Exhibit 4.24


 




 





ELECTRIC
CITY CORP.


 


SECURITIES
PURCHASE AGREEMENT


 


Dated
as of December 16, 2002




 





 

















 


SECURITIES PURCHASE AGREEMENT


 


This Securities Purchase
Agreement (as it may be amended from time to time, this “Agreement”), is
entered into as of December 16, 2002 by Electric City Corp., a Delaware
corporation (the “Company”), and the purchaser whose name appears on the
signature page of this Agreement (the “Purchaser”).


 


W I T N E S S E T H:


 


WHEREAS, the Company
desires to sell and issue to the Purchaser shares of its common stock, par
value $0.0001 (“Common Stock”), and warrants to purchase shares of its
Common Stock, all as more fully described herein; and


 


WHEREAS, 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 I

DEFINITIONS


 


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


 


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


 


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


 


“Ancillary
Agreements” means the Common Stock Warrants and the Trading Agreement.


 


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


 


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


 


“Certificate
of Designation” means collectively, the Certificate of Designations,
Preferences and Relative, Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and Restrictions Thereof of
Series A Convertible Preferred Stock of Electric City Corp. and the Certificate
of Designations, Preferences


 


1

















 


and Relative,
Participating, Optional and Other Special Rights of Preferred Stock and
Qualifications, Limitations and Restrictions Thereof of Series C Convertible
Preferred Stock of Electric City Corp.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Common
Stock Warrants” means the warrants to be issued by the Company to Purchaser
to purchase 300,000 shares of Common Stock, as evidenced by a Warrant
Certificate, as the same may be amended from time to time in accordance with
the terms thereof.


 


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


 


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


 


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


 


“Eligible
Securities” means the Common Shares and the shares of Common Stock
evidenced by the Common Stock Warrants.


 


 “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.


 


2

















 


“Interim
Financial Statements” shall have the meaning set forth in Section 5.8
hereof.


 


“Investor
Rights Agreement” means the Investor Rights Agreement dated as of July 31,
2001, by and among the Company and the Series A Preferred Stock Holders, as
amended by the Joinder and First Amendment to Investor Rights Agreement dated
as of June 4, 2002, by and among the Company, Series A Preferred Stock Holders
and the Series C Preferred Stock Holder.


 


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


 


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


 


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


 


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


 


“Placement
Agent” shall mean Capstone Investments.


 


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


 


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


 


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


 


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


 


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


 


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


 


“Series
A Preferred Stock Holders” means, collectively, Newcourt Capital USA Inc.,
a Delaware corporation, Newcourt Capital Securities, Inc., a Delaware
corporation, EP Power Finance L.L.C., a Delaware limited liability company,
Morgan Stanley Dean Witter Equity Funding, Inc., a Delaware corporation,
Originators Investment Plan, L.P., a Delaware limited partnership, Duke Capital
Partners, LLC, a Delaware limited liability company and Leaf Mountain Company,
LLC, an Illinois limited liability company.


 


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


 


3

















 


“Stockholders
Agreement” means the Stockholders Agreement dated as of July 31, 2001, by
and among the Company and the Series A Preferred Stock Holders, as amended by
the Joinder and First Amendment to Stockholders Agreement dated as of June 4,
2002, by and among the Company, Series A Preferred Stock Holders and the Series
C Preferred Stock Holder.


 


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


 


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


 


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


 


“Term
Sheet” means Schedule II hereto.


 


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


 


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


 


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


 


4

















 


ARTICLE II

ISSUE, PURCHASE AND SALE OF THE SECURITIES


 


2.1                                 Authorization of Issuance of
Securities.  The Company has
authorized the initial issuance of (a) 1,086,956 Common Shares to be issued
hereunder and (b) the Common Stock Warrants, collectively referred to herein as
the “Securities”.


 


2.2                                 Purchase and Sale of Securities;
Closing.  Subject to the terms
and conditions herein set forth, the Company hereby agrees to sell to
Purchaser, and Purchaser agrees to purchase from the Company, at the Closing
(as defined herein), for an aggregate purchase price of One Million and no/100
Dollars ($1,000,000.00) (the “Purchase Price”) the Securities.  Subject to the satisfaction or waiver of the
parties’ respective conditions to closing set forth in Sections 3.1 and
3.2, the closing of the purchase and sale of the Securities (the “Closing”)
shall take place on December 16,  2002,
or at such other time and on such other date as the Purchaser and the Company
may agree (the “Closing Date”), at the offices of Purchaser or at such
other location as the Purchaser and the Company may agree.  At the Closing, the Company will deliver to
Purchaser one or more stock certificates, as Purchaser may request, registered
in Purchaser’s name (or in its nominee name if designated by Purchaser)
evidencing the shares of Common Stock to be purchased by Purchaser, together
with the Common Stock Warrants, against payment of the Purchase Price therefore
by wire transfer of immediately available funds to or upon the order by the
Company.


 


2.3                                 Right of First Offer.  Subject to the terms and conditions specified in this
Section 2.3, the Company hereby grants to Purchaser a right of first offer
with respect to future sales by the Company of its Shares (as hereinafter
defined).


 


Each time the Company
proposes to offer any shares of, or securities convertible into or exercisable
for any shares of, any class of its capital stock (“Shares”), unless
such offering is a “Qualified Primary Offering” as such is defined in the
Investor Rights Agreement, the Company shall first make an offering of such
Shares to Purchaser, the Series A Preferred Stock Holders and the Series C
Preferred Stock Holder in accordance with the following provisions:


 


(a)                                  The
Company shall deliver a notice by registered or certified mail (“Notice”)
to Purchaser, the Series A Preferred Stock Holders and the Series C Preferred
Stock Holder stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered and (iii) the price and
terms, if any, upon which it proposes to offer such Shares.


 


(b)                                 Within
30 calendar days after delivery of the Notice, Purchaser may elect to purchase
or obtain, at the price and on the terms specified in the Notice, up to that
portion of such Shares that equals the proportion that the sum of Common Stock
acquired from time to time pursuant to this Section 2.3 and the number
of shares of Eligible Securities held by such Investor (and its Affiliates)
bears to the total number of shares of Common Stock then outstanding (assuming
exercise of all exercisable securities of Purchaser). Notwithstanding the
foregoing, the Shares purchased or obtained by Purchaser shall be limited, on a
pro rata basis, by the Shares purchased or obtained by the Series A Preferred
Stock Holders and the Series C Preferred Stock Holder pursuant to their rights
set forth in the Investor Rights Agreement, if such holders elect to
participate in such offering.


 


5

















 


(c)                                  The
right of first offer in this Section 2.3 shall not be applicable
(i) to the issuance or sale of Common Stock (or options therefor) to
employees, consultants and directors, pursuant to plans or agreements approved
by the Board of Directors for the purpose of soliciting or retaining their
services, (ii) to the issuance of securities in connection with a bona
fide business acquisition of or by the Company, whether by merger, consolidation,
sale of assets, sale or exchange of stock or otherwise, (iii) to Common
Stock issued upon conversion of the preferred stock held by the Series A
Preferred Stock Holders and the Series C Preferred Stock Holder, (iv) the
exercise of the Common Stock Warrants Issued to Preferred Holders or the
preferred stock warrants issued to the Series A Preferred Stock Holders and the
Series C Preferred Stock Holder, (iv) to the issuance of securities pursuant to
currently outstanding options, warrants, notes or other rights to acquire
securities of the Company, (vi) to a Qualified Primary Offering, or (vii) to
stock splits, stock dividends or like transactions.


 


ARTICLE III

CONDITIONS OF CLOSING


 


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


 


(a)                                  Receipt
of Securities.  Purchaser shall have
received delivery of the stock certificates and Warrant Certificates evidencing
the Securities, duly issued by the Company;


 


(b)                                 Opinion
of the Company’s Counsel.  Purchaser
shall have received from Schwartz, Cooper, Greenberger & Krauss, Chartered,
special counsel to the Company in connection with this transaction, an opinion
dated on the Closing Date in the form attached hereto as “Exhibit A –
Form of Opinion”;


 


(c)                                  Stock
Trading Agreement.  The Stock
Trading Agreement shall have been entered into an delivered by Purchaser;


 


(d)                                 Expenses.  The Company shall have paid the reasonable
fees and expenses of Purchaser’s 
counsel, if any, incurred in connection with the private placement
contemplated by this Agreement;


 


(e)                                  No
Litigation; No Order.  No action,
suit or proceeding relating to the transactions contemplated by this Agreement
or any Ancillary Agreement  (the “Transactions”)
shall be pending that in the reasonable good faith judgment of Purchaser (i)
seeks to restrain or prevent any of the Transactions and has a reasonable
probability of success or (ii) is reasonably likely to have a material adverse
effect on the assets, business, prospects, properties, operations or conditions
(financial or otherwise) of the Company and its Subsidiaries, taken as a whole
and no order (including, without limitation, a temporary restraining order),
decree, writ, judgment or injunction shall be in effect that restrains, enjoins
or prevents the consummation of the transactions contemplated by this Agreement
or any Ancillary Agreement (collectively, “Litigation”);


 


6

















 


(f)                                    Proceedings.  On or prior to the Closing Date, all
corporate and other proceedings required to be taken under applicable laws,
rules and all regulations and all rules of The American Stock Exchange in
connection with the transactions contemplated by this Agreement or any
Ancillary Agreement shall have been taken and all filings and documents
incident thereto shall be reasonably satisfactory in form and substance to Purchaser
and its special counsel, and the Purchaser and its special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request;


 


(g)                                 Compliance
with this Agreement.  The Company
shall have performed and complied with all of its agreements and conditions set
forth or contemplated herein that are required to be performed or complied with
by the Company on or before the Closing Date;


 


(h)                                 Officer’s
Certificate.  Such Purchaser shall
have received a certificate, dated the Closing Date and signed by the Chief
Executive Officer of the Company, certifying that the conditions set forth in Sections 3.1(d),
3.1(e), 3.1(f), 3.1(g), 3.1(k), and 3.1(l)
hereof have been satisfied on and as of such date;


 


(i)                                     Secretary’s
Certificate.  Purchaser shall have
received a certificate, dated the Closing Date and signed by the Secretary of
the Company, attaching good standing certificates from the Delaware Secretary
of State with respect to the Company and from the respective Secretaries of
State for the jurisdictions of incorporation for its Subsidiaries and
certifying the authenticity of attached copies of (i) the Certificate of
Incorporation and by-laws of the Company and the certificate of incorporation and
by-laws of each of its Subsidiaries, in each case as amended; (ii) resolutions
of the Board of Directors of the Company approving this Agreement and the
Ancillary Agreements and the transactions contemplated by this Agreement and
the Ancillary Agreements;


 


(j)                                     Purchase
Permitted by Applicable Laws; Legal Investment.  The acquisition of and payment for the Securities and the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements (i) shall not be prohibited by any applicable law or
governmental regulation, (ii) shall not subject Purchaser to any penalty or, in
its reasonable judgment, other onerous conditions under or pursuant to any
applicable law or governmental regulation and (iii) shall be permitted by the
laws and regulations of the jurisdictions to which Purchaser is subject;


 


(k)                                  Consents
and Approvals.  All consents,
waivers, approvals, exemptions, authorizations, or other actions by, or notices
to, or filings with, Governmental Authorities and other Persons necessary or
required in connection with the execution, delivery or performance by the
Company or enforcement against the Company of this Agreement (including,
without limitation, the issuance of the Securities contemplated hereunder), any
Ancillary Agreement or any other document executed in connection with the
consummation of the transactions contemplated by this Agreement or any
Ancillary Agreement shall have been obtained and be in full force and effect,
and Purchaser and its special counsel shall have been furnished with
appropriate evidence thereof;


 


(l)                                     Insolvency.  The Company shall not have made an
assignment for the benefit of creditors, nor shall it have filed with a court
of competent jurisdiction an


 


7

















 


application for
appointment of a receiver or similar official with respect to it or any
substantial part of its assets, nor shall there have been filed by the Company
or any of  its Subsidiaries a petition
seeking relief under any provision of the Federal Bankruptcy Code or any other
federal or state statute now or hereafter in effect affording relief to
debtors, nor shall there have been filed against the Company or any of its
Subsidiaries any such application or petition; and


 


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


 


(a)                                  Receipt
of Purchase Price.  The Company
shall have received payment of the Purchase Price by wire transfer of
immediately available funds;


 


(b)                                 Stock
Trading Agreement.  The Stock
Trading Agreement shall have been entered into and delivered by Purchaser;


 


(c)                                  No
Litigation; No Order.  No action,
suit or proceeding relating to the Transactions shall be pending that in the
reasonable good faith judgment of the Company seeks to restrain or prevent any
of the Transactions and has a reasonable probability of success;


 


(d)                                 Purchase
Permitted by Applicable Laws; Legal Investment.  The acquisition of and payment for the Securities and the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements (i) shall not be prohibited by any applicable law or
governmental regulation, and (ii) shall not subject the Company to any penalty
or, in its reasonable judgment, other onerous conditions under or pursuant to
any applicable law or governmental regulation; and


 


(e)                                  Consents
and Approvals.  All consents,
waivers, approvals, exemptions, authorizations, or other actions by, or notices
to, or filings with, Governmental Authorities and other Persons necessary or
required in connection with the execution, delivery or performance by the
Company or enforcement against the Company of this Agreement (including,
without limitation, the issuance of the Securities contemplated hereunder), any
Ancillary Agreement or any other document executed in connection with the
consummation of the transactions contemplated by this Agreement or any
Ancillary Agreement shall have been obtained and be in full force and effect.


 


ARTICLE IV

CERTAIN COVENANTS


 


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


 


8

















 


4.2                                 Listing. 
The Company shall have, within ninety (90) days of the Closing Date,
obtained approval from the American Stock Exchange to list for trading on the
American Stock Exchange the Common Shares issued hereto and the Common Shares
issuable upon the exercise of the Common Stock Warrants. Notwithstanding the
foregoing, in the event the Company closes on an additional issuance of its
Common Stock for more than $1,000,000 gross proceeds within sixty (60) days of
the Closing Date, then the Company, at its option, may include the Common
Shares issued hereto and the Common Shares issuable upon exercise of the Common
Stock Warrants on the additional listing application filed for such subsequent
issuance so long as such additional listing application is filed with twenty
(20) days of such subsequent closing date.


 


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


 


4.4                                 Registration. 
The Company agrees that it shall, subject to the receipt of necessary
information from the Purchaser, prepare and file with the SEC as soon as
practicable and in no event later than ninety (90) days following the Closing
Date, a Registration Statement on Form S-3, to enable the resale of the Common
Shares and the Common Stock evidenced by the Common Stock Warrants by the
Purchaser from time to time and use all reasonable efforts to cause such Registration
Statement to be declared effective as promptly as possible after filing and to
remain continuously effective for a period of not less than one  (1) year following the Closing Date. In the
event that Form S-3 is not available for such registration, the Company shall
use such other form as is available for such registration.


 


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


 


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


 


ARTICLE V

REPRESENTATIONS, COVENANTS AND WARRANTIES


 


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


 


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


 


(a)                                  Each
of the Company and each of its Subsidiaries is a corporation duly organized and
existing in good standing under the laws of the jurisdiction of its
organization, and has the corporate power to own its property and to carry on
its business as now being conducted, is duly


 


9

















 


qualified and in good
standing as a foreign corporation to do business in every jurisdiction where
the character of the properties owned or leased by it or the nature of any
business transacted by it makes such qualification necessary, except where such
nonqualification or lack of good standing would not have a material adverse
effect on the business of the Company and its Subsidiaries, taken as a whole.  Each of the Company and its Subsidiaries
have delivered to Purchaser true, complete and correct copies of their
respective certificates of incorporation and their respective by-laws, as
amended through the date hereof, which are in full force and effect on the date
hereof.


 


(b)                                 The
execution and delivery by the Company of this Agreement and the Ancillary
Agreements (collectively, the “Transaction Documents”), and the
performance by the Company of all transactions and obligations contemplated
hereby and thereby are within its corporate authority.  The execution, delivery and performance of
the Transaction Documents and each other agreement contemplated by the terms
hereof and thereof and the issuance of the Securities have been duly authorized
by all necessary corporate proceedings on the part of the Company.  Each of the Transaction Documents
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally and to equitable principles relating
to enforceability.  The Common Shares
are duly authorized and, when issued, will be validly issued, fully paid and
nonassessable and subject to no preemptive rights in favor of other Persons
which have not been waived.  Assuming
the accuracy of the representations of 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 subject to
no preemptive rights in favor of other Persons which have not been waived.  Assuming the accuracy of the representations
of 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 300,000  shares of Common Stock issuable upon
exercise of the Common Stock Warrants.


 


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


 


5.2                                 Capital Stock.


 


(a)                                  As
of the date hereof, the Company has authorized 120,000,000 shares of Common
Stock and 5,000,000 shares of preferred stock. 
As of the date hereof, the Company has 31,196,378  issued and outstanding shares of Common
Stock and 2,324,717 shares of preferred stock issued and outstanding.  All outstanding shares of the Company Common
Stock have been duly authorized, validly issued and are fully paid and
nonassessable and free of preemptive rights. 
All outstanding shares of Common Stock were issued in compliance with
all applicable federal and state securities laws.


 


(b)                                 Except
as otherwise stated in this Section 5.2 or in Schedule 5.2
and except for shares of capital stock reserved for issuance in connection with
the transactions contemplated by this Agreement and the Ancillary Agreements,
the Company has not granted or issued, or agreed to grant or issue, any
options, warrants or similar rights to acquire or receive any of the


 


10

















 


authorized but unissued
shares of its capital stock of any class or any securities convertible into
shares of its capital stock of any class or any stock appreciation rights.  Except as stated in Schedule 5.2, no
adjustment to the exercise price of any outstanding options or warrants of the
Company will be required as a result of the issuance of any of the Securities.


 


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


 


5.3                                 No Defaults. 
Except as set forth in Schedule 5.3, neither the Company nor any
of its Subsidiaries, to its knowledge, is in violation of, or in default under,
nor has there been  any waiver given with respect to, any term
or provision of any charter, by-law, mortgage, indenture, agreement,
instrument, statute, rule, law, regulation, judgment, decree, order, writ, or
injunction applicable to it, such that such violations and defaults in the
aggregate could reasonably be expected to result in any material adverse change
in the business, assets, properties, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole, or
materially adversely affect the ability of the Company to perform in any
material respect its obligations under this Agreement.  All Regulatory Approvals required by the
Company and its Subsidiaries to conduct their respective business as now
conducted by them have been obtained and are in full force and effect, and the
Company and its Subsidiaries are in compliance with the terms and requirements
of such Regulatory Approvals.  Except as
set forth on Schedule 5.3 hereto, since December 31, 2001, 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.


 


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


 


5.5                                 Title to Assets, Etc.  The Company has good and marketable fee
simple title to the assets reflected on the balance sheet set forth on Schedule
5.5 (the “Assets”).  Except
as set forth


 


11

















 


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


 


5.6                                 Leases.  Each of
the Company and its Subsidiaries enjoy peaceful and undisturbed possession of
all leases material to them.  All such
leases are valid and subsisting and are in full force and effect.


 


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


 


5.8                                 Financial Statements.  The Company has furnished the Purchaser with
(a) the balance sheet of the Company and its consolidated Subsidiaries as at
December 31, 2001 and the related statements of income, stockholders’ equity
and cash flows of the Company and its consolidated Subsidiaries for the fiscal
year ended December 31, 2001, all certified by BDO Seidman LLP, including in
each case the related schedules and notes, and (b) an unaudited balance sheet
of the Company and its consolidated Subsidiaries as at September 30, 2002 and
statements of income, stockholders’ equity and cash flows of the Company and
its consolidated Subsidiaries for the interim period ended on such date,
prepared by the Company and certified by its principal financial officer (item
(b) is referred to as the “Interim Financial Statements”).


 


12

















 


All such financial
statements (including any related schedules and notes) have been prepared in
accordance with generally accepted accounting principles consistently applied,
except to the extent set forth in the notes to such financial statements and
except for the absence of footnotes to the Interim Financial Statements and
except that the Interim Financial Statements are subject to normal year-end
adjustments and to adjustments made in the course of an audit that would not in
the aggregate be material, throughout the periods involved and to the extent
required by such principles show all liabilities, direct and contingent, of the
Company and its Subsidiaries required to be shown thereon in accordance with
generally accepted accounting principles. 
The balance sheets and the related schedules and notes fairly present
the financial condition of the Company and its consolidated Subsidiaries as at
the dates thereof and the net income and stockholders’ equity statements and
the related schedules and notes fairly present the results of the operations of
the Company and its consolidated Subsidiaries for the periods indicated.  Except as set forth in Schedule 5.8,  the Company has incurred no material
liabilities since September 30, 2002, other than those incurred in the ordinary
course.


 


Except as set forth in Schedule
5.8, there has been no material adverse change in the assets, business,
prospects, properties, operations or condition, financial or otherwise, of the
Company and its Subsidiaries, taken as a whole, since December 31, 2001.


 


5.9                                 Actions Pending.  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.


 


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


 


5.11                           Broker’s or Finder’s Commissions.  Other than the fee payable to the Placement
Agent, no broker’s or finder’s or placement fee or commission will be payable
with respect to the sale or the issuance of the Securities contemplated hereby
or by the Ancillary Agreements as a result of any act or omission by the
Company, and the Company will hold 
Purchaser harmless from any claim, demand or liability for broker’s or
finder’s or placement fees or commissions alleged to have been incurred in
connection with the sale or the issuance of the Securities due to


 


13

















 


any actions or omissions
by the Company or its Subsidiaries or any of their respective directors,
officers or agents.


 


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


 


5.13                           Intellectual Property.


 


(a)                                  The
Company and its Subsidiaries exclusively own or possess the requisite licenses
or rights (on reasonable commercial terms) to use all patents, trade secrets,
trademarks, service marks, service names, trade names, copyrights and other
intellectual property rights necessary to enable each of them to conduct their
respective businesses as now operated (collectively, the “Company IP”).  Schedule 5.13(a) sets forth a full
and complete list of all intellectual property rights of the Company and its
Subsidiaries.  There is no claim or
action by any Person pertaining to, or proceeding pending, or to the Company’s
knowledge threatened, that challenges the rights of the Company or its
Subsidiaries with respect to any Company IP. 
To the Company’s knowledge, neither the Company’s nor any of its
Subsidiaries’ current and intended products and services infringe on any
patents, licenses, trademarks, service marks, service names, trade names,
copyrights or other intellectual property rights held by any Person and neither
the Company nor any of its Subsidiaries is aware of any facts or circumstances
that might give rise to any of the foregoing.


 


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


 


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


 


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


 


14

















 


Subsidiaries, as the case
may be, does not file tax returns has made a claim, assertion or threat that
the Company or any of its Subsidiaries is or may be subject to taxation in such
jurisdiction.


 


5.15                           Insurance. 
The Company maintains or is covered by valid policies of workers’
compensation insurance, product liability insurance, and 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.


 


5.16                           Commission Documents.  Except as set forth in Schedule 5.16,
the Company has filed all registration statements, proxy statements,
information statements, reports and other documents required to be filed by it
under the Securities Act or the Exchange Act, and all amendments thereto
(collectively, the “Commission Documents”)  Each Commission Document when filed with the Commission was true
and accurate in all material respects and in compliance in all material
respects with the requirements of its respective report form and the rules and
regulations of the Commission.  No Commission
Document contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under which made,
not misleading.


 


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


 


ARTICLE VI

REPRESENTATIONS OF THE PURCHASER


 


Purchaser represents and
warrants as to itself only as follows:


 


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


 


6.2                                 Accredited Investor Status/Organization.  Purchaser is an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.  By


 


15

















 


reason of its business
and financial experience, sophistication and knowledge, Purchaser is capable of
evaluating the risks and merits of the investment made pursuant to this
Agreement. In addition, Purchaser is a corporation duly organized and validly
existing under the laws of the State of Maryland and has total assets in excess
of $5,000,000.


 


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


 


6.4                                 Broker’s or Finder’s Commissions.  Other than the fee payable to the Placement
Agent (which will be paid by the Company) no broker’s or finder’s or placement
fee or commission will be payable with respect to the sale or the issuance of
the Securities as a result of any act or omission by the Purchaser, and the
Purchaser will hold the Company harmless from any claim, demand or liability
for broker’s or finder’s or placement fees or commissions alleged to have been
incurred in connection with the sale or the issuance of the Securities due to
any actions of the Purchaser.


 


ARTICLE VII

INDEMNIFICATION


 


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


 


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


 


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


 


provided,
however, that the Company shall not be liable under this Section 7.1:
(a) for any amount paid in settlement of claims without the Company’s consent
(which consent shall not be unreasonably withheld or delayed) or (b) to the
extent that it is finally judicially determined that such Losses resulted
primarily from the willful misconduct, bad faith or gross negligence of such


 


16

















 


indemnified party or a
breach of such Purchaser’s representations in Article VI; provided,
further, that if and to the extent that such indemnification is unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of such indemnified liability that shall be permissible under
applicable laws.  In connection with the
obligation of the Company to indemnify for expenses as set forth above, the
Company further agrees to reimburse each indemnified party for all such
expenses (including reasonable fees, disbursements and other charges of
counsel) as they are incurred by such indemnified party; provided, however,
that in no event shall the Company be required to pay fees and expenses under
this Article VII for more than one firm of attorneys in addition to the
firm of attorneys representing the Company in any jurisdiction in any one legal
action or group of related legal actions; provided, further, that
if an indemnified party is reimbursed hereunder for any expenses, such
reimbursement of expenses shall be refunded to the extent it is finally
judicially determined that the Losses in question resulted primarily from the
willful misconduct, bad faith or gross negligence of such indemnified party.


 


7.2  Indemnification
for Registration. (a) In the event of a registration of the
Common Shares and the Common Stock evidenced by the Common Stock Warrants under
the Securities Act pursuant to Section 4.4 herein, the Company
shall indemnify and hold harmless, to the fullest extent permitted by law, the
Purchaser, its Affiliates, each of their respective officers, directors,
employees and agents, each underwriter of such Eligible Securities and each
other person, if any, who controls such Purchaser or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which Purchaser, or any such Affiliate, their
respective officer, director, employee, agent, underwriter or controlling
person may become subject under the Securities Act or otherwise or in any
action in respect thereof, and will reimburse each such person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses
are incurred, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement under which such Eligible Securities were registered under the
Securities Act pursuant to Section 4.4, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon 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; provided, however, that the
Company shall not be liable to Purchaser, or any such Affiliate, officer,
director, employee, agent, underwriter or controlling person in any such case
if and to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in conformity with information furnished by Purchaser,
or any such Affiliate officer, director, employee, agent, underwriter or
controlling person in writing specifically for use in such registration
statement or prospectus.


 


(b)                                    Purchaser
will indemnify and hold harmless the Company, each underwriter and each person,
if any, who controls the Company or any underwriter within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each other seller of securities
registered by the registration statement covering such Eligible Securities and
each person, if any, who controls such seller, against all losses, claims,
damages or liabilities, joint or several, to which the Company or any such
officer, director, underwriter, other seller or controlling person may become
subject under


 


17

















 


the Securities Act or
otherwise, and shall reimburse the Company and each such officer, director,
underwriter, other seller and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, insofar as such
losses, claims, damages or liabilities (or action in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of
material fact or omission or alleged omission of a material fact required to be
stated therein made in reliance upon and in conformity with information
pertaining to Purchaser furnished in writing to the Company by Purchaser
specifically for use in the registration statement or prospectus relating to
such Eligible Securities. 
Notwithstanding the immediately preceding sentence, the aggregate
liability of Purchaser hereunder shall not in any event exceed the net proceeds
received by Purchaser from the sale of Eligible Securities covered by such
registration statement.


 


(c)                                     The
reimbursements required by this Section 7.2 shall be made by
periodic payment during the course of the investigation or defense, as and when
bills are received and expenses incurred.


 


(d)                                    The
indemnification provided for under this Section 7.2 shall remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director, employee, agent, or controlling
person of such indemnified party and shall survive the transfer of securities.


 


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


 


18

















 


indemnified party of a
release from all liability in respect to such claim or litigation or that
requires action other than the payment of money by the Company.  The rights accorded to indemnified parties
hereunder shall be in addition to any rights that any indemnified party may
have at common law, by separate agreement or otherwise.


 


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


 


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


 


ARTICLE VIII

MISCELLANEOUS


 


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


 


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


 


(b)                                 the
reasonable fees and expenses of Purchaser’s special counsel, if any, in
connection with the Transaction Documents and any subsequent modification
thereof or consent thereto (including any proposed modification or consent,
whether or not finalized); and


 


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


 


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


 


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


 


THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED, QUALIFIED, APPROVED


 


19

















 


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


 


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


 


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


 


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


 


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


 


	
  (i)

  	
  If to the Company, to:

  	
   

  	
  1280 Landmeier Road

  Elk Grove Village, IL  60007

  Fax No. 847-437-4969

  Attention:  General Counsel.

  
	
   

  	
   

  	
   

  	
   

  
	
  (ii)

  	
  If to Purchaser:  at the address set forth on Schedule I.

  



 


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


 


20

















 


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


 


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


 


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


 


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


 


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


 


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


 


 


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


 


21

















 


IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed by their respective
officers thereunto duly authorized as of the day and year first above written.


 


	
  COMPANY:

  	
   

  	
  PURCHASER:

  
	
   

  
	
  ELECTRIC CITY CORP.,

  a Delaware corporation

  	
  MUNDER POWER PLUS FUND,
  A

  SERIES OF THE MUNDER FUNDS, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
  /s/ John Mitola

  	
   

  	
  By:

  	
       /s/
  Stephen Shenkenberg

  	
   

  
	
  Name:

  	
  John Mitola

  	
   

  	
  Name:

  	
  Stephen Shenkenberg

  	
   

  
	
  Title:

  	
  Chief Executive Officer

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
								



 


[SIGNATURE
PAGE TO SECURITIES PURCHASE AGREEMENT]


 

















 


SCHEDULE I


 


	
  Purchaser

  	
   

  	
  No. of
  Shares of Common Stock

  	
   

  	
  No. of
  Common Stock Warrants

  	
   

  	
  Total
  Aggregate Purchase Price

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Munder Power Plus Fund, a series of The Munder Funds, Inc.  480 Pierce Street  Birmingham, MI  48009  

   

  Fax: 248.647.5931

  	
   

  	
  1,086,957

  	
   

  	
  300,000

  	
   

  	
  $1,000,000

  



 

















 


SCHEDULE II


 


Term Sheet


 

















 


EXHIBIT A


 


Legal Opinion


 

















 


	
  ARTICLE I DEFINITIONS

  
	
   

  	
   

  
	
  ARTICLE II ISSUE, PURCHASE AND SALE OF THE
  SECURITIES

  
	
   

  	
   

  
	
  2.1

  	
  Authorization
  of Issuance of Series C Preferred Stock

  
	
  2.2

  	
  Purchase and
  Sale of Securities

  
	
  2.3

  	
  Right of First Offer

  
	
   

  	
   

  
	
  ARTICLE III CONDITIONS OF CLOSING

  
	
  3.1

  	
  Purchaser Conditions to Closing

  
	
  3.2

  	
  Company
  Conditions to Closing

  
	
   

  	
   

  
	
  ARTICLE IV CERTAIN COVENANTS

  
	
  4.1

  	
  Corporate
  Existence; Licenses and Permits; Maintenance of Properties

  
	
  4.2

  	
  Listing

  
	
  4.3

  	
  Securities Exchange

  
	
  4.4

  	
  Registration

  
	
  4.5

  	
  Best Efforts

  
	
  4.6

  	
  Insurance

  
	
   

  	
   

  
	
  ARTICLE V REPRESENTATIONS, COVENANTS AND
  WARRANTIES

  
	
  5.1

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

  
	
  5.2

  	
  Capital Stock

  
	
  5.3

  	
  No Defaults

  
	
  5.4

  	
  Burdensome and Conflicting Agreements and
  Charter Provisions

  
	
  5.5

  	
  Title to Assets, Etc.

  
	
  5.6

  	
  Leases

  
	
  5.7

  	
  Contracts

  
	
  5.8

  	
  Financial Statements

  
	
  5.9

  	
  Actions Pending

  
	
  5.10

  	
  Offering of Securities

  
	
  5.11

  	
  Broker’s or Finder’s Commissions

  
	
  5.12

  	
  Application of Proceeds

  
	
  5.13

  	
  Intellectual
  Property

  
	
  5.14

  	
  Taxes

  
	
  5.15

  	
  Insurance

  
	
  5.16

  	
  Commission Documents

  
	
  5.17

  	
  Disclosure

  
	
   

  	
   

  
	
  ARTICLE VI REPRESENTATIONS OF THE PURCHASER

  
	
  6.1

  	
  Investment
  Purpose

  
	
  6.2

  	
  Accredited Investor Status

  
	
  6.3

  	
  Authorization;  Enforcement

  
	
  6.4

  	
  Broker’s or Finder’s Commissions

  
	
   

  	
   

  
	
  ARTICLE VII INDEMNIFICATION

  
	
  7.1

  	
  Indemnification
  by Company

  
	
  7.2

  	
  Indemnification
  for Registration

  
	
  7.3

  	
  Notification

  
	
  7.4

  	
  Payment

  
	
  7.5

  	
  Survivial of
  Provisions of Article VII

  



 

















 


	
  ARTICLE VIII MISCELLANEOUS

  
	
  8.1

  	
  Expenses

  
	
  8.2

  	
  Restrictive Legends

  
	
  8.3

  	
  Consent to Amendments

  
	
  8.4

  	
  Survival of Representations, Warranties
  and Indemnities

  
	
  8.5

  	
  Successors
  and Assigns

  
	
  8.6

  	
  Notices

  
	
  8.7

  	
  Accounting Terms

  
	
  8.8

  	
  Governing Law

  
	
  8.9

  	
  Headings; Table of Contents

  
	
  8.10

  	
  Counterparts

  
	
  8.11

  	
  Non-Business Days

  
	
  8.12

  	
  Further Assurances

  
	
  8.13

  	
  Integration