exv10w1



 






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 April 28, 2005 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.



 









 






     “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.




     “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.




     “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.



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




     “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.




     “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 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 or any Purchaser 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).



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     “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 6,250,000 shares of Common Stock and up to 3,125,000 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
3,125,000 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 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.



     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 counsel for the Company, Schwartz, Cooper, Greenberger &
Krauss, Chartered, 180 North LaSalle Street, Suite 2700, Chicago, Illinois 60601, or at such other
date, time and/or location as is mutually agreed upon by the Company and the Purchasers.



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;



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     (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 (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;




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




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




     (i) 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; and



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     (j) No Material Adverse Change. Neither the Company nor any of its
subsidiaries shall have sustained since December 31, 2004 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 governmental action, order or decree, and
since December 31, 2004, there shall not have been any material change in or affecting the
general affairs, management, financial position, stockholders’ equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth or contemplated
in the Commission Documents..



     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;




     (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



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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 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;




     (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;




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



ARTICLE 4  –  REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.




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     4.1 Purchaser Representations, Warranties and Covenants. Each Purchaser hereby
represents and warrants to the Company as follows:




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




     (i) the Company’s registration statement on Form S-1 filed with the Commission on May
3, 2004, as amended by Form S-1/A filed with the Commission on May 21, 2004;




     (ii) the Company’s current report on Form 8-K dated August 31, 2004 filed with the
Commission on September 2, 2004;




     (iii) the Company’s current report on Form 8-K dated January 4, 2005 filed with the
Commission on January 4, 2005;




     (iv) the Company’s current report on Form 8-K dated February 28, 2005 filed with the
Commission on March 4, 2005;




     (v) the Company’s current report on Form 8-K dated March 4, 2005 filed with the
Commission on March 8, 2005;




     (vi) the Company’s registration statement on Form S-3 filed with the Commission on
March 18, 2005, as amended by Form S-3/A filed with the Commission on April 15, 2005;




     (vii) the Company’s annual report on Form 10-K for the year ended December 31, 2004
filed with the Commission on March 31, 2005, as amended by Form 10-K/A filed with the
Commission on April 13, 2005;




     (viii) the Company’s preliminary proxy statement for annual meeting of stockholders to
be held on May 4, 2005, filed with the Commission on March 31, 2005; and




     (ix) the Company’s definitive proxy statement for annual meeting of stockholders to be
held on May 4, 2005, mailed to stockholders on April 14, 2005 and filed with the Commission
on April 14, 2005.




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 statement referred
to in clause (vi) 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



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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.




     (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, and (ii) 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; provided, however, that if the transfer is between affiliated Purchasers, the
transferring Purchaser shall be required to deliver only a certificate (and not an opinion of
counsel) reasonably satisfactory to the Company stating that registration is not required under the
Securities Act.




     (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:




THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY; PROVIDED,
HOWEVER, THAT IF THE TRANSFER IS BETWEEN AFFILIATED PURCHASERS, THE
TRANSFERRING PURCHASER SHALL BE



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REQUIRED TO DELIVER ONLY A CERTIFICATE (AND NOT AN OPINION OF
COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY STATING THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT. THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN
RULE 501(a) UNDER THE SECURITIES ACT.



     The Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security
interest in some or all of the Securities to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the
provisions of this Agreement and, if required under the terms of such arrangement, such Purchaser
may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no legal opinion of legal counsel of
the pledgee, secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities, including, if the
Securities are subject to registration pursuant to this Agreement, the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of selling stockholders
thereunder.



     Certificates evidencing the Securities shall not contain any legend (including the legend set
forth in this Section 4.1(e)), (i) while a registration statement (including the
Registration Statement) covering the resale of such security is effective under the Securities Act,
or (ii) following any sale of such Securities pursuant to Rule 144, or (iii) if such Securities are
eligible for sale under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the
Company’s transfer agent promptly after the effective date of the Registration Statement if
required by the Company’s transfer agent to effect the removal of the legend hereunder. If all or
any portion of a Warrant is exercised at a time when there is an effective registration statement
to cover the resale of the Issued Warrant Shares, such Issued Warrant Shares shall be issued free
of all legends. The Company agrees that following the effective date of the Registration Statement
or at such time as such legend is no longer required under this Section 4.1(e), it will, no
later than three trading days following the delivery by a Purchaser to the Company or the Company’s
transfer agent of a certificate representing Securities issued with a restrictive legend (such
date, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a
certificate representing such Securities that is free from all restrictive and other legends. The
Company may not make any notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Section. Certificates for
Securities subject to legend removal hereunder shall be transmitted by the transfer agent of the



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Company to the Purchasers by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System.




     In addition to any other rights available to such Purchaser, if the Company fails to cause its
transfer agent to transmit to the Purchaser a certificate or certificates free of restrictive
legends by the Legend Removal Date, and if after such date the Purchaser is required by its broker
to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Purchaser of the Common Shares (a “Buy-In”), then the Company
shall pay in cash to the Purchaser the amount by which (x) the Purchaser’s total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y)
the amount obtained by multiplying (A) the number of Common Shares that the Company was required to
deliver to the Purchaser free of legends times (B) the price at which the sell order giving rise to
such purchase obligation was executed. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Company. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver certificates free from restrictive legends as
required pursuant to the terms hereof.



     Each Purchaser, severally and not jointly with the other Purchasers, agrees that the removal
of the restrictive legend from certificates representing Securities as set forth in this
Section 4.1(e) is predicated upon the Company’s reliance that the Purchaser will sell any
Securities pursuant to either the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom.



     (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 regarding the
distribution of such Securities in violation of the Securities Act.



     (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 such Registrable
Securities have been sold in accordance with a registration statement pursuant to
Section 5.1 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; provided, however, that if the
transfer is between affiliated Purchasers, the transferring Purchaser shall be required to



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deliver only a certificate (and not 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 5.4(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
5.4 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(e). 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 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 5.6.



     (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



12









 






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.




     (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;”



13









 






     (ii) if such Purchaser is acting on behalf of a managed account in the purchase of any
Securities, an acceptable representation letter (the “Managed Account 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 if such information is required to be
disclosed in the Registration Statement. 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 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.



14









 





     (r) 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.



     (s) Such Purchaser understands and acknowledges that the Company intends to use up to
$1,850,000 from the sale of the Securities to fund a portion of the merger consideration for the
acquisition of all of the outstanding capital stock of Maximum Performance Group, Inc., a Delaware
corporation (“MPG”). Such Purchaser represents to the Company that such Purchaser has had
the opportunity to (i) review a draft of the merger agreement pursuant to which, on the terms and
subject to the conditions thereof, the Company will acquire all of the outstanding stock of MPG in
consideration for $1,850,000 in cash (plus or minus an adjustment based on closing net book value,
as provided in the merger agreement) plus up to 5,650,000 shares of the Company’s Common Stock, as
well as documents ancillary to the merger agreement and (ii) ask questions and receive answers
concerning MPG, it business, assets, management, results of operations, financial condition and
prospects and the terms and conditions of the foregoing acquisition and to obtain any additional
information which the Company possesses or can acquire without unreasonable effort or expense that
is necessary to verify the accuracy of information furnished by the Company. Such Purchaser
understands that any acquisition by the Company of another company, such as MPG, involves a high
degree of risk and that there can be no assurance that any such acquisition will be successful or
beneficial to the Company. The Company acknowledges that 
______and  ______have
each declined to exercise such opportunity to review the MPG transaction.



     (t) Other than the transactions contemplated hereunder, such Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such
Purchaser, executed any disposition, including short sales (but not including the location and/or
reservation of borrowable shares of Common Stock), in the securities of the Company during the
period commencing from the time that such Purchaser first received a term sheet from the Company or
any other Person setting forth the material terms of the transactions contemplated hereunder until
the date hereof (“Discussion Time”). Each Purchaser understands and acknowledges,
severally and not jointly with any other Purchaser, that the Commission currently takes the
position that coverage of short sales of shares of the Common Stock “against the box” prior to the
effective date of the Registration Statement with the Securities is a violation of Section 5 of the
Securities Act, as set forth in Item 65, Section 5 under Section A, of the Manual of Publicly
Available Telephone Interpretations, dated July 1997, compiled by the Office of Chief Counsel,
Division of Corporation Finance. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of
the investment decisions made by the portfolio managers managing other portions of such Purchaser’s
assets, the representation set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement. Other than to other Persons party to this Agreement, such Purchaser has
maintained the confidentiality of all disclosures made to it in connection with this transaction
(including the existence and terms of this transaction).



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



15









 





     (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
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, the
authorization, sale, issuance and delivery of the Securities 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 each 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 5.6.



     (c) Assuming the accuracy of the representations of each Purchaser in this Agreement, the
Common Shares issuable hereunder will be issued in compliance with all applicable federal and state
securities laws. The Common Shares and 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 each 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  ______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 41,828,310 issued and
outstanding shares of Common Stock and 224,752 issued and outstanding shares of Series E
Convertible Preferred Stock. Other than the securities described in this Section 4.2(d)
and the options, rights and warrants to purchase up to 23,011,882 shares of Common Stock and
2,274,756 shares of Common Stock reserved for issuance upon conversion of outstanding convertible
notes, the Company does not have any other securities or rights to purchase its securities
outstanding except as set forth on Schedule 4.2(d).



     (e) The execution and delivery of this Agreement, the authorization, sale, issuance and
delivery of the Securities and 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 date) of the Company, including the



16









 





Certificates of Designations of the Series E 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 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 issuance
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.




     (f) Since December 31, 2004, 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. 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. 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 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.



     When the Registration Statement becomes effective, the documents incorporated by reference in
the Registration Statement, when they were or are filed with the Commission, conformed or will
conform in all material respects to the requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder,



17









 





and none of such documents contained or will contain an untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; and any further documents so filed and incorporated by
reference in the Registration Statement after the effective date or any further amendment or
supplement thereto after the effective date, when such documents become effective or are filed with
the Commission, as the case may be, will conform in all material respects to the requirements of
the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain 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; provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information furnished by any
Purchaser in such Purchaser’s Selling Stockholder Questionnaire.




     When the Registration Statement becomes effective, the Registration Statement will conform,
and any further amendments or supplements to the Registration Statement will conform, in all
material respects to the requirements of the Securities Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto, and as of the applicable filing date as to any
amendment or supplement thereto, contain 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; provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information furnished in
writing to the Company by any Purchaser in such Purchaser’s Selling Stockholders Questionnaire.



     (g) Since December 31, 2004, 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 or under the Common Stock
Warrants. 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 4.2(h), since December 31, 2004,
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, (iii)
any other limitations on the conduct of business by the Company or any of its



18









 





subsidiaries or (iv) any comments from the staff of the Commission on the Commission
Documents.




     (i) The Company has good and marketable fee simple title to the assets reflected on the
balance sheet set forth in the 2004 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 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.




19









 






     (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 made available 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 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 fund the
acquisition of all of the outstanding capital stock of Maximum Performance Group, Inc., a Delaware
corporation, 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. Except as set forth on
Schedule 4.2(p), all holders of piggyback registration rights which otherwise would apply
with



20









 





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).




     (q) The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of
2002 which are applicable to it as of the Closing Date. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company
and designed such disclosure controls and procedures to ensure that material information relating
to the Company, including each of its subsidiaries, is made known to the certifying officers by
others within those entities, particularly during the period in which the Company’s most recently
filed periodic report under the Exchange Act, is being prepared. The Company’s certifying officers
have evaluated the effectiveness of the Company’s controls and procedures as of the date prior to
the filing date of the most recently filed periodic report under the Exchange Act (such date, the
“Evaluation Date”). The Company presented in its most recently filed periodic report under
the Exchange Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no significant changes in the Company’s internal controls (as such
term is defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company’s
knowledge, in other factors that could significantly affect the Company’s internal controls.



     (r) The Company’s Common Stock is registered pursuant to Section 12(b) of the Exchange Act,
and the Company has taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange Act nor has the
Company received any notification that the Commission is contemplating terminating such
registration. Except as set forth in Schedule 4.2(r), the Company has not, in the 12
months preceding the date hereof, received notice from the AMEX that the Company is not in
compliance with the listing or maintenance requirements of the AMEX. Immediately following the
Closing, the Company will be, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance requirements.



     (s) The Company confirms that, neither the Company nor, to the Company’s knowledge, any other
Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any
information that constitutes material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to the Purchasers regarding the
Company, its business and the transactions contemplated hereby, including the disclosure schedules
to this Agreement, furnished by the Company with respect to the representations and warranties made
herein are true and correct in all material respects with respect to such representations and
warranties and do not contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes
or has made any representations or warranties with respect to the transactions contemplated hereby
other than those specifically set forth in Section 4.1 hereof.



21









 





     (t) Assuming the accuracy of the Purchasers’ representations and warranties set forth in
Section 4.1, neither the Company, nor to its knowledge any of its Affiliates, nor to its
knowledge any Person acting on its or their behalf, has made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of the Securities Act
or any applicable shareholder approval provisions, including, without limitation, under the rules
and regulations of the AMEX.



     (u) Based on the financial condition of the Company as of the Closing Date after giving effect
to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the
Company’s fair saleable value of its assets exceeds the amount that will be required to be paid on
or in respect of the Company’s existing debts and other liabilities (including known contingent
liabilities but excluding redemption of preferred stock) as they mature; (ii) the Company’s assets
do not constitute unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all of its assets, after
taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company does not intend to
incur debts beyond its ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any
facts or circumstances which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing
Date. The Commission Documents set forth as of the dates thereof all outstanding secured and
unsecured Indebtedness of the Company and each of its subsidiaries, or for which the Company or any
of its subsidiaries has commitments. For the purposes of this paragraph, “Indebtedness”
shall mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than
trade accounts payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness of others, whether or not
the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of any lease payments in
excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Neither the
Company nor any of its subsidiaries is in default with respect to any Indebtedness.



     (v) The Company is eligible to register the resale of its Common Stock by the Purchasers under
Form S-3 promulgated under the Securities Act and the Company hereby covenants and agrees to use
its best efforts to maintain its eligibility to use Form S-3 until the Registration Statement
covering the resale of the Shares shall have been filed with, and declared effective by, the
Commission.



     (w) Neither the Company nor any person acting on behalf of the Company has offered or sold any
of the Securities by any form of general solicitation or general advertising. The Company has
offered the Securities for sale only to the Purchasers and certain other entities



22









 





which it believes are “accredited investors” within the meaning of Rule 501 under the
Securities Act.




     (x) Neither the Company, nor to the knowledge of the Company, any agent or other person acting
on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or campaigns from corporate funds, or
(iii) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.



     (y) Anything in this Agreement or elsewhere herein to the contrary notwithstanding, it is
understood and agreed by the Company (i) that none of the Purchasers have been asked to agree, nor
has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or “derivative” securities based on securities issued by the Company or to hold the
Securities for any specified term; (ii) that past or future open market or other transactions by
any Purchaser, including short sales, and specifically including, without limitation, short sales
or “derivative” transactions, before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company’s publicly-traded securities;
(iii) that counter parties in “derivative” transactions to which any such Purchaser is a party,
directly or indirectly, presently may have a “short” position in the Common Stock, and (iv) that
each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction. The Company further understands and acknowledges
that (a) one or more Purchasers may engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation, during the periods that the
value of the Warrant Shares deliverable with respect to Securities are being determined and (b)
such hedging activities (if any) could reduce the value of the existing stockholders’ equity
interests in the Company at and after the time that the hedging activities are being conducted.
The Company acknowledges that such aforementioned hedging activities do not constitute a breach of
any of the Transaction Documents.



     4.3 Company Covenants. The Company hereby covenants as follows:



     (a) The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate
in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated
with the offer or sale of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be integrated with the
offer or sale of the Securities for purposes of the rules and regulations of the AMEX such that it
would require stockholder approval prior to the closing of such other transaction unless
stockholder approval is obtained before the closing of such subsequent transaction.



     (b) The Company shall, by 8:30 a.m. Eastern time on the trading day following the date hereof,
issue a Current Report on Form 8-K disclosing the material terms of the transactions contemplated
hereby, and shall attach the Transaction Documents thereto. The Company and each Purchaser shall
consult with each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release
or otherwise make any such public statement without the prior consent of the



23









 





Company, with respect to any press release of any Purchaser, or without the prior consent of
each Purchaser, with respect to any press release of the Company, which consent shall not
unreasonably be withheld, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of such public statement
or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any
regulatory agency or the AMEX, without the prior written consent of such Purchaser, except (i) as
required by federal securities law in connection with the Registration Statement and (ii) to the
extent such disclosure is required by law or AMEX regulations.




     (c) No claim will be made or enforced by the Company or, to the knowledge of the Company, any
other Person that any Purchaser is an “Acquiring Person” under any shareholder rights plan or
similar plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other agreement between the Company and the
Purchasers. The Company shall conduct its business in a manner so that it will not become subject
to the Investment Company Act.



     (d) The Company covenants and agrees that neither it nor any other Person acting on its behalf
will provide any Purchaser or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such information. The
Company understands and confirms that each Purchaser shall be relying on the foregoing
representation in effecting transactions in securities of the Company.



     (e) From the date hereof until the effective date of the Registration Statement, neither the
Company nor any of its subsidiaries shall issue shares of Common Stock; provided, however, the
period set forth in this Section 4.3(e) shall be extended for the number of trading days
during such period in which (i) trading in the Common Stock is suspended by AMEX, or (ii) following
the effective date of the Registration Statement, the Registration Statement is not effective or
the prospectus included in the Registration Statement may not be used by the Purchasers for the
resale of the Shares and Warrant Shares.



     (f) The obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way
for the performance of the obligations of any other Purchaser under any Transaction Document.
Nothing contained herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in its review and negotiation of the
Transaction Documents. The Company has elected to provide all Purchasers with the same



24









 





terms and Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.




     4.4 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 its best efforts, subject to receipt of all
necessary information from the Purchasers, to prepare and file with the Commission within 5
Business Days of the effective date of its current registration statement on Form S-3 filed March
18, 2005, as amended April 15, 2005 (Reg. No. 333-123437) (the “Target Deadline”) a
registration statement (the “Registration Statement”) covering the resale of the Common
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.



     (b) Subject to the provisions of Section 5.2 below, use its best 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 90 days after the filing of the Registration Statement (the “Effectiveness
Deadline”).



     (c) Use its best 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 under the Securities
Act, as determined by 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



25









 





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 in any
registration statement under Section 5.1 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 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 or pursuant to an exemption from registration under the Securities Act.



     5.4 Company’s Other Obligations In Respect of Registration. In connection with the
registration by the Company of the Registration Statement:



     (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 the Registration Statement (and to each underwriter, if any, of such



26









 





Registrable Securities ) such number of copies of the 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 5.4(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 5.4(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 Purchaser
holds) for a period of more than 60 days (which need not be consecutive 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 its best 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.



     5.5 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”),



27









 





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 5.5 exceed twelve percent (12.0%) 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 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.



     5.6 Indemnification and Contribution.



     (a) For the purpose of this Section 5.6:




     (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 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.



     (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



28









 





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 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 5.6, 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



29









 





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 5.6.




     (e) If the indemnification provided for in this Section 5.6 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 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 5.6, 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 5.6(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 5.6(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.



     5.7 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.



     5.8 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:



30









 






     (a) As soon as practicable after available (but in the case of the Company’s Annual
Report on Form 10-K, within 120 days after the end of each fiscal year of the Company), one
copy of (i) its Annual Report on Form 10-K or equivalent form (which shall contain financial
statements audited in accordance with generally accepted accounting principles by a firm of
certified public accountants), and (ii) 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 (ii) of subparagraph (a) of this Section 5.8 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;



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(i) 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 $10,000 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. In connection with the foregoing,
________may withhold $10,000 from its purchase price for the Securities at the Closing for
reasonable attorneys’ fees and expenses in connection with the negotiation of the Transaction
Documents and in connection with the procedures in Section 5.1 hereof.



     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.



31









 





     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
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 one 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.



32









 





     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.



     6.8 WAIVER OF JURY TRIAL. THE PARTIES HERETO, AFTER CONSULTING OR HAVING HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT.



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




33









 








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



	 	 	 
	

	 	ELECTRIC CITY CORP.
	 
	 	 
	

	 	By:                                                            
	

	 	Name: Jeffrey Mistarz
	

	 	Title: Chief Financial Officer & Treasurer






34









 






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



By:                                                                            

Name:

Title:

Address:                                                                  






                                                                                



Telephone:                                                                  



Facsimile:                                                                  



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




                                                                                



Address of Nominee:



                                                                                



                                                                                



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:



                                                                                



 









 





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


             
                                                                   

By:                                                                            

Name:

Title:

Address:                                                                  



                                                                                






Telephone:                                                                  



Facsimile:                                                                  



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




                                                                                



Address of Nominee:



                                                                                



                                                                                



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:



                                                                                



 









 





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



By:                                                                            

Name:

Title:

Address:                                                                  



                                                                                






Telephone:                                                                  



Facsimile:                                                                  



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




                                                                                



Address of Nominee:



                                                                                



                                                                                



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:



                                                                                



 









 





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


         
                                                                       

By:                                                                            

Name:

Title:

Address:                                                                  



                                                                                






Telephone:                                                                  



Facsimile:                                                                  



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




                                                                                



Address of Nominee:



                                                                                



                                                                                



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:



                                                                                



38









 





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

         
                                                                       


By:                                                                            

Name:

Title:

Address:                                                                  



                                                                                






Telephone:                                                                  



Facsimile:                                                                  



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




                                                                                



Address of Nominee:



                                                                                



                                                                                



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:



                                                                                



39









 





SCHEDULE I




SCHEDULE OF INVESTORS




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Number of	 	 	Number of	 	 	 	 
	Investor	 	Common Shares	 	 	Warrant Shares	 	 	Purchase Price	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	Telephone: ( ) ___-____
	 	 	 	 	 	 	 	 	 	 	 	 
	Facsimile: ( ) ___-____
	 	 	 	 	 	 	 	 	 	 	 	 
	Email: __________________
	 	 	2,222,222	 	 	 	1,111,111	1	 	$	2,000,000	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	Telephone: ( ) ___-____
	 	 	 	 	 	 	 	 	 	 	 	 
	Facsimile: ( ) ___-____
	 	 	 	 	 	 	 	 	 	 	 	 
	Email: __________________
	 	 	1,111,111	 	 	 	555,556	2	 	$	1,000,000	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	Telephone: ( ) ___-____
	 	 	 	 	 	 	 	 	 	 	 	 
	Facsimile: ( ) ___-____
	 	 	 	 	 	 	 	 	 	 	 	 
	Email: __________________
	 	 	2,222,222	 	 	 	1,111,111	3	 	$	2,000,000	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	Telephone: ( ) ___-____
	 	 	 	 	 	 	 	 	 	 	 	 
	Facsimile: ( ) ___-____
	 	 	 	 	 	 	 	 	 	 	 	 
	Email: __________________
	 	 	138,889	 	 	 	69,444	4	 	$	125,000	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	[          ]
	 	 	 	 	 	 	 	 	 	 	 	 
	Telephone: ( ) ___-____
	 	 	 	 	 	 	 	 	 	 	 	 
	Facsimile: ( ) ___-____
	 	 	 	 	 	 	 	 	 	 	 	 
	Email: __________________
	 	 	555,556	 	 	 	277,778	5	 	$	500,000	 
	Total:
	 	 	6,250,000	 	 	 	3,125,000	 	 	$	5,625,000	 












	1	 	Of these, 364,444 warrants will not be
exercisable for 6 months from the date of issuance.
	 
	2	 	Of these, 182,223 warrants will not be
exercisable for 6 months from the date of issuance.
	 
	3	 	Of these, 364,444 warrants will not be
exercisable for 6 months from the date of issuance.
	 
	4	 	Of these, 22,778 warrants will not be
exercisable for 6 months from the date of issuance.
	 
	5	 	Of these, 91,111 warrants will not be
exercisable for 6 months from the date of issuance.