-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UkZRbtRTIeqKsXThFbDfN8xtCTQ46UayIV+vh6NwTN4/+Dvi+xIRC0Hlr0O3Gslc 1GUx9coPakTcuxuRFXRW3Q== 0000930413-07-007915.txt : 20071015 0000930413-07-007915.hdr.sgml : 20071015 20071015163851 ACCESSION NUMBER: 0000930413-07-007915 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20071015 DATE AS OF CHANGE: 20071015 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: LIGHTING SCIENCE GROUP CORP CENTRAL INDEX KEY: 0000866970 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 232596710 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-42472 FILM NUMBER: 071172267 BUSINESS ADDRESS: STREET 1: 2100 MCKINNEY AVENUE STREET 2: SUITE 1555 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2143823630 MAIL ADDRESS: STREET 1: 2100 MCKINNEY AVENUE STREET 2: SUITE 1555 CITY: DALLAS STATE: TX ZIP: 75201 FORMER COMPANY: FORMER CONFORMED NAME: PHOENIX GROUP CORP DATE OF NAME CHANGE: 20001130 FORMER COMPANY: FORMER CONFORMED NAME: PHOENIX HEATHCARE CORP DATE OF NAME CHANGE: 19990519 FORMER COMPANY: FORMER CONFORMED NAME: IATROS HEALTH NETWORK INC DATE OF NAME CHANGE: 19941221 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LED Holdings, LLC CENTRAL INDEX KEY: 0001414298 IRS NUMBER: 260299414 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 11390 SUNRISE GOLD CIRCLE, #800 CITY: RANCHO CORDOVA STATE: CA ZIP: 95742 BUSINESS PHONE: 916.852.1719 MAIL ADDRESS: STREET 1: 11390 SUNRISE GOLD CIRCLE, #800 CITY: RANCHO CORDOVA STATE: CA ZIP: 95742 SC 13D 1 c50708_sc13d.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. _____________)*

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Lighting Science Group Corporation

(Name of Issuer)

Common Stock, par value $.001 per share
&
Series B Preferred Stock, par value $.001 per share

(Title of Class of Securities)

53224G103

(CUSIP Number)

Govi Rao
LED Holdings, LLC
11390 Sunrise Gold Circle #800
Rancho Cordova, CA 95742
(610) 745-9590

(Name, Address and Telephone Number of Person Authorized to

Receive Notices and Communications)

October 4, 2007

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedule filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

*The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page.

The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 53224G103

1	Names of Reporting Persons.
	I.R.S. Identification Nos. of above persons (entities only).

	LED Holdings, LLC

	26-0299414
2	Check the Appropriate Box if a Member of a Group (See Instructions)
	(a) c
	(b) c
3	SEC Use Only
4	Source of Funds (See Instructions) OO
5	Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) c
6	Citizenship or Place of Organization: Delaware
Number of Shares		7	Sole Voting Power 371,670,443
Beneficially Owned by		8	Shared Voting Power -0-
Each Reporting Person With		9	Sole Dispositive Power 371,670,443
		10	Shared Dispositive Power -0-
11	Aggregate Amount Beneficially Owned by Each Reporting Person 371,670,443
12	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) c
13	Percent of Class Represented by Amount in Row (11) 75.5%
14	Type of Reporting Person (See Instructions)

	OO

CUSIP No. 53224G103

1	Names of Reporting Persons.
	I.R.S. Identification Nos. of above persons (entities only).

	PP IV (AIV) LED, LLC

	26-0240524
2	Check the Appropriate Box if a Member of a Group (See Instructions)
	(a) c
	(b) c
3	SEC Use Only
4	Source of Funds (See Instructions) OO
5	Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) c
6	Citizenship or Place of Organization: Delaware
Number of Shares		7	Sole Voting Power -0-
Beneficially Owned by		8	Shared Voting Power 371,670,443
Each Reporting Person With		9	Sole Dispositive Power -0-
		10	Shared Dispositive Power 371,670,443
11	Aggregate Amount Beneficially Owned by Each Reporting Person 371,670,443
12	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) c
13	Percent of Class Represented by Amount in Row (11) 75.5%
14	Type of Reporting Person (See Instructions)

	OO

CUSIP No. 53224G103

1	Names of Reporting Persons.
	I.R.S. Identification Nos. of above persons (entities only).

	PP IV LED, LLC

	26-0196366
2	Check the Appropriate Box if a Member of a Group (See Instructions)
	(a) c
	(b) c
3	SEC Use Only
4	Source of Funds (See Instructions) OO
5	Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) c
6	Citizenship or Place of Organization: Delaware
Number of Shares		7	Sole Voting Power -0-
Beneficially Owned by		8	Shared Voting Power 371,670,443
Each Reporting Person With		9	Sole Dispositive Power -0-
		10	Shared Dispositive Power 371,670,443
11	Aggregate Amount Beneficially Owned by Each Reporting Person 371,670,443
12	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) c
13	Percent of Class Represented by Amount in Row (11) 75.5%
14	Type of Reporting Person (See Instructions)

	OO

CUSIP No. 53224G103

1	Names of Reporting Persons.
	I.R.S. Identification Nos. of above persons (entities only).

	RICHARD KELSON
2	Check the Appropriate Box if a Member of a Group (See Instructions)
	(a) c
	(b) c
3	SEC Use Only
4	Source of Funds (See Instructions) PF
5	Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) c
6	Citizenship or Place of Organization: United States
Number of Shares		7	Sole Voting Power -0-
Beneficially Owned by		8	Shared Voting Power 371,670,443
Each Reporting Person With		9	Sole Dispositive Power -0-
		10	Shared Dispositive Power 371,670,443
11	Aggregate Amount Beneficially Owned by Each Reporting Person 371,670,443
12	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) c
13	Percent of Class Represented by Amount in Row (11) 75.5%
14	Type of Reporting Person (See Instructions)

	IN

CUSIP No. 53224G103

1	Names of Reporting Persons.
	I.R.S. Identification Nos. of above persons (entities only).

	LED EFFECTS, INC.

	26-0299414
2	Check the Appropriate Box if a Member of a Group (See Instructions)
	(a) c
	(b) c
3	SEC Use Only
4	Source of Funds (See Instructions) OO
5	Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) c
6	Citizenship or Place of Organization: Nevada
Number of Shares		7	Sole Voting Power -0-
Beneficially Owned by		8	Shared Voting Power 371,670,443
Each Reporting Person With		9	Sole Dispositive Power -0-
		10	Shared Dispositive Power 371,670,443
11	Aggregate Amount Beneficially Owned by Each Reporting Person 371,670,443
12	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) c
13	Percent of Class Represented by Amount in Row (11) 75.5%
14	Type of Reporting Person (See Instructions)

	CO

Item 1. Security and Issuer

The title and class of equity securities to which this statement relates is Common Stock, par value $.001 per share (the “Common Stock”) and Series B Preferred Stock, par value $.001 per share (the “Series B Preferred Stock”).

The name and address of the principal executive offices of the issuer is

                         Lighting Science Group Corporation
                         2100 McKinney Avenue
                         Dallas, TX 75201

Item 2. Identity and Background

The identity and background of the persons filing this statement are as follows:

LED Holdings, LLC (“LEDH”) is a Delaware limited liability company, with its principal offices at 11390 Sunrise Gold Circle #800, Rancho Cordova, CA 95742.

PP IV (AIV) LED, LLC (“PPAIV”) is a Delaware limited liability company, with its principal offices at 99 River Road, Cos Cob, CT 06807.

PP IV LED, LLC (“PPLED”) is a Delaware limited liability company, with its principal offices at 99 River Road, Cos Cob, CT 06807.

Richard Kelson (“Mr. Kelson”) is an individual with a business address at 99 River Road, Cos Cob, CT 06807. Mr. Kelson is a citizen of the United States and Operating Advisor at Pegasus Capital Advisors, L.P.

LED Effects, Inc. (“LED”, together with PPAIV, PPLED, and Mr. Kelson, the “LEDH Members”) is a Nevada corporation, with its principal offices at 11390 Sunrise Gold Circle #800, Rancho Cordova, CA 95742.

None of the Reporting Persons was, during the last five years, convicted of a criminal proceeding (excluding traffic violations or similar misdemeanors).

None of the Reporting Persons was, during the last five years, a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration

LEDH contributed assets and cash in exchange for 318,574,665 shares of Common Stock of the issuer and 2,000,000 shares of Series B Preferred Stock of the issuer.

See Item 5 below for information with respect to the LEDH Members.

Item 4. Purpose of Transaction

The purpose of the acquisition of the securities of the issuer was for investment. See Item 6 below for additional information.

Item 5. Interest in Securities of the Issuer

LEDH contributed substantially all of its assets in exchange for sole voting and dispositive power of 318,574,665 shares of Common Stock of the issuer and 2,000,000 shares of Series B Preferred Stock of the issuer, representing 75.5% of the common stock of Lighting Sciences Group and having voting power equal to 80% of the outstanding voting stock.

The LEDH Members do not directly own any of the Common Stock or Series B Preferred Stock of the issuer. The LEDH Members share voting and dispositive power over the shares of Common Stock and Series B Preferred Stock of the issuer only as members of LEDH and by virtue of such status may be deemed to be the beneficial owner of the shares of Common Stock and Series B Preferred Stock of the issuer held by LEDH. The LEDH Members disclaim beneficial ownership of the shares of Common Stock and Series B Preferred Stock held by LEDH, except to the extent of any pecuniary interest, and this statement shall not be deemed to be an admission that they are the beneficial owners of such securities.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

LEDH acquired the Common Stock and Series B Preferred Stock of the issuer described above pursuant to an Exchange and Contribution Agreement, dated as of October 4, 2007.

In connection with the Exchange and Contribution Agreement, the issuer and LEDH entered into a Registration Rights Agreement dated as of October 4, 2007 (the “Registration Rights Agreement”), which provides that the issuer is required to file a registration statement (the “Registration Statement”) covering the resale of the Common Stock and the shares of Common Stock issuable upon conversion of the Series B Preferred Stock within sixty (60) days after the receipt of a request from LEDH that the issuer file the Registration Statement. Pursuant to the Registration Rights Agreement, the issuer has the right to defer such demand for up to thirty (30) days if the issuer furnishes a certificate signed by the Chief Executive Officer or Chairman of the Board stating that, in the good faith judgment of the Board of Directors of the issuer, it would be materially detrimental to the issuer and its stockholders for the Registration Statement to be effected at such time.

In connection with the Exchange and Contribution Agreement, the issuer entered into a Stockholder Voting Agreement, dated as of October 4, 2007, by and among the issuer, LEDH and certain stockholders (the “Voting Agreement”). The Voting Agreement governs the voting of stock held by LEDH and such stockholders in the election of members of the Board of Directors and has a term of two years. The Voting Agreement provides that the Board of Directors of the issuer is to consist of nine directors with: (i) four persons designated by the holders of the majority of the Series B Preferred Stock, (ii) four persons designated by the Board of Directors and (iii) the Chief Executive Officer of the issuer. The Voting Agreement also provides for the manner in which vacancies on the Board of Directors are to be filled.

Item 7. Material to be Filed as Exhibits

The following documents are filed as exhibits and are incorporated by reference to the issuer’s Form 8-K, filed by the issuer on October 11, 2007.

Exhibit Description

4.1	Exchange and Contribution Agreement, dated as of October 4, 2007, by and between LED Holdings, LLC and Lighting Science Group Corporation.

4.2	Certificate of Designation of Series B Preferred Stock of Lighting Science Group Corporation, dated October 4, 2007.

4.3	Stockholder Voting Agreement, dated as of October 4, 2007, by and between LED Holdings, LLC, Lighting Science Group Corporation, and certain stockholders.

4.4	Registration Rights Agreement, dated as of October 4, 2007, by and between LED Holdings, LLC and Lighting Science Group Corporation.

Signature

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Date: October 4, 2007

LED HOLDINGS, LLC

By:	/s/ Govi Rao
Name:	Govi Rao
Title:	President/CEO



PP IV (AIV) LED, LLC

By: Pegasus Partners IV (AIV), L.P.,
its sole member

By: Pegasus Investors IV, L.P.,
its general partner

By: Pegasus Investors IV GP, L.L.C.,
its general partner

By:	/s/ Steven Wacaster
Name:	Steven Wacaster
Title:	Vice President



PP IV LED, LLC

By: Pegasus Partners, IV, L.P.,
its sole member

By: Pegasus Investors IV, L.P.,
its general partner

By: Pegasus Investors IV GP, L.L.C.,
its general partner

By:	/s/ Steven Wacaster
Name:	Steven Wacaster
Title:	Vice President



/s/ Richard Kelson
RICHARD KELSON


LED EFFECTS, INC.

By:	/s/ Kevin Furry
Name:	Kevin Furry
Title:	President

Exhibit A

AGREEMENT REGARDING THE JOINT FILING OF SCHEDULE 13D

The undersigned hereby agree as follows:

	(i)	Each of them is individually eligible to use the Schedule 13D to which this Exhibit is attached, and such Schedule 13D is filed on behalf of each of them; and

	(ii)	Each of them is responsible for the timely filing of such Schedule 13D and any amendments thereto, and for the completeness and accuracy of the information concerning such person contained therein; but none of them is responsible for the completeness or accuracy of the information concerning the other persons making the filing, unless such person knows or has reason to believe that such information is inaccurate.

Date: October 4, 2007

LED HOLDINGS, LLC

By:	/s/ Govi Rao
Name:	Govi Rao
Title:	President/CEO



PP IV (AIV) LED, LLC

By: Pegasus Partners IV (AIV), L.P.,
its sole member

By: Pegasus Investors IV, L.P.,
its general partner

By: Pegasus Investors IV GP, L.L.C.,
its general partner

By:	/s/ Steven Wacaster
Name:	Steven Wacaster
Title:	Vice President

PP IV LED, LLC

By: Pegasus Partners, IV, L.P.,
its sole member

By: Pegasus Investors IV, L.P.,
its general partner

By: Pegasus Investors IV GP, L.L.C.,
its general partner

By:		/s/ Steven Wacaster
Name:		Steven Wacaster
Title:		Vice President



/s/ Richard Kelson
RICHARD KELSON


LED EFFECTS, INC.

By:	/s/ Kevin Furry
Name:	Kevin Furry
Title:	President

EX-4.1 2 c50708_ex4-1.htm ex4-1.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

EXHIBIT 4.1

EXCHANGE AND CONTRIBUTION AGREEMENT

BY AND AMONG

LED HOLDINGS, LLC

AND

LIGHTING SCIENCE GROUP CORPORATION

Dated as of October 4, 2007

TABLE OF CONTENTS

		Page

ARTICLE I DEFINITIONS		1

ARTICLE II CONTRIBUTION OF ASSETS; ASSUMPTION OF LIABILITIES; EXCHANGE
	CONSIDERATION	12
2.01	Exchange and Contribution	12
2.02	Exchange Consideration	12
2.03	Tax Treatment	12

ARTICLE III CLOSING		13
3.01	Time and Place	13
3.02	Deliveries by LED	13
3.03	Deliveries by LSG	14

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF LED		15
4.01	Organization; Qualification; Subsidiaries	15
4.02	Authority	16
4.03	No Violation	16
4.04	Consents	16
4.05	Title to Properties	16
4.06	Litigation	17
4.07	Contracts	17
4.08	Compliance with Law; Permits	18
4.09	Environmental Matters	18
4.10	Employees; Labor Matters	19
4.11	Benefit Plans	20
4.12	Taxes	21
4.13	Intellectual Property	22
4.14	LED Financial Statements	25
4.15	Absence of Certain Changes or Events	25
4.16	Insurance	27
4.17	Affiliate Transactions	27
4.18	Brokers’ Fees	27

4.19	Investment Intent	27

ARTICLE V REPRESENTATIONS AND WARRANTIES OF LSG		28
5.01	Organization; Qualification; Subsidiaries	28
5.02	Authority	28
5.03	No Violation	29
5.04	Consents	29
5.05	Title to Properties	29
5.06	Litigation	30
5.07	Contracts	30
5.08	Compliance with Law; Permits	31
5.09	Environmental Matters	31
5.10	Employees; Labor Matters	32
5.11	Benefit Plans	33
5.12	Taxes	34
5.13	Intellectual Property	36
5.14	SEC Filings; LSG Financial Statements	39
5.15	Capitalization	40
5.16	Absence of Certain Changes or Events	41
5.17	Insurance	43
5.18	Affiliate Transactions	43
5.19	Brokers’ Fees	43
5.20	Private Offering	43
5.21	Takeover Statutes	43

ARTICLE VI POST-CLOSING COVENANTS		44
6.01	Public Announcements	44
6.02	Further Assurances	44
6.03	Expenses	44
6.04	Remittance of Accounts Receivable and Excluded Assets	44
6.05	Certain Tax Matters	44
6.06	Personnel and Employment	45

6.07	Competitive Opportunities	46
6.08	LED KK Shares and Kabushiki LED Shares	47
6.09	Disney Contract	47
6.10	Common Stock Certificate	47

ARTICLE VII NO SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
	COVENANTS	47
7.01	No Survival of Representations, Warranties and Covenants	47

ARTICLE VIII MISCELLANEOUS		47
8.01	Binding Effect; Assignment; No Third-Party Rights	47
8.02	Entire Agreement	48
8.03	Headings	48
8.04	Notices	48
8.05	Severability	49
8.06	Amendment; Waiver, etc	49
8.07	Governing Law; Consent to Jurisdiction	50
8.08	Waiver of Trial By Jury	50
8.09	Bulk Sales	50
8.10	Counterparts	50
8.11	Neutral Construction	51
8.12	Interpretation	51

iii

EXCHANGE AND CONTRIBUTION AGREEMENT

EXCHANGE AND CONTRIBUTION AGREEMENT dated as of October 4, 2007 (this “Agreement”), by and among LED HOLDINGS, LLC, a Delaware limited liability company (“LED”), and LIGHTING SCIENCE GROUP CORPORATION, a Delaware corporation (“LSG,” and together with LED, the “Parties”).

RECITALS

WHEREAS, LED operates a business that is engaged in designing and manufacturing custom LED lighting and digital lighting controls for customers worldwide (the “Business”); and

WHEREAS, this Agreement contemplates a transaction pursuant to which (i) LED will contribute, transfer, assign, convey and deliver to LSG the Acquired Assets (as defined below) in exchange for shares of LSG Series B Preferred Stock and LSG Common Stock (each as defined below), and (ii) LSG will assume the Assumed Liabilities (as defined below), in each case on the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants, representations and warranties made herein, the Parties agree as follows:

ARTICLE I

DEFINITIONS

For purposes of this Agreement and any Schedule hereto, the following terms shall have the meanings ascribed to them below:

“Accounts Receivable” means (i) all trade accounts receivable and other rights to payment from customers of LED and the full benefit of all security for such accounts or rights to payment, (ii) all other accounts or notes receivable of LED and the full benefit of all security for such accounts or notes and (iii) any claim, remedy or other right related to any of the foregoing, in each case outstanding as of the Effective Time.

“Action” means any claim, charge, demand, action, suit, proceeding, arbitral action, governmental inquiry, criminal prosecution or other investigation.

“Acquired Assets” means all right, title, and interest in and to all of the assets of LED, in each case as they exist at the Effective Time, other than the Excluded Assets, but including all of LED’s right, title and interest in, to and under the following:

(a) all cash and cash equivalents (including marketable securities and short term investments);

(b) the LED KK Shares;

(d) all Leases and the LED Leased Real Property;

(e) all Equipment;

(f) all Inventory;

(g) all Accounts Receivable;

(h) all Contracts and any and all rights thereunder;

(i) all Permits;

(j) all Records;

(k) all Intellectual Property owned, used or held for use by LED, and all rights to the corporate and tradenames of the Business;

(l) all rights to causes of action, lawsuits, judgments, claims and demands of any nature whether choate or inchoate, known or unknown, contingent or non-contingent, available to or being pursued by LED or the ownership, use, function or value of any Acquired Asset, whether arising by way of counterclaim or otherwise;

(m) all prepaid expenses, credits deferred charges, advance payments, security deposits, postage deposits and other prepaid items, and any and all rights relating thereto; and

(n) all other assets and properties of LED that are used or useful in connection with the operation of the Business, tangible and intangible, wherever located, including all goodwill, know-how and trade secrets related to the Business.

Notwithstanding the foregoing, under no circumstances shall the Acquired Assets include any Excluded Assets.

“Affiliate(s)” shall have the meaning ascribed to it in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act.

“Affiliated Group” means any affiliated group within the meaning of Code Section 1504 (or any similar group defined under a similar provision of state, local or foreign law).

“Agreement” shall have the meaning ascribed to it in the preamble hereto.

“Assumed Liabilities” means all liabilities and obligations of LED (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due),

including (a) all liabilities of LED for unpaid Taxes with respect to periods prior to the Closing and the pre-Closing portion of any Straddle Period, (b) all liabilities of LED for transfer, sales, use, and other non-income Taxes arising in connection with the consummation of the transactions contemplated hereby, (c) all liabilities of LED for the unpaid Taxes of Persons other than LED (but including LED’s liability for the unpaid Taxes of LED’s Subsidiaries) under Treasury Reg. §1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise, (d) all liabilities and obligations of LED under Contracts, including all LED Employee Plans, (e) all liabilities and obligations of LED under the Worker Adjustment and Retraining Notification Act arising in connection with the transactions contemplated by this Agreement, (f) all liabilities and obligations of LED arising under Environmental Laws, (g) all obligations of LED to indemnify any Person by reason of the fact that such Person was a director, officer, employee, or agent of LED or was serving at the request of LED as a partner, trustee, director, officer, employee, or agent of another entity (whether such indemnification is for judgments, damages, penalties, fines, costs, amounts paid in settlement, losses, expenses, or otherwise and whether such indemnification is pursuant to any statute, charter document, bylaw, agreement, or otherwise), (h) all product liabilities and liability for any product warranties, and (i) all other liabilities and obligations of LED set forth in the disclosure schedules attached hereto; provided, however, that the Assumed Liabilities shall not include any liability or obligation of LED under this Agreement and any other agreement entered into in connection with the transactions contemplated hereby.

“Assumed Plans” shall have the meaning ascribed to it in Section 6.06(c) .

“Bill of Sale” means the Bill of Sale, Assignment and Assumption, dated as of the date hereof, between LED and LSG.

“Business” shall have the meaning ascribed to it in the recitals hereto.

“CERCLA” shall have the meaning ascribed to it in the definition of “Environmental Laws” below.

“Closing” shall have the meaning ascribed to it in Section 3.01.

“Closing Date” shall have the meaning ascribed to it in Section 3.01.

“Code” means the Internal Revenue Code of 1986, as amended, and the rules promulgated thereunder.

“Competitive Opportunity” shall have the meaning ascribed to it in Section 6.07.

“Continued Employees” shall have the meaning ascribed to it in Section 6.06(a) .

“Contracts” means any written or oral contracts, agreements, leases, understandings, arrangements, commitments, sales orders, product quotations and purchase orders, including all employee benefit plans (including related insurance contracts), and other

employee-related agreements, in each case as the same may exist as of the Effective Time.

“Effective Time” means 12:01 a.m. on the Closing Date.

“Employee” shall have the meaning ascribed to it in Section 6.06(a) .

“Employment Agreements” means the employment agreements to be entered into between LSG and each of Kevin Furry, Zach Gibler, Ken Honeycutt, Paul Kallmes, Ronald Lusk, Frederic Maxik, Govi Rao, and Chuck Sommerville.

“Encumbrance” means any mortgage, pledge, security interest, lien, reservation, exception, encroachment, easement, right-of-way, covenant, restriction, lease or other similar title exception or encumbrance.

“Environmental Damages” means any demands, claims, actions or causes of action, assessments, losses, damages, liabilities, obligations, penalties, fines, costs and expenses (including reasonable fees and expenses of counsel) arising out of or relating to: (i) the condition of the LED Leased Real Property or LSG Leased Real Property, as applicable, to the extent arising under Environmental Laws, including the presence of any Hazardous Substances thereon; (ii) the investigation, removal, transportation and/or disposal of any Hazardous Substances from, on, to or about the LED Leased Real Property or LSG Leased Real Property, as applicable; or (iii) a violation of any Environmental Laws or (iv) any remedial actions required under Environmental Law by any Governmental Authority relating to the condition of any LED Leased Real Property or LSG Leased Real Property, as applicable, including the investigation, removal, monitoring, transportation and/or disposal of any Hazardous Substances from, on, at or about any LED Leased Real Property or LSG Leased Real Property, as applicable.

“Environmental Laws” mean any federal, state or local law, statute, ordinance, rule, regulation or code, and any license, permit, authorization or court order, judgment, decree or injunction related to the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release, investigation, remediation or disposal of pollutants or toxic or hazardous substances, or related to the protection of threatened or endangered species or environmentally sensitive areas, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”); the Hazardous Material Transportation Act, 49. U.S.C. 1801, et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section 7401, et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251, et seq.; the Clean Air Act, 42 U.S.C. 2601, et seq.; the Toxic Substances Control Act, as amended, 125 U.S.C. Section 1251, et seq.; the Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 11001, et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq.; and the Occupational Safety and Health Act, 29 U.S.C. 651, et seq.

“Equipment” means all computers and other data processing hardware (including

all Software related thereto or used therewith), servers, network systems, telephone systems and equipment, office furniture, office equipment, fixtures, and all other tangible personal property of similar nature, in each case owned or used by LED.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Exchange Consideration” shall have the meaning ascribed to it in Section 2.02.

“Excluded Assets” means only the following assets of LED, all of which shall be retained by LED:

	(a)	the certificate of formation, limited liability company operating agreement and other governing documents of LED, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, bylaws, minute books and other documents relating to the organization, maintenance, and existence of LED as a limited liability company; and

	(b)	all rights of LED under this Agreement and any other agreement entered into in connection with the transactions contemplated hereby.

“Excluded Liabilities” means any and all liabilities of LED with respect to the Excluded Assets.

“GAAP” means United States generally accepted accounting principles as in effect from time to time, consistently applied.

“Governmental Authority” means any government, any governmental entity, department, commission, board, agency or instrumentality, any regulatory authority and any court, tribunal or judicial body, in each case whether federal, state, county, provincial, local or foreign.

“Hazardous Substances” shall mean any material, substance or waste presently listed, defined, designated or classified as hazardous, toxic or radioactive, under any Environmental Laws, whether by type or by quantity, any material regulated under Environmental Law because of its effect or potential effect on public health or the environment, and petroleum or any derivative or by-product thereof.

“Indemnity Agreement” means the letter agreement regarding certain indemnities, dated the date hereof, between LED and LSG.

“Intellectual Property” means all tangible and intangible intellectual property, including: (i) discoveries and inventions, Patents, Patent applications (either filed or in preparation for filing) and statutory invention registrations (including reissues, divisions,

continuations, continuations in part, extensions and reexaminations thereof) and all rights therein and all improvements thereto; (ii) Marks, slogans, logos, corporate names and other source identifiers (whether or not registered), including all common law rights, and registrations and applications for registration thereof and all rights therein and all renewals of any of the foregoing; (iii) copyrightable works, copyrights (whether or not registered) and copyright registrations and applications for registration therefor, derivative work and all rights therein and all extensions and renewals of any of the foregoing; (iv) electronic addresses and passwords, domain names and registrations and applications or reservations for registration thereof, and any similar rights and all content embodied in all websites and web pages found at such uniform resource locators; (v) Software; (vi) confidential and proprietary information, Trade Secrets, models, algorithms, processes, formulas, and techniques, research and development information, ideas, technical data, designs, drawings and specifications; (vii) advertising and promotional materials; (viii) rights under all Contracts under which intellectual property rights were granted to any Person by a third party, or to a third party by any Person; (ix) modifications or improvements to any item described in the immediately preceding clauses (i) through (viii); (x) copies and tangible embodiments of any item described in the immediately preceding clauses (i) through (ix); and (xi) other proprietary rights relating to any item described in the immediately preceding clauses (i) through (x), including associated goodwill, remedies against past and future infringements thereof and rights of protection of an interest therein under the laws of all jurisdictions.

“Inventory” means all raw materials, finished products and work-in-process of LED.

“IRS” shall mean the United States Internal Revenue Service.

“Kabushiki LED” shall mean Kabushiki Kaisha LED Systems, a Japanese corporation.

“Kabushiki LED Shares” shall mean 200 shares of common stock of Kabushiki LED, representing 20% of all of the issued and outstanding capital stock of Kabushiki LED.

“Known to LED” or “to LED’s Knowledge” or “Knowledge of LED” means the actual knowledge of the officers and directors of LED.

“Known to LSG” or “to LSG’s Knowledge” or “Knowledge of LSG” means the actual knowledge of the officers and directors of LSG.

“Law” or “Laws” means any domestic or foreign laws, statutes, ordinances, rules, regulations, codes, permitting requirements, executive orders, decrees, or judgments executed, issued, adopted, promulgated or applied by any Governmental Authority.

“Leases” means all oral or written leases, subleases or other use and occupancy agreements (and any amendment, renewal, supplement, modification or extension thereof or thereto) for real property, in each case held in connection with the Business.

“LED” shall have the meaning ascribed to it in the preamble hereto.

“LED Business Insurance Policies” shall have the meaning ascribed to it in Section 4.16.

“LED Effects” means LED Effects, Inc., a Delaware corporation.

“LED Employee Plan” means each “employee benefit plan” (as such term is defined in ERISA Section 3(3)), whether or not subject to ERISA, and each employment, consulting, independent contractor, bonus, incentive, equity purchase, option or other equity-based, deferred compensation, loan, severance, termination, retention, change of control, collective bargaining or other agreement with any works council or association, profit sharing, pension, retirement, 401(k), multiemployer, vacation, medical or other welfare, disability, life, fringe benefit and any other employee or retiree benefit or compensation plan, funding mechanism, agreement, program, policy or other arrangement, whether or not subject to ERISA or written or unwritten or legally binding or not, and (i) that is maintained, sponsored or contributed to by LED or any LED ERISA Affiliate for the benefit of any current or former employee, officer or independent contractor of LED, or the beneficiaries or dependents of any such individual, or (ii) under which LED may have any material outstanding liability.

“LED ERISA Affiliate” means any trade or business, whether or not incorporated, that, together with LED, is or would have been at any date of determination occurring within the preceding six years, treated as a single employer within the meaning of Section 414 of the Code.

“LED Financial Statements” shall have the meaning ascribed to it in Section 4.14.

“LED Investments” shall have the meaning ascribed to it in Section 4.01(b) .

“LED KK Shares” means 180 shares of common stock of LED KK, representing 90% of all of the issued and outstanding capital stock of LED KK.

“LED KK” means LED Effects Japan KK, a Japanese corporation.

“LED Leased Real Property” means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures, or other interest in real property held by LED and its Subsidiaries.

“LED Material Adverse Effect” shall mean any effect, event, circumstance or change that, individually or in the aggregate, results in a material adverse effect on the business, financial condition, assets, liabilities or results of operations of LED and its Subsidiaries, taken as a whole; provided, however, that none of the following, or any effects, events, circumstances or changes relating thereto or resulting therefrom, shall be deemed in themselves, either alone or in combination, to constitute, and none of them shall be taken into account in determining whether there has been, or would reasonably be expected to be, an LED Material Adverse Effect: (i) general economic conditions (including conditions in the stock markets or other capital

markets) or developments or changes therein, (ii) conditions in the industry in which LED and its Subsidiaries operate or developments or changes therein, (iii) the existence, announcement or performance of this Agreement or the transactions contemplated hereby, including compliance by LED with its covenants and agreements contained in this Agreement, (iv) any change in applicable Law or accounting regulation or principle effected after the date hereof, or (v) acts of God, national or international hostilities, war (whether or not declared) or terrorism; except, in the cases of clauses (i), (ii), and (v) above, if such effect, event, circumstance or change disproportionately impacts the business, financial condition, assets, liabilities or results of operations of LED and its Subsidiaries, taken as a whole, relative to other participants in the industry in which LED and its Subsidiaries operate.

“LED Material Contract” shall have the meaning ascribed to it in Section 4.07(a) .

“LED Service Provider” shall have the meaning ascribed to it in Section 4.10(a) .

“LSG” shall have the meaning ascribed to it in the preamble hereto.

“LSG Business Insurance Policies” shall have the meaning ascribed to it in Section 5.17.

“LSG Common Stock” shall mean shares of Common Stock, par value $.001 per share, of LSG.

“LSG Employee Plan” means each “employee benefit plan” (as such term is defined in ERISA Section 3(3)), whether or not subject to ERISA, and each employment, consulting, independent contractor, bonus, incentive, equity purchase, option or other equity-based, deferred compensation, loan, severance, termination, retention, change of control, collective bargaining or other agreement with any works council or association, profit sharing, pension, retirement, 401(k), multiemployer, vacation, medical or other welfare, disability, life, fringe benefit and any other employee or retiree benefit or compensation plan, funding mechanism, agreement, program, policy or other arrangement, whether or not subject to ERISA or written or unwritten or legally binding or not, and (i) that is maintained, sponsored or contributed to by LSG or any LSG ERISA Affiliate for the benefit of any current or former employee, officer or independent contractor of LSG, or the beneficiaries or dependents of any such individual, or (ii) under which LSG may have any material outstanding liability.

“LSG ERISA Affiliate” means any trade or business, whether or not incorporated, that, together with LSG, is or would have been at any date of determination occurring within the preceding six years, treated as a single employer within the meaning of Section 414 of the Code.

“LSG Existing Preferred Stock” shall mean shares of 6% Convertible Preferred Stock, par value $.001 per share, of LSG.

“LSG Financial Statements” shall have the meaning ascribed to it in Section 5.14(b) .

“LSG Leased Real Property” means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures, or other interest in real property held by LSG and its Subsidiaries.

“LSG Material Adverse Effect” shall mean any effect, event, circumstance or change that, individually or in the aggregate, results in a material adverse effect on the business, financial condition, assets, liabilities or results of operations of LSG and its Subsidiaries, taken as a whole; provided, however, that none of the following, or any effects, events, circumstances or changes relating thereto or resulting therefrom, shall be deemed in themselves, either alone or in combination, to constitute, and none of them shall be taken into account in determining whether there has been, or would reasonably be expected to be, an LSG Material Adverse Effect: (i) general economic conditions (including conditions in the stock markets or other capital markets) or developments or changes therein, (ii) conditions in the industry in which LSG and its Subsidiaries operate or developments or changes therein, (iii) the existence, announcement or performance of this Agreement or the transactions contemplated hereby, including compliance by LSG with its covenants and agreements contained in this Agreement, (iv) any change in applicable Law or accounting regulation or principle effected after the date hereof, (v) acts of God, national or international hostilities, war (whether or not declared) or terrorism, or (vi) any redemption or acceleration of rights of the holders of preferred stock of LSG outstanding on the date hereof pursuant to any documentation relating to such preferred stock, complete and correct copies of which were made available to LED on LSG’s online data site established for the purposes of the transactions contemplated by this Agreement; except, in the cases of clauses (i), (ii), and (v) above, if such effect, event, circumstance or change disproportionately impacts the business, financial condition, assets, liabilities or results of operations of LSG and its Subsidiaries, taken as a whole, relative to other participants in the industry in which LSG and its Subsidiaries operate.

“LSG Material Contract” shall have the meaning ascribed to it in Section 5.07(a) .

“LSG Preferred Stock” shall mean the LSG Existing Preferred Stock and the LSG Series B Preferred Stock.

“LSG Series B Preferred Stock” shall mean shares of Series B Preferred Stock, par value $.001 per share, of LSG.

“LSG Service Provider” shall have the meaning ascribed to it in Section 5.10(a) .

“LSG Stock Plan” shall have the meaning ascribed to it in Section 5.15(a) .

“Mark” shall have the meaning ascribed to it in Section 4.13(b) .

“Most Recent LED Balance Sheet Date” shall have the meaning ascribed to it in Section 4.14.

“Most Recent LSG Balance Sheet” shall have the meaning ascribed to it in

Section 5.14(g) .

“Open-Source” means Software which is licensed pursuant to license terms that (i) create, or purport to create, obligations for the licensee with respect to the use of any software incorporating any portion of such software or (ii) grant, or purport to grant, to any third party any rights or immunities under intellectual property or proprietary rights in such software; and includes any Software that requires as a condition of use, modification and/or distribution of such Software that other Software incorporated into, derived from or distributed with such software be (a) distributed in source code form; (b) be licensed for the purpose of making derivative works therefrom; or (c) be redistributed at no charge.

“Options” shall have the meaning ascribed to it in Section 5.15(a) .

“Patents” shall have the meaning ascribed to it in Section 4.13(a) .

“Permits” means the federal, state, local and other governmental and regulatory licenses, permits, orders, approvals and authorizations that relate to or are necessary to conduct the business of LED or LSG, as applicable.

“Permitted Encumbrances” shall mean (i) Encumbrances securing current taxes, assessments, fees or other governmental charges or levies not yet due and payable, or which are being contested in good faith, (ii) inchoate mechanics and materialmen’s Encumbrances for construction in progress, (iii) Encumbrances of warehousemen and carriers arising in the ordinary course of business in respect of obligations not overdue, (iv) Encumbrances on leased personal property used or useful in or with respect to the Business that do not impair the use of such personal property, and (v) Encumbrances solely securing Assumed Liabilities.

“Person” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization, Governmental Authority or other entity.

“Preexisting Code” shall have the meaning ascribed to it in Section 4.13(d) .

“Records” means originals or copies of all books, records, including property and equipment records, production records, purchasing and sales records, personnel and payroll records, financial and accounting records, magnetic copies of computer files and documentation, customer and vendor lists, price lists, correspondence, operating guides and manuals, advertiser and vendor files, invoices, marketing and statistical information, and all other books, records and files used or useful in or with respect to the Business; provided, however, that “Records” shall not include the tax returns of LED and policies or contracts of insurance, but LSG shall be permitted to examine and make copies of such documents upon its reasonable prior request.

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date hereof, between LED and LSG.

“Representatives” shall have the meaning ascribed to it in Section 6.07.

“Sarbanes-Oxley Act” shall have the meaning ascribed to it in Section 5.14(c) .

“SEC” shall have the meaning ascribed to it in Section 5.14(a) .

“SEC Reports” shall have the meaning ascribed to it in Section 5.14(a) .

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Software” means all computer software and Open-Source software, including source code, object code, machine-readable code, HTML, program listings, comments, user interfaces, menus, buttons and icons, and all files, data, manuals, design notes and other items and documentation related thereto or associated therewith.

“Straddle Period” means the taxable period beginning before and ending after the Closing Date.

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association, or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof or (ii) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof and for this purpose, a Person or Persons owns a majority ownership interest in such a business entity (other than a corporation) if such Person or Persons shall be allocated a majority of such business entity’s gains or losses or shall be or control any managing director or general partner of such business entity (other than a corporation).

“Tax” or “Taxes” means any federal, state, county, provincial, local or foreign income, gross receipts, sales, use, ad valorem, employment, workers’ compensation, severance, transfer, gains, profits, excise, franchise, property, capital stock, premium, minimum and alternative minimum or other taxes, fees, levies, duties, assessments or charges of any kind or nature whatsoever imposed by any Governmental Authority (whether payable directly or by withholding), together with any interest, penalties (civil or criminal), additions to or additional amounts imposed by, any Governmental Authority with respect thereto, and any expenses incurred in connection with the determination, settlement or litigation of any liability therefor.

“Tax Return” means a report, return or other information required to be supplied to a Governmental Authority with respect to any Tax.

“Trade Secret” shall have the meaning ascribed to it in Section 4.13(e).

“Trademark Assignment” means the Trademark Assignment, dated as of the date hereof, between LED and LSG.

“Transferred Contracts” shall have the meaning ascribed to it in Section 6.06(c).

“Warrants” shall have the meaning ascribed to it in Section 5.15(a).

ARTICLE II

CONTRIBUTION OF ASSETS;
ASSUMPTION OF LIABILITIES; EXCHANGE CONSIDERATION

2.01 Exchange and Contribution. Subject to the terms and conditions of this Agreement, at the Closing, LED shall convey, assign, transfer, deliver and/or contribute to LSG, and LSG shall acquire from LED, all right, title and interest of LED in and to the Acquired Assets, free and clear of all Encumbrances other than Permitted Encumbrances and LSG shall assume the Assumed Liabilities, all as of the Effective Time. If any of the Acquired Assets are not by their terms or by applicable Law assignable or transferable, LED shall use its reasonable best efforts to obtain, or cause to be obtained, any approvals or consents necessary to convey to LSG the benefit thereof. No such Acquired Asset shall be deemed to be transferred, assigned or conveyed unless and until any required consent or approval has been obtained. Anything herein to the contrary notwithstanding, LSG shall not acquire any interest in the Excluded Assets or Excluded Liabilities.

2.02 Exchange Consideration. As consideration for the contribution contemplated by Section 2.01, LSG agrees to issue and deliver to LED at the Closing (i) 2,000,000 shares of LSG Series B Preferred Stock, and (ii) 318,574,665 shares of LSG Common Stock (collectively, the “Exchange Consideration”), representing 70% of the capitalization of LSG assuming the exercise, exchange or conversion in full of all rights, warrants, options and other securities exercisable or exchangeable for, or convertible into, shares of capital stock of LSG (whether or not now exercisable, convertible or exchangeable), having 80% of the voting power of all outstanding shares of capital stock of LSG, in each case as of the Closing.

2.03 Tax Treatment. This Agreement contemplates a tax-free contribution of the Acquired Assets by LED to LSG in reorganization pursuant to Code Section 351. LED will receive voting preferred stock representing control (within the meaning of Code Section 368(c)) of LSG immediately after the contribution.

ARTICLE III

CLOSING

3.01 Time and Place. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Morrison Cohen LLP, 909 Third Avenue, New York, NY 10022, effective as of 4:01 p.m., local time, on the date hereof (the “Closing Date”).

3.02 Deliveries by LED. At the Closing, LED shall deliver to LSG the following:

(a) the Bill of Sale, duly executed by LED;

(b) Employment Agreements duly executed by Kevin Furry, Zach Gibler, Paul Kallmes, Govi Rao, Chuck Sommerville, Ken Honeycutt;

(d) the Registration Rights Agreement, duly executed by LED;

(e) wire transfer by LED to an account as directed by LSG of cash in an amount equal to $15,000,000 minus an amount equal to the aggregate available cash of LED KK, as indicated pursuant to evidence of such available cash satisfactory to LSG (it being agreed that the amount of available cash of LED KK shall be calculated as of October 2, 2007 using an exchange rate of 115.26 yen to the dollar);

(f) a copy of a certificate of the Secretary of State of Delaware, dated not more than seven (7) days prior to the Closing Date, certifying that LED is duly organized and in good standing or presently subsisting under the Laws of the State of Delaware;

(g) copies of all resolutions of LED’s Board of Managers authorizing the transactions contemplated hereby or otherwise relating to this Agreement and the transactions contemplated hereby, certified by an executive officer of LED as being in full force and effect on the Closing Date;

(h) an affidavit, stating, under penalty of perjury, LED’s United States taxpayer identification number and that LED is not a foreign person, pursuant to section 1445(b)(2) of the Code;

(i) a legal opinion of Morrison Cohen LLP in form and substance satisfactory to LSG, addressed to LSG and dated as of the Closing Date;

(j) the Indemnity Agreement, duly executed by LED; and

(k) such other documents and instruments as LSG may reasonably request.

3.03 Deliveries by LSG. At the Closing, LSG shall deliver to LED the following:

(a) certificates representing the shares of LSG Series B Preferred Stock to be issued as Exchange Consideration in accordance with Section 2.02;

(b) the Bill of Sale, duly executed by LSG;

(c) the Employment Agreements, duly executed by LSG; (d) the Trademark Assignment, duly executed by LSG; (e) the Registration Rights Agreement, duly executed by LSG;

(f) a payoff letter from the Bank of Texas, N.A., reflecting the repayment in full of all indebtedness owed by LSG and its Subsidiaries to Bank of Texas, N.A., and the release and termination of all Encumbrances relating to such indebtedness;

(g) a copy of a certificate of the Secretary of State of Delaware, dated not more than seven (7) days prior to the Closing Date, certifying that LSG is duly organized and in good standing or presently subsisting under the Laws of Delaware;

(h) copies of all resolutions of LSG’s Board of Directors authorizing the transactions contemplated hereby or otherwise relating to this Agreement and the transactions contemplated hereby, and including resolutions of LSG’s Board of Directors authorizing and submitting to stockholders of LSG for approval (i) a 1 for 20 reverse stock split and (ii) an amended and restated certificate of incorporation of LSG, in each case certified by an executive officer of LSG as being in full force and effect on the Closing Date;

(i) a legal opinion of Haynes and Boone, LLP in form and substance satisfactory to LED, addressed to LED and dated as of the Closing Date;

(j) a copy of the fairness opinion delivered to LSG concerning the transactions contemplated by this Agreement;

(k) the Indemnity Agreement, duly executed by LSG; and

(l) such other documents and instruments as LED may reasonably request.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF LED

LED hereby represents and warrants to LSG, as of the Closing Date, as follows:

4.01 Organization; Qualification; Subsidiaries. (a) LED and each of its Subsidiaries is duly organized, validly existing and in good standing (with respect to jurisdictions that recognize the concept of good standing) under the Laws of the jurisdiction of its organization and has all requisite company or similar power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted, except where any such failure to be so organized, existing or in good standing or to have such power or authority would not, individually or in the aggregate, reasonably be expected to have an LED Material Adverse Effect. LED and each of its Subsidiaries is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of its properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for any such failure to be so qualified or licensed or in good standing which would not, individually or in the aggregate, reasonably be expected to have an LED Material Adverse Effect.

(b) Schedule 4.01(b) sets forth for each Subsidiary of LED (i) its name and jurisdiction of organization, (ii) the number of shares of authorized capital stock of each class of its capital stock, (iii) the number of issued and outstanding shares of each class of its capital stock, the names of the holders thereof, and the number of shares held by each such holder, and (iv) the number of shares of its capital stock held in treasury. All of the issued and outstanding shares of capital stock of each Subsidiary of LED have been duly authorized and are validly issued, fully paid, and nonassessable. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other Contracts or commitments that could require any of LED and its Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any of its Subsidiaries or that could require any Subsidiary of LED to issue, sell, or otherwise cause to become outstanding any of its own capital stock. There are no outstanding stock appreciation, phantom stock, profit participation, or similar rights with respect to any Subsidiary of LED. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of any capital stock of any Subsidiary of LED. Schedule 4.01(b) also sets forth all interests of LED and its Subsidiaries in Persons other than the Subsidiaries of LED (the “LED Investments”). LED and its Subsidiaries, as applicable, have good and valid title, free and clear of all Encumbrances, to the LED Investments. Except as set forth in Schedule 4.01(b), none of LED and its Subsidiaries controls directly or indirectly or has any direct or indirect equity participation in any corporation, partnership, trust, or other business association which is not a Subsidiary of LED. Except for the Subsidiaries and other Persons set forth in Schedule 4.01(b), neither LED nor any of its Subsidiaries owns or has any right to acquire, directly or indirectly, any outstanding capital stock of, or other equity interests in, any Person.

4.02 Authority. LED has the full power and authority to execute and deliver this Agreement and perform its obligations hereunder and under the other agreements and instruments to be executed and delivered by it in connection with the transactions contemplated hereby and thereby. LED has taken all necessary company action to authorize the execution and delivery of this Agreement and such other agreements and instruments and the consummation of the transactions contemplated hereby and thereby. This Agreement is, and the other agreements and instruments to be executed and delivered by LED in connection with the transactions contemplated hereby will be, the legal, valid and binding obligations of LED, enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or hereafter in effect affecting the enforcement of creditors’ rights generally.

4.03 No Violation. Neither the execution and delivery of this Agreement or the other documents and instruments to be executed and delivered pursuant hereto, nor the consummation of the transactions contemplated hereby or thereby (a) violates any provision of the certificate of incorporation, certificate of formation, operating agreement, by-laws or other constitutive documents of LED or any of its Subsidiaries: (b) violates or is in conflict with any applicable Law: or (c) violates or conflicts with or constitutes a default in any material respect (or an event that, with notice or lapse of time or both, would constitute a default in any material respect) under or results in the termination of, or accelerates the performance required by, any term or provision of any Contract to which LED or any of its Subsidiaries is a party or by which any Acquired Assets are bound, or results in the creation of an Encumbrance (other than any Permitted Encumbrance) upon any of the Acquired Assets, excluding from the foregoing clauses (b) and (c) violations, conflicts, defaults, terminations, accelerations and creations of Encumbrances that, individually or in the aggregate, would not reasonably be expected to have an LED Material Adverse Effect and contracts listed on Schedule 4.04 that require an authorization, consent, approval, or notice in connection with the execution and delivery of this Agreement or any other agreement or document to be delivered by LED or the consummation by LED of the transactions contemplated hereby or thereby.

4.04 Consents. Except as set forth on Schedule 4.04, neither LED nor any of its Subsidiaries is required to give or obtain any authorization, consent, approval, order or filing with or notice to any Governmental Authority or other Person in connection with the execution and delivery of this Agreement or any other agreement or document to be delivered by LED or the consummation by LED of the transactions contemplated hereby or thereby.

4.05 Title to Properties.

(a) Real Property. Neither LED nor any of its Subsidiaries own any real property. Set forth on Schedule 4.05(a) is a complete list of all Leases held in connection with, necessary for or material to the Business, including the date thereof and identity of the parties to such Leases, and all LED Leased Real Property (identified by street address) held by LED or any of its Subsidiaries pursuant to such Leases. LED has made available to LSG true, correct and complete copies of each such Lease (including any amendments, addenda,

modifications, supplements or waivers thereto). LED or one or more of its Subsidiaries has a valid leasehold interest in each LED Leased Real Property and all such Leases are valid and binding leases, are in full force and effect and enforceable in accordance with their respective terms and none of LED, any of it its Subsidiaries and, to the Knowledge of LED, any other party thereto, is (or with notice or lapse of time or both would be) in violation or breach of, or in default under, the terms of any such Lease.

(b) Title to Acquired Assets. LED has good and valid title to, or holds valid leasehold interests in, all of the Acquired Assets, free and clear of all Encumbrances (except Permitted Encumbrances). All of the Acquired Assets consisting of tangible personal assets and properties have been maintained in accordance with normal industry practice and are in good repair and operating condition, ordinary wear and tear (and matters for which LED is not responsible) excepted.

4.06 Litigation. Except as set forth on Schedule 4.06, there are no Actions pending or, to LED’s Knowledge, threatened against or affecting LED or any of its Subsidiaries or any of their respective assets or properties (including the Acquired Assets) nor, to LED’s Knowledge, is there any basis for any such Action. There is no judgment, decree, injunction or order binding upon LED or any of its Subsidiaries that relates to any of the Acquired Assets or is applicable to the Business. None of LED and its Subsidiaries and none of their respective assets or properties (including the Acquired Assets) is or are subject to any order, writ, judgment, injunction, decree or award.

4.07 Contracts. (a) As of the date hereof, except for this Agreement and Contracts listed on Schedule 4.07, none of LED and its Subsidiaries is a party to or bound by any Contract: (i) containing covenants binding upon LED or any of its Subsidiaries that materially restrict the ability of LED or any of its Subsidiaries (or which, following the consummation of the sale of the Acquired Assets contemplated hereunder, could materially restrict the ability of LSG) to compete in any business or with any Person or in any geographic area that is material to LED and its Subsidiaries, taken as a whole, as of the date hereof, except for any such Contract that may be canceled without penalty by LED or any of its Subsidiaries upon notice of 90 days or less; (ii) with respect to a material joint venture or material partnership agreement; (iii) that would prevent, materially delay or materially impede LED’s ability to consummate the transactions contemplated by this Agreement; or (iv) under which the consequences of a default or early termination would have an LED Material Adverse Effect. Each such Contract described in clauses (i) through (iv) and set forth on Schedule 4.07 is referred to herein as an “LED Material Contract”.

(b) Each of the LED Material Contracts is valid and binding on LED and each of its Subsidiaries party thereto and, to the Knowledge of LED, each other party thereto and is in full force and effect. There is no material default under any LED Material Contract by LED or any of its Subsidiaries, and no event has occurred that with the lapse of time or the giving of notice or both would constitute such a default thereunder by LED or any of its Subsidiaries.

4.08 Compliance with Law; PermitsEach of LED and its Subsidiaries and each of their respective predecessors has complied and is in compliance with, in all material respects, all applicable Laws (including Environmental Laws), and no Action has been filed or commenced or, to LED’s Knowledge, threatened to be filed or commenced against any of them alleging any failure to so comply; and

(b) LED and its Subsidiaries hold all Permits that are necessary or advisable for them to own their assets and to operate their businesses as currently conducted, except where the failure to hold such Permits has not had, and would not reasonably be expected to have, an LED Material Adverse Effect. All such Permits are in full force and effect and, to LED’s Knowledge, no suspension or cancellation of any of them is being threatened.

4.09 Environmental MattersNo facts, events or conditions exist on any LED Leased Real Property or any former owned or operated sites and facilities of LED or any of its Subsidiaries or their respective businesses that (i) violate any Environmental Law in any material respect, (ii) may give rise to any material investigatory, remedial or corrective obligations pursuant to Environmental Laws or (iii) may result in any material costs or expenses for Environmental Damages (whether as a result of Actions by any Governmental Authority or otherwise).

(b) Except as set forth on Schedule 4.09(b), neither LED nor any of its Subsidiaries have received any notice, report or other information regarding any actual or alleged violation of any Environmental Law or any Environmental Damages or potential Environmental Damages, including any investigatory, remedial or corrective obligations, relating to the operation of the business of LED or any of its Subsidiaries or any condition on, under or about the LED Leased Property or any former owned or operated sites and facilities of LED or any of its Subsidiaries or their respective businesses. Neither LED nor any of its Subsidiaries has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released any substance, including any Hazardous Substance, upon the LED Leased Real Property or former owned or operated sites in a manner that has given or would give rise to material Environmental Damages. There has been no release or threat of release (as the term “release” is defined by CERCLA) of any Hazardous Substance on, to, from or about any property currently or formerly owned or operated by LED or any of its Subsidiaries or from any operations of LED or any of its Subsidiaries.

(c) Except as set forth on Schedule 4.09(c), to the Knowledge of LED, none of the following exists at any LED Leased Real Property: (i) underground storage tanks, (ii) asbestos-containing material in any form or conditions, (iii) materials or equipment containing polychlorinated biphenyls or (iv) landfills, surface impoundments or disposal areas.

(d) Except as set forth on Schedule 4.09(d), neither this Agreement nor the consummation of the transactions contemplated hereby will result in any obligations for site investigation or cleanup, or notification to or consent of any Governmental Authority or other

Person, pursuant to any of the so-called “transaction-triggered” or “responsible property transfer” Environmental Laws.

(e) LED has provided or made available to LSG copies of all environmental reports in LED’s possession or control regarding the LED Leased Real Property or any former owned or operated sites and facilities of LED and each of its Subsidiaries or their respective businesses.

4.10 Employees; Labor Matters. (a) Schedule 4.10(a) contains an accurate list of the names, titles, dates of hire or dates of service, rates of compensation and remuneration of any kind, and any unused accrued vacation, in each case, as of the date of this Agreement of all employees, officers, directors and independent contractors (other than professional service advisors) of, and consultants to, LED or any of its Subsidiaries and/or their respective businesses (all such individuals, the “LED Service Providers”). To LED’s Knowledge, no executive, key employee, key independent contractor or significant group of employees has any plans to terminate his or her employment or engagement with LED or any of its Subsidiaries as a result of the transactions contemplated by this Agreement or otherwise. Except as set forth on Schedule 4.10(a), the services provided by the LED Service Providers are terminable at will by LED or its Subsidiaries at no cost or expense to LED or any of its Subsidiaries, and neither LED nor its subsidiaries are party to an employment contract with such LED Service Providers. Since the Most Recent LED Balance Sheet Date, there has not been any increase in compensation payable to or to become payable to any LED Service Provider, except regular increases granted in the ordinary course of business.

(b) Neither LED nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement or similar agreement with any labor organization or employee association covering the terms and conditions of any employee or employee group of LED or its Subsidiaries. There has not been, nor is there pending or, to the Knowledge of LED, threatened any labor dispute between LED or any of its Subsidiaries, on the one hand, and any labor organization, on the other hand, or any strike, slowdown, jurisdictional dispute, work stoppage or other similar organized labor activity involving any employee of LED or any of its Subsidiaries or affecting LED or any of its Subsidiaries. There has not been, nor to the Knowledge of LED, is there threatened or pending, any labor union organizational activity involving, any employee of LED or any of its Subsidiaries. There exists no pending or, to the Knowledge of LED, threatened, Action between LED or any of its Subsidiaries and any current or former director, officer or employee of LED or any of its Subsidiaries, including any claim for discrimination, harassment, retaliation, wrongful employment or labor practices, breach of express or implied contract of employment or for violation of equal employment opportunity or wage and hour Laws. All former and current employees of LED or any of its Subsidiaries have provided the necessary information and documentation from which to file current, effective Employment Eligibility Verifications (INS Form I-9’s) for each such employee and neither LED nor any of its Subsidiaries has any information or other reason to believe that any of such supplied information or documentation is in any manner false, fraudulent or in any other manner not genuine. LED and its Subsidiaries have in all other respects complied with its obligations under the

Immigration Reform and Control Act of 1986, as amended, and with all other applicable Laws pertaining to the employment or termination of employment of such employees, including all such Laws relating to labor relations, equal employment opportunity, fair employment practices, wages and hours, occupational safety and other workplace regulations and activities.

4.11 Benefit Plans.

(a) Schedule 4.11 sets forth a true and complete list of each LED Employee Plan.

(b) Each LED Employee Plan has been established, operated and administered in all material respects in accordance with its terms, and each such LED Employee Plan is in material compliance with all applicable Laws. All contributions (including all employer contributions and employee salary reduction contributions) and premiums required to have been paid by LED to any LED Employee Plan under the terms of any such LED Employee Plan or its related trust, insurance contract or other funding arrangement, or pursuant to any applicable law have been paid within the time prescribed by any such LED Employee Plan, trust, contract or arrangement, or applicable Law. All contributions and premiums for any period ending on or before the Closing Date that are not yet due have been made to each such LED Employee Plan or its related trust, insurance contract or other funding arrangement.

(c) No LED Employee Plan is (i) a “multiple employer plan” for purposes of Sections 4063 or 4064 of ERISA, (ii) subject to Section 412 of the Code or Section 302 or Title IV of ERISA, (iii) a “multiemployer plan” (within the meaning of Section 4001(a)(3) of ERISA), (iv) intended to satisfy the requirements of Section 403(a) of the Code, or (v) intended to be qualified under Section 401(a) of the Code.

(d) Neither LED nor any LED ERISA Affiliate has incurred any liability (including as a result of any indemnification obligation) under Title I or Title IV of ERISA for which LED could be liable. No event has occurred, no condition exists, and there are no pending or, to the Knowledge of LED, threatened claims by or on behalf of any LED Employee Plan by any person covered thereby (other than ordinary claims for benefits submitted by participants or beneficiaries) or any Governmental Authority that would subject LED, either directly or by reason of affiliation with an LED ERISA Affiliate, to any material Tax, fine, Encumbrance, or other liability imposed by ERISA, the Code or other applicable Law. No asset of LED is subject to any Encumbrance under ERISA or the Code.

(e) With respect to each LED Employee Plan, LED has provided or made available to LSG true and complete copies of: (i) such LED Employee Plan, if written, or a description of such LED Employee Plan, if not written, and (ii) to the extent applicable to such LED Employee Plan: all trust agreements, insurance contracts or other funding arrangements; the three most recent Forms 5500 required to have been filed with the IRS and all schedules thereto; all current summary plan descriptions, all material communications received from or

sent to the IRS or the Department of Labor (including a written description of any oral communication); and all amendments and modifications to any such document.

(f) No LED Employee Plan exists that could result in the payment to any Continued Employee of any money or other property (including any severance payments, bonus of other compensation) or in the acceleration of any other rights or benefits to any Continued Employee as a result of the transactions contemplated herein.

4.12 Taxes.

(a) All Tax Returns required to be filed by or with respect to LED and its Subsidiaries on or prior to the Closing Date have been, in all material respects, properly prepared and timely filed (including all applicable extensions), and all such Tax Returns (including information provided therewith or with respect thereto) are true, correct and complete.

(b) LED and each of its Subsidiaries have fully and timely paid all Taxes owed by such companies (whether or not shown on any Tax Return).

(c) No audit or other proceeding by any Governmental Authority is pending, no Governmental Authority has given notice of any intention to commence an audit or other proceeding, or assert any deficiency or claim for additional Taxes against LED or any of its Subsidiaries, and no claim has been made by any Governmental Authority in a jurisdiction where LED or any of its Subsidiaries does not file Tax Returns with respect to a particular Tax that it is or may be subject to taxation by that jurisdiction with respect to such Tax, and all deficiencies for Taxes asserted or assessed against LED or any of its Subsidiaries have been fully and timely paid, settled or properly reflected in the LED Financial Statements. The Sellers do not expect any Governmental Authority to assess any additional Taxes for any period for which Tax Returns have been filed.

(d) LED and each of its Subsidiaries have each withheld from their respective employees, independent contractors, creditors, shareholders and third parties and timely paid to the appropriate Governmental Authority proper and accurate amounts in all material respects for all periods ending on or before the Closing Date in compliance with all Tax withholding and remitting provisions of applicable Laws and have each complied in all material respects with all Tax information reporting provisions of all applicable Laws.

(e) No Subsidiary of LED has agreed, or is required, to include in income any adjustment under Section 481 (a) of the Code by reason of a voluntary change in accounting method initiated by LED or any of its Subsidiaries, and no Governmental Authority has initiated or proposed any such adjustment or change in accounting method (including any method for determining reserves for bad debts maintained by any Subsidiary of LED). No Subsidiary of LED will be required to include in post-Closing income any amount resulting from a change in accounting method, closing agreement pursuant to Section 7121 of the Code, installment sale, inter-company transaction or excess loss account or similar type of adjustment.

(f) Neither LED nor any of its Subsidiaries has engaged in any reportable transaction described in Treasury Regulation Section 1.6011-4.

(g) LED and each of its Subsidiaries have collected all material sales, use and value added taxes required to be collected, and have remitted, or will remit on a timely basis, such amounts to the appropriate Governmental Authority and has furnished properly completed exemption certificates for all exempt transactions.

4.13 Intellectual Property.

(a) Schedule 4.13 contains a summary description of every U.S. or foreign patent, both utility and design, along with pending applications (“Patents”), owned by LED or any of its Subsidiaries and the owner of each such Patent. All such Patents which have been registered with the United States Patent and Trademark Office are currently in material compliance with all formal legal requirements (including recordation of assignments) and are not subject to any maintenance fees or Taxes or Actions falling due within 90 days after the Closing Date. To the Knowledge of LED, no facts or circumstances have occurred which, individually or in the aggregate, would render any Patent invalid and/or unenforceable. No Patent required to be listed on Schedule 4.13, has been or is now involved in any opposition, invalidation, or cancellation and, to LED’s Knowledge, no such Action is threatened with respect to any such Patent. All products and materials under such Patent bear the proper legal notice where permitted by Law.

(b) Schedule 4.13 lists each trademark, service mark, trade dress, product configuration, trade name (“Mark”) that is material to the business of LED or any of its Subsidiaries as currently conducted and used to identify LED products by LED or any of its Subsidiaries in the United States or worldwide and the owner of each such Mark. All Marks listed and which have been registered with the United States Patent and Trademark Office have been in continuous use since their respective first uses, are currently in material compliance with all formal legal requirements (including, as applicable, the timely post-registration filing of affidavits of use and incontestability and renewal applications), and are not subject to any maintenance fees or Taxes falling due within 90 days after the Closing Date. To the Knowledge of LED, no facts or circumstances have occurred which, individually or in the aggregate, would render any Mark required to be listed invalid and/or unenforceable. No Mark required to be listed on Schedule 4.13 has been or is now involved in any opposition, invalidation, or cancellation and, to LED’s Knowledge, no such Action is threatened with respect to any such Mark. All products and materials containing such a Mark bear the proper legal notice where permitted by Law.

(c) Schedule 4.13 lists each material copyright registration and each material unregistered copyright owned by LED or any of its Subsidiaries and the owner of each such copyright. All copyrights required to be listed on Schedule 4.13 that have been registered are currently in material compliance with formal legal requirements and are not subject to any maintenance fees or Taxes falling due within 90 days after the Closing Date. To the Knowledge

of LED, no facts or circumstances have occurred which, individually or in the aggregate, would render any material copyright registration or material unregistered copyright required to be listed invalid and/or unenforceable. All works encompassed by such copyrights have been marked with the proper copyright notices. After Closing, subject to existing Contracts, LSG will have the exclusive right to use all such copyrights and there are no third-party rights to such copyrights that will materially interfere with LSG’s ownership and exclusive use of such copyrights.

(d) Schedule 4.13 lists all Software used in connection with the operation of the business of each of LED and its Subsidiaries as currently conducted and developed by LED or any of its Subsidiaries and the owner of such Software. After Closing, LSG will have at least a non-exclusive right to use all such Software. Such Software may contain code that was not specifically written or developed for use in such Software (“Preexisting Code”). To the Knowledge of LED, there are no third-party rights to such Preexisting Code that will materially interfere with LSG’s use of such Software.

(e) Schedule 4.13 lists each category of trade secret and know how (“Trade Secret”) created, produced, developed, and/or used by LED or any of its Subsidiaries and the owner of each such Trade Secret. With respect to each such Trade Secret, the documentation relating to such Trade Secret is current and accurate in all material respects. To LED’s knowledge, its Trade Secrets are sufficiently secret to confer an actual or potential economic advantage upon one who possesses the information. LED and its Subsidiaries have taken reasonable precautions to protect such Trade Secret’s secrecy, confidentiality, and value. To the Knowledge of LED, no such Trade Secret is part of the public knowledge or literature or has been used, divulged or appropriated either for the benefit of any third person or to LED’s and its Subsidiaries’ detriment. No such Trade Secret is subject to any adverse claim nor, to LED’s Knowledge, has any adverse claim been threatened with respect to any such Trade Secret and there is no basis therefor.

(f) LED and its Subsidiaries own all material LED Intellectual Property rights or, to the Knowledge of LED, have the right to use pursuant to an enforceable Contract all material LED Intellectual Property rights. Except as set forth in Schedule 4.13, each LED Intellectual Property right immediately prior to the Closing will be owned or available for use by LSG on substantially identical terms and conditions immediately subsequent to the Closing. The parties to this Agreement acknowledge and agree that the representations and warranties contained in this Section 4.13(f) shall not apply to infringement by LED of any third party’s Intellectual Property rights, or any liabilities or Actions relating to or alleging the same.

(g) LED and its Subsidiaries have delivered to LSG correct and complete copies of all material written documentation evidencing ownership and prosecution (if applicable) of each LED Intellectual Property right required to be listed in Schedules 4.13(a)-(d). With respect to Intellectual Property owned by LED and its Subsidiaries, LED has disclosed to LSG all information known to LED which is relevant to or could impact the protectability or enforceability of its Intellectual Property. With respect to each such LED Intellectual Property right: (i) except for grants of rights made to third parties in Contracts, LED and its Subsidiaries

possess all right, title, and interest in and to the item, free and clear of any Encumbrance; (ii) the item is not subject to any outstanding order by a Governmental Authority; and (iii) no Action is pending or, to the Knowledge of LED, threatened (and there is no basis therefore) which challenges the enforceability, use, or ownership of the item.

(h) To LED’S Knowledge, LED and its Subsidiaries have not infringed upon or misappropriated any other Person’s Intellectual Property rights, and LED and its Subsidiaries, except as set forth in Schedule 4.13, and have never received any notice alleging any such infringement or misappropriation of any other Person’s Intellectual Property right (including any claim that LED or any of its Subsidiaries must license or refrain from using any other Person’s Intellectual Property rights).

(i) Schedule 4.13 identifies each item of Intellectual Property, other than commercially available Software, that any other Person owns and that LED or any of its Subsidiaries uses as a material portion of any product currently sold by LED or any of its Subsidiaries. Schedule 4.13 identifies each material Contract pursuant to which LED or any of its Subsidiaries have granted to any Person rights under or with respect to any of their Intellectual Property (together with any exceptions) that is now in effect. LED and its Subsidiaries have made available to LSG correct and complete copies of all such Contracts with respect to such use, as amended through the date hereof. With respect to the Contracts related to each item of Intellectual Property required to be identified in Schedule 4.13, the statements in clauses (i) - (vii) below are true and correct:

(i)	except as otherwise indicated in Schedule 4.13, the Contract will not be terminated or rendered amended or supplemented as a result of the consummation of the transactions contemplated by this Agreement;

(ii)	to the Knowledge of LED, no counter-party is in breach of such Contract, and no event has occurred which with notice or lapse of time would constitute a breach thereunder;

(iii)	no party to the Contract has repudiated any provision thereof;

(iv)	with respect to each sublicense Contract, to the Knowledge of LED, the representations and warranties set forth in Sections 4.13(i)(i) - 4.135(i)(iii) are true and correct with respect to the underlying license Contract;

(v)	the underlying item of Intellectual Property is not subject to any outstanding order by a Governmental Authority;

(vi)	no Action is pending or, to LED’S Knowledge, threatened (and there is no basis therefore) which challenges the enforceability of the underlying item of Intellectual Property; and

(vii)

LED and its Subsidiaries have not granted any sublicense or similar Contract with respect to such Contract.

(j) Except as set forth in Schedule 4.13, there are no Encumbrances (other than Permitted Encumbrances) outstanding on the LED Intellectual Property rights.

(k) Except as set forth in Schedule 4.13, all former and current employees of LED and its Subsidiaries have executed written Contracts with LED and its Subsidiaries that assign to LED and its Subsidiaries all Intellectual Property created by such employees relating to the business of LED and each of its Subsidiaries, including without limitation, all rights to any inventions, improvements, discoveries, or information. No employee of LED or its Subsidiaries has entered into any Contract that restricts or limits in any material way the scope or type of work in which such employee may be engaged or requires such employee to transfer, assign, or disclose information concerning his or her work to any Person other than LED and its Subsidiaries, except as may be required by Law.

4.14 LED Financial Statements. Set forth on Schedule 4.14 are the unaudited consolidated financial statements of LED Effects and its Subsidiaries for the fiscal years ended December 31, 2006 and December 31, 2005 and the period beginning January 1, 2007 and ended June 13, 2007, and the unaudited consolidated financial statements of LED and its Subsidiaries for the period from June 14, 2007 through August 31, 2007 (collectively, the “LED Financial Statements”). The LED Financial Statements have been prepared in accordance with GAAP, are complete and correct in all material respects and present fairly the financial position and results of operation of the business of LED and its Subsidiaries as of the indicated dates and for the indicated periods. Neither LED nor any of its Subsidiaries have any material liabilities except for liabilities (i) set forth in the LED Financial Statements or which are not required to be disclosed thereon under GAAP, (ii) which have arisen after August 31, 2007 (the “Most Recent LED Balance Sheet Date”) in the ordinary course of business (none of which result from, arise out of, relate to, are in the nature of, or were caused by any breach of contract, breach of warranty, tort, infringement or violation of Law), (iii) incurred pursuant to the transactions contemplated by this Agreement, and (iv) that have been discharged or paid in full prior to the date of this Agreement in the ordinary course of business.

4.15 Absence of Certain Changes or Events. Except as set forth on Schedule 4.15, since the Most Recent LED Balance Sheet Date, there has been no LED Material Adverse Effect and no event, change, condition or circumstance which, individually or in the aggregate, could reasonably be expected to have an LED Material Adverse Effect. Without limiting the generality of the foregoing, since that date, except as expressly contemplated by this Agreement:

(a) Neither LED nor any of its Subsidiaries has made any cash distributions or capital expenditures, including to any holder of its equity or for any such holder’s direct or indirect benefit;

(b) Neither LED nor any of its Subsidiaries has sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than for a fair consideration in the ordinary course of business;

(c) No Person (including LED or any of its Subsidiaries) has accelerated, terminated, modified, or cancelled any Contract or license (or series of related Contracts and licenses) involving more than $10,000 to which LED or any of its Subsidiaries is a party or is bound;

(d) Neither LED nor any of its Subsidiaries has delayed or postponed the payment of accounts payable and other liabilities outside the ordinary course of business;

(e) Neither LED nor any of its Subsidiaries has cancelled, compromised, waived, or released any right or claim (or series of related rights and claims) involving more than $10,000;

(f) Neither LED nor any of its Subsidiaries has transferred, assigned, or granted any license or sublicense of any rights under or with respect to any Intellectual Property;

(g) Neither LED nor any of its Subsidiaries has experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property;

(h) Neither LED nor any of its Subsidiaries has made any loans or advanced any money or other property, to any employee, officer, independent contractor or other Person (except advances to employees in the ordinary course of business not in excess of $5,000 in the aggregate);

(i) Neither LED nor any of its Subsidiaries has established, entered into, adopted, amended, modified or terminated any LED Employee Plan or other arrangement that would be an LED Employee Plan if it were in existence as of the date of this Agreement;

(j) Neither LED nor any of its Subsidiaries has increased the compensation or fringe benefits of any present or former employee or director (except for increases in salary or wage rates in the ordinary cause of business);

(k) Neither LED nor any of its Subsidiaries has granted any severance or termination pay to any present employee or director;

(l) Neither LED nor any of its Subsidiaries has discharged a material liability or Encumbrance outside the ordinary course of business; and

(m) Neither LED nor any of its Subsidiaries has committed to any of the foregoing.

4.16 Insurance. LED and its Subsidiaries maintain insurance in respect of the Acquired Assets and their respective businesses, covering such risks, in such amounts, with such terms and with such insurers as is reasonably necessary to provide adequate insurance coverage for the Acquired Assets and their respective businesses (such insurance, the “LED Business Insurance Policies”). Schedule 4.16 contains a true and complete list of all LED Business Insurance Policies and all of the LED Business Insurance Policies are in full force and effect. Neither LED nor any of its Subsidiaries is in default in any material respect with respect to any provision contained in any such LED Business Insurance Policy held by or on behalf of LED or any of its Subsidiaries. Neither LED nor any of its Subsidiaries has received any notice of cancellation or non-renewal of any such LED Business Insurance Policy.

4.17 Affiliate Transactions. Except that each of Zach Gibler, Paul Kallmes, and Govi Rao is an operating advisor of Pegasus Capital Advisors and its Affiliates, and other than employment arrangements with LED, no executive officer or director of LED or any of its Subsidiaries or any Person beneficially owning 5% or more of the outstanding equity interests of LED, or any immediate family member or Affiliate of any of the foregoing Persons, is a party to any Contract with or binding upon LED or any of its Subsidiaries or any of their respective properties or assets or has any interest in any material property owned by LED or any of its Subsidiaries or has engaged in any material transaction with any of the foregoing since January 1, 2006.

4.18 Brokers’ Fees. Neither LED nor any of its Subsidiaries has any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

4.19 Investment Intent. LED (i) understands that the Exchange Consideration to be issued hereunder has not been, and will not be, registered under the Securities Act, or under any state securities Laws, and are being offered and sold in reliance upon federal and state exemptions for transactions not involving any public offering, and acknowledges that the Exchange Consideration to be issued hereunder was not offered to LED by means of (1) any advertisement, article, notice or other communication published in any newspaper, magazine or similar medium, or broadcast over television or radio, or (2) any other form of general solicitation or advertising, (ii) is acquiring the Exchange Consideration to be issued hereunder solely for its own account for investment purposes, and not with a view to the distribution thereof, (iii) is an experienced and sophisticated investor with knowledge and experience in business and financial matters as are necessary to evaluate the merits and risks of an investment in the Exchange Consideration, (iv) has received certain information concerning LSG and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the shares that constitute Exchange Consideration, and has made the determination to enter into this Agreement and the transactions contemplated hereby and to acquire the Exchange Consideration to be issued hereunder based upon its own independent evaluation and assessment of its value, (v) is able to bear the economic risk and lack of liquidity inherent in holding the Exchange Consideration, and (vi) is an “Accredited Investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF LSG

LSG hereby represents and warrants to LED, as of the Closing Date, as follows:

5.01 Organization; Qualification; Subsidiaries. (a) LSG and each of its Subsidiaries is duly organized, validly existing and in good standing (with respect to jurisdictions that recognize the concept of good standing) under the Laws of the jurisdiction of its organization and has all requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted, except where any such failure to be so organized, existing or in good standing or to have such power or authority would not, individually or in the aggregate, reasonably be expected to have an LSG Material Adverse Effect. LSG and each of its Subsidiaries is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of its properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for any such failure to be so qualified or licensed or in good standing which would not, individually or in the aggregate, reasonably be expected to have an LSG Material Adverse Effect.

(b) Schedule 5.01(b) sets forth for each Subsidiary of LSG (i) its name and jurisdiction of incorporation, (ii) the number of shares of authorized capital stock of each class of its capital stock, (iii) the number of issued and outstanding shares of each class of its capital stock, the names of the holders thereof, and the number of shares held by each such holder, and (iv) the number of shares of its capital stock held in treasury. All of the issued and outstanding shares of capital stock of each Subsidiary of LSG have been duly authorized and are validly issued, fully paid, and nonassessable. LSG or one or more of its Subsidiaries holds of record and owns beneficially all of the outstanding shares of each Subsidiary of LSG, free and clear of any Encumbrances. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other Contracts or commitments that could require any of LSG and its Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any of its Subsidiaries or that could require any Subsidiary of LSG to issue, sell, or otherwise cause to become outstanding any of its own capital stock. There are no outstanding stock appreciation, phantom stock, profit participation, or similar rights with respect to any Subsidiary of LSG. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of any capital stock of any Subsidiary of LSG. None of LSG and its Subsidiaries controls directly or indirectly or has any direct or indirect equity participation in any corporation, partnership, trust, or other business association which is not a Subsidiary of LSG. Except for the Subsidiaries set forth in Schedule 5.01(b), neither LSG nor any of its Subsidiaries owns or has any right to acquire, directly or indirectly, any outstanding capital stock of, or other equity interests in, any Person.

5.02 Authority. LSG has the full power and authority to execute and deliver this Agreement and perform its obligations hereunder and under the other agreements and

instruments to be executed and delivered by it in connection with the transactions contemplated hereby and thereby. LSG has taken all necessary corporate action to authorize the execution and delivery of this Agreement and such other agreements and instruments and the consummation of the transactions contemplated hereby and thereby. This Agreement is, and the other agreements and instruments to be executed and delivered by LSG in connection with the transactions contemplated hereby will be, the legal, valid and binding obligations of LSG, enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or hereafter in effect affecting the enforcement of creditors’ rights generally.

5.03 No Violation. Except as set forth on Schedule 5.03, neither the execution and delivery of this Agreement or the other documents and instruments to be executed and delivered pursuant hereto, nor the consummation of the transactions contemplated hereby or thereby (a) violates any provision of the certificate of incorporation, certificate of formation, operating agreement, by-laws or other constitutive documents of LSG or any of its Subsidiaries, (b) violates or is in conflict with any applicable Law, or (c) violates or conflicts with or constitutes a default in any material respect (or an event that, with notice or lapse of time or both, would constitute a default in any material respect) under or results in the termination of, or accelerates the performance required by, any term or provision of any Contract to which LSG or any of its Subsidiaries is a party or by which any assets of LSG or any of its Subsidiaries are bound, or results in the creation of an Encumbrance (other than any Permitted Encumbrance) upon any of the properties or assets of LSG or any of its Subsidiaries, excluding from the foregoing clauses (b) and (c) violations, conflicts, defaults, terminations, accelerations, and creations of Encumbrances that, individually or in the aggregate, would not reasonably be expected to have an LSG Material Adverse Effect.

5.04 Consents. Neither LSG nor any of its Subsidiaries is required to give or obtain any authorization, consent, approval, order or filing with or notice to any Governmental Authority or other Person in connection with the execution and delivery of this Agreement or any other agreement or document to be delivered by LSG or the consummation by LSG of the transactions contemplated hereby or thereby.

5.05 Title to Properties.

(a) Real Property. Neither LSG nor any of its Subsidiaries own any real property. Set forth on Schedule 5.05(a) is a complete list of all Leases held in connection with, necessary for or material to the business of LSG or any of its Subsidiaries, including the date thereof and identity of the parties to such Leases, and all LSG Leased Real Property (identified by street address) held by LSG or any of its Subsidiaries pursuant to such Leases. LSG has made available to LED true, correct and complete copies of each such Lease (including any amendments, addenda, modifications, supplements or waivers thereto). LSG or one or more of its Subsidiaries has a valid leasehold interest in each LSG Leased Real Property and all such Leases are valid and binding leases, are in full force and effect and enforceable in accordance with their respective terms and none of LSG, any of it its Subsidiaries and, to the Knowledge of

LSG, any other party thereto, is (or with notice or lapse of time or both would be) in violation or breach of, or in default under, the terms of any such Lease.

(b) Title to Assets. LSG and each of its Subsidiaries has good and valid title to, or holds valid leasehold interests in, all of the material tangible personal assets and properties used or held for use by it in connection with the conduct of its business, free and clear of all Encumbrances (except Permitted Encumbrances). All of such tangible personal assets and properties have been maintained in accordance with normal industry practice and are in good repair and operating condition, ordinary wear and tear (and matters for which LSG is not responsible) excepted.

5.06 Litigation. Except as set forth on Schedule 5.06, there are no Actions pending or, to LSG’s Knowledge, threatened against or affecting LSG or any of its Subsidiaries or any of their respective assets or properties nor, to LSG’s Knowledge, is there any basis for any such Action. There is no judgment, decree, injunction or order binding upon LSG or any of its Subsidiaries that relates to any of its assets or properties or is applicable to its business. None of LSG and its Subsidiaries and none of their respective assets or properties is or are subject to any order, writ, judgment, injunction, decree or award. There are no SEC inquiries or investigations, other governmental inquiries or investigations or internal investigations pending or, to the Knowledge of LSG, threatened, in each case regarding any accounting practices of LSG or any of its Subsidiaries or any malfeasance by any director or executive officer of LSG or any of its Subsidiaries.

5.07 Contracts. As of the date hereof, except for this Agreement and for Contracts filed as exhibits to, or incorporated by reference in, LSG’s Annual Report on Form 10-KSB for the period ended December 31, 2006 and LSG’s Quarterly Reports on Form 10-QSB filed between January 1, 2007 and the date hereof (the “LSG Material Contracts”), none of LSG and its Subsidiaries is a party to or bound by any Contract: (i) of a type that would be required to be filed as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act; (ii) containing covenants binding upon LSG or any of its Subsidiaries that materially restrict the ability of LSG or any of its Subsidiaries (or which, following the contribution of the Acquired Assets contemplated hereunder, would materially restrict the ability of LSG) to compete in any business or with any Person or in any geographic area that is material to LSG and its Subsidiaries, taken as a whole, as of the date hereof, except for any such Contract that may be canceled without penalty by LSG or any of its Subsidiaries upon notice of 90 days or less; (iii) with respect to a material joint venture or material partnership agreement; or (iv) that would prevent, materially delay or materially impede LSG’s ability to consummate the transactions contemplated by this Agreement.

(b) Each of the LSG Material Contracts is valid and binding on LSG and each of its Subsidiaries party thereto and, to the Knowledge of LSG, each other party thereto and is in full force and effect. There is no material default under any LSG Material Contract by LSG or any of its Subsidiaries and no event has occurred that with the lapse of time or the giving of notice or both would constitute such a default thereunder by LSG or any of its Subsidiaries.

5.08 Compliance with Law; Permits.

(a) Each of LSG and its Subsidiaries and each of their respective predecessors has complied and is in compliance with, in all material respects, all applicable Laws (including Environmental Laws), and no Action has been filed or commenced or, to LSG’s Knowledge, threatened to be filed or commenced against any of them alleging any failure to so comply; and

(b) LSG and its Subsidiaries hold all Permits that are necessary or advisable for them to own their assets and to operate their businesses as currently conducted, except where the failure to hold such Permits has not had, and would not reasonably be expected to have, an LSG Material Adverse Effect. All such Permits are in full force and effect and, to LSG’s Knowledge, no suspension or cancellation of any of them is being threatened.

5.09 Environmental Matters.

(a) No facts, events or conditions exist on any LSG Leased Real Property or any former owned or operated sites and facilities of LSG or any of its Subsidiaries or their respective businesses that (i) violate any Environmental Law in any material respect, (ii) may give rise to any material investigatory, remedial or corrective obligations pursuant to Environmental Laws or (iii) may result in either LED or LSG incurring any material costs or expenses for Environmental Damages (whether as a result of Actions by any Governmental Authority or otherwise).

(b) Neither LSG nor any of its Subsidiaries have received any notice, report or other information regarding any actual or alleged violation of any Environmental Law or any Environmental Damages or potential Environmental Damages, including any investigatory, remedial or corrective obligations, relating to the operation of the business of LSG or any of its Subsidiaries or any condition on, under or about the LSG Leased Property or any former owned or operated sites and facilities of LSG or any of its Subsidiaries or their respective businesses. Neither LSG nor any of its Subsidiaries has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released any substance, including any Hazardous Substance, upon the LSG Leased Real Property in a manner that has given or would give rise to material Environmental Damages. There has been no release or threat of release (as the term “release” is defined by CERCLA) of any Hazardous Substance on, to, from or about any property currently or formerly owned or operated by LSG or any of its Subsidiaries or from any operations of LSG or any of its Subsidiaries.

(c) To the Knowledge of LSG, none of the following exists at any LSG Leased Real Property: (i) underground storage tanks, (ii) asbestos-containing material in any form or conditions, (iii) materials or equipment containing polychlorinated biphenyls or (iv) landfills, surface impoundments or disposal areas.

(d) Neither this Agreement nor the consummation of the transactions contemplated hereby will result in any obligations for site investigation or cleanup, or notification to or consent of any Governmental Authority or other Person, pursuant to any of the so-called “transaction-triggered” or “responsible property transfer” Environmental Laws.

(e) LSG has provided or made available to LED copies of all environmental reports in LSG’s possession or control regarding the LSG Leased Real Property or any former sites and facilities of LSG and each of its Subsidiaries or their respective businesses.

5.10 Employees; Labor Matters. (a) Schedule 5.10 contains an accurate list of the names, titles, dates of hire or dates of service, rates of compensation and remuneration of any kind, in each case, as of the date of this Agreement of all employees, officers, directors and independent contractors (other than professional service advisors) of, and consultants to, LSG or any of its Subsidiaries and/or the their respective businesses (all such individuals, the “LSG Service Providers”). Each independent contractor or consultant of LSG or any of its Subsidiaries is and has been properly characterized as an independent contractor or consultant based on the applicable standards under applicable Law. To LSG’s Knowledge, no executive, key employee, key independent contractor or significant group of employees has any plans to terminate his or her employment or engagement with LSG or any of its Subsidiaries as a result of the transactions contemplated by this Agreement or otherwise. Except as set forth on Schedule 5.10, the services provided by the LSG Service Providers are terminable at will by LSG or its Subsidiaries at no cost or expense to LSG or any of its Subsidiaries, and neither LSG nor its subsidiaries are party to an employment contract with such LSG Service Providers. Since December 31, 2006, there has not been any increase in compensation payable to or to become payable to any LSG Service Provider, except regular increases granted in the ordinary course of business.

(b) Except as set forth on Schedule 5.10, Neither LSG nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement or similar agreement with any labor organization or employee association covering the terms and conditions of any employee or employee group of LED or its Subsidiaries. There has not been, nor is there pending or, to the Knowledge of LSG, threatened any labor dispute between LSG or any of its Subsidiaries, on the one hand, and any labor organization, on the other hand, or any strike, slowdown, jurisdictional dispute, work stoppage or other similar organized labor activity involving any employee of LSG or any of its Subsidiaries or affecting LSG or any of its Subsidiaries. There has not been, nor to the Knowledge of LSG, is there threatened or pending, any labor union organizational activity involving, any employee of LSG or any of its Subsidiaries. There exists no pending or, to the Knowledge of LSG, threatened, Action between LSG or any of its Subsidiaries and any current or former director, officer or employee of LSG or any of its Subsidiaries, including any claim for discrimination, harassment, retaliation, wrongful employment or labor practices, breach of express or implied contract of employment or for violation of equal employment opportunity or wage and hour Laws. All former and current employees of LSG or any of its Subsidiaries have provided the necessary information and documentation from which to file current, effective Employment Eligibility Verifications (INS Form I-9’s) for each such employee and neither LSG nor any of its Subsidiaries has any

information or other reason to believe that any of such supplied information or documentation is in any manner false, fraudulent or in any other manner not genuine. LSG and its Subsidiaries have in all other respects complied with its obligations under the Immigration Reform and Control Act of 1986, as amended, and with all other applicable Laws pertaining to the employment or termination of employment of such employees, including all such Laws relating to labor relations, equal employment opportunity, fair employment practices, wage and hour, occupational safety and other workplace regulations and activities.

5.11 Benefit Plans.

(a) Schedule 5.11(a) sets forth a true and complete list of each LSG Employee Plan.

(b) Each LSG Employee Plan has been established, operated and administered in all material respects in accordance with its terms, and each such LSG Employee Plan is in material compliance with all applicable Laws. All contributions (including all employer contributions and employee salary reduction contributions) and premiums required to have been paid by LSG to any LSG Employee Plan under the terms of any such LSG Employee Plan or its related trust, insurance contract or other funding arrangement, or pursuant to any applicable law have been paid within the time prescribed by any such LSG Employee Plan, trust, contract or arrangement, or applicable Law. All contributions and premiums for any period ending on or before the Closing Date that are not yet due have been made to each such LSG Employee Plan or its related trust, insurance contract or other funding arrangement.

(c) All amendments and actions required to bring each LSG Employee Plan into conformity with applicable provisions of ERISA, the Code and other applicable law have been made or taken, except to the extent that such amendments or actions are not required by law to be made or taken until after the Closing Date.

(d) No LSG Employee Plan is (a) a “multiple employer plan” for purposes of Sections 4063 or 4064 of ERISA or (b) subject to Section 412 of the Code or Section 302 or Title IV of ERISA, or (c) intended to be qualified under Section 401(a) of the Code. Neither LSG nor, to the Knowledge of LSG, any LSG ERISA Affiliate has incurred any liability (including as a result of any indemnification obligation) under Title I or Title IV of ERISA for which LSG could be liable. No event has occurred, no condition exists, and there are no pending or, to the Knowledge of LSG, threatened claims by or on behalf of any LSG Employee Plan by any person covered thereby (other than ordinary claims for benefits submitted by participants or beneficiaries) or any Governmental Authority that would subject LSG, either directly or by reason of affiliation with an LSG ERISA Affiliate, to any material Tax, fine, Encumbrance, or other liability imposed by ERISA, the Code or other applicable Law. No asset of LSG is subject to any Encumbrance under ERISA or the Code. None of LSG, its Affiliates, and/or any LSG ERISA Affiliate has any liability or contributes (or has at any time contributed or had an obligation to contribute) to any “multiemployer plan” (within the meaning of Section 4001(a)(3) of ERISA).

(e) With respect to each LSG Employee Plan, LSG has provided or made available to LED true and complete copies of: (i) such LSG Employee Plan, if written, or a description of such LSG Employee Plan, if not written, and (ii) to the extent applicable to such LSG Employee Plan: all trust agreements, insurance contracts or other funding arrangements; the three most recent Forms 5500 required to have been filed with the IRS and all schedules thereto; the most recent IRS determination letter, all current summary plan descriptions, all material communications received from or sent to the IRS or the Department of Labor (including a written description of any oral communication); and all amendments and modifications to any such document.

(f) Except as set forth in Schedule 5.11(f), No LSG Employee Plan exists that could result in the payment to any LSG employee of any money or other property (including any severance payments, bonus of other compensation) or in the acceleration of any other rights or benefits to any LSG employee as a result of the transactions contemplated herein.

5.12 Taxes.

(a) All Tax Returns required to be filed by or with respect to LSG and its Subsidiaries on or prior to the Closing Date have been, in all material respects, properly prepared and timely filed (including all applicable extensions), and all such Tax Returns (including information provided therewith or with respect thereto) are true, correct and complete.

(b) LSG and each of its Subsidiaries have fully and timely paid all Taxes owed by such companies (whether or not shown on any Tax Return).

(c) No audit or other proceeding by any Governmental Authority is pending, no Governmental Authority has given notice of any intention to commence an audit or other proceeding, or assert any deficiency or claim for additional Taxes against LSG or any of its Subsidiaries, and no claim has been made by any Governmental Authority in a jurisdiction where LSG or any of its Subsidiaries does not file Tax Returns with respect to a particular Tax that it is or may be subject to taxation by that jurisdiction with respect to such Tax, and all deficiencies for Taxes asserted or assessed against LSG or any of its Subsidiaries have been fully and timely paid, settled or properly reflected in the LSG Financial Statements. The Sellers do not expect any Governmental Authority to assess any additional Taxes for any period for which Tax Returns have been filed.

(d) LSG and each of its Subsidiaries have each withheld from their respective employees, independent contractors, creditors, shareholders and third parties and timely paid to the appropriate Governmental Authority proper and accurate amounts in all material respects for all periods ending on or before the Closing Date in compliance with all Tax withholding and remitting provisions of applicable Laws and have each complied in all material respects with all Tax information reporting provisions of all applicable Laws.

(e) No Subsidiary of LSG has agreed, or is required, to include in income any adjustment under Section 481(a) of the Code by reason of a voluntary change in accounting method initiated by LSG or any of its Subsidiaries, and no Governmental Authority has initiated or proposed any such adjustment or change in accounting method (including any method for determining reserves for bad debts maintained by any Subsidiary of LSG). No Subsidiary of LSG will be required to include in post-Closing income any amount resulting from a change in accounting method, closing agreement pursuant to Section 7121 of the Code, installment sale, inter-company transaction or excess loss account or similar type of adjustment.

(f) Neither LSG nor any of its Subsidiaries has engaged in any reportable transaction described in Treasury Regulation Section 1.6011-4.

(g) LSG and each of its Subsidiaries have collected all material sales, use and value added taxes required to be collected, and have remitted, or will remit on a timely basis, such amounts to the appropriate Governmental Authority and has furnished properly completed exemption certificates for all exempt transactions.

(h) No power of attorney currently in force has been granted by LSG or any of its Subsidiaries with respect to any tax matter. Neither LSG nor any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(i) Neither LSG nor any of its Subsidiaries has filed consent under Code Section 341(f) concerning collapsible corporations. Neither LSG nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of Code Sec. 897(c)(2) during the applicable period specified in Code Sec. 897(c)(1)(A)(ii). Neither LSG nor any of its Subsidiaries is subject to any accumulated earnings tax or personal holding Companies tax. Neither LSG nor any of its Subsidiaries is currently a party to any Tax allocation or Tax sharing agreement or has an obligation to make a payment under such an agreement. Neither LSG nor any of its Subsidiaries (i) has been a member of an Affiliated Group filing a consolidated federal income Tax Return (other than an Affiliated Group the common parent of which was LSG) or (ii) has any liability for the Taxes of any person (other than LSG and any of its Subsidiaries) under Treas. Reg. § 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

(j) Neither LSG nor any of its Subsidiaries (i) has been the distributing corporation with respect to a transaction described in Code Section 355 within the three-year period ending on the date of this Agreement; (ii) has a permanent establishment or office or fixed place of business outside the United States; (iii) has a material item of income or gain reported for financial accounting purposes in a pre-closing period or otherwise attributable to pre closing period which is required to be included in taxable income for a post-closing period or (iv) has an overall foreign loss described in Code Section 904(f).

(k) Neither LSG nor any of its Subsidiaries owns shares of any controlled foreign corporations as described in Code Section 957 or passive foreign investment companies as described in Code Section 1297.

5.13 Intellectual Property.

(a) Schedule 5.13 contains a summary description of every Patent owned by LSG or any of its Subsidiaries and the owner of each such Patent. All such Patents are currently in material compliance with all formal legal requirements (including recordation of assignments) and are not subject to any maintenance fees or Taxes or Actions falling due within 90 days after the Closing Date. To the Knowledge of LSG, no facts or circumstances have occurred which, individually or in the aggregate, would render any Patent invalid and/or unenforceable. No Patent required to be listed on Schedule 5.13, has been or is now involved in any opposition, invalidation, or cancellation and, to LSG’s Knowledge, no such Action is threatened with respect to any such Patent. All products and materials under such Patent bear the proper legal notice where permitted by Law.

(b) Schedule 5.13 lists each Mark that is material to the business of LSG or any of its Subsidiaries as currently conducted and used to identify LSG products or services by LSG or any of its Subsidiaries in the United States or worldwide and the owner of each such Mark. All Marks listed and which have been registered with the United States Patent and Trademark Office have been in continuous use since their respective first uses, are currently in material compliance with all formal legal requirements (including, as applicable, the timely post-registration filing of affidavits of use and incontestability and renewal applications), and are not subject to any maintenance fees or Taxes falling due within 90 days after the Closing Date. To the Knowledge of LSG, no facts or circumstances have occurred which, individually or in the aggregate, would render any Mark invalid and/or unenforceable. No Mark required to be listed on Schedule 5.13 has been or is now involved in any opposition, invalidation, or cancellation and, to LSG’s Knowledge, no such Action is threatened with respect to any such Mark. All products and materials containing such a Mark bear the proper legal notice where permitted by Law.

(c) Schedule 5.13 lists each material copyright registration and each material unregistered copyright owned by LSG or any of its Subsidiaries and the owner of each such copyright. All copyrights required to be listed on Schedule 5.13 that have been registered are currently in material compliance with formal legal requirements and are not subject to any maintenance fees or Taxes falling due within 90 days after the Closing Date. To the Knowledge of LSG, no facts or circumstances have occurred which, individually or in the aggregate, would render any material copyright registration or material unregistered copyright required to be listed invalid and/or unenforceable. All works encompassed by such copyrights have been marked with the proper copyright notices.

(d) Schedule 5.13 lists all Software used in connection with the operation of the business of each of LSG and its Subsidiaries as currently conducted and

developed by LSG or any of its Subsidiaries and the owner of such Software. Such Software may contain Preexisting Code.

(e) Schedule 5.13 lists each category of Trade Secret created, produced, developed, and/or used by LSG or any of its Subsidiaries and the owner of each such Trade Secret. With respect to each such Trade Secret, the documentation relating to such Trade Secret is current and accurate in all material respects. To LSG’s knowledge, its Trade Secrets are sufficiently secret to confer an actual or potential economic advantage upon one who possesses the information. LSG and its Subsidiaries have taken reasonable precautions to protect such Trade Secret’s secrecy, confidentiality, and value. To the Knowledge of LSG, no such Trade Secret is part of the public knowledge or literature or has been used, divulged or appropriated either for the benefit of any third person or to LSG’s and its Subsidiaries’ detriment. No such Trade Secret is subject to any adverse claim nor, to LSG’s Knowledge, has any adverse claim been threatened with respect to any such Trade Secret and there is no basis therefor.

(f) LSG and its Subsidiaries own all material LSG Intellectual Property rights or, to the Knowledge of LSG, have the right to use pursuant to an enforceable Contract all material LSG Intellectual Property rights. Except as set forth in Schedule 5.13, each LSG Intellectual Property right immediately prior to the Closing will be owned by LSG on substantially identical terms and conditions immediately subsequent to the Closing. The parties to this Agreement acknowledge and agree that the representations and warranties contained in this Section 5.13(f) shall not apply to infringement by LSG of any third party’s Intellectual Property rights, or any liabilities or Actions relating to or alleging the same.

(g) LSG and its Subsidiaries have delivered to LED correct and complete copies of all material written documentation evidencing ownership and prosecution (if applicable) of each LSG Intellectual Property right required to be listed in Schedules 5.13(a)-(d). With respect to Intellectual Property owned by LSG and its Subsidiaries, LSG has disclosed to LED all information known to LSG which is relevant to or could impact the protectability or enforceability of its Intellectual Property. With respect to each such LSG Intellectual Property right: (i) except for grants of rights made to third parties in Contracts, LSG and its Subsidiaries possess all right, title, and interest in and to the item, free and clear of any Encumbrance; (ii) the item is not subject to any outstanding order by a Governmental Authority; and (iii) no Action is pending or, to the Knowledge of LSG, threatened (and there is no basis therefore) which challenges the enforceability, use, or ownership of the item.

(h) To LSG’S Knowledge, LSG and its Subsidiaries have not infringed upon or misappropriated any other Person’s Intellectual Property rights, and LSG and its Subsidiaries, except as set forth in Schedule 5.13, and have never received any notice alleging any such infringement or misappropriation of any other Person’s Intellectual Property right (including any claim that LSG or any of its Subsidiaries must license or refrain from using any other Person’s Intellectual Property rights).

(i) Schedule 5.13 identifies each item of Intellectual Property, other than commercially available Software, that any other Person owns and that LSG or any of its Subsidiaries uses as a material portion of any product currently sold by LSG or any of its Subsidiaries. Schedule 5.13 identifies each material Contract pursuant to which LSG or any of its Subsidiaries have granted to any Person rights under or with respect to any of their Intellectual Property (together with any exceptions) that is now in effect. LSG and its Subsidiaries have made available to LED correct and complete copies of all such Contracts with respect to such use, as amended through the date hereof. With respect to the Contracts related to each item of Intellectual Property required to be identified in Schedule 5.13, the statements in clauses (i) - (vii) below are true and correct:

(i)	except as otherwise indicated in Schedule 5.13, the Contract will not be terminated or rendered amended or supplemented as a result of the consummation of the transactions contemplated by this Agreement;

(ii)	to the Knowledge of LSG, no counter-party is in breach of such Contract, and no event has occurred which with notice or lapse of time would constitute a breach thereunder;

(iii)	no party to the Contract has repudiated any provision thereof;

(iv)	with respect to each sublicense Contract, to the Knowledge of LSG, the representations and warranties set forth in Sections 5.13(i)(i) - 5.13(i)(iii) are true and correct with respect to the underlying license Contract;

(v)	the underlying item of Intellectual Property is not subject to any outstanding order by a Governmental Authority;

(vi)	no Action is pending or, to LSG’S Knowledge, threatened (and there is no basis therefore) which challenges the enforceability of the underlying item of Intellectual Property; and

(vii)	LSG and its Subsidiaries have not granted any sublicense or similar Contract with respect to such Contract.

(j) Except as set forth in Schedule 5.13, there are no Encumbrances (other than Permitted Encumbrances) outstanding on LSG Intellectual Property rights.

(k) Except as set forth in Schedule 5.13, all former and current employees of LSG and its Subsidiaries have executed written Contracts with LSG and its Subsidiaries that assign to LSG and its Subsidiaries all rights to any inventions, improvements, discoveries, or information relating to the business of LSG and each of its Subsidiaries. No employee of LSG or its Subsidiaries has entered into any Contract that restricts or limits in any

material way the scope or type of work in which such employee may be engaged or requires such employee to transfer, assign, or disclose information concerning his or her work to any Person other than LSG and its Subsidiaries, except as may be required by Law.

5.14 SEC Filings; LSG Financial Statements.

(a) LSG has filed or otherwise transmitted all material forms, reports, statements, certifications and other documents (including all exhibits, amendments and supplements thereto) required to be filed by it with the Securities and Exchange Commission (the “SEC”) since January 1, 2004 (all forms, reports, statements, certifications and other documents (including all exhibits, amendments and supplements thereto filed by LSG since such date, collectively, the “SEC Reports”). Each of the SEC Reports, as amended, complied, and LSG’s periodic SEC Reports filed after the date hereof and during LSG’s current fiscal year will comply, as to form in all material respects with the applicable requirements of the Securities Act and the Securities Exchange Act, each as in effect on the date so filed. None of the SEC Reports contained, when filed as finally amended, any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(b) The audited consolidated financial statements of LSG (including any related notes thereto) included in LSG’s Annual Report on Form 10-KSB for the fiscal years ended December 31, 2006, 2005, and 2004 filed with the SEC have been prepared in accordance with GAAP and fairly present in all material respects the consolidated financial position of LSG and its Subsidiaries at the respective dates thereof and the consolidated statements of operations, cash flows and changes in stockholders’ equity for the periods indicated. The unaudited consolidated financial statements of LSG (including any related notes thereto) for all interim periods included in LSG’s Quarterly Reports on Form 10-QSB filed with the SEC since January 1, 2006 (together with the audited financial statements referenced in the immediately preceding sentence, the “LSG Financial Statements”) have been prepared in accordance with GAAP and fairly present in all material respects the consolidated financial position of LSG and its Subsidiaries at the respective dates thereof and the consolidated statements of operations and cash flows for the periods indicated (subject to normal period-end adjustments, none of which would, individually or in the aggregate, reasonably be expected to have an LSG Material Adverse Effect).

(c) Since the enactment of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act“), LSG has been and is in compliance in all material respects with the provisions of the Sarbanes-Oxley Act applicable to LSG.

(d) LSG has designed such disclosure controls and procedures to ensure that material information relating to LSG, including its Subsidiaries, is made known to the Chief Executive Officer and the Chief Financial Officer of LSG by others within those entities.

(e) LSG has disclosed, based on its most recent evaluation prior to the date hereof, to LSG’s auditors and the audit committee of the Board of Directors (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect in any material respect LSG’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in LSG’s internal controls over financial reporting.

(f) As of the date hereof, LSG has no Knowledge of any material weaknesses in the design or operation of internal controls over financial reporting. There is no reason to believe that LSG’s auditors and its Chief Executive Officer and Chief Financial Officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, when first due.

(g) Neither LSG nor any of its Subsidiaries has or is subject to any liabilities of any nature that would be required by GAAP to be reflected on an audited consolidated balance sheet (or in the notes thereto) of LSG and its Subsidiaries prepared to meet the requirements for inclusion in an Annual Report on Form 10-KSB, except liabilities that (i) are accrued or reserved against in the balance sheet included in the Quarterly Report on Form 10-QSB most recently filed by LSG prior to the date hereof (the “Most Recent LSG Balance Sheet”), (ii) were incurred in the ordinary course of business since the date of the Most Recent LSG Balance Sheet (none of which result from, arise out of, relate to, are in the nature of, or were caused by any breach of contract, breach of warranty, tort, infringement or violation of Law), (iii) are incurred pursuant to the transactions contemplated by this Agreement, or (iv) have been discharged or paid in full prior to the date of this Agreement in the ordinary course of business.

(h) LSG and its Subsidiaries have no continuing or existing liabilities or claims arising from or relating to the operations or the businesses of, or the bankruptcy cases or proceedings involving, The Phoenix Group Corporation, Americare Management, Inc., Lifeline Home Health Services, Inc., or Lifeline Managed Home Care, Inc.

(i) Each Option (A) was granted in compliance with all applicable Laws and all of the terms and conditions of the LSG Stock Plan pursuant to which it was issued, (B) has an exercise price per share of LSG Common Stock equal to or greater than the fair market value of a share of LSG Common Stock at the close of business on the date of such grant, (C) has a grant date identical to the date on which the LSG’s Board of Directors or compensation committee actually awarded such Option, and (D) qualifies for the tax and accounting treatment afforded to such Option in LSG’s tax returns and financial statements, respectively.

5.15 Capitalization. As of the date hereof, the authorized capital stock of LSG consists of (i) 495,000,000 shares of LSG Common Stock, (ii) 2,656,250 shares of LSG Existing Preferred Stock, and (iii) 2,000,000 shares of LSG Series B Preferred Stock. LSG has no shares of capital stock held in treasury. As of the Closing Date, after giving effect to the transactions

contemplated hereby but prior to the reverse stock split anticipated to be approved by stockholders of LSG as soon as practicable following the Closing, there shall have been no change to the authorized capital stock of LSG described above, and (i) 439,141,583 shares of LSG Common Stock shall have been issued and be outstanding (which assumes the issuance of 5,000,000 shares of restricted stock granted to Ken Honeycutt), all of which shall have been validly issued, fully paid and nonassessable and issued free of preemptive rights, (ii) 515,653 shares of LSG Existing Preferred Stock shall have been issued and be outstanding, all of which shall have been validly issued, fully paid and nonassessable and issued free of preemptive rights, (iii) 2,000,000 shares of LSG Series B Preferred Stock shall have been issued and be outstanding, all of which shall have been validly issued, fully paid and nonassessable and issued free of preemptive rights, (iv) an aggregate of 22,638,634 shares of LSG Common Stock shall have been reserved for issuance upon conversion of the LSG Preferred Stock, (v) an aggregate of 27,866,450 shares of LSG Common Stock shall have been reserved for issuance upon the exercise of outstanding warrants (“Warrants“), and (vi) an aggregate of 5,353,333 shares of LSG Common Stock shall have been reserved for issuance upon or otherwise deliverable in connection with the exercise of outstanding options (“Options”) issued pursuant to the Lighting Science Group Corporation 2005 Equity Based Incentive Compensation Plan (the “LSG Stock Plan“). Schedule 5.15 sets forth a true, correct and complete list, pro forma for the transactions contemplated by this Agreement, of each holder of LSG Preferred Stock, Warrants and Options and the number of shares of LSG Common Stock into which such LSG Preferred Stock, Warrants and Options are convertible into or exercisable for, as the case may be. All Exchange Consideration to be issued to LED pursuant to this Agreement shall be delivered by LSG to LED free and clear of any Encumbrances.

(b) Except as set forth in paragraph (a) above or as listed on Schedule 5.15(b): (i) there are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other Contracts or commitments that could require LSG to issue, sell, or otherwise cause to become outstanding any of its capital stock; (ii) there are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to LSG, and (iii) there are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the capital stock of LSG.

5.16 Absence of Certain Changes or Events. Except as set forth on Schedule 5.16, since the date of the Most Recent LSG Balance Sheet, there has been no LSG Material Adverse Effect and no event, change, condition or circumstance which, individually or in the aggregate, could reasonably be expected to have an LSG Material Adverse Effect. Without limiting the generality of the foregoing, since that date, except as expressly contemplated by this Agreement:

(a) Neither LSG nor any of its Subsidiaries has made any cash distributions or capital expenditures, including to any holder of its equity or for any such holder’s direct or indirect benefit;

(b) Neither LSG nor any of its Subsidiaries has sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than for a fair consideration in the ordinary course of business;

(c) No Person (including LSG or any of its Subsidiaries) has accelerated, terminated, modified, or cancelled any Contract or license (or series of related Contracts and licenses) involving more than $10,000 to which LSG or any of its Subsidiaries is a party or is bound;

(d) Neither LSG nor any of its Subsidiaries has delayed or postponed the payment of accounts payable and other liabilities outside the ordinary course of business;

(e) Neither LSG nor any of its Subsidiaries has cancelled, compromised, waived, or released any right or claim (or series of related rights and claims) involving more than $10,000;

(f) Neither LSG nor any of its Subsidiaries has transferred, assigned, or granted any license or sublicense of any rights under or with respect to any Intellectual Property;

(g) Neither LSG nor any of its Subsidiaries has experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property;

(h) Neither LSG nor any of its Subsidiaries has made any loans or advanced any money or other property, to any employee, officer, independent contractor or other Person (except advances to employees in the ordinary course of business not in excess of $5,000 in the aggregate);

(i) Neither LSG nor any of its Subsidiaries has established, entered into, adopted, amended, modified or terminated any LSG Employee Plan or other arrangement that would be an LSG Employee Plan if it were in existence as of the date of this Agreement;

(j) Neither LSG nor any of its Subsidiaries has increased the compensation or fringe benefits of any present or former employee or director (except for increases in salary or wage rates in the ordinary cause of business);

(k) Neither LSG nor any of its Subsidiaries has granted any severance or termination pay to any present employee or director;

(l) Neither LSG nor any of its Subsidiaries has discharged a material liability or Encumbrance outside the ordinary course of business; and

(m) Neither LSG nor any of its Subsidiaries has committed to any of the foregoing.

5.17 Insurance. LSG and its Subsidiaries maintain insurance in respect of the their properties and assets and their respective businesses, covering such risks, in such amounts, with such terms and with such insurers as is reasonably necessary to provide adequate insurance coverage for their respective properties, assets and businesses (such insurance, the “LSG Business Insurance Policies”). Schedule 5.17 contains a true and complete list of all LSG Business Insurance Policies and all of the LSG Business Insurance Policies are in full force and effect. Neither LSG nor any of its Subsidiaries is in default in any material respect with respect to any provision contained in any such LSG Business Insurance Policy held by or on behalf of LSG or any of its Subsidiaries. Neither LSG nor any of its Subsidiaries has received any notice of cancellation or non-renewal of any such LSG Business Insurance Policy.

5.18 Affiliate Transactions. Except as set forth on Schedule 5.18, no executive officer or director of LSG or any of its Subsidiaries or any Person beneficially owning 5% or more of the outstanding LSG Common Stock (including for this purpose shares of LSG Common Stock issuable upon conversion of any outstanding shares of LSG Existing Preferred Stock), or any immediate family member or Affiliate of any of the foregoing Persons, is a party to any Contract with or binding upon LSG or any of its Subsidiaries or any of their respective properties or assets or has any interest in any material property owned by LSG or any of its Subsidiaries or has engaged in any material transaction with any of the foregoing since January 1, 2006.

5.19 Brokers’ Fees. Neither LSG nor any of its Subsidiaries has any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

5.20 Private Offering. No form of general solicitation or general advertising was used by LSG or any of its Subsidiaries or their respective representatives in connection with the offer or sale of the Exchange Consideration to be issued hereunder. No registration of the Exchange Consideration to be issued hereunder or the LSG Common Stock issuable upon the conversion of the LSG Series B Preferred Stock to be issued hereunder pursuant to the provisions of the Securities Act or state securities or “blue sky” laws will be required for the offer, sale or issuance of the Exchange Consideration to be issued pursuant to this Agreement or of the LSG Common Stock issuable upon conversion of the LSG Series B Preferred Stock to be issued hereunder. LSG agrees that neither it, nor anyone acting on its behalf, will offer or sell shares of LSG Series B Preferred Stock, LSG Common Stock, or any other security so as to require the registration of the Exchange Consideration or the LSG Common Stock issuable upon conversion of the LSG Series B Preferred Stock issued hereunder pursuant to the provisions of the Securities Act or any state securities or “blue sky” laws, unless the Exchange Consideration or the LSG Common Stock issuable upon the conversion of the LSG Series B Preferred Stock issued hereunder are so registered

5.21 Takeover Statutes. No “fair price”, “moratorium”, “control share acquisition” or other similar antitakeover statute or regulation enacted under state or federal Laws in the United States applicable to LSG is applicable to the transactions contemplated hereby.

ARTICLE VI

POST-CLOSING COVENANTS

6.01 Public Announcements. The Parties shall jointly agree on any announcement or correspondence with or to the public or customers, suppliers or employees of the Parties about the terms and conditions of this Agreement or the transactions contemplated hereby, unless such announcement is required by Law, and in such case the announcing or corresponding Party will notify the other Party and provide it in advance with a copy of the public disclosure and a reasonable opportunity to comment on such proposed disclosure.

6.02 Further Assurances. Each Party shall at the request of any other Party do and perform or cause to be done and performed all such further acts and furnish, execute and deliver such other documents, instruments, certificates, notices or other further assurances as the requesting party may reasonably request, from time to time, to consummate the transactions contemplated by this Agreement, including any of the foregoing necessary to adjust the Exchange Consideration if at any time within the ninety (90) day period immediately following the Closing Date it is determined that the number of shares of LSG Series B Preferred Stock and/or LSG Common Stock issued and delivered to LED under Section 2.02 hereof was not in fact equal to 70% of the fully-diluted capitalization of LSG, having 80% of the outstanding voting power, in each case as of the Closing, as contemplated by Section 2.02.

6.03 Expenses. LSG will bear all costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby.

6.04 Remittance of Accounts Receivable and Excluded Assets. If, after the Effective Time, LED receives payment of (i) any Accounts Receivable or (ii) other accounts receivable or other receivables generated by LSG from the operation of the Business after the Effective Time, then LED shall immediately remit such collections, or cause such collections to be immediately remitted, to LSG. LSG shall promptly remit to LED, if and when received, any amounts or other items that shall be received by LSG after the Effective Time which are Excluded Assets.

6.05 Certain Tax Matters.

(a) LSG shall prepare and timely file all returns with respect to Taxes relating to the Acquired Assets for the Straddle Period. LSG shall pay and discharge all Taxes shown to be due on such Tax Returns.

(b) LED shall not file an amended Tax Return or make an election with respect to periods or portions thereof ending on or before the Closing Date without the written consent of LSG if the amendment or election adversely affects LSG, the Business or the Acquired Assets.

(c) LED shall turn over to LSG all originals and copies of all Tax Returns, schedules, work papers, records and other documents relating to Tax matters with respect to the Business and the Acquired Assets and LSG shall retain such documents that relate to any pre-Closing Tax period until 60 days after the expiration of the applicable statute of limitations with respect to such Tax matters.

(d) LSG shall be responsible for the preparation of Tax Returns (including any documentation) with respect to all transfer, documentation, sales, use, stamp, registration, and similar Taxes incurred in connection with this Agreement or any transaction contemplated thereby and shall be responsible for the payment of such Taxes. LSG shall also file all necessary documentation and Tax Returns with respect to such Taxes.

(e) Each Party shall provide each other Party with such assistance as may reasonably be requested by any of them in connection with the preparation of any filings with any taxing authorities (federal, state, local or otherwise) and with any Action relating to liability for Taxes, in either case in connection with the operation of the Business or the Acquired Assets. Such assistance shall include making employees available on a mutually convenient basis to provide information and explanation of any material provided hereunder, and shall include providing copies of any relevant information, data, reports, tax returns and supporting work schedules, to the extent such is available. LSG, on the one hand, and LED, on the other hand, each agree to reimburse the other for its reasonable out-of-pocket expenses, such as travel costs, incurred by it, him or her, as the case may be, in connection with performing obligations under this Section 6.07(e), provided, however, that such reimbursable expenses shall not include any per diem or other expenses in the nature of salary replacement or overhead absorption measures.

6.06 Personnel and Employment.

(a) Employment Offers. LSG shall, effective immediately following the Closing Date and contingent on the Closing, offer employment to all employees involved in the operation of the Business (the “Employees”). Those Employees who receive and accept LSG’s offer of employment are referred to herein as “Continued Employees.” Nothing contained in this Agreement is intended to confer upon any Continued Employee any right to continued employment after the Closing Date, and such Continued Employees shall be at-will employees who are terminable in the discretion of LSG.

(b) Liability for Certain Benefits. LSG shall be responsible for all salaries, wages and benefits of each Continued Employee arising after the Closing Date, and LED shall have no liability for salaries, wages or benefits of Continued Employees or other employees of LSG relating to periods after the Closing Date.

(c) Benefits. Contingent upon and effective as of the Closing Date, to the extent applicable: (i) LSG shall be substituted for LED as the plan sponsor and named fiduciary of each of the LED Employee Plans identified on Schedule 6.06(c) (the “Assumed

Plans”); (ii) LED shall assign, and LSG shall assume, plan sponsorship (as that term is defined in Section 3(16)(B) of ERISA) of the Assumed Plans, including all the powers, rights, obligations and responsibilities of a plan sponsor; (iii) LED shall assign, and LSG shall assume, liability for all (A) assets and (B) liabilities under the Assumed Plans arising with respect to operations of the Assumed Plans after the Closing Date provided that LSG shall be responsible for processing all benefit payment obligations with respect to the Assumed Plans regardless of when such benefit payment obligation arose, and all rights, obligations, and responsibilities of LED under any and all trust agreements, plan administrative agreements, and insurance contracts (the “Transferred Contracts”); and (iv) LSG shall replace LED wherever LED is identified as plan sponsor or contract holder or otherwise, as applicable, under the respective Transferred Contracts. Contingent upon and effective as of the Closing Date, LSG shall take such action as may be required to amend the Assumed Plans to change (x) all references to the sponsoring employer to LSG and (y) all references in the Assumed Plans to a committee or board of LED to the comparable applicable committee or Board of Directors of LSG. All powers of administration, amendment, termination, distribution or otherwise attributable to LED, a LED committee or a LED board are hereby assumed by LSG, the comparable committee of LSG or Board of Directors of LSG.

(d) Employee Records. To the extent permitted by applicable Law and contract, LED shall provide LSG with information, as reasonably requested by LSG, with respect to the Continued Employees to assist in effecting their employment by LSG following the Closing Date in an orderly fashion. In addition, to the extent permitted by applicable Law and contract, LED shall deliver to LSG on or within thirty (30) days after the Closing Date all personnel and medical records or copies thereof that are reasonably required by LSG for proper employee administration and shall transfer all files or copies thereof then relating to the Continued Employees (including benefit information and personnel files).

(e) No Third Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to or shall confer upon or be construed to confer upon any Person, including any employee (including any Continued Employee or any beneficiary or dependent thereof) of LSG or LED or legal representative thereof, any rights or remedies (including any right to employment for any specified period or rights to any specific benefits or compensation) of any nature or kind whatsoever under or by reason of this Agreement.

6.07 Competitive Opportunities. LSG hereby acknowledges that certain members of LED are involved in the business of making investments, and if any such member, or any officer, director, partner, employee, agent, operating advisor or Affiliate thereof (collectively, “Representatives”) acquires knowledge of a potential transaction or matter which may be an investment or business opportunity or prospective economic or competitive advantage in which the Company could have an interest or expectancy (a “Competitive Opportunity”) or otherwise is then exploiting any Competitive Opportunity, LSG will have no interest in, or expectation that, such Competitive Opportunity be offered to it. Any such interest or expectation is hereby renounced so that such member of LED and its Representatives shall (i) have no duty to communicate or present such Competitive Opportunity to LSG, and (ii) have the right to either

hold any such Competitive Opportunity for its (and its Representatives’) own account and benefit or to recommend, assign or otherwise transfer such Competitive Opportunity to Persons other than LSG or any Affiliate of LSG.

6.08 LED KK Shares and Kabushiki LED Shares. LED shall, as soon as practicable after the Closing Date at the sole cost and expense of LSG, (i) cause LED KK to issue certificates representing the LED KK Shares to LED and (ii) obtain approvals from LED KK and Kabushiki LED, respectively, to the extent required under the Companies Act of Japan and the articles of incorporation of LED KK and Kabushiki LED, for the transfer of the LED KK Shares and the Kabushiki LED Shares to LSG. Upon obtaining such certificates and approvals from LED KK and Kabushiki LED, LED shall deliver the certificates together with a copy of documents evidencing the approvals to LSG.

6.09 Disney Contract. LED shall use its commercially reasonable efforts to cause the rights and obligations of LED Effects under the Material Procurement Contract, dated August 28, 2007, by and between Walt Disney Imagineering, a division of Walt Disney World Co., a Florida corporation, and LED Effects to be assigned to LSG promptly following the Closing.

6.10 Common Stock Certificate. LSG shall use its reasonable best efforts to deliver to LED a certificate representing the 318,574,665 shares of LSG Common Stock constituting a portion of the Exchange Consideration as soon as practicable following the Closing.

ARTICLE VII

NO SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS

7.01 No Survival of Representations, Warranties and Covenants. The representations, warranties and covenants of LED and LSG contained in this Agreement, or in any certificate delivered in connection with this Agreement (other than the covenants contained in Article II, Article VI and Article VIII of this Agreement) shall not survive the Closing, and any and all breaches of such representations, warranties and covenants shall be deemed waived as of the Closing. Neither Party shall be deemed to have made to the other Party any representation or warranty other than as expressly made in Article IV and Article V hereof.

ARTICLE VIII

MISCELLANEOUS

8.01 Binding Effect; Assignment; No Third-Party Rights. This Agreement shall be binding upon and shall inure to the benefit of, and be enforceable by, the Parties and their permitted successors and assigns. This Agreement may not be assigned by any Party

without the prior written consent of the other Parties. Nothing herein is intended to, nor shall it, create any rights in any Person other than the Parties and their respective successors and assigns.

8.02 Entire Agreement. This Agreement (including the Schedules hereto), together with the documents incorporated by reference and the agreements to be executed in connection herewith, sets forth the entire agreement and understanding of the parties and their respective Affiliates in respect of the transactions contemplated hereby and supersedes all prior agreements, arrangements and understandings relating to the subject matter hereof and thereof, including (i) the Confidentiality Agreement, dated as of April 12, 2007, between Pegasus Partners IV, L.P. and LSG, (ii) the Confidentiality Agreement, dated as of July 25, 2007, between LED and LSG, and (iii) the letter agreement and term sheet, dated August 21, 2007, between LED and LSG.

8.03 Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

8.04 Notices. All notices, requests, demands, claims and other communications that are required or may be given pursuant to this Agreement must be in writing and delivered personally against written receipt, by facsimile or by reputable domestic or international overnight courier to the parties at the following addresses (or to the attention of such other Person or at such other address as any party may provide to the other party by notice in accordance with this Section 8.04):

	If to LED:	LED Holdings, LLC
		11390 Sunrise Gold Circle #800
		Rancho Cordova, CA 95742
		Attention: Chief Executive Officer
		Telephone: (610) 745-9590
		Facsimile: (908) 281-6033


		with a copy to (which shall not constitute notice):

		Pegasus Capital Advisors, L.P.
		505 Park Avenue, 22nd Floor
		New York, NY 10022
		Attention: Richard Weinberg; Steven Wacaster
		Telephone: (212) 710-2500
		Facsimile: (212) 355-2303

		and with a copy (which shall not constitute notice) to:

		Morrison Cohen LLP

	909 Third Avenue
	New York, NY 10022
	Attention: David A. Scherl, Esq.
	Telephone: (212) 735-8600
	Facsimile: (212) 735-8708


If to LSG:	Lighting Science Group Corporation
	2100 McKinney Avenue
	Dallas, TX 75201
	Attention: Chief Executive Officer
	Telephone: (214) 382-3630
	Facsimile: (214) 722-1391


	with a copy (which shall not constitute notice) to:


	Haynes and Boone LLP
	901 Main Street
	Suite 3100
	Dallas, TX 75202
	Attention: Gregory Samuel, Esq.
	Telephone: (214) 651-5645
	Facsimile: (214) 200-0577

Any such notice, request, demand, claim or other communication will be deemed to have been given (a) if personally delivered, when so delivered, (b) if sent by facsimile, upon transmission with electronic confirmation thereof or (c) if sent by reputable domestic or international overnight courier, when received.

8.05 Severability. If any provision of this Agreement, including any phrase, sentence, clause, section or subsection is inoperative or unenforceable for any reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatsoever.

8.06 Amendment; Waiver, etc.. No amendment, modification or discharge of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in writing and duly executed by the Party against whom enforcement of the amendment, modification, discharge or waiver is sought. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the Party granting such waiver in any other respect or at any other time. Neither the waiver by any of the Parties of a breach of or a default under any of the provisions of this Agreement, nor the failure by any of the Parties, on one or more occasions, to enforce any of the provisions of this

Agreement or to exercise any right or privilege hereunder, shall be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights or privileges hereunder. The rights and remedies of any Party based upon, arising out of or otherwise in respect of any inaccuracy or breach of any representation, warranty, covenant or agreement or failure to fulfill any condition shall in no way be limited by the fact that the act, omission, occurrence or other state of facts upon which any claim of any such inaccuracy or breach is based may also be the subject matter of any other representation, warranty, covenant or agreements to which there is no inaccuracy or breach.

8.07 Governing Law; Consent to Jurisdiction.

(a) This Agreement will be governed by and construed and interpreted in accordance with the substantive Laws of the State of New York, without giving effect to any choice of Law or conflicts of Law provision or rule that would cause the application of the Laws of a jurisdiction other than New York.

(b) All judicial proceedings brought against any party hereto arising out of or relating to this Agreement, or any obligations hereunder, shall be brought in any state court of competent jurisdiction in the State of New York, County of New York, or any federal court of competent jurisdiction in the Southern District of New York. By executing and delivering this Agreement, each party, for itself and in connection with its properties, irrevocably (i) accepts generally and unconditionally the exclusive jurisdiction and venue of such courts, (ii) waives any defense of forum non coveniens, (iii) agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to such party at its address provided in accordance with Section 8.04 hereof, (iv) agrees that service as provided in clause (iii) above is sufficient to confer personal jurisdiction over such party in any such proceeding in any such court, and otherwise constitutes effective and binding service in every respect and (v) agrees that the rights to serve process and bring proceedings provided above shall be in addition to any other rights to serve process in any other manner permitted by Law and to bring proceedings in the courts of any other jurisdiction.

8.08 Waiver of Trial By Jury. EACH PARTY HERETO WAIVES THE RIGHT TO TRIAL BY JURY AND REPRESENTS TO THE OTHER THAT IT HAS REVIEWED THE FOREGOING WAIVER WITH ITS COUNSEL AND THAT IT HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS RIGHT TO TRIAL BY JURY AFTER CONSULTATION WITH SUCH COUNSEL.

8.09 Bulk Sales. LSG hereby waives compliance by LED with the provisions of the bulk sales Laws applicable to the transfers described in this Agreement.

8.10 Counterparts. This Agreement may be executed by facsimile or other electronically-scanned signature pages and in one or more counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

8.11 Neutral Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

8.12 Interpretation. For purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires: (a) words using the singular or plural number also include the plural or singular number, respectively, and the use of any gender herein shall be deemed to it include the other genders; (b) references herein to “Articles,” “Sections,” “subsections” and other subdivisions without reference to a document are to the specified Articles, Sections, subsections and other subdivisions of this Agreement; (c) a reference to a subsection without further reference to a Section is a reference to such subsection as contained in the same Section in which the reference appears, and this rule shall also apply to other subdivisions within a Section or subsection; (d) the words “herein,” “hereof,” “hereunder,” “hereby” and other words of similar import refer to this Agreement as a whole and not to any particular provision; (e) any reference to any federal, state, local, or foreign statute or Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise, (f) the words “include,” “includes” and “including” are deemed to be followed by the phrase “without limitation” and (g) the words “ordinary course of business” and “ordinary course of the Business” are deemed to be followed by the phrase “consistent with past practices.” All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP.

[Signature Page Follows]

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized representative as of the day and year first above written.

	LED HOLDINGS, LLC


	By:
	Name:
	Title:



	LIGHTING SCIENCE GROUP CORPORATION


	By:
	Name:
	Title:

[Signature Page to Exchange and Contribution Agreement]

EX-4.2 3 c50708_ex4-2.htm

EXHIBIT 4.2

CERTIFICATE OF DESIGNATION
OF
PREFERRED STOCK
OF
LIGHTING SCIENCE GROUP CORPORATION

To Be Designated
Series B Preferred Stock
___________

Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
___________

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

RESOLVED, that pursuant to the authority conferred on the Board of Directors by the Corporation’s Certificate of Incorporation, the issuance of a series of preferred stock, par value $0.001 per share, of the Corporation which shall consist of 2,000,000 shares of convertible preferred stock be, and the same hereby is, authorized; and the Chairman and Chief Executive Officer of the Corporation be, and he hereby is, authorized and directed to execute and file with the Secretary of State of the State of Delaware a Certificate of Designation of Preferred Stock of the Corporation fixing the designations, powers, preferences and rights of the shares of such series, and the qualifications, limitations or restrictions thereof (in addition to the designations, powers, preferences and rights, and the qualifications, limitations or restrictions thereof, set forth in the Certificate of Incorporation which may be applicable to the Corporation’s preferred stock), as follows:

1. Number of Shares; Designation. A total of 2,000,000 shares of preferred stock, par value $0.001 per share, of the Corporation are hereby designated as Series B Preferred Stock (the “Series”). Shares of the Series (“Preferred Shares”) will be issued pursuant to the terms of an Exchange and Contribution Agreement, dated as of October 4, 2007 by and among the Corporation and LED Holdings, LLC (the “Exchange and Contribution Agreement”), a copy of which will be provided to any stockholder of the Corporation upon request therefor. Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Exchange and Contribution Agreement.

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

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

EXHIBIT 4.2

		Corporation are hereinafter referred to as “Junior Liquidation Shares.”

	(ii)	Pari passu with the 6% Convertible Preferred Stock of the Corporation (the “6% Preferred”) and any additional series of preferred stock which may in the future be issued by the Corporation and are designated in the amendment to the Certificate of Incorporation or the certificate of designation establishing such additional preferred stock as ranking equal to the Preferred Shares or which do not state they are Junior Liquidation Shares or Senior Liquidation Shares (as defined below). Any shares of the Corporation’s Capital Stock which are equal to the Preferred Shares with respect rights (including to redemption payments) upon liquidation, dissolution or winding-up of the affairs of the Corporation are hereinafter referred to as “Parity Liquidation Shares.”

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

3. Dividends. Dividends may be declared and paid on the Preferred Shares from funds legally available therefor as and when determined by the Board of Directors. The Series shall, with respect to the payment of dividends, rank pari passu with the Common Stock; provided, however, that for the avoidance of doubt the 6% accrual on the Preferred Shares payable upon a Liquidation Event shall nonetheless have the priority set forth in paragraph 4 below.

4. Liquidation.

(a) The liquidation value per Preferred Share, in case of the voluntary or involuntary liquidation, dissolution or winding-up of the affairs of the Corporation, shall be an amount equal to (i) $7.50 per share (the “Purchase Price”), subject to adjustment in the event of a stock split, stock dividend or similar event applicable to the Series, plus (ii) an amount accruing at the rate of 6% per annum on the Purchase Price, from the date of original issuance and compounding annually (the sum of the foregoing clauses (i) and (ii) being hereinafter referred to as the “Liquidation Value”).

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

(c) For purposes of this paragraph 4, a Change of Control shall be treated as a Liquidation Event and shall entitle each Holder to receive, upon the consummation of such Change of Control, and at

EXHIBIT 4.2

such Holder’s option, cash in an amount equal to the Liquidation Value of such Holder’s Preferred Shares.

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

5. Conversion.

(a) Right to Convert. Each Holder shall have the right to convert, at any time and from time to time, all or any part of the Preferred Shares held by such Holder into such number of fully paid and non-assessable shares of Common Stock (the “Conversion Shares”) as is determined in accordance with the terms hereof (a “Conversion”).

(b) Conversion Notice. In order to convert Preferred Shares, a Holder shall send to the Corporation by facsimile transmission, at any time prior to 3:00 p.m., central time, on the Business Day (as used herein, the term “Business Day” shall mean any day except a Saturday, Sunday or day on which the Federal Reserve Bank of Dallas, Texas is closed in the ordinary course of business) on which such Holder wishes to effect such Conversion (the “Conversion Date”), a notice of conversion in substantially the form attached as Annex I hereto (a “Conversion Notice”), stating the number of Preferred Shares to be converted, and a calculation of the number of shares of Common Stock issuable upon such Conversion in accordance with the formula set forth in paragraph 5(c) below setting forth the basis for each component thereof, including the details relating to any adjustments made to the Conversion Price. The Holder shall promptly thereafter send the Conversion Notice and the certificate or certificates being converted to the Corporation. The Corporation shall issue a new certificate for Preferred Shares to the Holder in the event that less than all of the Preferred Shares represented by a certificate are converted; provided, however, that the failure of the Corporation to deliver such new certificate shall not affect the right of the Holder to submit a further Conversion Notice with respect to such Preferred Shares and, in any such case, the Holder shall be deemed to have submitted the original of such new certificate at the time that it submits such further Conversion Notice. Except as otherwise provided herein, upon delivery of a Conversion Notice by a Holder in accordance with the terms hereof, such Holder shall, as of the applicable Conversion Date, be deemed for all purposes to be the record owner of the Common Stock to which such Conversion Notice relates. In the case of a dispute between the Corporation and a Holder as to the calculation of the Conversion Price or the number of Conversion Shares issuable upon a Conversion (including, without limitation, the calculation of any adjustment to the Conversion Price following any adjustment thereof), the Corporation shall issue to such Holder the number of Conversion Shares that are not disputed within the time periods specified in paragraph 5(d) below and shall submit the disputed calculations to a certified public accounting firm of national reputation (other than the Corporation’s regularly retained accountants) within two (2) Business Days following the Corporation’s receipt of such Holder’s Conversion Notice. The Corporation shall cause such accountant to calculate the Conversion Price as provided herein and to notify the Corporation and such Holder of the results in writing no later than three (3) Business Days following the day on which such accountant received the disputed calculations (the “Dispute Procedure”). Such accountant’s calculation shall be deemed conclusive absent manifest error. The fees of any such accountant shall be borne by the party whose calculations were most at variance with those of such accountant.

EXHIBIT 4.2

(c) Number of Conversion Shares. The number of Conversion Shares to be delivered by the Corporation to a Holder for each Preferred Share pursuant to a Conversion shall be determined by dividing (i) the Purchase Price (for the avoidance of doubt, not including the 6% accrual on the Preferred Shares payable upon a Liquidation Event) by (ii) the Conversion Price in effect on the applicable Conversion Date; provided, however, that the number of Conversion Shares issued shall never, when combined with all other then outstanding shares of Common Stock and shares of Common Stock which have been subscribed for or otherwise committed to be issued, exceed the number of shares of Common Stock then authorized to be issued by the Corporation, and in the event that there are insufficient shares of Common Stock authorized to permit the full Conversion contemplated by any Conversion Notice, the Corporation will promptly take all such actions necessary so as to permit the full Conversion contemplated by such Conversion Notice as soon as practicable after receipt by the Corporation of such Conversion Notice.

(d) Delivery of Conversion Shares. The Corporation shall, no later than the close of business on the third (3^rd) Business Day following the later of the date on which the Corporation receives a Conversion Notice from a Holder by facsimile transmission pursuant to paragraph 5(b), above, and the date on which the Corporation receives the related Preferred Shares certificate (such third Business Day, the “Delivery Date”), issue and deliver or cause to be delivered to such Holder the number of Conversion Shares determined pursuant to paragraph 5(c) above; provided, however, that any Conversion Shares that are the subject of a Dispute Procedure shall be delivered no later than the close of business on the third (3^rd) Business Day following the determination made pursuant thereto.

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

	(i)	In the event that the Corporation shall (A) pay a dividend or make a distribution, in shares of Common Stock, on any class of Capital Stock of the Corporation or any subsidiary which is not directly or indirectly wholly owned by the Corporation, (B) split or subdivide its outstanding Common Stock into a greater number of shares, or (C) combine its outstanding Common Stock into a smaller number of shares, then in each such case the Conversion Price in effect immediately prior thereto shall be adjusted so that the holder of each share of the Series thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock that such holder would have owned or have been entitled to receive after the occurrence of any of the events described above had such share of the Series been converted immediately prior to the occurrence of such event. An adjustment made pursuant to this paragraph 5(e)(i) shall become effective immediately after the close of business on the record date in the case of a dividend or distribution and shall become effective immediately after the close of business on the effective date in the case of such subdivision, split or combination, as the case may be. Any shares of Common Stock issuable in payment of a dividend shall be deemed to have been issued immediately prior to the close of business on the record date for such dividend for purposes of calculating the number of outstanding shares of Common Stock under clauses (ii) and (iii) below.

	(ii)	In the event that the Corporation shall issue or distribute New Securities pursuant to an issuance or distribution approved by a majority of the directors nominated by stockholders other than the Holders, in any such case at a price per share less than the Current Market Price or that would entitle the holders of the New Securities to subscribe for or purchase shares of Common Stock at less than Current Market Price per share

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

	(iii)	No adjustment in the Conversion Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price then in effect; provided, however, that any adjustments that by reason of this paragraph 5(e)(iii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this paragraph 5(e) shall be made to the nearest cent or nearest 1/100th of a share.

	(iv)	In the event that, at any time as a result of an adjustment made pursuant to paragraph 5(e)(i) through 5(e)(iii) above, the holder of any share of the Series thereafter surrendered for conversion shall become entitled to receive any shares of Capital Stock of the Corporation other than shares of the Common Stock, thereafter the number of such other shares so receivable upon conversion of any share of the Series shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in paragraphs 5(e)(i) through 5(e)(iii) above, and the other provisions of this paragraph 5(e) with respect to the Common Stock shall apply on like terms to any such other shares.

(f) In case of any reclassification of the Common Stock (other than in a transaction to which paragraph 5(e)(i) applies), any consolidation of the Corporation with, or merger of the Corporation into, any other entity, any merger of another entity into the Corporation (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Corporation), any sale or transfer of all or substantially all of the assets of the Corporation or any compulsory share exchange, pursuant to which share exchange the Common Stock is converted into other securities, cash or other property, then lawful provision shall be made as part of the terms of such transaction whereby the holder of each share of the Series then outstanding shall have the right thereafter, during the period such share shall be convertible, to convert such share only into the kind and amount of securities, cash and other property receivable upon the reclassification, consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Common Stock of the Corporation into which a share of the Series might have been converted immediately prior to the reclassification, consolidation, merger, sale, transfer or share exchange assuming that such holder of Common Stock failed to exercise rights of election, if any, as to the kind or amount of securities, cash or other property

EXHIBIT 4.2

receivable upon consummation of such transaction, subject to adjustment as provided in paragraph 5(e) above following the date of consummation of such transaction. As a condition to any such transaction, the Corporation or the person formed by the consolidation or resulting from the merger or which acquires such assets or which acquires the Corporation’s shares, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to (i) establish such right and (ii) ensure that any such transaction does not, in and of itself, effect the holders’ rights to the Liquidation Value. The certificate or articles of incorporation or other constituent document shall provide for adjustments which, for events subsequent to the effective date of the certificate or articles of incorporation or other constituent document, shall be as nearly equivalent as may be practicable to the adjustments provided for in this paragraph 5. The provisions of this paragraph 5(f) shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

	(g)	If:

	(i)	the Corporation shall take any action which would require an adjustment in the Conversion Price pursuant to paragraph 5(e); or

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

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

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

then, the Corporation shall cause to be delivered to each Holder in accordance with the notice provisions of the Exchange and Contribution Agreement, as promptly as possible, but at least 20 days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution or granting of rights, warrants or options or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights, warrants or options are to be determined, or (B) the date on which such reclassification, change, consolidation, merger, statutory share exchange, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, change, consolidation, merger, statutory share exchange, sale, transfer, dissolution, liquidation or winding-up. Failure to give such notice or any defect therein shall not affect the legality or validity of the proceedings described in this paragraph 5(g).

(h) The Corporation shall promptly cause a notice of the adjusted Conversion Price to be delivered to each Holder.

(i) In any case in which paragraph 5(e) provides that an adjustment shall become effective immediately after a record date for an event and the date fixed for such adjustment pursuant to paragraph

EXHIBIT 4.2

5(e) occurs after such record date but before the occurrence of such event, the Corporation may defer until the actual occurrence of such event issuing to the holder of any Preferred Shares converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment.

(j) Subject to the proviso set forth in paragraph 5(c) hereof, the Corporation shall at all times reserve and keep available for issuance upon the conversion of the shares of the Series the maximum number of each of its authorized but unissued shares of Common Stock as is reasonably anticipated to be sufficient to permit the conversion of all outstanding shares of the Series, and shall take all action required to increase the authorized number of shares of Common Stock, or any other actions necessary or desirable, if at any time there shall be insufficient authorized but unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of the Series.

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

7. Voting Rights. Each share of the Series shall entitle the holder thereof to 3.5 votes for each Conversion Share into which such share of the Series is then Convertible, which on the initial date of issuance of the Preferred Shares shall equal, when combined with the shares of Common Stock held by the initial Holder on the initial date of issuance of the Preferred Shares, in the aggregate not less than 80% of the total votes of all outstanding shares of capital stock of the Corporation, and shall otherwise have voting rights and powers equal to the voting rights and powers of the Common Stock (except as otherwise expressly provided herein or as required by law), voting together with the Common Stock as a single class and shall be entitled to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation. Fractional votes shall not, however, be permitted, and any fractional voting rights (after aggregating all shares into which shares of the Series held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).

8. Restrictions and Limitations.

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

	(i)	Redeem, purchase or otherwise acquire for value (or pay into or set aside for a sinking or other analogous fund for such purpose) any share or shares of its Capital Stock, except for (a) a transaction in which all outstanding shares of Preferred Stock are concurrently redeemed, purchased or otherwise acquired, (b) conversion into or exchange for shares of Capital Stock of the Corporation that are both (x) Junior Liquidation Shares, and (y) no greater than pari passu with the Preferred Shares with respect to the payment of dividends, or (c) the redemption of the 6% Preferred when due pursuant to the terms of this Restated Certificate of Incorporation; provided, however, that this restriction shall not apply to the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for the Corporation or any subsidiary pursuant to agreements under which the Corporation has the option to repurchase such shares at cost or at cost plus interest at a rate not to exceed nine percent

EXHIBIT 4.2

		(9%) per annum, or, if lower than cost, at fair market value, upon the occurrence of certain events, such as the termination of employment; and provided further, that the total amount applied to the repurchase of shares of Common Stock shall not exceed $100,000 during any twelve month period;

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

	(iii)	create (whether by merger or otherwise) any new series or class of Capital Stock ranking pari passu with or having a preference over the Series as to redemption or distribution of assets upon a Liquidation Event;

	(iv)	increase (whether by merger or otherwise) the authorized number of shares of the Series;

	(v)	re-issue (whether by merger or otherwise) any Preferred Shares which have been converted in accordance with the terms hereof;

	(vi)	issue (whether by merger or otherwise) any securities of the Corporation ranking pari passu with or senior to Preferred Shares as to rights upon a Liquidation Event;

	(vii)	issue (whether by merger or otherwise) any shares of the Series except pursuant to the terms of the Exchange and Contribution Agreement;

	(viii)	enter into any definitive agreement or commitment with respect to any of the foregoing; or

	(ix)	cause or permit any Subsidiary to engage in or enter into any definitive agreement or commitment with respect to any of the foregoing.

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

9. Follow-on Investment. Until October 4, 2009, the Holders of at least a majority of the Series outstanding from time to time shall have the right to cause the Corporation to sell for cash to the Holders on a pro rata basis up to an aggregate of $10,000,000 of Common Stock in one or more transactions at a 15% discount to the average closing price of the Common Stock (as reported for consolidated transactions with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, then in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System or such other system then in use or, if the Common Stock is not quoted by any such organization, then as furnished by a New York Stock Exchange member firm selected by the Corporation) for the thirty (30) consecutive trading days immediately prior to (but not including) the date of such purchase or purchases. The Holders may exercise such right by delivering in accordance with the notice provisions of the Exchange and Contribution Agreement a written notice thereof to the Corporation specifying the amount of Common Stock which the Holders intend to purchase. The Corporation and the Holders shall cooperate to close

EXHIBIT 4.2

such sale as soon as reasonably practical after receipt by the Corporation of such notice. Such sale shall be on terms and conditions customary for transactions of this type.

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

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

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

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

“Conversion Price” means $0. 282508340410028, as adjusted from time to time pursuant to the terms of paragraph 5.

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

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

EXHIBIT 4.2

“New Securities” means any Common Stock or preferred stock, whether or not authorized on the date hereof, and rights, options or warrants to purchase Common Stock or preferred stock and securities of any type whatsoever that are, or may become, convertible into Common Stock or preferred stock; provided, however, that “New Securities” does not include the following:

(i) shares of Capital Stock of the Corporation issued or issuable upon conversion or exercise of any currently outstanding securities;

(ii) shares or options or warrants for Common Stock granted to officers, directors and employees of, and consultants to, the Corporation pursuant to stock option or purchase plans or other compensatory agreements approved by the Board of Directors;

(iii) shares of Common Stock or preferred stock issued in connection with any pro rata stock split, stock dividend or recapitalization by the Corporation;

(iv) shares of Capital Stock issued to a strategic investor in connection with a strategic commercial agreement as determined by the Board of Directors;

(v) shares of Capital Stock issued to an investor in connection with a joint venture arrangement where the Corporation is a participant;

(vi) shares of Capital Stock issued pursuant to the acquisition of another corporation or entity by the Corporation by consolidation, merger, purchase of all or substantially all of the assets, or other reorganization in which the Corporation acquires, in a single transaction or series of related transactions, all or substantially all of the assets of such other corporation or entity or fifty percent (50%) or more of the voting power of such other corporation or entity or fifty percent (50%) or more of the equity ownership of such other corporation or entity;

(vii) shares of Capital Stock issued in an underwritten public securities offering pursuant to a registration statement filed under the Securities Act of 1933, as amended;

(viii) shares of Capital Stock issued to current or prospective customers or suppliers of the Corporation approved by the Board of Directors as compensation or accommodation in lieu of other payment, compensation or accommodation to such customer or supplier;

(ix) shares of Capital Stock issued to any person that provides services to the Corporation as compensation therefor pursuant to an agreement approved by the Board of Directors;

(x) shares of Common Stock issued pursuant to paragraph 9; and

(xi) securities issuable upon conversion or exercise of the securities set forth in paragraphs (i) – (x) above.

[signature page follows]

EXHIBIT 4.2

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly executed on its behalf by its undersigned Chairman and Chief Executive Officer as of October 4, 2007.


By:	/s/ Ronald E. Lusk
	Name:	Ronald E. Lusk
	Title:	Chairman, Chief Executive Officer

EXHIBIT 4.2

ANNEX I

CONVERSION NOTICE

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

	Conversion Date:

	Number of Shares of Preferred Stock to be Converted:

	Applicable Conversion Price:

	Number of Shares of Common Stock to be Issued:

	Name of Holder:

	Address:

	Signature:______________________
	Name:
	Title:

	Holder Requests Delivery to be made: (check one)

	By Delivery of Physical Certificates to the Above Address: __

	Through Depository Trust Corporation: __ (Account No:________________)

EX-4.3 4 c50708_ex4-3.htm

EXHIBIT 4.3

STOCKHOLDER VOTING AGREEMENT

THIS STOCKHOLDER VOTING AGREEMENT (this “Agreement”) is made, entered into, and effective as of October 4, 2007, by and among Lighting Science Group Corporation, a Delaware corporation (“LSG”), LED Holdings, LLC, a Delaware limited liability company (“LED”), and the persons listed on Schedule A to this Agreement (each, a “Stockholder” and, collectively, the “Stockholders”).

RECITALS

WHEREAS, concurrently with the execution and delivery of this Agreement, LSG and LED are entering into that certain Exchange and Contribution Agreement (the “Exchange Agreement”), which provides, among other things, for the exchange of LSG Series B Preferred Stock (as defined in the Exchange Agreement) for the Acquired Assets (as defined in the Exchange Agreement), all on the terms and subject to the conditions set forth in the Exchange Agreement;

WHEREAS, as an inducement and a condition to entering into the Exchange Agreement, LED and the Stockholders have agreed to enter into this Agreement; and

WHEREAS, each capitalized term used herein but not otherwise defined shall have the meaning as set forth in the Exchange Agreement.

AGREEMENT

NOW, THEREFORE, in and as consideration of and for the foregoing premises and the representations, warranties, agreements, and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Voting. During the term of this Agreement, the Stockholders and LED agree to vote, or cause to be voted (at all meetings of stockholders of LSG and pursuant to all written consents in lieu of voting at a meeting), all shares of LSG’s voting securities now or hereafter owned by them, whether beneficially or otherwise, or as to which they have voting power (the “Shares”) in accordance with the provisions of this Agreement.

2. Board of Directors.

(a) Voting. The Board of Directors of LSG (the “Board of Directors”) shall consist of nine (9) directors. For as long as any shares of LSG Series B Preferred Stock are outstanding, each of the Stockholders and LED agree to vote, or cause to be voted, all Shares owned by such Person, in such a manner as may be necessary to elect as members of the Board of Directors the following individuals:

	i.		Four (4) persons designated by holders of a majority of the LSG Series B Preferred Stock (the “Series B Directors”);

	ii.		Four (4) persons designated by the Board of Directors, who initially shall be Ronald E. Lusk, Donald Harkleroad, Daryl Snadon, and Robert Bachman (the “Common Directors”); and

	iii.		The Chief Executive Officer of LSG.

(b) Vacancies. In the event that any Common Director is removed for cause, resigns or is otherwise unable or unwilling to serve as a director of LSG prior to the expiration of the term of such Common Director, the holders of the LSG Series B Preferred Stock will take such action necessary to cause the election or appointment of a replacement director designated by the remaining Common Directors to fill the vacancy and serve as a director of LSG for the unexpired term of such Common Director. In the event that any Series B Director is removed for cause, resigns or is otherwise unable or unwilling to serve as a director of LSG prior to the expiration of the term of such Series B Director, the holders of the LSG Series B Preferred Stock will take such action necessary to cause the election or appointment of a replacement director designated by the remaining Series B Directors to fill the vacancy and serve as a director of LSG for the unexpired term of such Series B Director.

3. Reasonable Efforts to Cooperate. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper, and/or advisable under applicable laws to consummate and make effective the transactions contemplated by this Agreement. Each party hereto shall promptly consult with the other parties hereto and provide any necessary information and material with respect to all filings made by any party hereto with any Governmental Authority in connection with this Agreement and the transactions contemplated hereby.

4. Representations and Warranties of Each Stockholder. Each Stockholder and LED hereby represent and warrant, severally and not jointly, as follows:

(a) Ownership of Shares. Such Stockholder or LED is the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, which meaning shall apply for all purposes of this Agreement) of, and have the sole power to vote and dispose of, the number of Shares set forth opposite the name of such Stockholder on Schedule A or LED on Schedule B hereto, free and clear of any security interests, liens, charges, encumbrances, equities, claims, options or limitations of whatever nature and free of any other limitation or restriction (including, without limitation, any restriction on the right to vote, sell, or otherwise dispose of such Shares), except, in each case, as may exist by reason of this Agreement or pursuant to applicable law. The number of Shares set forth opposite the name of such Stockholder on Schedule A or LED on Schedule B hereto represents all of the shares of capital stock of LSG beneficially owned by such Stockholder or LSG as of the date of this Agreement. Except as permitted by this Agreement, the Shares beneficially owned by such Stockholder or LED, and the certificates representing such Shares are now, and at all times during the term hereof shall be, held by such Stockholder or LED, or by a nominee or custodian for the benefit of such Stockholder or LED, free and clear of all liens, proxies, voting trusts or agreements, understandings or arrangements or any other rights whatsoever, except for any such liens or proxies arising hereunder.

(b) Power; Binding Agreement. Such Stockholder or LED has the power and authority to enter into and perform all of such Stockholder’s or LED’s obligations under this Agreement. This Agreement has been duly and validly executed and delivered by such Stockholder or LED and, assuming due execution and delivery by, and enforceability against such Stockholder or LED, constitutes a legal, valid and binding agreement of such Stockholder or LED, enforceable against such Stockholder or LED in accordance with its terms, except as such enforcement may be limited by any equitable defense. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which such Stockholder or LED is a trustee,

or any party to any other agreement or arrangement, whose consent is required for the execution and delivery of this Agreement or the consummation by such Stockholder or LED of the transactions contemplated thereby.

(c) Consents; No Conflicts. No filing with, and no permit, authorization, consent or approval of, any Governmental Authority is necessary for the execution and delivery of this Agreement by such Stockholder or LED, the consummation by such Stockholder or LED of the transactions contemplated hereby and the compliance by such Stockholder or LED with the provisions hereof and none of the execution and delivery of this Agreement by such Stockholder or LED, the consummation by such Stockholder or LED of the transactions contemplated hereby or compliance by such Stockholder or LED with any of the provisions hereof, except in cases in which any conflict, breach, default or violation described below would not interfere with the ability of such Stockholder or LED to perform such Stockholder’s or LED’s obligations hereunder, shall (i) conflict with or result in any breach of any organizational documents applicable to LED, (ii) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, modification or acceleration) under, any of the terms, conditions or provisions of any note, loan agreement, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind, including, without limitation, any voting agreement, proxy arrangement, pledge agreement, stockholders agreement or voting trust, to which such Stockholder or LED is a party or by which such Stockholder or LED or any properties or assets of such Stockholder or LED may be bound, or (iii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to such Stockholder or LED or any properties or assets of such Stockholder or LED.

4. Termination. This Agreement shall terminate upon the second (2^nd) anniversary of the Closing.

5. No Limitation. Notwithstanding any other provision hereof, nothing in this Agreement shall be construed to prohibit any Stockholder that is or has been designated as a member of the Board of Directors, or any designee of LED to the Board of Directors, from taking any action solely in his or her capacity as a member of the Board of Directors or from exercising his or her fiduciary duties as a member of such Board of Directors.

6. Miscellaneous.

(a) Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof.

(b) Assignment. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of each Stockholder (in the case of an assignment by LED) or LED (in the case of an assignment by any Stockholder); provided, however, that LED may assign the rights and obligations of LED hereunder to any affiliate or subsidiary of LED, but no such assignment shall relieve LED of the obligations of LED hereunder.

(c) Successors and Assigns. Without limiting any other rights LED or the Stockholders may have hereunder in respect of any transfer of any Shares, each Stockholder and

LED agrees that this Agreement and the obligations hereunder shall not attach to the Shares beneficially owned by such Stockholder and LED and shall not be binding upon any person to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise, other than LED’s or such Stockholder’s heirs, guardians, administrators, successors or affiliates.

(d) Amendment. This Agreement may not be amended, changed, supplemented or otherwise modified except by an instrument in writing signed by the Stockholders and LED.

(e) Notice. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly received if given) by hand delivery or by facsimile transmission with confirmation of receipt, as follows:

	If to LED:

	LED Holdings, LLC
	11390 Sunrise Gold Circle #800
	Rancho Cordova, CA 95742
	Attention: Chief Executive Officer
	Telephone: (610) 745-9590
	Facsimile: (908) 281-6033


	with a copy (which shall not constitute notice) to:

	Pegasus Capital Advisors, L.P.
	505 Park Avenue, 22nd Floor
	New York, NY 10022
	Attention: Richard Weinberg; Steven Wacaster
	Telephone: (212) 710-2500
	Facsimile: (212) 355-2303

	and with a copy (which shall not constitute notice) to:

	Morrison Cohen LLP
	909 Third Avenue
	New York, NY 10022
	Attention: David A. Scherl, Esq.
	Telephone: (212) 735-8600
	Facsimile: (212) 735-8708

	If to a Stockholder:

	At the addresses and facsimile numbers set forth on Schedule A hereto.

	with a copy (which shall not constitute notice) to:

	Haynes and Boone, LLP
	901 Main Street, Suite 3100
	Dallas, Texas 75202-3789
	Attention: Greg R. Samuel, Esq.
	Fax: 214.200.0577

or to such other address or facsimile number as the person to whom notice is given may have previously furnished to the other parties hereto in writing in the manner set forth above.

(f) Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

(g) Remedies. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.

(h) Waiver. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance.

(i) Third Parties. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and any other third party successor, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

(j) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware.

(k) Specific Performance; Consent to Jurisdiction. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any state court located in the State of New York, County of New York, or any Federal court located in the Southern District of New York, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of any state court located in the State of New York, County of New York, or any

Federal court located in the Southern District of New York in the event any dispute arises out of this Agreement or any transaction contemplated by this Agreement, (ii) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (iii) agrees that it shall not bring any action relating to this Agreement or any transaction contemplated by this Agreement in any court other than any such court. The parties hereto irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the courts of the State of New York, County of New York or in any Federal court located in the Southern District of New York, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in a inconvenient forum.

(l) Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.

(m) Counterparts. This Agreement may be executed in counterparts (by fax or otherwise), each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same agreement.

Remainder of Page Intentionally Left Blank. Signature Page(s) to Follow.

EXHIBIT 4.3

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Stockholder Voting Agreement effective as of the date first written above.

LSG:

Lighting Science Group Corporation


By:
Name:
Title:

LED:


LED Holdings, LLC

By:
Name:
Title:

STOCKHOLDERS:



Ronald D. Lusk



Donald Harkleroad



Daryl Snadon


USGT Investors, L.P.
By: USGT Investors Management Company, Inc.,
its General Partner


By:
Name:	Robert E. Bachman
Title:	President

EXHIBIT 4.3

SCHEDULE A

Stockholders

Name of Stockholder	Shares
Ronald Lusk		6,910,258 shares of Common Stock
8238 Forest Hills Blvd.
Dallas, TX 75218
Fax: 214.722.1391
Donald Harkleroad		2,455,903 shares of Common Stock
The Bristol Company
Suite 500
2091 Governors Lake Drive
Norcross, GA 30071
Fax: 678.533.9010
Daryl Snadon		2,908,950 shares of Common Stock
Beltway Development Company
15280 Addison Road
Suite 300
Addison, TX 75001
Fax: 972.385.8039
Robert Bachman		2,596,922 shares of Common Stock
USGT Investors, L.P.
3838 Oak Lawn Avenue
Suite 1775
Dallas, TX 75219
Fax: 214.661.7760

EXHIBIT 4.3

SCHEDULE B

LED

Name of Stockholder	Shares
LED Holdings, LLC		2,000,000 shares of LSG Series B
		Preferred Stock

		318,574,665 shares of Common Stock

EX-4.4 5 c50708_ex4-4.htm c50708_ex4-4.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

Exhibit 4.4

EXECUTION VERSION

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into as of the 4th day of October, 2007, by and between Lighting Science Group Corporation, a Delaware corporation (the “Company”) and LED Holdings, LLC (the “Investor” ).

WHEREAS, upon the terms and subject to the conditions of the Exchange and Contribution Agreement, by and between the Company and the Investor, dated as of the date hereof, the Company has agreed to issue and sell to the Investor Preferred Stock and;

WHEREAS, the Investor and the Company desire to enter into this Agreement to provide the Investor with certain rights relating to the registration of shares of Common Stock and Preferred Stock.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. DEFINITIONS. The following capitalized terms used herein have the following meanings:

“Agreement” means this Agreement, as amended, restated, supplemented, or otherwise modified from time to time.

“Commission” means the Securities and Exchange Commission, or any other federal agency then administering the Securities Act or the Exchange Act.

“Common Stock” means the common stock, par value $0.001 per share, of the Company.

“Company” is defined in the preamble to this Agreement.

“Demand Registration” is defined in Section 2.1.1.

“Demanding Holder” is defined in Section 2.1.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.

“Form S-3” is defined in Section 2.3.

“Guarantors” means the Persons listed on Schedule A.

“Indemnified Party” is defined in Section 4.3.

“Indemnifying Party” is defined in Section 4.3.

“Investor” is defined in the preamble to this Agreement.

“Investor Indemnified Party” is defined in Section 4.1.

“Majority-in-Interest” is defined in Section 2.1.1.

“Maximum Number of Securities” is defined in Section 2.1.4.

“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

“Piggy-Back Registration” is defined in Section 2.2.1.

“Preferred Stock” means the Series B Preferred Stock, par value $0.001 per share, of the Company.

“Pro Rata” is defined in Section 2.1.3.

“Register,” “Registered” and “Registration” mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.

“Registrable Securities” mean all of the shares of Common Stock and the shares of Common Stock issuable pursuant to the conversion of the Preferred Stock owned or held by the Investor and the transferees of the Investor. Registrable Securities include any shares of capital stock or other securities of the Company issued as a dividend or other distribution with respect to or in exchange for or in replacement of such Registrable Securities. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when: (a) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (b) such securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of them shall not require registration under the Securities Act; (c) such securities shall have ceased to be outstanding, or (d) the Registrable Securities are saleable under Rule 144(k) of the Securities Act.

“Registration Statement” means a registration statement filed by the Company with the Commission in compliance with the Securities Act and the rules and regulations promulgated thereunder for a public offering and sale of Registrable Securities (other than a registration statement on Form S-4 or Form S-8, or their successors, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another entity).

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.

“Underwriter” means a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer's market-making activities.

2. REGISTRATION RIGHTS.

2.1 Demand Registration.

2.1.1 Request for Registration. At any time and from time to time the holders of a majority-in-interest of the Registrable Securities held by the Investor or the transferees of the Investor (determined on a fully diluted basis, i.e., assuming the conversion of all Registrable Securities consisting of Preferred Stock, the “Majority-in-Interest”), may make a written demand for registration under the Securities Act of all or part of their Registrable Securities (a “Demand Registration”). Any demand for a Demand Registration shall specify the number of shares of Registrable Securities proposed to be sold and the intended method(s) of distribution thereof. The Company shall promptly notify all holders of Registrable Securities of such demand, and each holder of Registrable Securities who wishes to include all or a portion of such holder's Registrable Securities in the Demand Registration (each such holder including shares of Registrable Securities in such registration, a “Demanding Holder”) shall so notify the Company within fifteen (15) days after the receipt by the holder of the notice from the Company. Upon any such request, the Demanding Holders shall be entitled to have their Registrable Securities included in the Demand Registration, subject to Section 2.1.4 and the provisos set forth in Section 3.1.1. The Company shall not be obligated to effect more than an aggregate of three (3) Demand Registrations under this Section 2.1.1 in respect of Registrable Securities.

2.1.2 Effective Registration. A registration will not count as a Demand Registration until the Registration Statement filed with the Commission with respect to such Demand Registration registering all of the Registrable Securities specified in the notice received pursuant to Section 2.1.1, determined on the basis described in Section 2.1.1, has been declared effective and the Company has complied with all of its obligations under this Agreement with respect thereto; provided, however, that if, after such Registration Statement has been declared effective, the offering of Registrable Securities pursuant to a Demand Registration is interfered with by any stop order or injunction of the Commission or any other governmental agency or court, the Registration Statement with respect to such Demand Registration will be deemed not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a Majority-in-Interest of the Demanding Holders thereafter elect to continue the offering; provided, further, that the Company shall not be obligated to file a second Registration Statement until a Registration Statement that has been filed is counted as a Demand Registration or is terminated.

2.1.3 Reduction of Offering. If the Company chooses to engage in an underwritten public offering of a Demand Registration and if the managing underwriter or

underwriters for a Demand Registration that is to be an underwritten offering advises the Company and the Demanding Holders in writing that the dollar amount or number of Registrable Securities which the Demanding Holders desire to sell, taken together with all other shares of Common Stock or other securities which the Company desires to sell and the shares of Common Stock or other securities, if any, as to which registration has been requested pursuant to written contractual piggy-back registration rights held by other stockholders of the Company who desire to sell, exceeds the maximum dollar amount or maximum number of securities that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of securities, as applicable, the “Maximum Number of Securities”), then the Company shall include in such registration: (i) first, the Registrable Securities as to which Demand Registration has been requested by the Demanding Holders (pro rata in accordance with the number of securities that each such Person has requested be included in such registration, regardless of the number of securities held by each such Person (such proportion is referred to herein as “Pro Rata”)) that can be sold without exceeding the Maximum Number of Securities; (ii) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i), the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Securities; (iii) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i) and (ii), the shares of Common Stock or other securities for the account of other Persons that the Company is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Securities.

2.1.4 Withdrawal. If a Majority-in-Interest of the Demanding Holders disapprove of the terms of any underwriting or are not entitled to include all of their Registrable Securities in any offering, such Majority-in-Interest of the Demanding Holders may elect to withdraw from such offering by giving written notice to the Company and the Underwriter or Underwriters of their request to withdraw prior to the effectiveness of the Registration Statement filed with the Commission with respect to such Demand Registration. If the Majority-in-Interest of the Demanding Holders withdraws from a proposed offering relating to a Demand Registration, then such registration shall not count as a Demand Registration provided for in Section 2.1.1.

2.2 Piggy-Back Registration.

2.2.1 Piggy-Back Rights. Except with respect to the registration statements filed or to be filed under Rule 415 pursuant to either: (i) the Registration Rights Agreement, dated as of May 12, 2005, between the Company and the Purchasers listed on Exhibit A thereto or (ii) that certain Securities Purchase Agreement, dated as of March 9, 2007, between LSG and the investors party thereto, if at any time the Company proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for stockholders of the Company for their account (or by the Company and by stockholders of the Company including, without limitation, pursuant to Section 2.1), other than a Registration Statement (i) filed in connection with any employee stock option

or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company's existing stockholders, (iii) for an offering of debt that is convertible into equity securities of the Company or (iv) for a dividend reinvestment plan, then the Company shall (x) give written notice of such proposed filing to the holders of Registrable Securities as soon as practicable but in no event less than ten (10) days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, of the offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to register the sale of such number of Registrable Securities as such holders may request in writing within ten (10) days following receipt of such notice (a “Piggy-Back Registration”). The Company shall cause such Registrable Securities to be included in such registration and shall use its reasonable best efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a PiggyBack Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All holders of Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves an Underwriter or Underwriters shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such Piggy-Back Registration.

2.2.2 Reduction of Offering. If the managing Underwriter or Underwriters for a Piggy-Back Registration that is to be an underwritten offering advises the Company and the holders of Registrable Securities in writing that the dollar amount or number of securities which the Company desires to sell, taken together with shares of Common Stock or other securities, if any, as to which registration has been demanded pursuant to written contractual arrangements with Persons other than the holders of Registrable Securities hereunder, the Registrable Securities as to which registration has been requested under this Section 2.2, and the shares of Common Stock or other securities, if any, as to which registration has been requested pursuant to the written contractual piggy-back registration rights of other stockholders of the Company, exceeds the Maximum Number of Securities, then the Company shall include in any such registration:

(i) If the registration is undertaken for the Company's account: (A) first, the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the shares of Common Stock or other securities, if any, that are Registrable Securities, as to which registration has been requested pursuant to the applicable written contractual piggy-back registration rights of such security holders, Pro Rata, that can be sold without exceeding the Maximum Number of Securities; and (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), the shares of Common Stock or other securities for the account of other Persons that the Company is obligated to register pursuant to written contractual piggy-back registration rights with such Persons and that can be sold without exceeding the Maximum Number of Securities; and

(ii) If the registration is a “demand” registration undertaken at the demand of Persons other than the holders of Registrable Securities pursuant to written contractual arrangements with such Persons, (A) first, the shares of Common Stock or other securities for the account of the demanding Persons that can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Securities; (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), the shares of Common Stock or other securities comprised of Registrable Securities, Pro Rata, as to which registration has been requested pursuant to the terms hereof, that can be sold without exceeding the Maximum Number of Securities; and (D) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A), (B) and (C), the shares of Common Stock or other securities for the account of other Persons that the Company is obligated to register pursuant to written contractual arrangements with such Persons, that can be sold without exceeding the Maximum Number of Securities.

2.2.3 Withdrawal. Any holder of Registrable Securities may elect to withdraw such holder's request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the Registration Statement. The Company (whether on its own determination or as the result of a withdrawal by Persons making a demand pursuant to written contractual obligations) may withdraw a registration statement at any time prior to the effectiveness of the Registration Statement. Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by the holders of Registrable Securities in connection with such Piggy-Back Registration as provided in Section 3.3.

2.3 Registrations on Form S-3. The holders of Registrable Securities may at any time and from time to time, request in writing that the Company register the resale of any or all of such Registrable Securities on Form S-3 or any similar short-form registration which may be available at such time (“Form S-3”); provided, however, that the Company shall not be obligated to effect such request through an underwritten offering. Upon receipt of such written request, the Company will promptly give written notice of the proposed registration to all other holders of Registrable Securities, and, as soon as practicable thereafter, effect the registration of all or such portion of such holder's or holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities or other securities of the Company, if any, of any other holder or holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration pursuant to this Section 2.3 (i) if Form S-3 is not available for such offering or (ii) if the holders of the Registrable Securities, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at any aggregate price to the public of less than $500,000. Registrations effected pursuant to this Section 2.3 shall not be counted as Demand Registrations effected pursuant to Section 2.1.

3. REGISTRATION PROCEDURES.

3.1 Filings; Information. Whenever the Company is required to effect the registration of any Registrable Securities pursuant to Section 2, the Company shall use its reasonable best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method(s) of distribution thereof as expeditiously as practicable, and in connection with any such request:

3.1.1 Filing Registration Statement. The Company shall, as expeditiously as possible and in any event within sixty (60) days after receipt of a request for a Demand Registration pursuant to Section 2.1, prepare and file with the Commission a Registration Statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of all Registrable Securities to be registered thereunder in accordance with the intended method(s) of distribution thereof, and shall use its reasonable best efforts to cause such Registration Statement to become and remain effective for the period required by Section 3.1.3; provided, however, that the Company shall have the right to defer any Demand Registration for up to thirty (30) days, and any Piggy-Back Registration for such period as may be applicable to deferment of any demand registration to which such Piggy-Back Registration relates, in each case if the Company shall furnish to the holders a certificate signed by the Chief Executive Officer or Chairman of the Board of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be materially detrimental to the Company and its stockholders for such Registration Statement to be effected at such time; provided further, however, that the Company shall not have the right to exercise the right set forth in the immediately preceding proviso more than once in any 365-day period in respect of a Demand Registration hereunder.

3.1.2 Copies. The Company shall, prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to the holders of Registrable Securities included in such registration, and such holders' legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such Registration Statement (including each preliminary prospectus), and such other documents as the holders of Registrable Securities included in such registration or legal counsel for any such holders may request in order to facilitate the disposition of the Registrable Securities owned by such holders.

3.1.3 Amendments and Supplements. The Company shall prepare and file with the Commission such amendments, including post-effective amendments, and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and in compliance with the provisions of the Securities Act until all Registrable Securities and other securities covered by such Registration Statement have been disposed of in accordance with the intended method(s) of distribution set forth in such Registration Statement or such securities have been withdrawn.

3.1.4 Notification. After the filing of a Registration Statement, the Company shall promptly, and in no event more than two (2) business days after such filing, notify the holders of Registrable Securities included in such Registration Statement of such filing, and shall further notify such holders promptly and confirm such advice in writing in all events within two (2) business days of the occurrence of any of the following: (i) when such Registration Statement becomes effective; (ii) when any post-effective amendment to such Registration Statement becomes effective; (iii) the issuance or threatened issuance by the Commission of any stop order (and the Company shall take all actions required to prevent the entry of such stop order or to remove it if entered); and (iv) any request by the Commission for any amendment or supplement to such Registration Statement or any prospectus relating thereto or for additional information or of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the securities covered by such Registration Statement, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and promptly make available to the holders of Registrable Securities included in such Registration Statement any such supplement or amendment; except that before filing with the Commission a Registration Statement or prospectus or any amendment or supplement thereto, including documents incorporated by reference, the Company shall furnish to the holders of Registrable Securities included in such Registration Statement and to the legal counsel for any such holders, copies of all such documents proposed to be filed sufficiently in advance of filing to provide such holders and legal counsel with a reasonable opportunity to review such documents and comment thereon, and the Company shall not file any Registration Statement or prospectus or amendment or supplement thereto, including documents incorporated by reference, to which such holders or their legal counsel shall object.

3.1.5 State Securities Laws Compliance. The Company shall use its reasonable best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph or subject itself to taxation in any such jurisdiction.

3.1.6 Agreements for Disposition. The Company shall enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities. The representations, warranties and covenants of the Company in any underwriting agreement which are made to or for the benefit of any Underwriters, to the extent applicable, shall also be made to and for the benefit of the holders of Registrable

Securities included in such registration statement. No holder of Registrable Securities included in such registration statement shall be required to make any representations or warranties in the underwriting agreement except, if applicable, with respect to such holder's organization, good standing, authority, title to Registrable Securities, lack of conflict of such sale with such holder's material agreements and organizational documents, and with respect to written information relating to such holder that such holder has furnished in writing expressly for inclusion in such Registration Statement. Holders of Registrable Securities shall agree to such covenants and indemnification and contribution obligations for selling stockholders as are customarily contained in agreements of that type. Further, such holders shall cooperate fully in the preparation of the Registration Statement and other documents relating to any offering in which they include securities pursuant to Section 2 hereof. Each holder shall also furnish to the Company such information regarding itself, the Registrable Securities held by such holder, as applicable, and the intended method of disposition of such securities as shall be reasonably required to effect the registration of the Registrable Securities.

3.1.7 Cooperation. The principal executive officer of the Company and all other officers and members of the management of the Company shall cooperate fully in any offering of Registrable Securities hereunder, which cooperation shall include, without limitation, the preparation of the Registration Statement with respect to such offering and all other offering materials and related documents, and participation in meetings with Underwriters, attorneys, accountants and potential investors.

3.1.8 Records. The Company shall make available for inspection by the holders of Registrable Securities included in such Registration Statement, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any holder of Registrable Securities included in such Registration Statement or any Underwriter, all financial and other records, pertinent corporate documents and properties of the Company, as shall be necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information requested by any of them in connection with such Registration Statement.

3.1.9 Opinions and Comfort Letters. The Company shall furnish to each holder of Registrable Securities included in any Registration Statement a signed counterpart, addressed to such holder, of (i) any opinion of counsel to the Company delivered to any Underwriter and (ii) any comfort letter from the Company's independent public accountants delivered to any Underwriter. In the event no legal opinion is delivered to any Underwriter, the Company shall furnish to each holder of Registrable Securities included in such Registration Statement, at any time that such holder elects to use a prospectus, an opinion of counsel to the Company to the effect that the Registration Statement containing such prospectus has been declared effective and that no stop order is in effect.

3.1.10 Earnings Statement. The Company shall comply with all applicable rules and regulations of the Commission and the Securities Act, and make available to its stockholders, as soon as practicable, an earnings statement covering a period of twelve (12) months, beginning within three (3) months after the effective date of the registration statement,

which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

3.1.11 Listing. The Company shall use its reasonable best efforts to cause all Registrable Securities included in any registration to be listed on such exchanges or otherwise designated for trading in the same manner as similar securities issued by the Company are then listed or designated or, if no such similar securities are then listed or designated, in a manner satisfactory to the holders of a Majority-in-Interest of the Registrable Securities included in such registration.

3.2 Obligation to Suspend Distribution. Upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.1.4(iv), or, in the case of a resale registration on Form S-3 pursuant to Section 2.3 hereof, upon any suspension by the Company, pursuant to a written insider trading compliance program adopted by the Company's Board of Directors, of the ability of all “insiders” covered by such program to transact in the Company's securities because of the existence of material non-public information, each holder of Registrable Securities included in any registration shall immediately discontinue disposition of such Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such holder receives the supplemented or amended prospectus contemplated by Section 3.1.4(iv) or the restriction on the ability of “insiders” to transact in the Company's securities is removed, as applicable, and, if so directed by the Company, each such holder will deliver to the Company all copies, other than permanent file copies then in such holder's possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice.

3.3 Registration Expenses. The Company shall bear all costs and expenses incurred in connection with any Demand Registration pursuant to Section 2.1, any Piggy-Back Registration pursuant to Section 2.2, and any registration on Form S-3 effected pursuant to Section 2.3, and all expenses incurred in performing or complying with its other obligations under this Agreement, whether or not the Registration Statement becomes effective, including, without limitation: (i) all registration and filing fees; (ii) fees and expenses of compliance with securities or “blue sky” laws (including fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities); (iii) printing expenses; (iv) the Company's internal expenses (including, without limitation, all salaries and expenses of its officers and employees); (v) the fees and expenses incurred in connection with the listing of the Registrable Securities as required by Section 3.1.11; (vi) National Association of Securities Dealers, Inc. fees; (vii) fees and disbursements of counsel for the Company and fees and expenses for independent certified public accountants retained by the Company (including the expenses or costs associated with the delivery of any opinions or comfort letters requested pursuant to Section 3.1.9); (viii) the fees and expenses of any special experts retained by the Company in connection with such registration and (ix) the fees and expenses of one legal counsel selected by the holders of a Majority-in-Interest of the Registrable Securities included in such registration. The Company shall have no obligation to pay any underwriting discounts or selling commissions attributable to the Registrable Securities being sold by the holders thereof, which underwriting discounts or selling commissions shall be borne by such holders. Additionally, in an

underwritten offering, all selling stockholders and the Company shall bear the expenses of the Underwriter pro rata in proportion to the respective amount of shares each is selling in such offering.

3.4 Information. The holders of Registrable Securities shall provide such information as may reasonably be requested by the Company, or the managing Underwriter, if any, in connection with the preparation of any Registration Statement, including amendments and supplements thereto, in order to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 2 and in connection with the Company's obligation to comply with federal and applicable state securities laws.

4. INDEMNIFICATION AND CONTRIBUTION.

4.1 Indemnification by the Company. The Company agrees to indemnify and hold harmless the Investor and each other holder of Registrable Securities, and each of their respective officers, employees, affiliates, directors, partners, members, attorneys and agents, and each Person, if any, who controls the Investor and each other holder of Registrable Securities (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each, an “Investor Indemnified Party”), from and against any expenses, losses, judgments, claims, damages or liabilities, whether joint or several, arising out of or based upon any untrue statement (or allegedly untrue statement) of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arising out of or based upon any omission (or alleged omission) to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or any rule or regulation promulgated thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration; and the Company shall promptly reimburse the Investor Indemnified Party for any legal and any other expenses reasonably incurred by such Investor Indemnified Party in connection with investigating and defending any such expense, loss, judgment, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such expense, loss, claim, damage or liability arises out of or is based upon any untrue statement or allegedly untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, final prospectus, or summary prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to the Company, in writing, by the selling holder with which such Investor Indemnified Party is affiliated expressly for use therein. The Company also shall indemnify any Underwriter of the Registrable Securities, their officers, affiliates, directors, partners, members and agents and each Person who controls such Underwriter on substantially the same basis as that of the indemnification provided above in this Section 4.1.

4.2 Indemnification by Holders of Registrable Securities. Each selling holder of Registrable Securities will, in the event that any registration is being effected under the Securities Act pursuant to this Agreement of any Registrable Securities held by such selling

holder, indemnify and hold harmless the Company, each of its directors and officers and each underwriter (if any), and each other selling holder and each other Person, if any, who controls another selling holder or such underwriter within the meaning of the Securities Act, against any losses, claims, judgments, damages or liabilities, whether joint or several, insofar as such losses, claims, judgments, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or allegedly untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or the alleged omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading, if the statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by such selling holder expressly for use therein, and shall reimburse the Company, its directors and officers, and each other selling holder or controlling Person for any legal or other expenses reasonably incurred by any of them in connection with investigation or defending any such loss, claim, damage, liability or action. Each selling holder's indemnification obligations hereunder shall be several and not joint and shall be limited to the amount of any net proceeds actually received by such selling holder from the sale of Registrable Securities which gave rise to such indemnification obligation.

4.3 Conduct of Indemnification Proceedings. Promptly after receipt by any Person of any notice of any loss, claim, damage or liability or any action in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such Person (the “Indemnified Party”) shall, if a claim in respect thereof is to be made against any other Person for indemnification hereunder, notify such other Person (the “Indemnifying Party”) in writing of the loss, claim, judgment, damage, liability or action; provided, however, that the failure by the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which the Indemnifying Party may have to such Indemnified Party hereunder, except and solely to the extent the Indemnifying Party is actually prejudiced by such failure. If the Indemnified Party is seeking indemnification with respect to any claim or action brought against the Indemnified Party, then the Indemnifying Party shall be entitled to participate in such claim or action, and, to the extent that it wishes, jointly with all other Indemnifying Parties, to assume control of the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume control of the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that in any action in which both the Indemnified Party and the Indemnifying Party are named as defendants, the Indemnified Party shall have the right to employ separate counsel (but no more than one such separate counsel) to represent the Indemnified Party and its controlling Persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, with the fees and expenses of such counsel to be paid by such Indemnifying Party if, based upon the written opinion of counsel of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. No Indemnifying Party shall, without the

prior written consent of the Indemnified Party, consent to entry of judgment or effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such judgment or settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding.

4.4 Contribution.

4.4.1 If the indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of any loss, claim, damage, liability or action referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the Indemnified Parties and the Indemnifying Parties in connection with the actions or omissions which resulted in such loss, claim, damage, liability or action, as well as any other relevant equitable considerations. The relative fault of any Indemnified Party and any Indemnifying Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such Indemnified Party or such Indemnifying Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

4.4.2 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding Section 4.4.1.

4.4.3 The amount paid or payable by an Indemnified Party as a result of any loss, claim, damage, liability or action referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no holder of Registrable Securities shall be required to contribute any amount in excess of the dollar amount of the net proceeds (after payment of any underwriting fees, discounts, commissions or taxes) actually received by such holder from the sale of Registrable Securities which gave rise to such contribution obligation. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

5. UNDERWRITING AND DISTRIBUTION.

5.1 Rule 144. The Company covenants that it shall file any reports required to be filed by it under the Securities Act and the Exchange Act and shall take such further action as the holders of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holders to sell Registrable Securities without registration under the Securities

Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rules may be amended from time to time, or any similar Rule or regulation hereafter adopted by the Commission.

6. MISCELLANEOUS.

6.1 Other Registration Rights. Except with respect to (i) the Company’s 6% Convertible Preferred Stock, (ii) the investors purchasing Common Stock pursuant to that certain Securities Purchase Agreement, dated as of March 9, 2007, between LSG and the investors party thereto and (iii) the Guarantors, the Company represents and warrants that no Person, other than a holder of the Registrable Securities, has any right to require the Company to register any shares of the Company's capital stock for sale or to include shares of the Company's capital stock in any registration filed by the Company for the sale of shares of capital stock for its own account or for the account of any other Person. The Investor hereby agrees that it shall not cause the Company to file with the Commission a Registration Statement covering the resale of the Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act at any time prior to the date that is one (1) year from the date of this Agreement.

6.2 Assignment; No Third Party Beneficiaries. This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part. This Agreement and the rights, duties and obligations of the holders of Registrable Securities hereunder may be freely assigned or delegated by such holder of Registrable Securities in conjunction with and to the extent of any transfer by any holder of at least 1% of the Registrable Securities outstanding at the time of such transfer. This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and their respective successors and the permitted assigns of the Investor or holder of Registrable Securities or of any assignee of the Investor or holder of Registrable Securities. This Agreement is not intended to confer any rights or benefits on any Persons that are not party hereto other than as expressly set forth in Article 4 and this Section 6.2.

6.3 Notices. All notices, requests, demands, claims and other communications that are required or may be given pursuant to this Agreement must be in writing and delivered personally against written receipt, by facsimile or by reputable domestic or international overnight courier to the parties at the following addresses (or to the attention of such other Person or at such other address as any party may provide to the other party by notice in accordance with this Section 8.04):

If to LED:	LED Holdings, Inc.
	11390 Sunrise Gold Circle #800
	Rancho Cordova, CA 95742
	Attention:	Chief Executive Officer
	Telephone:	(610) 745-9590
	Facsimile:	(908) 281-6033

	with a copy to (which shall not constitute notice):

	Pegasus Capital Advisors, L.P.
	505 Park Avenue, 22nd Floor
	New York, NY 10022
	Attention:	Richard Weinberg; Steven Wacaster
	Telephone:	(212) 710-2500
	Facsimile:	(212) 355-2303
	and with a copy (which shall not constitute notice) to:

	Morrison Cohen LLP
	909 Third Avenue
	New York, NY 10022
	Attention: David A. Scherl, Esq.
	Telephone:	(212) 735-8600
	Facsimile:	(212) 735-8708

If to LSG:	Lighting Science Group Corporation
	2100 McKinney Avenue
	Dallas, TX
	Attention:	Chief Executive Officer
	Telephone:	(214) 382-3630
	Facsimile:	(214) 722-1391

	with a copy (which shall not constitute notice) to:
	Haynes and Boone LLP
	901 Main Street
	Suite 3100
	Dallas, TX 75202
	Attention:	Gregory Samuel, Esq.
	Telephone:	(214) 651-5645
	Facsimile:	(214) 200-0577

6.4 Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible that is valid and enforceable.

6.5 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument.

6.6 Entire Agreement. This Agreement (including all agreements entered into pursuant hereto and all certificates and instruments delivered pursuant hereto and thereto) constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior and contemporaneous agreements, representations, understandings, negotiations and discussions between the parties, whether oral or written.

6.7 Modifications and Amendments. No amendment, modification or termination of this Agreement shall be binding upon any party unless executed in writing by such party.

6.8 Titles and Headings. Titles and headings of Sections of this Agreement are for convenience only and shall not affect the construction of any provision of this Agreement.

6.9 Waivers and Extensions. Any party to this Agreement may waive any right, breach or default which such party has the right to waive, provided that such waiver will not be effective against the waiving party unless it is in writing, is signed by such party, and specifically refers to this Agreement. Waivers may be made in advance or after the right waived has arisen or the breach or default waived has occurred. Any waiver may be conditional. No waiver of any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof nor of any other agreement or provision herein contained. No waiver or extension of time for performance of any obligations or acts shall be deemed a waiver or extension of the time for performance of any other obligations or acts.

6.10 Remedies Cumulative. In the event that the Company fails to observe or perform any covenant or agreement to be observed or performed under this Agreement, the Investor or any other holder of Registrable Securities may proceed to protect and enforce its rights by suit in equity or action at law, whether for specific performance of any term contained in this Agreement or for an injunction against the breach of any such term or in aid of the exercise of any power granted in this Agreement or to enforce any other legal or equitable right, or to take any one or more of such actions, without being required to post a bond. None of the rights, powers or remedies conferred under this Agreement shall be mutually exclusive, and each such right, power or remedy shall be cumulative and in addition to any other right, power or remedy, whether conferred by this Agreement or now or hereafter available at law, in equity, by statute or otherwise.

6.11 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. Each of the parties hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. Each of the parties

hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

6.12 Waiver of Trial by Jury. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, OR THE ACTIONS OF THE INVESTOR IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.

	LIGHTING SCIENCE GROUP CORPORATION



	By: _____________________________________________
	Name:
	Title:




	LED HOLDINGS, LLC



	By: _____________________________________________
	Name:
	Title:

[Registration Rights Agreement]

Schedule A

Guarantors

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