      from time to time shall be due and payable on each Payment Date, commencing
      on
      December 30, 2006. The then-outstanding principal balance of this Note and
      all
      accrued but unpaid interest thereon shall be due and payable on the Maturity
      Date or upon the earlier maturity hereof, whether by acceleration or otherwise.
      Borrower may from time to time during the term of this Note borrow, partially
      or
      wholly repay its outstanding borrowings, and reborrow, subject to all of the
      limitations, terms and conditions of this Note and of the Loan Documents;
      provided however, that the total outstanding borrowings under this Note shall
      not at any time exceed the Borrowing Base or the principal amount stated above.
      The unpaid principal balance of this Note at any time shall be the total amounts
      advanced hereunder by Lender less the amount of principal payments made hereon
      by or for Borrower, which balance may be endorsed hereon from time to time
      by
      Lender or otherwise noted in Lender’s records, which notations shall be, absent
      manifest error, conclusive evidence of the amounts owing hereunder from time
      to
      time.

     

    Section
      2.2  Application.
      Except
      as expressly provided herein to the contrary, all payments on this Note shall
      be
      applied in the following order of priority: (i) the payment or reimbursement
      of
      any expenses, costs or obligations (other than the outstanding principal balance
      hereof and interest hereon) for which either Borrower shall be obligated or
      Lender shall be entitled pursuant to the provisions of this Note or the other
      Loan Documents, (ii) the payment of accrued but unpaid interest hereon, and
      (iii) the payment of all or any portion of the principal balance hereof then
      outstanding hereunder. If an Event of Default exists under this Note or under
      any of the other Loan Documents, then Lender may, at the sole option of Lender,
      apply any such payments, at any time and from time to time, to any of the items
      specified in clauses (i), (ii) or (iii) above without regard to the order of
      priority otherwise specified in this Section
      2.

     

    Section
      2.3  Payments.
      All
      payments under this Note made to Lender shall be made in immediately available
      funds at 4217 Swiss Avenue, Dallas, Texas 75204 (or at such other place as
      Lender, in Lender’s sole discretion, may have established by delivery of written
      notice thereof to Borrower from time to time), without offset, in lawful money
      of the United States of America, which shall at the time of payment be legal
      tender in payment of all debts and dues, public and private. Payments by check
      or draft shall not constitute payment in immediately available funds until
      the
      required amount is actually received by Lender in full. Payments in immediately
      available funds received by Lender in the place designated for payment on a
      Business Day prior to 11:00 a.m. Dallas, Texas time at said place of payment
      shall be credited prior to the close of business on the Business Day received,
      while payments received by Lender on a day other than a Business Day or after
      11:00 a.m. Dallas, Texas time on a Business Day shall not be credited until
      the
      next succeeding Business Day. If any payment of principal or interest on this
      Note shall become due and payable on a day other than a Business Day, such
      payment shall be made on the next succeeding Business Day. Any such extension
      of
      time for payment shall be included in computing interest which has accrued
      and
      shall be payable in connection with such payment.

     

    Section
      2.4  Computation
      Period.
      Interest on the indebtedness evidenced by this Note shall be computed on the
      basis of a three hundred sixty (360) day year and shall accrue on the actual
      number of days elapsed for any whole or partial month in which interest is
      being
      calculated. In computing the number of days during which interest accrues,
      the
      day on which funds are initially advanced shall be included regardless of the
      time of day such advance is made, and the day on which funds are repaid shall
      be
      included unless repayment is credited prior to the close of business on the
      Business Day received as provided in Section
      2.3
      hereof.

     

    Section
      2.5  Prepayment.
      Borrower shall have the right to prepay, at any time and from time to time,
      upon
      five (5) days prior written notice to Lender, without fee, premium or penalty
      (except as noted below), all or any portion of the outstanding principal balance
      hereof, provided, however, that such prepayment shall also include any and
      all
      accrued but unpaid interest on the amount of principal being so prepaid through
      and including the date of prepayment, plus any other sums which have become
      due
      to Lender under the other Loan Documents on or before the date of prepayment,
      but which have not been fully paid. If at any time the outstanding principal
      balance hereunder exceeds
      the Borrowing Limit, Borrower shall immediately
      upon
      written notice of demand prepay
      such principal balance to the extent necessary to eliminate such excess;
      provided, that if such excess is directly caused by a default of one or more
      Guarantors under a Guaranty Agreement or other Loan Document and the amount
      of
      such excess is less than $350,000.00, Borrower shall have thirty (30) days
      from
      the date of such notice to pay such excess amount or cause the replacement
      of
      the defaulting Guarantor with another Guarantor subject to documents and terms
      satisfactory to Lender.

     

    Section
      2.6  Unconditional
      Payment.
      Borrower is and shall be obligated to pay all principal, interest and any and
      all other amounts which become payable under this Note or under any of the
      other
      Loan Documents absolutely and unconditionally and without any abatement,
      postponement, diminution or deduction whatsoever and without
      any
      reduction for counterclaim or setoff whatsoever. If at any time any payment
      received by Lender hereunder shall be deemed by a court of competent
      jurisdiction to have been a voidable preference or fraudulent conveyance under
      any Debtor Relief Laws, then the obligation to make such payment shall survive
      any cancellation or satisfaction of this Note or return thereof to Borrower
      and
      shall not be discharged or satisfied with any prior payment thereof or
      cancellation of this Note, but shall remain a valid and binding obligation
      enforceable in accordance with the terms and provisions hereof, and such payment
      shall be immediately due and payable upon demand.

     

    Section
      2.7  Partial
      or Incomplete Payments.
      Remittances in payment of any part of this Note other than in the required
      amount in immediately available funds at the place where this Note is payable
      shall not, regardless of any receipt or credit issued therefor, constitute
      payment until the required amount is actually received by Lender in full in
      accordance herewith and shall be made and accepted subject to the condition
      that
      any check or draft may be handled for collection in accordance with the practice
      of the collecting bank or banks. Acceptance by Lender of any payment in an
      amount less than the full amount then due shall be deemed an acceptance on
      account only, and the failure to pay the entire amount then due shall be and
      continue to be an Event of Default in the payment of this Note.

     

    Section
      2.8  Default
      Interest Rate, Etc.
      Upon
      the occurrence of a default or Event of Default under any of the Loan Documents,
      and for so long as such default or Event of Default exists, regardless of
      whether or not there has been an acceleration of the indebtedness evidenced
      by
      this Note, and at all times after the maturity of the indebtedness evidenced
      by
      this Note (whether by acceleration or otherwise), and in addition to all other
      rights and remedies of Lender hereunder, interest shall accrue on the
      outstanding principal balance hereof at the Default Interest Rate, and such
      accrued interest shall be immediately due and payable. Borrower acknowledges
      that it would be extremely difficult or impracticable to determine Lender’s
      actual damages resulting from any late payment or Event of Default, and such
      late charges and accrued interest are reasonable estimates of those damages
      and
      do not constitute a penalty. 

     

    ARTICLE
      III  

     

    EVENT
      OF DEFAULT AND REMEDIES

     

    Section
      3.1  Event
      of Default.
      The
      occurrence or happening, at any time and from time to time, of any one or more
      of the following shall immediately constitute an “Event
      of Default”
under
      this Note: (a) Borrower shall fail, refuse or neglect to pay and satisfy, in
      full and in the applicable method and manner required, any required payment
      of
      principal or interest or any other portion of the indebtedness evidenced by
      this
      Note,
      within
      five (5) days of the date the same shall become due and
      payable, whether at the stipulated due date thereof, at a date fixed for
      payment, or at maturity, by acceleration or otherwise; or (b) the occurrence
      of
      any default under this Note or the occurrence of any Event of Default as defined
      in or under the Loan Agreement or any other Loan Document that remains uncured
      under and pursuant to the provisions of the Loan Agreement or any other Loan
      Document.

     

    Section
      3.2  Remedies.
      Upon
      the occurrence of an Event of Default, Lender shall have the immediate right,
      at
      the sole discretion of Lender and without notice, demand, presentment, notice
      of
      nonpayment or nonperformance, protest, notice of protest, notice of intent
      to
      accelerate, notice of acceleration, or any other notice or any other action
      (ALL
      OF WHICH BORROWER HEREBY EXPRESSLY WAIVES AND RELINQUISHES)
      (i) to
      declare the entire unpaid balance of the indebtedness evidenced by this Note
      (including, without limitation, the outstanding principal balance hereof,
      including all sums advanced or accrued hereunder or under any other Loan
      Document, and all accrued but unpaid interest thereon) at once immediately
      due
      and payable (and upon such declaration, the same shall be at once immediately
      due and payable) and may be collected forthwith, whether or not there has been
      a
      prior demand for payment and regardless of the stipulated date of maturity,
      and
      (ii) to exercise any and all other rights and remedies available to the Lender
      in law or in equity, under the Loan Documents or otherwise.

     

    ARTICLE
      IV  

     

    GENERAL
      PROVISIONS

     

    Section
      4.1  No
      Waiver; Amendment.
      The
      failure to exercise any remedy available to Lender shall not be deemed to be
      a
      waiver of any rights or remedies of Lender under this Note or under any of
      the
      other Loan Documents, or at law or in equity. No extension of the time for
      the
      payment of this Note or any installment due hereunder, made by agreement with
      any person now or hereafter liable for the payment of this Note, shall operate
      to release, discharge, modify, change or affect the original liability of
      Borrower under this Note, either in whole or in part, unless Lender
      specifically, unequivocally and expressly agrees otherwise in writing. This
      Note
      may not be changed orally, but only by an agreement in writing signed by the
      party against whom enforcement of any waiver, change, or modification is
      sought.

     

    Section
      4.2  Interest
      Provisions.
      The
      provisions of Section 11.6 and 11.7 of the Loan Agreement are hereby
      incorporated by reference and shall apply to this Note as if fully set forth
      herein.

     

    Section
      4.3  Further
      Assurances and Corrections.
      From
      time to time, at the request of Lender, Borrower will (a) promptly correct
      any
      defect, error or omission which may be discovered in the contents of this Note
      or in any other Loan Document or in the execution or acknowledgment thereof;
      and
      (b) execute, acknowledge, deliver, record and/or file (or cause to be executed,
      acknowledged, delivered, recorded and/or filed) such further documents and
      instruments and perform such further acts and provide such further assurances
      as
      may be necessary, desirable, or proper, in Lender’s reasonable
      opinion.

     

    Section
      4.4  Governing
      Law.
      This
      Note is executed and delivered as an incident to a lending transaction
      negotiated and consummated in Dallas County, Texas, and shall be governed by
      and
      construed in accordance with the laws of the State of Texas. Borrower, for
      itself and its successors and assigns, hereby irrevocably (i) submits to the
      nonexclusive jurisdiction of the state and federal courts in Texas, (ii) waives,
      to the fullest extent permitted by law, any objection that it may now or in
      the
      future have to the laying of venue of any litigation arising out of or in
      connection with this Note or any Loan Document brought in the District Court
      of
      Dallas County, Texas, or in the United States District Court for the Northern
      District of Texas, Dallas Division, (iii) waives any objection it may now or
      hereafter have as to the venue of any such action or proceeding brought in
      such
      court or that such court is an inconvenient forum, and (iv) agrees that any
      legal proceeding against any party to any of the Loan Documents arising out
      of
      or in connection with any of the Loan Documents may be brought in one of the
      foregoing courts. Borrower hereby agrees that service of process upon Borrower
      may be made by certified or registered mail, return receipt requested, at its
      address specified herein. Nothing herein shall affect the right of Lender to
      serve process in any other manner permitted by law or shall limit the right
      of
      Lender to bring any action or proceeding against Borrower or with respect to
      any
      of Borrower’s property in courts in other jurisdictions. The scope of each of
      the foregoing waivers is intended to be all encompassing of any and all disputes
      that may be filed in any court and that relate to the subject matter of this
      transaction, including, without limitation, contract claims, tort claims, breach
      of duty claims, and all other common law and statutory claims. Borrower
      acknowledges that these waivers are a material inducement to Lender’s agreement
      to enter into the agreements and obligations evidenced by the Loan Documents,
      that Lender has already relied on these waivers and will continue to rely on
      each of these waivers in related future dealings. The waivers in this
Section
      4.4
      are
      irrevocable, meaning that they may not be modified either orally or in writing,
      and these waivers apply to any future renewals, extensions, amendments,
      modifications, or replacements in respect of any and all of the applicable
      Loan
      Documents. In connection with any litigation, this Note may be filed as a
      written consent to a trial by the court.

     

    Section
      4.5  Waiver
      of Jury Trial.
      BORROWER, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY KNOWINGLY,
      INTENTIONALLY, IRREVOCABLY, UNCONDITIONALLY AND VOLUNTARILY, WITH AND UPON
      THE
      ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT
      TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
      OR IN
      ANY WAY RELATING TO THIS NOTE OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR
      BORROWER, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES,
      AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER,
      IN
      EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR
      OTHERWISE.

     

    Section
      4.6  Successors
      and Assigns.
      The
      terms and provisions hereof shall be binding upon and inure to the benefit
      of
      Borrower and Lender and their respective heirs, executors, legal
      representatives, successors, successors-in-title and assigns, whether by
      voluntary action of the parties, by operation of law or otherwise, and all
      other
      persons claiming by, through or under them. The terms “Borrower” and “Lender” as
      used hereunder shall be deemed to include their respective heirs, executors,
      legal representatives, successors, successors-in-title and assigns, whether
      by
      voluntary action of the parties, by operation of law or otherwise, and all
      other
      persons claiming by, through or under them. Borrower’s rights and obligations
      hereunder may not be assigned or otherwise transferred without the prior written
      consent of Lender.

     

    Section
      4.7  Controlling
      Agreement.
      In the
      event of any conflict between the provisions of this Note and the Loan
      Agreement, it is the intent of the parties hereto that the provisions of the
      Loan Agreement shall control. In the event of any conflict between the
      provisions of this Note and any of the other Loan Documents (other than the
      Loan
      Agreement), it is the intent of the parties hereto that the provisions of this
      Note shall control. The parties hereto acknowledge that they were represented
      by
      competent counsel in connection with the negotiation, drafting and execution
      of
      this Note and the other Loan Documents and that this Note and the other Loan
      Documents shall not be subject to the principle of construing their meaning
      against the party which drafted same.

     

    Section
      4.8  Notices.
      All
      notices or other communications required or permitted to be given pursuant
      to
      this Note shall be in writing and given as set forth in the Loan
      Agreement.

     

    Section
      4.9  Severability.
      If any
      provision of this Note or the application thereof to any person or circumstance
      shall, for any reason and to any extent, be invalid or unenforceable, then
      neither the remainder of this Note nor the application of such provision to
      other persons or circumstances nor the other instruments referred to herein
      shall be affected thereby, but rather shall be enforced to the greatest extent
      permitted by applicable law.

     

    Section
      4.10  Right
      of Setoff.
      In
      addition to all liens upon and rights of setoff against the money, securities,
      or other property of Borrower given to Lender that may exist under applicable
      law, Lender shall have and Borrower hereby grants to Lender a lien upon and
      a
      right of setoff against all money, securities, and other property of Borrower,
      now or hereafter in possession of or on deposit with Lender, whether held in
      a
      general or special account or deposit, for safe-keeping or otherwise, and every
      such lien and right of setoff may be exercised without demand upon or notice
      to
      Borrower. No lien or right of setoff shall be deemed to have been waived by
      any
      act or conduct on the part of Lender, or by any neglect to exercise such right
      of setoff or to enforce such lien, or by any delay in so doing, and every right
      of setoff and lien shall continue in full force and effect until such right
      of
      setoff or lien is specifically waived or released by an instrument in writing
      executed by Lender.

     

    Section
      4.11  Statement
      of Unpaid Balance.
      Intentionally left blank.

     

    Section
      4.12  Entire
      Agreement.
      THIS
      NOTE AND THE OTHER LOAN DOCUMENTS CONTAIN THE FINAL, ENTIRE AGREEMENT BETWEEN
      THE PARTIES HERETO RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND ALL
      PRIOR AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATIVE HERETO AND THERETO WHICH
      ARE
      NOT CONTAINED HEREIN OR THEREIN ARE SUPERSEDED AND TERMINATED HEREBY, AND THIS
      NOTE AND THE OTHER LOAN DOCUMENTS MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE
      OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
      PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES
      HERETO.

     

    Section
      4.13  Joint
      and Several Liability.
      Each
      maker, signer, surety and endorser hereof, including without limitation each
      Borrower, as well as all heirs, successors and legal representatives of said
      parties, shall be directly and primarily, jointly and severally, liable for
      the
      payment of all indebtedness hereunder. Lender may release or modify the
      obligations of any of the foregoing persons or entities, or guarantors hereof,
      in connection with this loan without affecting the obligations of the others.
      

     

    Section
      4.14  Use
      of
      Funds.
      Borrower hereby warrants, represents and covenants that (i) the loan evidenced
      by this Note is made to Borrower solely for the purpose of acquiring or carrying
      on a business or commercial enterprise, (ii) all proceeds of this Note shall
      be
      used only for business and commercial purposes, and (iii) no funds disbursed
      hereunder shall be used for personal, family, agricultural or household
      purposes.

     

    Section
      4.15  Relationship
      of the Parties.
      Notwithstanding any prior business or personal relationship between Borrower
      and
      Lender, or any officer, director or employee of Lender, that may exist or have
      existed, the relationship between Borrower and Lender is solely that of debtor
      and creditor, Lender has no fiduciary or other special relationship with
      Borrower, Borrower and Lender are not partners or joint venturers, and no term
      or condition of any of the Loan Documents shall be construed so as to deem
      the
      relationship between Borrower and Lender to be
      other
      than that of debtor and creditor.

     

    Section
      4.16  Amendment
      and Restatement.
      THIS
      NOTE
      AMENDS, RESTATES AND MODIFIES THAT CERTAIN REVOLVING PROMISSORY NOTE, DATED
      JUNE
      29, 2006, EXECUTED BY BORROWER PAYABLE TO THE ORDER OF LENDER IN THE PRINCIPAL
      AMOUNT OF $2,000,000.00 (THE “ORIGINAL
      NOTE”).
      THIS
      NOTE IS GIVEN IN AMENDMENT, RESTATEMENT, REPLACEMENT, MODIFICATION AND
      SUBSTITUTION OF THE ORIGINAL NOTE AND SHALL NOT EXTINGUISH THE INDEBTEDNESS
      EVIDENCED BY THE ORIGINAL NOTE, AND THE OBLIGATIONS THEREOF AND HEREOF SHALL
      BE
      PAID IN ACCORDANCE WITH THE TERMS AND CONDITIONS HEREIN.

     

    [Remainder
      of page intentionally left blank]

    

     

    

     

    IN
      WITNESS WHEREOF, Borrower, intending to be legally bound hereby, has duly
      executed this Note as of the day and year first written above.

     

    BORROWER:

    

    LIGHTING
      SCIENCE GROUP CORPORATION,

    a
      Delaware corporation

    

    

    By:
              

    Name:      

    Title:Exhibit 10.3

    Factoring
      Agreement

    

    This
      Agreement, dated January 5, 2007 (the "Effective Date"), is between Lighting
      Science Group Corporation with offices at 2100 McKinney Avenue, Suite 1555,
      Dallas, Texas 75201 (hereinafter called "Seller"), and Allied Capital Partners,
      L.P., with offices at 5151 Belt Line Rd., Suite 500, Dallas, Texas 75254
      (hereinafter called "Allied").

    

    The
      Seller desires to sell its Accounts to Allied on the following terms, conditions
      and provisions and, therefore, it is agreed as follows:

    

    	1.  	
            Definitions.
              As used in this Agreement and all other documents or instruments executed
              and delivered in connection with this
              Agreement:

          

    

    	1.1  	
            The
              capitalized words used herein (singular, plural or in any tense) shall
              have the same definitions as those set forth in the Uniform Commercial
              Code as adopted by the State of Texas, effective July 1,
              2001.

          

    

    	1.2  	
            "Without
              Recourse" shall mean the Seller of Accounts is not obligated to pay
              or
              repurchase an Account sold to Allied unless Seller breaches its warranties
              or representations concerning such Account. “With Recourse” or "Recourse"
              means Seller shall pay or repurchase Accounts acquired by Allied that
              are
              not paid according to the terms of the
              invoice.

          

    

    	1.3  	
            “Face
              Amount” shall mean the total amount of each Account, including taxes,
              delivery charges, etc.

          

    

    	1.4  	
            An
              Account shall be deemed to be "Disputed" if (i) the Account Debtor
              disputes an Account, including the amount owing, timely delivery of
              the
              goods, conformity of the goods or services to the order, or any other
              aspect of the sale giving rise to the Account for any reason whatsoever,
              even if the dispute has no merit, is in bad faith or is unreasonable,
              (ii)
              the Account contains mistakes, is not correct or was sent in error,
              or
              (iii) all of the following three conditions exist: (a) the Account
              is not
              paid within 90 days of its invoice date unless Factor agrees in writing
              to
              other terms, (b) the Account Debtor will not communicate the reason
              for
              non-payment to Allied, and (c) the Seller fails to produce, within
              such
              time period, good and sufficient evidence that nonpayment is due to
              the
              Account Debtor's financial inability to pay, the pendency of a bankruptcy
              proceeding by or against the Account Debtor or some reason other than
              a
              dispute of the type referred to above.

          

    

    	1.5  	
            “New
              Commitment” shall mean any written commitment Seller may receive during
              the Term of this Agreement from a 

          

    third
      party to provide working capital financing or factoring to Seller, which
      commitment Seller intends to accept.

    

    1.6
      “Discount” shall mean the sum of the following, subject to adjustment as set
      forth below: (i)1.75% of the Face Amount of each Account sold to Allied under
      this Agreement for the Initial Payment Period and (ii) .066% for each 1 day
      period (or portion thereof) that the Account remains unpaid after the Initial
      Payment Period (as hereinafter defined), until the earlier of (a) the date
      it is
      paid in full or repurchased by the Seller in accordance with this Agreement,
      or
      (b) if the Account is not one that the Seller is or becomes obligated to pay
      or
      repurchase, 150 days from the date of the invoice of the Account. In the event
      the Wall
      Street Journal
      Prime
      shall have increased or decreased on the first business day of each calendar
      quarter during the Term from its percentage as of the first business day of
      the
      previous calendar quarter, or as of the Effective Date if this term is applied
      on the first business day of the calendar quarter immediately following the
      Effective Date, the Discount shall increase or decrease
      proportionally.

    

    	1.7  	
            “Initial
              Payment Period” shall mean the period of 30 days from the date Allied has
              purchased an Account under this
              Agreement.

          

    

    	1.8  	
            “Purchase
              Price” shall mean the Face Amount of the Account less the
              Discount.

          

    

    	1.9  	
            “Wall
              Street Journal Prime”
              shall mean the “prime rate” quoted by The
              Wall Street Journal
              as
              the national average base rate on loans posted by at least 75% of the
              nation’s largest banks.

          

    

    	1.10  	
            “Seller’s
              Business” is manufacture and distribution of LED lighting
              applications.

          

    

    Other
      words used herein, which are capitalized, shall have the definitions prescribed
      herein. Variations of words defined herein shall have the same meaning as the
      defined terms.

    

    

    	2.  	
            Offer
              to Sell.
              Seller may, at its option, offer to sell, assign and transfer to Allied
              its existing and hereinafter arising, acquired or created Accounts.
              Any
              such offer shall be made on an assignment form prescribed by Allied
              (the
              "Schedule") sent to Allied at its above stated office and accompanied
              by a
              copy of (i) each invoice, (ii) the bill of lading, shipping documents
              or
              other proof of delivery, (iii) the contract or purchase order (or purchase
              order number which corresponds with the invoice), and (iv) such other
              documentation as may be requested by Allied for each Account listed
              on the
              Schedule.

          

    

    	3.  	
            Acceptance
              of Offer.
              Allied may accept Seller's offer to sell Accounts at its above stated
              office by either (i) paying the Purchase Price (less the Reserve, defined
              below) with respect to all Accounts appearing on the Schedule submitted
              to
              Allied, or (ii) by marking out the Accounts which appear on the Schedule
              and which Allied is unwilling to purchase, paying the Purchase Price
              (less
              the Reserve) for the remaining Accounts, and sending a copy of the
              Schedule to Seller which shows which Accounts were rejected. Allied
              shall
              not be obligated to purchase any Account that Seller offers to sell
              to
              Allied.

          

    

    

    	4.  	
            Reserve.
              Allied may, at its sole option and discretion, defer making payment
              to
              Seller of a portion of the Purchase Price payable for all Accounts
              purchased under this Agreement which have not been paid by the Account
              Debtor or paid or repurchased by Seller's payment of the Repurchase
              Price
              to Allied, up to an aggregate amount equal to18.25% of the Face Amount
              of
              all such Accounts (the "Reserve"). The Reserve shall not bear interest.
              The remaining portion of the Purchase Price payable for each Account
              purchased hereunder and which constitutes part of the Reserve is payable
              by Allied to Seller, on request of Seller (limited to one request per
              week), after the earlier of (i) the date the Account is paid to Allied,
              or
              (ii) 150 days from the date of the invoice of the Account, unless the
              Reserve is increased as herein provided or the Account is or becomes
              one
              that the Seller is obligated to repurchase or pay. An
              Account is not deemed paid to Allied unless the payment instrument
              is
              actually paid and, in the case of payments of more than $500,000, until
              after 5 days from receipt of the payment instrument excluding wire
              transfers. Notwithstanding
              the preceding limitation on the Reserve, in the event Seller breaches
              any
              representation, warranty, term, condition or provision of this Agreement,
              or if in Allied's reasonable judgment it is necessary to increase the
              Reserve to protect Allied from losses due to a Dispute of any Account,
              returns or other contingencies, or Seller's unsatisfied obligations
              and
              liabilities, Allied is entitled to increase the amount of the Reserve
              without Seller's consent. If any Account owned by Allied is not paid
              within 75 days of the date of the invoice related thereto, Allied may
              presume that the Account may be Disputed and may increase the Reserve
              by
              an amount equal to that portion of the Purchase Price previously paid
              by
              Allied plus the Discount unless Factor agrees in writing to other terms.
              In the event Allied notifies Seller that it has increased the Reserve,
              Seller shall immediately refund to Allied a portion of the Purchase
              Price
              previously paid by Allied for the purchase of Seller's Accounts which
              is
              equal to the increased amount of the Reserve. After the Term of this
              Agreement defined below has expired and Seller has paid its liabilities
              to
              Allied and fulfilled its obligations arising hereunder, Allied shall
              pay
              the balance of the Purchase Price payable for all Accounts purchased
              hereunder which constitutes Reserve (if any) to Seller. The purpose
              of the
              Reserve is to provide Allied with additional collateral to secure payment
              of Seller's liabilities and performance of Seller's obligations arising
              under this Agreement. Allied shall be entitled to offset or recoup
              from
              the Reserve the amount of any liabilities owing by Seller to Allied,
              whether presently existing or hereinafter arising, and whether or not
              arising under this Agreement, including, but not limited to, Seller's
              obligation to repurchase Accounts or to pay Accounts pursuant to the
              provisions of this Agreement. Seller acknowledges that the Reserve
              is not
              a cash deposit, but represents the balance of Allied's liability to
              Seller
              for payment of the Purchase Price, subject to its right of offset or
              recoupment and its security interest in the Reserve. Allied shall provide
              Seller with a monthly statement of accounting of transactions affecting
              the Reserve.

          

    

    	5.  	
            Seller’s
              Repurchase Obligation.
              In
              addition to all other rights of Allied hereunder, Allied may require
              that
              Seller repurchase, by payment of the Repurchase Price together with
              any
              other unpaid fees then owing to Allied, any Account that has been
              purchased by Allied: (i) for which Seller has breached its warranty
              or
              representation concerning such Account as set forth herein; or (ii)
              which
              was purchased by Allied With Recourse. If any Account purchased by
              Allied
              is one that Seller is or becomes obligated to pay or repurchase under
              this
              Agreement and is not paid within the Initial Payment Period, Allied,
              at
              Allied’s sole discretion, may elect to: (i) retain ownership of the
              Account until the earlier of either the date the Account is paid by
              the
              Account Debtor or 90 days after the invoice date of the Account unless
              Factor agrees in writing to other terms, or (ii) at any time require
              Seller to repurchase the Account at the Repurchase Price. The purchase
              price for any Account, which Seller is required to repurchase from
              Allied
              under this Agreement is the Face Amount of the Account (the “Repurchase
              Price”). If Seller ever becomes obligated to repurchase an Account from
              Allied, it shall not become the owner of such Account until it has
              paid
              the Repurchase Price to Allied.

          

    

    	6.  	
            Minimum
              Sales.
              If Seller fails to offer to sell and assign to Allied a monthly minimum
              of
              $0 in Accounts which are acceptable to Allied, Seller will pay to Allied
              the difference between the Discount on all Accounts purchased by Allied
              from Seller during the month and $0.

          

    

    	7.  	
            Recourse.
              Except as provided below, all Accounts sold and purchased hereunder
              are
              sold With Recourse on Seller. Allied and Seller may agree in writing
              that
              the Accounts of a specific Account Debtor or specific Accounts shall
              be
              purchased Without Recourse on Seller. 

          

    

    	8.  	
            Account
              Warranties.
              Seller warrants, represents, covenants and agrees that the presently
              existing and hereafter arising, acquired or created Accounts of Seller
              sold to Allied or in which Allied obtains a security interest: (i)
              are not
              and will not be Disputed; (ii) will be paid when due (unless the Account
              was purchased Without Recourse); (iii) are owned solely by Seller,
              which
              has the power to transfer the Accounts, and that its title to the Accounts
              is free of all adverse claims, liens, security interests and restrictions
              on transfer, encumbrance or pledge, except as created by this Agreement;
              (iv) set forth the correct and complete terms of sale, which have not
              been
              and will not be altered or amended; (v) are valid and owing, and all
              goods
              and services giving rise to the Accounts have been provided or delivered
              in accordance with Seller's agreement with the Account Debtor; (vi)
              will
              not be paid by a preference payment or fraudulent transfer (as defined
              by
              the Bankruptcy Code or the relevant law of any state); (vii) are not
              and
              shall not become subject to a defense or claim in recoupment or setoff
              that can be asserted against Allied; (viii) are not owing by Account
              Debtors that were subject to insolvency or bankruptcy proceedings
              concerning which Seller had any notice as of the date the Account is
              sold,
              or in which Seller owns an interest of any kind; (ix) shall be reflected
              on Seller's books and records as having been transferred, sold and
              conveyed to Allied if Allied purchases such Accounts; and (x) shall
              be
              evidenced by an invoice, and each invoice shall have printed on the
              face
              thereof a statement, approved by Allied, notifying the Account Debtor
              that
              the invoice has been sold and assigned to Allied and is payable only
              to
              Allied (or jointly to Allied and Seller) at the address designated
              in such
              notice and that, if the Account is paid, the Account will be paid by
              the
              Account Debtor in accordance with such instructions. The warranties
              and
              representations set forth herein shall apply as of the date each Account
              is sold hereunder and shall continue with respect to each Account until
              each such Account is paid. If Seller breaches any warranty, covenant
              or
              agreement set forth above, Seller shall repurchase the applicable Account
              for the Repurchase Price, or pay the Account; such payment or repurchase
              shall cure Seller’s default for breach of warranty with respect to such
              Account. All warranties and representations of Seller under this Agreement
              are continuing warranties and representations.

          

    

    

    	9.  	
            Other
              Warranties and Covenants of Seller.
              Seller further warrants, represents, covenants and agrees that as of
              the
              Effective Date and at all times during the Term of this Agreement:
              (i)
              Seller is and shall be able to pay its debts as they become due; (ii)
              Seller's (a) principal executive office is located in the State of
              Texas,
              (b) Seller’s Jurisdiction of Organization or state of incorporation or
              charter is the State of Delaware and (c) exact legal name is as set
              forth
              in the first paragraph of this Agreement, and Seller does not operate
              under any trade name or assumed name except: LSG, LSGC, Lighting Science
              Group; (iii) Allied is and shall remain Seller's sole factor, and Seller
              will not sell its Accounts to any other person, firm or corporation
              during
              the Term; (iv) after written notice by Allied to Seller and automatically,
              without notice, after Seller's default under this Agreement, Seller
              shall
              not, without the prior written consent of Allied in each instance,
              (a)
              grant any extension of time for payment of any Accounts or any other
              Collateral which includes a monetary obligation, (b) compromise or
              settle
              any Accounts or any such other Collateral for less than the full amount
              thereof, (c) release in whole or in part any Account Debtor or other
              person liable for payment of Accounts or any other such Collateral,
              or (d)
              grant any credits, discounts, allowances, deductions, return
              authorizations or the like with respect to any Accounts or any such
              other
              Collateral; (v) before sending any invoice to an Account Debtor with
              respect to an Account that has been sold to Allied, Seller shall mark
              the
              same with a notice of assignment as may be required by Allied; (vi)
              Seller
              maintains and shall continue to maintain complete and accurate business
              records of the type normally maintained by businesses similar to Seller,
              and all financial records, statements, books and other documents shall
              be
              made available for Allied's inspection and shall be true and accurate
              in
              all respects; (vii) the Accounts and Collateral are and shall at all
              times
              remain free and clear of liens, claims and encumbrances other than
              the
              security interests granted to Allied hereunder; (viii) the Accounts
              assigned to Allied by Seller shall become the sole property of Allied
              and
              Seller’s sale and assignment of accounts shall pass legal and equitable
              title to Allied free and clear of liens, claims and encumbrances; (ix)
              Seller insures and shall continue to insure its business and its assets
              in
              a manner customary for businesses of the type of Seller's business,
              and
              Seller will insure its inventory and goods in transit for their full
              value
              or the maximum attainable; (x) Seller will not sell, encumber or move
              the
              Collateral except in the ordinary course of its business, without the
              prior written consent of Allied; (xi) Seller is and shall remain in
              compliance with all federal, state and local tax laws, rules and
              regulations and shall furnish Allied with evidence thereof on demand;
              (xii) Seller will preserve its present legal formation and existence
              and
              not, in one transaction or series of related transactions, merge into
              or
              consolidate with any other entity, change the form of its legal existence,
              or sell all or substantially all of its assets; (xiii) Seller will
              not
              change the state where it is located, will not change the state where
              it
              is incorporated or organized and will not change its organizational
              documents, and will not change its name without providing Allied with
              at
              least 30 days prior written notice; and, (xiv)
              Seller shall from time to time realize sales or income from other business
              activity; however, Allied will not factor any of Seller’s other business
              activity other than those business activities set forth in Paragraph
              1.10
              above.
              Seller also agrees that, if an Account purchased by Allied authorizes
              the
              Account Debtor to discount the Face Amount of the Account for prompt
              payment, the Seller shall pay to Allied an amount equal to the discount
              taken by the Account Debtor (even if not properly taken) and Allied
              is
              authorized to offset such discount against the Reserve. All warranties
              and
              representations of Seller under this Agreement are continuing warranties
              and representations. 

          

    

    	10.  	
            Notice
              to Allied.
              Seller shall immediately notify Allied of (i) a Dispute of any Account
              sold or encumbered under this Agreement, (ii) any other breach of warranty
              or default in Seller's covenants and agreements set forth herein, (iii)
              Seller’s discovery of evidence of Insolvency of an Account Debtor, and
              (iv) the filing and service of a lawsuit or adversary proceeding related
              to an Account purchased by Allied or the payment related thereto
              (including, but not limited to, preference or fraudulent transfer
              litigation), (v) any claim of a lien in the Collateral of Allied
              (including federal tax liens), (vi) any change in controlling ownership
              of
              Seller, and (vii) Seller’s failure to pay any tax it may owe at any time
              for any reason, when due.

          

    

    	11.  	
            Security
              Interest in Collateral.
              To secure Seller’s payment to Allied of all amounts owing to Allied
              hereunder or damages arising due to Seller’s breach of the terms,
              warranties, representations, or conditions of this Agreement or any
              other
              agreement by and between Allied and Seller, whether now or hereafter
              owing
              to Allied, Seller grants to Allied a Security Interest in all of its
              presently existing and hereafter arising, acquired or created: All
              amounts
              owing to Seller under this Factoring Agreement including the Purchase
              Price and Reserve and all proceeds thereof, Accounts (including Accounts
              that are proceeds of Inventory) and the following property of Seller
              (but
              only to the extent it constitutes proceeds, payment, or secures or
              assures
              payment of Accounts, or is returned goods): Chattel Paper, Supporting
              Obligations, Instruments, Inventory that is goods returned by an Account
              Debtor, Documents and Letter-of Credit Rights. Seller agrees as follows
              with respect to the aforementioned Collateral: (i) Allied shall have
              the
              right at any time and in its sole discretion to enforce Seller's rights
              against the Account Debtors and obligors; (ii) Seller will not pledge,
              hypothecate or encumber the Collateral during the Term of this Agreement
              and while it is indebted or otherwise obligated to Allied; (iii) Allied
              may exercise all rights and remedies of an unpaid seller with respect
              to
              Accounts, Supporting Obligations, and Chattel Paper constituting
              Collateral hereunder, including the right of replevin, reclamation
              and
              stoppage in transit; (iv) Seller has the risk of loss of the Collateral;
              (v) Allied shall have no duty to collect the Collateral or preserve
              or
              enforce any rights relating to the Collateral; and (vi) Factor may,
              at its
              sole discretion, be willing to subordinate its first lien position
              in
              certain accounts that Factor has declined to purchase. Any such release
              must be in writing and signed by Allied to be
              effective.

          

    

    	12.  	
            Inspection
              of Records.
              Any agent of Allied may audit, check, make abstracts from or copies
              of the
              books, records, receipts, correspondence, memoranda, and other papers
              or
              data relating to the Collateral, Accounts purchased under this Agreement,
              the obligations of Seller to Allied and any other transactions between
              Seller and Allied, or generally audit all of Seller's books and records
              at
              Seller's place of business upon Allied's demand therefore with 24-hour
              notice provided to Seller. Seller shall at all times maintain a complete
              set of books and records containing up-to-date posting of all of its
              cash
              and accrual transactions of any nature. 

          

    

    	13.  	
            Property
              of Allied/Proceeds and Returned Goods Held in Trust.
              After Allied has purchased an Account from Seller, (i) the Account
              and all
              proceeds thereof shall become the sole and absolute property of Allied,
              (ii) Allied may at any time in its sole discretion notify all Account
              Debtors of Accounts purchased by Allied that such Accounts have been
              sold
              and assigned to Allied and are payable only to Allied at the address
              provided by Allied, (iii) Seller shall immediately make proper entries
              on
              its books and records disclosing the absolute sale of such Accounts
              to
              Allied, (iv) Seller shall not hinder, delay or interfere with payment
              of
              Accounts and shall cooperate with and assist Allied in connection with
              Allied's handling, collection or other dealings with the Accounts and
              Account Debtors, including, without limitation, assisting Allied in
              obtaining written confirmation, statements or agreements from Account
              Debtors which specify or confirm any information requested by Allied
              with
              respect to the Accounts, and (v) Seller shall hold any check, commercial
              paper, notes, cash or other forms of payment of any Account sold to
              Allied
              which may come into Seller's possession or under its control (even
              if such
              payment is payable to Seller) in
              trust
              for the benefit of Allied and shall immediately turn over and deliver
              to
              Allied all such payments, in kind, and in the exact form received.
              Seller
              shall endorse any instrument or other form of payment which is payable
              to
              Seller, but which is paid on an Account sold to Allied hereunder. In
              the
              event of the return or non-acceptance, in whole or in part, of property,
              the sale of which resulted in Accounts which were sold and assigned
              to
              Allied, the Seller shall hold such property in
              trust
              for Allied, give to Allied immediate notice of such return or
              non-acceptance, immediately turn over such property to the custody
              and
              control of Allied, and legibly mark such merchandise as the property
              of
              Allied; thereafter, upon demand, Seller shall repurchase such property
              from and pay to Allied the invoice price thereof, and upon such payment
              the Seller shall be entitled to the redelivery of such property. If
              Seller
              fails to make such purchase and payment immediately upon demand, it
              shall
              be in default hereunder and Allied shall be entitled (in addition to
              its
              other remedies) to sell such property at public or private sale and
              to
              charge Seller's account with the difference between the invoice price
              of
              such property and the amount realized upon the sale, plus all charges,
              fees and commissions upon such sale. Allied may become a bidder and
              purchaser at any such sale.

          

    

    

    	14.  	
            Breach
              of Trust Fee.
              Seller's strict adherence to the provisions of Paragraph 13 is essential
              in order for Allied to purchase Seller's Accounts at the Discount and
              on
              the other terms set forth in this Agreement. Seller agrees that the
              provisions of such paragraph are of the essence of this Agreement and
              agrees to implement policies and procedures to ensure its consistent
              and
              prompt performance of its obligations hereunder. In the event Seller
              breaches its obligations under such paragraph for reasons other than
              excusable neglect (which shall be determined solely by Allied in its
              sole
              judgment and discretion), (i) Allied may immediately terminate this
              Agreement and charge the Termination Fee, as defined in Paragraph 17
              below, (ii) Seller shall pay to Allied a fee equal to 15% of the amount
              of
              any payment or other property which was received by Seller as property
              of
              Allied in addition to all other amounts owing to Allied, and (iii)
              Seller,
              at Allied's option, shall immediately repurchase all Accounts acquired
              by
              Allied which are then owing by the Account Debtors by payment of the
              Repurchase Price to Allied, even if such Accounts were purchased Without
              Recourse.

          

    

    	15.  	
            Power
              of Attorney.
              Seller makes, constitutes and appoints Allied as Seller's true and
              lawful
              attorney-in-fact with power of substitution and with power and authority
              to: (i) endorse the name of Seller or of any of its officers or agents
              upon any notes, checks, drafts, money orders, or other instruments
              of
              payment; (ii) sign and endorse the name of Seller or any of its agents
              upon any invoice, freight or express bill, bill of lading, storage
              or
              warehouse receipt, drafts against Account Debtors, assignments,
              verifications, demands under letters of credit and notices in connection
              with Accounts acquired by Allied or which are Collateral under this
              Agreement, and any instrument or document relating thereto or to Seller's
              rights therein; (iii) execute any agreement compromising and settling
              any
              Dispute or collection of any Account owned by Allied or owned by Seller,
              if Seller is in default hereunder, on terms and conditions acceptable
              to
              Allied in its sole discretion; (iv) bring suit in the name of Seller
              or
              Allied to collect any Account; (v) amend the terms of any Account owned
              by
              Allied or owned by Seller, if Seller is in default hereunder; (vi)
              execute
              any financing statements (including amendments) to perfect Allied's
              Security Interest granted by this Agreement; (vii) execute and file
              in the
              name of Seller or Allied, or both, mechanics' liens and all related
              notices and claims under any payment bond, in connection with goods
              or
              services sold by Seller for the improvement of realty; (viii) notify
              any
              Account Debtor obligated with respect to any Account purchased by Allied
              that the underlying Account has been assigned to Allied by Seller and
              that
              payment thereof is to be made to the order of and directly and solely
              to
              Allied; (ix) communicate directly with Account Debtors to verify the
              amount and validity of any Account and to collect payment; (x) if Allied
              (in its sole and absolute discretion) declares Seller to be in default
              hereunder, give written notice to such office and officials of the
              United
              States Post Office to effect such change or changes of address that
              all
              mail addressed to Seller may be delivered directly to Allied; and (xi)
              exercise reclamation rights of Seller and to file a claim in a bankruptcy
              proceeding of an Account Debtor (which Seller requests Allied to do).
              Seller's attorney-in-fact is hereby granted full power to do all necessary
              things to accomplish the above as fully and effectively as could Seller.
              Seller ratifies all that the attorney-in-fact shall lawfully do or
              cause
              to be done by virtue hereof. The power of attorney shall be irrevocable
              for the Term of this Agreement and all transactions
              hereunder.

          

    

    

    	16.  	
            Default.
              Except as specifically provided herein, the following events shall
              constitute a default under this Agreement: (i) Seller fails to pay
              any
              amounts owing hereunder or fails to fulfill its other obligations under
              this Agreement or fails to make payments or fulfill obligations under
              any
              other agreements that it may have with Allied, (ii) Seller's warranties
              or
              representations set forth herein prove to be untrue or false in any
              respect, (iii) Seller or any guarantor of the payment and performance
              of
              obligations hereunder becomes subject to any debtor-relief proceedings,
              (iv) any such guarantor fails to perform or observe any of such
              guarantor's obligations to Allied or to notify Allied of its intention
              to
              rescind, modify, terminate, or revoke any guaranty, or any such guaranty
              ceases to be in full force and effect for any reason whatsoever, or
              (v)
              Allied, for any reason, in good faith, deems itself insecure with respect
              to the prospect of repayment or performance of the obligations of Seller.
              If Client does not pay or perform its liabilities or obligations hereunder
              or any other event of default exists (in Allied’s sole determination),
              Allied may, without notice (except as required by Texas law), (i) enforce
              and foreclose its Security Interest in the Collateral in accordance
              with
              its rights under the Texas Uniform Commercial Code, (ii) notify any
              Account Debtor to make payment of any Account directly to Allied,
              regardless of whether such Accounts have been purchased by Allied or
              Allied has a Security Interest therein, (iii) initiate electronic debit
              or
              credit entries through the ACH system to Seller’s bank accounts or other
              deposit account maintained by Seller, wherever located, to collect
              all
              amounts owing to Allied by Seller, and (iv) exercise any one or all
              of its
              other rights and remedies set forth in this
              Agreement.

          

    

    	17.  	
            Term.
              Unless sooner terminated by either of the parties hereto, the initial
              Term
              of this Agreement shall commence on the Effective Date and continue
              for
              twelve months thereafter, and this Agreement shall automatically renew
              for
              additional twelve-month renewal Terms at the end of the initial Term
              and
              each renewal Term unless either party hereto gives written notice to
              the
              other at least 30 days prior to the end of the original Term or any
              renewal Term that the Term is not renewed. (Such initial Term and renewal
              Term is the "Term.") Allied may terminate this Agreement at any time
              (i)
              if the Seller is in default under this Agreement, by giving written
              notice
              to Seller, or (ii) by giving 30 days advance written notice to Seller.
              Provided Seller is not in default hereunder, Seller may terminate this
              Agreement at any time by giving 90
              days prior written notice to Allied, accompanied by the Termination
              Fee. A
              fee of 4% of $1,000,000 (the facility amount in Buyer’s proposal, accepted
              by Seller, dated December 14, 2006) shall be paid by Seller to Allied
              if
              this Agreement is terminated by Seller (except as hereinafter provided)
              or
              if this Agreement is terminated by Allied due to Seller's breach of
              any
              warranty, term, condition or provision of this Agreement (the "Termination
              Fee"); provided, however, the Termination Fee is waived if Seller is
              not
              in default and obtains a bank loan, secured by its Accounts, and pays
              all
              of its obligations to Allied from the loan proceeds or if Allied is
              paid
              off from the proceeds of additional equity offerings. The Termination
              Fee
              is not a penalty, but is a reasonable estimate of the damages Allied
              is
              likely to suffer as a result of termination, and constitutes agreed
              liquidated damages. All obligations hereunder shall continue in full
              force
              and effect with respect to all transactions entered into and obligations,
              whether absolute or contingent, existing or incurred before the end
              of the
              Term.

          

    

    	18.  	
            Right
              of First Offer.
              Seller hereby agrees that in the event Seller receives a New Commitment,
              Seller will (i) advise Allied in writing of the identity of the offeror
              of
              the New Commitment and the complete terms of the New Commitment, and
              (ii)
              accept Allied’s commitment if Allied elects, in its sole discretion, to
              offer to modify this Agreement to contain the same terms as the New
              Commitment.

          

    

    	19.  	
            Miscellaneous.
              The parties agree to the following additional
              terms:

          

    

    19.1
      This
      Agreement shall be binding upon and inure to the benefit of both parties and
      their legal representatives, successors and assigns.

    

    19.2
      This
      Agreement shall be construed and enforced in accordance with and governed by
      the
      laws of the State of Texas. Venue for the institution of any legal proceeding
      shall be in Dallas County, Texas. Each sale of an Account to Allied under this
      Agreement is an “Account Purchase Transaction” as defined by section 306.001(1)
      of the Texas Finance Code and is subject to such subtitle of the Texas Finance
      Code.

    

    19.3
      If
      any term of this Agreement is held to be illegal, invalid, or unenforceable,
      such determination shall not affect the validity of the remaining terms. Time
      is
      of the essence of this Agreement.

    

    19.4
      Seller authorizes Allied to file a Financing Statement describing the above
      described Collateral (and all amendments thereto and renewals thereof) any
      place
      Allied may deem necessary or appropriate, with or without the signature of
      Seller thereon. 

    

    19.5
      All
      notices under this Agreement shall be in writing and delivered personally,
      faxed
      or mailed by certified mail, return receipt requested, postage prepaid. The
      parties shall use the addresses or fax number set forth below for all notices,
      unless the party giving the notice has received written notice from the
      recipient of a change of address or fax number at least 10 days prior to the
      notice given under this Agreement.

    

    Allied
      Capital Partners, L.P.

    PO
      Box 676649

    Dallas,
      TX 75267-6649

    Hand
      Delivery or overnight delivery only:

    5151
      Beltline Road, Ste. 500

    Dallas,
      TX 75254

    Facsimile:
      972-404-0060

    

    Seller:

    Lighting
      Science Group Corporation

    2100
      McKinney Avenue, Suite 1555

    Dallas,
      TX 75201

    Facsimile:
      214-382-3631

    

    19.6
      Seller waives all notices of default, opportunity to cure, presentment, demand,
      protest, and notice of dishonor.

    

    19.7
      This
      Agreement constitutes the entire understanding between the parties. It may
      not
      be changed or terminated except in an instrument signed by both
      parties.

    

    19.8
      Allied shall not be deemed to have waived any of its rights and remedies unless
      the waiver is in writing and signed by Allied. A waiver by Allied of a right
      or
      remedy under this Agreement on one occasion shall not constitute a waiver of
      the
      right or remedy on any subsequent occasion.

    

    19.9
      Each
      statement of Seller’s account which Allied sends to Seller shall be deemed
      acceptable and binding upon Seller unless Allied receives written notice from
      Seller stating in detail and with particularity any exception thereto within
      30
      days after the date thereof.

    

    19.10
      Seller shall reimburse Allied for the following costs incurred by Allied in
      the
      course of performing its functions under this Agreement: credit research,
      certified mail postage, UCC searches and UCC filing fees, and wire transfer
      fees. The cost of credit reports and all other costs shall be reimbursed at
      Allied's actual cost. Seller also agrees to reimburse Allied the actual amount
      of costs and expenses, including reasonable attorney's fees, incurred by Allied
      in protecting, preserving or enforcing any lien, security interest, title,
      Collateral or other right granted by Seller to Allied or arising under
      applicable law, whether or not suit is brought, including but not limited to
      the
      defense of fraudulent transfer and preference claims, enforcement of this
      Agreement or recovery of any damages incurred by Allied as a result of the
      Seller's default. Seller shall also reimburse Allied for its actual costs in
      assuring Seller’s compliance with this Agreement, such as the cost of the
      federal tax lien search, UCC searches and Secretary of State Confirmations
      and
      certificates.

    

    19.11
      Seller agrees to execute any further documents and to take any further actions
      reasonably requested by Allied to evidence or perfect the Security Interest
      granted herein or the assignments of Accounts pursuant hereto, or to give effect
      to any of the rights granted to Allied under this Agreement. 

    

    19.12
      Seller has signed this agreement and submits the Agreement to Allied for
      acceptance at Allied’s offices in Dallas, Dallas County, Texas. Seller and
      Allied shall make all payments and perform all other obligations arising
      hereunder at Dallas County, Texas, and this Agreement is made and entered into
      at Dallas County, Texas. Dallas County, Texas, shall be the venue for any
      litigation arising under this Agreement. Client acknowledges that Allied Capital
      Partners, L.P. is the assumed name of Allied Capital Services, L.P., a Texas
      Limited Partnership, and that Allied Capital Services, L.P. also does business
      under the assumed name, TCC. All contracts, UCC filings and this factoring
      agreement shall only be binding upon and inure to the benefit of Allied Capital
      Services, L.P., if executed or filed in the name of Allied Capital Services,
      L.P. or in one of its aforementioned assumed names. In the event it becomes
      necessary for Allied to obtain a temporary restraining order or other injunctive
      relief in order to enforce the provisions of this Agreement, Seller hereby
      agrees to such an order, and the parties agree that the Court may require a
      bond
      which does not exceed the sum of $1,000.00 as a condition therefor, and such
      bond shall be reasonable and adequate in all respects and under all
      circumstances.

    

    19.13
      All
      amounts payable to Allied by Seller under this Agreement are payable on demand
      by Allied, except amounts payable under Paragraph 13 of this Agreement, for
      which no demand is required; Allied is authorized, at its sole option, to
      collect any payments owing by Seller to Allied under this Agreement by debit,
      offset or recoupment from or against the Reserve. In the event Seller is in
      default under any of the terms of this Agreement, Allied may, at its option,
      require Seller to repurchase all unpaid Accounts that were purchased by Allied,
      even if such Accounts were purchased Without Recourse. Interest shall accrue
      on
      all sums owing to Allied by Seller at 17% per annum, but not to exceed the
      highest rate permitted by law, as amended from time to time. The determination
      of the highest rate permitted by applicable Texas law shall be made by using
      the
      weekly ceiling, as applicable and as limited by statutorily fixed interest
      rate
      ceilings (the “Maximum Rate”). In no event shall the amount paid, or agreed to
      be paid to or charged by Allied for the use, forbearance, of detention of money
      or for the payment of performance of any covenant or obligation contained herein
      exceed the Maximum Rate, and if Allied receives interest which otherwise would
      cause the amount paid, charged, collected or demanded to exceed the Maximum
      Rate, and Allied receives interest which otherwise would exceed the Maximum
      Rate, such amount which would be excessive interest shall be applied to the
      reduction of the principal indebtedness and the balance, if any, shall be
      refunded the Seller. 

    

    

    Seller:

    Lighting
      Science Group Corporation

    

    By:      

    Name: Stephen
      A. Hamilton

    Title: Chief
      Financial Officer

    Date: ____________________________

    

    Accepted
      at Dallas, Dallas County, Texas by Allied Capital Partners, L.P. on the ________
      day of ________________________, 2007.

    

    ALLIED
      CAPITAL PARTNERS, L.P.

    

    By: ________________________________________

    Name: Clay
      Tramel

    Title: Chief
      Executive Officer

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