Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (as it may be amended from time to time,
this “Agreement”), is entered into as of March 19, 2004 by Electric City Corp.,
a Delaware corporation (the “Company”), and the purchasers whose names appear on
the signature pages 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 Common Stock and warrants to purchase shares of its Common Stock, all as
more fully described herein; and

     WHEREAS, each Purchaser 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 1 — 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.

     “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 Designations” means, with respect to any series of
preferred stock of the Company, the Certificate of Designations, Preferences and
Relative, Participating, Optional and Other Special Rights of Preferred Stock
and Qualifications, Limitations and Restrictions Thereof for such series of
preferred stock.

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     “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 2.3 hereof.

     “Closing Date” shall have the meaning set forth in Section 2.3 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 4.2(f)
hereof.

     “Common Shares” means the shares of Common Stock to be issued by the
Company to the Purchasers hereunder (excluding any shares of Common Stock which
may be issued pursuant to exercise of the Common Stock Warrants).

     “Common Stock” means shares of the Company’s common stock, par value
$0.0001 per share.

     “Common Stock Warrants” means the warrants to purchase Common Stock to be
issued by the Company to the Purchasers pursuant to this Agreement, as evidenced
by Warrant Certificates.

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

     “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 that certain Investor Rights Agreement
dated as of July 31, 2001, by and among the Company and the other parties
thereto, as amended, restated, modified or supplemented and in effect from time
to time.

     “Issuable Warrant Shares” means, as of any date of determination thereof,
the unissued shares of Common Stock which the Purchasers then have the right to
acquire from the Company pursuant to exercise of the Common Stock Warrants.

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     “Issued Warrant Shares” means, as of any date of determination thereof, all
shares of Common Stock which the Purchasers then hold pursuant to having
exercised the Common Stock Warrants in whole or in part.

     “MSDW” shall mean Morgan Stanley Dean Witter Equity Funding, Inc., a
Delaware corporation.

     “MSDW/OIP Agreement” shall mean that certain Securities Purchase Agreement
dated as of March 19, 2004 by and among the Purchasers, MSDW and OIP, as it may
be amended from time to time.

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

     “OIP” shall mean Originators Investment Plan, L.P., a Delaware limited
partnership.

     “Person” shall mean any individual, partnership, limited liability company,
joint venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or any agency, department or instrumentality
thereof.

     “Placement Agent” means Morgan Keegan & Company, Inc.

     “Purchasers” shall have the meaning set forth in the preamble of this
Agreement. “Purchaser” shall mean one of the Purchasers, as applicable in the
context.

     “Registration Statement” shall have the meaning set forth in Section 5.1(a)
hereof.

     “Regulatory Approvals” means (i) 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 (ii) any and all waiting periods imposed by
applicable laws.

     “Securities” means the Common Shares and the Common Stock Warrants which
are issued and sold by the Company to the Purchasers under this Agreement.

     “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.

     “Target Deadline” shall have the meaning set forth in Section 5.1(a)
hereof.

     “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

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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).

     “Transaction Documents” means this Agreement, the Warrant Certificates and
each other instrument, document or agreement to which the Company and any
Purchaser is a party or which is executed or delivered by the Company in
connection with consummation of the Transactions, as amended, modified or
supplemented and in effect from time to time.

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

     “Warrant Certificate” means a warrant certificate evidencing Common Stock
Warrants, duly executed and delivered by the Company 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.

     “Warrant Shares” means, as of any date of determination thereof,
collectively, all Issued Warrant Shares and all Issuable Warrant Shares.

ARTICLE 2 – ISSUE, PURCHASE AND SALE OF SECURITIES

     2.1 Authorization of Issuance of Securities. The Company has authorized the
initial issuance of up to 5,000,000 shares of Common Stock and up to 1,750,000
Common Stock Warrants on and subject to the terms and conditions of this
Agreement and has reserved out of its authorized and unissued Common Stock for
the purpose of effecting the exercise of the Common Stock Warrants, up to
1,750,000 shares of Common Stock.

     2.2 Purchase and Sale of Securities. Subject to the terms and conditions
herein set forth, the Company hereby agrees to sell to each Purchaser, and each
Purchaser severally for itself only agrees to purchase from the Company, at the
Closing, the number of shares of Common Stock and Common Stock Warrants, for the
aggregate purchase price, set forth opposite such Purchaser’s name on Schedule I
hereto. The obligations of each party to close hereunder shall be conditioned
upon closing hereunder by all Purchasers and the Company on the Closing Date and
in the event that any party shall not close as contemplated hereby no other
party shall be obligated to proceed with closing hereunder, without prejudice to
any rights which the other parties may have against such non-closing party.

     2.3 Closing. Subject to the satisfaction or waiver of the conditions to
closing set forth in Article 3, the closing of the purchase and sale of the
Securities (the “Closing”) shall take place at 10:00 a.m. Central Time within
three Business Days of the date hereof (the “Closing Date”), at the offices of
the Placement Agent, or at such other date, time and/or location as is mutually
agreed upon by the Company and the Purchasers.

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ARTICLE 3 — 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 (or waiver by such Purchaser), on or
before the Closing Date, of each of the following conditions:

     (a) Receipt of Securities. Such Purchaser shall have received delivery of
the stock certificates and Warrant Certificates evidencing the Securities to be
issued to such Purchaser in accordance with Section 3.4;

     (b) No Litigation; No Order. No action, suit or proceeding relating to the
transactions contemplated by this Agreement (the “Transactions”) shall be
pending that seeks to restrain or prevent any of the Transactions, 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;

     (c) 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 shall have been taken and all filings and documents incident
thereto shall be reasonably satisfactory in form and substance to such
Purchaser;

     (d) Representations and Warranties. The Company’s representations and
warranties set forth in this Agreement shall have been true and correct in all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality, in which case, such
representations and warranties shall be true and correct without further
qualification) when made and shall continue to be true and correct in all
material respects on the Closing Date (except, in either case, to the extent
that any of such representations and warranties are specifically made as of a
date prior to the date of this Agreement, in which case such representations and
warranties shall have been true and correct as of the applicable earlier
date(s));

     (e) Compliance with this Agreement. The Company shall have performed and
complied with all of the covenants, 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;

     (f) Purchase Permitted by Applicable Laws; Legal Investment. The
acquisition of and payment for the Securities and the consummation of the
Transactions shall not be prohibited by any applicable law, governmental
regulation or rules of AMEX;

     (g) Consents and Approvals. All consents, waivers, approvals, exemptions,
authorizations, or other actions by, or notices to, or filings with, any
Governmental Authority, self-regulatory agency 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

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contemplated hereunder) in connection with the consummation of the Transactions
shall have been obtained or made and be in full force and effect;

     (h) MSDW/OIP Agreement. The closing of the transactions contemplated by the
MSDW/OIP Agreement shall occur simultaneously with the Closing;

     (i) Average Closing Price. The volume weighted average closing price of the
Common Stock as quoted on the American Stock Exchange for the five
(5) consecutive trading days immediately preceding the Closing Date shall be
greater than or equal to $1.90;

     (j) Closing Deliveries. The Company shall have delivered the Closing
Deliveries in accordance with Section 3.4;

     (k) Purchase Permitted by Applicable Laws; Legal Investment. The
acquisition of and payment for the Securities by such Purchaser and the
consummation of the Transactions (i) shall not be prohibited by any applicable
law, governmental regulation or rules of AMEX, 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

     (l) Consents and Approvals. All consents, waivers, approvals, exemptions,
authorizations, or other actions by, or notices to, or filings with, any
Governmental Authority, self-regulatory agency 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) and the
consummation of the Transactions shall have been obtained or made and be in full
force and effect. The Company shall have provided the Purchasers with copies of
the consents obtained from the Company’s preferred stockholders, CIT Capital
Securities, Inc., Laurus Master Fund, Ltd. and Munder Power Plus Fund, a series
of the Munder Series Trust.

     (m) Costs and Expenses. The Company shall have paid (or reimbursed the
Purchasers for) the reasonable costs and expenses, including reasonable
attorneys’ fees, incurred by the Purchasers in connection with the negotiation
of the Transaction Documents and the Closing of the Transactions; provided that
the Company shall not be obligated to pay more than $15,000 in the aggregate
against all such costs and expenses incurred.

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

     (a) Receipt of Purchase Price. The Company shall have received from such
Purchaser payment of the purchase price payable by such Purchaser by wire
transfer of immediately available funds to the account specified on Annex III
hereto;

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     (b) 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;

     (c) Representations and Warranties. Such Purchaser’s representations and
warranties set forth in this Agreement shall have been true and correct in all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality, in which case, such
representations and warranties shall be true and correct without further
qualification) when made and shall continue to be true and correct in all
material respects on the Closing Date (except, in either case, to the extent
that any of such representations and warranties are specifically made as of a
date prior to the date of this Agreement, in which case such representations and
warranties shall have been true and correct as of the applicable earlier
date(s));

     (d) Compliance with this Agreement. Such Purchaser shall have performed and
complied with all of the covenants, agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by such
Purchaser on or before the Closing Date;

     (e) Purchase Permitted by Applicable Laws; Legal Investment. The
acquisition of and payment for the Securities by such Purchaser and the
consummation of the Transactions (i) shall not be prohibited by any applicable
law, governmental regulation or rules of AMEX, 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

     (f) Consents and Approvals. All consents, waivers, approvals, exemptions,
authorizations, or other actions by, or notices to, or filings with, any
Governmental Authority, self-regulatory agency 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) and the
consummation of the Transactions shall have been obtained or made and be in full
force and effect.

     3.3 Closing Deliveries by Each Purchaser. At the Closing, each Purchaser,
severally for itself only, shall deliver to the Company the following:

     (a) the purchase price for the Securities being purchased by such
Purchaser, as set forth on Schedule I hereto, by wire transfer of immediately
available funds to an account designated by the Company set forth on Annex III
hereto, which funds will be delivered to the Company in consideration of the
Securities issued to such Purchaser at the Closing;

     (b) an executed Investor Questionnaire in the form attached as Annex I
hereto;

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     (c) an executed representation letter in acceptable form if the Purchaser
is acting on behalf of a managed account in the purchase of any Securities; and

     (d) a completed Selling Stockholder Questionnaire for such Purchaser in the
form attached as Annex II hereto.

     3.4 Closing Deliveries by the Company. At the Closing, the Company shall
deliver to each Purchaser which has complied with its obligations under
Sections 3.2 and 3.3:

     (a) one or more stock certificates representing the Common Shares being
purchased by such Purchaser, registered in the name of such Purchaser or its
nominee(s), as such Purchaser has specified in writing to the Company prior to
the Closing;

     (b) one or more Warrant Certificates representing the Common Stock Warrants
being purchased by such Purchaser, registered in the name of such Purchaser or
its nominee(s), as such Purchaser has specified in writing to the Company prior
to the Closing;

     (c) Officer’s Certificate. 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) and 3.1(e) hereof have been satisfied on and as of
such date;

     (d) Secretary’s Certificate. A certificate, dated the Closing Date and
signed by the Secretary of the Company, certifying as to the Company’s
Certificate of Incorporation, Bylaws, resolutions of the Board of Directors,
good standing, and incumbency; and

     (e) an opinion of counsel, dated the Closing Date, from outside counsel to
the Company, in substantially the form attached as Annex II hereto.

ARTICLE 4 — REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.

     4.1 Purchaser Representations, Warranties and Covenants. Each Purchaser,
severally as to itself only and not jointly as to any other Purchaser, hereby
represents and warrants to the Company, and agrees with the Company, as follows:

     (a) Such Purchaser has received or given access to and reviewed copies of
the following:

     (i) the Company’s annual report on Form 10-KSB for the year ended
December 31, 2002 filed with the Commission on March 31, 2003;

     (ii) the Company’s quarterly report on Form 10-QSB for the period ended
March 31, 2003 filed with the Commission on May 15, 2003;

     (iii) the Company’s current report on Form 8-K dated June 3, 2003 filed
with the Commission on June 5, 2003;

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     (iv) the Company’s current report on Form 8-K dated June 27, 2003 filed
with the Commission on July 2, 2003;

     (v) the Company’s quarterly report on Form 10-QSB for the period ended
June 30, 2003 filed with the Commission on August 14, 2003;

     (vi) the Company’s current report on Form 8-K dated September 11, 2003
filed with the Commission on September 16, 2003;

     (vii) the Company’s proxy statement for annual meeting of stockholders to
be held on September 24, 2003, mailed to stockholders on August 29, 2003 and
filed with the Commission on August 29, 2003;

     (viii) the Company’s registration statement on Form SB-2 filed with the
Commission on October 20, 2003, as amended by the first amendment thereto filed
with the Commission on November 14, 2003 and as amended by the second amendment
thereto filed with the Commission on February 19, 2004; and

     (ix) the Company’s quarterly report on Form 10-QSB for the period ended
September 30, 2003 filed with the Commission on November 13, 2003; and

     (x) the Company’s audited balanced sheet as of the year ending December 31,
2003, and the related statements of income and cash flow (the “2003 Audited
Financial Statements”).

Such Purchaser understands that no Person has been authorized to give any
information or to make any representations for or on behalf of the Company other
than as set forth in the Commission Documents or in this Agreement, and each
Purchaser represents and agrees that it has not relied on any such other
information or representations in making a decision to purchase the Securities
which such Purchaser agrees to purchase hereunder. Such Purchaser represents to
the Company that such Purchaser has had access to such financial and other
information and has had the opportunity to ask questions and receive answers as
it deemed necessary in respect of the decision to purchase the Securities it is
purchasing hereunder, and has consulted with its own advisors concerning the
proposed investment in the Company. Such Purchaser understands that an
investment in the Company involves a high degree of risk for the reasons, among
others, set forth under the caption “RISK FACTORS” in the Company’s registration
statements referred to in clause (vii) above.

     (b) Such Purchaser represents that it (or, if applicable, each managed
account on whose behalf Securities are being purchased by such Purchaser) is a
sophisticated investor and an “accredited investor” as defined in Rule 501 under
the Securities Act, as certified by such Purchaser pursuant to the Investor
Questionnaire in the form attached hereto as Annex I which such Purchaser has
completed and delivered to the Company. Such Purchaser further represents that
it (or, if applicable, each managed account on whose behalf Securities are being
purchased by such Purchaser) has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Securities and making an informed investment decision with
respect thereto, and can bear the economic risk of loss of the entire investment
in the Securities being purchased.

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     (c) Such Purchaser acknowledges that it has sole responsibility for its own
due diligence investigation and its own investment decision, and that in
connection with its investigation and its investment decision (i) such Purchaser
has not relied on any representation by or on behalf of the Company not set
forth in the Commission Documents or in this Agreement, (ii) such Purchaser has
not relied on any representation made by the Placement Agent or any Person
affiliated with the Placement Agent, and (iii) such Purchaser has not relied on
the fact that any other Person has decided to invest in the Securities or in
capital stock of the Company.

     (d) Such Purchaser understands and expressly acknowledges and agrees that
none of the Securities have been registered under the Securities Act, or
qualified under any applicable securities laws of any State of the United States
(“Applicable State Law”) and therefore the Securities may not be offered, sold,
transferred, assigned, pledged, hypothecated or otherwise disposed of, directly
or indirectly, unless subsequently registered or qualified under the Securities
Act and under Applicable State Law or unless an exemption from the registration
requirements of the Securities Act and Applicable State Law is available and an
opinion of counsel indicates that such an exemption is available, in each case
to the extent permitted by the terms of this Agreement.

     (e) Such Purchaser understands and agrees that all certificates
representing the Securities shall bear a legend which will be substantially in
the form of the following:

      “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”) OR ANY APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS
(“APPLICABLE STATE LAW”). THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED,
TRANSFERRED OR HYPOTHECATED OR OTHERWISE ASSIGNED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT THERE
IS AN EXEMPTION FROM REGISTRATION.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holders of the Securities upon which it
is stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the Securities Act, (ii) in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel acceptable to the Company, in an acceptable form, to the
effect that a public sale, assignment or transfer of the Securities may be made
without registration under the Securities Act, or (iii) such holder provides the
Company with reasonable assurances that the Securities have been or are being
sold pursuant to Rule 144.

     (f) Such Purchaser (or, if applicable, each managed account on whose behalf
Securities are being purchased by such Purchaser) will acquire the Securities
pursuant to this Agreement for its own account for investment and not with a
view to, or in connection with, the resale or distribution thereof or in any
arrangement or understanding with any other persons

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regarding the distribution of such Securities in violation of the Securities
Act. Such Purchaser hereby covenants and agrees to execute a lockup agreement,
containing a one hundred eighty (180) day restriction on the sale of any
Securities, and other standard terms and conditions, with any requesting
underwriter participating in a primary offering (as defined in Section 5.4
below). The foregoing obligation shall apply only if all officers and directors
of the Company and all significant equity holders of the Company enter into
similar agreements, and shall not apply to a registration relating solely to
employee benefit plans, or to a registration relating solely to a transaction
pursuant to Rule 145 under the Securities Act. If any Person, including any
officer or director of the Company and any equity holder of the Company, is
released from its obligations under the lockup agreement or such similar
arrangements, all such Purchaser shall be released from such obligations.

     (g) Except as otherwise permitted by Rule 144, such Purchaser hereby
covenants and agrees with the Company not to make any sale of any Registrable
Securities without causing the prospectus delivery requirement under the
Securities Act to be satisfied or otherwise complying with the Securities Act,
and such Purchaser acknowledges and agrees that the Registrable Securities are
not transferable on the books of the Company unless the certificate submitted to
the transfer agent evidencing such Registrable Securities is accompanied by

     (i) a separate certificate in acceptable form executed by an officer of, or
other authorized person designated by, such Purchaser to the effect that
(1) such Registrable Securities have been sold in accordance with a registration
statement pursuant to Section 5.1 or Section 5.4 hereof and the requirement of
delivering a current prospectus has been satisfied; or

     (ii) an opinion of counsel reasonably satisfactory to the Company stating
that registration is not required under the Securities Act.

     (h) Such Purchaser acknowledges that there may be times when the Company
may temporarily suspend the use of the prospectus forming a part of the
Registration Statement in the circumstances, and subject to the limitations, set
forth in Section 5.5(c) below. Such Purchaser hereby covenants and agrees that
it will not sell any Registrable Securities pursuant to said prospectus during
the period commencing at the time at which the Company gives such Purchaser
written notice of the suspension of the use of said prospectus in accordance
with Section 5.5 and ending the date on which the Company gives such Purchaser
written notice that such Purchaser may thereafter effect sales pursuant to said
prospectus.

     (i) Such Purchaser understands that nothing in the Commission Documents,
this Agreement or any other materials presented to such Purchaser in connection
with the purchase and sale of the Securities constitutes legal, tax or
investment advice, other than the opinion of counsel delivered pursuant to
Section 3.4(d). Such Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Securities.

     (j) Such Purchaser understands that the Securities (including the Issuable
Warrant Shares) are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of the Securities Act and
Applicable State Law and that the Company is relying

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upon the truth and accuracy of, and such Purchaser’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of such Purchaser to acquire the Securities.

     (k) the execution and delivery of this Agreement by such Purchaser and the
performance of this Agreement and the consummation by such Purchaser or its
advisory clients, as the case may be, of the Transactions have been duly
authorized by all necessary action of such Purchaser’s directors and
stockholders (if a corporation), partners (if a partnership) or members and
managers (if a limited liability company) and, if applicable, such Purchaser’s
advisory clients; and this Agreement, when duly executed and delivered by such
Purchaser, will constitute a valid and legally binding instrument, enforceable
in accordance with its terms against such Purchaser or any of its advisory
clients, as the case may be; except as the enforceability thereof may be limited
by (i) bankruptcy, insolvency, moratorium and other laws affecting the rights
and remedies of creditors and secured parties, (ii) rules of law governing
specific performance, injunctive relief or other equitable remedies and by
general principles of equity, and (iii) the indemnification provisions of
Section 5.7.

     (l) Such Purchaser represents that:

     (i) If such Purchaser is a corporation, it is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with all requisite power and authority to perform its obligations
under this Agreement. If such Purchaser is a limited liability company, it is a
limited liability company duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization or formation, with all
requisite power and authority to perform its obligations under this Agreement.
The person executing this Agreement on behalf of such Purchaser is authorized to
act for such Purchaser in purchasing the Securities.

     (ii) If such Purchaser is a corporation acting in an advisory capacity, it
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with full power and authority
(corporate and other) to act on behalf of its advisory clients under this
Agreement. If such Purchaser is a limited liability company acting in an
advisory capacity, it is a limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization or formation, with full power and authority (limited liability
company and other) to act on behalf of its advisory clients under this
Agreement.

     (iii) If such Purchaser is a trust, the trustee thereunder has been duly
appointed as trustee of such Purchaser with full power and authority to act on
behalf of such Purchaser and to perform the obligations of such Purchaser under
this Agreement. Furthermore, the trustee under such trust has independently
determined that the purchase of the Securities to be purchased by such Purchaser
is a suitable investment for such trust as authorized by the terms thereof and
applicable laws and regulations.

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     (iv) If such Purchaser is a limited partnership, it is a limited
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, with full power and authority to
perform its obligations under this Agreement.

     (v) If such Purchaser is a limited partnership acting in an advisory
capacity, it is a limited partnership duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, with full
power and authority to act on behalf of its advisory clients under this
Agreement.

     (vi) If such Purchaser is a corporation, limited liability company,
partnership, trust or other form of business entity, the execution and delivery
of this Agreement by such Purchaser will not contravene or result in a default
under any provision of existing law or regulation to which such Purchaser is
subject, the provisions of its trust instrument, charter, by-laws or other
governing documents or any indenture, mortgage or other agreement or instrument
to which it is a party or by which it is bound and does not require on its part
any approval, authorization, license or filing from or with any foreign,
federal, state or municipal board or agency which has not been obtained or duly
made.

     (vii) If such Purchaser is an individual, he or she has full power and
authority to perform his or her obligations under this Agreement.

     (m) Such Purchaser agrees to complete and execute and return to the Company

     (i) the Investor Questionnaire in the form of Annex I to this Agreement
representing that such Purchaser is investing in Securities as an “accredited
investor;”

     (ii) if such Purchaser is acting on behalf of a managed account in the
purchase of any Securities, an acceptable representation letter; and

     (iii) the Selling Stockholder Questionnaire in the form of Annex II to this
Agreement,

in each case together with an executed signature page to this Agreement. Such
Purchaser represents and warrants that the answers to each of the foregoing are
true and correct as of the date hereof and will be true and correct as of the
effective date of the Registration Statement. Notwithstanding the foregoing,
from the effective date of the Registration Statement through the date that the
Registration Statement is no longer effective, each Purchaser agrees to promptly
notify the Company if at any time the information contained in the documents
delivered by or on behalf of such Purchaser pursuant to this Agreement becomes
untrue or incorrect in any manner and shall promptly provide the Company with
corrected information. Such Purchaser further represents and warrants that it is
not purchasing any Securities on behalf of any managed account other than as
listed in the Managed Account Representation Letter.

     (n) Such Purchaser represents that it has not entered into any contracts,
arrangements, understandings or relationships (written or otherwise) with any
other Person or Persons (other than the Company or a limited partner/member of
such Purchaser, which in any case shall not violate any securities laws) with
respect to any securities of the Company (including but not

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limited to transfer or voting of any of the securities, finder’s fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
division of profits or loss, or the giving or withholding of proxies) or the
operations, management or control of the Company; such Purchaser is not bound
together, under common control with, in a common enterprise with, or otherwise
acting in concert with, any other Person or Persons (other than a limited
partner/member of such Purchaser, which in any case shall not violate any
securities laws) in connection with the Transactions; and such Purchaser does
not own any securities of the Company which are pledged or otherwise subject to
a contingency the occurrence of which would give another Person voting power or
investment power over such securities.

     (o) Such Purchaser represents, for itself, that as of the date hereof, such
Purchaser does not beneficially own any shares of Common Stock.

     (p) No state, federal or foreign regulatory approvals, permits, licenses or
consents or other contractual or legal obligations are required for such
Purchaser to enter into this Agreement or otherwise purchase the Securities to
be purchased by such Purchaser.

     (q) Without limiting the provisions of any confidentiality agreement
entered into between such Purchaser and the Company, such Purchaser agrees that,
without the Company’s prior written consent, it will keep confidential and will
not disclose or divulge any confidential, proprietary or secret information
which such Purchaser may obtain from the Company in connection with the
Transactions which information the Company has identified in writing to the
Purchasers to be confidential, unless such information is known, or until such
information becomes known, by the public through no fault of such Purchaser.

     (r) Upon reasonable request from the Company, such Purchaser shall provide
the Company with such other information, documents and certifications that the
Company shall require to verify the information provided by such Purchaser in
connection with the offer and sale of the Securities to such Purchaser hereunder
and in connection with the registration of the Registrable Securities pursuant
to Section 5.1 and/or Section 5.4 hereof.

     (s) The residence or principal place of business of such Purchaser is set
forth on the signature page to this Agreement and the offer and sale of the
Securities to such Purchaser was made solely in that state.

     (t) Such Purchaser understands and acknowledges that the Company intends to
use some or all of the proceeds from the sale of the Securities to redeem some
(but not all) of the outstanding shares of the Company’s Series A Convertible
Preferred Stock, Series C Convertible Preferred Stock and/or Series D
Convertible Preferred Stock.

     4.2 Company Representations, Warranties and Covenants. The Company hereby
represents and warrants to each Purchaser, and agrees with each Purchaser, as
follows:

     (a) The Company and each of its subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization, is duly qualified as a foreign entity and in good standing under
the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification, other than
in such jurisdictions where the failure to be so qualified and in good standing
would not be

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reasonably expected to have a material adverse effect, with the requisite power
and authority to perform its obligations under this Agreement, to consummate the
Transactions and to conduct its business as currently conducted.

     (b) The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the Transactions have been duly
authorized by all necessary corporate action of the Company and this Agreement
has been duly executed and delivered by the Company; and this Agreement, when
duly executed and delivered by such Purchaser and the Company, will constitute a
valid and legally binding instrument of the Company enforceable in accordance
with its terms, except as the enforceability thereof may be limited by (i)
bankruptcy, insolvency, moratorium and other laws affecting the rights and
remedies of creditors and secured parties, (ii) rules of law governing specific
performance, injunctive relief or other equitable remedies and by general
principles of equity, and (iii) the indemnification provisions of Section 5.7.

     (c) The Common Shares and the shares of Common Stock issued pursuant to the
MSDW/OIP Agreement are duly authorized and, when issued hereunder, will be
validly issued, fully paid and nonassessable and free of all liens, encumbrances
and restrictions imposed by law (other than restrictions upon transfer imposed
generally by applicable securities laws), any agreement or by the Company and
subject to no preemptive rights, co-sale rights, rights of first refusal or
similar rights in favor of other Persons which have not been waived. Assuming
the accuracy of the representations of such Purchaser in this Agreement, the
Common Shares issuable hereunder will be issued in compliance with all
applicable federal and state securities laws. The shares of Common Stock
issuable upon the exercise of the Common Stock Warrants are duly authorized and
reserved for issuance, and, when issued upon such exercise, will be validly
issued, fully paid and nonassessable, and free of all liens, encumbrances and
restrictions imposed by law (other than restrictions upon transfer imposed
generally by applicable securities laws), any agreement or by the Company and
subject to no preemptive rights, co-sale rights, rights of first refusal or
similar rights in favor of other Persons which have not been waived. Assuming
the accuracy of the representations of such Purchaser in this Agreement, when
such shares 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 1,750,000 shares of Common Stock issuable upon exercise of the
Common Stock Warrants.

     (d) 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 34,922,021 issued and outstanding shares of Common Stock, 2,351,589
issued and outstanding shares of Series A Convertible Preferred Stock, 233,613
issued and outstanding shares of Series C Convertible Preferred Stock and
157,769 issued and outstanding shares of Series D Convertible Preferred Stock.
Other than the securities described in this Section 4.2(d) and the options,
rights and warrants to purchase up to 20,017,048 shares of Common Stock and
warrants to purchase up to 375,000 shares of Series D Preferred Stock, the
Company does not have any other securities or rights to purchase its securities
outstanding.

     (e) The execution and delivery of this Agreement, the consummation by the
Company of the Transactions on its part herein contemplated and the compliance
by the Company with the terms hereof do not (i) violate the Certificate of
Incorporation (as amended to

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date) of the Company, including the Certificates of Designations of the
Series A, Series C and Series D Preferred Stock of the Company, or the By-Laws
(as amended to date) of the Company, or (ii) violate any of the terms or
provisions of, or constitute a default under or give a right of termination of,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of their
properties or assets are subject, or (iii) result in a material violation of any
applicable law, statute or any order, judgment, decree, rule or regulation of
any court or Governmental Authority having jurisdiction over the Company or any
of its subsidiaries or any of their properties or assets; and (iv) no consent,
approval, authorization, order, registration or qualification of or with any
such court or Governmental Authority is required for the valid authorization,
execution, delivery and performance by the Company of this Agreement, the issue
of the Securities or any Warrant Shares or the consummation by the Company of
the other transactions on its part contemplated by this Agreement, except for
such consents, approvals, authorizations, registrations or qualifications as may
be required under Federal securities law or Applicable State Law, American Stock
Exchange listing requirements or with respect to requirements applicable to such
Purchaser. The Company has obtained all consents, approvals, waivers of rights
and other authorizations from securityholders of the Company necessary to the
consummation of the transactions contemplated by the MSDW/OIP Agreement.

     (f) Since January 1, 2003, the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Commission pursuant to the reporting requirements of the Exchange Act (all of
the foregoing filed prior to the date hereof (including all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein) being hereinafter referred to as the
“Commission Documents”). As of their respective dates, the Commission Documents
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder applicable to
the Commission Documents, except that the Company’s filing of the pro forma
financial information which is set forth in the Company’s current report on Form
8-K filed on July 2, 2003 was not timely filed within 15 days after the
Company’s sale of the assets of Switchboard Apparatus, Inc. Each Commission
Document does not as of the date hereof contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein in light of the circumstances
in which they were made not misleading. The Commission Documents, including the
financial statements, when they were filed with the Commission, conformed in all
material respects with the applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto, except that the
Company’s filing of the pro forma financial information which is set forth in
the Company’s current report on Form 8-K filed on July 4, 2003 was not timely
filed within 15 days after the Company’s sale of the assets of Switchboard
Apparatus, Inc. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended. The Company is not required to file
and will not be required to file any agreement, note, lease, mortgage, deed or
other instrument entered into prior to the date hereof or

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the Closing Date and to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound which has not been
previously filed as an exhibit to the Company’s reports filed or made with the
Commission under the Exchange Act. The Company meets the requirements for use of
Form SB-2 for registration of the resale of Registrable Securities.

     (g) Since December 31, 2002, neither the Company nor any of its
subsidiaries has sustained any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree.

     (h) Neither the Company nor any of its Subsidiaries 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. Since December 31, 2002, none of the Company or
any of its Subsidiaries has received any written notice or other written
communication from any 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.

     (i) The Company has good and marketable fee simple title to the assets
reflected on the balance sheet set forth in the 2003 Audited Financial
Statements (the “Assets”). Except as set forth in Schedule 4.2(i), 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

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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.

     (j) Except as disclosed on Schedule 4.2(j), 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, 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.

     (k) The Company maintains or is covered by valid policies of workers’
compensation insurance, product liability insurance, and of 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.

     (l) Except as set forth on Schedule 4.2(l), neither the Company nor any of
its Subsidiaries is directly or indirectly a party to or otherwise involved in
any transaction including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service, with any Affiliate.
The Company has delivered to the Purchasers copies of all agreements and
documents related to all transactions listed on Schedule 4.2(l).

     (m) 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

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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.

     (n) 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.

     (o) The net proceeds of the sale of the Securities will be used by the
Company to redeem certain shares of the Company’s outstanding preferred stock
and for other general corporate purposes.

     (p) Schedule 4.2(p) lists all agreements with any Person in which the
Company has granted registration rights with respect to its capital stock.
Schedule 4.2(p) lists all agreements, arrangements or understandings between the
Company and one or more stockholders of the Company relating to the transfer of
any class of securities of the Company (including, without limitation, tag-along
rights, drag-along rights, rights of first offer or any similar rights or
obligations) or voting of any class of securities of the Company. All holders of
piggyback registration rights which otherwise would apply with respect to the
Registration Statement (as defined in Section 5.1 below) have waived such rights
with respect to the registration of the Registrable Securities (as defined in
Section 5.1 below).

     4.3 Survival of Representations, Warranties and Agreements. Notwithstanding
any investigation made by any party to this Agreement, all covenants,
agreements, representations and warranties made by the Company and the
Purchasers herein shall survive the execution of this Agreement, the delivery to
the Purchasers of the Securities and the payment therefore.

ARTICLE 5 — REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT

     5.1 Required Registration. The Company shall:

     (a) Subject to Section 5.2 below, use commercially reasonable efforts,
subject to receipt of all necessary information from the Purchaser, to prepare
and file with the Commission within 45 days of the Closing Date (the “Target
Deadline”) a registration statement (the “Registration Statement”) covering the
resale of the Common Shares, the shares of Common Stock to be acquired by the
Purchasers pursuant to the MSDW/OIP Agreement (the “MSDW Shares”) and the
Warrant Shares (collectively, the “Registrable Securities”) by the Purchasers
from time to time through the American Stock Exchange, the over-the-counter
market or in privately-negotiated transactions or otherwise.

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     (b) Subject to the provisions of Section 5.2 below, use commercially
reasonable efforts, subject to receipt of all necessary information from the
Purchasers, to cause the Registration Statement to be declared effective as
promptly as practicable after filing thereof, but in no event later than the
date which is 120 days after the Closing Date (the “Effectiveness Deadline”).

     (c) Use its reasonable commercial efforts to keep the Registration
Statement continuously effective under the Securities Act until the date which
is the earlier of the date when (i) all Registrable Securities have been sold,
or (ii) all Registrable Securities may be sold immediately without registration
under the Securities Act and without volume restrictions pursuant to Rule 144(k)
under the Securities Act, as determined by the counsel to the Company pursuant
to a written opinion letter to such effect, addressed and acceptable to the
Company’s transfer agent and the Purchasers.

     (d) File documents required of the Company for customary “blue sky”
clearance in states specified in writing by the Purchasers and reasonably
required by the Purchasers in order to resell the Registrable Securities;
provided, however, that the Company shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented.

     (e) File with the Commission in a timely manner the reports and other
documents required to be filed by it under the Securities Act and the Exchange
Act (or, if the Company is not required to file such reports, it will, upon the
request of any Purchaser, make publicly available other information so long as
necessary to permit sales by the Purchasers under Rule 144 under the Securities
Act), all to the extent required to enable the Purchasers to sell the
Registrable Securities from time to time without registration under the
Securities Act within the limitations provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the Commission; provided,
however, that nothing in this Agreement shall require the Company to file
reports under the Securities Act or the Exchange Act, to register any of its
securities under the Exchange Act, or to make publicly available any information
concerning the Company at any time when it is not required by law or by any
agreement by which it is bound to do any of the foregoing.

     (f) Subject to Section 6.1, all expenses relating to the registration and
offering of the Registrable Securities pursuant to this Section 5.1 shall be
borne by the Company, except that the Purchasers shall bear underwriting and
selling commissions attributable to their Registrable Securities being
registered and any transfer taxes on shares being sold by such Purchaser.

     5.2 Purchasers’ Cooperation. In addition to and without limitation of any
other covenant, representation or warranty contained in this Agreement, each
Purchaser shall:

     (a) Complete the Selling Stockholder Questionnaire related to the
Registration Statement in the form attached hereto as Annex II and deliver the
same to the Company promptly (and in any event within five (5) Business Days)
following Closing hereunder).

     (b) Furnish to the Company, upon the Company’s request, all information
regarding such Purchaser and the intended distribution of such Purchaser’s
Registrable Securities included

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in any registration statement under Section 5.1 or Section 5.4 for the purpose
of preparing such registration statement, to the extent that such information is
required to comply with applicable legal requirements.

     (c) Upon the Company’s request, notify the Company of the number of
Registrable Securities held by such Purchaser and the number of Registrable
Securities that have been sold and remain to be sold pursuant to any
registration statement under Section 5.1 or Section 5.4 on which any Registrable
Securities are registered. In any event, each Purchaser shall promptly notify
the Company when all registered Registrable Securities of such Purchaser have
been sold.

     5.3 Transfer of Shares. Each Purchaser agrees not to effect any disposition
of any Registrable Securities or the right to purchase any Registrable
Securities that would constitute an offer or sale within the meaning of the
Securities Act except as contemplated in Section 5.1 and Section 5.4 or pursuant
to an exemption from registration under the Securities Act.

     5.4 Piggyback Registration. If at any time or times after the date hereof
but prior to the fifth (5th) anniversary of the Closing hereunder, the Company
shall determine or be required to register any shares of its Common Stock or
other equity securities for sale under the Securities Act in exchange for cash
(whether in connection with a public offering of securities by the Company (a
“primary offering”), a public offering of securities by stockholders of the
Company (a “secondary offering”) or both), but not in connection with a
registration on Forms S-8, S-4 or other form effected solely to implement an
employee benefit plan or a transaction to which Rule 145 or any other similar
rule of the Commission under the Securities Act is applicable, the Company
shall:

     (a) Promptly give written notice thereof to each of the Purchasers.

     (b) use commercially reasonable efforts to effect the registration under
the Securities Act of any Registrable Securities (but not any other shares of
Common Stock) which any Purchasers then continue to hold and request to be
registered in a writing delivered to the Company within 10 days after such
Purchasers’ receipt of the notice referred to above, subject to Section 5.4(c)
below.

     (c) In the case of a primary offering which is the registration of shares
of Common Stock by the Company in connection with an underwritten public
offering, (i) the Company shall not be required to include any Registrable
Securities in such underwriting unless the Purchasers which are holders thereof
accept the terms of the underwriting as agreed upon between the Company and the
underwriter or underwriters selected by it, and (ii) if the underwriter(s)
determines that marketing factors require a limitation on the number of
Registrable Securities to be offered, the Company shall not be required to
register Registrable Securities of the Purchasers in excess of the amount, if
any, of shares of the capital stock which the principal underwriter of such
underwritten offering shall reasonably and in good faith agree to include in
such offering in excess of any amount to be registered for the Company, and any
amount of shares of Common Stock which the Company is obligated to include in
such registration pursuant for any other Person, and the number of shares to be
registered and sold by each Person (other than the Company) shall be reduced pro
rata according to the relative number of fully

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diluted shares of Common Stock owned by such Person and all shares owned by all
Persons requesting inclusion in such registration.

     (d) All expenses relating to the registration and offering of Registrable
Securities pursuant to this Section 5.4 shall be borne by the Company, except
that the Purchasers shall bear underwriting and selling commissions attributable
to their Registrable Securities being registered, any transfer taxes on shares
being sold by such Purchaser.

     5.5 Company’s Other Obligations In Respect of Registrations. In connection
with any registration by the Company under this Article 5 (including the
Registration Statement) of any Purchaser’s Registrable Securities :

     (a) The Company will promptly notify each Purchaser holding Registrable
Securities covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in the
light of the circumstances then existing.

     (b) The Company will furnish to each Purchaser with respect to the
Registrable Securities registered under such registration statement (and to each
underwriter, if any, of such Registrable Securities ) such number of copies of
such registration statement and any amendment or supplement thereto and of
prospectuses and preliminary prospectuses in conformity with the requirements of
the Securities Act as such Purchaser shall reasonably request.

     (c) The Company shall prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing; provided, however,
the Company may, subject to the last sentence of this Section 5.5(c),
temporarily suspend the use of the prospectus forming a part of such
registration statement in the event that, and during such period as, (i) the
Company is engaged in confidential negotiations or other confidential business
activities, disclosure of which would be required to be included or incorporated
by reference in such prospectus or registration statement, and (ii) the Board of
Directors of the Company determines in good faith that such disclosure would
have a material adverse effect on any such confidential negotiations or other
confidential business activities or would be materially detrimental to the
Company. In such event, subject to the last sentence of this Section 5.5(c), the
Company may suspend the use of such prospectus until such time as an amendment
to such registration statement has been filed by the Company and declared
effective by the Commission, or until such time as the Company has filed an
appropriate report with the Commission pursuant to the Exchange Act. Anything
herein to the contrary notwithstanding, the Company does not have the right to
suspend the use of such prospectus or otherwise restrict the Purchasers’ ability
to sell or otherwise transfer the Registrable Securities (or any other
securities of the Company any

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Purchaser holds) for a period of more than 90 days per suspension not more than
twice in any twelve month period, and the Company may not exercise this right to
suspend the use of such prospectus more than 180 days in any twelve-month
period.

     (d) The Company will promptly inform the Purchasers when any stop order by
the Commission has been issued with respect to the Registrable Securities and
use commercially reasonable efforts to promptly cause such stop order to be
withdrawn.

     (e) The Company will cause all Registrable Securities registered pursuant
to such registration statement to be listed on each securities exchange or
market system on which the Company’s Common Stock then is listed.

     (f) The Company will take such other actions as may be reasonably necessary
to effect the registration of the resale of the Registrable Securities in
accordance with the terms of this Agreement, to allow such Registrable
Securities to trade in the same market system or exchange where the Company’s
Common Stock then trades, and to comply with all rules and regulations of the
Commission applicable thereto.

     (g) The Company will obtain a “cold comfort” letter from the independent
certified public accountants of the Company addressed to the holders of the
Registrable Securities included in such registration and the underwriters, if
any, dated the effective date of such registration statement (and, if such
registration statement includes an underwritten public offering, also dated the
date of the closing under the underwriting agreement), such letter to be in
customary form and covering such matters as are customarily covered by such
letters.

     5.6 Effect of Failure to File or Obtain Effectiveness of Registration
Statement.

     (a) If the Registration Statement covering the resale of all the
Registrable Securities required to be filed by the Company pursuant to this
Agreement has not been filed with the Commission on or before the Target
Deadline or has not been declared effective by the Commission on or before the
Effectiveness Deadline (either event, a “Registration Default”), then following
such Registration Default and until such Registration Default is cured by the
Company filing such Registration Statement with the Commission or such
Registration Statement being declared effective by the Commission, as applicable
(a “Registration Cure”), the Company shall pay to each Purchaser an amount (the
“Default Payment”) equal to the product of (x) one thirtieth (1/30th) of one
percent (1%) of the purchase price paid by such Purchaser on the Closing Date,
multiplied by (y) the number of days which elapse between the date of the
Registration Default and the date of the Registration Cure (the “Registration
Default Period”), provided, however, that in no event shall the payments to
which a Purchaser shall be entitled pursuant to this Section 5.6 exceed five
percent (5.0%) of the total purchase price paid by such Purchaser hereunder.

     (b) Notwithstanding the foregoing, if the sole reason why the Registration
Statement has not been filed on or before the Target Deadline or has not become
effective on or before the Effectiveness Deadline is because any of the
Purchasers did not provide the Company with information which is required to be
disclosed in the Registration Statement and which the Company requested such
Purchaser to so provide in writing at least ten (10) days prior to the

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Target Deadline or the Effectiveness Deadline, as applicable, the Target
Deadline and the Effectiveness Deadline shall be extended until the later of
(i) ten (10) days after the information has been provided to the Company or
(ii) ten (10) days after the date which otherwise would be the Target Deadline
or the Effectiveness Deadline, as applicable, and the Company’s obligation to
pay the Default Payment will not begin to accrue until after the extended Target
Deadline or Effectiveness Deadline, as applicable.

     (c) The Default Payment shall be paid in cash, at the end of each 30-day
period following the Registration Default.

     5.7 Indemnification and Contribution.

     (a) For the purpose of this Section 5.7:

     (i) The term “Selling Shareholder” shall include a Purchaser and its
officers, directors, trustees, partners and members and successors and assigns
and any Person which controls the Purchaser and the officers, directors,
trustees, partners and members of any such Person; and

     (ii) The term “Registration Statement” shall include (A) the Registration
Statement to be filed pursuant to Section 5.1 hereof and any final prospectus,
supplement or amendment included in or relating to the Registration Statement
and (B) any registration statement filed pursuant to Section 5.4 and any final
prospectus, supplement or amendment included in or relating to such registration
statement.

     (b) The Company agrees to indemnify and hold harmless each Selling
Shareholder from and against any losses, claims, damages or liabilities to which
such Person may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon any untrue statement or alleged
untrue statement of a material fact contained in a Registration Statement or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
arise out of any failure by the Company to fulfill any undertaking included in a
Registration Statement and the Company will reimburse such Selling Shareholder
for any reasonable legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim as such
expenses are incurred, provided, however, that the Company shall not be liable
in any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon, any such untrue statement or omission made in such
Registration Statement in reliance upon written information furnished to the
Company by or on behalf of such Selling Shareholder expressly for use in
preparation of the Registration Statement, or the failure of such Selling
Shareholder to comply with the covenants and agreements contained in
Sections 4.1, 5.2 and 5.3 hereof respecting sale of any Registrable Securities
or any statement or omission in any prospectus that is corrected or made not
misleading in any subsequent prospectus that was delivered to the related
Purchaser prior to the pertinent sale or sales by such Purchaser.

     (c) Each Purchaser agrees to indemnify and hold harmless the Company (and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities

- 24 -

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Act, and each of its officers and directors who sign the Registration Statement)
from and against any losses, claims, damages or liabilities to which the Company
(or any such officer, director or controlling person) may become subject (under
the Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any failure to comply with the covenants and agreements contained in
Sections 4.1, 5.2 and 5.3 hereof respecting sale of any Registrable Securities ,
or any untrue statement or alleged untrue statement of a material fact contained
(or incorporated by reference), or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in the Registration Statement on the
effective date thereof if such untrue statement was made in reliance upon and in
conformity with written information furnished by or on behalf of such Purchaser
for use in preparation of such Registration Statement. Such Purchaser will
reimburse the Company (or such officer, director or controlling person), as the
case may be, for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim. In no event shall the liability of such Purchaser hereunder be greater in
amount than the dollar amount of the net proceeds received by such Purchaser
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.

     (d) Promptly after receipt by any indemnified person of a notice of a claim
or the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 5.7, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person, such
indemnifying person shall be entitled to participate therein, and, to the extent
it shall wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified person. After notice from the indemnifying
person to such indemnified person of its election to assume the defense thereof,
such indemnifying person shall not be liable to such indemnified person for any
legal expenses subsequently incurred by such indemnified person in connection
with the defense thereof, provided, however, that if there exists or shall exist
a conflict of interest that would make it inappropriate, in the opinion of
counsel to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person, the indemnified person shall be
entitled to retain its own counsel (in addition to local counsel) at the expense
of such indemnifying person; provided, further, that no indemnifying person
shall be responsible for the fees and expenses of more than one separate counsel
for all indemnified parties. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but, if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party or parties in
accordance with the provisions of this Section 5.7.

     (e) If the indemnification provided for in this Section 5.7 from the
indemnifying person is determined by a court of competent jurisdiction to be
unavailable to an indemnified person hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then the indemnifying
person, in lieu of indemnifying such indemnified person, shall contribute to the
amount paid or payable by such indemnified person as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying person and indemnified persons in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant

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equitable considerations. The relative fault of such indemnifying person and
indemnified persons shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission, has been made by, or relates
to information supplied by, such indemnifying person or indemnified persons, and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in this
Section 5.7, any reasonable legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this Section 5.7(e) 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 paragraph. Notwithstanding the
provisions of this Section 5.7(e), no Purchaser shall be required to contribute
any amount in excess of the dollar amount of the gross proceeds received by such
Purchaser upon the sale of the Registrable Securities giving 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.

     5.8 Termination of Conditions and Obligations. The conditions precedent
imposed by Article 2 or this Article 5 upon the transferability of the
Registrable Securities shall cease and terminate as to any particular number of
the Registrable Securities when such Registrable Securities shall have been
effectively registered under the Securities Act and sold or otherwise disposed
of in accordance with the intended method of disposition set forth in the
Registration Statement covering such Registrable Securities or at such time as
an opinion of counsel satisfactory to the Company shall have been rendered to
the effect that such conditions are not necessary in order to comply with the
Securities Act.

     5.9 Information Available. So long as a registration statement is effective
covering the resale of any Registrable Securities of a Purchaser, the Company
will furnish to such Purchaser:

     (a) As soon as practicable after available (but in the case of the
Company’s Annual Report on Form 10-KSB, within 120 days after the end of each
fiscal year of the Company), one copy of (i) its Annual Report on Form 10-KSB or
equivalent form (which shall contain financial statements audited in accordance
with generally accepted accounting principles by a firm of certified public
accountants), (ii) its quarterly reports on Form 10-QSB or equivalent form, and
(iii) a full copy of the particular registration statement covering the
Registrable Securities of such Purchaser which are registered thereby (the
foregoing, in each case, excluding exhibits);

     (b) Upon the reasonable request of such Purchaser, any exhibits excluded by
the parenthetical to clause (iii) of subparagraph (a) of this Section 5.9 and
all other information that is made available to shareholders; and

     (c) Upon the reasonable request of such Purchaser, an adequate number of
copies of the prospectuses to supply to any other party requiring such
prospectuses;

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and the Company, upon the reasonable request of such Purchaser, will meet with
such Purchaser or a representative thereof at the Company’s headquarters to
discuss all information relevant for disclosure in the registration statement
covering such Registrable Securities and will otherwise cooperate with such
Purchaser conducting an investigation for the purpose of reducing or eliminating
such Purchaser’s exposure to liability under the Securities Act, including the
reasonable production of information at the Company’s headquarters.

ARTICLE 6 — MISCELLANEOUS

     6.1 Fees and Expenses. Each of the parties hereto shall be responsible for
their own expenses incurred in connection with the negotiation and Closing of
the purchase and sale of Securities contemplated hereby, provided that, to the
extent set forth in Section 3.1(m) hereof, the Company shall pay (or reimburse
the Purchasers for) the reasonable costs and expenses, including reasonable
attorneys’ fees, incurred by the Purchasers in connection with the negotiation
of the Transaction Documents and the Closing of the Transactions. The Company
shall reimburse the Purchasers for up to $20,000 of their reasonable
out-of-pocket expenses incurred in connection with the procedures in Section 5.1
hereof, including reasonable fees and expenses, if any, of one counsel or other
advisors to all of the Purchasers upon delivery to the Company of reasonable
documentation setting forth such out-of-pocket expenses.

     6.2 Binding Agreement; Assignment. This Agreement shall be binding upon,
and shall inure solely to the benefit of, each of the parties hereto, and each
of their respective heirs, executors, administrators, successors and permitted
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. No Purchaser may assign any of its rights or obligations
hereunder to any other person or entity without the prior written consent of the
Company, which shall not be unreasonably withheld.

     6.3 Entire Agreement. This Agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof and may be amended
only by written execution by all parties. By executing this Agreement below,
each Purchaser agrees to be bound by all of the terms, provisions, warranties,
covenants and conditions contained herein. Upon acceptance by the Company, this
Agreement shall be binding on all parties hereto.

     6.4 Governing Law; Consent To Jurisdiction. EXCEPT AS TO MATTERS GOVERNED
BY THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE AND DECISIONS THEREUNDER
OF THE DELAWARE COURTS APPLICABLE TO DELAWARE CORPORATIONS, WHICH SHALL BE
GOVERNED BY SUCH LAWS AND DECISIONS, 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. FURTHERMORE, EACH PARTY HERETO HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

     6.5 Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed by first class registered or
certified mail, or nationally

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recognized overnight express courier postage prepaid, and shall be deemed given
when so mailed and shall be delivered as addressed as follows:

     
if to the Company, to:
  Electric City Corp.
1280 Landmeier Road
Elk Grove Village, Illinois 60007
Attn: Jeffrey Mistarz, Chief Financial Officer
 
    with a copy (which shall not constitute notice hereunder) mailed to:
 
   

  Schwartz, Cooper, Greenberger & Krauss, Chartered
180 North LaSalle Street, Suite 2700
Chicago, Illinois 60601
Attn: Andrew H. Connor, Esq.

or to such other person at such other place as the Company shall designate to
the Purchasers in writing in accordance herewith; and if to any Purchaser, to
such Purchaser, at its address as set forth at the end of this Agreement, or at
such other address as such Purchaser designate to the Company in writing in
accordance herewith.

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

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

[Balance of page intentionally left blank; signature pages follow.]

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

              ELECTRIC CITY CORP.
 
       

  By:   /s/ Jeffrey Mistarz

     

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

      Name: Jeffrey Mistarz     Title: Chief Financial Officer and Treasurer

- 29 -

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Accepted and agreed to as of the date first above written:

SECURITY EQUITY FUND, MID CAP VALUE SERIES

         
By:
  /s/ James P. Schier    

 

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

      Name: James P. Schier
    Title: Vice President     Address:    

  One Security Place
Topeka, Kansas 66636    

         
Telephone:
       

 

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

     

       
Facsimile:
       

 

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

     

Nominee (name in which Securities are to be registered, if different than name
of the Purchaser)

UMBTRU for benefit of Security Mid Cap Growth Fund

Address of Nominee:
     UMB Bank, na
     928 Grand Blvd, 10th Floor
     Kansas City, MO 64106

Taxpayer ID Number:                                       
(if acquired in the name of a nominee, the Taxpayer ID number of such nominee)

AMEX Affiliation or Association of Purchaser, if any:

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

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Accepted and agreed to as of the date first above written:

SBL FUND, SERIES V

         

       
By:
  /s/ James P. Schier    

 

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

      Name: James P. Schier
    Title: Vice President     Address:
   

  One Security Place
Topeka, Kansas 66636    

         
Telephone:
       

 

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

     

       
Facsimile:
       

 

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

     

Nominee (name in which Securities are to be registered, if different than name
of the Purchaser)

UMBTRU for benefit of Security Equity Fund, Mid Cap Value Series

Address of Nominee:
      UMB Bank, na
      928 Grand Blvd, 10th Floor
      Kansas City, MO 64106

Taxpayer ID Number:                                       
(if acquired in the name of a nominee, the Taxpayer ID number of such nominee)

AMEX Affiliation or Association of Purchaser, if any:

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

- 31 -

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

 

Accepted and agreed to as of the date first above written:

SECURITY MID CAP GROWTH

         

       
By:
  /s/ James P. Schier    

 

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

      Name: James P. Schier     Title: Vice President     Address:
   

  One Security Place
Topeka, Kansas 66636    

         
Telephone:
       

 

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

     

       
Facsimile:
       

 

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

     

Nominee (name in which Securities are to be registered, if different than name
of the Purchaser)

UMBTRU for benefit of SBL Fund Series J

Address of Nominee:
     UMB Bank, na
     928 Grand Blvd, 10th Floor
     Kansas City, MO 64106

Taxpayer ID Number:                                        (if acquired in the
name of a nominee, the Taxpayer ID number of such nominee)

AMEX Affiliation or Association of Purchaser, if any:

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

- 32 -

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

 

Accepted and agreed to as of the date first above written:

SBL FUND, SERIES J

         

       
By:
  /s/ James P. Schier    

 

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

      Name: James P. Schier     Title: Vice President     Address:
   

  One Security Place
Topeka, Kansas 66636    

         
Telephone:
       

 

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

     

       
Facsimile:
       

 

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

     

Nominee (name in which Securities are to be registered, if different than name
of the Purchaser)

UMBTRU for benefit of SBL Fund Series V

Address of Nominee:
      UMB Bank, na
      928 Grand Blvd, 10th Floor
      Kansas City, MO 64106

Taxpayer ID Number:                                       
(if acquired in the name of a nominee, the Taxpayer ID number of such nominee)

AMEX Affiliation or Association of Purchaser, if any:

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

EACH PURCHASER EXECUTING THESE SECURITIES PURCHASE AGREEMENT SIGNATURE PAGES ON
BEHALF OF ONE OR MORE MANAGED ACCOUNTS SHOULD PROVIDE THE NAME OF, AND FOREGOING
INFORMATION WITH RESPECT TO, EACH SUCH MANAGED ACCOUNT.

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SCHEDULE I

SCHEDULE OF INVESTORS

                              Number of   Number of     Investor

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

  Common Shares

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

  Warrant Shares

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

  Purchase Price

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

Security Equity Fund,
Mid Cap Value Series
[address]
Telephone: (___)___-____
Facsimile: (___)___-____
    1,265,000       442,750     $ 2,783.000   SBL Fund, Series V
[address]
Telephone: (___)___-____
Facsimile: (___)___-____
Email:     1,000,000       350,000     $ 2,200,000   Security Mid Cap Growth
[address]
Telephone: (___)___-____
Facsimile: (___)___-____
Email:     890,000       311,500     $ 1,958,000   SBL Fund, Series J
[address]
Telephone: (___)___-____
Facsimile: (___)___-____
Email:     1,845,000       645,750     $ 4,059,000  

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ANNEX I

INVESTOR QUESTIONNAIRE

     The Securities are being offered for sale to “accredited investors” as that
term is defined in Rule 501 under the Securities Act of 1933, as amended (the
“Act”).

     The undersigned certifies that it (and the owner of each managed account on
whose behalf Securities are being purchased by it) is an “accredited investor”
because it is (check one or more items below):

         
           
  i.   a bank as defined in section 3(a)(2) of the Act whether acting in its
individual or fiduciary capacity;
 
       
           
  ii.   a savings and loan association or other institution as defined in
section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity;
 
       
           
  iii.   a broker dealer registered pursuant to section 15 of the Securities
Exchange Act of 1934, as amended;
 
       
           
  iv.   an insurance company as defined in section 2(13) of the Act;
 
       
           
  v.   an investment company registered under the Investment Company Act 1940,
as amended (the “1940 Act”);
 
       
           
  vi.   a business development company as defined in section 2(a)(48) of the
1940 Act;
 
       
           
  vii.   a Small Business Investment Company licensed by the U.S. Small Business
Administration under section 301(c) or (d) of the Small Business Investment Act
of 1958;
 
       
           
  viii.   a plan established and maintained by a state or its political
subdivision for the benefit of its employees, provided that such plan has total
assets in excess of $5,000,000;
 
       
           
  ix.   an employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974 (“ERISA”), provided that the investment
decision is made by a plan fiduciary, as defined in section 3(21) of ERISA, and
the plan fiduciary is either a bank, savings and loan association, insurance
company or registered, investment adviser or provided that the employee benefit
plan has total assets in excess of $5,000,000; or if a self-directed plan, with
investment decisions made solely by persons that are accredited investors;
 
       
           
  x.   a private business development company as defined in section 202(a)(22)
of the Investment Advisers Act of 1940;

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  xi.   an organization described in section 501(c)(3) of the Internal Revenue
Code, not formed for the specific purpose of acquiring the Securities, with
total assets in excess of $5,000,000;
 
       
           
  xii.   a director or executive officer, or general partner of the Company;
 
       
           
  xiii.   a corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the Securities,
with total assets in excess of $5,000,000;
 
       
           
  xiv.   a trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Securities, and the purchase of the Securities
is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under
the Act;
 
       
           
  xv.   a natural person whose individual net worth, or joint net worth with
that person’s spouse, at the time of his purchase exceeds $1,000,000;
 
       
           
  xvi.   a natural person who had an individual income in excess of $200,000 in
each of 2002 and 2003 or joint income with that person’s spouse in excess of
$300,000 in each of those years and has a reasonable expectation of reaching the
same income level in 2004;
 
       
           
  xvii.   an entity in which all of the equity owners are accredited investors
(described in any of (i)-(xvi) above).

             

  INVESTOR:   [name]    
 
           

      By:    

         

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      Name:    

         

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      Title:    

         

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SELLING STOCKHOLDER’S QUESTIONNAIRE

ELECTRIC CITY CORP.

Information furnished by:                                                      
                      

(Please Print Name)

     Electric City Corp. (the “Company”) intends to file a registration
statement on Form SB-2 (the “Registration Statement”) under the Securities Act
of 1933 with the Securities and Exchange Commission (the “Commission”) for a
proposed public offering of shares of the Company’s Common Stock, $0.001 par
value per share (the “Common Stock”) to be sold by the undersigned, (the
“Selling Stockholder”). The purpose of this questionnaire is to obtain certain
information from the Selling Stockholder for use in the Registration Statement
and prospectus contained therein. Exhibit A to this Questionnaire contains
certain definitions that should be read before completing the Questionnaire.

     Please complete (using separate sheets if necessary), date, sign and return
this Questionnaire to Jeffrey Mistarz, CFO, Electric City Corp., 1280 Landmeier
Road, Elk Grove Village, IL 60007 (847) 437-1666, no later than                
   , 2004. Please answer every question. If the answer to any question is “no”
or “none,” please so state.

* * * * *

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THE QUESTIONNAIRE

1. Please set forth below your name and address exactly as it should appear in
the Registration Statement.

     
Name:
   

 

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Address:
   

 

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2. Please state the nature of any position, office or other material
relationship that the person listed above under Question No. 1 (or any officer,
director, partner or employee, as applicable) now has or has had during the last
3 years with the Company or any of its affiliates.

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3. List the total number of shares of Common Stock and other securities of the
Company that you beneficially own: Please carefully read the definitions in
Exhibit A attached hereto, particularly the definition of “beneficial ownership”
before completing this question.

     
Number of shares of Common Stock:
   

 

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Other securities of the Company:
   

 

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     If you are the sole direct beneficial owner of all shares and securities
listed above, please initial the space provided below. If you share beneficial
ownership of any of the shares of Common Stock or other securities of the
Company listed above with any other person, please describe the nature of such
relationship in the space below.

     
     If sole direct beneficial owner, please initial:
   

 

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     If not, please explain:
   

 

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4. If you have made any agreement to sell any securities of the Company, or if
you will make any sale or agreement to sell any such securities before the
effectiveness of the Registration Statement (excluding the sale of your shares
pursuant to the Registration Statement), please state below the number of such
shares sold or to be sold by you, the name(s) of the purchaser(s), and the
consideration received or to be received by you for such shares.

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5. (a) Please state whether you have valid and marketable title to the Common
Stock (including any shares to be acquired pursuant to exercise of Warrants) to
be sold by you, free and clear of any liens, encumbrances, equities and claims,
and have full right, power and authority to sell, transfer and deliver such
Common Stock.

Yes                     No                    

     (b) If the answer to any part of the preceding question 5(a) is negative,
please explain.

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     I/We have supplied the above information at the request of the Company for
use in the preparation of the Registration Statement in connection with the
public resale of shares of Common Stock.

     IF, AT ANY TIME PRIOR TO THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT,
ANY OF THE INFORMATION SET FORTH IN MY/OUR RESPONSES TO THIS QUESTIONNAIRE
CHANGES DUE TO PASSAGE OF TIME, OR ANY DEVELOPMENT OCCURS WHICH REQUIRES A
CHANGE IN MY/OUR ANSWER, OR MY/OUR ANSWER FOR ANY OTHER REASON BECOMES
INCORRECT, I/WE WILL PROMPTLY FURNISH TO THE PERSON TO WHOM A COPY OF THIS
QUESTIONNAIRE IS TO BE SENT AT THE ADDRESS SHOWN ON PAGE 1 ANY NECESSARY OR
APPROPRIATE CORRECTING INFORMATION. OTHERWISE, THE COMPANY IS TO UNDERSTAND THAT
THE ABOVE INFORMATION CONTINUES TO BE, TO THE BEST OF MY/OUR KNOWLEDGE,
INFORMATION AND BELIEF, COMPLETE AND CORRECT AS OF THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT.

     I/We hereby confirm that I/we will not, directly or indirectly, either
alone or with other persons, bid for or purchase for any account in which I/we
have a beneficial interest, any shares of Common Stock, or take any action for
the purpose or which might have the effect of stabilizing the market price of
the Common Stock, until the distribution of the Common Stock pursuant to the
Registration Statement has been completed, in any such case in a manner that
violates Regulation M under the Exchange Act.

     

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Signature
  Title*
 
   

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Please Print Name
   

Dated:                    , 200__

* If you are executing this Questionnaire on behalf of a corporation (or other
legal entity) or as an executor or custodian or in any other representative
capacity, please state the exact title of the capacity in which you are acting.

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EXHIBIT A — DEFINITIONS

     Before you complete the Questionnaire, please carefully review the
following definitions of various terms used in the Questionnaire.

1. Affiliate. An “affiliate” of a specified person is a person that, directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, the person specified.

2. Beneficial Ownership. “Beneficial ownership” has been very broadly defined by
the Securities and Exchange Commission to encompass many situations that might
not be thought to confer ownership in the usual sense. Therefore carefully read
the following discussion. If you are uncertain as to whether you beneficially
own securities, please resolve your doubts in favor of disclosing the securities
in question on the Questionnaire. Space is specifically provided in the
Questionnaire for a disclaimer of beneficial ownership.

     In general, you are a beneficial owner of a security if you, directly or
indirectly, through any contract, arrangement, understanding, relationship, or
otherwise, have or share either: (1) voting power, which includes the power to
vote, or to direct the voting of, such security; or (2) investment power, which
includes the power to dispose, or to direct the disposition, of such security.
It must be emphasized that the possession of either voting power or investment
power, whether or not shared, and whether exercised directly or indirectly,
suffices to confer beneficial ownership. It is not a matter of legal title or
authority but a question of fact that can go behind legal forms. As a result of
these rules several people can be beneficial owners of the same securities.

     A person is also deemed to be the “beneficial owner” of a security if that
person has the right to acquire beneficial ownership of the security within 60
days, whether through the exercise of any option, warrant or right (including
options traded on option exchanges) the conversion of securities, or pursuant to
a power to revoke a trust, discretionary account or similar arrangement.

     Securities held in the name of your spouse, your minor children, or any
relative of yours or of your spouse who is living in your home normally should
be considered as beneficially owned by you. The final determination of
beneficial ownership is determined in the light of all the facts of a particular
case. Remember, you can include securities in this Questionnaire and disclaim
beneficial ownership of such securities.

3. Control. The term “control” means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract or
otherwise.

4. Material. The term “material”, as related to your interest in various
transactions, should be understood to mean an interest that is of such
materiality that a substantial likelihood exists that a reasonable shareholder
would consider it important in deciding how to vote. This does not mean that
there is a substantial likelihood that disclosure of an omitted fact would cause
a

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reasonable shareholder to change his vote, but rather that the omitted fact
would have assumed actual significance in his deliberations.

5. Person. The term “person” should be understood to mean any individual,
company, or individuals and companies acting as a partnership, limited
partnership, syndicate or other group for the purpose of acquiring, holding, or
disposing of securities of an issuer.

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ANNEX II

FORM OF OPINION OF COUNSEL

     1. The Company is a corporation validly existing and in good standing under
the laws of the State of Delaware. Great Lakes Controlled Energy Corporation
(the “Subsidiary”) is a corporation validly existing and in good standing under
the laws of the State of Delaware.

     2. Each of the Company and the Subsidiary is duly qualified as a foreign
corporation in the State of Illinois and in each other jurisdiction where the
character of the properties owned or leased by it or the nature of any business
transacted by it, as applicable, 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 the Subsidiary, taken as a whole.

     3. The Company has corporate power and authority (a) to execute and deliver
each of the Transaction Documents, (b) to issue, sell and deliver the Securities
pursuant to the terms of the Securities Purchase Agreement, and (c) to perform
its obligations under each of the Transaction Documents.

     4. The execution, delivery and performance of the Transaction Documents has
been approved by all necessary corporate action on the part of the Company.

     5. Each of the Transaction Documents has been duly authorized, executed and
delivered by the Company, and each constitutes the legally valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.

     6. The definitive certificates evidencing the shares of Common Stock
(collectively, the “Common Shares”) to be delivered under the Securities
Purchase Agreement are in proper form under Delaware law, have been duly
authorized by the Board of Directors of the Company and, when signed by the
Company and duly countersigned by the Company’s transfer agent and registrar and
delivered to you against payment of the agreed consideration in accordance with
the provisions of the Securities Purchase Agreement, the Common Shares will be
duly authorized, validly issued, fully paid and nonassessable, and to our
knowledge, free of preemptive rights, co-sale rights, rights of first refusal or
similar rights imposed by law, agreement or the Company’s Articles of By-laws.

     7. The shares of Common Stock which are initially issuable upon exercise of
the Warrants have been duly authorized and reserved for issuance with respect to
such matters and when issued and paid for upon exercise of the Warrants will be
duly authorized, validly issued, fully paid and nonassessable, and to our
knowledge, free of preemptive rights, co-sale rights, rights of first refusal or
similar rights imposed by law, agreement or the Company’s Articles of By-laws.

     8. The execution and delivery of, and the performance by the Company of its
obligations under, the Transaction Documents, including, without limitation, the
issuance of the Common Shares as of the date hereof do not;

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     (a) conflict with or result in the violation by the Company of its
Certificate of Incorporation or By-laws;

     (b) to our knowledge, conflict with or result in a breach of or a default
by the Company or the Subsidiary under any agreement which is listed on
Schedule E hereto or under any court order or decree; or

     (c) conflict with or violate any law or published regulation applicable to
the Company or the Subsidiary.

     9. The issuance, sale and delivery of the Warrants and the issue, sale and
delivery of the shares of Common Stock by the Company pursuant to the terms of
the Securities Purchase Agreement, including upon exercise of the Warrants, do
not require the registration of such securities under the Securities Act of
1933, as amended.

     10. Other than as disclosed in the Transaction Documents, the execution and
delivery of, and the performance by the Company of its obligations under, the
Transaction Documents do not require the consent, approval or authorization of
any court, regulatory, administrative or other governmental body that is
normally applicable to transactions of the type contemplated by the Securities
Purchase Agreement which consent or approval has not been obtained and is in
full force and effect or which consent or approval has been waived in writing
which waiver is in full force and effect.

     11. As of the date hereof, there are no legal or governmental actions,
suits or proceedings pending, or to our knowledge threatened, against the
Company or the Subsidiary (i) pertaining to the validity or enforceability of
each of the Transaction Documents, or (ii) seeking to enjoin or otherwise
prevent the consummation of the transactions contemplated by the Securities
Purchase Agreement and the other Transaction Documents.

     12. We have participated with officers of the Company in the preparation of
the Commission Documents and during the course of such participation, no facts
came to our attention that caused us to believe that the Commission Documents
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading at that time, or that the Commission Documents and each amendment
thereto, as of the respective dates they were filed or as of the date of this
opinion contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; it being understood
that we express no belief with respect to the financial statements, schedules
and other financial data included in or omitted from the Commission Documents.

     13. We have participated in conferences with officers of the Company at
which the contents of the Securities Purchase Agreement and related matters were
discussed and during the course of such participation, no facts came to our
attention that caused us to believe that the Securities Purchase Agreement
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading at that time, or that the Securities Purchase Agreement, as of
its date or as of the date

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of this opinion, contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

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ANNEX III

WIRE INSTRUCTIONS

Each Purchaser’s purchase price for Securities shall be wired to:

     
Bank:
  American Chartered Bank
1199 E. Higgins Road
Schaumburg, IL 60173
 
   
ABA#:
  071925046
 
   

  For Credit to: Electric City Corp., Acct. #

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