Exhibit 10.3


 


STOCK TRADING AGREEMENT


 


This Stock Trading Agreement, dated as
of  June 27, 2003 (as may be amended
from time to time, this “Agreement”), is made by and among Electric City
Corp., a Delaware corporation (the “Company”), Richard P. Kiphart, an
individual (“Kiphart”), Cinergy Ventures II, LLC, a Delaware limited
liability company(“Cinergy”), SF Capital Partners, a British Virgin
Islands company (“SFCP”), David R. Asplund, an individual (“Asplund”)
and John Thomas Hurvis Revocable Trust, an Illinois trust (“Hurvis Trust”)
(collectively, Kiphart, Cinergy, SFCP, Asplund and Hurvis Trust are referred to
herein as the “Purchasers”), and shall become effective upon the Closing
under the Securities Purchase Agreement (as herein defined).


 


W I T N E S S E T H:


 


WHEREAS, the Purchasers and the Company have
entered into that certain Securities Purchase Agreement, dated as of June 27,
2003 (as it may be amended from time to time, the “Securities Purchase
Agreement”), whereby the Company will sell and the Purchasers will buy
shares of the Company’s Series D Convertible Preferred Stock, par value $0.01
per share (the “Series D Preferred Stock”), together with warrants to
purchase Series D Preferred Stock, shares of Common Stock and warrants to
purchase Common Stock; and


 


WHEREAS, it is a condition to the obligations
of the Purchasers to purchase such securities pursuant to the Securities
Purchase Agreement that the Parties (as defined below) enter into this
Agreement;


 


NOW, THEREFORE, in consideration of the foregoing
and for other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Parties agree as follows:


 


ARTICLE
I

DEFINITIONS


 


1.1           Defined Terms.  All terms capitalized but not defined herein
shall have the meaning attributable to such terms in the Securities Purchase
Agreement, except where the context otherwise requires.  The following additional 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 controlling, controlled by or
under common control with such Person. 
For 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
any such other Person, whether through the ownership of voting securities or by
contract or otherwise.  With respect to
individuals, the term Affiliate shall also include such individuals parents,
spouse, children or grandchildren.


 


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


 


“Average
Daily Trading Volume” with respect to any trading day, means the average
daily trading volume of the Common Stock as reported on the American Stock
Exchange (or, if not traded on the American Stock Exchange, any national
securities exchange or automated quotation services on which the Common Stock
is then listed for trading) for the twenty (20) consecutive trading days (as
adjusted to exclude the highest and the lowest volume trading days for such
twenty (20) consecutive trading day period) ending on the date immediately
prior to such trading day.


 


“Block
Sales” means a sale of at least 10,000 shares of Common Stock.


 


“Closing”
shall have the meaning set forth in the Securities Purchase Agreement.


 


“Closing
Price” means the closing price of the Common Stock as reported on the
American Stock Exchange (or, if not traded on the American Stock Exchange, any
national securities exchange or automated quotation services on which the
Common Stock is then listed for trading).


 


“Common
Stock” means and includes the Company’s authorized common stock, par value
$0.0001 per share.


 


“Company”
shall have the meaning set forth in the preamble hereof.


 


“Effective
Date” means the Closing Date (as defined in the Securities Purchase
Agreement).


 


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


 


“Parties”
means all of the parties that are signatories to this Agreement from time to
time, including under any joinders executed pursuant to the terms hereof, other
than the Company.


 


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


 


“Purchasers”
shall have the meaning set forth in the preamble hereof.


 


“Qualified
Primary Offering” means a firmly underwritten primary registered public
offering of Common Stock by the Company that raises at least $35 million in
aggregate gross proceeds at a price of at least $5.00 per share (as adjusted
for stock splits, stock combinations and the like).


 


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


 


“Securities
Purchase Agreement” shall have the meaning set forth in the first recital
hereof.


 


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


 


“Series D
Preferred Stock” shall have the meaning set forth in the first recital
hereof.


 


“Subject
Common Stock” means any shares of Common Stock which a Party acquires
pursuant to the Securities Purchase Agreement, the warrants to purchase shares
of Common Stock issued thereunder, or conversion of any shares of Series D Preferred
Stock.


 


ARTICLE
II

TRADING RESTRICTIONS


 


2.1           Public Sales.  Each Party shall be subject to the following
trading restrictions from time to time concerning its respective holdings of
Common Stock:


 


(a)           During the term of this Agreement, no
Party may sell any of its Subject Common Stock into the public market before
the completion of a Qualified Primary Offering; provided, however,
that prior to the completion of a Qualified Primary Offering each Party may
sell its Subject Common Stock into the public market, severally and not
jointly, subject to the following conditions:


 


(i)                                     the Closing Price must exceed $4.00
per share (as adjusted for stock splits, stock combinations and the like) for
each of the twenty (20) consecutive trading days immediately prior to the date
of sale;


 


(ii)                                  the Average Daily Trading Volume
immediately prior to the date of sale must exceed 150,000 shares;


 


(iii)                               the number of shares of Subject
Common Stock sold by such Party on any trading day may not exceed five percent
(5%) of the Average Daily Trading Volume;


 


(iv)                              the number of shares of Subject
Common Stock sold by such Party into the public market in any three-month
period may not exceed fifteen percent (15%) of such Party’s total holdings of
Subject Common Stock (calculated assuming the exercise of all rights, options
and warrants to purchase Subject Common Stock or securities convertible or
exchangeable for shares of Subject Common Stock, and the conversion or exchange
of all securities convertible or exchangeable for Subject Common Stock) on the
Effective Date (as adjusted for stock splits, stock combinations and the like);
and


 


(v)                                 Block Sales must be executed at a
minimum price per share of 90% of the ask price as reported on the American
Stock Exchange (or, if not traded on the American Stock Exchange, any national
securities exchange or automated quotation services on which the Common Stock
is then listed for trading).


 


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(b)           If the Company completes a Qualified
Primary Offering during the term of this Agreement, each Party shall comply
with its obligations under any “lock-up” agreement entered into by such Party
in connection with such Qualified Primary Offering.  After any such “lock-up” period expires or is terminated, each
Party may sell its Subject Common Stock into the public market, severally and
not jointly, subject to the following conditions:


 


(i)                                     the number of shares of Subject
Common Stock sold by such Party on any trading day may not exceed five percent
(5%) of the Average Daily Trading Volume;


 


(ii)                                  the number of shares of Subject
Common Stock sold by such Party into the public market in any three-month
period may not exceed twenty percent (20%) of such Party’s holdings of Subject
Common Stock (calculated assuming the exercise of all rights, options and
warrants to purchase Subject Common Stock or securities convertible or
exchangeable for shares of Subject Common Stock, and the conversion or exchange
of all securities convertible or exchangeable for Subject Common Stock) on the
Effective Date (as adjusted for stock splits, stock combinations and the like);
and


 


(iii)                               Block Sales must be executed at a
minimum price per share of 90% of the ask price as reported on the American
Stock Exchange (or, if not traded on the American Stock Exchange, any national
securities exchange or automated quotation services on which the Common Stock
is then listed for trading).


 


2.2           Private Sales.  If a Party (the “Selling Party”)
intends to sell any of its shares of Series D Preferred Stock or Subject Common
Stock (or securities exercisable or exchangeable for or convertible into shares
of Series D Preferred Stock or Subject Common Stock) in a private transaction
(other than to an Affiliate), the Selling Party shall send written notice (the
“Sale Notice”) of such intent to each other Party.  The Sale Notice shall include the following
information:  (a) the type of Company
capital stock or other securities the Selling Party intends to sell; (b) the
number of shares or other securities the Selling Party intends to sell; (c) the
proposed sale price per share or per security, as applicable, and (d) any other
material terms of the offer.  The other
Parties shall have two (2) business days after receipt of the Sale Notice (the
“Election Period”) to elect to purchase the capital stock or other
securities that are the subject of the Sale Notice by giving the Selling Party
written notice thereof within the Election Period, in which case the Selling
Party and the Party (or Parties) so electing to purchase shall complete such
sale within five (5) business days on the terms set forth in the Sale
Notice.  If more than one Party elects
to purchase the capital stock or other securities set forth in the Sale Notice,
then such shares or securities shall be allocated among the Parties so electing
to purchase pro rata in proportion to their respective holdings of Subject
Common Stock (calculated assuming the exercise of all rights, options and
warrants to purchase Subject Common Stock or securities convertible or
exchangeable for shares of Subject Common Stock, and the conversion or exchange
of all securities convertible or exchangeable for Subject Common Stock held by
such Parties so electing to purchase). 
If none of the Parties provides written notice so electing to 


 


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purchase
within the Election Period, then the Selling Party may sell the capital stock
or other securities that are the subject of the Sale Notice on terms no less
favorable to the Selling Party than those set forth in the Sale Notice to any
third party within 10 business days of the date of the Sale Notice; provided,
however, that any sale of shares of Series D Preferred Stock or Subject
Common Stock (or securities exercisable or exchangeble for or convertible into
shares of Series D Preferred Stock or Subject Common Stock) to a party that is
not a party to this Agreement shall have as a condition to such sale that such
party shall become a party to and bound by this Agreement.  For purposes of Sections 2.1(a)(iv)
and 2.1(b)(ii), the purchasing party’s holdings (if such party was not a
party to the Securities Purchase Agreement) with respect to the shares of
capital stock or other securities it purchases shall be the number of shares of
Subject Common Stock (calculated assuming the exercise of all rights, options
and warrants to purchase Subject Common Stock or securities convertible or
exchangeable for shares of Subject Common Stock, and the conversion or exchange
of all securities convertible or exchangeable for Subject Common Stock)
purchased in the subject sale.


 


2.3           Transfer to Affiliates.  Notwithstanding anything in this Agreement
to the contrary, any party may freely sell or otherwise transfer any Series D
Preferred Stock or Subject Common Stock (or securities exercisable or
exchangeable for or convertible into shares of Series D Preferred Stock or
Subject Common Stock) it owns to its Affiliates without such sale or transfer
being subject to the terms of this Agreement; provided, however, that
any such Affiliate shall become a party to and bound by this Agreement and its
ownership and sales of shares of Series D Preferred Stock and Subject Common
Stock and other securities exercisable or exchangeable for or convertible into
shares of Series D Preferred Stock or Subject Common Stock shall be aggregated
with the transferring Party for purposes of Section 2.1.


 


2.4           Term of Trading Agreement.  The term of the Trading Agreement shall
commence on the Effective Date and terminate on September 7, 2004.


 


2.5           Amendments to the Trading
Agreement.  The Parties may amend
this Agreement only upon the written agreement of the Parties hereto at such
time and the Company and provided that the prior written consent of holders of
at least seventy-five percent (75%) of the outstanding shares of the Company’s
Series A Convertible Preferred Stock to such amendment is also obtained.


 


ARTICLE
III

GENERAL PROVISIONS


 


3.1           Legend on Share Certificates.  All Company securities issued at the Closing
(as defined in the Securities Purchase Agreement) or otherwise that are subject
to the terms and provisions of Article II, in addition to such other
legends as may be required by law and any other legend required by any
Transaction Document (as defined in the Securities Purchase Agreement) shall
bear the following legend:


 


THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO CERTAIN REQUIREMENTS AS TO TRADING CONTAINED IN
THE STOCK TRADING AGREEMENT, DATED JUNE 27, 2003, BY AND


 


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AMONG THE COMPANY AND CERTAIN SECURITY
HOLDERS, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.


 


Upon the termination of this Agreement, each Party shall be entitled to
receive, in exchange for any security bearing the legend regarding this
Agreement specifically set forth above, a security without such legend.


 


3.2           Injunctive Relief.  It is acknowledged that it is impossible to
measure in money the damages that would be suffered if the Parties fail to
comply with the obligations imposed on them by this Agreement and that, in the
event of any such failure, an aggrieved Party would be irreparably damaged and
would not have an adequate remedy at law. 
Any such Party shall, therefore, be entitled to injunctive relief and/or
specific performance to enforce such obligations, and if any action should be
brought in equity to enforce any of such provisions of this Agreement, none of
the Parties shall raise the defense that there is an adequate remedy at law.


 


3.3           Governing Law.  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 New York.


 


3.4           Entire Agreement; Waiver.  This Agreement contains the entire agreement
among the parties hereto with respect to the subject matter hereof.  No waiver of any term or provision shall be
effective unless in writing signed by the party to be charged.


 


3.5           Binding Effect.  This Agreement shall be binding on and inure
to the benefit of the Parties and, subject to the terms and provisions hereof, their
respective legal representatives, successors and assigns.


 


3.6           Invalidity of Provision.  The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of this Agreement, including that provision, in
any other jurisdiction.


 


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


 


3.8           Notices.  All notices, consents and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given when (a) delivered by hand, (b) sent by telecopier (with
receipt confirmed), provided that a copy is mailed by certified or registered mail,
return receipt requested, or (c) when received by the addressee, if sent by
Express Mail, Federal Express or other express delivery service (receipt
requested), in each case


 


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to
the appropriate addresses and telecopier numbers set forth below (or to such
other addresses and telecopier numbers as a party may designate as to itself by
notice to the other parties):


 


	
  If to the Company:

  	
  1280 Landmeier Road

  
	
   

  	
  Elk Grove Village, IL 60007-2410

  
	
   

  	
  Fax No. 847-437-4969

  
	
   

  	
  Attention: 
  Chief Executive Officer

  



 


	
  If to another Party:

  	
  at such Party’s address in accordance with the Securities Purchase
  Agreement.

  



 


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


 


[Balance of page intentionally left blank; signature page follows.]


 


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


 


 


	
  COMPANY:

  	
  PURCHASERS:

  
	
   

  	
   

  
	
  ELECTRIC
  CITY CORP.,

  	
  CINERGY
  VENTURES II, LLC

  
	
  a Delaware
  corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
   

  	
  /s/ John P.
  Mitola

  	
   

  	
  By:

  	
   

  	
  /s/ R.
  Foster Duncan

  	
   

  
	
  Name: 

  	
  John Mitola

  	
  Name:

  	
   

  	
  R. Foster
  Duncan

  	
   

  
	
  Title: 

  	
  Chief
  Executive Officer

  	
  Title:

  	
   

  	
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
    /s/
  Richard P. Kiphart

  	
   

  
	
   

  	
  Richard P.
  Kiphart

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SF CAPITAL
  PARTNERS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Brian H. Davidson

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Brian H.
  Davidson

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Authorized
  Signatory

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JOHN THOMAS
  HURVIS REVOCABLE

  TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  John Thomas Hurvis

  	
   

  
	
   

  	
  Name:

  	
   

  	
  John Thomas
  Hurvis

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    /s/
  David R. Asplund

  	
   

  
	
   

  	
  David R. Asplund

  	
   

  
													



 


 


[Signature Page to Stock Trading Agreement]