DEBT CONVERSION AGREEMENT
THIS
CONVERSION AGREEMENT (this “Agreement”) is dated as of April 12, 2005 (the
“Effective Date”) by and between Match, Inc., a Texas corporation (“Match”), Xxx
Xxxx, a natural person and resident of the state of Texas (“Xxxx”), and Lighting
Science Group Corporation (“LSGC”), a Delaware Corporation (the “Corporation”).
Match, Xxxx and the Corporation are sometimes referred to collectively as the
Parties.
WHEREAS,
on February 1, 1999, the Corporation executed and delivered to Match, a
promissory note for $1,000,000.00 (the “Promissory Note”) pursuant to the terms
of that certain Credit Agreement by and between Match and a predecessor entity
of the Corporation (the “Credit Agreement”);
WHEREAS,
subsequently the parties entered into the 1st
Amendment the Credit Agreement dated April 29, 1999 (the “1st
Amendment”) whereupon the Allonge to the Promissory Note to Match (the
“Allonge”) was executed and which increased the principal amount under the
Promissory Note to $2,000,000.00 (the Promissory Note, the Credit Agreement, the
1st
Amendment and the Allonge are collectively referred to as the “Loan Documents.”
The Promissory Note and the Allonge are collectively referred to as the
“Promissory Note”);
WHEREAS,
a predecessor entity to the Corporation declared bankruptcy and the bankruptcy
court approved a plan of reorganization on September 16, 2003, such approved
plan of reorganization becoming effective on September 26, 2003 and preserving
Match’s rights under the Promissory Note and other Loan Documents;
WHEREAS,
the current debt outstanding to the Company under the terms of the Promissory
Note totals approximately $2,192,524.35 in principle and accrued
interest;
WHEREAS,
Xxx Xxxx, the current President and CEO of the Corporation and a member of its
Board of Directors is the controlling shareholder and senior officer of
Match;
WHEREAS,
Xxxx and Match have agreed to recapitalize the Corporation by converting the
amounts due under the Promissory Note into the common stock of the Corporation,
$.001 par value (the “Common Stock”) of the Corporation (the “Conversion”) prior
to the closing of an anticipated equity financing;
WHEREAS,
the Board of Directors of the Corporation feel that the Conversion is in the
best interests of the Corporation;
WHEREAS,
the Board of Directors has been advised by Company’s investment advisor that
conversion of the debt is necessary in order to attract new equity capital into
the Company on favorable market terms;
WHEREAS,
the Corporation has authorized sufficient Common Stock for issuance with regards
to the Conversion;
WHEREAS,
Xxxx and Match desire to exchange the amounts due under the Promissory Note into
Common Stock all as set forth below;
WHEREAS,
the terms and conditions of this transaction have been negotiated with and
approved by all of the non-interested directors of the Company; and
WHEREAS,
Xxxx, Match and the Corporation desire to enter into this Agreement to provide
the terms and conditions upon which the Promissory Note will be converted into
the Common Stock;
NOW
THEREFORE, in exchange for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Xxxx, Match and the Corporation
agree as follows:
1. Conversion.
(a) As of the
Effective Date, Match hereby elects to convert $2,192,524.35 which represents
the principal and interest owed by the Corporation to Match under the Promissory
Note and the Allonge (the Promissory Note and Allonge are attached as Exhibits
“A” and “B” into a number of shares of the Common Stock according to the
Conversion Formula (defined below).
2. Representations,
Warranties and Covenants.
(a) Of the
Corporation. The
Corporation hereby makes the following representations, warranties and covenants
in favor of Match:
(i) Authorized
Shares. The
Common Stock identified in Section 1 of this Agreement constitute duly
authorized common stock of the Corporation, the issuance of which to Match has
been duly authorized by the board of directors of the Corporation.
(ii) Validly
Issued. Upon
issuance of the Common Stock identified in Section 1 of this Agreement and
receipt by the Corporation of the Promissory Note representing the amounts owed
to Match by Corporation pursuant to the terms of the Loan Documents, properly
endorsed and accompanied by all instruments necessary to effect the transfer of
such Promissory Note to the Corporation, such Common Stock shall be validly
issued and outstanding, fully paid, nonassessable and free and clear of all
liens and encumbrances arising through the actions of the Corporation or its
directors, officers, employees or agents.
(iii) Issuance
of Common Stock. Upon
the Corporation’s receipt of the Promissory Note and the duly executed
counterparts of this Agreement from Match, the Corporation shall issue the
Common Stock specified in Section 1 of this Agreement to the party identified in
Section 1 of this Agreement as electing to receive such Common
Stock.
(b) Of
Match. Match
(the “Note Holder”) hereby makes the following representations, warranties and
covenants with respect to such Note Holder in favor of the
Corporation.
(i) Note
Holder. Such
Note Holder is the owner of the Promissory Note, and owns such Promissory Note
free and clear of all liens, claims and encumbrances.
(ii) Authorization. Such
Note Holder has full power and authority to enter into this Agreement, and this
Agreement, when executed and delivered, will constitute a valid and legally
binding obligation of such Note Holder. The individual signing this Agreement on
behalf of such Note Holder is duly authorized to execute this Agreement for and
on behalf of such Note Holder. All organizational action required to be taken to
authorize (i) the execution and delivery of this Agreement by the undersigned
individual for and on behalf of such Note Holder and (ii) the performance by
such Note Holder of such Note Holder's obligations hereunder has been
taken.
(iii) To Be
Purchased Entirely For Own Account. This
Agreement is made with such Note Holder in reliance upon such Note Holder’s
representation to the Corporation, which, by such Note Holder’s execution of
this Agreement, such Note Holder hereby confirms, that the Common Stock to be
purchased by such Note Holder and any securities issuable upon conversion
thereof (such Common Stock and securities issuable upon conversion thereof
being, collectively, the “Securities”) are being and will be acquired for
investment for such Note Holder’s own account, not as nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that neither
such Note Holder nor any of its officers, members, managers or representatives
with the authority, responsibility or power to make a decision with regard to
the purchase or sale of the Securities or any portion thereof (collectively,
such “Note Holder’s Representatives”) has any present intention of selling,
granting any participation in or otherwise distributing the same. Such Note
Holder and such Note Holder’s Representatives are familiar with the phrase
“acquired for investment and not with a view to distribution” as it relates to
the Securities Act of 1933, as amended (the “Securities Act”) and state
securities laws and the special meaning given to such term by the Securities and
Exchange Commission (the “SEC”). By executing this Agreement, such Note Holder
further represents that such Note Holder does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.
(iv) Reliance
Upon Note Holder’s Representations and Warranties. Such
Note Holder and such Note Holder’s Representatives understand that the
Securities are not, and upon issuance of any of the Securities on conversion of
the Common Stock, at the time of issuance may not be, registered under the
Securities Act on the ground that the sale provided for in this Agreement and
the issuance of securities hereunder is exempt from registration under the
Securities Act, and that the Corporation’s reliance on such exemption is
predicated on such Note Holder’s representations and warranties set forth
herein.
(v) Receipt
of Information. Such
Note Holder and such Note Holder’s Representatives have received all the
information they consider necessary or appropriate for deciding whether to
purchase the Securities and each portion thereof. Such Note Holder further
represents that such Note Holder and such Note Holder's Representatives have had
an opportunity to ask questions and receive answers from the Corporation
regarding the terms and conditions of the offering of the Securities and each
portion thereof and the business, properties, prospects and financial condition
of the Corporation and to obtain additional information necessary to verify the
accuracy of any information furnished to such Note Holder or such Note Holder’s
Representatives or to which such Note Holder or such Note Holder’s
Representatives had access.
(vi) Investment
Experience. Such
Note Holder represents that it and such Note Holder’s Representatives are
experienced in evaluating and investment in private placement transactions of
securities of companies in a similar stage of development as the Corporation and
acknowledges that such Note Holder can bear the economic risk of such Note
Holder’s investment and that such Note Holder’s Representatives have such
knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risks of the investment in the
Securities.
(vii) Accredited
Investor. Such
Note Holder is an Accredited Investor, as such term is defined in Regulation D
promulgated under the Securities Act.
(viii) Restricted
Securities. Such
Note Holder and each of such Note Holder’s Representatives understands that
neither the Securities nor any portion thereof may be sold, transferred or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering the Securities (or such portion thereof) or an available
exemption from registration under the Securities Act, the Securities and each
portion thereof must be held indefinitely. Such Note Holder and each of such
Note Holder’s Representatives realizes that the Securities and each portion
thereof are unlikely to qualify for sale or other disposition under Rule 144
issued by the SEC. Furthermore, such Note Holder and each of such Note Holder’s
Representatives is aware that neither the Securities nor any portion thereof may
be sold pursuant to Rule 144 promulgated under the Securities Act unless all of
the conditions of that Rule are met. Among the conditions for use of Rule 144
may be the availability of current information to the public about the
Corporation. Such information is not now available and the Corporation has no
present plans to make such information available.
(ix) Legends. To the
extent applicable, each certificate or other document evidencing any of the
Securities shall be endorsed with the legends substantially in the form set
forth below:
The
following legend under the Securities Act:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS LIGHTING
SCIENCE GROUP CORPORATION. (THE “CORPORATION”) HAS RECEIVED AN OPINION OF
COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
Also the
Corporation shall endorse such certificates with each legend imposed or required
by the Corporation's Articles of Organization or applicable state securities
laws.
3. Piggyback
Registration Rights. To the
extent that the any class of Shareholders of the Corporation are allowed to sell
any of the Corporation’s Common Stock (the “Selling Shareholders”) or other
securities into which such equity interests may convert (in either case, a
“Corporation Security”) in a registered offering, the holders of the Common
Stock shall have the right to convert its Common Stock (or other securities into
which the Common Stock may convert) into the class of Corporation securities
being sold and sell in the same registered offering, on the same terms as the
Selling Shareholders, the same percentage of the aggregate of Corporation
Securities held by such Common Stock Shareholders as the Selling Shareholders
are selling of the Corporation Securities being sold. Each Common Stock
Shareholder’s right to sell in the foregoing shall be in proportion to the
percentage of all Corporation Securities held by all Common Stock Shareholders
that such individual Common Stock Shareholder holds.
4. Definitions:
(a) “Commission”
shall mean the U.S. Securities and Exchange Commission.
(b) The
Conversion Formula is as follows:
|
Promissory Note Amount
Conversion
Price |
= |
shares
of Common Stock to be converted |
(c) “Conversion
Price” shall mean $1.725 per share of Common Stock.
(d) “Person” shall
mean any natural person, trust,
corporation,
partnership, limited partnership, limited liability company, unincorporated
association or other entity.
(e) “Securities
Act” shall mean the Securities Act of 1933, as amended.
5. Governing
Law. This
Agreement shall be governed by the laws of the State of Texas, without reference
to the choice of laws rules of such state.
6. Attorneys’
Fees. In the
event any party hereto fails to perform any of its obligations under this
Agreement or the transactions contemplated hereby or in the event a dispute
arises concerning the meaning or interpretation of any provision of this
Agreement, the defaulting party or the party not prevailing in such dispute, as
the case may be, shall pay any and all reasonable costs and expenses incurred by
the other party in enforcing or establishing its rights hereunder, including
court costs and reasonable attorneys’ fees.
7. Successors
and Assigns. This
Agreement shall be binding upon each party hereto and its respective successors
and assigns.
8. Severability. If any
term of provision of this Agreement or any application thereof shall be held
invalid or unenforceable, the remainder of this Agreement and any other
application of such term or provision shall not be affected
thereby.
9. Entire
Agreement. This
Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof, and may not be changed or modified except by an agreement
in writing signed by the parties hereto. The Corporation and Match hereby agree
that all prior or contemporaneous oral understandings, agreements or
negotiations relative to the subject matter hereof are merged into and revoked
by this Agreement.
10. Interpretation. All
provisions of this Agreement shall be interpreted according to their fair
meaning and shall not be strictly construed against any party.
11. Counterparts;
Facsimile Signature. This
Agreement may be executed in one or more counterparts, each of which shall be an
original, but all of which, taken together, shall constitute one agreement. An
original signature or copy thereof transmitted by facsimile shall constitute an
original signature for purposes of this Agreement.
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Effective Date.
COMPANY
LIGHTING
SCIENCE GROUP CORPORATION, a Delaware corporation
By:____/s/ J.
Michael Poss_________
Name: J.
Xxxxxxx Xxxx
Title:
Chief Financial Officer
MATCH
MATCH
INC., a Texas corporation
By:
____/s/
Xxx Lusk______________
Name: Xxx
Xxxx
Title:
Representative of Match, Inc.
XXX
XXXX
_______/s/
Xxx Lusk_____________
