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                                                                    Exhibit 4.17

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                               ELECTRIC CITY CORP.

                          SECURITIES PURCHASE AGREEMENT

                            DATED AS OF MAY 31, 2002

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                          SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (as it may be amended from time to time,
this "AGREEMENT"), is entered into as of May 31, 2002 by Electric City Corp., a
Delaware corporation (the "COMPANY"), and the purchaser whose name appears on
the signature page of this Agreement (the "PURCHASER").

                              W I T N E S S E T H:

     WHEREAS, the Company desires to sell and issue to the Purchaser shares of
its Series C Convertible Preferred Stock, $.01 par value per share ("SERIES C
PREFERRED STOCK"), together with warrants to purchase shares of Series C
Preferred Stock, shares of its common stock, par value $0.0001 ("COMMON STOCK"),
and warrants to purchase shares of its Common Stock, all as more fully described
herein; and

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

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

                                    ARTICLE I
                                   DEFINITIONS

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

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

           "AGREEMENT" shall have the meaning set forth in the preamble of this
     Agreement.

           "ANCILLARY AGREEMENTS" means the Stockholders Agreement, the Investor
     Rights Agreement, the Series C Preferred Stock Warrants, the Common Stock
     Warrants and the Trading Agreement.

           "ASSETS" shall have the meaning set forth in SECTION 5.5 hereof.

           "BUSINESS DAY" means any day other than a Saturday, Sunday or other
     day on which commercial banks in the City of New York are authorized or
     required by law or executive order to close.

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           "CERTIFICATE OF DESIGNATIONS" means the Certificate of Designations,
     Preferences and Relative, Participating, Optional and Other Special Rights
     of Preferred Stock and Qualifications, Limitations and Restrictions Thereof
     of Series C Convertible Preferred Stock of the Company, as filed with the
     Secretary of State of Delaware.

           "CERTIFICATE OF INCORPORATION" means the Amended Certificate of
     Incorporation of the Company, as amended or restated from time to time.

           "CLOSING" shall have the meaning set forth in SECTION 2.2 hereof.

           "CLOSING DATE" shall have the meaning set forth in SECTION 2.2
     hereof.

           "CODE" means the Internal Revenue Code of 1986, as amended.

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

           "COMMISSION DOCUMENTS" shall have the meaning set forth in SECTION
     5.25 hereof.

           "COMMON SHARES" means the shares of Common Stock to be issued by the
     Company to the Purchaser hereunder.

           "COMMON STOCK" shall have the meaning set forth in the Recitals
     hereof.

           "COMMON STOCK WARRANTS" means the warrants to be issued by the
     Company to Purchaser to purchase 281,250 shares of Common Stock, as
     evidenced by a Warrant Certificate, as the same may be amended from time to
     time in accordance with the terms thereof.

           "COMPANY" shall have the meaning set forth in the preamble of this
     Agreement.

           "COMPANY IP" shall have the meaning set forth in SECTION 5.13 hereof.

           "COMPANY PERSONNEL" shall have the meaning set forth in SECTION
     5.15(a) hereof.

           "CONVERSION PRICE" shall have the meaning set forth in Section 7(a)
     of the Certificate of Designations.

           "CONVERSION STOCK" shall have the meaning set forth in SECTION 6.1
     hereof.

           "CUSTOMERS" shall have the meaning set forth in SECTION 5.20 hereof.

           "EMPLOYEE PLANS" shall have the meaning set forth in SECTION 5.15(a)
     hereof.

           "ENVIRONMENTAL CONDITION" shall have the meaning set forth in SECTION
     5.16(i) hereof.

           "ENVIRONMENTAL LAW" shall have the meaning set forth in SECTION
     5.16(f) hereof.

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           "ERISA" shall have the meaning set forth in SECTION 5.15(a) hereof.

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

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

           "HAZARDOUS SUBSTANCES" shall have the meaning set forth in SECTION
     5.16(g) hereof.

           "INTERIM FINANCIAL STATEMENTS" shall have the meaning set forth in
     SECTION 5.8 hereof.

           "INVESTOR RIGHTS AGREEMENT" means the Investor Rights Agreement dated
     as of July 31, 2001, by and among the Company and the Series A Holders, as
     amended from time to time in accordance with the terms thereof.

           "LIQUIDATION AMOUNT" shall have the meaning set forth in the
     Certificate of Designations.

           "LITIGATION" shall have the meaning set forth in SECTION 3.1(k)
     hereof.

           "LOSSES" shall have the meaning set forth in SECTION 8.1 hereof.

           "OFFICER'S CERTIFICATE" means a certificate of the Company signed by
     its Chief Executive Officer or Chief Financial Officer.

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

           "PLACEMENT AGENT" shall mean Delano Group Securities, LLC.

           "PREFERRED SHARES" means shares of Series C Preferred Stock.

           "PROPERTIES" shall have the meaning set forth in SECTION 5.16(c)
     hereof.

           "PURCHASER" shall have the meanings set forth in the preamble of this
     Agreement.

           "PURCHASE PRICE" shall have the meaning set forth in SECTION 2.2
     hereof.

           "REGULATORY APPROVALS" means (a) any and all certificates, permits,
     licenses, franchises, concessions, grants, consents, approvals, orders,
     registrations, authorizations, waivers, variances, exemptions,
     declarations, or clearances from, or filings or

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     registrations with, or reports or notices to, any Governmental Authority,
     and (b) any and all waiting periods imposed by applicable laws.

           "RELEASE" shall have the meaning set forth in SECTION 5.16(h) hereof.

           "SECURITIES" shall have the meaning set forth in SECTION 2.1 hereof.

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

           "SERIES C PREFERRED STOCK" shall have the meaning set forth in the
     Recitals to this Agreement.

           "SERIES C PREFERRED STOCK WARRANTS" means the warrants to be issued
     by the Company to Purchaser to purchase 50,000 shares of Series C Preferred
     Stock, as evidenced by a Warrant Certificate, as the same may be amended
     from time to time in accordance with the terms thereof.

           "STATED VALUE" of the Series C Preferred Stock shall mean $10.00 per
     share.

           "STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated the
     Closing Date, by and among the Company and the Series A Holders, as amended
     from time to time in accordance with the terms thereof.

           "STOCK TRADING AGREEMENT" means the Stock Trading Agreement dated the
     Closing Date, by and among Newcourt Capital Securities, Inc., the Series A
     Holders, John Mitola, Brian Kawamura, Jeff Mistarz, Dennis Enberg and
     Michael Pokora, as amended from time to time in accordance with the terms
     thereof.

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

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

           "TAX RETURN" means a report, return or other information required to
     be supplied to a Governmental Authority with respect to Taxes including,
     where permitted or

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     required, combined, unitary, group or consolidated returns for any group of
     entities that includes the Company or any of its Subsidiaries.

           "TERM SHEET" means Schedule II hereto.

           "TRANSACTIONS" shall have the meaning set forth in SECTION 3.1(k).

           "TRANSACTION DOCUMENTS" shall have the meaning set forth in SECTION
     5.1(b) hereof.

           "UNION PLAN" means the defined contribution plan described on
     Schedule 5.15(g) hereof.

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

                                   ARTICLE II
                   ISSUE, PURCHASE AND SALE OF THE SECURITIES

     2.1 AUTHORIZATION OF ISSUANCE OF SECURITIES. The Company has authorized the
initial issuance of (a) 200,000 Preferred Shares to be issued hereunder, having
the powers, designations, preferences and relative rights and the
qualifications, limitations and restrictions set forth in the Certificate of
Designations, and (b) up to 50,000 Preferred Shares upon exercise of the Series
C Preferred Stock Warrants, and (c) such additional shares of Series C Preferred
Stock as may be necessary to pay in-kind accrued but unpaid dividends on the
shares of Series C Preferred Stock referred to in clauses (a) and (b) preceding
for up to three (3) years; and (d) the Series C Preferred Stock Warrants; and
(e) the Common Stock Warrants, and (f) 30,082 Common Shares. The 200,000
Preferred Shares, 30,082 Common Shares, Series C Preferred Stock Warrants and
Common Stock Warrants to be issued pursuant to this Agreement are collectively
referred to herein as the "SECURITIES".

     2.2 PURCHASE AND SALE OF SECURITIES; CLOSING. Subject to the terms and
conditions herein set forth, the Company hereby agrees to sell to Purchaser, and
Purchaser agrees to purchase from the Company, at the Closing (as defined
herein), for an aggregate purchase price of Two Million and no/100 Dollars
($2,000,000.00) (the "PURCHASE PRICE") the Securities. Subject to the
satisfaction or waiver of the parties' respective conditions to closing set
forth in Sections 3.1 and 3.2, the closing of the purchase and sale of the
Securities (the "CLOSING") shall take place on May 31, 2002, or at such other
time and on such other date as the Purchaser and the Company may agree (the
"CLOSING DATE"), at the offices of Purchaser or at such other location as the
Purchaser and the Company may agree. At the Closing, the Company will deliver to
Purchaser one or more stock certificates, as Purchaser may request, registered
in Purchaser's name evidencing the shares of Series C Preferred Stock and shares
of Common Stock to be purchased by Purchaser, together with the Common Stock
Warrants and the Series C Preferred Stock Warrants, against payment of the
Purchase Price therefore by wire transfer of immediately available funds to or
upon the order by the Company.

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                                   ARTICLE III
                              CONDITIONS OF CLOSING

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

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

           (b)  OPINION OF THE COMPANY'S COUNSEL. Purchaser shall have received
     from Schwartz, Cooper, Greenberger & Krauss, Chartered, special counsel to
     the Company in connection with this transaction, an opinion dated on the
     Closing Date;

           (c)  STOCKHOLDERS AGREEMENT AMENDMENT. The Stockholders Agreement
     shall have been amended by the parties thereto to include the Purchaser as
     a party thereto on terms consistent with the Term Sheet and otherwise
     reasonably acceptable to the Purchaser;

           (d)  INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement shall
     have been have been amended by the parties thereto to include the Purchaser
     as a party thereto on terms consistent with the Term Sheet and otherwise
     reasonably acceptable to the Purchaser;

           (e)  STOCK TRADING AGREEMENT. The Stock Trading Agreement shall have
     been entered into an delivered by Purchaser;

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

           (g)  CERTIFICATE OF DESIGNATIONS. The Certificate of Designations
     shall have been approved by the Board of Directors of the Company and filed
     with the Secretary of State of the State of Delaware and shall be in full
     force and effect;

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

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

           (j)  COMPLIANCE WITH THIS AGREEMENT. The Company shall have performed
     and complied with all of its agreements and conditions set forth or
     contemplated herein that are required to be performed or complied with by
     the Company on or before the Closing Date;

           (k) OFFICER'S CERTIFICATE. Such Purchaser shall have received a
     certificate, dated the Closing Date and signed by the Chief Executive
     Officer of the Company, certifying that the conditions set forth in
     SECTIONS 3.1(f), 3.1(g), 3.1(h), 3.1(i), 3.1(j), 3.1(n),and 3.1(o) hereof
     have been satisfied on and as of such date;

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

           (m) PURCHASE PERMITTED BY APPLICABLE LAWS; LEGAL INVESTMENT. The
     acquisition of and payment for the Securities and the consummation of the
     transactions contemplated by this Agreement and the Ancillary Agreements
     (i) shall not be prohibited by any applicable law or governmental
     regulation, (ii) shall not subject Purchaser to any penalty or, in its
     reasonable judgment, other onerous conditions under or pursuant to any
     applicable law or governmental regulation and (iii) shall be permitted by
     the laws and regulations of the jurisdictions to which Purchaser is
     subject;

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

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           (o) INSOLVENCY. The Company shall not have made an assignment for the
     benefit of creditors, nor shall it have filed with a court of competent
     jurisdiction an application for appointment of a receiver or similar
     official with respect to it or any substantial part of its assets, nor
     shall there have been filed by the Company or any of its Subsidiaries a
     petition seeking relief under any provision of the Federal Bankruptcy Code
     or any other federal or state statute now or hereafter in effect affording
     relief to debtors, nor shall there have been filed against the Company or
     any of its Subsidiaries any such application or petition; and

           (p) LISTING. The Company shall have, within ninety (90) days of the
     Closing Date, obtained approval from the American Stock Exchange to list
     for trading on the American Stock Exchange the Common Stock issuable upon
     conversion of the Series C Preferred Stock (including shares of Series C
     Preferred Stock issuable upon the exercise of the Series C Preferred Stock
     Warrants) and the Common Shares upon the exercise of the Common Stock
     Warrants.

     3.2   COMPANY CONDITIONS TO CLOSING. The Company's obligation to issue and
sell the Securities at the Closing is subject to the satisfaction, on or before
the Closing Date, of the following conditions:

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

           (b)  STOCKHOLDERS AGREEMENT. The Stockholders Agreement shall have
     been amended by the parties thereto to include the Purchaser as a party
     thereto on terms consistent with the Term Sheet and otherwise reasonably
     acceptable to the Purchaser;

           (c)  INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement shall
     have been amended by the parties thereto to include the Purchaser as a
     party thereto on terms consistent with the Term Sheet and otherwise
     reasonably acceptable to the Purchaser;

           (d)  STOCK TRADING AGREEMENT. The Stock Trading Agreement shall have
     been entered into and delivered by Purchaser;

           (e)  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;

           (f) PURCHASE PERMITTED BY APPLICABLE LAWS; LEGAL INVESTMENT. The
     acquisition of and payment for the Securities and the consummation of the
     transactions contemplated by this Agreement and the Ancillary Agreements
     (i) shall not be prohibited by any applicable law or governmental
     regulation, and (ii) shall not subject the Company to any penalty or, in
     its reasonable judgment, other onerous conditions under or pursuant to any
     applicable law or governmental regulation; and

           (g)  CONSENTS AND APPROVALS. All consents, waivers, approvals,
     exemptions, authorizations, or other actions by, or notices to, or filings
     with, Governmental

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     Authorities and other Persons necessary or required in connection with the
     execution, delivery or performance by the Company or enforcement against
     the Company of this Agreement (including, without limitation, the issuance
     of the Securities contemplated hereunder), any Ancillary Agreement or any
     other document executed in connection with the consummation of the
     transactions contemplated by this Agreement or any Ancillary Agreement
     shall have been obtained and be in full force and effect.

                                   ARTICLE IV
                                CERTAIN COVENANTS

     4.1   FINANCIAL STATEMENTS AND OTHER REPORTS. After the Closing Date, the
Company agrees to send the following reports to each holder of Series C
Preferred Stock:

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

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

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

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

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

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

Purchaser is hereby authorized to deliver a copy of any financial statement
delivered to it pursuant to this SECTION 4.2 to any regulatory body having
jurisdiction over it that requests such information. Subject to compliance with
reasonable confidentiality requirements imposed by the Company, Purchaser shall
have reasonable access to the Company, including its management, and its books
and records during regular business hours and is further authorized to request
information from and to have access to, at the Company's expense, the Company's
independent public accountants. The Company shall request such accountants to
make available to Purchaser such information as Purchaser may reasonably
request.

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

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

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

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

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                                    ARTICLE V
                    REPRESENTATIONS, COVENANTS AND WARRANTIES

     The Company represents, covenants and warrants to each of the Purchasers as
follows:

     5.1   ORGANIZATION; STANDING AND QUALIFICATION OF COMPANY AND ITS
SUBSIDIARIES; CORPORATE AUTHORITY.

     (a) Each of the Company and each of its Subsidiaries is a corporation duly
organized and existing in good standing under the laws of the jurisdiction of
its organization, and has the corporate power to own its property and to carry
on its business as now being conducted, is duly qualified and in good standing
as a foreign corporation to do business in every jurisdiction where the
character of the properties owned or leased by it or the nature of any business
transacted by it makes such qualification necessary, except where such
nonqualification or lack of good standing would not have a material adverse
effect on the business of the Company and its Subsidiaries, taken as a whole.
Each of the Company and its Subsidiaries have delivered to Purchaser true,
complete and correct copies of their respective certificates of incorporation
and their respective by-laws, as amended through the date hereof, which are in
full force and effect on the date hereof.

     (b) The execution and delivery by the Company of this Agreement and the
Ancillary Agreements (collectively, the "TRANSACTION DOCUMENTS"), and the
performance by the Company of all transactions and obligations contemplated
hereby and thereby are within its corporate authority. The execution, delivery
and performance of the Transaction Documents and each other agreement
contemplated by the terms hereof and thereof and the issuance of the Securities
have been duly authorized by all necessary corporate proceedings on the part of
the Company. Each of the Transaction Documents constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and to equitable principles relating to enforceability. The Preferred Shares and
the Common Shares are duly authorized and, when issued, will be validly issued,
fully paid and nonassessable and subject to no preemptive rights in favor of
other Persons which have not been waived. Assuming the accuracy of the
representations of Purchaser in this Agreement, the Preferred Shares and the
Common Shares issuable hereunder will be issued in compliance with all
applicable federal and state securities laws. The shares of Common Stock
issuable upon the conversion of the Preferred Shares and the Series C Preferred
Stock that is issuable upon exercise of the Series C Preferred Stock Warrants,
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 conversion or exercise, will be validly issued, fully paid and
nonassessable, and subject to no preemptive rights in favor of other Persons
which have not been waived. Assuming the accuracy of the representations of
Purchaser in this Agreement, when such shares of Common Stock are issued, such
shares will be issued in compliance with all applicable federal and state
securities laws. The Company has reserved for issuance 337,500 shares of Series
C Preferred Stock and 3,363,668 shares of Common Stock for issuance upon
conversion thereof. In addition, the Company has reserved for issuance 281,250
shares of Common Stock issuable upon exercise of the Common Stock Warrants.

                                       11
<Page>

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

     5.2   CAPITAL STOCK.

     (a) As of the date hereof, the Company has authorized 85,000,000 shares of
Common Stock and 5,000,000 shares of preferred stock. As of the date hereof, the
Company has 31,113,842 issued and outstanding shares of Common Stock and
2,016,168 shares of preferred stock issued and outstanding. All outstanding
shares of the Company Common Stock have been duly authorized, validly issued and
are fully paid and nonassessable and free of preemptive rights. All outstanding
shares of Common Stock were issued in compliance with all applicable federal and
state securities laws.

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

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

     5.3 NO DEFAULTS. Except as set forth in SCHEDULE 5.3, neither the Company
nor any of its Subsidiaries is in violation of, or in default under, nor has
there been any waiver given with respect to, any term or provision of any
charter, by-law, mortgage, indenture, agreement, instrument, statute, rule, law,
regulation, judgment, decree, order, writ, or injunction applicable to it, such
that such violations and defaults in the aggregate could reasonably be expected
to result in any material adverse change in the business, assets, properties,
condition (financial or otherwise) or results of operations of the Company and
its Subsidiaries, taken as a whole, or materially adversely affect the ability
of the Company to perform in any material respect its obligations under this
Agreement. All Regulatory Approvals required by the Company and its Subsidiaries
to conduct their respective business as now conducted by them have been obtained
and are in full force and effect, and the Company and its Subsidiaries are in
compliance with the terms and requirements of such Regulatory Approvals. Except
as set forth on SCHEDULE 5.3 hereto, since December 31, 2001, none of the
Company or any of its Subsidiaries has received any written notice or other
written communication from any Governmental Entity regarding (i) any revocation,
withdrawal, suspension, termination or modification of, or the imposition of any
material conditions with respect to, any Regulatory Approval, (ii) any violation
of any law by the Company or any of its Subsidiaries, or (iii) any other
limitations on the conduct of business by the Company or any of its
Subsidiaries.

     5.4   BURDENSOME AND CONFLICTING AGREEMENTS AND CHARTER PROVISIONS. Neither
the execution or delivery of the Transaction Documents by the Company, nor the
offering, issuance and sale of the Securities by the Company, nor fulfillment
of, or compliance with, the terms and

                                       12
<Page>

provisions of the Transaction Documents and the Series C Preferred Stock by the
Company, nor the issuance of Series C Preferred Stock upon exercise of the
Series C Preferred Stock Warrants, nor the issuance by the Company of shares of
Common Stock upon conversion of the Series C Preferred Stock as provided in the
Certificate of Designations, or upon exercise of the Common Stock Warrants,
will, except as set forth in SCHEDULE 5.4, conflict with, or result in a breach
of the terms, conditions or provisions of, or constitute a default under, or
result in any violation of, or result in the creation of any lien upon any of
the properties or assets of the Company or any of its Subsidiaries, or require
any consent, approval or other action by, or notice to, or filing with, any
court or administrative or governmental body or any other Person or pursuant to
the Certificate of Incorporation or by-laws of the Company or the certificate of
incorporation or by-laws of any of the Company's Subsidiaries, any award of any
arbitrator or any material agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which the Company or any of its Subsidiaries is subject, except
for such approvals or waivers as may be required in connection with fulfillment
of, or compliance with, the Investor Rights Agreement, which shall have been
obtained by the Closing Date.

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

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

     5.7 CONTRACTS. Except as set forth in SCHEDULE 5.7, there is no contract,
agreement or understanding required to be described in or filed as an exhibit to
any Commission Documents that is not described in or filed as required by the
Securities Act or the Exchange Act, as the case may be. Except as set forth in
SCHEDULE 5.7, each such contract, agreement and understanding is valid and
binding and is in full force and effect and enforceable in accordance with its
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally or as may be limited by equitable

                                       13
<Page>

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

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

     All such financial statements (including any related schedules and notes)
have been prepared in accordance with generally accepted accounting principles
consistently applied, except to the extent set forth in the notes to such
financial statements and except for the absence of footnotes to the Interim
Financial Statements and except that the Interim Financial Statements are
subject to normal year-end adjustments and to adjustments made in the course of
an audit that would not in the aggregate be material, throughout the periods
involved and to the extent required by such principles show all liabilities,
direct and contingent, of the Company and its Subsidiaries required to be shown
thereon in accordance with generally accepted accounting principles. The balance
sheets and the related schedules and notes fairly present the financial
condition of the Company and its consolidated Subsidiaries as at the dates
thereof and the net income and stockholders' equity statements and the related
schedules and notes fairly present the results of the operations of the Company
and its consolidated Subsidiaries for the periods indicated. Except as set forth
in SCHEDULE 5.8, the Company has incurred no material liabilities since March
31, 2002, other than those incurred in the ordinary course.

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

     5.9 ACTIONS PENDING. There is no action, suit, investigation or proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries before any court, arbitrator or administrative or
governmental body that (a) seeks to enjoin or otherwise prevent the consummation
of the sale or issuance of the Securities or (b) materially and adversely
affects, or as to which there is a reasonable possibility of an adverse decision
that would materially and adversely affect, either individually or collectively,
the assets, business, properties, prospects, operations or condition, financial
or otherwise, of the Company and its Subsidiaries, taken as a whole. Neither the
Company nor any of its Subsidiaries is in violation of any judgment, order,
writ, injunction, decree, rule or regulation of any court or governmental
department, commission, board, bureau, agency or instrumentality, the violation
of which

                                       14
<Page>

reasonably could be expected to, either individually or collectively, materially
and adversely affect the business, property, assets, prospects, operations or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole.

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

     5.11 BROKER'S OR FINDER'S COMMISSIONS. Other than the fee payable to the
Placement Agent, no broker's or finder's or placement fee or commission will be
payable with respect to the sale or the issuance of the Securities contemplated
hereby or by the Ancillary Agreements as a result of any act or omission by the
Company, and the Company will hold Purchaser harmless from any claim, demand or
liability for broker's or finder's or placement fees or commissions alleged to
have been incurred in connection with the sale or the issuance of the Securities
due to any actions or omissions by the Company or its Subsidiaries or any of
their respective directors, officers or agents.

     5.12  APPLICATION OF PROCEEDS. The net proceeds of the sale of the Series C
Preferred Stock will be used by the Company for working capital and for general
corporate purposes.

     5.13  INTELLECTUAL PROPERTY.

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

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

                                       15
<Page>

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

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

     5.15  ERISA.

     (a) SCHEDULE 5.15 sets forth each plan, agreement, arrangement or
commitment that is an employment or consulting agreement, executive or incentive
compensation plan, bonus plan, deferred compensation agreement, employee
pension, profit sharing, savings or retirement plan, employee stock option or
stock purchase plan, group life, health, or accident insurance or other employee
benefit plan, agreement, arrangement or commitment, including, without
limitation, any severance, holiday, vacation, Christmas or other bonus plans
(including, but not limited to, "employee benefit plans," as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), maintained by the Company or any of its Subsidiaries for any present
or former employees, officers or directors of the Company or any of its
Subsidiaries ("COMPANY PERSONNEL") or with respect to which the Company or any
of its Subsidiaries has liability or makes or has an obligation to make
contributions ("EMPLOYEE PLANS").

     (b) Except as to the Union Plan, the Company has provided the Purchaser
with access to (i) copies of all Employee Plans or, in the case of an unwritten
plan, a written description thereof, (ii) copies of any annual, financial or
actuarial reports and Internal Revenue Service determination letters relating to
such Employee Plans and (iii) copies of all summary plan descriptions (whether
or not required to be furnished under ERISA) and employee communications
relating to such Employee Plans that materially modify an existing summary plan
description and have been distributed to Company Personnel, in each case under
this clause (iii), existing or in effect during or within the past five years.

                                       16
<Page>

     (c) Except as set forth on SCHEDULE 5.15(c), no Employee Plan except the
Union Plan (which is excluded from this SECTION 5.15(c) representation and
warranty) entitles Company Personnel to (i) any pension benefit that is unfunded
or (ii) any pension or other benefit to be paid after termination of employment
other than required by Section 601 of ERISA or pursuant to plans intending to be
qualified under Section 401(a) of the Code and listed on the SCHEDULE 5.15(c),
and no other benefits whatsoever are payable to any Company Personnel after
termination of employment (including retiree medical and death benefits).

     (d) Each Employee Plan, except the Union Plan (which is excluded from this
SECTION 5.15(d) representation and warranty), that is an employee welfare
benefit plan under Section 3(1) of ERISA is either (i) funded through an
insurance company contract and is not a "welfare benefit fund" within the
meaning of Section 419 of the Code or (ii) unfunded.

     (e) Each Employee Plan, except the Union Plan (which is excluded from this
SECTION 5.15(e) representation and warranty) by its terms and operation is in
compliance in all material respects with all applicable laws (including, but not
limited to, ERISA, the Code and the Age Discrimination in Employment Act of
1967, as amended).

     (f) There are no actions, suits or claims pending or, to the Company's
knowledge, threatened against any Employee Plan or administrator or fiduciary of
any such Employee Plan (other than routine noncontested claims for benefits)
nor, to the Company's knowledge, does any set of circumstances exist that may
reasonably give rise to such a claim. As to each Employee Plan for which an
annual report is required to be filed by the Company under ERISA or the Code,
all such filings, including schedules, have been made on a timely basis and with
respect to the most recent report regarding each such Employee Plan liabilities
do not exceed assets, and no material adverse change has occurred with respect
to the financial materials covered thereby.

     (g) Except as set forth on SCHEDULE 5.15(g), neither the Company nor any
entity that is or was at any time treated as a single employer with the Company
under Section 414(b), (c), (m) or (o) of the Code has at any time (i)
maintained, contributed to or been required to contribute to any plan under
which more than one employer makes contributions (within the meaning of Section
4064(a) of ERISA) or any plan that is a multiemployer plan, (ii) incurred or
expects to incur any liability to the Pension Benefit Guaranty Corporation or
otherwise under Title IV of ERISA or (iii) incurred or expects to incur
liability in connection with an "accumulated funding deficiency" within the
meaning of Section 412 of the Code whether or not waived.

     (h) Each Employee Plan except the Union Plan (which is excluded from this
SECTION 5.15(h) representation and warranty) intended to be qualified under
Section 401(a) of the Code and, if applicable, Section 401(k) of the Code has
received a favorable determination letter from the Internal Revenue Service
stating that such Employee Plan is qualified under Section 401(a) and, if
applicable, Section 401(k) of the Code and the related trust is exempt from tax
under Section 501(a) and nothing has occurred since the date of such letter to
cause the letter to be no longer valid or effective.

     (i) Neither the Company nor, to the knowledge of the Company, any other
Person, including any fiduciary, has engaged in any "prohibited transaction" (as
defined in Section 4975 of the Code or Section 406 of ERISA), that could subject
any of the Employee Plans (or their trusts), the Company, or any Person who the
Company has an obligation to indemnify, to any tax

                                       17
<Page>

or penalty imposed under Section 4975 of the Code or Section 502 of ERISA. To
the knowledge of the Company, no "reportable event" (as such term is defined in
Section 4043 of ERISA) for which the notice requirement has not been waived by
the Pension Benefit Guaranty Corporation has occurred or is expected to occur
with respect to any Employee Plan and the Company will provide each Purchaser
notice of any reportable events upon learning of the same.

     (j) Except as set forth on SCHEDULE 5.15(j), the events contemplated by
this Agreement (either alone or together with any other event) will not (i)
entitle any Company Personnel to severance pay, unemployment compensation, or
other similar payments under any Employee Plan or law, (ii) accelerate the time
of payment or vesting or increase the amount of benefits due under any Employee
Plan or compensation to any Company Personnel, (iii) result in any payments
(including parachute payments) under any Employee Plan or law becoming due to
any Company Personnel or (iv) terminate or modify or give a third party a right
to terminate or modify the provisions or terms of any Employee Plan.

     (k) Except as set forth in SCHEDULE 5.15(k), neither the Company nor any of
its Subsidiaries (nor any entity that is or was at any time treated as a single
employer with the Company or any Subsidiary under Section 414(b), (c), (m) or
(o) of the Code or ERISA) has any obligation or liability (contingent or
otherwise) relating to or in connection with the Union Plan. The Union Plan is
not subject to Title IV of ERISA. Except as set forth in SCHEDULE 5.15(k), all
contributions required to be made by the Company or any Subsidiary to the Union
Plan have been made when due and, to the best of the Company's knowledge, if the
Company and/or any of its Subsidiaries were to withdraw from the Union Plan on
the Closing Date, neither the Company nor any of its Subsidiaries would incur
any liability relating to or in connection with the Union Plan.

     5.16  ENVIRONMENTAL.

     (a) Except as set forth on SCHEDULE 5.16(a), the Company and its
Subsidiaries comply, and the Company, its Subsidiaries and their respective
predecessors at all times during their existence have complied, with all
applicable Environmental Laws (as defined below).

     (b) There is not now pending or, to the knowledge of the Company or any of
its Subsidiaries, threatened, any action, claim, proceeding or investigation,
nor has the Company, its Subsidiaries, or any of their respective predecessors
received any notice, claim, demand letter or request for information at any
time, alleging that the Company, any of its Subsidiaries, or any of their
respective predecessors may be or is in violation of, or liable under, any
Environmental Law, nor does there exist any basis for any such action, claim,
proceeding or investigation.

     (c) Except as disclosed on SCHEDULE 5.16(c), there are no Hazardous
Substances (as defined below) located on any of the properties currently or
formerly owned or operated by the Company, any of its Subsidiaries or any of
their respective predecessors (including soil, groundwater and surface features
and buildings and structures thereon) (the "PROPERTIES"), and none of the
Properties contains, or has contained, any underground improvements, including,
but not limited to, treatment or storage tanks, sumps, water, gas or oil wells,
or associated piping.

     (d) The Company and its Subsidiaries do not have any contingent liability
in connection with a Release (as defined below) or threatened Release of any
Hazardous Substance at any location.

                                       18
<Page>

     (e) To the knowledge of the Company and its Subsidiaries, there are no
present or past Environmental Conditions (as defined below) in any way related
to the Company, any of its Subsidiaries, or any of their respective predecessors
that have, or may have, individually or in the aggregate, a material adverse
effect with respect to any Property or the business or condition of the Company
and its Subsidiaries, taken as a whole.

     (f) As used herein, "ENVIRONMENTAL LAW" means any federal, state, local or
foreign law, regulation, order, decree, judgment, opinion, common law or binding
equitable principle or agency requirement relating to pollution, contamination,
wastes, hazardous material or the protection of the environment, human health or
safety.

     (g) As used herein, "HAZARDOUS SUBSTANCE" means any substance that is
listed, classified under or regulated by any governmental authority pursuant to
any Environmental Law, including, without limitation, any petroleum product or
by-product, asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive material or radon.

     (h) As used herein, "RELEASE" means any release, spill, emission, leaking,
pumping, injection, deposit, discharge, dispersal, leaching or migrating into
the indoor or outdoor environment of any Hazardous Substance.

     (i) As used herein, "ENVIRONMENTAL CONDITION" means the Release or
threatened Release of any Hazardous Substance upon, under, in or about any of
the Properties, or any other circumstance involving any Property or the Company,
any of its Subsidiaries, or any of their respective predecessors that could be
expected to result in any claim, liability, costs or losses, or any restriction
on the ownership, use or transfer of any Property pursuant to any Environmental
Law.

     5.17 INSURANCE. The Company maintains or is covered by valid policies of
workers' compensation insurance, product liability insurance, and of insurance
with respect to its properties and business. The Company currently maintains in
full force insurance covering the respective risks of the Company and its
Subsidiaries of such types and in such amounts, with such deductibles and with
such insurance companies as are customary for other companies engaged in similar
lines of business. The Company currently maintains key man life insurance for
John Mitola in the amount of $5,000,000, which is and will remain in full force
and effect through December 31, 2005. SCHEDULE 5.17 lists all insurance
policies, the name of the insurer, a description of the policy, the amount of
coverage, the amount of any deductible, the amount of the premium and the
expiration date of the policy.

     5.18 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE 5.18,
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.

     5.19 EMPLOYEES; LABOR MATTERS. Except as set forth in SCHEDULE 5.19, the
Company is not a party to any labor agreement with respect to its employees with
any labor organization, group or association. The Company is not delinquent in
payments to any of the employees of the Company for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed for
it to the date hereof or amounts required to be reimbursed to such employees.
The Company is in material compliance with all applicable laws respecting

                                       19
<Page>

employment practices, terms and conditions of employment and wages and hours and
is not engaged in any unfair labor practice. Except as set forth in SCHEDULE
5.19, there is no unfair labor practice charge or complaint against the Company
pending before any Governmental Authority arising out of the Company's
activities, and the Company has no knowledge of any facts or information that
would give rise thereto. There is no labor strike or labor disturbance pending
or threatened against the Company nor, except as set forth in SCHEDULE 5.19, is
any grievance currently being asserted, and the Company has not experienced a
work stoppage or other labor difficulty. The Company has not received any
information indicating that any of its employment policies or practices is
currently being audited or investigated by any Governmental Authority. The
Company is, and at all times has been, in compliance with the requirements of
the Immigration Reform Control Act of 1986.

     5.20. CUSTOMERS, SUPPLIERS AND DISTRIBUTORS. SCHEDULE 5.20 sets forth a
listing of each customer that accounted for more than $100,000 in revenue for
the Company for the year ended December 31, 2001 (collectively, the
"CUSTOMERS"). The relationships of the Company with its Customers, suppliers,
distributors and manufacturer's representatives are good commercial working
relationships. To the knowledge of the Company, no Customer, supplier,
distributor or manufacturer's representative of the Company intends to terminate
or materially reduce its business relationship with the Company for any reason.

     5.21 INVESTOR RIGHTS AGREEMENTS. SCHEDULE 5.21 lists all agreements with
any Person in which the Company has granted registration rights with respect to
its capital stock. The Company will not, on or after the Closing Date, enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to Purchaser in the Investor Rights Agreement or otherwise
conflicts with the provisions thereof. Upon obtaining the approvals and waivers
set forth in SCHEDULE 5.21, which the Company shall obtain prior to the Closing,
the rights to be granted to Purchaser under the Investor Rights Agreement will
not in any way conflict with any other agreements to which the Company is a
party or by which it is bound.

     5.22 AGREEMENTS WITH STOCKHOLDERS. SCHEDULE 5.22 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.

     5.23 COMPANY QUALIFIES AS A "SMALLER ENTERPRISE". The Company qualifies as
a "smaller enterprise" under the Code of Federal Regulations, such that a small
business investment company is permitted to make an investment in the Company.

     5.24 COMMISSION DOCUMENTS. Except as set forth in SCHEDULE 5.24, the
Company has filed all registration statements, proxy statements, information
statements, reports and other documents required to be filed by it under the
Securities Act or the Exchange Act, and all amendments thereto (collectively,
the "COMMISSION DOCUMENTS") Each Commission Document when filed with the
Commission was true and accurate in all material respects and in compliance in
all material respects with the requirements of its respective report form and
the rules and regulations of the Commission. No Commission Document contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which made, not
misleading.

                                       20
<Page>

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

                                   ARTICLE VI
                        REPRESENTATIONS OF THE PURCHASER

     Purchaser represents and warrants as to itself only as follows:

     6.1 INVESTMENT PURPOSE. Purchaser is purchasing the Securities for
Purchaser's own account for investment only and not with a view toward or in
connection with the public sale or distribution thereof. Purchaser will not
resell the Securities or the capital stock issued upon conversion of any such
Securities (the "CONVERSION STOCK") except pursuant to sales that are exempt
from the registration requirements of the Securities Act and all applicable
state securities laws, and/or sales registered under the Securities Act and all
applicable state securities laws. Purchaser understands that Purchaser may bear
the economic risk of this investment indefinitely, unless the Securities and/or
the Conversion Stock are registered pursuant to the Securities Act and any
applicable state securities laws or an exemption from such registration is
available, and that the Company has no present intention of registering the
Securities or the Conversion Stock other than as contemplated by the Investor
Rights Agreement.

     6.2 ACCREDITED INVESTOR STATUS. Purchaser is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act. By reason of its business and financial experience,
sophistication and knowledge, Purchaser is capable of evaluating the risks and
merits of the investment made pursuant to this Agreement.

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

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

                                       21
<Page>

                                   ARTICLE VII
                                 INDEMNIFICATION

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

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

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

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

     7.2 NOTIFICATION. Each indemnified party under this ARTICLE VII shall,
promptly (and in any event within 20 days), after the receipt of notice of the
commencement of any action or other proceeding against such indemnified party in
respect of which indemnity may be sought from the Company under this ARTICLE
VII, notify the Company in writing of the commencement thereof. The failure of
any indemnified party so to notify the Company of any such action shall not
relieve the Company from any liability that it may have to such indemnified
party pursuant to this ARTICLE VII, except to the extent that such failure
causes material prejudice to the Company. In case any such action or other
proceeding shall be brought against any indemnified party and it

                                       22
<Page>

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

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

     7.4   SURVIVAL OF PROVISIONS OF ARTICLE VII. The obligations of the Company
under this ARTICLE VII shall survive indefinitely.

                                  ARTICLE VIII
                                  MISCELLANEOUS

     8.1 DIVIDEND PAYMENTS. The Company agrees that, so long as Purchaser shall
hold any Series C Preferred Stock, the Company will make any cash payments with
respect thereto pursuant to the terms of the Certificate of Designations by wire
transfer of immediately available funds for credit to such Purchaser's account
in the United States of America as such Purchaser may designate in writing,
notwithstanding any contrary provision herein or in any share of Series C
Preferred Stock with respect to the place of payment. The Company agrees to
afford the benefits of this SECTION 8.1 to any permitted transferee of any
Series C Preferred Stock purchased by any Purchaser hereunder.

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

           (a) the negotiation and execution of the Transaction Documents and
     the Certificate of Designations and the issuance of the Securities,
     including all taxes (including any intangible personal property tax,
     together in each case with interest and

                                       23
<Page>

     penalties, if any, and also including any filing fees payable to any
     governmental authority, and any income tax payable by any Purchaser in
     respect of any reimbursement for any such tax or fee) that may be payable
     in respect of the execution and delivery of the Transaction Documents or
     the issuance, delivery or acquisition (but not the holding, ownership or
     transfer) of any of the Securities issued pursuant to this Agreement or any
     Common Stock issuable upon conversion of any Series C Preferred Stock or
     upon exercise of the Common Stock Warrants;

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

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

The obligations of the Company under this SECTION 8.2 shall survive the transfer
of any Securities by Purchaser.

     8.3   RESTRICTIVE LEGENDS. The Securities shall bear a legend in
substantially the following form:

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

In addition, the certificates evidencing the Preferred Shares and the Series C
Preferred Stock Warrants shall also bear the following legend:

           THE SHARES OF COMMON STOCK ISSUABLE UPON THE [CONVERSION] [EXERCISE]
           OF THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO AN INVESTOR
           RIGHTS AGREEMENT, A STOCKHOLDERS AGREEMENT AND A TRADING AGREEMENT,
           AS EACH OF THE SAME MAY BE AMENDED FROM TIME TO TIME, COPIES OF WHICH
           ARE AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICES OF THE COMPANY.

                                       24
<Page>

     8.4 CONSENT TO AMENDMENTS. This Agreement may be amended, and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
of Purchaser to such amendment, action or omission to act. Any consideration
given to any holder to obtain his, her or its consent under this Agreement or
any Ancillary Agreement or with respect to the Series C Preferred Stock shall be
given pro rata to all holders of shares of Series C Preferred Stock whether or
not they give consent. Each holder of any shares of Series C Preferred Stock at
the time or thereafter outstanding (or of shares of Common Stock entitled to any
rights hereunder) shall be bound by any consent authorized by this SECTION 8.4,
whether or not such shares of Series C Preferred Stock shall have been marked to
indicate such consent, but any shares of Series C Preferred Stock issued
thereafter may bear a notation referring to any such consent. No course of
dealing between the Company and the holder of any shares of Series C Preferred
Stock nor any delay in exercising any rights hereunder or under any shares of
Series C Preferred Stock shall operate as a waiver of any rights of any holder
of such shares of Series C Preferred Stock. As used herein, the term "this
Agreement" and references thereto shall mean this Agreement as it may from time
to time be amended or supplemented.

     8.5 NOTICES TO SUBSEQUENT HOLDER. Except as otherwise provided herein, if
any shares of Series C Preferred Stock shall have been transferred to another
holder and that holder shall have designated in writing the address to which
communications with respect to such shares of Series C Preferred Stock shall be
mailed, all notices, certificates, requests, statements and other documents
required to be delivered to Purchaser by any provision hereof shall also be
delivered to each such holder.

     8.6 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND INDEMNITIES. All
representations, warranties, covenants and agreements contained herein or made
in writing by the Company in connection herewith shall survive the execution,
delivery and performance of this Agreement and the Ancillary Agreements,
regardless of any investigation made by the Purchaser or on the Purchaser's
behalf.

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

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

     (i)   If to the Company, to:     1280 Landmeier Road
                                      Elk Grove Village, IL 60007
                                      Fax No. 847-437-4969
                                      Attention: General Counsel.

     (ii)  If to Purchaser:  at the address set forth on SCHEDULE I.

                                       25
<Page>

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

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

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

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

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

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

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

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

                                       26
<Page>

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

COMPANY:                                             PURCHASER:

ELECTRIC CITY CORP.,                                 RICHARD KIPHART
a Delaware corporation                               an individual

By: /s/ John Mitola                                      /s/ Richard Kiphart
   ------------------------------------              ---------------------------
Name:  John Mitola
Title: Chief Executive Officer

                [SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

<Page>

                                   SCHEDULE I

<Table>
<Caption>
    PURCHASER                   NO. OF SHARES       NO. OF         NO. OF       NO. OF      TOTAL AGGREGATE
                                 OF SERIES C       SERIES C      SHARES OF      COMMON       PURCHASE PRICE
                                  PREFERRED       PREFERRED        COMMON       STOCK
                                    STOCK           STOCK          STOCK       WARRANTS
                                                   WARRANTS
-----------------------------------------------------------------------------------------------------------
<S>                                 <C>              <C>           <C>          <C>            <C>
Richard Kiphart                     200,000          50,000        30,082       281,250        $ 2,000,000
c/o William Blair & Co.
222 W. Adams Street
Chicago, IL 60606
Fax:
-----------------------------------------------------------------------------------------------------------
</Table>

<Page>

<Table>
<S>                                                                                                        <C>
ARTICLE I DEFINITIONS.......................................................................................1

ARTICLE II ISSUE, PURCHASE AND SALE OF THE SECURITIES.......................................................5
   2.1    Authorization of Issuance of Series C Preferred Stock.............................................5
   2.2    Purchase and Sale of Securities...................................................................5

ARTICLE III CONDITIONS OF CLOSING...........................................................................6
   3.1    Purchaser Conditions to Closing...................................................................6
   3.2    Company Conditions to Closing.....................................................................8

ARTICLE IV CERTAIN COVENANTS................................................................................9
   4.1    Financial Statements and Other Reports............................................................9
   4.2    Corporate Existence; Licenses and Permits; Maintenance of Properties..............................9
   4.3    Securities Exchange..............................................................................10
   4.4    Best Efforts.....................................................................................10
   4.5    Insurance........................................................................................10

ARTICLE V REPRESENTATIONS, COVENANTS AND WARRANTIES........................................................11
   5.1    Organization; Standing and Qualification of Company and its Subsidiaries; Corporate Authority....11
   5.2    Capital Stock....................................................................................12
   5.3    No Defaults......................................................................................12
   5.4    Burdensome and Conflicting Agreements and Charter Provisions.....................................12
   5.5    Title to Assets, Etc.............................................................................13
   5.6    Leases...........................................................................................13
   5.7    Contracts........................................................................................13
   5.8    Financial Statements.............................................................................14
   5.9    Actions Pending..................................................................................14
   5.10   Offering of Securities...........................................................................15
   5.11   Broker's or Finder's Commissions.................................................................15
   5.12   Application of Proceeds..........................................................................15
   5.13   Intellectual Property............................................................................15
   5.14   Taxes............................................................................................16
   5.15   ERISA............................................................................................16
   5.16   Environmental....................................................................................18
   5.17   Insurance........................................................................................19
   5.18   Transactions with Affiliates.....................................................................19
   5.19   Employees; Labor Matters.........................................................................19
   5.20   Customers, Suppliers and Distributors............................................................20
   5.21   Investor Rights Agreements.......................................................................20
   5.22   Agreements with Stockholders.....................................................................20
   5.23   Company Qualifies as a "Smaller Enterprise"......................................................20
   5.24   Commission Documents.............................................................................20
   5.25   Disclosure.......................................................................................20

ARTICLE VI REPRESENTATIONS OF THE PURCHASERS...............................................................21
   6.1    Investment Purpose...............................................................................21
   6.2    Accredited Investor Status.......................................................................21
   6.3    Authorization;  Enforcement......................................................................21
   6.4    Broker's or Finder's Commissions.................................................................21

ARTICLE VII INDEMNIFICATION................................................................................21
   7.1    Indemnification by Company.......................................................................21

<Page>

<S>                                                                                                        <C>
   7.2    Notification.....................................................................................22
   7.3    Investor Rights Agreement........................................................................23
   7.4    Survivial of Provisions of Article VII...........................................................23

ARTICLE VIII MISCELLANEOUS.................................................................................23
   8.1    Dividend Payments................................................................................23
   8.2    Expenses.........................................................................................23
   8.3    Restrictive Legends..............................................................................24
   8.4    Consent to Amendments............................................................................24
   8.5    Notices to Subsequent Holder.....................................................................25
   8.6    Survival of Representations, Warranties and Indemnities..........................................25
   8.7    Successors and Assigns...........................................................................25
   8.8    Notices..........................................................................................25
   8.9    Accounting Terms.................................................................................25
   8.10   Governing Law....................................................................................26
   8.11   Headings; Table of Contents......................................................................26
   8.12   Counterparts.....................................................................................26
   8.13   Non-Business Days................................................................................26
   8.14   Further Assurances...............................................................................26
   8.15   Integration......................................................................................26
</Table><Page>

                                                                   Exhibit 4.18

                           CERTIFICATE OF DESIGNATIONS

                    CERTIFICATE OF DESIGNATIONS, PREFERENCES
                    AND RELATIVE, PARTICIPATING, OPTIONAL AND
                     OTHER SPECIAL RIGHTS OF PREFERRED STOCK
                         AND QUALIFICATIONS, LIMITATIONS
                            AND RESTRICTIONS THEREOF

                                       OF

                              SERIES C CONVERTIBLE
                                 PREFERRED STOCK

                                       OF

                               ELECTRIC CITY CORP.

                         PURSUANT TO SECTION 151 OF THE
                GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

               Electric City Corp., a Delaware corporation (the "CORPORATION"),
certifies that pursuant to the authority contained in Article 4 of its Amended
and Restated Certificate of Incorporation (the "CERTIFICATE OF INCORPORATION")
and in accordance with the provisions of Section 151 of the General Corporation
Law of the State of Delaware, the Board of Directors of the Corporation at a
meeting called and held on May 22, 2002 adopted the following resolution, which
remains in full force and effect on the date hereof:

               RESOLVED, that there is hereby established a series of authorized
               preferred stock having a par value of $.01 per share, which
               series shall be designated as "SERIES C CONVERTIBLE PREFERRED
               STOCK," shall consist of [ ] shares and shall have the following
               voting powers, preferences and relative, participating, optional
               and other special rights, and qualifications, limitations and
               restrictions thereof as follows:

               1.   DEFINITIONS. The following terms when used herein shall,
except where the context otherwise requires, have the following meanings, such
meanings to be equally applicable to the singular and plural forms thereof:

               "BOARD" means Board of Directors of the Corporation.

                                        1
<Page>

               "BUSINESS DAY" means a day other than a Saturday or Sunday, or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.

               "BY-LAWS" means the by-laws of the Corporation.

               "CHANGE OF CONTROL TRANSACTION" means a transaction which results
in the occurrence of any of the following events: (i) any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934 (the "Exchange Act")) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person
shall be deemed to have "beneficial ownership" of all securities that such
person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than 40% of
the total outstanding voting stock of the Corporation; (ii) the Corporation
consolidates with or merges with or into another person or conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to any
person, or any person consolidates with or merges with or into the Corporation,
in any such event, pursuant to a transaction in which the outstanding voting
stock of the Corporation is converted into or exchanged for cash, securities or
other property; (iii) any person consolidates with or merges with or into a
subsidiary of the Corporation and such consolidation or merger results in the
transfer of fifty percent (50%) or more of the outstanding voting power of the
Corporation or results in the holders of the outstanding voting securities of
this Corporation immediately prior to such transaction holding less than a
majority of the voting securities of this Corporation or the surviving entity
immediately thereafter; or (iv) the Corporation is liquidated or dissolved or a
special resolution is passed by the stockholders of the Corporation approving
the plan of liquidation or dissolution.

               "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 security exchange or automated quotation services on
which the Common Stock is then listed for trading).

               "COMMON STOCK" means the Corporation's authorized common stock,
par value $.0001 per share.

               "CONVERSION DATE" shall have the meaning set forth in SECTION
7(c) hereof.

               "CONVERSION PRICE" shall have the meaning set forth in SECTION
7(a) hereof.

               "CONVERSION SHARES" shall have the meaning set forth in SECTION
7(a) hereof.

               "CONVERTIBLE SECURITIES" shall have the meaning set forth in
SECTION 7(e)(i) hereof.

               "DIVIDEND PAYMENT DATE" shall have the meaning set forth in
SECTION 3(a) hereof.

               "DIVIDEND RATE" shall have the meaning set forth in SECTION 3(a)
hereof.

               "DIVIDEND RECORD DATE" shall have the meaning set forth in
SECTION 3(a) hereof.

                                        2
<Page>

               "JUNIOR STOCK" shall have the meaning set forth in SECTION 3(b)
hereof.

               "LIQUIDATION AMOUNT" means the higher of (i) 200% of the Stated
Value plus any accrued but unpaid dividends, and (ii) the Market Price of the
number of shares of Common Stock into which one (1) share of Series C Preferred
Stock is convertible.

               "MARKET PRICE" shall have the meaning set forth in SECTION
7(e)(vi) hereof.

               "NOTICE OF REDEMPTION" shall have the meaning set forth in
SECTION 5(c) hereof.

               "PARITY STOCK" means the Company's Series A Preferred Stock and
any class or series of stock of the Corporation authorized after the date of
issuance of the Series C Preferred Stock in accordance with SECTION 6(e) hereof
ranking on a parity with the Series C Preferred Stock in respect of the right to
receive dividends or the right to participate in any distribution upon
liquidation.

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

               "PURCHASE RIGHTS" shall have the meaning set forth in SECTION
7(f)(ii) hereof.

               "REDEMPTION DATE" shall have the meaning set forth in SECTION
5(c) hereof.

               "REDEMPTION PRICE" shall have the meaning set forth in Section
5(b) hereof.

               "SECURITIES PURCHASE AGREEMENT" means that certain Securities
Purchase Agreement dated as of May __, 2002 by and among the Corporation and
certain investors party thereto, as the same may be amended from time to time.

               "SENIOR STOCK" means any class or series of stock of the
Corporation authorized after the date of issuance of the Series C Preferred
Stock in accordance with SECTION 6(e) hereof ranking senior to the Series C
Preferred Stock in respect of the right to receive dividends or the right to
participate in any distribution upon liquidation.

               "SERIES A PREFERRED STOCK" means the Corporation's Series A
Convertible Preferred Stock, par value $0.01 per share.

               "SERIES A CERTIFICATE OF DESIGNATIONS" means the Certificate of
Designations, Preferences And Relative, Participating, Optional And Other
Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof of the Corporation filed with the Secretary of State of
Delaware on or about September 7, 2001.

               "SERIES C PREFERRED STOCK" shall have the meaning set forth in
SECTION 2 hereof.

               "SERIES C PREFERRED STOCK ISSUE DATE" means the date of the
initial Closing (as defined therein) under the Securities Purchase Agreement.

               "STATED VALUE" shall have the meaning set forth in SECTION 2
hereof.

                                        3
<Page>

               2. DESIGNATION AND AMOUNT. The designation of the series of the
Preferred Stock shall be "Series C Convertible Preferred Stock," par value $.01
per share (the "SERIES C PREFERRED STOCK"). The number of shares of Series C
Preferred Stock shall be [ ]. The Series C Preferred Stock shall be assigned a
stated value of $10.00 per share (as adjusted for stock splits, stock
combinations, recapitalizations and the like, the "STATED VALUE").

               3.   DIVIDENDS.

                    (a) RATE, ETC. The holders of shares of Series C Preferred
Stock shall be entitled to receive, when and if declared by the Board of
Directors out of funds legally available therefor, cumulative dividends from the
date of issue thereof, on the Stated Value plus any accrued but unpaid
dividends, at an annual rate equal to ten percent (10%) (the "DIVIDEND RATE")
through and including the first Dividend Payment Date following the third
anniversary of the Series C Preferred Stock Issue Date, after which the Dividend
Rate shall increase by one-half of one percent (0.5%) every six months up to a
maximum rate of fifteen percent (15%) per annum. Dividends hereunder shall be
calculated on the basis of a 360-day year consisting of twelve 30-day months,
accruing and payable quarterly, in arrears, on the last day in June, September,
December and March of each year (each a "DIVIDEND PAYMENT DATE"), commencing on
May __, 2002 until such time as the Series C Preferred Stock is retired in full.
If any Dividend Payment Date occurs on a day that is not a Business Day, any
accrued dividends otherwise payable on such Dividend Payment Date shall be paid
on the next succeeding Business Day with the same effect as though made on such
Dividend Payment Date. Through and including the first Dividend Payment Date
following the third anniversary of the Series C Preferred Stock Issue Date,
dividends on the Series C Preferred Stock may be paid in cash or additional
shares of Series C Preferred Stock at the sole discretion of the Board. The cash
equivalent of a share of Series C Preferred Stock shall be the Stated Value.
After the first Dividend Payment Date following the third anniversary of the
Series C Preferred Stock Issue Date, dividends on the Series C Preferred Stock
shall be paid by the Corporation in cash only. Dividends shall accrue and be
cumulative with respect to each share of Series C Preferred Stock from the date
of original issuance whether or not earned or declared. Except as otherwise
required by law, the "DIVIDEND RECORD DATE" with respect to the next succeeding
Dividend Payment Date shall be the date ten (10) Business Days prior to such
Dividend Payment Date. Upon conversion of any shares of Series C Preferred
Stock, dividends shall be paid as provided in SECTION 7 hereof.

                    (b) RANK, ETC.

                    Unless full dividends, if applicable, on all outstanding
shares of Series C Preferred Stock that have previously become due and payable,
have been paid or are contemporaneously declared and paid (or declared and a sum
sufficient for the payment thereof is set apart for such payment), the
Corporation shall not (i) declare or pay any dividend on (A) the Series C
Preferred Stock, except if such dividend is allocated pro rata on a
share-by-share basis among all shares of Series C Preferred Stock at that time
outstanding, (B) any other class of Parity Stock, except if such dividend is
allocated pro rata on a share-by-share basis among all shares of Series C
Preferred Stock and any other class of Parity Stock at that time outstanding
taken together as a class, (C) the Common Stock or (D) on any other class or
series of stock ranking junior to the Series C Preferred Stock as to dividends
or upon liquidation (the Common

                                        4
<Page>

Stock and any such junior class or series being the "JUNIOR STOCK") or make any
payment on account of, or set apart money for, a sinking or other analogous fund
for the purchase, redemption or other retirement of, any Parity Stock or Junior
Stock or make any distribution in respect thereof, either directly or indirectly
and whether in cash or property or in obligations or shares of the Corporation
or (ii) purchase or redeem any of the shares of Series C Preferred Stock, unless
such purchase or redemption is pursuant to SECTION 5 or SECTION 6(e)(i)(D), or
purchase or redeem any shares of Parity Stock or Junior Stock then outstanding,
unless such purchase or redemption is approved in accordance with SECTION 6(e)
hereof. If any dividend is paid on the Common Stock, the holders of shares of
Series C Preferred Stock shall be entitled to receive, in addition to dividends
as provided in SECTION 3(a) hereof, additional dividends to the extent necessary
so that the aggregate dividends paid on Series C Preferred Stock from the issue
date thereof shall not be less than the aggregate dividends paid on Common Stock
during the corresponding period.

               4. LIQUIDATION.

                    (a) PREFERENCE UPON LIQUIDATION, DISSOLUTION OR WINDING UP.
In the event of any liquidation, dissolution or winding up of the affairs of the
Corporation (any or all of such events, a "LIQUIDATION"), whether voluntary or
involuntary, subject to the prior preferences and other rights of any Senior
Stock, if any, as to liquidation preferences, the holders of shares of Series C
Preferred Stock then outstanding shall be entitled first as if members of a
single class of securities with the holders of any Parity Stock, if any, to be
paid out of the assets of the Corporation, before any payment shall be made to
the holders of the Junior Stock, the Liquidation Amount per outstanding share.
Except as provided in this SECTION 4(a), holders of Series C Preferred Stock
shall not be entitled to any distribution in the event of a liquidation.

                    (b) INSUFFICIENT ASSETS. If, upon any liquidation pursuant
to SECTION 4(a), the assets of the Corporation are insufficient to pay the
holders of shares of the Series C Preferred Stock and any Parity Stock, if any,
then outstanding the full amount to which they shall be entitled, such assets
shall be distributed to each holder of the Series C Preferred Stock and Parity
Stock, if any, pro-rata based on the number of shares of Series C Preferred
Stock and Parity Stock, if any, held by each.

                    (c) RIGHTS OF OTHER HOLDERS. In the event of any liquidation
pursuant to SECTION 4(a), after payment shall have been made to the holders of
the Series C Preferred Stock and Parity Stock, if any, of all preferential
amounts to which they shall be entitled, the holders of shares of Junior Stock
shall receive such amounts as to which they are entitled by the terms thereof.

               5. REDEMPTION.

                    (a)     MANDATORY REDEMPTION. The Series C Preferred Stock
shall not be subject to mandatory redemption by the Corporation.

                    (b)     OPTIONAL REDEMPTION. Through and including the third
anniversary of the Series C Preferred Stock Issue Date, the shares of Series C
Preferred Stock may not be redeemed by the Corporation. At any time after the
third anniversary of the Series C

                                        5
<Page>

Preferred Stock Issue Date, all, but not less than all, of the outstanding
shares of Series C Preferred Stock may be redeemed, at the option of the
Corporation, at a price per share equal to and in the form of (i) cash in an
amount equal to the Stated Value plus any accrued but unpaid dividends, plus
(ii) that number of fully paid and nonassessable shares of Common Stock having a
Market Price equal to seventy percent (70%) of the excess, if any, of (x) the
Market Price on the day immediately preceding the Redemption Date of the number
of shares of Common Stock into which a share of Series C Preferred Stock is then
convertible over (y) the Stated Value (such cash and shares, the "REDEMPTION
PRICE") if (A) the Closing Price exceeds $7.50 per share (as adjusted for stock
splits, stock combinations, recapitalizations and the like) for at least the
twenty (20) consecutive trading days immediately preceding the date the
Corporation sends a Notice of Redemption to all holders of record of the Series
C Preferred Stock and (B) the average daily trading volume for such twenty (20)
trading day period (as adjusted to exclude the highest and lowest volume trading
days during such period) exceeds 500,000 shares.

                    (c) MECHANICS OF REDEMPTION. A notice of redemption ("NOTICE
OF REDEMPTION") shall be sent by or on behalf of the Corporation not less than
fifteen (15) Business Days nor more than thirty (30) days prior to the date
specified for redemption in such notice (the "REDEMPTION DATE"), by first class
mail, postage prepaid, to all holders of record of the Series C Preferred Stock
at their last addresses as they shall appear on the books of the Corporation;
PROVIDED, HOWEVER, that no failure to give such notice or any defect therein or
in the mailing thereof shall affect the validity of the proceedings for the
redemption of any shares of Series C Preferred Stock except as to the holder to
whom the Corporation has failed to give notice or except as to the holder to
whom notice was defective. In addition to any information required by law or by
the applicable rules of any exchange upon which the Series C Preferred Stock or
the Common Stock may be listed or admitted to trading, such notice shall state:
(i) that such redemption is being made pursuant to the optional redemption
provisions hereof; (ii) the Redemption Date; (iii) a description of the formula
for calculating the Redemption Price and the estimated amount of the Redemption
Price by component as of the date of the Notice of Redemption; (iv) that all the
outstanding shares of Series C Preferred Stock are to be redeemed; (v) the place
or places where certificates for such shares are to be surrendered for payment
of the Redemption Price; and (vi) that dividends on the shares of Series C
Preferred Stock will cease to accumulate on the Redemption Date. Upon the
mailing of any such Notice of Redemption, the Corporation shall become obligated
to redeem at the time of redemption specified therein all shares of Series C
Preferred Stock.

                    (d) If a Notice of Redemption has been mailed in accordance
with SECTION 5(c) above and if all funds and shares of Common Stock necessary
for such redemption shall have been set aside by the Corporation on or before
the Redemption Date, separate and apart from its other funds in trust for the
benefit of the holders of the outstanding shares of Series C Preferred Stock, so
as to be, and to continue to be available therefor, then dividends on the shares
of the Series C Preferred Stock so called for redemption shall cease to accrue
or accumulate on the Redemption Date, and such shares shall no longer be deemed
to be outstanding and shall not have the status of shares of Series C Preferred
Stock on the Redemption Date, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the Redemption Price) shall cease on the Redemption Date. Upon
surrender, in accordance with such Notice of Redemption, of the certificates for
any shares of Series C Preferred Stock so redeemed (properly endorsed or
assigned for transfer, if the

                                        6
<Page>

Corporation shall so require and the Notice shall so state), such shares of
Series C Preferred Stock shall be redeemed by the Corporation at the Redemption
Price.

                    (e) OPTION TO CONVERT. Notwithstanding the delivery by the
Corporation of a Notice of Redemption, each holder of Series C Preferred Stock
may convert all or any portion of his, her or its shares of Series C Preferred
Stock into shares of Common Stock in accordance with SECTION 7(a) and SECTION
7(c) hereof until the close of business on the day prior to the Redemption Date.

               6.   VOTING RIGHTS.

                    (a) GENERAL. Except as to the election of directors and as
to any special approvals required under Section 6(b), as to which Section 6(b)
and (c) shall apply to the exclusion of any voting rights under this Section
6(a), the holder of record of each share of Series C Preferred Stock shall have
the right to one vote for each share of Common Stock into which such share of
Series C Preferred Stock could then be converted, and with respect to such vote,
such holder of record shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be entitled
to notice of any stockholders' meeting in accordance with the bylaws of the
Corporation, and shall be entitled to vote together with the holders of Common
Stock as a single class, with respect to any question upon which holders of
record of Common Stock have the right to vote, except as otherwise required by
applicable law. Fractional votes shall not, however, be permitted and any
fractional voting rights available on an as-converted basis (after aggregating
all shares into which shares of Series C Preferred Stock held by each holder of
record could be converted) shall be rounded to the nearest whole number (with
one-half being rounded upward).

                    (b)     SPECIAL APPROVAL RIGHTS.

                    (i) For so long as any shares of Series C Preferred Stock
remain issued and outstanding, the Corporation shall not, without the
affirmative written consent or approval of the holders of record representing
75% or more of the aggregate number of shares of Series A Preferred Stock and
Series C Preferred Stock then outstanding, voting as a single class to the
exclusion of all other classes of the Corporation's capital stock (such consent
or approval to be given by written consent in lieu of a meeting if allowable
under the Corporation's Certificate of Incorporation or by vote at a meeting
called for such purpose for which notice shall have been given to the holders of
the Series A Preferred Stock and the holders of the Series C Preferred Stock):

                    (1)     enter into any agreement that would restrict the
     Corporation's ability to perform under the Securities Purchase Agreement;

                    (2) amend its Certificate of Incorporation (including this
     resolution) or Bylaws in any way that could adversely affect, alter or
     change the rights, powers or preferences of the Series C Preferred Stock;

                    (3)     engage in any transaction that would impair or
     reduce the rights, powers or preferences of the Series C Preferred Stock as
     a class; or

                                        7
<Page>

                    (4) complete any Change of Control Transaction (PROVIDED
     that if less than 400,000 shares of the Series C Preferred Stock are then
     outstanding (as adjusted for stock splits, stock combinations,
     recapitalizations and the like) and the then holders of Series C Preferred
     Stock refused to consent to such Change of Control Transaction pursuant to
     this SECTION 6(b)(i)(B), the Corporation may, at its option, redeem all,
     but not less than all, of such Series C Preferred Stock in connection with
     the completion of such Change of Control Transaction at a redemption price
     per share equal to the Liquidation Amount, in accordance with the
     procedures set forth in SECTIONS 5(c)-(e) above; but PROVIDED FURTHER, that
     any such redemption shall be made subject to, and expressly conditioned
     upon, the consummation of the proposed Change of Control Transaction.

                    (ii) For so long as at least 800,000 shares in the aggregate
of Series A Preferred Stock and Series C Preferred Stock remain issued and
outstanding (as adjusted for stock splits, stock combinations, recapitalizations
and the like), the Corporation shall not, without the affirmative written
consent or approval of the holders of record of shares representing 66-2/3% of
the aggregate number of shares of Series A Preferred Stock and Series C
Preferred Stock then outstanding, voting as a single class to the exclusion of
all other classes of the Corporation's capital stock (such consent or approval
to be given by written consent in lieu of a meeting if allowable under the
Corporation's Certificate of Incorporation or by vote at a meeting called for
such purpose for which notice shall have been given to the holders of the Series
A Preferred Stock and to the holders of the Series C Preferred Stock):

                    (A) authorize or issue any Senior Stock or Parity Stock or
     any securities convertible, exercisable or exchangeable into such
     securities, other than:

                            (1)    Series A Preferred Stock issued upon exercise
          of warrants outstanding on May 31, 2002;

                            (2) Series A Preferred Stock issued as payment in
          kind of any accrued but unpaid dividends on the Series A Preferred
          Stock;

                            (3) Series C Preferred Stock issued upon exercise of
          the Series C Preferred Stock Warrants issued pursuant to the
          Securities Purchase Agreement; or

                            (4) Series C Preferred Stock issued as payment in
          kind of any accrued but unpaid dividends on the Series C Preferred
          Stock;

                    (B) authorize or issue any options, rights or warrants to
     purchase capital stock of the Corporation or enter into any agreement or
     amendment with respect to any outstanding options, rights or warrants to
     purchase capital stock of the Corporation that reduces or that has the
     effect of reducing the per share exercise price for any such options,
     rights or warrants or by canceling existing options, rights or warrants in
     connection with the grant of a new option, right or warrant;

                    (C) authorize or issue any debt securities of the
     Corporation or any of its subsidiaries, other than debt under the
     Corporation's existing revolving lines of credit in effect as of July 31,
     2001 or the replacement thereof on substantially similar terms, and

                                        8
<Page>

     any additional debt up to $1,000,000 in the aggregate issued or incurred in
     the ordinary course of business (excluding trade payables incurred in the
     ordinary course of business);

                    (D)     purchase, redeem, or otherwise acquire any of the
     Corporation's capital stock, other than (x) the redemption of the Series C
     Preferred Stock pursuant to SECTION 5 or SECTION 6(b)(i)(B) hereof, or (y)
     the redemption of the Series A Preferred Stock pursuant to section 5 or
     section 6(e)(i)(D) of the Series A Certificate of Designations;

                    (E)     enter into an acquisition, sale, merger, joint
     venture, consolidation or reorganization involving the Corporation or any
     of its subsidiaries;

                    (F)     sell or lease assets of the Corporation or any of
     its subsidiaries, except in the ordinary course of business;

                    (G)     declare or pay any cash dividends or make any
     distributions on any of its capital stock, other than on the Series A
     Preferred Stock and the Series C Preferred Stock;

                    (H)     authorize the payment or pay to any individual
     employee of the Corporation of cash compensation in excess of $500,000 per
     annum; or

                    (I)     enter into any transaction (or series of
     transactions), including loans, with any employee, officer or director of
     the Corporation or to or with his, her or its affiliates or family members
     (other than with respect to payment of compensation to actual full-time
     employees in the ordinary course of business) involving $50,000 or more per
     year individually or $250,000 or more per year in the aggregate.

                    (iii) For so long as at least 1,200,000 shares in the
aggregate of Series A Preferred Stock and Series C Preferred Stock remain issued
and outstanding (as adjusted for stock splits, stock combinations,
recapitalizations and the like), the Corporation shall not, without the
affirmative written consent or approval of the holders representing 66-2/3% of
the aggregate number of shares of Series A Preferred Stock and Series C
Preferred Stock then outstanding, voting as a single class to the exclusion of
all other classes of the Corporation's capital stock (such consent or approval
to be given by written consent in lieu of a meeting if allowable under the
Corporation's Certificate of Incorporation or by vote at a meeting called for
such purpose for which notice shall have been given to the holders of the Series
A Preferred Stock and the holders of the Series C Preferred Stock):

                    (A)     terminate or newly appoint the chief executive
     officer or president of the Corporation;

                    (B)     approve any annual capital expense budget if such
     budget provides for annual capital expenditures by the Corporation and its
     subsidiaries in excess of $1,000,000 in the aggregate in any year; or

                                        9
<Page>

                    (C)     approve the incurrence of any single capital
     expenditure (or series of related capital expenditures) in excess of
     $500,000; PROVIDED, HOWEVER, the Corporation may make any reasonable
     emergency capital expenditure that the Board of Directors determines is
     necessary to maintain the operations of the Corporation as a result of a
     catastrophic event.

Notwithstanding any other provision in this resolution, (I) upon the consent or
approval of the holders of record of the required numbers of shares of Series C
Preferred Stock (or, where applicable holders of Series C Preferred Stock and
holders of Series A Preferred Stock), with respect to SECTION 6(b)(i), SECTION
6(b)(ii) and SECTION 6(b)(iii), and (II) with such other votes or consents as
may be required by Delaware law, the rules and regulations of the Securities and
Exchange Commission, the regulations of the American Stock Exchange or other
securities exchange applicable to the Corporation or pursuant to the
Corporation's Certificate of Incorporation, the Corporation may take any such
action referenced in this SECTION 6(b).

                    (c) VIOLATION OF SPECIAL APPROVAL RIGHTS. If the Corporation
takes any action without first obtaining the requisite approval of the holders
of record of the Series C Preferred Stock (or, where applicable holders of
Series C Preferred Stock and holders of Series A Preferred Stock), pursuant to
any of the special approval rights set forth in SECTION 6(b) (each, an "EVENT OF
DEFAULT") it shall provide notice of such violation to all holders of Series C
Preferred Stock. Any holder of Series C Preferred Stock may send written notice
of any Event of Default, whether or not the Corporation gave notice pursuant to
the preceding sentence, to the Secretary of the Corporation and demand that such
Event of Default be cured within ten (10) days of the Corporation's receipt of
such notice (or, solely in the case of the first such Event of Default, within
thirty (30) days of the Corporation's receipt of such notice). If the
Corporation does not cure such Event of Default within such ten-day or
thirty-day period, as applicable, by obtaining the required consent of holders
of the Series C Preferred Stock, then, in addition to any rights and remedies
which may be available in equity or at law to the holders of the Series C
Preferred Stock, (i) provided that the holders of the Series A Preferred Stock
are not exercising their rights under the Series A Certificate of Designations
to take control of the Corporation's board of directors, the holders of record
of the shares of Series C Preferred Stock then outstanding shall be entitled to
vote, as a single class to the exclusion of all other classes of the
Corporation's capital stock (other than the rights of the Series A Preferred
Stock) to elect that number of additional directors of the Board which shall
constitute a majority of the total number of directors of the Corporation's
Board of Directors, and (ii) in connection therewith, the authorized number of
directors of the Corporation's Board of Directors shall be immediately and
automatically increased by such number of additional directors. The term of
office of all directors so elected pursuant to this Section 6(c) shall terminate
immediately (x) upon any ex(x) upon any exercise of similar rights by the
holders of the Series A Preferred Stock, and/or (b) when less than 20,000 shares
of Series C Preferred Stock remain issued and outstanding (as adjusted for stock
splits, stock combinations, recapitalizations and the like). The rights granted
pursuant to this SECTION 6(c) may be exercised by written consent of the holders
of Series C Preferred Stock, at a special meeting of the holders of Series C
Preferred Stock, or at any annual meeting of stockholders held for the purpose
of electing directors. If any director elected by the holders of the Series C
Preferred Stock pursuant to this SECTION 6(c) shall cease to serve as a director
before his or her term shall have expired, any such vacancy shall be filled by
the holders of the Series C Preferred Stock. Any director elected by the holders
of the Series C Preferred

                                       10
<Page>

Stock pursuant to this SECTION 6(c) may be removed during such director's term
of office by the holders of the Series C Preferred Stock.

               7.   CONVERSION RIGHTS.

                    (a) OPTIONAL CONVERSION OF SERIES C PREFERRED STOCK. The
holder of any shares of Series C Preferred Stock shall have the right, at such
holder's option, at any time or from time to time after sixty (60) days from the
Series C Preferred Stock Issue Date to convert any or all of such holder's
shares of Series C Preferred Stock into such number of fully paid and
nonassessable shares of Common Stock (the "CONVERSION SHARES") as determined for
each share of Series C Preferred Stock by dividing the Stated Value by the
"CONVERSION PRICE" in effect at the time of such conversion. The initial
"CONVERSION PRICE" shall be $1.00 (One Dollar). The Conversion Shares and the
Conversion Price are subject to certain adjustments as set forth herein, and the
terms Conversion Shares and Conversion Price as used herein shall as of any time
be deemed to include all such adjustments to be given effect as of such time in
accordance with the terms hereof; PROVIDED, that under no circumstances shall
the Conversion Price be reduced to a level that is less than the par value of
the Common Stock.

                    Upon the exercise of the option of the holder of any shares
of Series C Preferred Stock to convert Series C Preferred Stock into Common
Stock, the holder of such shares of Series C Preferred Stock to be converted
shall surrender the certificates representing the shares of Series C Preferred
Stock so to be converted in the manner provided in SECTION 7(c) hereof.
Immediately following such conversion, the rights of the holders of converted
Series C Preferred Stock (other than the right to receive dividends accrued to
the date of such conversion) shall cease and the persons entitled to receive the
Common Stock upon the conversion of Series C Preferred Stock shall be treated
for all purposes (other than the right to receive dividends accrued to the date
of such conversion) as having become the owners of such Common Stock.

                    (b) AUTOMATIC CONVERSION. Each share of Series C Preferred
Stock shall be automatically converted into such number of fully paid and
nonassessable shares of Common Stock as determined by dividing the Stated Value
by the Conversion Price in effect at the time of such conversion: (i) at such
time as the Closing Price exceeds $12.00 per share (as adjusted appropriately
for stock splits, stock combinations, recapitalizations and the like) for twenty
(20) consecutive trading days and the average daily trading volume for such
twenty (20) trading day period (as adjusted to exclude the highest and lowest
volume trading days during such period) exceeds 500,000 shares; or (ii) in the
event of the consummation of a firmly underwritten primary public offering of
Common Stock by the Corporation that results in aggregate gross proceeds of not
less than $35 million, at a price per share of not less than $5.00 (as adjusted
appropriately for stock splits, stock combinations, recapitalizations and the
like). All accrued but unpaid dividends shall be payable immediately prior to
conversion, either in cash or, at the option of the Corporation if such
conversion occurs prior to the third anniversary of the Series C Preferred Stock
Issue Date, in additional shares of Series C Preferred Stock.

                    (c) DELIVERY OF STOCK CERTIFICATES. The holder of any shares
of Series C Preferred Stock may exercise the optional conversion right pursuant
to SECTION 7(a) by delivering to the Corporation during regular business hours
the certificate or certificates for the shares to be converted, duly endorsed or
assigned either in blank or to the Corporation (if

                                       11
<Page>

required by it), accompanied by written notice stating that such holder elects
to convert such shares and shall provide a certificate to the Corporation as to
the date of such conversion. Upon the occurrence of an automatic conversion
pursuant to SECTION 7(b), the Corporation shall deliver notice to each holder of
Series C Preferred Stock and each holder of any shares of Series C Preferred
Stock shall deliver to the Corporation at the office of the Corporation the
certificate or certificates for all shares of Series C Preferred Stock then held
by such holder, duly endorsed or assigned either in blank or to the Corporation
(if requested by it). Conversion shall be deemed to have been effected (i) in
the case of an optional conversion, on the date when the aforesaid delivery of
stock certificates accompanied by written notice of conversion is made if such
day is a Business Day and otherwise on the Business Day following the date of
the aforesaid delivery, and (ii) in the case of an automatic conversion pursuant
to SECTION 7(b), upon the date of the event triggering the automatic conversion.
In each case, such date is referred to herein as the "CONVERSION DATE." As
promptly as practicable thereafter, the Corporation, through its transfer agent,
shall issue and deliver to or upon the written order of such holder, to the
place designated by such holder, a certificate or certificates for the number of
full shares of Common Stock to which such holder is entitled and a check or cash
in respect of any fractional interest in a share of Common Stock, as provided
below; PROVIDED, HOWEVER, that in the case of a conversion in connection with
liquidation, no such certificates need be issued. The person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become the stockholder of record in respect of such Common Stock on the
applicable Conversion Date unless the transfer books of the Corporation are
closed on that date, in which event such holder shall be deemed to have become
the stockholder of record in respect of such Common Stock on the next succeeding
date on which the transfer books are open, but the Conversion Price shall be
that in effect on the Conversion Date. Upon conversion of only a portion of the
number of shares covered by a stock certificate representing shares of Series C
Preferred Stock surrendered for conversion, the Corporation shall issue and
deliver to or upon the written order of the holder of the stock certificate so
surrendered for conversion, at the expense of the Corporation, a new stock
certificate covering the number of shares of Series C Preferred Stock
representing the unconverted portion of the certificate so surrendered. The
Corporation shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of Common Stock or the
reissuance of the Series C Preferred Stock in a name other than that in which
the shares of Series C Preferred Stock so converted were registered, and no such
issuance or delivery shall be made unless and until the person requesting such
issuance has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax, if any, has
been paid.

                    (d)     NO FRACTIONAL SHARES OF COMMON STOCK.

                            (i)    No fractional shares of Common Stock shall be
issued upon conversion of shares of Series C Preferred Stock and in lieu
thereof, the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to the then current Market Price (as
defined in SECTION 7(e)(vi) below) of a share of Common Stock multiplied by such
fractional interest. The holders of fractional interests shall not be entitled
to any rights as stockholders of the Corporation in respect of such fractional
interests. In determining the number of shares of Common Stock and the payment,
if any, in lieu of fractional shares that a holder of Series C Preferred Stock
shall receive, the total number of shares of Series C Preferred Stock
surrendered for conversion by such holder shall be aggregated.

                                       12
<Page>

                            (ii)   On the first Dividend Payment Date on which
accrued dividends are paid in full to holders of Series C Preferred Stock
following the optional conversion pursuant to SECTION 7(a) of all or any portion
of the Series C Preferred Stock, the Corporation shall pay any dividends accrued
on such converted Series C Preferred Stock to the date of such conversion.
Accrued dividends with respect to all shares converted pursuant to SECTION 7(b)
hereof shall be paid in full on the Conversion Date out of funds legally
available therefor or, at the option of the Corporation if such conversion
occurs prior to the third anniversary of the Series C Preferred Stock Issue
Date, in additional shares of Series C Preferred Stock.

                    (e) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF COMMON
STOCK. If and whenever after the Series C Preferred Stock Issue Date the
Corporation shall issue or sell any shares of its Common Stock for a price per
share less than, under certain circumstances (including, without limitation,
those circumstances described in paragraphs (i) through (vii) below), the
Conversion Price in effect immediately prior to the time of such issue or sale,
then immediately upon such issue or sale, the Conversion Price then in effect
shall be reduced to such lower price per share.

                    For the purposes of this SECTION 7(e), the following
paragraphs (i) through (vii) shall also be applicable:

                            (i)    ISSUANCE OF RIGHTS OR OPTIONS. In case at any
time after the date hereof the Corporation shall in any manner grant (whether
directly or by assumption in a merger or otherwise, except in the circumstances
described in SECTION 7(f) below) any rights to subscribe for or to purchase, or
any options or warrants for the purchase of, Common Stock or any stock, notes or
securities convertible into or exchangeable for Common Stock (such convertible
or exchangeable stock, notes or securities being herein called "CONVERTIBLE
SECURITIES"), whether or not such rights, options or warrants or the right to
convert or exchange any such Convertible Securities are immediately exercisable,
such grant shall be deemed a sale by the Corporation of its Common Stock and the
price per share for such deemed sale of Common Stock shall be determined by
dividing (A) the total amount, if any, in cash or property received or
receivable by the Corporation as consideration for the granting of such rights,
options or warrants, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the exercise of such
rights, options or warrants, plus, in the case of such rights, options or
warrants that relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the exercise of
such rights, options or warrants or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights, options or
warrants. Except as provided in SECTION 7(e)(iii), no further adjustment of the
Conversion Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such rights, options or warrants or
upon the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.

                            (ii)   ISSUANCE OF CONVERTIBLE SECURITIES. In case
at any time after the date hereof the Corporation shall in any manner issue
(whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights

                                       13
<Page>

to exchange or convert thereunder are immediately exercisable, such issuance or
sale of Convertible Securities shall be deemed to be a sale by the Corporation
of its Common Stock and the price per share for such Common Stock shall be
determined by dividing (A) the total amount in cash or in property received or
receivable by the Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities;
PROVIDED, HOWEVER, that (I) except as otherwise provided in SECTION 7(e)(iii),
no further adjustment of the Conversion Price shall be made upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities, and (II) if any such issue or sale of such Convertible Securities is
made upon exercise of any rights to subscribe for or to purchase or any option
to purchase any such Convertible Securities for which adjustments of the
Conversion Price have been or are to be made pursuant to other provisions of
this SECTION 7(e), no further adjustment of the Conversion Price shall be made
by reason of such issue or sale.

                            (iii)  CHANGE IN OPTION PRICE OR CONVERSION PRICE.
If the purchase price provided for in any right or option referred to in SECTION
7(e)(i), the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in SECTION 7(e)(i) or
7(e)(ii), or the rate at which any Convertible Securities referred to in SECTION
7(e)(i) or 7(e)(ii) are convertible into or exchangeable for Common Stock shall
change (other than under or by reason of provisions designed to protect against
dilution), the Conversion Price then in effect hereunder shall forthwith be
readjusted (increased or decreased, as the case may be) to the Conversion Price
that would have been in effect at such time had such rights, options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold. No readjustment pursuant to the
preceding sentence shall have the effect of increasing the Conversion Price by
an amount in excess of the amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of rights, options or
Convertible Securities. On the expiration of any such option or right referred
to in SECTION 7(e)(i) or the termination of any such right to convert or
exchange any such Convertible Securities referred to in SECTION 7(e)(i) or
7(e)(ii), the Conversion Price then in effect hereunder shall forthwith be
readjusted (increased or decreased, as the case may be) to the Conversion Price
that would have been in effect at the time of such expiration or termination had
such right, option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been granted, issued
or sold. If the purchase price provided for in any such right or option referred
to in SECTION 7(e)(i) or the rate at which any Convertible Securities referred
to in SECTION 7(e)(i) or SECTION 7(e)(ii) are convertible into or exchangeable
for Common Stock shall be reduced at any time under or by reason of provisions
with respect thereto designed to protect against dilution, then in case of the
delivery of shares of Common Stock upon the exercise of any such right or option
or upon conversion or exchange of any such Convertible Securities, the
Conversion Price then in effect hereunder shall, if not already adjusted,
forthwith be adjusted to such amount as would have obtained had such right,
option or Convertible Securities never been issued as to such shares of Common
Stock and had adjustments been made upon the issuance of the shares of Common
Stock delivered as aforesaid, but only if as a result of such adjustment the
Conversion Price then in effect hereunder is thereby reduced.

                                       14
<Page>

                            (iv)   CONSIDERATION FOR STOCK. Anything herein to
the contrary notwithstanding, in case at any time any shares of Common Stock or
Convertible Securities or any rights, options or warrants to purchase any such
Common Stock or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith.

                            In case at any time any shares of Common Stock or
Convertible Securities or any rights, options or warrants to purchase any such
shares of Common Stock or Convertible Securities shall be issued or sold for a
consideration other than cash, in whole or in part, the amount of the
consideration other than cash received by the Corporation shall be deemed to be
the fair value of such consideration as determined reasonably and in good faith
by the Board of Directors of the Corporation, without deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. In case at any time any shares of Common
Stock or Convertible Securities or any rights, options or warrants to purchase
such shares of Common Stock or Convertible Securities shall be issued in
connection with any merger or consolidation in which the Corporation is the
surviving corporation, the amount of consideration received therefor shall be
deemed to be the fair value as determined reasonably and in good faith by the
Board of Directors of the Corporation of such portion of the assets and business
of the nonsurviving corporation as such Board may determine to be attributable
to such shares of Common Stock, Convertible Securities, rights, options or
warrants, as the case may be. In case at any time any rights, options or
warrants to purchase any shares of Common Stock or Convertible Securities shall
be issued in connection with the issue and sale of other securities of the
Corporation, together comprising one integral transaction in which no
consideration is allocated to such rights, options or warrants by the parties
thereto, such rights, options or warrants shall be deemed to have been issued
for an amount of consideration equal to the fair value thereof as determined
reasonably and in good faith by the Board of Directors of the Corporation.

                            (v)    RECORD DATE. In case the Corporation shall
take a record of the holders of its Common Stock for the purpose of entitling
them to subscribe for or purchase shares of Common Stock or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold as a
result of the granting of such right of subscription or purchase.

                            (vi)   DEFINITION OF MARKET PRICE. Unless otherwise
set forth in this resolution, "MARKET PRICE" shall mean the last reported sale
price of the applicable security as reported by the American Stock Exchange, the
National Association of Securities Dealers, Inc. Automatic Quotations System,
or, if the applicable security is listed or admitted for trading on another
securities exchange, the last reported sales price of the applicable security on
the principal exchange on which the applicable security is listed or admitted
for trading (which shall be for consolidated trading if applicable to such
exchange), or if neither so reported or listed or admitted for trading, the last
reported bid price of the applicable security in the over-the-counter market. In
the event that the Market Price cannot be determined as aforesaid, the Board of
Directors of the Corporation shall determine the Market Price on the basis of
such quotations as it in good faith considers appropriate, in consultation with
a nationally recognized investment

                                       15
<Page>

bank. The Market Price shall be such price averaged over a period of ten (10)
consecutive Business Days ending two (2) days prior to the day as of which
"Market Price" is being determined.

                            (vii)  ADJUSTMENT TO DETERMINATION OF CONVERSION
PRICE. When making the calculations and determinations described in this SECTION
7(e), there shall not be taken into account (A) the issuance of Common Stock
upon the exercise of outstanding options or warrants outstanding on the Series C
Preferred Stock Issue Date, (B) the issuance of Common Stock upon conversion of
the Series C Preferred Stock, (C) the issuance of Common Stock upon exercise of
any warrants issued pursuant to the Securities Purchase Agreement, (D) the
issuance of Series C Preferred Stock upon exercise of the Series C Preferred
Stock Warrants (as defined in the Securities Purchase Agreement), and (E) the
issuance of 320,868 shares of Common Stock pursuant to the Securities Purchase
Agreement.

                    (f) DIVIDENDS AND DISTRIBUTIONS; PURCHASE RIGHTS.

                    (i) In case at any time after the date hereof the
Corporation shall declare a dividend or other distribution upon the shares of
Common Stock of any class payable otherwise than in shares of Common Stock or
Convertible Securities and otherwise than in the securities to which the
provisions of SECTION 7(f)(ii) hereof apply, the Corporation shall pay over to
each holder of Series C Preferred Stock, upon conversion thereof on or after the
dividend payment date, the securities and other property (including cash) that
such holder would have received (together with all distributions thereon) if
such holder had converted the Series C Preferred Stock held by it on the record
date fixed in connection with such dividend, and the Corporation shall take
whatever steps are necessary or appropriate to keep in trust for the holders of
the Series C Preferred Stock at all times such securities and other property as
shall be required to fulfill its obligations hereunder in respect of the shares
issuable upon the exercise or conversion of all the Series C Preferred Stock.

                    (ii) If at any time or from time to time on or after the
Series C Preferred Stock Issue Date, the Corporation grants, issues or sells any
options or rights (other than Convertible Securities) to purchase stock,
warrants, securities or other property pro rata to the holders of Common Stock
of all classes ("PURCHASE RIGHTS"), and if the holder shall be entitled to an
adjustment pursuant to SECTION 7(e) above, then in lieu of such adjustment, each
holder of Series C Preferred Stock shall be entitled, at such holder's option,
to acquire (whether or not such holder's Series C Preferred Stock shall have
been converted), upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights that such holder could have acquired if such holder
had held the number of shares of Common Stock issuable upon conversion of such
Series C Preferred Stock immediately prior to the time or times at which the
Corporation granted, issued or sold such Purchase Rights.

                    (g) SUBDIVISION OR COMBINATION OF STOCK OR STOCK DIVIDENDS.
In case the Corporation shall at any time subdivide its outstanding shares of
Common Stock into a greater number of shares, by split or otherwise, or issue
additional shares of Common Stock as a dividend (other than a dividend in
accordance with SECTION 3 hereof), or make any other distribution upon any class
or series of stock payable in shares of Common Stock or Convertible Securities,
the Conversion Price in effect immediately prior to such subdivision shall be

                                       16
<Page>

proportionately reduced and, conversely, in case the outstanding shares of
Common Stock of the Corporation shall be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased.

                    (h) CHANGES IN COMMON STOCK. If any capital reorganization
or reclassification of the capital stock of the Corporation, or consolidation or
merger of the Corporation with or into another Person, or the sale, transfer or
other disposition of all or substantially all of its assets to another
corporation for cash or stock of such other corporation, shall be effected,
then, as a condition of such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition, lawful and adequate provision shall
be made whereby each holder of Series C Preferred Stock shall thereafter have
the right to purchase and receive upon the basis and upon the terms and
conditions herein specified and in lieu of the shares of the Common Stock of the
Corporation immediately theretofore issuable upon conversion of the Series C
Preferred Stock, such kind and amount of shares of stock, securities (of the
Corporation or another issuer) or property or cash as may be issuable or payable
with respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such Common Stock immediately theretofore
issuable upon conversion of the Series C Preferred Stock had such
reorganization, reclassification, consolidation, merger, sale, transfer or other
disposition not taken place, and in any such case appropriate provisions shall
be made with respect to the rights and interests of each holder of Series C
Preferred Stock to the end that the provisions hereof (including without
limitation provisions for adjustment of the Conversion Price) shall thereafter
be applicable, as nearly equivalent as may be practicable in relation to any
shares of stock, securities or property or cash thereafter deliverable upon the
conversion thereof. The Corporation shall not effect any such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition,
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Corporation) resulting from such reorganization,
reclassification, consolidation or merger or the corporation purchasing or
otherwise acquiring such properties shall assume, by written instrument executed
and mailed or delivered to the holders of Series C Preferred Stock at the last
address of such holders appearing on the books of the Corporation, the
obligation to deliver to such holders such shares of stock, securities or
properties or cash as, in accordance with the foregoing provisions, such holders
may be entitled to acquire. The above provisions of this subparagraph shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers or other dispositions.

                    (i) CERTAIN EVENTS. If any event occurs as to which in the
reasonable opinion of the Board of Directors of the Corporation, in good faith,
the other provisions of this SECTION 7 are not strictly applicable or if
strictly applicable would not fairly protect the conversion rights of the
holders of the Series C Preferred Stock in accordance with the essential intent
and principles of such provisions, then such Board of Directors, acting by a
vote of at least a majority of the members thereof, shall provide for the
benefit of holders of shares of Series C Preferred Stock an adjustment, if any,
on a basis consistent with such essential intent and principles, necessary to
preserve, without dilution, the rights of the holders of the Series C Preferred
Stock. Upon such vote by the Board of Directors, the Corporation shall forthwith
make the adjustments described therein; PROVIDED, HOWEVER, that no such
adjustments shall have the effect of increasing the Conversion Price as
otherwise determined pursuant to this SECTION 7

                                       17
<Page>

except in the event of a combination of shares of the type contemplated in
SECTION 7(g) and then in no event to an amount larger than the Conversion Price
as adjusted pursuant to SECTION 7(g).

                    (j) PROHIBITION OF CERTAIN ACTIONS. The Corporation will not
take any action that would result in any adjustment of the Conversion Price
pursuant to the terms hereof if the total number of shares of Common Stock
issuable after such action upon conversion of all the Series C Preferred Stock
would exceed the total number of shares of Common Stock then authorized by the
Corporation's Certificate of Incorporation.

                    (k) COMMON STOCK TO BE RESERVED. The Corporation will at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issue upon the conversion of Series C Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding Series C Preferred Stock. The Corporation
covenants that all shares of Common Stock that shall be so issuable shall, upon
issuance, be duly authorized, validly issued, fully paid and nonassessable, free
from preemptive or similar rights on the part of the holders of any shares of
capital stock or securities of the Corporation, and free from all liens and
charges with respect to the issue thereof; and without limiting the generality
of the foregoing, the Corporation covenants that it will from time to time take
all such action as may be requisite to assure that the par value, if any, per
share of the Common Stock is at all times equal to or less than the then
effective Conversion Price. The Corporation will take all such action as may be
necessary to assure that such shares of Common Stock may be so issued without
violation by the Corporation of any applicable law or regulation or agreement,
or of any requirements of any domestic securities exchange upon which the Series
C Preferred Stock or Common Stock may be listed. Without limiting the foregoing,
the Corporation will take all such action as may be necessary to assure that,
upon conversion of any of the Series C Preferred Stock, an amount equal to the
lesser of (i) the par value of each share of Common Stock outstanding
immediately prior to such conversion, or (ii) the Conversion Price shall be
credited to the Corporation's stated capital account for each share of Common
Stock issued upon such conversion, and that, if SECTION 7(k)(i) above is
applicable, the balance of the Conversion Price of Series C Preferred Stock
converted shall be credited to the Corporation's capital surplus account. If at
any time the Corporation should not have a sufficient number of authorized
shares of Common Stock to issue upon conversion of all then outstanding shares
of Series C Preferred Stock or the shares of Series C Preferred Stock issuable
upon exercise of outstanding options, rights or warrants to purchase Series C
Preferred Stock, the Corporation covenants to take all steps necessary to amend
its Certificate of Incorporation to increase the number of shares of authorized
Common Stock to the extent necessary.

                    (l) PREFERRED STOCK TO BE RESERVED. The Corporation will at
all times reserve and keep available out of its authorized Series C Preferred
Stock, solely for the purpose of issue upon the declaration of a dividend on the
outstanding Series C Preferred Stock, such number of shares of Series C
Preferred Stock as shall then be issuable as a dividend on the Series C
Preferred Stock. The Corporation covenants that all shares of Series C Preferred
Stock that shall be issued as such dividends shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, free from preemptive
or similar rights on the part of the holders of any shares of capital stock or
securities of the Corporation, and free from all liens and charges with respect
to the issue thereof. The Corporation will take all such action as may be
necessary to assure that such shares of Series C Preferred Stock may be so
issued without violation by the

                                       18
<Page>

Corporation of any applicable law or regulation or agreement, or of any
requirements of any domestic securities exchange upon which the Series C
Preferred Stock or the Common Stock may be listed. If at any time the
Corporation should not have a sufficient number of authorized shares of Series C
Preferred Stock to issue as dividends on the then outstanding shares of Series C
Preferred Stock, the Corporation covenants to amend this resolution to increase
the number of shares of authorized Series C Preferred Stock to the extent
necessary.

                    (m) REGISTRATION AND LISTING OF COMMON STOCK. If any shares
of Common Stock required hereunder to be reserved for purposes of conversion of
Series C Preferred Stock require registration with or approval of any
governmental authority under any Federal or state law (other than the Securities
Act) before such shares may be issued upon conversion, the Corporation will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered or approved, as the case may be. If and so long as
the Common Stock is listed on any national securities exchange, the Corporation
will, at its expense, obtain promptly and maintain the approval for listing on
each such exchange upon official notice of issuance, of shares of Common Stock
issuable upon conversion of the then outstanding Series C Preferred Stock and
the shares of Series C Preferred Stock then issuable upon the exercise of
options, rights or warrants to purchase Series C Preferred Stock, and maintain
the listing of such shares after their issuance; and the Corporation will also
list on such national securities exchange, will register under the Exchange Act
and will maintain such listing of, any other securities that at any time are
issuable upon conversion of the Series C Preferred Stock, if and at the time
that any securities of the same class shall be listed on such national
securities exchange by the Corporation.

                    (n) CLOSING OF BOOKS. The Corporation will at no time close
its transfer books against the transfer of any Series C Preferred Stock or of
any shares of Common Stock issued or issuable upon the conversion of any Series
C Preferred Stock in any manner that interferes with the timely conversion of
such Series C Preferred Stock.

                    (o) STATEMENT OF ADJUSTMENT OF CONVERSION PRICE. Whenever
the Conversion Price shall be adjusted as provided in SECTION 7(e), SECTION
7(g), SECTION 7(h) or SECTION 7(i) above, the Corporation shall forthwith file
at its office a statement, signed by its independent certified public
accountants, showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment. The Corporation
shall also cause a copy of such statement to be sent by certified mail, return
receipt requested, to each holder of shares of Series C Preferred Stock to such
holder's address appearing on the Corporation's records. When appropriate, such
copy may be given in advance and may be included as part of a notice required to
be mailed under the provisions of SECTION 7(p) below.

                    (p) NOTICE. In the event the Corporation shall propose to
take any action of the types described in SECTION 7(e), SECTION 7(f), SECTION
7(g) or SECTION 7(h) above, the Corporation shall give notice to each holder of
shares of Series C Preferred Stock. The notice shall specify the record date, if
any, with respect to any such action and the date on which such action is to
take place. Such notice shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Conversion
Price and the number, kind or class of shares or other securities or property or
cash that shall be deliverable or purchasable upon the

                                       19
<Page>

occurrence of such action or deliverable upon conversion of shares of Series C
Preferred Stock. In the case of any action that would require the fixing of a
record date, such notice shall be given at least twenty (20) days prior to the
date so fixed, and in case of all other action, such notice shall be given at
least thirty (30) days prior to the taking of such proposed action.

                    (q) TAXES. The Corporation shall pay all documentary, stamp
or other transactional taxes attributable to the issuance or delivery of shares
of capital stock of the Corporation upon conversion of any shares of Series C
Preferred Stock. The Corporation shall not, however, be required to pay any tax
that may be payable in respect of any transfer involved in the issuance and
delivery of Common Stock or the reissuance of the Series C Preferred Stock in a
name other than that in which the shares of Series C Preferred Stock so
converted were registered, and no such issuance or delivery shall be made unless
and until the person requesting such issuance has paid to the Corporation the
amount of any such tax or has established to the satisfaction of the Corporation
that such tax, if any, has been paid.

               8. EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required
by law, the shares of Series C Preferred Stock shall not have any voting powers,
preferences and relative, participating, optional or other special rights, other
than those specifically set forth in this resolution and in the Certificate of
Incorporation.

               9. HEADINGS OF SUBDIVISIONS. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.

               10. REISSUANCE OF PREFERRED STOCK. Shares of Series C Preferred
Stock that have been issued and reacquired in any manner, including shares
purchased or exchanged or converted, shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized but unissued
shares of preferred stock of the Corporation undesignated as to Series Cnd may
be designated or redesignated and issued or reissued, as the case may be, as
part of any series of preferred stock of the Corporation, provided that any
issuance of such shares as preferred stock must be in compliance with the terms
hereof.

               11. MUTILATED OR MISSING PREFERRED STOCK CERTIFICATES. If any of
the Series C Preferred Stock certificates shall be mutilated, lost, stolen or
destroyed, the Corporation shall issue, in exchange and in substitution for and
upon cancellation of the mutilated Series C Preferred Stock certificate, or in
lieu of and substitution for the Series C Preferred Stock certificate lost,
stolen or destroyed, a new Series C Preferred Stock certificate of like tenor
and representing an equivalent amount of shares of Series C Preferred Stock, but
only upon receipt of evidence of such loss, theft or destruction of such Series
C Preferred Stock certificate and indemnity, if requested, reasonably
satisfactory to the Corporation and the transfer agent (if other than the
Corporation), or, in the case of mutilation, upon surrender and cancellation of
such mutilated certificate.

                            [SIGNATURE PAGE FOLLOWS]

                                       20
<Page>

               IN WITNESS WHEREOF, Electric City Corp. has caused these presents
to be signed in its name and on its behalf by its Chief Executive Officer on Jun
4, 2002.

                                             ELECTRIC CITY CORP.

                                             By  /s/ John Mitola
                                                 ----------------------
                                             Name:   John Mitola
                                             Title:  Chief Executive Officer

                 [SIGNATURE PAGE TO CERTIFICATE OF DESIGNATIONS]

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