Exhibit 10.1

 

 

 

ELECTRIC CITY CORP.

 

SECURITIES PURCHASE AGREEMENT

 

Dated as of June 27, 2003

 

 

 

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SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (as it may be amended from time to time, this
“Agreement”), is entered into as of June 27, 2003 by Electric City Corp., a
Delaware corporation (the “Company”), and the purchasers whose names appear on
the signature page of this Agreement (each, a “Purchaser” and collectively, the
“Purchasers”).

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to sell and issue to the Purchasers shares of its
Series D Convertible Preferred Stock, par value $0.01 par value per share
(“Series D Preferred Stock”), warrants to purchase shares of Series D Preferred
Stock, shares of the Company’s common stock, par value $0.0001 (“Common Stock”),
and warrants to purchase shares of its Common Stock, all as more fully described
herein; and

 

WHEREAS, each Purchaser severally and jointly desires to purchase such
securities from the Company in the amounts and for the purchase price and
otherwise on the terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

1.1                                 The following terms when used in this
Agreement, including its preamble and recitals, shall, except where the context
otherwise requires, have the following meanings, such meanings to be equally
applicable to the singular and plural forms thereof:

 

“Affiliate” means, as applied to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person.  For the purposes of this definition, “control” (including, with
correlative meanings, the terms “controlled by” and “under common control
with”), as applied to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.

 

“Agreement” shall have the meaning set forth in the preamble of this Agreement.

 

“Ancillary Agreements” means the Series D Warrants, the Common Stock Warrants,
the Joinder to the Investor Rights Agreement (and the Investor Rights Agreement
as amended thereby) and the Stock Trading Agreement.

 

“Assets” shall have the meaning set forth in Section 5.5 hereof.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in the City of Chicago are authorized or required by law or
executive order to close.

 

“Certificate of Designation” means the Certificate of Designations, Preferences
and Relative, Participating, Optional and Other Special Rights of Preferred
Stock and

 

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Qualifications, Limitations and Restrictions Thereof of Series D Convertible
Preferred Stock of Electric City Corp., in substantially the form of Exhibit A
hereto, as the same is filed with the Secretary of State of Delaware and as it
may be amended from time to time.

 

“Certificate of Incorporation” means the Certificate of Incorporation of the
Company, as amended or restated from time to time.

 

“Closing” shall have the meaning set forth in Section 2.2 hereof.

 

“Closing Date” shall have the meaning set forth in Section 2.2 hereof.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Commission” means the United States Securities and Exchange Commission or any
other governmental authority at the time administering the Securities Act or the
Exchange Act.

 

“Commission Documents” shall have the meaning set forth in Section 5.16 hereof.

 

“Common Shares” means the shares of Common Stock to be issued by the Company to
the Purchasers hereunder.

 

“Common Stock” shall have the meaning set forth in the Recitals hereof.

 

“Common Stock Warrants” means the warrants to be issued by the Company to
Purchasers to purchase an aggregate of 210,938 shares of Common Stock, as
evidenced by Warrant Certificates, as any of the same may be amended from time
to time in accordance with the terms thereof.

 

“Common Stock Warrants Issued to Existing Preferred Holders” means the warrants
to purchase common stock of the Company which have been issued to each of the
Series A Preferred Stock Holders and the Series C Preferred Stock Holder.

 

“Company” shall have the meaning set forth in the preamble of this Agreement.

 

“Company IP” shall have the meaning set forth in Section 5.13 hereof.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
similar or successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.

 

“Governmental Authority” means the government of any nation, state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.

 

“Investor Rights Agreement” means the Investor Rights Agreement dated as of July
31, 2001, by and among the Company and the Series A Preferred Stock Holders, as
amended by the Consent and Amendment of Securities Purchase Agreement, Stock

 

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Trading Agreement, Stockholders Agreement and Investor Rights Agreement dated as
of November 29, 2001 among the same parties and certain other Persons and by the
Joinder and First Amendment to Investor Rights Agreement dated as of June 4,
2002, by and among the same parties, certain other Persons named therein and
Richard P. Kiphart, an individual, as amended, restated, modified or
supplemented and in effect from time to time.

 

“Joinder to Investor Rights Agreement” means that certain Joinder and Second
Amendment to Investor Rights Agreement, substantially in the form of Exhibit B
hereto, to be executed and delivered by the parties thereto in connection with
Closing hereunder.

 

“Liquidation Amount” shall have the meaning set forth in the Certificate of
Designations.

 

“Litigation” shall have the meaning set forth in Section 3.1(e) hereof.

 

“Losses” shall have the meaning set forth in Section 7.1 hereof.

 

“Officer’s Certificate” means a certificate of the Company signed by its Chief
Executive Officer or Chief Financial Officer.

 

“Person” means an individual, a corporation, a limited liability company, an
association, a partnership, a trust or estate, a government or any department or
agency thereof.

 

“Placement Agent” shall mean Delano Group Securities, LLC.

 

“Preferred Stock Certificates of Designation” means, collectively, (i) the
Certificate of Designations, (ii) the Series A Certificate of Designations, and
(iii) the Series C Certificate of Designations.

 

“Purchaser” shall have the meaning set forth in the preamble of this Agreement.

 

“Registration Statement” shall have the meaning set forth in Section 4.4 hereof.

 

“Regulatory Approvals” means (a) any and all certificates, permits, licenses,
franchises, concessions, grants, consents, approvals, orders, registrations,
authorizations, waivers, variances, exemptions, declarations, or clearances
from, or filings or registrations with, or reports or notices to, any
Governmental Authority, and (b) any and all waiting periods imposed by
applicable laws.

 

“Securities” shall have the meaning set forth in Section 2.1 hereof.

 

“Securities Act” means the Securities Act of 1933, as amended, and any similar
or successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same may be in effect from time to time.

 

“Series A Preferred Stock Holders” means, collectively, Newcourt Capital USA
Inc., a Delaware corporation, Newcourt Capital Securities, Inc., a Delaware
corporation, EP Power Finance L.L.C., a Delaware limited liability company,
Morgan Stanley Dean Witter Equity Funding, Inc., a Delaware corporation,
Originators Investment Plan, L.P., a

 

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Delaware limited partnership, Duke Capital Partners, LLC, a Delaware limited
liability company and Leaf Mountain Company, LLC, an Illinois limited liability
company.

 

“Series A Certificate of Designations” means the Certificate of Designations,
Preferences and Relative, Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and Restrictions Thereof of
Series A Convertible Preferred Stock of Electric City Corp. which has been filed
by the Company with the Secretary of State of Delaware, as it may be amended
from time to time.

 

“Series C Preferred Stock Holder” means Richard P. Kiphart, an individual.

 

“Series C Certificate of Designations” means the Certificate of Designations,
Preferences and Relative, Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and Restrictions Thereof of
Series A Convertible Preferred Stock of Electric City Corp. which has been filed
by the Company with the Secretary of State of Delaware, as it may be amended
from time to time.

 

“Series D Preferred Stock” shall have the meaning set forth in the Recitals to
this Agreement.

 

“Series D Warrants” shall mean the warrants to be issued by the Company to
Purchasers to purchase an aggregate of 37,500 shares of Series D Preferred
Stock, as evidenced by Warrant Certificates, as any of the same may be amended
from time to time in accordance with the terms thereof.

 

“Stated Value” of the Series D Preferred Stock shall mean $10.00 per share.

 

“Stock Trading Agreement” means a Stock Trading Agreement, substantially in the
form of Exhibit C hereto, dated as of the Closing Date and entered into by the
Company and the Purchasers, as the same may be amended from time to time in
accordance with the terms thereof.

 

“Subsidiary” of a Person means any corporation, association, partnership, joint
venture or other business entity of which more than 50% of the voting stock or
other equity interests (in the case of Persons other than corporations), is
owned or controlled, directly or indirectly, by the Person, or one or more of
the Subsidiaries of the Person, or a combination thereof.

 

“Taxes” means any federal, state, county, local or foreign taxes, charges, fees,
levies, or other assessments, including, without limitation, all net income,
gross income, sales and use, ad valorem, transfer, gains, profits, excise,
franchise, real and personal property, gross receipt, capital stock, business
and occupation, disability, employment, payroll, license, estimated, or
withholding taxes or charges imposed by any governmental entity, and includes
any interest and penalties on or additions to any such taxes (and, in the case
of the Company and its Subsidiaries, Taxes for which the Company or any of its
Subsidiaries may be liable in its own right, or as the transferee of the assets
of, or as successor to, any other corporation, association, partnership, joint
venture, or other entity, or under Treasury Regulation Section 1.1502-6 or any
similar provision of state or local law).

 

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“Tax Return” means a report, return or other information required to be supplied
to a Governmental Authority with respect to Taxes including, where permitted or
required, combined, unitary, group or consolidated returns for any group of
entities that includes the Company or any of its Subsidiaries.

 

“Transactions” shall have the meaning set forth in Section 3.1(e).

 

“Transaction Documents” shall have the meaning set forth in Section 5.1(b)
hereof.

 

“Warrant Certificate” means a warrant certificate evidencing Common Stock
Warrants or Series D Warrants, duly executed by the Company and delivered to the
Purchaser pursuant to this Agreement, and any replacement certificate issued by
the Company in respect thereof pursuant to partial exercise, transfer, loss or
mutilation of such warrant certificate, as such original or replacement
certificate may be amended and in effect from time to time.

 

ARTICLE II
ISSUE, PURCHASE AND SALE OF THE SECURITIES

 

2.1           Authorization of Issuance of Securities.  The Company has
authorized the initial issuance of (a) 150,000 shares of Series D Preferred
Stock, (b) the Series D Warrants, (c) 22,562 Common Shares to be issued
hereunder, and (d) the Common Stock Warrants, collectively referred to herein as
the “Securities”.

 

2.2           Purchase and Sale of Securities; Closing.  Subject to the terms
and conditions herein set forth, the Company hereby agrees to sell to each
Purchaser, and each Purchaser severally and not jointly agrees to purchase from
the Company, at the Closing (as defined herein), shares of Series D Preferred
Stock, Series D Warrants, Common Shares and Common Stock Warrants in the amounts
indicated on Schedule I attached hereto with respect to such Purchaser for the
aggregate purchase price set forth on Schedule I to be paid by such Purchaser. 
Subject to the satisfaction or waiver of the parties’ respective conditions to
closing set forth in Sections 3.1 and 3.2, the closing of the purchase and sale
of the Securities (the “Closing”) shall take place on June 27, 2003, or at such
other time and on such other date as the Purchasers and the Company may agree
(the “Closing Date”), at the offices of the Company or at such other location as
the Purchasers and the Company may agree.  At the Closing, the Company will
deliver to each Purchaser two or more stock certificates, as such Purchaser may
request, registered in such Purchaser’s name (or in its nominee name if
designated by Purchaser) evidencing the shares of Series D Preferred Stock and
Common Stock to be purchased by Purchaser, together with the Series D Warrants
and Common Stock Warrants to be purchased by such Purchaser, against payment of
the applicable purchase price therefore by wire transfer of immediately
available funds to or upon the order by the Company.

 

ARTICLE III
CONDITIONS OF CLOSING

 

3.1                                 Purchasers’ Conditions to Closing.  Each
Purchaser’s obligation to purchase and pay for the Securities to be purchased by
such Purchaser at the Closing is subject to the satisfaction, as determined by,
or waived by, such Purchaser on or before the Closing Date, of the following
conditions:

 

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(A)                                  RECEIPT OF SECURITIES.  SUCH PURCHASER
SHALL HAVE RECEIVED DELIVERY OF THE STOCK CERTIFICATES AND WARRANT CERTIFICATES
EVIDENCING THE SECURITIES TO BE PURCHASED BY SUCH PURCHASER, DULY ISSUED BY THE
COMPANY;

 

(B)                                 OPINION OF THE COMPANY’S COUNSEL.  SUCH
PURCHASER SHALL HAVE RECEIVED FROM SCHWARTZ, COOPER, GREENBERGER & KRAUSS,
CHARTERED, SPECIAL COUNSEL TO THE COMPANY IN CONNECTION WITH THIS TRANSACTION,
AN OPINION DATED ON THE CLOSING DATE IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO SUCH PURCHASER;

 

(C)                                  STOCK TRADING AGREEMENT.  THE STOCK TRADING
AGREEMENT SHALL HAVE BEEN ENTERED INTO BY THE COMPANY AND EACH PURCHASER
HEREUNDER;

 

(D)                                 NO LITIGATION; NO ORDER.  NO ACTION, SUIT OR
PROCEEDING RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY
ANCILLARY AGREEMENT (THE “TRANSACTIONS”) SHALL BE PENDING THAT IN THE REASONABLE
GOOD FAITH JUDGMENT OF SUCH PURCHASER (I) SEEKS TO RESTRAIN OR PREVENT ANY OF
THE TRANSACTIONS AND HAS A REASONABLE PROBABILITY OF SUCCESS OR (II) IS
REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE EFFECT ON THE ASSETS, BUSINESS,
PROSPECTS, PROPERTIES, OPERATIONS OR CONDITIONS (FINANCIAL OR OTHERWISE) OF THE
COMPANY AND ITS SUBSIDIARIES, TAKEN AS A WHOLE, AND NO ORDER (INCLUDING, WITHOUT
LIMITATION, A TEMPORARY RESTRAINING ORDER), DECREE, WRIT, JUDGMENT OR INJUNCTION
SHALL BE IN EFFECT THAT RESTRAINS, ENJOINS OR PREVENTS THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY ANCILLARY AGREEMENT
(COLLECTIVELY, “LITIGATION”);

 

(E)                                  PROCEEDINGS.  ON OR PRIOR TO THE CLOSING
DATE, ALL CORPORATE AND OTHER PROCEEDINGS REQUIRED TO BE TAKEN UNDER APPLICABLE
LAWS, RULES AND ALL REGULATIONS AND ALL RULES OF THE AMERICAN STOCK EXCHANGE IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT SHALL HAVE BEEN TAKEN AND ALL FILINGS AND DOCUMENTS INCIDENT THERETO
SHALL BE REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO SUCH PURCHASER;

 

(F)                                    COMPLIANCE WITH THIS AGREEMENT.  THE
COMPANY SHALL HAVE PERFORMED AND COMPLIED WITH ALL OF ITS AGREEMENTS AND
CONDITIONS SET FORTH OR CONTEMPLATED HEREIN THAT ARE REQUIRED TO BE PERFORMED OR
COMPLIED WITH BY THE COMPANY ON OR BEFORE THE CLOSING DATE;

 

(G)                                 OFFICER’S CERTIFICATE.  SUCH PURCHASER SHALL
HAVE RECEIVED A CERTIFICATE, DATED THE CLOSING DATE AND SIGNED BY THE CHIEF
EXECUTIVE OFFICER OF THE COMPANY, CERTIFYING THAT THE CONDITIONS SET FORTH IN
SECTIONS 3.1(D), 3.1(E), 3.1(F), 3.1(G), 3.1(K), AND 3.1(L) HEREOF HAVE BEEN
SATISFIED ON AND AS OF SUCH DATE;

 

(H)                                 SECRETARY’S CERTIFICATE.  SUCH PURCHASER
SHALL HAVE RECEIVED A CERTIFICATE, DATED THE CLOSING DATE AND SIGNED BY THE
SECRETARY OF THE COMPANY, ATTACHING GOOD STANDING CERTIFICATES FROM THE DELAWARE
SECRETARY OF STATE WITH RESPECT TO THE COMPANY AND FROM THE RESPECTIVE
SECRETARIES OF STATE FOR THE JURISDICTIONS OF INCORPORATION FOR ITS SUBSIDIARIES
AND CERTIFYING THE AUTHENTICITY OF ATTACHED COPIES OF (I) THE CERTIFICATE OF
INCORPORATION AND BY-LAWS OF THE COMPANY AND THE CERTIFICATE OF INCORPORATION
AND BY-LAWS OF EACH OF ITS SUBSIDIARIES, IN EACH CASE AS AMENDED; (II)
RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE COMPANY APPROVING THIS AGREEMENT
AND THE ANCILLARY AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
AND THE ANCILLARY AGREEMENTS;

 

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(I)                                     PURCHASE PERMITTED BY APPLICABLE LAWS;
LEGAL INVESTMENT.  THE ACQUISITION BY SUCH PURCHASER OF AND PAYMENT FOR THE
SECURITIES TO BE PURCHASED BY SUCH PURCHASER AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE ANCILLARY AGREEMENTS (I)
SHALL NOT BE PROHIBITED BY ANY APPLICABLE LAW OR GOVERNMENTAL REGULATION, (II)
SHALL NOT SUBJECT SUCH PURCHASER TO ANY PENALTY OR, IN ITS REASONABLE JUDGMENT,
OTHER ONEROUS CONDITIONS UNDER OR PURSUANT TO ANY APPLICABLE LAW OR GOVERNMENTAL
REGULATION AND (III) SHALL BE PERMITTED BY THE LAWS AND REGULATIONS OF THE
JURISDICTIONS TO WHICH SUCH PURCHASER IS SUBJECT;

 

(J)                                     CONSENTS AND APPROVALS.  ALL CONSENTS,
WAIVERS, APPROVALS, EXEMPTIONS, AUTHORIZATIONS, OR OTHER ACTIONS BY, OR NOTICES
TO, OR FILINGS WITH, GOVERNMENTAL AUTHORITIES AND OTHER PERSONS NECESSARY OR
REQUIRED IN CONNECTION WITH THE EXECUTION, DELIVERY OR PERFORMANCE BY THE
COMPANY OR ENFORCEMENT AGAINST THE COMPANY OF THIS AGREEMENT (INCLUDING, WITHOUT
LIMITATION, THE ISSUANCE OF THE SECURITIES CONTEMPLATED HEREUNDER), ANY
ANCILLARY AGREEMENT OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION WITH THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT SHALL HAVE BEEN OBTAINED AND BE IN FULL FORCE AND EFFECT, AND
PURCHASER AND ITS SPECIAL COUNSEL SHALL HAVE BEEN FURNISHED WITH APPROPRIATE
EVIDENCE THEREOF; AND

 

(K)                                  INSOLVENCY.  THE COMPANY SHALL NOT HAVE
MADE AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS, NOR SHALL IT HAVE FILED WITH A
COURT OF COMPETENT JURISDICTION AN APPLICATION FOR APPOINTMENT OF A RECEIVER OR
SIMILAR OFFICIAL WITH RESPECT TO IT OR ANY SUBSTANTIAL PART OF ITS ASSETS, NOR
SHALL THERE HAVE BEEN FILED BY THE COMPANY OR ANY OF ITS SUBSIDIARIES A PETITION
SEEKING RELIEF UNDER ANY PROVISION OF THE FEDERAL BANKRUPTCY CODE OR ANY OTHER
FEDERAL OR STATE STATUTE NOW OR HEREAFTER IN EFFECT AFFORDING RELIEF TO DEBTORS,
NOR SHALL THERE HAVE BEEN FILED AGAINST THE COMPANY OR ANY OF ITS SUBSIDIARIES
ANY SUCH APPLICATION OR PETITION.

 

3.2                                 Company Conditions to Closing.  The
Company’s obligation to issue and sell the Securities to each Purchaser
hereunder at the Closing is subject to the satisfaction, on or before the
Closing Date, of the following conditions:

 

(A)                                  RECEIPT OF PURCHASE PRICE.  THE COMPANY
SHALL HAVE RECEIVED FROM SUCH PURCHASER PAYMENT OF THE PURCHASE PRICE TO BE PAID
BY SUCH PURCHASER HEREUNDER BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS;

 

(B)                                 ACKNOWLEDGEMENT AND AGREEMENT.  THE STOCK
TRADING AGREEMENT SHALL HAVE BEEN ENTERED INTO AND DELIVERED BY THE COMPANY AND
ALL THE PURCHASERS;

 

(C)                                  NO LITIGATION; NO ORDER.  NO ACTION, SUIT
OR PROCEEDING RELATING TO THE TRANSACTIONS SHALL BE PENDING THAT IN THE
REASONABLE GOOD FAITH JUDGMENT OF THE COMPANY SEEKS TO RESTRAIN OR PREVENT ANY
OF THE TRANSACTIONS AND HAS A REASONABLE PROBABILITY OF SUCCESS;

 

(D)                                 PURCHASE PERMITTED BY APPLICABLE LAWS; LEGAL
INVESTMENT.  THE ACQUISITION BY SUCH PURCHASER OF AND PAYMENT FOR THE SECURITIES
AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE
ANCILLARY AGREEMENTS (I) SHALL NOT BE PROHIBITED BY ANY APPLICABLE LAW OR
GOVERNMENTAL REGULATION, AND (II) SHALL NOT SUBJECT THE COMPANY TO ANY PENALTY
OR, IN ITS REASONABLE JUDGMENT, OTHER ONEROUS CONDITIONS UNDER OR PURSUANT TO
ANY APPLICABLE LAW OR GOVERNMENTAL REGULATION; AND

 

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(E)                                  CONSENTS AND APPROVALS.  ALL CONSENTS,
WAIVERS, APPROVALS, EXEMPTIONS, AUTHORIZATIONS, OR OTHER ACTIONS BY, OR NOTICES
TO, OR FILINGS WITH, GOVERNMENTAL AUTHORITIES AND OTHER PERSONS NECESSARY OR
REQUIRED IN CONNECTION WITH THE EXECUTION, DELIVERY OR PERFORMANCE BY THE
COMPANY OR ENFORCEMENT AGAINST THE COMPANY OF THIS AGREEMENT (INCLUDING, WITHOUT
LIMITATION, THE ISSUANCE OF THE SECURITIES CONTEMPLATED HEREUNDER), ANY
ANCILLARY AGREEMENT OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION WITH THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT SHALL HAVE BEEN OBTAINED AND BE IN FULL FORCE AND EFFECT.

 

ARTICLE IV
CERTAIN COVENANTS

 

4.1                                 Financial Statements and Other Reports. 
After the Closing Date, the Company agrees to send the following reports to each
holder of Series D Preferred Stock:

 

(a)                                  so long as the Company is subject to the
requirements of, or otherwise making filings pursuant to, Section 13 or 15(d) of
the Exchange Act, within three (3) days after the filing with the Commission, a
copy of its Annual Report on Form 10-KSB or Form 10-K, its Quarterly Reports on
Form 10-QSB or Form 10-Q, any proxy statements or information statements and any
Current Reports on Form 8-K, together in each case with amendments thereto;

 

(b)                                 within one (1) day after release, copies of
all press releases issued by the Company or any of its Subsidiaries;

 

(c)                                  promptly upon receipt thereof, copies of
reports, if any, submitted to the Company by independent accountants in
connection with each annual or interim audit of the books of the Company made by
such accountants; and

 

(d)                                 all other information sent to holders of the
Common Stock or any other equity security holder.

 

Without limiting the foregoing, the Company shall deliver to each Purchaser
until such Purchaser transfers, assigns (except in the case of an assignment to
an Affiliate) or sells all of its Series D Preferred Stock (i) as soon as
practicable and in any event within 45 days after the end of each fiscal
quarter, the following information: consolidated statements of income,
stockholders’ equity and cash flows of the Company and its Subsidiaries for such
fiscal period and for the period from the beginning of the then current fiscal
year to the end of such fiscal period and a comparison of each such item to the
then current budget, and the balance sheet of the Company and its Consolidated
Subsidiaries as at the end of such fiscal period, setting forth in each case in
comparative form figures for the corresponding periods in the preceding fiscal
year, all in reasonable detail, prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
certified as to fair presentation by the principal financial officer of the
Company and accompanied by a written discussion of operations in summary form;
and (ii) as soon as practicable and in any event within 90 days after the end of
each fiscal year of the Company, the following information: statements of
income, stockholders’ equity and cash flows of the Company and its consolidated
Subsidiaries for such year, and a consolidated balance sheet of the Company and
its consolidated Subsidiaries as at the end of such year, setting forth in each
case in comparative form corresponding figures from the preceding fiscal year,
prepared in accordance with generally accepted accounting principles

 

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consistently applied throughout the periods involved, and accompanied by an
opinion of BDO Siedman LP, or another firm of independent public accountants of
recognized national standing selected by the Company, to the effect that the
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application in which such accountants concur and as are noted
therein) and present fairly the financial condition of the Company and its
consolidated Subsidiaries and that the examination of such accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and accordingly included such tests of the
accounting records and such other auditing procedures as were considered
necessary in the circumstances; and accompanied by a written discussion of
operations by management in summary form with respect to such fiscal year,
including a comparison to budget.

 

Each Purchaser is hereby authorized to deliver a copy of any financial statement
delivered to it pursuant to this Section 4.1 to any regulatory body having
jurisdiction over it that requests such information.  Subject to compliance with
reasonable confidentiality requirements imposed by the Company, each Purchaser
shall have reasonable access to the Company, including its management, and its
books and records during regular business hours and is further authorized to
request information from and to have access to, at the Company’s expense, the
Company’s independent public accountants.  The Company shall request such
accountants to make available to any Purchaser such information as such
Purchaser may reasonably request.

 

Notwithstanding the foregoing, the Company need not provide any Purchaser with
any information pursuant to this Section 4.1 which the Company reasonably
believes constitutes material, non-public information, unless such Purchaser has
entered into an acceptable written confidentiality agreement with the Company.

 

4.2                                 Corporate Existence; Licenses and Permits;
Maintenance of Properties.  The Company shall at all times use commercially
reasonable efforts to do or cause to be done all things necessary to maintain,
preserve and renew its existence as a corporation organized under the laws of a
state of the United States of America, and to preserve and keep in force and
effect, and cause each of its consolidated Subsidiaries to apply for on a timely
basis, all licenses and permits necessary and material to the conduct of the
business of the Company and its Subsidiaries, taken as a whole.

 

4.3                                 Securities Exchange.  The Company shall use
its reasonable best efforts to maintain its Common Stock listing and to continue
to have its Common Stock be quoted on The American Stock Exchange or on another
national securities exchange, so long as it is subject to Section 13 or 15(d) of
the Exchange Act.

 

4.4                                 Best Efforts.  The Company agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things reasonably necessary, proper or advisable under
applicable laws, rules and regulations to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable.  In case
at any time after the Closing any further action is reasonably necessary to
carry out the purposes of this Agreement, the proper agents, officers and
directors of the Company shall take such action.

 

4.5                                 Insurance.  The Company shall at all times
maintain customary directors and officers insurance in amounts as are customary
for other publicly traded companies of similar size.

 

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4.6                                 Public Disclosure.  The Company shall: (i)
on the Closing Date issue a press release disclosing the material terms of the
transactions contemplated hereby (including at least the number of shares sold
and proceeds therefrom) and any information disclosed to Purchaser which the
Company believes may constitute material, non-public information, and (ii) make
such other filings and notices in the manner and time required by the
Commission, (including filing of this Agreement with the Commission pursuant to
the Exchange Act and other actions required to comply with Section 4.3 hereof).

 

ARTICLE V
REPRESENTATIONS, COVENANTS AND WARRANTIES

 

The Company represents, covenants and warrants to the Purchaser as follows:

 

5.1                                 Organization; Standing and Qualification of
Company and its Subsidiaries; Corporate Authority.

 

(a)                                  Each of the Company and each of its
Subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction of its organization, and has the corporate power to
own its property and to carry on its business as now being conducted, is duly
qualified and in good standing as a foreign corporation to do business in every
jurisdiction where the character of the properties owned or leased by it or the
nature of any business transacted by it makes such qualification necessary,
except where such nonqualification or lack of good standing would not have a
material adverse effect on the business of the Company and its Subsidiaries,
taken as a whole.

 

(b)                                 The execution and delivery by the Company of
this Agreement and the Ancillary Agreements (collectively, the “Transaction
Documents”), and the performance by the Company of all transactions and
obligations contemplated hereby and thereby are within its corporate authority. 
The execution, delivery and performance of the Transaction Documents and each
other agreement contemplated by the terms hereof and thereof and the issuance of
the Securities have been duly authorized by all necessary corporate proceedings
on the part of the Company.  Each of the Transaction Documents constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally and to equitable principles relating to
enforceability.  The Common Shares are duly authorized and, when issued, will be
validly issued, fully paid and nonassessable and subject to no preemptive rights
in favor of other Persons which have not been waived.  Assuming the accuracy of
the representations of each Purchaser in this Agreement, the Series D Preferred
Stock and the Common Shares issuable hereunder will be issued in compliance with
all applicable federal and state securities laws.  The shares of Series D
Preferred Stock issuable upon the exercise of the Series D Warrants are duly
authorized and reserved for issuance, and, when issued upon such exercise, will
be validly issued, fully paid and nonassessable, and subject to no preemptive
rights in favor of other Persons which have not been waived.  The shares of
Common Stock issuable upon the exercise of the Common Stock Warrants, or the
conversion of shares of the Series D Preferred Stock to be issued at Closing
hereunder or upon the conversion of shares of the Series D Preferred Stock
issuable upon exercise of the Series D Warrants, are duly authorized and
reserved for issuance, and, when issued upon such exercise, will be validly
issued, fully paid and nonassessable, and subject to no preemptive rights in
favor of other Persons which have not been waived.  Assuming the accuracy of the
representations of each of the Purchasers in this Agreement, when such shares of
Series D Preferred Stock and such shares

 

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of Common Stock are issued, such shares will be issued in compliance with all
applicable federal and state securities laws.  The Company has reserved for
issuance (i) 210,938 shares of Common Stock issuable upon exercise of the Common
Stock Warrants, (ii) 37,500 shares of Series D Preferred Stock issuable upon
exercise of the Series D Warrants, (iii) 1,500,000 shares of Common Stock
issuable upon conversion of the Series D Preferred Stock to be issued hereunder,
and (iv) 375,000 shares of Common Stock issuable upon conversion of the shares
of Series D Preferred Stock issuable upon exercise of the Series D Warrants.

 

(c)                                  Great Lakes Controlled Energy Corporation
and Switchboard Apparatus, Inc. are the only Subsidiaries of the Company.  Each
such Subsidiary is wholly owned by the Company.

 

5.2                                  Capital Stock.

 

(a)                                  As of the date hereof, the Company has
authorized 120,000,000 shares of Common Stock and 5,000,000 shares of preferred
stock.  As of the date hereof, the Company has 34,125,460 issued and outstanding
shares of Common Stock, 2,225,471 issued and outstanding shares of Series A
Convertible Preferred Stock and 216,933 issued and outstanding shares of Series
C Convertible Preferred Stock.  All outstanding shares of the Company Common
Stock, the Series A Convertible Preferred Stock and the Series C Convertible
Preferred Stock have been duly authorized, validly issued and are fully paid and
nonassessable and free of preemptive rights and were issued in compliance with
all applicable federal and state securities laws.

 

(b)                                 Except as otherwise stated in this Section
5.2 or in Schedule 5.2 and except for shares of capital stock reserved for
issuance in connection with the transactions contemplated by this Agreement and
the Ancillary Agreements, the Company has not granted or issued, or agreed to
grant or issue, any options, warrants or similar rights to acquire or receive
any of the authorized but unissued shares of its capital stock of any class or
any securities convertible into shares of its capital stock of any class or any
stock appreciation rights.  Except as stated in Schedule 5.2, no adjustment to
the exercise price of any outstanding options or warrants of the Company will be
required as a result of the issuance of any of the Securities.

 

(c)                                  Except as set forth in Schedule 5.2(c), no
holder of shares of Common Stock (or securities convertible into or exchangeable
or exercisable for Common Stock) has any rights to purchase or receive
additional or other securities upon the occurrence of an event that might dilute
such holder’s percentage interest in the Company.

 

5.3                                 No Defaults.  Except as set forth in
Schedule 5.3, neither the Company nor any of its Subsidiaries, to its knowledge,
is in violation of, or in default under, nor has there been any waiver given
with respect to, any term or provision of any charter, by-law, mortgage,
indenture, agreement, instrument, statute, rule, law, regulation, judgment,
decree, order, writ, or injunction applicable to it, such that such violations
and defaults in the aggregate could reasonably be expected to result in any
material adverse change in the business, assets, properties, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole, or materially adversely affect the ability of
the Company to perform in any material respect its obligations under this
Agreement.  All Regulatory Approvals required by the Company and its
Subsidiaries to conduct their respective business as now conducted by them have
been obtained and are in full force and effect, and the Company and its
Subsidiaries are in compliance with the terms and requirements of such
Regulatory Approvals.  Except as set forth on Schedule 5.3 hereto, since
December 31, 2002, none of the Company or any of its Subsidiaries has received
any written notice or other written communication from any

 

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Governmental Entity regarding (i) any revocation, withdrawal, suspension,
termination or modification of, or the imposition of any material conditions
with respect to, any Regulatory Approval, (ii) any violation of any law by the
Company or any of its Subsidiaries, or (iii) any other limitations on the
conduct of business by the Company or any of its Subsidiaries.

 

5.4                                 Burdensome and Conflicting Agreements and
Charter Provisions.  Neither the execution or delivery of the Transaction
Documents by the Company, nor the offering, issuance and sale of the Securities
by the Company, nor fulfillment of, or compliance with, the terms and provisions
of the Transaction Documents, nor the issuance by the Company of shares of
Series D Preferred Stock upon exercise of the Series D Warrants, shares of
Common Stock upon exercise of the Common Stock Warrants and shares of Common
Stock upon conversion of shares of Series D Preferred Stock will, except as set
forth in Schedule 5.4, conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any lien upon any of the properties
or assets of the Company or any of its Subsidiaries, or require any consent,
approval or other action by, or notice to, or filing with, any court or
administrative or governmental body or any other Person or pursuant to the
Certificate of Incorporation or by-laws of the Company or the certificate of
incorporation or by-laws of any of the Company’s Subsidiaries, any award of any
arbitrator or any material agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which the Company or any of its Subsidiaries is subject.

 

5.5                                 Title to Assets, Etc.  The Company has good
and marketable fee simple title to the assets reflected on the balance sheet set
forth on Schedule 5.5 (the “Assets”).  Except as set forth in Schedule 5.5, none
of the Assets is subject to any encumbrances, except for minor liens that in the
aggregate are not substantial in amount, do not materially detract from the
value of the property or assets subject thereto or interfere with the present
use thereof and have not arisen other than in the ordinary course of business. 
There are no pending or threatened condemnation proceedings relating to any of
the facilities of the Company.  The real property improvements (including
leasehold improvements) and fixtures and equipment of the Company are adequately
insured and are structurally sound with no known material defects.  The
facilities, fixtures and equipment of the Company are in good operating
condition and repair (except for ordinary wear and tear and any defect for which
the cost of repairing would not be material), are sufficient for the operation
of the Company’s business as presently conducted and are in conformity in all
material respects with all applicable laws, ordinances, orders, regulations and
other requirements (including applicable zoning, environmental, motor vehicle
safety or standards, occupational safety and health laws and regulations)
relating thereto currently in effect, except where the failure to conform would
not have a material adverse effect on the business or financial condition of the
Company.  The Assets are valued on the Company’s books at or below actual cost
less an adequate and proper depreciation charge.  The Company has not
depreciated any of the Assets on an accelerated basis or in any other manner
inconsistent with applicable Internal Revenue Service tax and fiscal guidelines,
if any.

 

5.6                                 Leases.  Each of the Company and Great Lakes
Controlled Energy Corporation enjoy peaceful and undisturbed possession of all
leases material to them.  All such leases are valid and subsisting and are in
full force and effect.

 

5.7                                 Contracts.  Except as set forth in Schedule
5.7, there is no contract, agreement or understanding required to be described
in or filed as an exhibit to any Commission Documents that is not described in
or filed as required by the Securities Act or the Exchange Act, as the case

 

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may be.  Except as set forth in Schedule 5.7, each such contract, agreement and
understanding is valid and binding and is in full force and effect and
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally or as may be limited by equitable
principles relating to enforceability), except in the case of such contracts,
agreements or understandings that are by their terms no longer in force or
effect.  Except as set forth on Schedule 5.7, (a) no approval or consent of, or
notice to, any Person is needed in order that such contract, agreement or
understanding shall continue in full force and effect in accordance with its
terms without penalty, acceleration or rights of early termination following the
consummation of the transactions contemplated by the Transaction Documents,
other than such notices, consents and approvals as have been obtained and (b)
the Company and/or its Subsidiaries are not in violation of, breach of, or
default under any such contract, agreement or understanding nor, to the
Company’s knowledge, is any other party to any such contract, agreement or
understanding.

 

5.8                                 Financial Statements.  The Company has
furnished the Purchasers with (a) the balance sheet of the Company and its
consolidated Subsidiaries as at December 31, 2002 and the related statements of
income, stockholders’ equity and cash flows of the Company and its consolidated
Subsidiaries for the fiscal year ended December 31, 2002, all certified by BDO
Seidman LLP, including in each case the related schedules and notes, and (b) an
unaudited balance sheet of the Company and its consolidated Subsidiaries as at
March 31, 2003 and statements of income, stockholders’ equity and cash flows of
the Company and its consolidated Subsidiaries for the interim period ended on
such date, prepared by the Company and certified by its principal financial
officer (item (b) is referred to as the “Interim Financial Statements”).

 

All such financial statements (including any related schedules and notes) have
been prepared in accordance with generally accepted accounting principles
consistently applied, except to the extent set forth in the notes to such
financial statements and except for the absence of footnotes to the Interim
Financial Statements and except that the Interim Financial Statements are
subject to normal year-end adjustments and to adjustments made in the course of
an audit that would not in the aggregate be material, throughout the periods
involved and to the extent required by such principles show all liabilities,
direct and contingent, of the Company and its Subsidiaries required to be shown
thereon in accordance with generally accepted accounting principles.  The
balance sheets and the related schedules and notes fairly present the financial
condition of the Company and its consolidated Subsidiaries.  Except as set forth
in Schedule 5.8,  the Company has incurred no material liabilities since
March 31, 2003, other than those incurred in the ordinary course.  The net
income and stockholders’ equity statements and the related schedules and notes
fairly present the results of the operations of the Company and its consolidated
Subsidiaries for the periods indicated.

 

Except as set forth in Schedule 5.8, there has been no material adverse change
in the assets, business, prospects, properties, operations or condition,
financial or otherwise, of the Company and its Subsidiaries, taken as a whole,
since March 31, 2003.

 

5.9                                 Actions Pending.  Except as set forth in
Schedule 5.9 hereto, there is no action, suit, investigation or proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries before any court, arbitrator or administrative or
governmental body that (a) seeks to enjoin or otherwise prevent the consummation
of the sale or issuance of the Securities or (b) materially and adversely
affects, or as to which there is a reasonable possibility of an adverse decision
that would materially and adversely affect, either individually or collectively,
the assets, business, properties, prospects, operations or condition,

 

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financial or otherwise, of the Company and its Subsidiaries, taken as a whole. 
Neither the Company nor any of its Subsidiaries is in violation of any judgment,
order, writ, injunction, decree, rule or regulation of any court or governmental
department, commission, board, bureau, agency or instrumentality, the violation
of which reasonably could be expected to, either individually or collectively,
materially and adversely affect the business, property, assets, prospects,
operations or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole.

 

5.10                           Offering of Securities.  Assuming the accuracy of
the representations of each of the Purchasers in this Agreement, the offer, sale
and issuance of the Securities are exempt from the registration requirements of
the Securities Act.  Neither the Company nor any agent on its behalf has
solicited or will solicit any offers to sell or has offered to sell or will
offer to sell all or any part of the Securities to any Person so as to bring the
offering and sale of such Securities by the Company within the registration
provisions of the Securities Act.  The Company has filed all notices and
satisfied all registration or qualification requirements of any state securities
or Blue Sky law of any applicable jurisdiction with respect to the offer,
issuance and sale of the Securities or required by the Ancillary Agreements.

 

5.11                           Placement Agent Fees; Broker’s or Finder’s
Commissions.  The Company will pay the Placement Agent a fee equal to 8% of the
gross proceeds received from the sale of the Securities at the Closing
hereunder.  The Placement Agent is controlled by David Asplund, a director of
the Company.  Other than the fee payable by the Company to the Placement Agent,
no broker’s or finder’s or placement fee or commission will be payable with
respect to the sale or the issuance of the Securities contemplated hereby or by
the Ancillary Agreements as a result of any act or omission by the Company, and
the Company will hold the Purchasers harmless from any claim, demand or
liability for broker’s or finder’s or placement fees or commissions alleged to
have been incurred in connection with the sale or the issuance of the Securities
due to any actions or omissions by the Company or its Subsidiaries or any of
their respective directors, officers or agents.

 

The Company acknowledges that the Placement Agent has served as placement agent
for the Company, Duke Capital Partners, LLC, and EP Power Finance, L.L.C. with
respect to the sale of securities of the Company (including the securities to be
sold hereunder) and that Mr. Asplund is a Purchaser under this Agreement and an
Investor under that certain Duke Securities Purchase and Sale Agreement of even
date herewith.    The Company hereby waives any and all conflict of interest
claims against the Placement Agent and/or Mr. Asplund arising from the Placement
Agent’s simultaneous agency relationship with the Company, Duke Capital
Partners, LLC, and EP Power Finance, L.L.C., his status as a Purchaser hereunder
and Mr. Asplund’s status as a director of the Company.

 

5.12                           Application of Proceeds.  The net proceeds of the
sale of the Securities will be used by the Company for working capital and for
general corporate purposes.

 

5.13                           Intellectual Property.

 

(a)                                  The Company and its Subsidiaries
exclusively own or possess the requisite licenses or rights (on reasonable
commercial terms) to use all patents, trade secrets, trademarks, service marks,
service names, trade names, copyrights and other intellectual property rights
necessary to enable each of them to conduct their respective businesses as now
operated (collectively, the “Company IP”).  Schedule 5.13(a) sets forth a full
and complete list of all

 

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intellectual property rights of the Company and its Subsidiaries.  There is no
claim or action by any Person pertaining to, or proceeding pending, or to the
Company’s knowledge threatened, that challenges the rights of the Company or its
Subsidiaries with respect to any Company IP.  To the Company’s knowledge,
neither the Company’s nor any of its Subsidiaries’ current and intended products
and services infringe on any patents, licenses, trademarks, service marks,
service names, trade names, copyrights or other intellectual property rights
held by any Person and neither the Company nor any of its Subsidiaries is aware
of any facts or circumstances that might give rise to any of the foregoing.

 

(b)                                 Except as set forth in Schedule 5.13(b), no
proceedings or claims in which the Company alleges that any Person is infringing
upon, or otherwise violating, any Company IP are pending, and none has been
served by, instituted or asserted by the Company or any of its Subsidiaries, nor
are any proceedings threatened alleging any such violation or infringement.

 

(c)                                  The Company has taken and will take all
commercially reasonable actions that are necessary or advisable in order to
fully protect the Company IP, in a manner consistent with prudent commercial
practice.

 

5.14                           Taxes.  The Company and each of its Subsidiaries
has timely filed (or caused to be filed) all Tax Returns that are required to be
filed by (or with respect to) it on or before the date hereof and has paid all
Taxes due on or before the date hereof whether or not reflected on such Tax
Returns, including pursuant to any assessment received by it.  All such Tax
Returns were true, correct and complete in all material respects.  None of such
Tax Returns has been audited by the relevant taxing authority, and no taxing
authority has notified (or threatened) the Company or any of its Subsidiaries,
orally or in writing, that such taxing authority will or may audit any such
return.  The Company and its Subsidiaries have complied with all requirements of
the Code, the Treasury Regulations and any state, local or foreign law relating
to the payment and withholding of Taxes relating to them, and the Company and
each of its Subsidiaries have, within the time and in the manner prescribed by
applicable law, paid over to the proper taxing authorities all amounts required
to be so withheld and paid over relating to them.  The charges, accruals and
reserves on the books of the Company and its Subsidiaries in respect of Taxes or
other governmental charges are adequate to cover any liability of the Company
and its Subsidiaries for Taxes through the date hereof.  There are no liens for
Taxes with respect to any asset of the Company or any of its Subsidiaries,
except for liens with respect to Taxes that are not yet due and payable.  No
taxing authority in a jurisdiction where the Company or any of its Subsidiaries,
as the case may be, does not file tax returns has made a claim, assertion or
threat that the Company or any of its Subsidiaries is or may be subject to
taxation in such jurisdiction.

 

5.15                           Insurance.  The Company maintains or is covered
by valid policies of workers’ compensation insurance, product liability
insurance, and insurance with respect to its properties and business.  The
Company currently maintains in full force insurance covering the respective
risks of the Company and its Subsidiaries of such types and in such amounts,
with such deductibles and with such insurance companies as are customary for
other companies engaged in similar lines of business.  The Company currently
maintains key man life insurance for John Mitola in the amount of $5,000,000,
which is and will remain in full force and effect through December 31, 2005.

 

5.16                           Commission Documents.  Except as set forth in
Schedule 5.16, the Company has filed all registration statements, proxy
statements, information statements, reports and other documents required to be
filed by it under the Securities Act or the Exchange Act, and all

 

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amendments thereto (collectively, the “Commission Documents”).  Each Commission
Document when filed with the Commission was true and accurate in all material
respects and in compliance in all material respects with the requirements of its
respective report form and the rules and regulations of the Commission.  No
Commission Document contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under which
made, not misleading.

 

5.17                           Disclosure.  Neither this Agreement nor any other
document, certificate or statement prepared by or on behalf of the Company by
its authorized representatives or agents and furnished to or made available to
the Purchaser in writing by or on behalf of the Company by its authorized
representatives or agents in connection herewith, contains any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements contained herein and
therein, in the light of the circumstances under which made, not misleading.

 

ARTICLE VI
REPRESENTATIONS OF THE PURCHASERS

 

Each Purchaser represents and warrants, as to itself only, as follows:

 

6.1                                 Investment Purpose.  Such Purchaser is
purchasing the Securities for such Purchaser’s own account for investment only
and not with a view toward or in connection with the public sale or distribution
thereof.  Such Purchaser will not resell the Securities except pursuant to sales
that are exempt from the registration requirements of the Securities Act and all
applicable state securities laws, and/or sales registered under the Securities
Act and all applicable state securities laws.  Such Purchaser understands that
such Purchaser may bear the economic risk of this investment indefinitely,
unless the Securities are registered pursuant to the Securities Act and any
applicable state securities laws or an exemption from such registration is
available.

 

6.2                                 Accredited Investor Status/Organization. 
Such Purchaser is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D promulgated under the Securities Act.  By reason of his
or its business and financial experience, sophistication and knowledge, such
Purchaser is capable of evaluating the risks and merits of the investment made
pursuant to this Agreement.

 

6.3                                 Authorization; Enforcement.  This Agreement
has been duly and validly authorized, executed and delivered on behalf of such
Purchaser and is the legally valid and binding agreement of such Purchaser
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors’ rights generally or by equitable principles relating
to enforceability.  As of the Closing Date, each Ancillary Agreement to which
such Purchaser is a party will be the legally valid and binding agreement of
such Purchaser enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors’ rights generally or by equitable
principles relating to enforceability.

 

6.4                                 Broker’s or Finder’s Commissions.  Other
than the fee payable to the Placement Agent (which will be paid by the Company)
no broker’s or finder’s or placement fee or commission will be payable with
respect to the sale or the issuance of the Securities as a result of

 

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any act or omission by such Purchaser, and such Purchaser will hold the Company
harmless from any claim, demand or liability for broker’s or finder’s or
placement fees or commissions alleged to have been incurred in connection with
the sale or the issuance of the Securities due to any actions of such Purchaser.

 

The Purchasers acknowledge that the Placement Agent has served as placement
agent for the Company, Duke Capital Partners, LLC, and EP Power Finance, L.L.C.
with respect to the sale of certain securities of the Company (including the
securities to be sold hereunder) and that Mr. Asplund is a Purchaser under this
Agreement and an Investor under that certain Duke Securities Purchase and Sale
Agreement of even date herewith.  The Purchasers hereby waive any and all
conflict of interest claims against the Placement Agent and/or Mr. Asplund
arising from the Placement Agent’s simultaneous agency relationship with
Company, Duke Capital Partners, LLC, and EP Power Finance, L.L.C., his status as
a Purchaser hereunder and Mr. Asplund’s status as a director of the Company.

 

ARTICLE VII
INDEMNIFICATION

 

7.1                                 Indemnification by Company.  In addition to
all other sums due hereunder or provided for in this Agreement, the Company
agrees to indemnify and hold harmless each Purchaser and its officers,
directors, agents, employees and partners (each, an “indemnified party”) to the
fullest extent permitted by law from and against any and all losses, claims,
damages, expenses (including reasonable fees, disbursements and other charges of
counsel), damages or other liabilities (“Losses”) resulting from:

 

(i)                                     any breach of any representation or
warranty, covenant or agreement of the Company in this Agreement, or

 

(ii)                                  any legal, administrative or other actions
(including actions brought by any equityholders of the Company or derivative
actions brought by any Person claiming through the Company or in the Company’s
name), proceedings or investigations (whether formal or informal), or written
threats thereof, based upon, relating to or arising out of any of the
Transaction Documents or the Securities, the transactions contemplated hereby or
thereby, or any indemnified person’s role therein;

 

provided, however, that the Company shall not be liable under this Section 7.1:
(a) for any amount paid in settlement of claims without the Company’s consent
(which consent shall not be unreasonably withheld or delayed) or (b) to the
extent that it is finally judicially determined that such Losses resulted
primarily from the willful misconduct, bad faith or gross negligence of such
indemnified party or a breach of such Purchaser’s representations in Article VI;
provided, further, that if and to the extent that such indemnification is
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of such indemnified liability that shall be
permissible under applicable laws.  In connection with the obligation of the
Company to indemnify for expenses as set forth above, the Company further agrees
to reimburse each indemnified party for all such expenses (including reasonable
fees, disbursements and other charges of counsel) as they are incurred by such
indemnified party; provided, however, that in no event shall the Company be
required to pay fees and expenses under this Article VII for more than one firm
of attorneys in addition to the firm of attorneys representing the Company in
any jurisdiction in any one legal action or group of related legal actions;
provided, further, that if an indemnified party is reimbursed hereunder for any
expenses,

 

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such reimbursement of expenses shall be refunded to the extent it is finally
judicially determined that the Losses in question resulted primarily from the
willful misconduct, bad faith or gross negligence of such indemnified party.

 

7.2                                 Notification.  Each indemnified party under
this Article VII shall, promptly (and in any event within 20 days), after the
receipt of notice of the commencement of any action or other proceeding against
such indemnified party in respect of which indemnity may be sought from the
Company under this Article VII, notify the Company in writing of the
commencement thereof.  The failure of any indemnified party so to notify the
Company of any such action shall not relieve the Company from any liability that
it may have to such indemnified party pursuant to this Article VII, except to
the extent that such failure causes material prejudice to the Company.  In case
any such action or other proceeding shall be brought against any indemnified
party and it shall notify the Company of the commencement thereof, the Company
shall be entitled to participate therein and, to the extent that it may wish, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that any indemnified party may, at its own
expense, retain separate counsel to participate in such defense. 
Notwithstanding the foregoing, in any action or proceeding in which both the
Company and an indemnified party is, or is reasonably likely to become, a party,
such indemnified party shall have the right to employ separate counsel at the
Company’s expense and to control its own defense of such action or proceeding
if, in the reasonable written opinion of counsel to such indemnified party
(obtained at the expense of the Company), (a) there are or may be legal defenses
available to such indemnified party or to other indemnified parties that are
different from or additional to those available to the Company or (b) any
conflict or potential conflict exists between the Company and such indemnified
party that would make such separate representation advisable; provided, however,
that in no event shall the Company be required to pay fees and expenses under
this Article VII for more than one firm of attorneys in addition to the firm of
attorneys representing the Company in any jurisdiction in any one legal action
or group of related legal actions.  The Company shall not, without the consent
of the indemnified party (which consent shall not be unreasonably withheld),
consent to the entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation or that requires action other than the payment of money by
the Company.  The rights accorded to indemnified parties hereunder shall be in
addition to any rights that any indemnified party may have at common law, by
separate agreement or otherwise.

 

7.3                                 Payment.  No indemnifying party shall be
liable for any amounts paid in a settlement effected without the consent of such
indemnifying party, which consent shall not be unreasonably withheld or
delayed.  No indemnifying party shall, without the indemnified party’s prior
written consent, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
plaintiff to the indemnified party of a release from all liability in respect of
such claim or litigation.

 

7.4                                 Investor Rights Agreement.  Notwithstanding
anything to the contrary in this Article VII, the indemnification and
contribution provisions of the Investor Rights Agreement shall govern any claim
made with respect to registration statements filed pursuant thereto or sales
made thereunder.

 

7.5                                 Survival of Provisions of Article VII.  The
obligations of the Company under this Article VII shall survive indefinitely.

 

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ARTICLE VIII
MISCELLANEOUS

 

8.1                                 Expenses.  The Company agrees to pay, and
save each Purchaser harmless against liability for the payment of, all
reasonable out-of-pocket expenses arising in connection with:

 

(a)                                  the negotiation and execution of the
Transaction Documents and the issuance of the Securities, including all taxes
(including any intangible personal property tax, together in each case with
interest and penalties, if any, and also including any filing fees payable to
any governmental authority, and any income tax payable by any Purchaser in
respect of any reimbursement for any such tax or fee) that may be payable in
respect of the execution and delivery of the Transaction Documents or the
issuance, delivery or acquisition (but not the holding, ownership or transfer)
of any of the Securities issued pursuant to this Agreement or any Series D
Preferred Stock issuable upon exercise of the Series D Warrants or any of the
shares of Common Stock issuable upon exercise of the Common Stock Warrants or
pursuant to conversion of shares of Series D Preferred;

 

(b)                                 the cost and expenses, including reasonable
attorney’s fees, incurred by any Purchaser in enforcing any of his or its rights
hereunder, including, without limitation, costs and expenses incurred in any
bankruptcy case.

 

The obligations of the Company under this Section 8.1 shall survive the transfer
of any Securities by the Purchasers.

 

8.2                                 Restrictive Legends.  The Securities shall
each bear a legend in substantially the following form:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED,
QUALIFIED, APPROVED OR DISAPPROVED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS AND NEITHER THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY
AUTHORITY HAS PASSED ON OR ENDORSED THE MERITS OF THESE SECURITIES.

 

THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO A STOCK TRADING AGREEMENT, AS
IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS AVAILABLE FOR INSPECTION
AT THE PRINCIPAL OFFICES OF THE COMPANY.

 

Said legends shall be removed by the Company, upon the request of the holder
thereof, at such time as the restrictions on the transfer of the applicable
Security under applicable securities laws and the obligations imposed on the
holder thereof under the Investor Rights Agreement and Stock Trading Agreement,
as applicable, shall have terminated.

 

19

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8.3                                 Consent to Amendments.  This Agreement may
be amended, and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, if the Company shall
obtain the written consent of each Purchaser affected thereby to such amendment,
action or omission to act.

 

8.4                                 Survival of Representations, Warranties and
Indemnities.  All representations, warranties, covenants and agreements
contained herein or made in writing by the Company in connection herewith shall
survive the execution, delivery and performance of this Agreement and the
Ancillary Agreements, regardless of any investigation made by the Purchasers or
on the Purchasers’ behalf.

 

8.5                                 Successors and Assigns.  Except as otherwise
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not.

 

8.6                                 Notices.  All notices, consents and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given when (a) delivered by hand, (b) sent by telecopier (with
receipt confirmed), provided that a copy is mailed by certified mail, return
receipt requested or (c) when received by the addressee, if sent by Express
Mail, Federal Express or other express delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate as
to itself by notice to the other parties):

 

(i)

If to the Company, to:

1280 Landmeier Road
Elk Grove Village, IL  60007
Fax No. 847-437-4969
Attention:  Chief Executive Officer

 

(ii)

 

If to a Purchaser:  at the address for such Purchaser set forth on Schedule II
hereto.

 

8.7                                 Accounting Terms.  Unless otherwise set
forth herein, all accounting terms and provisions in this Agreement or any
Ancillary Agreement shall be construed to be as determined in accordance with
generally accepted accounting principles in the United States then in effect.

 

8.8                                 Governing Law.  This Agreement shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Illinois.  This Agreement may not be
changed orally, but only by an agreement in writing signed by the party against
whom enforcement is sought.

 

8.9                                 Headings.  The descriptive headings of the
several paragraphs of this Agreement and the table of contents are inserted for
convenience only and do not constitute a part of this Agreement.

 

8.10                           Counterparts.  This Agreement may be executed in
two or more counterparts, all of which shall be deemed but one and the same
instrument and each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart for each of the parties hereto.  Delivery by facsimile by
any of the parties hereto of an executed counterpart of this Agreement shall be
effective as an

 

20

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original executed counterpart hereof and shall be deemed a representation that
an original executed counterpart hereof will be delivered.

 

8.11                           Non-Business Days.  If the date for making any
payment or the last date for performance of any act or the exercising of any
right, as provided in this Agreement, shall not be a Business Day, such payment
may be made or act performed or right exercised on the next succeeding Business
Day, with the same force and effect as if done on the nominal date provided in
this Agreement.

 

8.12                           Further Assurances.  The Company shall from time
to time and at all times hereafter make, do, execute or cause or procure to be
made, done and executed such further acts, deeds, conveyances, consents and
assurances, without further consideration, that may reasonably be required to
effect the transactions contemplated by this Agreement or any Ancillary
Agreement.

 

8.13                           Integration.  This Agreement and the Ancillary
Agreements, together with the exhibits hereto and thereto, embody the entire
agreement by and among the parties hereto with respect to the matters set forth
herein and supersede any and all previous agreements, whether oral or written,
on the same subject matter.

 

8.14                           Obligations Several Not Joint.  This The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document.  Nothing contained herein or in any
Transaction Document, and no action taken by any Investor or other party hereto
pursuant thereto, shall be deemed to constitute the Investors and such parties
as a partnership, an association, a joint venture or any other kind of entity,
or create a presumption that such parties are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Documents.

 

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]

 

21

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IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase
Agreement as of the day and year first above written.

 

 

COMPANY:

PURCHASERS:

 

 

ELECTRIC CITY CORP.,

CINERGY VENTURES II, LLC

a Delaware corporation

 

 

 

 

 

By:

 

/s/ John P. Mitola

 

By:

 

/s/ R. Foster Duncan

 

Name:

John Mitola

Name:

 

R. Foster Duncan

 

Title:

Chief Executive Officer

Title:

 

President

 

 

 

 

 

 

  /s/ Richard P. Kiphart

 

 

Richard P. Kiphart

 

 

 

 

 

SF CAPITAL PARTNERS

 

 

 

 

 

By:

  /s/

Brian H. Davidson

 

 

Name:

 

Brian H. Davidson

 

 

Title:

 

Authorized Signatory

 

 

 

 

 

 

JOHN THOMAS HURVIS REVOCABLE
TRUST

 

 

 

 

 

By:

  /s/ John Thomas Hurvis

 

 

Name:

 John Thomas Hurvis

 

 

Title:

 Trustee

 

 

 

 

 

 

  /s/ David R. Asplund

 

 

David R. Asplund

 

--------------------------------------------------------------------------------

 

SCHEDULE I

 

Securities Being Purchased

 

Purchaser

 

Shares of
Series D
Preferred

 

Shares of
Series D
Warrants

 

Shares of
Common
Stock

 

Common
Stock
Warrants

 

Purchase
Price

 

 

 

 

 

 

 

 

 

 

 

 

 

Cinergy Ventures II, LLC

 

60,000

 

15,000

 

9,025

 

84,375

 

$

600,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Richard P. Kiphart

 

52,500

 

13,125

 

7,897

 

73,829

 

$

525,000

 

 

 

 

 

 

 

 

 

 

 

 

 

SF Capital Partners

 

30,000

 

7,500

 

4,512

 

42,188

 

$

300,000

 

 

 

 

 

 

 

 

 

 

 

 

 

John Thomas Hurvis Revocable Trust

 

3,750

 

938

 

564

 

5,273

 

$

37,500

 

 

 

 

 

 

 

 

 

 

 

 

 

David R Asplund

 

3,750

 

937

 

564

 

5,273

 

$

37,500

 

 

--------------------------------------------------------------------------------

 

SCHEDULE II

 

Purchasers’ Addresses for Notices

 

Name of Purchaser

 

Address For Notices

 

 

 

Cinergy Ventures, LLC

 

 

 

 

 

Richard P. Kiphart

 

 

 

 

 

SF Capital Partners, Ltd.

 

 

 

 

 

David R. Asplund

 

 

 

 

 

John Thomas Hurvis Revocable Trust Dated March 8, 2002

 

 

 

22

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EXHIBIT A

 

Certificate of Designations

 

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EXHIBIT B

 

Joinder to Investor Rights Agreement

 

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EXHIBIT C

 

Stock Trading Agreement

 

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