Document:

Prepared by MerrillDirect

Exhibit 10.8

PLACEMENT AGENT COMMON STOCK WARRANT

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.

 

WARRANT NO. 13

 

WARRANT
CERTIFICATE

TO
PURCHASE SHARES OF COMMON STOCK,

PAR
VALUE $0.0001 PER SHARE

OF

ELECTRIC
CITY CORP.

             THIS IS TO CERTIFY THAT Newcourt
Capital Securities, Inc., or its registered assigns (the “Holder”), is
the owner of 3,314,830 warrants (the “Warrants”), each of which entitles
the registered Holder thereof to purchase from Electric City Corp., a Delaware
corporation (the “Company”), one fully paid, duly authorized and
nonassessable share of Common Stock, par value $0.0001 per share (the “Common
Stock”), of the Company at any time or from time to time after the earlier
of (i) sixty days following the Closing Date as defined in the Securities
Purchase Agreement and (ii) December 15, 2001, but on or before 5:00 p.m., New
York City time, on the Warrant Expiration Date, at an exercise price of $1.00
per share, subject to adjustment from time to time as set forth herein (the “Exercise
Price”), all on the terms and subject to the conditions hereinafter set
forth.

             The number of shares of Common
Stock issuable upon exercise of each Warrant (the “Number Issuable”)
shall be determined for each Warrant by dividing $1.00 by the Exercise Price in
effect at the time of such exercise, and is initially one (1) share of Common
Stock.  Capitalized terms used herein
but not otherwise defined shall have the meanings given them in Section 13
hereof or, if not therein defined, in the Securities Purchase Agreement.

             Section 1.         Exercise Of Warrants.  Subject to the last paragraph of this Section 1, the
Warrants evidenced hereby may be exercised, in whole or in part, by the
registered Holder hereof at any time or from time to time after the earlier of
(i) sixty days following the Closing Date as defined in the Securities Purchase
Agreement and (ii) December 15, 2001, but on or before 5:00 p.m., New York City
time, on the Warrant Expiration Date, upon delivery to the Company at the
principal executive office of the Company in the United States of America, of
(a) this Warrant Certificate, (b) a written notice stating that such Holder
elects to exercise the Warrants evidenced hereby in accordance with the
provisions of this Section 1 and specifying the number of Warrants
being exercised and the name or names in which such Holder wishes the
certificate or certificates for shares of Common Stock to be issued and (c)
payment of the Exercise Price for the shares of Common Stock issuable upon
exercise of such Warrants, which shall be payable by any one or any combination
of the following: (i) cash, (ii) certified or official bank check payable to
the order of the Company, (iii) by the surrender (which surrender shall be
evidenced by cancellation of the relevant number of Warrants represented by any
Warrant certificate presented in connection with a Cashless Exercise (as
defined below)) of a Warrant or Warrants (represented by one or more relevant
Warrant certificates), and without the payment of the Exercise Price in cash,
in return for the delivery to the surrendering Holder of such number of shares
of Common Stock equal to the number of shares of Common Stock for which such
Warrant is exercised as of the date of exercise (if the Exercise Price were
being paid in cash) reduced by that number of shares of Common Stock equal to
the number of shares for which such Warrant is exercised multiplied by a
fraction, the numerator of which is (A) the Exercise Price and the denominator
of which is (B) the Market Price of one share of Common Stock on the Business
Day that immediately precedes the day of exercise of the Warrant, (iv) by the
delivery of shares of Common Stock that are valued at the Market Price on the
Business Day immediately preceding the day of the exercise of the Warrant that
are either held by the Holder or are acquired in connection with such exercise,
and without payment of the Exercise Price in cash, or (v) by the cancellation
of outstanding indebtedness (including accrued but unpaid interest) due and
payable by the Company to the Holder under the convertible senior subordinated
promissory notes issued pursuant to the Note Purchase Agreement, and without
payment of the Exercise Price in cash. 
Any share of Common Stock delivered as payment of the Exercise Price in
connection with an In–Kind Exercise (as defined below) shall be deemed to
have a value equal to the Market Price of one share of Common Stock on the
Business Day that immediately precedes the day of exercise of the Warrant.  An exercise of a Warrant in accordance with
clause (iii) is herein referred to as a “Cashless Exercise” and an
exercise of a Warrant in accordance with clause (iv) is herein referred to as
an “In–Kind Exercise.” The documentation and consideration, if any,
delivered in accordance with clauses (a), (b) and (c) of this paragraph above
are collectively referred to herein as the “Warrant Exercise Documentation.”
For the purposes of this Section 1, Market Price shall be
calculated without reference to the last sentence of the definition thereof.

             As promptly as
practicable, and in any event within two (2) Business Days after receipt of the
Warrant Exercise Documentation, the Company shall deliver or cause to be
delivered certificates representing the number of validly issued, fully paid
and nonassessable shares of Common Stock issuable in connection with such
exercise, and if less than the full number of Warrants evidenced hereby are
being exercised, a new Warrant Certificate or Certificates, of like tenor, for
the number of Warrants evidenced by this Warrant Certificate, less the number
of Warrants then being exercised or surrendered; provided, however,
that no new Warrant Certificate need be delivered if the Warrant Expiration
Date has occurred.  Such exercise shall
be deemed to have been made at the close of business on the date of delivery of
the Warrant Exercise Documentation so that the Person entitled to receive
shares of Common Stock upon such exercise shall be treated for all purposes as
having become the record holder of such shares of Common Stock at such time.

             The Company shall pay all expenses
in connection with, and all taxes and other governmental charges (other than
income taxes of the Holder) that may be imposed in respect of the issue or
delivery of any shares of Common Stock issuable upon the exercise of the
Warrants evidenced hereby.  The Company
shall not be required, however, to pay any tax or other charge imposed in
connection with any transfer involved in the issue of any certificate for shares
of Common Stock in any name other than that of the registered Holder of the
Warrants evidenced hereby.

             In connection with the exercise of
any Warrants evidenced hereby, at the Company’s option, no fractions of shares
of Common Stock shall be issued, but in lieu thereof the Company may elect to
pay a cash adjustment in respect of such fractional interest in an amount equal
to any such fractional interest multiplied by the current Market Price per
share of Common Stock on the Business Day that precedes the day of
exercise.  If more than one such Warrant
shall be exercised by the Holder thereof at the same time, the number of full
shares of Common Stock issuable on such exercise shall be computed on the basis
of the total number of Warrants so exercised.

             Section 2.         Adjustments.  The Exercise Price shall be subject to
adjustment from time to time as provided in this Section 2.

             (a)         Adjustment
of Exercise Price Upon Issuance of Common Stock.  If after July 31, 2001 (the “Issue Date”) the Company
shall issue or sell any shares of its Common Stock (except upon exercise of the
Warrants and shares issued as a result of adjustments made under the terms of
the Warrants) for a price per share less than (including, without limitation,
those circumstances described in paragraphs (i) through (vii) below), the
Exercise Price in effect on the date immediately prior to the date of such
issue or sale, then, immediately upon such issue or sale, the Exercise Price
then in effect shall be reduced to such lower price per share.

                           (i)          Issuance of Rights or Options.  In case at any time after the Issue Date the
Company shall in any manner grant (whether directly or by assumption in a
merger or otherwise), 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 Company 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 in property received or
receivable by the Company as consideration for the granting of such rights,
options or warrants, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company 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 2(a)(iii), no further adjustment of the Exercise 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 Issue Date the
Company 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 to exchange or convert thereunder are immediately exercisable, such
issuance or sale of Convertible Securities shall be deemed a sale by the
Company of its Common Stock and the price per share for such Common Stock shall
be determined by dividing (A) the total amount received or receivable in cash
or in property by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company 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 2(a)(iii),
no further adjustment of the Exercise 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
Exercise Price have been or are to be made pursuant to other provisions of this
Section 2(a), no further adjustment of the Exercise Price shall be
made by reason of such issue or sale.

                           (iii)        Change in Option Price or Exercise
Price.  If the purchase price
provided for in any right or option referred to in Section 2(a)(i),
the additional consideration, if any, payable upon the conversion or exchange
of any Convertible Securities referred to in Section 2(a)(i) or 2(a)(ii),
or the rate at which any Convertible Securities referred to in Section 2(a)(i)
or 2(a)(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 Exercise Price then in effect hereunder shall forthwith be
readjusted (increased or decreased, as the case may be) to the Exercise 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 Exercise 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 2(a)(i) or the termination of any such
right to convert or exchange any such Convertible Securities referred to in Section 2(a)(i)
or 2(a)(ii), the Exercise Price then in effect hereunder shall forthwith
be readjusted (increased or decreased, as the case may be) to the Exercise
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 2(a)(i)
or the rate at which any Convertible Securities referred to in
Section 2(a)(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 Exercise 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 Exercise Price
then in effect hereunder is thereby reduced.

                           (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 Company
therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith.

                           In case at any time
any shares of Common Stock or Convertible Securities or any rights or options
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 Company 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 Company, without deduction of
any expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith.  In case at any time any shares of Common Stock or Convertible
Securities or any rights or options to purchase such shares of Common Stock or
Convertible Securities shall be issued in connection with any merger or consolidation
in which the Company is the surviving company, 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 Company of such portion of
the assets and business of the nonsurviving corporation as the Board may
determine to be attributable to such shares of Common Stock, Convertible
Securities, rights or options, as the case may be.  In case at any time any rights or options 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 Company, together comprising one
integral transaction in which no consideration is allocated to such rights or
options by the parties thereto, such rights or options 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
Company.

                           (v)        Record Date.  In case the Company 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)       Adjustment to Determination of
Exercise Price.  When making the
calculations and determinations described in this Section 2(a),
there shall not be taken into account (A) the issuance of Common Stock upon the
exercise of options or warrants outstanding on the Issue Date, (B) the issuance
of Series A Preferred Stock, Common Stock, Series A Preferred Stock Warrants or
Common Stock Warrants issued pursuant to the Securities Purchase Agreement or
the Additional Purchase Agreement, (C) the issuance of Common Stock upon the
conversion of the Series A Preferred Stock of the Company, (D) the issuance of
Common Stock upon exercise of the Warrants evidenced by this Warrant
Certificate, or any other warrants to purchase Common Stock issued pursuant to
the Securities Purchase Agreement, (E) the issuance of Series A Preferred Stock
upon exercise of the Series A Preferred Stock Warrants (as defined in the
Securities Purchase Agreement) issued pursuant to the Securities Purchase
Agreement Agreement or the Additional Purchase Agreement, and (F) the issuance
of 320,868 shares of Common Stock pursuant to the Securities Purchase
Agreement.

                           (vii)      Good Faith.  If any event occurs as to which in the
reasonable opinion of the Board of Directors of the Company, in good faith, the
other provisions of this Section 2 are not strictly applicable but the
lack of any adjustment in the Exercise Price or the Number Issuable or both
would not in the opinion of the Board of Directors of the Company fairly
protect the exercise rights of the Holder, in accordance with the basic intent
and principles of such provisions, then the Board of Directors of the Company
shall appoint a firm of independent certified public accountants (which may be
the regular auditors of the Company) of recognized national standing, which
shall give their opinion upon the adjustment, if any, to the Exercise Price or
Number Issuable or both, as the case may be, on a basis consistent with the
basic intent and principles of this Section 2, necessary to
preserve, without dilution, the exercise rights of all the registered Holders
of the Warrants in accordance with this Warrant Certificate.

                           (viii)     Notice of Change in Exercise Price.  The Company promptly shall deliver to each
registered Holder of Warrants at least five (5) Business Days prior to
effecting any transaction that would result in an increase or decrease in the
Exercise Price pursuant to this Section 2, a statement, signed by
its independent certified public accountants, setting forth in reasonable
detail the event requiring the adjustment and the method by which such
adjustment was calculated and specifying the increased or decreased Exercise Price
then in effect following such adjustment. 

             (b)        Subdivision;
Combination of Stock or Stock Dividends. 
In case the Company 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 of the Certificate of Designations (as defined
in the Securities Purchase Agreement) in respect of the Series A Preferred
Stock), or make any other distribution upon any class or series of stock
payable in shares of Common Stock or Convertible Securities, the Exercise Price
in effect immediately prior to such subdivision shall be proportionately
reduced and, conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the Exercise Price
in effect immediately prior to such combination shall be proportionately
increased.

             (c)         Reorganization;
Reclassification; Consolidation; Merger or Sale of Assets.  In case of (i) any capital reorganization or
reclassification or other change of outstanding shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), (ii) any
consolidation or merger of the Company with or into another Person (other than
a consolidation or merger in which the Company is the resulting or surviving
Person and that does not result in any reclassification or change of outstanding
Common Stock) or (iii) transfer or sale of all or substantially all of the
Company’s Assets to another person (any of the foregoing, a “Transaction”),
the Company, or such successor or purchasing Person, as the case may be, shall
execute and deliver to each Holder of the Warrants evidenced hereby, at least
five (5) Business Days prior to effecting any of the foregoing Transactions, a
certificate that the Holder of each such Warrant then outstanding shall have
the right thereafter to exercise such Warrant into the kind and highest amount
of shares of stock or other securities (of the Company or another issuer) or
property or cash receivable upon such Transaction by a holder of the number of
shares of Common Stock into which such Warrant could have been exercised
immediately prior to such Transaction. 
Such certificate shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section 2
and shall contain other terms identical to the terms hereof.   If, in the case of any such Transaction,
the stock, other securities, cash or property receivable thereupon by a holder
of Common Stock includes shares of stock or other securities of a Person other
than the successor or purchasing Persons and other than the Company, who
controls or is controlled by the successor or purchasing Person or who, in
connection with such Transaction, issues stock, securities, other property or
cash to holders of Common Stock, then such certificate also shall be executed
by such Person, and such Person shall, in such certificate, specifically assume
the obligations of such successor or purchasing Person and acknowledge its
obligations to issue such stock, securities, other property or cash to Holders
of the Warrants upon exercise thereof as provided above.  The provisions of this Section 2(c)
similarly shall apply to successive Transactions.

             (d)        Adjustment
for Other Distributions.  If the
Company distributes to all holders of its Common Stock any of its assets
(including but not limited to cash), debt securities, preferred stock, or any
rights or warrants to purchase debt securities, preferred stock, assets or
other securities of the Company, the Exercise Price shall be adjusted in
accordance with the following formula:

	E’	=	E	x	M    -   
  F
	 	 	 	 	M

             where:

             E’          =           the adjusted Exercise Price.

             E           =           the current Exercise Price.

             M         =           the Market Price of one share of
Common Stock on the record date mentioned below.

             F           =           the fair market value (determined in good faith by the Board of
Directors of the Company) on the record date of the assets, securities,
rights or warrants applicable to one share of Common Stock.

             The adjustment shall be made
successively whenever any such distribution is made and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive the distribution. 
This Section 2(d) does not apply to any dividend or
distribution that results in an adjustment to the Exercise Price pursuant to Section 2(a)
or Section 2(b) above.

             Section
3.         Notice of Certain Events.  In case at any time or from time to time the
Company shall declare any dividend or any other distribution to the holders of
its Common Stock, or shall authorize the granting to the holders of its Common Stock
of rights or warrants to subscribe for or purchase any additional shares of
stock of any class or any other right, or shall authorize the issuance or sale
of any other shares or rights that would result in an adjustment to the
Exercise Price pursuant to Section 2(a) or Section 2(d),
or there shall be any capital reorganization or reclassification of the Common
Stock or consolidation or merger of the Company with or into another Person, or
any sale or other disposition of all or substantially all the assets of the
Company, or there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company, then, in any one or more of such cases the
Company shall mail to each Holder of the Warrants evidenced hereby at such
Holder’s address as it appears on the transfer books of the Company, as
promptly as practicable but in any event at least ten (10) Business Days prior
to the applicable date hereinafter specified, a notice stating (a) the date on
which a record is to be taken for the purpose of such dividend, distribution,
rights or warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined, (b) the issue date of
such dividend, distribution, rights or warrants or (c) the date on which such
reorganization, reclassification, consolidation, merger, sale, disposition,
dissolution, liquidation or winding up is expected to become effective.  Such notice also shall specify the date as
of which it is expected that the holders of Common Stock of record shall be
entitled to exchange their Common Stock for shares of stock or other securities
or property or cash deliverable upon such reorganization, reclassification,
consolidation, merger, sale, disposition, dissolution, liquidation or winding
up.

             Section 4.         Certain Covenants.  The Company will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Common Stock or its authorized and issued Common Stock
held as treasury stock, for the purpose of enabling it to satisfy any
obligation to issue Common Stock upon exercise of the Warrants, the maximum
number of shares of Common Stock that may then be deliverable upon the exercise
of all outstanding Warrants. The Company shall take all action required to
increase the authorized number of shares of Common Stock if at any time there
shall be insufficient authorized but unissued shares of Common Stock to permit
such reservation or to permit the exercise of all outstanding Warrants.  The Company shall take all action necessary
to cause the Common Stock issuable upon exercise of the Warrants to be listed
on each securities exchange or over-the-counter market on which similar
securities issued by the Company are then listed, if applicable.

             The Company or, if appointed, the
transfer agent for the Common Stock (the “Transfer Agent”) and every
subsequent transfer agent for any shares of the Company’s capital stock
issuable upon the exercise of any of the rights of purchase aforesaid will be
irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be required for such purpose. The Company will keep
a copy of this Warrant Certificate on file with the Transfer Agent and with
every subsequent transfer agent for any shares of the Company’s capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrants.  The Company will furnish such
Transfer Agent a copy of all notices of adjustments and certificates related
thereto transmitted to each Holder pursuant to Section 2(a)(viii)
hereof.

             Before taking any action that would
cause an adjustment pursuant to Section 2 hereof to reduce the
Exercise Price below the then par value (if any) of the Common Stock, the
Company will take any corporate action that may, in the opinion of its counsel
(which may be counsel employed by the Company), be necessary in order that the
Company may validly and legally issue fully paid and nonassessable Common Stock
at the Exercise Price as so adjusted.

             The Company covenants that all
Common Stock that may be issued upon exercise of the Warrants will, upon issue,
be validly issued, fully paid, nonassessable, free of preemptive rights and
free from all taxes, liens, charges and security interests with respect to the
issue thereof.

             Section 5.         Registered Holder.  The person in whose name this Warrant
Certificate is registered shall be deemed the owner hereof and of the Warrants
evidenced hereby for all purposes.

             Section 6.         Transfer of Warrants.  Any transfer of the rights represented by
this Warrant Certificate shall be effected by the surrender of this Warrant
Certificate, along with the form of assignment attached hereto, properly
completed and executed by the registered Holder hereof, at the principal
executive office of the Company in the United States of America.  Thereupon, the Company shall issue in the
name or names specified by the registered Holder hereof and, in the event of a
partial transfer, in the name of the registered Holder hereof, a new Warrant
Certificate or Certificates evidencing the right to purchase such number of
shares of Common Stock as shall be equal to the number of shares of Common
Stock then purchasable hereunder.

             Section
7.         Restrictive Legend.  Each certificate representing the Common
Stock issued upon exercise of this Warrant shall be stamped or otherwise
imprinted with a legend in the following form (in addition to any legend
required under applicable state securities laws):

	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.

             Following the Closing under
the Securities Purchase Agreement, each certificate representing the Common
Stock issued upon exercise of this Warrant shall be stamped or otherwise
imprinted with a legend in the following form:

	THE
  SECURITIES REPRESENTED HEREBY ARE SUBJECT TO AN INVESTOR RIGHTS AGREEMENT, A
  STOCKHOLDERS AGREEMENT AND A STOCK 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.

Said
legends shall be removed by the Company, upon the request of the holder
thereof, at such time as the restrictions on the transfer of the applicable
security under applicable securities laws and the obligations imposed on the
holder thereof under the Investor Rights Agreement, the Stockholders Agreement
and the Stock Trading Agreement, as applicable, shall have terminated.

             Section 8.         Denominations.  The Company will, at its expense, promptly
upon surrender of this Warrant Certificate at the principal executive office of
the Company in the United States of America, execute and deliver to the
registered Holder hereof a new Warrant Certificate or Certificates in
denominations specified by such Holder for an aggregate number of Warrants
equal to the number of Warrants evidenced by this Warrant Certificate.

             Section 9.         Replacement of Warrants.  Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant
Certificate and, in the case of loss, theft or destruction, upon delivery of an
indemnity reasonably satisfactory to the Company (in the case of an insurance
company or other institutional investor, its own unsecured indemnity agreement
shall be deemed to be reasonably satisfactory), or, in the case of mutilation,
upon surrender and cancellation thereof, the Company will issue a new Warrant
Certificate of like tenor for a number of Warrants equal to the number of
Warrants evidenced by this Warrant Certificate.

             Section 10.       Governing Law.  Except as to matters governed by the General
Corporation Law of the State of Delaware and decisions thereunder of the
Delaware courts applicable to Delaware corporations, which shall be governed by
such laws and decisions, this Warrant Certificate shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the laws of the State of New York applicable to agreements made and to be
performed entirely within such State.

             Section 11.       Rights Inure to Registered Holder.  The Warrants evidenced by this Warrant
Certificate will inure to the benefit of and be binding upon the registered
Holder thereof and the Company and their respective successors and permitted
assigns.  Nothing in this Warrant
Certificate shall be construed to give to any Person other than the Company and
the registered Holder and their respective successors and permitted assigns any
legal or equitable right, remedy or claim under this Warrant Certificate, and
this Warrant Certificate shall be for the sole and exclusive benefit of the
Company and such registered Holder. 
Nothing in this Warrant Certificate shall be construed to give the registered
Holder hereof any rights as a Holder of shares of Common Stock until such time,
if any, as the Warrants evidenced by this Warrant Certificate are exercised in
accordance with the provisions hereof.

             Section 12.       Notice.  All notices, demands and other communications provided for or
permitted hereunder shall be made in writing and shall be given by registered
or certified first–class mail, return receipt requested, nationally
recognized overnight delivery service or personal delivery, (a) if to the
Holder of a Warrant, at such Holder’s last known address appearing on the books
of the Company; and (b) if to the Company, at its principal executive office in
the United States located at the address designated for notices in the
Securities Purchase Agreement, or such other address as shall have been
furnished to the party given or making such notice, demand or other
communication.  All such notices and
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; when delivered if delivered by a nationally recognized
overnight delivery service; and five (5) Business Days after being deposited in
the mail, as aforesaid, postage prepaid, if mailed.

             Section
13.       Definitions.  For the purposes of this Warrant
Certificate, the following terms shall have the meanings indicated below:

             “Additional Purchase Agreement”
means the securities purchase agreement providing for the issuance and sale of
Series A Preferred Stock and Series A Preferred Stock Warrants to the
Additional Purchasers, as contemplated by Section 2.3 of the Securities
Purchase Agreement.

             “Additional Purchaser” shall
mean each purchaser under the Additional Purchase Agreement.

             “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.

             “Cashless Exercise” shall
have the meaning set forth in Section 1 hereof.

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

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

             “Convertible Securities”
shall have the meaning set forth in Section 2(a)(i) hereof.

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

             “Holder” shall have the
meaning set forth in the preamble.

             “In-Kind Exercise” shall
have the meaning set forth in Section 1 hereof.

             “Issue Date” shall have the
meaning set forth in Section 2(a) hereof.

             “Market Price” means the
last reported sale price of the applicable security as reported by the American
Stock Exchange or 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 Company 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 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.

             “Note Purchase Agreement”
means that certain Convertible Senior Subordinated Promissory Note and Warrant
Purchase Agreement, dated as of April 18, 2001, among the Company and the
Holder, as amended by the First Amendment thereto dated as of July 31, 2001, as
the same may be further amended, modified or otherwise supplemented from time
to time in accordance with its terms.

             “Number Issuable” shall have
the meaning set forth in the preamble.

             “Person” means any
individual, corporation, limited liability company, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.

             “Securities Purchase Agreement”
means that certain Securities Purchase Agreement, dated July 31, 2001, among
the Company, the Holder and the other parties signatory thereto, as the same
may be amended, modified or otherwise supplemented from time to time in
accordance with its terms.

             “Transaction” shall have the
meaning set forth in Section 2(c) hereof.

             “Transfer Agent” shall have
the meaning set forth in Section 4 hereof.

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

             “Warrant Exercise Documentation”
shall have the meaning set forth in Section 1 hereof.

             “Warrant Expiration Date”
means the later of (i) July 31, 2008 and (ii) if there is a Closing under the
Securities Purchase Agreement, the seventh anniversary of the Closing Date as
defined in the Securities Purchase Agreement.

[SIGNATURE PAGE FOLLOWS]

             IN
WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed as
of the Issue Date.

 

	 	COMPANY
	 	 
	 	ELECTRIC
  CITY CORP.,
	 	a
  Delaware corporation
	 	 
	 	 
	 	 
	 	By:	   /s/ John Mitola
	 	 	

	 	Name:	   John Mitola
	 	 	

	 	Title:	   CEO
	 	 	

	 	 
	ATTEST:	 
	 	 
	 	 
	 /s/ 
  Greg Rice	 
	

	 

 

Form of Assignment Form

[To be executed upon assignment of
Warrants]

             The undersigned hereby assigns and
transfers unto ______________________, whose Social Security Number or Tax ID
Number is ____________________ and whose record address is
___________________________________ the rights represented by the attached
Warrant Certificate with respect to ___ Warrants to which the attached Warrant
Certificate relates, and irrevocably appoints _______________ as agent to
transfer this security on the books of the Company.  Such agent may substitute another to act for such agent.

	 	Signature: 
	 	 
	 	 
	 	 
	 	

	 	(Signature must conform in all respects
  to name of holder as specified on the face of the Warrant Certificate)
	 	 
	 	Signature Guarantee:
	 	 
	 	 
	 	 
	 	

	 	 
	 	 
	Date:	 
	 	 
	

	 

(SUBSCRIPTION FORM TO BE EXECUTED UPON
EXERCISE OF

SOME OR ALL OF THE WARRANTS)

             The undersigned, registered Holder,
successor or assignee of such registered Holder of the within Warrant Certificate,
hereby:

             (a) subscribes for ___ shares
of Common Stock which the undersigned is entitled to purchase under the terms
of the within Warrant Certificate, (b) makes the full cash payment
therefor called for by the within Warrant Certificate, or elects a Cashless
Exercise or In-Kind Exercise as provided therein, or elects to cancel
outstanding indebtedness due and payable by the Company to the Holder under the
convertible senior subordinated promissory notes issued pursuant to the Note
Purchase Agreement as provided in the within Warrant Certificate, and
(c) directs that the Common Stock issuable upon exercise of said Warrants
be issued as described hereunder.

 

	 	

	 	(Name)
	 	 
	 	

	 	(Address)
	 	 
	 	 
	 	 
	 	

	 	SIGNATURE
	 	 
	 	 
	Dated:Prepared by MerrillDirect

Exhibit 10.9

______________________________________________________________________________

 

 

ELECTRIC CITY CORP.

SECURITIES PURCHASE AGREEMENT

Dated as of July 31, 2001

 

______________________________________________________________________________

SECURITIES PURCHASE AGREEMENT

             This
Securities Purchase Agreement, is entered into as of July 31, 2001 (as it may
be amended from time to time, this “Agreement”) between Electric City
Corp., a Delaware corporation (the “Company”), and the Purchasers listed
on Schedule I hereto (each, a “Purchaser” and collectively, the “Purchasers”).

WITNESSETH

             WHEREAS,
the Company desires to sell and issue to the Purchasers 1,600,000 shares of its
Series A Convertible Preferred Stock, $.01 par value per share (“Series A
Preferred Stock”), together with warrants to purchase 400,000 shares of
Series A Preferred Stock, 320,868 shares of its common stock, par value $0.0001
(“Common Stock”), and warrants to purchase 3,000,000 shares of its
Common Stock; and

             WHEREAS,
each of the Purchasers desires, severally, to purchase a portion of such
securities, each in the amounts as set forth on Schedule I hereto, from
the Company, on the terms and subject to the conditions set forth herein.

AGREEMENT

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

ARTICLE I

DEFINITIONS

             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:

                           “Additional
Purchaser” shall have the meaning set forth in Section 2.3 hereof.

                           “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 A Preferred Stock Warrants, the Common Stock Warrants,
the Placement Agent Warrants and the Trading Agreement.

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

                           “Bridge
Notes” means those certain notes, as may be amended from time to time,
issued by the Company to Newcourt under the Note Purchase Agreement.

                           “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.

                           “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 A
Convertible Preferred Stock of the Company, in the form attached hereto as Exhibit
“A”.

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

                           “Charter
Amendment” shall have the meaning set forth in Section 3.1(h)
hereof.

                           “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
Purchasers 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 each
Purchaser to purchase 750,000 shares of Common Stock, as evidenced by the
Warrant Certificate substantially in the form of Exhibit “E” attached
hereto, 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.

                           “ERISA”
shall have the meaning set forth in Section 5.15(a) hereof.

                           “Escrow
Agent” shall have the meaning given to it in the Escrow Agreement.

                           “Escrow
Agreement” means that certain Escrow Agreement of even date herewith by and
among Placement Agent, the Purchasers (other than Newcourt) and  American National Bank and Trust Company of
Chicago, as Escrow Agent.

                           “Escrowed
Funds” shall have the meaning set forth in Section 2.2 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, substantially in the
form of Exhibit “B” attached hereto, as the same may be amended from
time to time in accordance with the terms thereof.

                           “Joinder
Agreement” means the joinder agreement to be entered into by each
Additional Purchaser, substantially in the form of Exhibit “H” attached
hereto, as the same may be 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.

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

                           “Newcourt”
means Newcourt Capital USA Inc., a Delaware corporation.

                           “Note
Purchase Agreement” means that certain Convertible Senior Subordinated
Promissory Note and Warrant Purchase Agreement dated as of April 18, 2001 by
and between the Company and Newcourt, as amended by the First Amendment thereto
of even date herewith,  as the same may
be further amended from time to time.

                           “Losses”
shall have the meaning set forth in Section 8.1 hereof.

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

                           “OIP”
means Originators Investment Plan, L.P.

                           “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” means Newcourt Capital Securities, Inc., a Delaware corporation.

                           “Placement
Agent Warrants” means the warrants issued by the Company to the Placement
Agent to purchase 3,314,830 shares of Common Stock, as the same may be amended
from time to time in accordance with the terms thereof.

                           “PPM”
means that certain Confidential Private Placement Memorandum of the Company
dated February 16, 2001, including any supplements thereto issued prior to the
Closing Date.

                           “Preferred
Shares” means shares of Series A Preferred Stock.

                           “Projections”
shall have the meaning set forth in Section 5.24 hereof.

                           “Properties”
shall have the meaning set forth in Section 5.16(c) hereof.

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

                           “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
A Preferred Stock” shall have the meaning set forth in the Recitals to this
Agreement.

                           “Series
A Preferred Stock Warrants” means the warrants to be issued by the Company
to each Purchaser to purchase 100,000 shares of Series A Preferred Stock, as
evidenced by the Warrant Certificate substantially in the form of Exhibit
“D” attached hereto, as the same may be amended from time to time in
accordance with the terms thereof.

                          “Stated
Value” of the Series A Preferred Stock shall mean $10.00 per share.

                           “Stockholders
Agreement” means the Stockholders Agreement, substantially in the form of Exhibit
“C” attached hereto, as the same maybe amended from time to time in
accordance with the terms thereof.

                           “Stock
Trading Agreement” means the Stock Trading Agreement, substantially in the
form of Exhibit “F” attached hereto, as the same may be 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
required, combined, unitary, group or consolidated returns for any group of
entities that includes the Company or its Subsidiary.

                           “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.

 

ARTICLE
II

ISSUE, PURCHASE AND SALE OF THE SECURITIES

                           2.1        Authorization of Issuance of Series A
Preferred Stock.  The Company has authorized the initial
issuance of (a) the 1,600,000 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, plus such additional shares of Series A Preferred Stock as may be
necessary to pay in-kind accrued but unpaid dividends on the Series A Preferred
Stock and to issue up to 400,000 Preferred Shares upon exercise of the Series A
Preferred Stock Warrants; (b) 400,000 Series A Preferred Stock Warrants; (c)
3,000,000 Common Stock Warrants; (d) the 320,868 Common Shares and (e) the
Placement Agent Warrants (collectively the “Securities”).

                           2.2        Purchase
and Sale of Securities.  Subject to the terms and conditions herein
set forth, the Company hereby agrees to sell to each Purchaser, and each Purchaser
agrees that it will purchase from the Company, at the Closing (as defined
herein), for an aggregate purchase price to be paid by such Purchaser to the
Company as set forth opposite such Purchaser’s name in the column entitled
“Purchase Price” on Schedule I (the “Purchase Price”) the number
of shares of Series A Preferred Stock and Common Stock and the number of Series
A Preferred Stock Warrants and Common Stock Warrants, as set forth opposite
such Purchaser’s name on Schedule I. 
Concurrently with the execution of this Agreement each Purchaser (other
than Newcourt with respect to clause (i) of this sentence) has delivered into
escrow (i) an amount of immediately available funds equal to its Purchase Price
(the “Escrowed Funds”); and (ii) counterpart signature pages of each of
the Stockholders Agreement, the Stock Trading Agreement and the Investor Rights
Agreement.  Distribution of the Escrowed
Funds and the signature pages described in clause (ii) of the preceding
sentence shall be governed by the Escrow Agreement.  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 September 10, 2001, or at such other time and on such other date as the
Purchasers and the Company may agree (the “Closing Date”).  At the Closing, the Company will deliver to
each Purchaser at the offices of Latham & Watkins, 12636 High Bluff Drive,
Suite 300, San Diego, California 92130, or at such other location as the
Purchasers and the Company may agree, one or more stock certificates, as each
Purchaser may request, registered in such Purchaser’s name or otherwise as such
Purchaser may direct, evidencing the shares of Series A Preferred Stock and
shares of Common Stock to be purchased by such Purchaser, together with 750,000
Common Stock Warrants and 100,000 Series A Preferred Stock Warrants, against
payment of the purchase price therefor by wire transfer of immediately
available funds to or upon the order of the Company by the Escrow Agent, and,
in the case of Newcourt, by payment in part through the conversion of the
outstanding principal amount and accrued interest thereon under the Bridge
Notes.  The Purchasers’ obligations under
this Agreement shall be several and not joint.

 

                           2.3        Additional Purchase and Sale of
Series A Preferred Stock and Series A Preferred Stock Warrants.  Subsequent to the date of this Agreement and
prior to the Closing, the Company may enter into an additional securities
purchase agreement, in a form substantially similar to this Agreement and its
exhibits and attachments, providing for the sale by the Company to Westend
Capital (and/or its Affiliates) (each, an “Additional Purchaser”) solely
of not more than 400,000 shares of Series A Preferred Stock in the aggregate
and Series A Preferred Stock Warrants to purchase not more than 100,000 shares
of Series A Preferred Stock in the aggregate, in exchange for an aggregate cash
purchase price for such preferred stock and warrants of not less than
$4,000,000, and containing such additional or different terms and conditions as
are set forth on Schedule 2.3 attached hereto.  At or prior to the closing under the additional securities
purchase agreement, each Additional Purchaser shall execute and deliver to the
Company a Joinder Agreement pursuant to which such Additional Purchaser shall
agree to be bound by and become a party to the Stockholders Agreement, the
Stock Trading Agreement and the Investor Rights Agreement.  The Company will conduct the closing under
such additional securities purchase agreement, if any, concurrently with the
Closing under this Agreement.  Each
Purchaser irrevocably consents to the Company’s entering into such additional
securities purchase agreement and consummating such purchase and sale.  Any such purchase and sale shall be
conducted in accordance with all applicable laws, rules and regulations and the
rules of the American Stock Exchange. 
Neither the execution of an additional securities purchase agreement nor
the consummation of any such purchase and sale shall be a condition to the
parties’ respective obligations under this Agreement.

 

ARTICLE III

CONDITIONS
OF CLOSING

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

                           (a)         Receipt of Securities.  Each Purchaser shall have received delivery
of the Securities purchased by it in accordance with Section 2.2 and
each Purchaser shall have purchased the Securities pursuant to this Agreement.

                           (b)        Opinion of the Company’s Counsel.  Such Purchaser shall have received from
Schwartz, Cooper, Greenberger & Krauss, Chartered, special counsel to the
Company in connection with this transaction, an opinion, dated the Closing
Date, as to the matters set forth on Exhibit “G” attached hereto, in
form and substance reasonably satisfactory to such Purchaser and counsel.

                           (c)         Stockholders Agreement.  The Stockholders Agreement shall have been
entered into and delivered by the parties thereto other than such Purchaser.

                           (d)        Investor Rights Agreement.  The Investor Rights Agreement shall have
been entered into and delivered by the parties thereto other than such
Purchaser.

                           (e)         Stock Trading Agreement.  The 
Stock Trading Agreement shall have been entered into and delivered by
the parties thereto other than such Purchaser. 
Each of the Existing Stockholders (as defined in the Stock Trading
Agreement) shall have executed and delivered the amendments referred to in
Article III of the Stock Trading Agreement, in form and substance reasonably
satisfactory to Purchasers.

 

                           (f)         Board Designees.  Two of the 10 current members of the Board
of Directors of the Company shall have resigned and the individuals designated
by each Purchaser with MSDW and OIP being deemed to be one Purchaser for
purposes of this Section 3.1(f)) in writing shall have been elected to
serve on the Board of Directors of the Company by such Board.

                           (g)        Expenses.  The Company shall have paid (i) the
Placement Agent’s placement fee of 5% of the aggregate gross proceeds of the
Securities purchased hereunder, (ii) 
the reasonable fees and expenses of Latham & Watkins as special
counsel to the Placement Agent and Purchasers incurred in connection with the
private placement contemplated by this Agreement and in connection with the
transactions contemplated by the Note Purchase Agreement, (iii) the reasonable
fees and expenses for each Purchaser’s counsel up to $25,000 per Purchaser and
(iv) the out-of-pocket expenses of the Placement Agent incurred  in connection with the private placement
contemplated by this Agreement and in connection with the transactions
contemplated by the Note Purchase Agreement.

                           (h)        Certificate of Designations; Charter
Amendment.  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. The Board of Directors and the stockholders of the
Company shall have approved a charter amendment that increases the Company’s
authorized Common Stock from 60,000,000 shares to 85,000,000 shares (the “Charter
Amendment”) and the Charter Amendment shall have been filed with the
Secretary of State of the State of Delaware and shall be in full force and
effect.

                           (i)          Amendment of By-laws; Authorized
Number of Directors.  The Company
shall have amended its By-laws to permit the Board to be comprised of up to
seventeen (17) directors.  The Board
shall have fixed by resolution the authorized number of directors that comprise
the Board at twelve (12).

                           (j)          Issuance of Capital Stock.  Neither the Company nor any of its
Subsidiaries shall have amended its certificate of incorporation (other than as
contemplated in Section 3(h) above) or by-laws (other than as
contemplated by Section 3(i) above) nor issued any shares of capital
stock or securities exercisable for or convertible into shares of capital stock
(other than options or warrants to purchase Common Stock issued in the ordinary
course of business and on  terms
consistent with past practice not to exceed options or warrants to purchase
more than 100,000 shares of Common Stock), nor granted any additional stock
appreciation rights or altered the terms of any stock appreciation rights
existing on the date hereof, in either case subsequent to the date hereof and
prior to the Closing.

 

                           (k)         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 at least three (3) of the
Purchasers (with MSDW and OIP being deemed a single Purchaser for this purpose)
(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”).

                           (l)          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 such
Purchaser and its special counsel, and the Purchasers and their special counsel
shall have received all such counterpart originals or certified or other copies
of such documents as they may reasonably request.

                           (m)        Bridge Notes.  Newcourt shall have delivered to each
Purchaser (other than itself) a writing in form and substance reasonably
satisfactory to such Purchaser, stating that (i) as of the Closing Date there
has been no Event of Default (as defined in the Bridge Notes) under any of the
Bridge Notes or that any such Events of Default have been waived by Newcourt;
and (ii) it shall convert the principal amount of indebtedness owed by the
Company to Newcourt evidenced by all Bridge Notes, plus accrued interest
thereon, as partial payment against the Purchase Price of the Securities to be
purchased by Newcourt hereunder.

                           (n)        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.

                           (o)        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(k), 3.1(l),
3.1(n), 3.1(r), 3.1(s), and 3.1(u) hereof have been
satisfied on and as of such date.

                           (p)        Secretary’s Certificate.  Such 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; (iii) evidence of the approval by the stockholders of the Company
of this Agreement and the Ancillary Agreements and the transactions
contemplated hereby and thereby, the Charter Amendment and such other matters
for which stockholder approval is required under applicable laws, rules and
regulations and the rules of the American Stock Exchange or evidence reasonably
satisfactory to such Purchaser and its special counsel that such approval is
not required; and (iv) the Charter Amendment and the Certificate of
Designations, as filed with the Secretary of State of the State of Delaware.

 

                           (q)        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 such 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 each Purchaser is subject.

                           (r)         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 such Purchaser and its special counsel shall have been furnished with
appropriate evidence thereof.

                           (s)         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.

                           (t)         Execution and Delivery of the
Placement Agent Warrants.  The
Company shall have executed and delivered the Placement Agent Warrants to the
Placement Agent.

                           (u)        Listing.  The Company shall have 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 A Preferred
Stock (including shares of Series A Preferred Stock issuable upon the exercise
of the Series A Preferred Stock Warrants), the Common Shares, and the Common
Stock issuable upon exercise of the Placement Agent Warrants and 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 with respect to the Securities purchased hereunder.

                           (b)        Stockholder Approval.  The Company shall have received all required
approval by the stockholders of the Company of this Agreement and the
transactions contemplated hereby, the Charter Amendment, and such other matters
for which stockholder approval is required under applicable laws, rules and
regulations and the rules of the American Stock Exchange.

ARTICLE IV

CERTAIN
COVENANTS

                           4.1        Conduct
of the Business.  From the date of this Agreement to the
Closing, the Company shall refrain from taking any action that would render any
representation or warranty contained in this Agreement inaccurate in any
material respect.  From the date of this
Agreement to the Closing, except as requested or consented to by at least 66-2/3%
of the Purchasers in writing (with MSDW and OIP being deemed a single Purchaser
for this purpose), the Company shall conduct its business only in the ordinary
course of business consistent with past practice, and shall use its best
commercial efforts to preserve intact its business and its relationships with
its employees, suppliers and others having business relationships with it, and
not to take any action inconsistent with this Agreement or with the
consummation of the Closing.  Without
limiting the generality of the foregoing, except as contemplated by this
Agreement or as set forth on Schedule 4.1, from the date of this Agreement to
the Closing, the Company shall not without the prior written consent of at
least 66-2/3% of the Purchasers (with MSDW and OIP being deemed a single
Purchaser for this purpose):

             `            (a)        
take any actions that are set forth in Section 6(e) of the Certificate of
Designations entitled “Special Approval Rights,” which action would otherwise
require the approval of the holders of the Series A Preferred Stock if the shares
of Series A Preferred Stock to be issued at the Closing were already
outstanding;

                           (b)        issue any equity securities, or any
options, rights or warrants to acquire any equity securities, or any other
securities convertible into or exercisable or exchangeable for equity
securities (other than options or warrants to purchase Common Stock issued in
the ordinary course of business on terms consistent with past practice not to
exceed options or warrants to purchase more than 100,000 shares of Common
Stock);

                           (c)         fail to maintain insurance policies of
the Company currently in force;

                           (d)        waive any rights of material value, or
terminate or amend any material agreement;

                           (e)         enter into or adopt any Employee
Benefit Plan;

                           (f)         fail to timely file any required filing
with the Securities and Exchange Commission;

 

                           (g)        sell, lease, transfer, mortgage, incur any liens on or
assign any material assets of the Company or its Subsidiaries, tangible or
intangible, other than items held for sale for a fair consideration in the
ordinary course of business consistent with past practice;

                           (h)        grant any increase in the base
compensation of or agree to pay a bonus to any of the directors, officers or
employees of the Company other than ordinary annual increases consistent with
past practice and not in excess of 5% of such Person’s base compensation; or         

                           (i)          enter into any contract or other
agreement to do any of the foregoing.

                           4.2        Financial
Statements and Other Reports.  After the Closing Date, the Company agrees
to send the following reports to each holder of Series A 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 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 each Purchaser until such
Purchaser transfers, assigns (except in the case of an assignment to an
Affiliate) or sells all of its Series A Preferred Stock (a) 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 (b) 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 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.

 

                           Each
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, each 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 any Purchaser such
information as such Purchaser may reasonably request.

                           4.3        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.

                           4.4        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.

                           4.5        Stockholder
Approval.  The Company shall use its reasonable best
efforts to obtain all required approval by the stockholders of the Company of
this Agreement and the Ancillary Agreements and the transactions contemplated
hereby and thereby, the Charter Amendment, and such other matters required
hereunder or thereunder for which stockholder approval is required under
applicable laws, rules and regulations and the rules of the American Stock
Exchange.  Any notices, proxies, proxy
statements or information statements to be furnished to the Company’s stockholders
in connection with obtaining the stockholder approvals referred to in this Section
4.5 shall be subject to the reasonable approval of the Purchasers and their
special counsel prior to their use.  The
Company shall furnish drafts of any such notices, proxies, proxy statements or
information statements to Purchasers and their special counsel, and provide
them with an opportunity to review and provide comments on any such materials,
a reasonable period of time prior to the earlier of the filing of such
materials with the Securities and Exchange Commission or otherwise furnishing
them to stockholders.

                           4.6        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.

 

                           4.7        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.

                           4.8        Placement
Agent Fee For Series A Preferred Stock Warrants.  The Company shall promptly pay Placement
Agent by wire transfer of immediately available funds to an account designated
by Placement Agent 5% of the aggregate gross proceeds obtained by the Company
in connection with each exercise (in whole or in part) by a Purchaser of its
Series A Preferred Stock Warrants, such payment to be made within three (3)
Business Days of each such exercise.

                           4.9        Amendments
to Existing Trading Agreements.  From the date hereof until the termination
of the Stock Trading Agreement, except as contemplated by the second sentence
of Section 3.1(e), the Company shall not amend any trading agreement between it
and any Existing Investor (as defined in the Stock Trading Agreement) without
the written consent of at least three (3) of the Purchasers (it being
understood that MSDW and OIP shall be treated as a single Purchaser for
purposes of this Section 4.9).

                           4.10      Waivers.  The Company shall use commercially
reasonable efforts to obtain waivers prior to the Closing from each security
holder of the Company and each holder of warrants, options, or similar rights
to purchase capital stock of the Company who has registration rights that
conflict or are inconsistent with the rights to be granted to the Purchasers
under the Investor Rights Agreement. 
The Company shall also use commercially reasonable efforts to seek
waivers or amendments reasonably satisfactory to the Purchasers of the letter
agreements set forth in Schedule 5.2(c).

                           4.11      Hoppensteadt’s
Right of First Refusal.  The Company shall use commercially
reasonable efforts to terminate Dale Hoppensteadt’s right of first refusal and
right of first offer with respect to certain assets of Switchboard Apparatus,
Inc., which rights are set forth in Schedule 5.5.

                           4.12      American
National Bank.  The Company shall use commercially
reasonable efforts to obtain an acknowledgment letter from American National
Bank and Trust Company of Chicago stating that it does not consider a dividend
or distribution in capital stock of the Company to be a distribution under that
certain Loan Agreement between it and the Company dated March 22, 2001.

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 the Purchasers 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,
except that the Company does not have authority to issue more than 60,000,000
shares of its Common Stock and will not have such authority unless its
stockholders approve the Charter Amendment and the Charter Amendment is duly
filed with the Secretary of State of Delaware. 
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 other than approval of the Charter
Amendment by the Company’s stockholders. 
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
will, on or prior to the Closing Date, be duly authorized and, when issued,
will be validly issued, fully paid and nonassessable and subject to no
preemptive rights.  Assuming the
accuracy of the representations of the Purchasers 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 A Preferred Stock that is
issuable upon exercise of the Series A Preferred Stock Warrants, and the shares
of Common Stock issuable upon the exercise of the Common Stock Warrants and the
Placement Agent Warrants, will, on or prior to the Closing Date, be duly
authorized and reserved for issuance, will be subject to no preemptive rights
and, when issued upon such conversion or exercise, will be validly issued,
fully paid and nonassessable. Assuming the accuracy of the representations of
the Purchasers 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,
subject to stockholder approval, reserved for issuance 3,700,000 shares of
Series A Preferred Stock and 37,000,000 shares of Common Stock for issuance
upon conversion thereof.  In addition,
the Company has reserved for issuance 6,314,830 shares of Common Stock issuable
upon exercise of the Common Stock Warrants and the Placement Agent Warrants.

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

                           5.2        Capital
Stock.

                           (a)         As of the date hereof, the Company has
authorized 60,000,000 shares of Common Stock and 5,000,000 shares of preferred
stock.  As of the date hereof, the
Company has 30,722,168 issued and outstanding shares of Common Stock and no
shares of preferred stock issued and outstanding.  As of the Closing Date, the Company will have authorized
85,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, of
which 3,700,000 will have been designated Series A Preferred Stock.  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, 2000, none of the
Company or any of its Subsidiaries has received any written notice or other
written communication from any Governmental Entity regarding (i) any
revocation, withdrawal, suspension, termination or modification of, or the imposition
of any material conditions with respect to, any Regulatory Approval, (ii) any
violation of any law by the Company or any of its Subsidiaries, or (iii) any
other limitations on the conduct of business by the Company or any of its
Subsidiaries.

                           5.4        Burdensome
and Conflicting Agreements and Charter Provisions.  Neither the execution or delivery of the
Transaction Documents by the Company, nor the offering, issuance and sale of
the Securities by the Company, nor fulfillment of, or compliance with, the terms
and provisions of the Transaction Documents and the Series A Preferred Stock by
the Company, nor the issuance of Series A Preferred Stock upon exercise of the
Series A Preferred Stock Warrants, nor the issuance by the Company of shares of
Common Stock upon conversion of the Series A Preferred Stock as provided in the
Certificate of Designations, or upon exercise of the Common Stock Warrants or
the Placement Agent 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 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, 2000 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, 2000, all certified by BDO Seidman LP, 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, 2001 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.  Except as
set forth in Schedule 5.8,  the
Company has incurred no material liabilities since March 31, 2001, other
than those incurred in the ordinary course. 
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, 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, 2000.

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

 

                           5.10      Offering of Securities.  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, including the Placement Agent Warrants (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 contemplated hereby
or by the Ancillary Agreements as a result of any act or omission by the
Company, and the Company will hold the Purchasers 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 A
Preferred Stock will be used by the Company in the manner described in Schedule
5.12.

                           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”) except for those items listed
on Schedule 5.13(a), which rights shall have been obtained by the
Closing Date.  Schedule 5.13(a)
sets forth a full and complete list of all intellectual property rights of the
Company and its Subsidiaries.  There is
no claim or action by any Person pertaining to, or proceeding pending, or to
the Company’s knowledge threatened, that challenges the rights of the Company
or its Subsidiaries with respect to any Company IP.  To the Company’s knowledge, neither the Company’s nor any of its
Subsidiaries’ current and intended products and services infringe on any
patents, licenses, trademarks, service marks, service names, trade names,
copyrights or other intellectual property rights held by any Person and neither
the Company nor any of its Subsidiaries is aware of any facts or circumstances
that might give rise to any of the foregoing.

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

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

 

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

                           (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 or penalty imposed under Section 4975 of the Code or
Section 502 of ERISA.  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.

                           (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 each of John Mitola and Brian
Kawamura 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. 
The Company has delivered to the Purchasers copies of all agreements and
documents related to all transactions listed on Schedule 5.18.

 

                           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.  Except as set forth on Schedule 5.19, 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 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, 2000 (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 date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to Purchasers 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 the
Purchasers under the Investor Rights Agreement do not in any way conflict with
and are not inconsistent 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. 
The Company has delivered to the Purchasers copies of all agreements and
documents relating thereto.

 

                           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      Projections.  Prior to the date hereof, the Company and
the Placement Agent delivered to the Purchasers financial projections relating
to the Company dated May 25, 2001 (the “Projections”). In the reasonable
opinion of management of the Company, the assumptions used in preparation of
the Projections were reasonable when made and continue to be reasonable as of
the date hereof and as of the Closing Date. 
The Projections have been prepared in good faith and give effect to the
transactions contemplated by this Agreement and the Ancillary Agreements.

                           5.25      Commission
Documents.  Except as set forth in Schedule 5.25,
the Company has filed all registration statements, proxy statements,
information statements, reports and other documents required to be filed by it
under the Securities Act or the Exchange Act, and all amendments thereto
(collectively, the “Commission Documents”)  Each Commission Document when filed with the Commission was true
and accurate in all material respects and in compliance in all material
respects with the requirements of its respective report form and the rules and
regulations of the Commission.  No
Commission Document contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements contained therein, in light of the circumstances
under which made, not misleading.

                           5.26      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 Purchasers in writing by or on behalf of the Company by its authorized
representatives or agents in connection herewith, including without limitation,
the PPM, 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 PURCHASERS

             Each
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 and Placement Agent
Warrants 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 such Purchaser will hold the Company harmless
from any claim, demand or liability for broker’s or finder’s or placement fees
or commissions alleged to have been incurred in connection with the sale or the
issuance of the Securities, due to any actions of the Purchaser.

ARTICLE VII

TERMINATION

                           7.1        Termination.  This Agreement
may be terminated at any time with respect to the applicable parties prior to
the Closing:

                           (a)         by mutual written agreement of the
Company and the Purchasers;

                           (b)        by a Purchaser, (provided that the
terminating party (or parties) is not then in material breach of any
representation, warranty, covenant or other agreement contained in this
Agreement) if the Closing shall not have been consummated on or before
September 17, 2001; provided, however, if American National Bank
or another lender advances not less than $1.0 million aggregate principal
amount of additional senior debt financing to the Company prior to such date
and Newcourt has agreed, in writing, to extend the maturity date on all Bridge
Notes to October 15, 2001, then such date shall be automatically extended from
September 17, 2001 to October 15, 2001;

                           (c)         by a Purchaser, on the one hand, or the
Company, on the other hand, if a court of competent jurisdiction or a
governmental, regulatory or administrative agency or commission shall have
issued a non-appealable final order, decree or ruling or taken any other action
having the effect of permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement;

                           (d)        by a Purchaser, on the one hand, or the
Company, on the other hand, (provided that
the terminating party (or parties) is not then in material breach of any
representation, warranty, covenant or other agreement contained in this
Agreement) in the event of a material breach by the other party (or
parties) of any representation or warranty contained in this Agreement that
cannot be or has not been cured within ten (10) days after the giving of
written notice to the breaching party of such breach; or

 

                           (e)         by a Purchaser, on the one hand, or the
Company, on the other hand, (provided that the terminating party (or parties)
is not then in material breach of any representation, warranty, covenant or
other agreement contained in this Agreement) in the event of a material breach
by the other party of any covenant or agreement contained in this Agreement
that cannot be or has not been cured within ten (10) days after the giving of written
notice to the breaching party of such breach.

                           7.2        Effect of Termination.  In the event
of the termination of this Agreement pursuant to Section 7.1,
except as set forth below, this Agreement shall forthwith become void with
respect to the applicable parties and there shall be no liability on the part
of any such party hereto (or any stockholder, director, officer, partner,
employee, agent, consultant or representative of such party); provided, however,
that nothing contained in this Agreement shall relieve any party from liability
for any breach of this Agreement and provided further that Article VIII
shall survive termination of this Agreement.
In the event this Agreement is terminated with respect to any Purchaser for any
reason other than a breach of this Agreement by such Purchaser, then the
Company shall pay to each such Purchaser an amount equal to the difference
between (i) the interest that would have been earned on such Purchaser’s
Escrowed Funds from the date such Escrowed Funds were deposited with the Escrow
Agent until the date such Escrowed Funds are repaid to such Purchaser in
accordance with the terms of the Escrow Agreement at an interest rate equal to
such Purchaser’s internal cost of funds and (ii) the amount of interest paid to
such Purchaser by the Escrow Agent pursuant to the terms of the Escrow
Agreement.   Such payment will be made
by the Company to each Purchaser within ten (10) Business Days of receiving
from such Purchaser a calculation of such Purchaser’s cost of funds, which
calculation shall be certified by such Purchaser’s chief financial officer.

ARTICLE VIII

INDEMNIFICATION

                           8.1        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 each Purchaser and its Affiliates and their respective 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 8.1: (a) for any amount paid in
settlement of claims without the Company’s consent (which consent shall not be
unreasonably withheld or delayed), or (b) to the extent that it is finally
judicially determined that such Losses resulted primarily from the willful
misconduct, bad faith or gross negligence of such 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 VIII 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.

 

                           8.2        Notification.  Each indemnified party under this Article
VIII 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 VIII, 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 VIII, except to the extent that such
failure causes material prejudice to the Company.  In case any such action or other proceeding shall be brought
against any indemnified party and it shall notify the Company of the
commencement thereof, the Company shall be entitled to participate therein and,
to the extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided, however,
that any indemnified party may, at its own expense, retain separate counsel to
participate in such defense. 
Notwithstanding the foregoing, in any action or proceeding in which both
the Company and an indemnified party is, or is reasonably likely to become, a
party, such indemnified party shall have the right to employ separate counsel
at the Company’s expense and to control its own defense of such action or
proceeding if, in the reasonable written opinion of counsel to such indemnified
party (obtained at the expense of the Company), (a) there are or may be legal
defenses available to such indemnified party or to other indemnified parties
that are different from or additional to those available to the Company or (b)
any conflict or potential conflict exists between the Company and such
indemnified party that would make such separate representation advisable; provided,
however, that in no event shall the Company be required to pay fees and
expenses under this Article VIII 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.

                           8.3        Investor
Rights Agreement.  Notwithstanding anything to the contrary in
this Article VIII, 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.

                           8.4        Survival
of Provisions of Article VIII.  The obligations of the Company under this Article
VIII shall survive indefinitely.

ARTICLE IX

MISCELLANEOUS

                           9.1        Dividend
Payments.  The Company agrees that, so long as any
Purchaser shall hold any Series A 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 A Preferred Stock with respect to the place of payment.  The Company agrees to afford the benefits of
this Section 9.1 to any permitted transferee of any Series A Preferred
Stock purchased by any Purchaser hereunder.

                           9.2        Expenses.  The Company agrees to pay, and save the
Purchasers 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 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 A
Preferred Stock or upon exercise of the Common Stock Warrants or the Placement
Agent Warrants, (b) the reasonable fees and expenses of Purchasers’ special
counsel, Latham & Watkins, in connection with the Transaction Documents and
the Certificate of Designations and the transactions contemplated by the Note
Purchase Agreement, and any subsequent modification thereof or consent thereto
(including any proposed modification or consent, whether or not finalized), (c)
the reasonable fees and expenses of each individual Purchaser’s special
counsel, in an amount not to exceed $25,000 per Purchaser, 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 (d) the cost and
expenses, including reasonable attorney’s fees, incurred by Purchasers in
enforcing any of their rights hereunder, including, without limitation, costs
and expenses incurred in any bankruptcy case. 
The obligations of the Company under this Section 9.2 shall
survive the transfer of any Securities by any Purchaser.

                           9.3        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.

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.

 

                           9.4        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 each 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 A Preferred Stock shall be given pro rata to all
holders of shares of Series A Preferred Stock whether or not they give
consent.  Each holder of any shares of
Series A 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 9.4, whether or not such shares of Series A
Preferred Stock shall have been marked to indicate such consent, but any shares
of Series A 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 A Preferred Stock
nor any delay in exercising any rights hereunder or under any shares of Series
A Preferred Stock shall operate as a waiver of any rights of any holder of such
shares of Series A 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.

                           9.5        Notices
to Subsequent Holder.  Except as otherwise provided herein, if any
shares of Series A 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 A Preferred Stock shall be
mailed, all notices, certificates, requests, statements and other documents
required to be delivered to the Purchaser by any provision hereof shall also be
delivered to each such holder.

                           9.6        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
any Purchaser or on such Purchaser’s behalf.

                           9.7        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.

 

                           9.8        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:

                                                     1280
Landmeier Road

                                                     Elk
Grove Village, IL  60007

                                                      Fax No. 847-437-4969

                                                     Attention:  General Counsel.

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

                           9.9        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.

                           9.10      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 New York. 
This Agreement may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement is sought.

                           9.11      Headings;
Table of Contents.  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.

                           9.12      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.

                           9.13      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.

                           9.14      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.

                           9.15      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.

[SIGNATURE
PAGE TO FOLLOW]

 

                           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	PURCHASERS
	 	 
	ELECTRIC
  CITY CORP.,	NEWCOURT
  CAPITAL USA INC.,
	a
  Delaware corporation	a
  Delaware corporation
	 	 
	By:       /s/ John Mitola	By:        /s/ Guy Piazza
	

	

	Name:  John Mitola	Name:    Guy Piazza
	Title:   Chief Executive Officer	

	 	Title:      Vice President
	 	

	 	EP POWER FINANCE, L.L.C.,
	 	a
  Delaware limited liability company
	 	 
	 	By:        /s/ Paul E. McGlinn
	 	

	 	Name	Paul
  E. McGlinn
	 	Title:	Managing
  Director
	 	 	 
	 	MORGAN
  STANLEY DEAN WITTER
	 	EQUITY
  FUNDING, INC., a Delaware corporation
	 	 
	 	By:         /s/ Thomas A. Clayton
	 	

	 	Name:	Thomas
  A. Clayton
	 	Title:	Vice-President
	 	 	 
	 	ORIGINATORS
  INVESTMENT PLAN, L.P., 

  a Delaware limited partnership
	 	 
	 	By:  MSDW OIP Investors, Inc., its general
  partner
	 	By:        /s/ Thomas A. Clayton
	 	

	 	Name:	Thomas
  A. Clayton
	 	Title:	Vice-President
	 	 	 
	 	DUKE
  CAPITAL PARTNERS, LLC,
	 	a
  Delaware limited liability company
	 	By:         /s/ Gerald S. Stalun
	 	

	 	Name:    Gerald S. Stalun
	 	

	 	 
	 	Title:      EVP + Managing Director
	 	

				

[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

SCHEDULE
I

	Purchaser	 	No.
  of Shares of Series A Preferred Stock	 	No.
  of Series A Preferred Stock Warrants	 	No.
  of Shares of Common Stock	 	No.
  of Common Stock Warrants	 	Total
  Aggregate Purchase Price	 
	

	 	

	 	

	 	

	 	

	 	

	 
	 	 	 	 	 	 	 	 	 	 	 	 
	EP Power Finance,
  L.L.C.

  225 W. Washington St.,

  Suite 2185 Chicago, IL 60606

  Fax:  (312) 263-6906 

  Attn : Rick Noble and

  Mark Tarini at

  Two Newton Executive Park

  Suite 200 

  Newton, MA 02462

  Fax:(617)597-3049	 	400,000	 	100,000	 	80,217	 	750,000	 	$	4,000,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Newcourt Capital USA
  Inc. 

  1211 Ave of the Americas,

  22nd Floor

  New York, NY 10036 

  Fax:  (212) 382-9033

  Attn:  Guy Piazza	 	400,000	 	100,000	 	80,217	 	750,000	 	$	4,000,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Morgan Stanley Dean
  Witter Equity Funding, Inc.

  1585 Broadway 

  New York, NY 10036

  Fax:  (212) 761-0260 

  Attn:  Thomas A. Clayton
          Barry Kupferberg	 	380,000	 	95,000	 	76,206	 	712,500	 	$	3,800,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Originators Investment
  Plan, L.P. 1585 Broadway

  New York, NY 10036 

  Fax:  (212) 761-0260 

  Attn:  Thomas A. Clayton 
          Barry Kupferberg	 	20,000	 	5,000	 	4,011	 	37,500	 	$	200,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Duke Capital Partners,
  LLC 

  128 S. Tryon St., 

  Suite 1100 

  Charlotte, NC 28202 

  Fax:  (704) 373-4242 

  Attn:  Dean D’Angelo	 	400,000	 	100,000	 	80,217	 	750,000	 	$	4,000,000	 

 

	ARTICLE
  I DEFINITIONS	 	 
	 	 	 
	ARTICLE
  II ISSUE, PURCHASE AND SALE OF THE SECURITIES 	 
	 	2.1	Authorization
  of Issuance of Series A Preferred Stock	 
	 	2.2	Purchase
  and Sale of Securities	 
	 	2.3	Additional
  Purchase and Sale of Series A Preferred Stock and Series A Preferred Stock
  Warrants	 
	ARTICLE
  III CONDITIONS OF CLOSING 	 
	 	3.1	Purchaser
  Conditions to Closing	 
	 	3.2	Company
  Conditions to Closing	 
	ARTICLE
  IV CERTAIN COVENANTS 	 
	 	4.1	Conduct
  of the Business	 
	 	4.2	Financial
  Statements and Other Reports	 
	 	4.3	Corporate
  Existence; Licenses and Permits; Maintenance of Properties	 
	 	4.4	Securities
  Exchange	 
	 	4.5	Stockholder
  Approval	 
	 	4.6	Best
  Efforts	 
	 	4.7	Insurance	 
	 	4.8	Placement
  Agent Fee For Series A Preferred Stock Warrants	 
	 	4.9	Amendments
  to Existing Trading Agreements	 
	 	4.10	Waivers	 
	 	4.11	Hoppensteadt’s
  Right of First Refusal	 
	 	4.12	American
  National Bank	 
	ARTICLE
  V REPRESENTATIONS, COVENANTS AND WARRANTIES 	 
	 	5.1	Organization;
  Standing and Qualification of Company and its Subsidiaries; Corporate
  Authority	 
	 	5.2	Capital
  Stock	 
	 	5.3	No
  Defaults	 
	 	5.4	Burdensome
  and Conflicting Agreements and Charter Provisions	 
	 	5.5	Title
  to Assets, Etc.	 
	 	5.6	Leases	 
	 	5.7	Contracts	 
	 	5.8	Financial
  Statements	 
	 	5.9	Actions
  Pending	 
	 	5.10	Offering
  of Securities	 
	 	5.11	Broker’s
  or Finder’s Commissions	 
	 	5.12	Application
  of Proceeds	 
	 	5.13	Intellectual
  Property	 
	 	5.14	Taxes	 
	 	5.15	ERISA	 
	 	5.16	Environmental	 
	 	5.17	Insurance	 
	 	5.18	Transactions
  with Affiliates	 
	 	5.19	Employees;
  Labor Matters	 
	 	5.20	Customers,
  Suppliers and Distributors	 
	 	5.21	Investor
  Rights Agreements	 
	 	5.22	Agreements
  with Stockholders	 
	 	5.23	Company
  Qualifies as a “Smaller Enterprise”	 
	 	5.24	Projections	 
	 	5.25	Commission
  Documents	 
	 	5.26	Disclosure	 
	ARTICLE
  VI REPRESENTATIONS OF THE PURCHASERS 	 
	 	6.1	Investment
  Purpose	 
	 	6.2	Accredited
  Investor Status	 
	 	6.3	Authorization;  Enforcement	 
	 	6.4	Broker’s
  or Finder’s Commissions	 
	ARTICLE
  VII TERMINATION 	 
	 	7.1	Termination	 
	 	7.2	Effect of Termination	 
	ARTICLE
  VIII INDEMNIFICATION 	 
	 	8.1	Indemnification
  by Company	 
	 	8.2	Notification	 
	 	8.3	Investor
  Rights Agreement	 
	 	8.4	Survival
  of Provisions of Article VIII	 
	ARTICLE
  IX MISCELLANEOUS 	 
	 	9.1	Dividend
  Payments	 
	 	9.2	Expenses	 
	 	9.3	Restrictive
  Legends	 
	 	9.4	Consent
  to Amendments	 
	 	9.5	Notices
  to Subsequent Holder	 
	 	9.6	Survival
  of Representations, Warranties and Indemnities	 
	 	9.7	Successors
  and Assigns	 
	 	9.8	Notices	 
	 	9.9	Accounting
  Terms	 
	 	9.10	Governing
  Law	 
	 	9.11	Headings;
  Table of Contents	 
	 	9.12	Counterparts	 
	 	9.13	Non-Business
  Days	 
	 	9.14	Further
  Assurances	 
	 	9.15	Integration	 
	 	 	 
					

 

EXHIBIT "A"

FORM OF 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
A 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 July 27, 2001 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 A
Convertible Preferred Stock,” shall consist of 3,700,000 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.

                           “Business
Day” means a day other than a Saturday or Sunday, or other day on which
commercial banks in the City 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.

                           “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 A 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 any class or series of stock of the Corporation authorized
after the date of issuance of the Series A Preferred Stock in accordance with Section
6(e) hereof ranking on a parity with the Series A 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 July 31, 2001 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 A Preferred Stock in accordance with Section
6(e) hereof ranking senior to the Series A Preferred Stock in respect of
the right to receive dividends or the right to participate in any distribution
upon liquidation.

                           “Series
A Preferred Stock” shall have the meaning set forth in Section 2
hereof.

                           “Series
A 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.

                           2.
Designation and Amount.  The
designation of the series of the Preferred Stock shall be “Series A Convertible
Preferred Stock,” par value $.01 per share (the “Series A Preferred Stock”).  The number of shares of Series A Preferred
Stock shall be 3,700,000.  The Series A
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 A 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 A 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
September 30, 2001 until such time as the Series A Preferred Stock is retired
in full; provided, however, that with respect to such first Dividend Payment
Date, the holders of shares of Series A Preferred Stock shall be entitled to
receive, when and if declared by the Board of Directors out of funds legally
available therefor, a cumulative dividend in respect of each share of Series A
Preferred Stock in the amount of (i) $0.25 multiplied by (ii) a fraction equal
to (A) the number of days from (and including) the date of the Securities
Purchase Agreement to (but excluding) such Dividend Payment Date divided by (B)
90.  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 A Preferred Stock
Issue Date, dividends on the Series A Preferred Stock may be paid in cash or
additional shares of Series A Preferred Stock at the sole discretion of the
Board.  The cash equivalent of a share
of Series A Preferred Stock shall be the Stated Value.  After the first Dividend Payment Date
following the third anniversary of the Series A Preferred Stock Issue Date,
dividends on the Series A Preferred Stock shall be paid by the Corporation in
cash only.  Dividends shall accrue and
be cumulative with respect to each share of Series A 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 A 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 A 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 A Preferred Stock, except if such
dividend is allocated pro rata on a share–by–share basis among all
shares of Series A 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 A 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
A Preferred Stock as to dividends or upon liquidation (the Common 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 A 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 A 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 A 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 A
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 A 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 A 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 A Preferred Stock and Parity Stock,
if any, pro-rata based on the number of shares of Series A 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 A
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 A Preferred Stock shall not be
subject to mandatory redemption by the Corporation.

                                        (b)        Optional
Redemption.  Through and including the third anniversary
of the Series A Preferred Stock Issue Date, the shares of Series A Preferred
Stock may not be redeemed by the Corporation.  
At any time after the third anniversary of the Series A Preferred Stock
Issue Date, all, but not less than all, of the outstanding shares of Series A
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 A 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 A 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 A 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 A 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 A 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 A 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 A 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 A 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 A
Preferred Stock, so as to be, and to continue to be available therefor, then
dividends on the shares of the Series A 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 A 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 A Preferred Stock so redeemed (properly endorsed or assigned for
transfer, if the Corporation shall so require and the Notice shall so state),
such shares of Series A 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 A Preferred Stock
may convert all or any portion of his, her or its shares of Series A 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(e), as to which Sections
6(b)-(f) shall apply to the exclusion of any voting rights under this Section
6(a), the holder of record of each share of Series A Preferred Stock shall have
the right to one vote for each share of Common Stock into which such share of
Series A 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
A 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)        Election of Directors.  

                                                     (i)          For so long as at least 800,000 shares
of the Series A Preferred Stock remain issued and outstanding (as adjusted
for stock splits, stock combinations, recapitalizations and the like), the
holders of record of the outstanding shares of Series A Preferred Stock,
voting as a single class to the exclusion of all other classes of the
Corporation’s capital stock, and with each share of Series A Preferred Stock
entitled to one (1) vote per share, shall be entitled to elect four (4)
directors of the Board of Directors of the Corporation and shall not otherwise
be permitted to vote with the holders of record of Common Stock as to the
election of directors of the Corporation. 
If the holders of record of the Series A Preferred Stock for any reason
fail to elect anyone to fill any such directorship, such position shall remain
vacant until such time as the holders of record of the Series A Preferred Stock
elect a director to fill such position, and shall not be filled by resolution
or vote of the Corporation’s Board of Directors or the Corporation’s other
stockholders.

                                                     (ii)         For so long as at least 600,000 shares
but less than 800,000 shares of the Series A Preferred Stock remain issued
and outstanding (as adjusted for stock splits, stock combinations,
recapitalizations and the like), the holders of record of the outstanding
shares of Series A Preferred Stock, voting as a single class to the
exclusion of all other classes of the Corporation’s capital stock, and with
each share of Series A Preferred Stock entitled to one (1) vote per share,
shall be entitled to elect three (3) directors of the Board of Directors of the
Corporation and shall not otherwise be permitted to vote with the holders of
record of Common Stock as to the election of directors of the Corporation.  If the holders of record of the Series A
Preferred Stock for any reason fail to elect anyone to fill any such
directorship, such position shall remain vacant until such time as the holders
of record of the Series A Preferred Stock elect a director to fill such
position, and shall not be filled by resolution or vote of the Corporation’s
Board of Directors or the Corporation’s other stockholders.

                                                     (iii)        For so long as at least 400,000 shares
but less than 600,000 shares of the Series A Preferred Stock remain issued
and outstanding (as adjusted for stock splits, stock combinations,
recapitalizations and the like), the holders of record of the outstanding
shares of Series A Preferred Stock, voting as a single class to the
exclusion of all other classes of the Corporation’s capital stock, and with
each share of Series A Preferred Stock entitled to one (1) vote per share,
shall be entitled to elect two (2) directors of the Board of Directors of the
Corporation and shall not otherwise be permitted to vote with the holders of
record of Common Stock as to the election of directors of the Corporation.  If the holders of record of the Series A
Preferred Stock for any reason fail to elect anyone to fill any such
directorship, such position shall remain vacant until such time as the holders
of record of the Series A Preferred Stock elect a director to fill such
position, and shall not be filled by resolution or vote of the Corporation’s
Board of Directors or the Corporation’s other stockholders.

                                                     (iv)       For so long as at least 200,000 shares
but less than 400,000 shares of the Series A Preferred Stock remain issued
and outstanding (as adjusted for stock splits, stock combinations,
recapitalizations and the like), the holders of record of the outstanding
shares of Series A Preferred Stock, voting as a single class to the exclusion
of all other classes of the Corporation’s capital stock, and with each share of
Series A Preferred Stock entitled to one (1) vote per share, shall be entitled
to elect one (1) director of the Board of Directors of the Corporation and
shall not otherwise be permitted to vote with the holders of record of Common
Stock as to the election of directors of the Corporation.  If the holders of record of the Series A
Preferred Stock for any reason fail to elect anyone to fill any such
directorship, such position shall remain vacant until such time as the holders
of record of the Series A Preferred Stock elect a director to fill such
position, and shall not be filled by resolution or vote of the Corporation’s
Board of Directors or the Corporation’s other stockholders.

                                                     (v)        If less than 200,000 shares of the
Series A Preferred Stock remain issued and outstanding (as adjusted for
stock splits, stock combinations, recapitalizations and the like), each holder
of record of the outstanding shares of Series A Preferred Stock shall have
the right to one vote for each share of Common Stock into which such share of
Series A 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 this
Corporation, and shall be entitled to vote together with holders of Common
Stock as a single class, with respect to the election of directors.  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 A 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).

                                        The
rights granted pursuant to Section 6(b)(i)-(iv) (if the four individuals
described in Section 6(b)(i) hereof have not already been appointed by
the Board on or prior to the Series A Preferred Stock Issue Date) may be
exercised by written consent of the holders of Series A Preferred Stock, at a
special meeting of the holders of Series A Preferred Stock, called as provided
for in Section 6(c), or at any annual meeting of stockholders held for
the purpose of electing directors.

                                        (c)         Vacancies.  If any director so elected by the holders of
the Series A Preferred Stock shall cease to serve as a director before his or
her term shall have expired, the holders of Series A Preferred Stock then
outstanding, by the written consent of the holders of Series A Preferred Stock
or at a special meeting of the holders of Series A Preferred Stock, may elect
the successor to hold such office.  A
special meeting of the holders of Series A Preferred Stock may be called for
upon the written request of the holders of record of more than fifty percent
(50%) of the shares of Series A Preferred Stock then outstanding, addressed to
the Secretary of the Corporation. 
Thereafter, a proper officer of the Corporation shall call a special
meeting of the holders of Series A Preferred Stock, which shall be held at the
earliest practicable date upon the notice required for annual meetings of
stockholders at the place for holding annual meetings of stockholders of the
Corporation or at such other place designated by the Secretary of the
Corporation.  If such meeting shall not
be called by the proper officers of the Corporation within thirty (30) days
after the personal service of such written request upon the Secretary of the
Corporation, or within thirty (30) days after mailing the same within the
United States, by registered mail, addressed to the Secretary, of the receipt
issued by the postal authorities, then the holders of record of more than fifty
percent (50%) of the shares of Series A Preferred Stock then outstanding may
designate in writing a holder of Series A Preferred Stock to call such meeting
at the expense of the Corporation, and such meeting may be called by such
person so designated upon the notice required for annual meetings of
stockholders and shall be held at the place for holding annual meetings of the
Corporation or, if none, at a place designated by such holder.  Any holder of record of Series A Preferred
Stock that would be entitled to vote at such meeting shall have access to the
stock books of the Corporation for the purpose of causing a meeting of
stockholders to be called pursuant to the provisions of this Section 6(c).  Notwithstanding the provisions of this
Section 6(c), however, no such special meeting shall be called if any such
request is received less than 90 days before the date fixed for the next annual
meeting of stockholders.

                                        (d)        Removal.  Any director elected by the holders of the
Series A Preferred Stock may be removed during such director’s term of office,
either for or without cause, by and only by the holders of the Series A
Preferred Stock, by written consent of the holders of Series A Preferred Stock
or at a special meeting of holders of Series A Preferred Stock for that
purpose.

                                        (e)         Special Approval Rights.

                                                     (i)          For so long as any shares of Series A
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 shares of Series A 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): (A) enter into any agreement that would restrict the Corporation’s
ability to perform under the Securities Purchase Agreement; (B) 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 A Preferred Stock; (C) engage in any transaction that would
impair or reduce the rights, powers or preferences of the Series A
Preferred Stock as a class; (D) complete any Change of Control Transaction (provided
that if less than 400,000 shares of the Series A Preferred Stock are then
outstanding (as adjusted for stock splits, stock combinations,
recapitalizations and the like) and the then holders of Series A Preferred
Stock refused to consent to such Change of Control Transaction pursuant to this
Section 6(e)(i), the Corporation may, at its option, redeem all, but not
less than all, of such Series A 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; or (E)
change the authorized number of directors of the Board of Directors of the
Corporation, except pursuant to Section 6(f).

                                                     (ii)         For so long as at least 800,000 shares
of Series A 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 shares of Series A
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): 
(A) authorize or issue any Senior Stock or Parity Stock or any
securities convertible, exercisable or exchangeable into such securities, other
than (x) Series A Preferred Stock issued upon exercise of the Series A
Preferred Stock Warrants issued pursuant to the Securities Purchase Agreement,
(y) Series A Preferred Stock issued to the Additional Purchasers (as defined in
the Securities Purchase Agreement), if any, or issued upon exercise of the
Series A Preferred Stock Warrants issued to the Additional Purchasers, if any,
in compliance with Section 2.3 of the Securities Purchase Agreement, or (z)
Series A Preferred Stock issued as payment in kind of any accrued but unpaid
dividends on the Series A Preferred Stock; (B) authorize or issue any options,
rights or warrants to purchase capital stock of the Corporation, other than
Series A Preferred Stock Warrants issued to the Additional Purchasers, if any,
in compliance with Section 2.3 of the Securities Purchase Agreement, 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; (C) authorize or issue any debt securities of the
Corporation or any of its subsidiaries, other than debt under the existing
revolving lines of credit in effect as of the date of this resolution or the
replacement thereof on substantially similar terms, and 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 the
redemption of the Series A Preferred Stock pursuant to Section 5 or
Section 6(e)(i)(D) hereof; (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;
(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
of Series A 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 shares of Series A 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):  (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 (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
holders of record of shares representing at least 75% of the shares of Series A
Preferred Stock then outstanding, voting as a single class, with respect to Section
6(e)(i) and at least 66 ­2/3% of the shares of Series A Preferred Stock
then outstanding, voting as a single class, with respect to Sections
6(e)(ii) and 6(e)(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(e).

             

                                        (f)         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 A
Preferred Stock pursuant to any of the special approval rights set forth in Section
6(e) (each, an “Event of Default”) it shall provide notice of such
violation to all holders of Series A Preferred Stock.  Any holder of Series A 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 A
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 A Preferred Stock,
(i) the holders of record of the shares of Series A Preferred Stock then
outstanding (in addition to their rights to vote, as a single class, to elect
directors pursuant to Section 6(b)) shall be entitled to vote, as a
single class to the exclusion of all other classes of the Corporation’s capital
stock, to elect that number of additional directors of the Board so that, when
such additional number of directors is added to the number of directors then
elected to the Board of Directors by the holders of record of the Series A
Preferred Stock pursuant to Section 6(b), that sum 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(f) shall terminate immediately when less than 200,000 shares of
Series A 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(f) may be exercised by written consent of the holders of Series A
Preferred Stock, at a special meeting of the holders of Series A Preferred
Stock, called as provided for in Section 6(c), or at any annual meeting
of stockholders held for the purpose of electing directors.  If any director elected by the holders of
the Series A Preferred Stock pursuant to this Section 6(f) shall cease
to serve as a director before his or her term shall have expired, any such
vacancy shall be filled solely in the manner set forth in Section 6(c).
Any director elected by the holders of the Series A Preferred Stock pursuant to
this Section 6(f) may be removed during such director’s term of office
solely in the manner set forth in Section 6(d).

                           7.  Conversion Rights.

                                        (a)         Optional Conversion of Series A
Preferred Stock.  The holder of any
shares of Series A 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
A Preferred Stock Issue Date to convert any or all of such holder’s shares of
Series A Preferred Stock into such number of fully paid and nonassessable
shares of Common Stock (the “Conversion Shares”) as determined for each
share of Series A 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 A Preferred
Stock to convert Series A Preferred Stock into Common Stock, the holder of such
shares of Series A Preferred Stock to be converted shall surrender the
certificates representing the shares of Series A 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 A 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 A 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 A 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 A Preferred Stock Issue Date, in additional shares of
Series A Preferred Stock.

                                        (c)         Delivery of Stock Certificates.  The holder of any shares of Series A
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 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 A Preferred Stock and each holder of any shares
of Series A Preferred Stock shall deliver to the Corporation at the office of
the Corporation the certificate or certificates for all shares of Series A
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 A 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 A 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 A Preferred Stock
in a name other than that in which the shares of Series A 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 A 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 A Preferred Stock shall receive, the total number of shares of
Series A Preferred Stock surrendered for conversion by such holder shall be
aggregated.  

                                                     (ii)         On the first Dividend Payment Date on
which accrued dividends are paid in full to holders of Series A Preferred Stock
following the optional conversion pursuant to Section 7(a) of all or any
portion of the Series A Preferred Stock, the Corporation shall pay any
dividends accrued on such converted Series A 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 A Preferred Stock Issue Date, in additional shares of
Series A Preferred Stock.

                                        (e)         Adjustment of Conversion Price Upon
Issuance of Common Stock.  If and
whenever after the Series A 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 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.

                                                     (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 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 A
Preferred Stock Issue Date, (B) the issuance of Common Stock upon conversion of
the Series A 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 A Preferred Stock upon exercise of the Series A Preferred
Stock Warrants (as defined in the Securities Purchase Agreement), (E) the
issuance of 320,868 shares of Common Stock pursuant to the Securities Purchase
Agreement, and (F) the issuance of Series A Preferred Stock to the Additional
Purchasers (as defined in the Securities Purchase Agreement), if any, the
issuance of Series A Preferred Stock Warrants to the Additional Purchasers, if
any, and the issuance of Series A Preferred Stock upon exercise of the Series A
Preferred Stock Warrants issued to the Additional Purchasers, if any, in each
case in compliance with Section 2.3 of 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 A 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 A 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 A 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 A
Preferred Stock.

                                        (ii)  If at any time or from time to time on or
after the Series A 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 A Preferred Stock shall be entitled,
at such holder’s option, to acquire (whether or not such holder’s Series A
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 A 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 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 A 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
A 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 A 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 A 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 A 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 A 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 A 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 A 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 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 A 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 A Preferred Stock as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
conversion of all outstanding Series A 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 A 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 A 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 A 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 A Preferred Stock or the
shares of Series A Preferred Stock issuable upon exercise of outstanding
options, rights or warrants to purchase Series A 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 A Preferred Stock, solely for
the purpose of issue upon the declaration of a dividend on the outstanding
Series A Preferred Stock, such number of shares of Series A Preferred Stock as
shall then be issuable as a dividend on the Series A Preferred Stock.  The Corporation covenants that all shares of
Series A 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 A Preferred
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 A 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
A Preferred Stock to issue as dividends on the then outstanding shares of
Series A Preferred Stock, the Corporation covenants to amend this resolution to
increase the number of shares of authorized Series A 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 A
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 A Preferred Stock and the shares of Series A Preferred Stock
then issuable upon the exercise of options, rights or warrants to purchase Series
A 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 A 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 A Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any Series A
Preferred Stock in any manner that interferes with the timely conversion of
such Series A 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 A 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 A 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 occurrence of such action or deliverable upon conversion of shares of
Series A 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 A 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 A
Preferred Stock in a name other than that in which the shares of Series A
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 A 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 A 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 and 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 A 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 A Preferred Stock certificate, or in lieu of and substitution
for the Series A Preferred Stock certificate lost, stolen or destroyed, a new
Series A Preferred Stock certificate of like tenor and representing an
equivalent amount of shares of Series A Preferred Stock, but only upon receipt
of evidence of such loss, theft or destruction of such Series A 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]

                           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 September ___,
2001.

ELECTRIC
CITY CORP.

 

	 	By	 
	 	 	

	 	 	Name:  John Mitola
	 	 	Title:  Chief Executive Officer

 

EXHIBIT B

INVESTOR RIGHTS AGREEMENT

             This
Investor Rights Agreement, dated as of July 31, 2001 (as it may be amended from
time to time, this “Agreement”), is made by and among Electric City
Corp., a Delaware corporation (the “Company”), and each of the parties
set forth on Schedule I attached hereto from time to time (collectively, the “Investors”
and, together with the Company, the “Parties”) and shall become
effective on the Closing Date (as defined in the Securities Purchase
Agreement).

WITNESSETH

             WHEREAS,
the Parties are parties to the Securities Purchase Agreement, dated as of
July 31, 2001 (as it may be amended from time to time, the “Securities
Purchase Agreement”), whereby the Company will sell and certain of the
Investors will buy shares of the Company’s Series A Convertible Preferred Stock,
par value $0.01 per share (the “Series A Preferred Stock”), together
with shares of Common Stock, warrants to purchase Common Stock, and warrants to
purchase Series A Preferred Stock (collectively, the “Securities”); and

             WHEREAS,
it is a condition to the obligations of the Investors to purchase the
Securities pursuant to the Securities Purchase Agreement that the Parties
execute and deliver this Agreement.

AGREEMENT

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

ARTICLE
I

DEFINITIONS

             1.1        Definitions.  All terms capitalized but not defined herein
shall have the meaning attributable to such terms in the Securities Purchase
Agreement, except where the context otherwise requires.  The following additional terms when used in
this Agreement, including its preamble and recitals, shall, except where the
context otherwise requires, have the following respective meanings, such
meanings to be equally applicable to the singular and plural forms thereof:

                           “Additional
Purchase Agreement” means the securities purchase agreement, if any,
providing for the issuance and sale of Series A Preferred Stock and Series A
Preferred Stock Warrants to the Additional Purchasers, as contemplated by
Section 2.3 of the Securities Purchase Agreement.

             

                           “Additional
Purchaser” shall mean each purchaser under the Additional Purchase
Agreement.

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

                           “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 A
Convertible Preferred Stock of Electric City Corp. referenced in the Securities
Purchase Agreement.

                           “Closing
Date” shall have the meaning given to it in the Securities Purchase
Agreement.

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

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

                           “Common
Stock Warrants” means the warrants issued to each Investor pursuant to the
Securities Purchase Agreement to purchase 750,000 shares of Common Stock as
evidenced by those certain Warrant Certificates, of even date herewith, between
each Investor and the Company, as each such Warrant Certificate may be amended
from time to time.

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

                           “Eligible
Securities” means (i) the shares of Common Stock issued or issuable upon
the conversion of the Series A Preferred Stock issued or issuable pursuant to
the Securities Purchase Agreement or the Additional Purchase Agreement or
issued or issuable upon exercise of the Series A Preferred Stock Warrants and
conversion of the Series A Preferred Stock issued or issuable pursuant to such
exercise; (ii) the shares of Common Stock issued or issuable upon exercise of
the Placement Agent Warrants; (iii) the shares of Common Stock issued pursuant
to Securities Purchase Agreement; (iv) the shares of Common Stock issued or
issuable upon exercise of the Common Stock Warrants; and (v) any other shares
of Common Stock issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to or in exchange for or in replacement of, the
shares described in clauses (i), (ii), (iii), (iv) and this clause (v); provided,
however, that the foregoing definition shall exclude in all cases any
Eligible Securities sold by a Holder in a transaction in which its rights under
this Agreement are not also assigned; and provided further that any
Eligible Securities sold pursuant to Rule 144 or sold in a registered public
offering that has been declared effective shall no longer be Eligible
Securities hereunder.

                           “Exchange
Act” means the Securities Exchange Act of 1934, 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 at the time.

             

             “Fully-Exercising Investor”
shall have the meaning set forth in Section 3.1 hereof.

                           “Holder”
means a registered holder of record of outstanding Eligible Securities or
securities convertible into or exercisable for, directly or indirectly,
Eligible Securities.

             “Investors” shall have the
meaning set forth in the preamble hereto.

             “Notice” shall have the
meaning set forth in Section 3.1 hereof.

             “Parties” shall have the
meaning set forth in the preamble hereto.

                           “Placement
Agent Warrants” means the warrants issued by the Company to Newcourt
Capital Securities, Inc. to purchase 3,314,830 shares of Common Stock as
evidenced by that certain Warrant Certificate of even date herewith between the
Company and Newcourt Capital Securities Inc., as the same may be amended from
time to time.

             “Piggyback Request” shall
have the meaning set forth in Section 2.2(a) hereof.

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

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

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

             “Rule 144” means Rule 144
promulgated by the Commission under the Securities Act, as in effect from time
to time.

             “Securities” shall have the
meaning set forth in the first recital of this Agreement.

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

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

                           “Series
A Preferred Stock” shall have the meaning set forth in the first recital of
this Agreement.

                           “Series
A Preferred Stock Warrants” means the warrants issued to certain of
the  Investors pursuant to the
Securities Purchase Agreement or the Additional Purchase Agreement to purchase
100,000 shares of Series A Preferred Stock as evidenced by those certain
Warrant Certificates, of even date herewith, between each such Investor and the
Company, as each such Warrant Certificate may be amended from time to time.

             “Shares”
shall have the meaning set forth in Section 3.1 hereof.

 

ARTICLE
II

REGISTRATION RIGHTS

             2.1        Requested Registration.

                           (a)         At any time after the Closing Date,
Holders holding at least a majority of the shares constituting Eligible Securities
may deliver to the Company a written request that the Company file and use its
best efforts to cause to become effective a registration statement under the
Securities Act with respect to such number of the Eligible Securities owned by
the Holders as shall be specified in such request (a “Registration Request”),
including, if specified in the Registration Request, a “shelf” registration
statement on Form S-3 (or if Form S-3 is not then available, Form S-1 or such
other form that the Company is eligible to use with respect to the Eligible
Securities) for an offering to be made on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act; provided, however,
that the Company shall not be obligated to effect any such registration
pursuant to this Section 2.1 if the aggregate value on the date of the
Registration Request of the Eligible Securities to be registered thereon is
less than $5,000,000.  The Company shall
not be required to file and use its best efforts to cause to become effective,
pursuant to a Registration Request under this Section 2.1 more than four
(4) registration statements at the demand of the Holders.  The party (or parties) delivering a
Registration Request is hereinafter referred to as the “Requesting Holder.”

                           (b)        As soon as practicable following the
receipt of a Registration Request, the Company will use its best efforts to
register under the Securities Act, for public sale in accordance with the
method of disposition specified in such Registration Request, the number of
shares of Eligible Securities specified in such Registration Request (and the
number of Eligible Securities specified in all notices received from Holders
within 20 business days after notice of the Registration Request delivered
pursuant to Section 2.2 hereof). 
The Company shall also be entitled to include in any registration
statement filed pursuant to a Registration Request, for sale in accordance with
the method of disposition specified in such Registration Request, such number
of shares of Common Stock as the Company shall desire to sell for its own
account or for the account of other security holders or both.  If the method of sale designated is an
underwritten public offering, the managing underwriter or underwriters must be
reasonably acceptable to both the Requesting Holder (or the holders of a
majority of the shares of Eligible Securities held by all parties comprising
the Requesting Holder if more than one party is the Requesting Holder) and the
Company, which acceptance shall not be unreasonably withheld.  Notwithstanding the foregoing provisions of
this Section 2.1(b), to the extent that, in the opinion of the
underwriter or underwriters (if the method of disposition shall be an
underwritten public offering), marketing considerations require the reduction
of the number of shares of Common Stock covered by any such registration, the
number of shares of Common Stock to be registered and sold pursuant to such
registration shall be reduced as follows:

                                        (i)          first, the number of shares of Common
Stock to be registered on behalf of the Company shall be reduced (to zero, if
necessary); and

             

                                        (ii)         second, the number of shares of Common
Stock to be registered on behalf of Persons other than the Holders and their
Affiliates, if any, shall be reduced (to zero, if necessary) pro rata according
to the number of shares of restricted Common Stock held by each; and

                                        (iii)        third, the number of shares of Eligible
Securities to be registered on behalf of the Holders and their Affiliates shall
be reduced pro rata according to the number of shares of Eligible Securities
held by each.

                           (c)         Notwithstanding anything to the
contrary contained herein, the exercise by any Holder of any right hereunder
with respect to shares of Eligible Securities shall not effect or diminish any
other rights of such Holder hereunder with respect to any other securities of
the Company held by such Holder.

             2.2        Piggyback Registration.

                           (a)         If the Company at any time after the
Closing Date proposes to register Common Stock under the Securities Act for
sale to the public (including registrations pursuant to Section 2.1
hereof, but excluding the registration on Form SB-2 that the Company intends to
file by September 30, 2001 with respect to certain options, warrants and shares
of Common Stock outstanding as of the date of the Securities Purchase
Agreement), whether for its own account or for the account of other security
holders or both (except registration statements on Form S–8, S–4 or
another form not available for registering the Eligible Securities for sale to
the public), each such time it will give written notice to all Holders of its
intention to do so.  Upon the written
request of any Holder (a “Piggyback Request”), given within 20 business
days after receipt of any such notice, to register any of its Eligible
Securities, the Company shall, subject to Section 2.2(b) below, cause
the Eligible Securities as to which registration shall have been so requested
to be covered by the registration statement proposed to be filed by the Company.

                           (b)        In the event that any registration
statement described in this Section 2.2 shall relate, in whole or in
part, to an underwritten public offering of shares of Common Stock, the
Eligible Securities to be registered must be sold through the same underwriters
as have been selected by the Company (or agreed to pursuant to Section 2.1
hereof, if applicable).  Otherwise, the
method of distribution of the Eligible Securities to be sold by any Holder
making a Piggyback Request shall be as specified therein.  Except with respect to all Holders (and their
respective Affiliates) in the case of a registration statement filed pursuant
to a Registration Request under Section 2.1 hereof, the number of shares
of Common Stock to be included in such registration statement on account of any
person may be reduced if and to the extent that the underwriter or underwriters
shall be of the opinion that such inclusion would materially adversely affect
the marketing of the total number of shares of Common Stock proposed to be sold,
and the number of shares to be registered and sold by each person (other than
the Company) shall be reduced pro rata according to the relative number of
fully diluted shares of Common Stock owned by such person.  Notwithstanding the foregoing provisions of
this Section 2.2, the Company may withdraw any registration statement
referred to in this Section 2.2 (other than a registration statement
filed pursuant to a Registration Request under Section 2.1) without
thereby incurring any liability for such withdrawal to any requesting Holder.

             

             2.3        Registration Procedures.  If and whenever the Company is required by the provisions of Sections
2.1 or 2.2 to effect the registration of any Eligible Securities
under the Securities Act, the Company shall:

                           (a)         prepare and file with the Commission a
registration statement with respect to such securities that will permit the
public sale thereof in accordance with the method of distribution specified in
the applicable Registration Request, and the Company shall use its best efforts
(i) to cause such registration statement to be filed within 60 days of receipt
of the Registration Request, (ii) to cause such registration statement to be
declared effective as promptly as practicable and (iii) to maintain the
effectiveness of such registration statement for a period of not less than 90
days or, in the case of a registration statement pursuant to a Registration
Request under Section 2.1, until such times as all securities registered
thereunder have been sold;

                           (b)        promptly prepare and file with the
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to effect and
maintain the effectiveness of such registration statement for the period specified
in Section 2.3(a) and as to comply with the provisions of the Securities
Act with respect to the disposition of all Eligible Securities covered by such
registration statement in accordance with the intended method of disposition
set forth in such registration statement for such period, including such
amendments or supplements as are necessary to cure any untrue statement or
omission referred to in Section 2.3(e)(vi);

                           (c)         provide to the managing underwriter or
underwriters and not more than one counsel for all underwriters, the Holders of
Eligible Securities to be included in such registration statement and not more
than one counsel for all such Holders the opportunity to participate in the
preparation of (i) such registration statement, (ii) each prospectus relating
thereto and included therein or filed with the Commission and (iii) each
amendment or supplement thereto;

                           (d)        make available for inspection by the
parties referred to in Section 2.3(c) such financial and other
information and books and records of the Company, and cause the officers,
directors and employees of the Company, and counsel and independent certified
public accountants of the Company, to respond to such inquiries, as shall be
reasonably necessary, in the judgment of respective counsel to such Holders and
such underwriter or underwriters, to conduct a reasonable investigation within
the meaning of the Securities Act; provided, however, that each
such person shall be required to retain in confidence and not to disclose to
any other person any information or records reasonably designated by the
Company in writing as being confidential until such time as such information
becomes a matter of public record (whether by virtue of its inclusion in such
registration statement or otherwise), unless (i) such person shall be required
to disclose such information pursuant to the subpoena or order of any court or
other governmental agency or body having jurisdiction over the matter or (ii)
such information is required to be set forth in such registration statement or
the prospectus included therein or in an amendment to such registration
statement or an amendment or supplement to such prospectus in order that such
registration statement, prospectus, amendment or supplement, as the case may be,
shall not contain an untrue statement of a material fact or omit to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and such information has not been so set
forth after the request by a Holder to such effect;

 

                           (e)         immediately notify the persons referred
to in Section 2.3(c) and (if requested by any such person) confirm such
advice in writing, (i) when such registration statement or any prospectus
included therein or any amendment or supplement thereto has been filed and,
with respect to such registration statement or any such amendment, when the
same has become effective, (ii) of any written or material comments by the
Commission with respect thereto or any request by the Commission for amendments
or supplements to such registration statement or prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or the initiation
of any proceedings for that purpose, (iv) if at any time the representations
and warranties of the Company contemplated by Section 2.3(1)(i) cease to
be true and correct in all material respects, (v) of the receipt by the Company
of any notification with respect to the suspension of the qualification of any
Eligible Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose or (vi) at any time when a
prospectus is required to be delivered under the Securities Act, of the occurrence
or failure to occur of any event, or any other change in law, fact or
circumstance, as a result of which such registration statement, prospectus or
any amendment or supplement thereto, or any document incorporated by reference
in any of the foregoing, contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing;

                           (f)         take reasonable efforts to prevent or
obtain the withdrawal at the earliest practicable date of any order suspending
the effectiveness of such registration statement or any post–effective
amendment thereto;

                           (g)        if requested by the managing underwriter
or underwriters or the Holders of at least a majority of the Eligible
Securities being sold in connection with an underwritten public offering,
promptly incorporate in a prospectus supplement or post–effective
amendment such information as such managing underwriter or underwriters or such
Holders reasonably specify should be included therein relating to the terms of
the sale of such Eligible Securities, including, without limitation,
information with respect to the number of Eligible Securities being sold to
such underwriters, the names and descriptions of such Holders, the purchase
price being paid therefor by such underwriters and any other terms of the
underwritten (or best efforts underwritten) offering of the Eligible Securities
to be sold in such offering, and make all required filings of such prospectus
supplement or post–effective amendment promptly after notification of the
matters to be incorporated in such prospectus supplement or post–effective
amendment;

                           (h)        furnish to each Holder of Eligible
Securities included in such registration and each underwriter and counsel for
Holder, if any, thereof a copy of such executed registration statement, each
such amendment and supplement thereto (in each case including all exhibits
thereto, whether or not such exhibits are incorporated by reference therein)
and such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus)
and each amendment or supplement thereto, in conformity with the requirements
of the Securities Act, as such Holder and managing underwriter, if any, may
reasonably request in order to facilitate the disposition of such Eligible
Securities by such Holder or by the participating underwriters;

 

                           (i)          use its best efforts to (i) register
or qualify the Eligible Securities to be included in such registration
statement under such other securities laws or blue sky laws of such
jurisdictions as any Holder of such Eligible Securities and each managing
underwriter, if any, thereof shall reasonably request, (ii) keep such
registrations or qualifications in effect for so long as is necessary to effect
the disposition of such Eligible Securities in the manner contemplated by the
registration statement, the prospectus included therein and any amendment or
supplement thereto and (iii) take any and all such actions as may be reasonably
necessary or advisable to enable such Holder and any participating underwriter
or underwriters to consummate the disposition in such jurisdictions of such
Eligible Securities;

                           (j)          cooperate with the Holders of the
Eligible Securities included in such registration and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Eligible Securities to be sold, which certificates
shall be printed, lithographed or engraved, or produced by any combination of
such methods, and which shall not bear any restrictive legends; and, in the
case of an underwritten public offering, enable such Eligible Securities to be
registered in such names as the underwriter or underwriters may request at
least two (2) business days prior to any sale of such Eligible Securities;

                           (k)         provide not later than the effective
date of the registration statement a transfer agent and registrar for such
Eligible Securities and a CUSIP number for all Eligible Securities;

                           (l)          enter into an underwriting agreement,
engagement letter, agency agreement, “best efforts” underwriting agreement or
similar agreement, as appropriate, and take such other actions in connection
therewith as the Holders of at least a majority of the Eligible Securities to
be included in such registration shall reasonably request in order to expedite
or facilitate the disposition of such Eligible Securities, and in connection
therewith, whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten public offering, (i) make such
representations and warranties to the Holders of such Eligible Securities
included in such registration and the underwriters, if any, in form, substance
and scope as are customarily made in an underwritten public offering; (ii)
obtain an opinion of counsel to the Company in customary form and covering such
matters as are customarily covered by such an opinion as the Holders of at
least a majority of such Eligible Securities and the underwriters, if any, may
reasonably request, addressed to each participating Holder and the
underwriters, if any, and dated the effective date of such registration
statement (or, if such registration includes an underwritten public offering,
dated the date of the closing under the underwriting agreement); (iii) obtain a
“cold comfort” letter from the independent certified public accountants of the
Company addressed to the Holders of the Eligible Securities included in such
registration and the underwriters, if any, dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, also dated the date of the closing under the underwriting agreement),
such letter to be in customary form and covering such matters as are
customarily covered by such letters; (iv) deliver such documents and
certificates as may be reasonably requested by the Holders of at least a
majority of the Eligible Securities included in such registration and the
underwriters, if any, to evidence compliance with clause (i) of this Section
2.3(1) and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company and (v) undertake such
obligations relating to expense reimbursement, indemnification and contribution
as are provided in Sections 2.4, 2.5 and 2.6 hereof;

                           (m)        cause all such Eligible Securities
registered hereunder to be listed on each securities exchange or over-the-counter
market on which similar securities issued by the Company are then listed, and,
if not so listed, to be listed on the NASD automated quotation system and, if
listed on the NASD automated quotation system, use its commercially reasonable
efforts to secure designation of all such Eligible Securities covered by the
registration statement as a NASDAQ “national market system security” within the
meaning of Rule 11Aa2-1 of the Commission or, failing that, to secure NASDAQ
authorization for such Eligible Securities and, without limiting the generality
of the foregoing, to use its commercially reasonable efforts to arrange for at
least two market makers to register as such with respect to such Eligible
Securities with the NASD;

                            (n)       make
available on a reasonable basis senior management personnel of the Company to
participate in, and cause them to cooperate with the selling Holders of
Eligible Securities or the managing underwriter in any underwritten offering in
connection with “road show” and other customary marketing activities, including
“one-on-one” meetings with prospective purchasers of the Eligible Securities to
be sold in the underwritten offering and otherwise to facilitate, cooperate
with, and participate in each proposed offering contemplated herein and
customary selling efforts related thereto, in each case to the same extent as
if the Company were engaged in a primary registered offering of its capital
stock; and

 

                           (o)        otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission.

             Notwithstanding
the provisions of Section 2.3(a), the Company’s obligation to file a
registration statement, or cause such registration statement to become
effective, shall be suspended, without incurring any liability to any Holder,
for a period not to exceed 90 days if there exists at the time material non–public
information relating to the Company that, in the reasonable opinion of the
Company, should not be disclosed, provided that any such suspension shall occur
no more than once in any 12–month period.  In such an event, the Company shall promptly inform all Holders
of the Company’s decision to defer filing of a registration statement and shall
notify all Holders promptly (but in any event not later than upon the expiration
of the 90-day period specified in the immediately preceding sentence) of the
recommencement of the Company’s best efforts to file the registration statement
and to cause the registration statement to become effective.  If the Company shall so postpone the filing
of a registration statement, (i) the Company shall use its reasonable best
efforts to limit the delay to as short a period as is practicable and (ii) the
Holders shall have the right to withdraw the request for registration by giving
written notice to the Company at any time. 
In the event of such withdrawal, such request shall not be counted for
purposes of the number of requests for registration to which the Holders are
entitled pursuant to Section 2.1(a).

             In
connection with each registration of Eligible Securities hereunder, each Holder
thereof will furnish to the Company in writing such information with respect to
it and the proposed distribution by it as shall be reasonably necessary in
order to assure compliance with applicable federal and state securities
laws.  Each such Holder also agrees to
notify the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such Holder to the Company or of the
occurrence of any other event, in either case as a result of which any
prospectus relating to such registration contains an untrue statement of a
material fact regarding such Holder or the distribution of such Eligible
Securities or omits to state any material fact regarding such Holder or the
distribution of such Eligible Securities required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly to furnish to the Company any
additional information required to correct and update such previously furnished
information or required so that such prospectus shall not contain, with respect
to such Holder or the distribution of such Eligible Securities, an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
light of the circumstances then existing. 
Each Holder further agrees that upon receipt of any notice referred to
in the immediately preceding sentence, or upon receipt of any notice from the
Company pursuant to Section 2.2(e)(vi) hereof, such Holder shall
forthwith discontinue the disposition of Eligible Securities pursuant to the
registration statement applicable to such Eligible Securities until such Holder
shall have received copies of an amended or supplemented registration statement
or prospectus, and if so directed by the Company, such Holder shall deliver to
the Company (at the Company’s expense) all copies, other than permanent file
copies, then in such Holder’s possession of the prospectus covering such
Eligible Securities at the time of receipt of such notice.

             

             2.4        Expense.  The
Company shall pay all expenses incurred in complying with Sections 2.1
and 2.2, including without limitation all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses of one counsel for the selling
Holders, fees and expenses (including counsel fees) incurred in connection with
complying with state securities or “blue sky” laws (other than those that by
law must be paid by the selling security holders), fees of the transfer taxes,
fees of transfer agents and registrars and stock exchange listing fees, but
excluding all fees and expenses of counsel for the underwriters, if any, and
all underwriting discounts and selling commissions applicable to the sale of
Eligible Securities.  All expenses of
participating sellers other than those assumed by the Company in this Agreement
shall be borne by such sellers in proportion to the number of shares of
Eligible Securities sold by each seller or as they may otherwise agree.

             2.5        Indemnification.

                           (a)         In the event of a registration of
Eligible Securities under the Securities Act pursuant to Sections 2.1
and 2.2, the Company shall indemnify and hold harmless, to the fullest
extent permitted by law, each selling Holder, its Affiliates, each of their
respective officers, directors, employees and agents, each underwriter of such
Eligible Securities and each other person, if any, who controls such selling
Holder or underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which such selling
Holder, Affiliate, their respective officer, director, employee, agent,
underwriter or controlling person may become subject under the Securities Act
or otherwise or in any action in respect thereof, and will reimburse each such
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such Eligible
Securities were registered under the Securities Act pursuant to Sections 2.1
or 2.2, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Company shall not be
liable to any such selling Holder, Affiliate, officer, director, employee,
agent, underwriter or controlling person in any such case if and to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in conformity with information furnished by such selling Holder, Affiliate
officer, director, employee, agent, underwriter or controlling person in
writing specifically for use in such registration statement or prospectus.

             

                           (b)        Each selling Holder of such Eligible
Securities, severally and not jointly, will indemnify and hold harmless the
Company, each underwriter and each person, if any, who controls the Company or
any underwriter within the meaning of the Securities Act, each officer of the
Company who signs the registration statement, each director of the Company,
each other seller of securities registered by the registration statement
covering such Eligible Securities and each person, if any, who controls such
seller, against all losses, claims, damages or liabilities, joint or several,
to which the Company or any such officer, director, underwriter, other seller
or controlling person may become subject under the Securities Act or otherwise,
and shall reimburse the Company and each such officer, director, underwriter,
other seller and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, insofar as such losses, claims, damages or
liabilities (or action in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of material fact or omission or
alleged omission of a material fact required to be stated therein made in
reliance upon and in conformity with information pertaining to such Holder
furnished in writing to the Company by such Holder specifically for use in the
registration statement or prospectus relating to such Eligible Securities.  Notwithstanding the immediately preceding
sentence, the aggregate liability of each such Holder hereunder shall not in
any event exceed the net proceeds received by such Holder from the sale of
Eligible Securities covered by such registration statement.

                           (c)         Promptly after receipt by an
indemnified party hereunder of notice of the commencement of any action, such
indemnified party, if a claim in respect thereof is to be made against an
indemnifying party hereunder, shall notify such indemnifying party in writing
thereof, but the omission so to notify such indemnifying party shall not
relieve such indemnifying party from any liability that it may have to any
indemnified party other than under this Section 2.5 and, unless the
failure to so provide notice materially adversely affects or prejudices such
indemnifying party’s defense against any action, shall not relieve such
indemnifying party from any liability that it may have to any indemnified party
under this Section 2.5.  In case
any such action shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, such indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel reasonably satisfactory
to such indemnified party, and, after notice from such indemnifying party to
such indemnified party of its election so to assume and undertake the defense
thereof, such indemnifying party shall not be liable to such indemnified party
under this Section 2.5 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected; provided,
however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
that are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select a separate counsel and to assume and undertake
the defense of such action, with the expenses and fees of such separate counsel
and other expenses related to such defense to be reimbursed by the indemnifying
party as incurred.

             

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

                            (e)        The
reimbursements required by this Section 2.5 shall be made by periodic
payment during the course of the investigation or defense, as and when bills
are received and expenses incurred.

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

             2.6        Contribution.  If for any reason the indemnity set forth in
Section 2.5 is unavailable or is insufficient to hold harmless an
indemnified party, then the indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of the aggregate losses,
claims, damages, liabilities and expenses of the nature contemplated by said
indemnity (a) in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and such indemnified party on
the other hand (determined by reference to, among other things, whether the
actual or alleged untrue statement of a material fact or actual or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or such indemnified party and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission) or (b) if the allocation provided by Section
2.6(a) above is not permitted by applicable law or provides a lesser sum to
such indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative fault of the
indemnifying party and such indemnified party but also the relative benefits
received by the indemnifying party on the one hand and such indemnified party
on the other hand, as well as any other relevant equitable considerations.

             The
Parties agree that it would not be just and equitable if contribution pursuant
to this Section 2.6 were determined by pro rata allocation or by any
other method of allocation that does not take account of the equitable
consideration referred to in the immediately preceding paragraph.  The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or expenses
referred to in such paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim.  Notwithstanding the
provisions of this Section 2.6, a Holder shall not be required to
contribute any amount in excess of the amount by which the net proceeds of the
sale of Eligible Securities sold by such Holder and distributed to the public
exceeds the amount of any damages that such Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission.  No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person that is not guilty of
such fraudulent misrepresentation.

             2.7        Underwriting Agreement.  If Eligible Securities are to be sold
pursuant to a registration statement in an underwritten offering pursuant to Sections
2.1 or 2.2, the Company and each selling Holder of Eligible
Securities shall enter into a written agreement with the managing underwriter
or underwriters selected in the manner herein provided in such form and
containing such provisions as are reasonably satisfactory to the Company and
each such selling Holder and as are customary in the securities business for
such an arrangement among such underwriter or underwriters, each such selling
Holder and companies of the Company’s size and investment stature.  No Holder of Eligible Securities may
participate in any underwritten sale of Eligible Securities pursuant to Sections
2.1 or 2.2 hereof unless such Holder agrees to sell such Holder’s
securities in accordance with any underwriting arrangements approved by the
persons entitled hereunder to specify the method of distribution of the
securities being registered and completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.  Notwithstanding anything to the contrary
contained herein, no Holder of Eligible Securities shall be required to make
any representations and warranties to the Company or the underwriters other than
representations or warranties regarding the identity of such Holder, such
Holder’s Eligible Securities, such Holder’s ability to transfer title to such
Holder’s Eligible Securities and such Holder’s intended method of distribution
or any other representations required by applicable law.

             2.8        Limitations on Subsequent
Registration Rights.  If, subsequent
to the date hereof, the Company grants to any holders or prospective holders of
the Company’s securities the right to require that the Company register any
securities of the Company under the Securities Act, such registration rights
shall be granted subject to the rights of the Holders to include all or part of
their Eligible Securities in any such registration on the terms and conditions
set forth in Section 2.2.

             2.9        Reports Under Securities Exchange Act
of 1934.  With a view to making
available to the Holders the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit the Holders to sell
securities of the Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:

             

                           (a)         make and keep public information
available, as those terms are understood and defined in Rule 144, at all times
so long as the Company remains subject to the periodic reporting requirements
under Sections 13 or 15(d) of the Exchange Act;

                           (b)        take such action, including the
voluntary registration of its Common Stock under Section 12 of the Exchange
Act, as is necessary to enable the Holders to use Form S-3 for the sale of its
Eligible Securities;

                           (c)         file with the SEC in a timely manner
all reports and other documents as may be required of the Company under the
Securities Act and the Exchange Act; and

                           (d)        furnish to each Holder, so long as such
Holder owns any Eligible Securities, forthwith upon request (i) a written
statement by the Company that it has complied with the reporting requirements
of Rule 144, the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.

             2.10      Market-Standoff
Agreement.

                           (a)         Market-Standoff
Period; Agreement.  If requested by
the Company and the managing underwriter of Common Stock of the Company, each
Holder agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any securities of
the Company (other than those included in the
registration) without the prior written consent of such underwriter, for such
period of time (not to exceed 180 days) from the effective date of a
registration statement filed under the Act as may be requested by such
underwriter and to execute an agreement reflecting the foregoing as may be
requested by such underwriter at the time of the Company’s underwritten public
offering; provided that
such agreement shall only apply to the first such registration statement of the
Company including securities to be sold on its behalf to the public after the
date hereof.

                           (b)        Limitations.  The obligations described in Section
2.10(a) shall apply only if all officers and directors of the Company and
all significant equity holders of the Company enter into similar agreements,
and shall not apply to a registration relating solely to employee benefit
plans, or to a registration relating solely to a transaction pursuant to Rule
145 under the Act.  If any Person, including any officer or
director of the Company and any equity holder of the Company, is released from
its obligations under Section 2.10(a) or such similar arrangements, all
Holders shall be released from such obligations.

             2.11      Subsequent Public Offering.  At any time following the Closing, upon
request of Holders holding a majority of the Eligible Securities, the Company
shall use its best efforts to conduct a firmly underwritten primary registered
public offering of its Common Stock as promptly as practical following the
receipt of such notice, if, in the opinion of a major investment banking firm
selected by Holders holding a majority of the Eligible Securities, the public
equity markets would be receptive to such an offering.

 

ARTICLE
III

PARTICIPATION RIGHTS

             3.1        Right
of First Offer.  Subject to the terms and conditions
specified in this Section 3.1, the Company hereby grants to each
Investor a right of first offer with respect to future sales by the Company of
its Shares (as hereinafter defined).

             Each
time the Company proposes to offer any shares of, or securities convertible
into or exercisable for any shares of, any class of its capital stock (“Shares”),
the Company shall first make an offering of such Shares to each Investor in
accordance with the following provisions:

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

                           (b)        Within
30 calendar days after delivery of the Notice, each Investor may elect to
purchase or obtain, at the price and on the terms specified in the Notice, up
to that portion of such Shares that equals the proportion that the sum of
Common Stock acquired from time to time pursuant to this Article III and
the number of shares of Eligible Securities held by such Investor (and its
Affiliates) bears to the total number of shares of Common Stock then
outstanding (assuming full conversion and exercise of all convertible or
exercisable securities).  The Company
shall promptly, in writing, inform each Investor that elects to purchase all
the Shares available to it (each, a “Fully-Exercising Investor”) of any
other Investor’s failure to do likewise. 
During the 10-day period commencing after receipt of such information,
each Fully-Exercising Investor (and its Affiliates) shall be entitled to obtain
its initial allocation of the Shares, plus, if desired, that portion of the
Shares for which Investors were entitled to subscribe but that were not
subscribed for by the Investors that is equal to the proportion that the number
of shares of Eligible Securities issued and held by such Fully-Exercising
Investor (and its Affiliates) bears to the total number of shares of Eligible
Securities issued and held by all such Fully-Exercising Investors (and their
Affiliates) desiring to purchase such unsubscribed Shares.

             

                           (c)         The Company may, during the 90-day
period following the expiration of the periods provided in Section 3.1(b)
hereof, offer the remaining unsubscribed portion of the Shares to any person or
persons at a price not less than, and upon terms no more favorable to the
offeree than those specified in, the Notice. 
If the Company does not enter into an agreement for the sale of the
Shares within such period, or if such agreement is not consummated within 90
days of the execution thereof, the rights provided hereunder shall be deemed to
be revived and such Shares shall not be offered unless first reoffered to the
Investors in accordance herewith.

                           (d)        The
right of first offer in this Section 3.1 shall not be applicable (i) to
the issuance or sale of Common Stock (or options therefor) to employees,
consultants and directors, pursuant to plans or agreements approved by the
Board of Directors for the purpose of soliciting or retaining their services,
(ii) to the issuance of securities in connection with a bona fide business
acquisition of or by the Company, whether by merger, consolidation, sale of
assets, sale or exchange of stock or otherwise, (iii) to Common Stock
issued upon conversion of the Series A Preferred Stock or the exercise of
the Common Stock Warrants or the Placement Agent Warrants, or the Series A
Preferred Stock issued upon the exercise of Series A Preferred Stock Warrants,
(iv) to the issuance of securities pursuant to currently outstanding options,
warrants, notes or other rights to acquire securities of the Company, (v) to a Qualified
Primary Offering, (vi) to the issuance of Series A Preferred Stock and Series A
Preferred Stock Warrants pursuant to the Additional Purchase Agreement, in
compliance with Section 2.3 of the Securities Purchase Agreement or
(vii) to stock splits, stock dividends or like transactions.

ARTICLE
IV

MISCELLANEOUS

             4.1        Assignment; Third Party Beneficiaries.  All covenants and agreements contained in
this Agreement by or on behalf of any of the signatories shall bind and inure
to the benefit of the respective successors and assigns of the signatories,
whether so expressed or not.  If any
transferee of any Holder of Eligible Securities shall acquire Eligible
Securities in any manner (other than by way of a registered public offering),
whether by operation of law or otherwise, such Eligible Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Eligible Securities such transferee shall be entitled to receive the
benefits of a Holder and be conclusively deemed to have agreed to be bound by
and to perform all of the terms and provisions of this Agreement.  The benefits to which any such permitted
transferee shall be entitled shall include, without limitation, the rights to register
Eligible Securities under Sections 2.1 or 2.2 hereof; provided,
however, that any such transferee shall not be entitled to deliver to
the Company a Registration Request pursuant to Section 2.1 hereof unless
such permitted transferee acquired from its transferor at least 1,000,000
Eligible Securities; provided, however, that the transfer of
registration rights held pursuant to this Agreement to an Affiliate,
shareholder, equity holder or officer of any Investor or its Affiliates shall
be without restriction as to minimum shareholding.

             4.2        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 registered or certified
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:

                         1280 Landmeier Road

                              Elk Grove
Village, IL 60007-2410

                              Fax No.
847-437-4969

                              Attention:
General Counsel.

                           (ii)         If to an Investor: at the address set
forth in the Securities Purchase Agreement or Additional Purchase Agreement, as
applicable.

                           (iii)        If to a Holder other than an Investor,
at the most recent address for such Holder maintained in the books and records
of the Company.

             4.3        Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

             4.4        Amendments.

                           (a)         This Agreement may not be amended or
modified, and no provision hereof may be waived, except in writing, and any
such writing shall only be effective with respect to a Party who has executed
such writing.  The failure of any of the
Parties to insist upon strict adherence to any term of this Agreement on any
occasion shall not be considered a waiver of that term or deprive such Party of
the right thereafter to insist upon strict adherence to that term or any other
term of this Agreement.

                           (b)        The Company may enter into the
Additional Purchase Agreement.  Each
Investor agrees that upon each Additional Purchaser’s acquisition of Series A
Preferred Stock and Series A Preferred Stock Warrants in compliance with
Section 2.3 of the Securities Purchase Agreement and execution and delivery of
a signature page to the joinder agreement between the Company and each such
Additional Purchaser pursuant to which such Additional Purchaser agrees to
become a Party and to be bound by the terms hereof, each such Additional
Purchaser shall become a Party to this Agreement for all intents and purposes
and shall then be an Investor hereunder. 
The Company shall then revise Schedule I to reflect the addition
of each such Additional Purchaser.  The
addition of such new parties and revision of Schedule I shall not
constitute a modification, waiver or amendment of this Agreement that requires
the consent of or any writing from any of the Parties hereto.

             

             4.5        Counterparts. 
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.  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 an original executed
counterpart hereof and a representation that an original executed counterpart
hereof will be delivered.

             4.6        Remedies.  The Parties acknowledge that there may be no
adequate remedy at law if any Party fails to perform any of its obligations
hereunder and that each Party may be irreparably harmed by any such failure,
and accordingly agree that each Party, in addition to any other remedy that it
may be entitled at  law or in equity,
shall be entitled to compel specific performance of the obligations of any
other Party under this Agreement in accordance with the terms and conditions of
this Agreement in any court of the United States or any state thereof having
jurisdiction.

             4.7        Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

             4.8        Severability.  In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any
way impaired thereby, it being intended that all of the rights and privileges
of the Investors and Holders shall be enforceable to the fullest extent
permitted by law.

             4.9        Entire Agreement.  This Agreement is intended by the Parties as
a final expression of their agreement and a complete and exclusive statement of
the agreement and understanding of the parties hereto in respect of the subject
matter contained herein.  There are no
restrictions, promises, warranties or undertakings other than those set forth
or referred to herein or therein.  This
Agreement supersedes all prior agreements and understandings between the
Parties with respect to such subject matter.

[SIGNATURE
PAGE FOLLOWS]

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

	COMPANY	INVESTORS
	 	 
	ELECTRIC
  CITY CORP.,	NEWCOURT
  CAPITAL USA INC.,
	a
  Delaware corporation	a
  Delaware corporation
	 	 
	By:      	By:     
	

	

	Name:
  	John
  Mitola	Name  Guy Piazza
	 	

	

	Title:
  	Chief
  Executive Officer	Title:   Vice President
	 	

	

 

	 	NEWCOURT
  CAPITAL SECURITIES, INC.
	 	 a Delaware corporation
	 	 
	 	By:     
	 	

	 	Name:
  Robert W. Sextor
	 	

	 	Title:   Managing Director

 

	 	EP
  POWER FINANCE, L.L.C.,
	 	a
  Delaware limited liability company
	 	 
	 	By:     
	 	

	 	Name:
  Paul E. McGlinn
	 	

	 	Title:    Managing Director

 

	 	MORGAN
  STANLEY DEAN WITTER
	 	EQUITY
  FUNDING, INC., a Delaware corporation
	 	 
	 	By:      
	 	

	 	Name:
  Thomas A. Clayton
	 	Title:
  Vice President

 

	 	ORIGINATORS
  INVESTMENT PLAN, 

  L.P., a Delaware limited partnership
	 	 
	 	By:  MSDW OIP Investors, Inc., its
 general partner
	 	 
	 	By:      
	 	

	 	Name:
  Thomas A. Clayton
	 	Title:
  Vice President

 

	 	DUKE
  CAPITAL PARTNERS, LLC,
	 	a
  Delaware limited liability company
	 	By:     
	 	

	 	Name:
  Gerald S. Stalun
	 	

	 	Title:   EUP + Managing Director

 

SCHEDULE I

INVESTORS

Newcourt Capital USA Inc.

Newcourt Capital Securities, Inc.

EP Power Finance, L.L.C.

Morgan Stanley Dean Witter Equity
Funding, Inc.

Originators Investment Plan, L.P.

Duke Capital Partners, LLC

 

 

EXHIBIT
C

STOCKHOLDERS AGREEMENT

                           This Stockholders
Agreement, dated as of  July 31, 2001
(as it may be amended from time to time, this “Agreement”), is made by
and among Electric City Corp., a Delaware corporation (the “Company”),
and each of the other entities set forth on Schedule I hereto from time
to time and shall become effective on the Closing Date (as defined in the
Securities Purchase Agreement).

WITNESSETH

                           WHEREAS, the Company
and the Holders have entered into that certain Securities Purchase Agreement,
dated as of July 31, 2001 (as it may be amended from time to time, the “Securities
Purchase Agreement”), whereby the Company will sell and the Holders will
buy shares of the Company’s Series A Convertible Preferred Stock, par value
$.01 per share (the “Series A Preferred Stock”), together with shares of
Common Stock, warrants to purchase Series A Preferred Stock and warrants to
purchase Common Stock; and

                           WHEREAS, it is a
condition to the obligations of the Holders to purchase such securities
pursuant to the Securities Purchase Agreement that the parties hereto enter
into this Agreement.

AGREEMENT

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

ARTICLE I

DEFINITIONS

                           1.1        Defined Terms.  All terms capitalized but not defined herein
shall have the meaning attributable to such terms in the Securities Purchase
Agreement, except where the context otherwise requires.  The following additional terms when used in
this Agreement, including its preamble and recitals, shall, except where the context
otherwise requires, have the following meanings, such meanings to be equally
applicable to the singular and plural forms thereof:

                           “Additional
Purchase Agreement” means the securities purchase agreement providing for
the issuance and sale of Series A Preferred Stock and Series A Preferred Stock
Warrants to the Additional Purchasers, as contemplated by Section 2.3 of the
Securities Purchase Agreement.

                           “Additional
Purchaser” shall mean each purchaser under the Additional Purchase
Agreement.

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

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

                           “Board Observer”
means an individual who shall not be a member of the Board and who shall have
the rights set forth in Section 2.3 hereof.

                           “Board”
means the Board of Directors of the Company.

                           “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 A
Convertible Preferred Stock of Electric City Corp. referenced in the Securities
Purchase Agreement.

                           “Change of Control
Transaction” means a transaction that 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
Company; (ii) the Company 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 Company, in any such event, pursuant to a
transaction in which the outstanding voting stock of the Company 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 Company and such
consolidation or merger results in the transfer of fifty percent (50%) or more
of the outstanding voting power of the Company or results in the holders of the
outstanding voting securities of this Company immediately prior to such
transaction holding less than a majority of the voting securities of this
Company or the surviving entity immediately thereafter; or (iv) the Company is
liquidated, dissolved or a special resolution is passed by the stockholders of
the Company approving the plan of liquidation or dissolution..

                           “Commission”
means the United States Securities and Exchange Commission or any other
governmental authority at the time administering the Securities Act of 1933, as
amended.

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

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

                           “Director”
means a director of the Company.

             

                           “Holders”
means the entities (or groups of entities, as the case may be) set forth on Schedule
I hereto from time to time.

                           “Information” shall have the meaning set forth in Section 3.13.

                           “Other Companies” means Persons that may
directly or indirectly compete with any or all of the business of the Company
or its subsidiaries.

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

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

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

                           “Unlimited Parties” shall have the meaning
set forth in Section 3.13.

ARTICLE II

VOTING

                           2.1        Board Nominations.  The Company and the Holders hereby agree
that:

                                        (a)         For so long as a Holder (other than an
Additional Purchaser or its transferees) and its Affiliates hold at least
200,000 shares of Series A Preferred Stock (as adjusted for stock splits, stock
combinations and the like) in the aggregate, each such Holder shall be
entitled, through a nominating committee or other procedure adopted by the
Board, to designate for nomination by the Board one nominee for election to the
Board by the holders of the Series A Preferred Stock, voting as a single class,
each time Directors of the Company are to be elected.

                                        (b)        Within 30 days of the first day that a
Holder and its Affiliates hold less than 200,000 shares of Series A Preferred
Stock (as adjusted for stock splits, stock combinations and the like) in the
aggregate, such Holder shall cause the Director nominated by such Holder to
resign from the Board.

                           2.2        Board of Directors of
the Company.

                                        (a)         So long as a Holder shall hold any
shares of Series A Preferred Stock, such Holder shall vote all of its shares of
Series A Preferred Stock for the election of all Directors nominated pursuant
to Section 2.1 hereof.  The
nominee designated by each Holder shall be identified in a proxy statement
delivered to the Company stockholders in connection with any annual meeting of
stockholders or to the Holders in connection with a special meeting of the
Holders of Series A Preferred Stock, if such nominees have not been already
elected by written consent of the Holders.

                                        (b)        Each Holder shall appear in person or by
proxy at all annual or special meetings of stockholders and at all special
meetings of the holders of Series A Preferred Stock for the purpose of
obtaining a quorum and shall vote or cause the vote of the Series A Preferred
Stock owned by such Holder or by any Affiliate of such Holder, either in person
or by proxy, to be cast in accordance with the provisions of this Article II.

                                        (c)         Each Holder shall vote all of its
Series A Preferred Stock in favor of removal from the Board, upon notice by a
Holder that an individual designated by it pursuant to Section 2.1
should be removed, and to use its best efforts to cause the Board to fill the
vacancy so vacated with another person designated by such Holder (unless such
removal resulted from such Holder and its Affiliates holding less than an
aggregate of 200,000 shares of Series A Preferred Stock, as adjusted for stock
splits, stock combinations and the like). 
Each Holder shall cooperate fully in connection with the nomination of
Directors, the voting of its shares of Series A Preferred Stock, the execution
of written consents (if then permissible under the Certificate of Incorporation
(as amended and restated from time to time) of the Company), the calling of
meetings and other stockholder matters to effect the provisions of this Article
II.

                                        (d)        If any Director nominated pursuant to Section
2.1 is unable to serve, or once having commenced to serve, is removed or
withdraws from the Board, the Holder who designated such Director will be
entitled to designate an individual to fill the vacancy on the Board so created
and each Holder will use its best efforts to cause the Board to fill the
vacancy so created with the individual so designated, in accordance with the
Certificate of Designations (unless such removal or withdrawal resulted from
such Holder and its Affiliates holding less than an aggregate of 200,000 shares
of Series A Preferred Stock, as adjusted for stock splits, stock combinations
and the like).

                                        (e)         Each Holder shall not and shall not
permit any of its Affiliates to grant any proxy or enter into or be bound by
any voting trust or voting agreement with respect to its Series A Preferred
Stock, or enter into any arrangements of any kind with any Person with respect
to its Series A Preferred Stock, in any case in a manner that is inconsistent
with the provisions of this Agreement.

                                        (f)         The Company shall take such actions as
may be necessary to permit the Holders to elect the nominees of each Holder
pursuant to the provisions of this Article II or to appoint such nominees
to the Board to fill any vacancy resulting from the death, resignation, removal
or other withdrawal from the Board of a Director previously designated by such
Holder of the Series A Preferred Stock (unless such removal or withdrawal
resulted from such Holder and its Affiliates holding less than an aggregate of
200,000 shares of Series A Preferred Stock (as adjusted for stock splits, stock
combinations and the like)), and if necessary, to be included in the slate of
nominees recommended by the Board to the Company’s stockholders for election as
Directors.

                                        (g)        For so long as any Series A Preferred
Stock is outstanding, the number of Directors serving on the Board shall be
fixed by resolution of the Board at twelve (12) and shall not be increased or
decreased except in accordance with Section 6(f) of the Certificate of
Designations.

                           2.3        Board Observation Rights.  If a Holder (other than an Additional
Purchaser or its transferees) (a) possesses the right to designate for
nomination to the Board its nominee pursuant to Section 2.1(a), or (b)
no longer possesses a right to designate for nomination to the Board its
nominee pursuant to Section 2.1(a) because such Holder and its
Affiliates hold less than an aggregate of 200,000 shares of Series A Preferred Stock
(as adjusted for stock splits, stock combinations and the like), but such
Holder and its Affiliates hold at least an aggregate of 2,000,000 shares of the
Common Stock (calculated assuming the exercise of all rights, options and
warrants to purchase Common Stock or securities convertible or exchangable for
shares of Common Stock, and the exchange or conversion of all securities
convertible or exchangeable for Common Stock), then such Holder shall be
entitled to designate one individual to serve as a Board Observer.  Such Board Observer will be invited to
attend all meetings of the Board and any Board committees as an observer and to
receive copies of all materials and communications provided to the Board and
Board committees when so distributed. 
The Board Observer will not be excluded from any portion of Board
meetings, Board committee meetings or Board discussions except for those
portions (a) in which the Company’s counsel communicates with the Board on
matters where Board Observer’s attendance would result in loss of the
attorney-client privilege for the Company 
and (b) in which, in the good faith judgment of counsel to the
Company, participation by the Board Observer is not appropriate under
applicable law.

                           2.4        Conversion of Series A Preferred Stock.  Any Holder (including its Affiliates) who
converts more than 50% of the shares of Series A Preferred Stock (as adjusted
for stock splits, stock combinations and the like) purchased by it pursuant to
the Securities Purchase Agreement or Additional Purchase Agreement, as
applicable, shall, at the written request of the Company, convert all of its
remaining shares of Series A Preferred Stock, if any, within five (5) Business
Days of receipt of such request, in accordance with Section 7(c) of the Certificate
of Designations.  Any transferee of a
Holder (other than a Holder’s Affiliates) who converts more than 50% of the
shares of Series A Preferred Stock transferred to it by a Holder shall, at the
written request of the Company, convert all of its remaining shares of Series A
Preferred Stock, if any, within five (5) Business Days of receipt of such
request, in accordance with Section 7(c) of the Certificate of Designations.

                           2.5        Approval of Certain Actions by
Holders of Series A Preferred Stock.

                                        (a)         For so long as any shares of Series A
Preferred Stock remain issued and outstanding, the Company shall not, without
the affirmative consent or approval of the holders of record representing 75%
or more of the shares of Series A Preferred Stock then outstanding, voting as a
single class to the exclusion of all other classes of the Company’s capital
stock (such consent or approval to be given by written consent in lieu of a
meeting if allowable under the Company’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): (i) enter into any
agreement that would restrict the Company’s ability to perform under the
Securities Purchase Agreement; (ii) amend its Certificate of Incorporation
(including the Certificate of Designations) or bylaws in any way that could
adversely affect, alter or change the rights, powers or preferences of the
Series A Preferred Stock; (iii) engage in any transaction that would impair
or reduce the rights, powers or preferences of the Series A Preferred
Stock as a class; or (iv) complete any Change of Control Transaction (provided
that if less than 400,000 shares of the Series A Preferred Stock are then
outstanding (as adjusted for stock splits, stock combinations,
recapitalizations and the like) and the then holders of Series A Preferred
Stock refused to consent to such Change of Control Transaction, the Company
may, at its option, redeem all, but not less than all, of such Series A Preferred
Stock pursuant to Section 6(e)(i)(D) of the Certificate of Designations.

                                        (b)        For so long as at least 800,000 shares
of Series A Preferred Stock remain issued and outstanding (as adjusted for
stock splits, stock combinations, recapitalizations and the like), the Company
shall not, without the affirmative consent or approval of the holders of shares
representing 66-2/3% of the shares of Series A Preferred Stock then
outstanding, voting as a single class to the exclusion of all other classes of
the Company’s capital stock (such consent or approval to be given by written
consent in lieu of a meeting if allowable under the Company’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):  (i) authorize or issue any capital
stock or other equity security with rights, preferences or privileges that are
senior to or pari passu with the Series A Preferred Stock or any securities
convertible or exchangeable into such capital stock or equity, other than (x)
Series A Preferred Stock issued upon exercise of the Series A Preferred Stock
Warrants issued pursuant to the Securities Purchase Agreement, (y) Series A
Preferred Stock issued to the Additional Purchasers (as defined in the
Securities Purchase Agreement), if any, or issued upon exercise of the Series A
Preferred Stock Warrants issued to the Additional Purchasers, if any, in
compliance with Section 2.3 of the Securities Purchase Agreement, or (z) Series
A Preferred Stock issued as payment in kind of any accrued but unpaid dividends
on the Series A Preferred Stock; (ii) authorize or issue any options, rights or
warrants to purchase capital stock of the Company, other than Series A
Preferred Stock Warrants issued to the Additional Purchasers, if any, in
compliance with Section 2.3 of the Securities Purchase Agreement, or enter into
any agreement or amendment with respect to any outstanding options, rights or
warrants to purchase capital stock of the Company 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; (iii) authorize or issue any
debt securities of the Company, other than debt under the Company’s existing
revolving lines of credit in effect on the date hereof or the replacement
thereof on substantially similar terms, and 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); (iv) purchase, redeem, or otherwise acquire any of the
Company’s capital stock, other than the redemption of the Series A Preferred
Stock; (v) enter into any acquisition, sale, merger, joint venture,
consolidation or reorganization involving the Company or any of its
subsidiaries; (vi) sell or lease assets of the Company or any of its
subsidiaries, except in the ordinary course of business; (vii) declare or
pay any cash dividends or make any distributions on any of its capital stock,
other than on the Series A Preferred Stock; (viii) authorize the payment
or pay to any individual employee of the Company of cash compensation in excess
of $500,000  per annum; or (ix) enter
into any transactions (or series of transactions), including loans, with any
employee, officer or director of the Company 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.

                                        (c)         For so long as at least 1,200,000
shares of Series A Preferred Stock remain issued and outstanding (as adjusted
for stock splits, stock combinations, recapitalizations and the like), the
Company shall not, without the affirmative consent or approval of the holders
representing 66-2/3% of the shares of Series A Preferred Stock then
outstanding, voting as a single class to the exclusion of all other classes of
the Company’s capital stock (such consent or approval to be given by written
consent in lieu of a meeting if allowable under the Company’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):  (i) terminate or newly appoint the chief
executive officer or president of the Company; (ii) approve any annual capital
budget if such budget provides for annual capital expenditures by the Company
and its subsidiaries in excess of $1,000,000 in the aggregate in any year; or
(iii) approve the incurrence of any single capital expenditure (or series of
related capital expenditures) in excess of $500,000; provided, however,
the Company shall have the right to make any reasonable emergency capital
expense that the Board of Directors determines is necessary to maintain
operations as a result of a catastrophic event.

                           2.6        Successors.  The provisions of this Agreement shall be
binding upon the successor in interest to any Holder of the Series A Preferred
Stock.  The Company shall not permit the
transfer of any of the Series A Preferred Stock on its books or issue a new
certificate representing any of the Series A Preferred Stock unless and until
the Person to whom such Series A Preferred Stock is to be transferred shall
have executed a written agreement, substantially in the form of this Agreement,
pursuant to which such Person becomes a party to this Agreement and agrees to
be bound by all the provisions hereof as if such Person were a Holder
hereunder; provided, however, that such successor Persons shall
not have any rights to designate any Directors pursuant to Section 2.1(a)
nor any rights under Section 2.3 (except in the case of Section
2.1(a) or Section 2.3 if such Person is an Affiliate of a Holder
having rights thereunder).

                           2.7        Aggregation.
For purposes of determining the number of shares of Series A Preferred Stock
held (or converted) by a Holder pursuant to this Article II, the number
of shares of Series A Preferred Stock held (or converted) by all of such
Holder’s Affiliates shall be aggregated with the number of shares of Series A
Preferred Stock held (or converted) by such Holder.

                           2.8        Agreement of Additional Purchasers
Regarding Special Approval Rights Vote. 
In connection with any vote, approval or written consent of the holders
of shares of Series A Preferred Stock pursuant to Section 2.5 of this
Agreement (and/or Section 6(e) of the Certificate of Designations), each
Additional Purchaser (and its Affiliates or their respective transferees) shall
vote or otherwise grant its approval or written consent for its shares of
Series A Preferred Stock (prior to the close of voting but after the votes,
approvals or written consents of all of the other holders of Series A Preferred
Stock casting votes, approvals or written consents have been tallied) in the
same proportion to the aggregate affirmative and negative votes, approvals or
written consents of the other holders of Series A Preferred Stock, with respect
to each proposal submitted for vote, approval or written consent.

 

 

ARTICLE III

 GENERAL PROVISIONS

                           3.1        Legend on Share
Certificates.

                                        (a)         All certificates for shares of Series A
Preferred Stock that are subject to the terms and provisions of Article
2, in addition to such other legends as may be required by law,
shall bear the legend set forth in Section 9.3 of the Securities Purchase
Agreement (and any other legend required by any other agreement contemplated by
the Securities Purchase Agreement), as applicable, and the following legend:

THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN REQUIREMENTS
AS TO VOTING CONTAINED IN THE STOCKHOLDERS AGREEMENT, DATED AS OF JULY 31, 2001
(AS SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME), BETWEEN THE COMPANY AND
CERTAIN STOCKHOLDERS, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.

                                        (b)        Upon the termination of this Agreement,
each Holder shall be entitled to receive, in exchange for any certificate
bearing the legend described in Section 3.1(a), a
certificate that no longer bears the legend set forth in Section 3.1(a),
unless the Company shall have sooner determined (based upon advice of legal counsel)
that such legend is no longer required by law.

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

                           3.3        Further Assurances.  Each party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any other party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.

                           3.4        Governing Law.  Except as to matters governed by the General
Corporation Law of the State of Delaware and decisions thereunder of the Delaware
courts applicable to Delaware corporations, which shall be governed by such
laws and decisions, this Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws
of the State of New York.

                          

                           3.5        Entire Agreement;
Amendment; Waiver.

                                        (a)         This Agreement, together with the
Certificate of Designations, contains the entire agreement among the parties
hereto with respect to the subject matter hereof.  This Agreement may not be amended or supplemented except by an
instrument or counterparts thereof in writing signed by the Holders and by the
Company.  Any such amendment so approved
shall be binding on all Holders and all other Persons bound by this Agreement.  No waiver of any term or provision shall be
effective unless in writing signed by the party to be charged.

                                        (b)        The Company may enter into the
Additional Purchase Agreement.  Each
Holder agrees that upon each Additional Purchaser’s acquisition of Series A
Preferred Stock and Series A Preferred Stock Warrants in compliance with
Section 2.3 of the Securities Purchase Agreement and execution and delivery of
a signature page to the joinder agreement between the Company and each such
Additional Purchaser pursuant to which such Additional Purchaser agrees to
become a party and to be bound by the terms hereof, each such Additional
Purchaser shall become a party to this Agreement for all intents and purposes
and shall then be a Holder hereunder. 
The Company shall then revise Schedule I to reflect the addition
of each such Additional Purchaser.  The
addition of such new parties and revision of Schedule I shall not
constitute a modification, waiver or amendment of this Agreement that requires
the consent of or any writing from any of the parties hereto.

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

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

                           3.8        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.

                           3.9        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:

                                        1280
Landmeier Road

                                        Elk
Grove Village, IL 60007-2410

                                        Fax
No. 847-437-4969

                                        Attention:  General Counsel

                                        (ii)         If to a Holder: at the address set
forth in the Securities Purchase Agreement, or Additional Purchase Ageeement,
as applicable.

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

                           3.11      Representations and Warranties.  Each party to this Agreement represents and
warrants to the other parties to this Agreement that (i) all action on the part
of such party necessary for the authorization, execution, delivery and
performance of this Agreement has been taken and (ii) this Agreement is the
legally valid and binding obligation of such party, enforceable against such
party 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.

                           3.12      No Conflict.  The Company shall not enter into any
agreement that is inconsistent with or that would in any way interfere with the
rights of the parties hereto.  The
Company shall ensure that its Certificate of Incorporation and bylaws do not at
any time conflict with the provisions of this Agreement then in effect.  In the event that any such conflict should
nevertheless exist, the provisions of this Agreement shall control to the
extent permitted under applicable law.

                           3.13      Unlimited Parties.  All parties to this Agreement hereby
acknowledge and agree that:

                                        (a)         Nothing in this Agreement shall in any
way limit or be construed as limiting the ability of a Holder or its Affiliates
or Directors or Board Observers designated by such Holder (collectively, the
“Unlimited Parties”), and such Unlimited Parties may, in the past, present or
future, carry out and engage in any and all activities associated with their
businesses, including, without limitation, underwriting (including, without
limitation, underwriting investments of private equity of the Unlimited Parties
or other persons in the business of designing, developing, manufacturing or
marketing of power conservation and reliability systems, including, without
limitation, direct competitors of the Company), trading, brokerage, financing,
derivatives, foreign exchange, asset management activities and principal
investment, and for the avoidance of doubt and without limiting the generality
of the foregoing, the Unlimited Parties may: (i) purchase and hold long or
short positions, otherwise make investments, trade or otherwise effect
transactions, for their own account or the account of their customers, in the
debt or equity securities or loans of persons which may directly or indirectly
compete with any or all of the business of the Company (the “Other Companies”);
and (ii) provide financial advice to the Other Companies; and

                                        (b)        The Unlimited Parties may have
information that may be of interest or value to the Company (“Information”)
regarding various matters including without limitation, (i) an Unlimited
Party’s products, plans, services and technology, and plan and strategies
relating thereto, (ii) current and future investments an Unlimited Party has
made, may make, may consider or may become aware of with respect to other
companies and other products, services and technology, including without
limitation, Other Companies, and (iii) developments with respect to the
technologies, products and services, and plans and strategies relating thereto,
including, without limitation, Other Companies.  The Company agrees that the Unlimited Parties shall have no duty
to disclose any Information to the Company or permit the Company to participate
in any investments or transactions based on any Information, or to otherwise
take advantage of any opportunity that may be of interest to the Company if it
were aware of such Information.

[SIGNATURE PAGE TO
FOLLOW]

                           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	 	HOLDERS
	 	 	 
	ELECTRIC CITY CORP., a
  Delaware corporation	 	NEWCOURT CAPITAL USA
  INC., a Delaware corporation
	 
	 	 	 	 
	By:	 	 	By:	 
	 	

	 	 	

	Name:	John Mitola	 	Name:	 
	 	 	 	 	

	Title:	Chief Executive
  Officer	 	Title:	 
	 	 	 	 	

	 	 	 	 	 
	 	 	 	EP POWER FINANCE, L.L.C.,
  a Delaware limited liability company
	 	 	 
	 	 	 	 	 
	 	 	 	By:	 
	 	 	 	 	

	 	 	 	Name:	 
	 	 	 	 	

	 	 	 	Title:	 
	 	 	 	 	

	 	 	 	 	 
	 	 	 	MORGAN STANLEY DEAN
  WITTER EQUITY FUNDING, INC., a Delaware corporation
	 	 	 
	 	 	 	 	 
	 	 	 	By:	 
	 	 	 	 	

	 	 	 	Name:	Thomas A. Clayton
	 	 	 	Title:	Vice President
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	ORIGINATORS INVESTMENT
  PLAN, L.P., a Delaware limited partnership
	 	 	 	 	 
	 	 	 	By:	MSDW OIP Investors,
  Inc., its general partner
	 	 	 	 	 
	 	 	 	By:	 
	 	 	 	 	

	 	 	 	Name:	Thomas Clayton
	 	 	 	Title:	Vice President
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	DUKE CAPITAL PARTNERS,
  LLC, a Delaware limited liability company
	 	 	 
	 	 	 	 	 
	 	 	 	By:	 
	 	 	 	 	

	 	 	 	Name:	 
	 	 	 	 	

	 	 	 	Title:	 
	 	 	 	 	

							

[Signature Page to Stockholders Agreement]

SCHEDULE I

HOLDERS

 

1.          Newcourt Capital USA, Inc. is a
Holder.

2.          EP Power Finance, L.L.C. is a Holder

3.          Morgan Stanley Dean Witter Equity
Funding, Inc. together with Originators Investment Plan, L.P. are collectively
a Holder.

4.          Duke Capital Partners, LLC is a
Holder.

 

 

 

 

 

EXHIBIT D

FORM OF SERIES A CONVERTIBLE
PREFERRED STOCK WARRANT

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.

THE SERIES A PREFERRED STOCK ISSUABLE
UPON THE EXERCISE OF THE SECURITIES REPRESENTED HEREBY AND THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH SERIES A PREFERRED STOCK ARE SUBJECT TO AN
INVESTOR RIGHTS AGREEMENT, A STOCKHOLDERS AGREEMENT AND A STOCK 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.

WARRANT
NO.     

WARRANT CERTIFICATE

TO PURCHASE SHARES OF SERIES A
CONVERTIBLE PREFERRED STOCK,

PAR VALUE $0.01 PER SHARE

OF

ELECTRIC CITY CORP.

             THIS IS TO CERTIFY THAT [Purchaser] or its registered assigns (the
“Holder”), is the owner of 100,000 warrants (the “Warrants”),
each of which entitles the registered Holder thereof to purchase from Electric
City Corp., a Delaware corporation (the “Company”), one fully paid, duly
authorized and nonassessable share of Series A Convertible Preferred Stock, par
value $0.01 per share (the “Series A Preferred Stock”), of the Company
at any time or from time to time on or before 5:00 p.m., New York City time, on
the Warrant Expiration Date, at an exercise price of $10.00 per share, subject
to adjustment from time to time as set forth herein (the “Exercise Price”),
all on the terms and subject to the conditions hereinafter set forth.

             The
number of shares of Series A Preferred Stock issuable upon exercise of each
Warrant (the “Number Issuable”) shall be determined for each Warrant by
dividing $10.00 by the Exercise Price in effect at the time of such exercise,
and is initially one (1) share of Series A Preferred Stock.  Capitalized terms used herein but not
otherwise defined shall have the meanings given them in Section 13
hereof or, if not therein defined, in the Securities Purchase Agreement.

             Section
1.         Exercise
Of Warrants.  Subject to the last
paragraph of this Section 1, the Warrants evidenced hereby may be
exercised, in whole or in part, by the registered Holder hereof at any time or
from time to time, on or before 5:00 p.m., New York City time, on the Warrant
Expiration Date upon delivery to the Company at the principal executive office
of the Company in the United States of America, of (a) this Warrant
Certificate, (b) a written notice stating that such Holder elects to exercise
the Warrants evidenced hereby in accordance with the provisions of this Section
1 and specifying the number of Warrants being exercised and the name or
names in which such Holder wishes the certificate or certificates for shares of
Series A Preferred Stock to be issued and (c) payment of the Exercise Price for
the shares of Series A Preferred Stock issuable upon exercise of such Warrants,
which shall be payable by any one or any combination of the following: (i) cash
or (ii) certified or official bank check payable to the order of the
Company.  The documentation and
consideration delivered in accordance with clauses (a), (b) and (c) of this
paragraph above are collectively referred to herein as the “Warrant Exercise
Documentation.”

             As
promptly as practicable, and in any event within two (2) Business Days after
receipt of the Warrant Exercise Documentation, the Company shall deliver or
cause to be delivered certificates representing the number of validly issued,
fully paid and nonassessable shares of Series A Preferred Stock issuable in
connection with such exercise, and if less than the full number of Warrants
evidenced hereby are being exercised, a new Warrant Certificate or
Certificates, of like tenor, for the number of Warrants evidenced by this
Warrant Certificate, less the number of Warrants then being exercised; provided,
however, that no new Warrant Certificate need be delivered if the
Warrant Expiration Date has occurred. 
Such exercise shall be deemed to have been made at the close of business
on the date of delivery of the Warrant Exercise Documentation so that the
Person entitled to receive shares of Series A Preferred Stock upon such
exercise shall be treated for all purposes as having become the record holder
of such shares of Series A Preferred Stock at such time.

             The
Company shall pay all expenses in connection with, and all taxes and other
governmental charges (other than income taxes of the Holder) that may be
imposed in respect of the issue or delivery of any shares of Series A Preferred
Stock issuable upon the exercise of the Warrants evidenced hereby.  The Company shall not be required, however,
to pay any tax or other charge imposed in connection with any transfer involved
in the issue of any certificate for shares of Series A Preferred Stock in any
name other than that of the registered Holder of the Warrants evidenced hereby.

             In
connection with the exercise of any Warrants evidenced hereby, at the Company’s
option, no fractions of shares of Series A Preferred Stock shall be issued, but
in lieu thereof the Company may elect to pay a cash adjustment in respect of
such fractional interest in an amount equal to any such fractional interest
multiplied by $10.00 per share of Series A Preferred Stock.  If more than one such Warrant shall be
exercised by the Holder thereof at the same time, the number of full shares of
Series A Preferred Stock issuable on such exercise shall be computed on the
basis of the total number of Warrants so exercised.

Section
2.         Adjustments.

                           (a)         Subdivision or Combination of Stock or
Stock Dividends.  In case the Company
shall at any time subdivide its outstanding shares of Series A Preferred Stock
into a greater number of shares, by split or otherwise, or issue additional
shares of Series A Preferred Stock as a dividend (other than as a dividend in
respect of the outstanding Series A Preferred Stock in accordance with
Section 3 of the Certificate of Designations (as defined in the Securities
Purchase Agreement)), or make any other distribution upon any class or series
of stock payable in shares of common stock or Convertible Securities of the
Company, the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced and, conversely, in case the outstanding
shares of Series A Preferred Stock of the Company shall be combined into a
smaller number of shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased.

                           (b)        Reorganization; Reclassification;
Consolidation; Merger or Sale of Assets. 
In case of any capital reorganization or reclassification or other
change of outstanding shares of Series A Preferred Stock (other than a change
in par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another Person (other than
a consolidation or merger in which the Company is the resulting or surviving
person and that does not result in any reclassification or change of
outstanding Series A Preferred Stock) (any of the foregoing, a “Transaction”),
the Company, or such successor or purchasing Person, as the case may be, shall
execute and deliver to each Holder of the Warrants evidenced hereby, at least
five (5) Business Days prior to effecting any of the foregoing Transactions, a
certificate that the Holder of each such Warrant then outstanding shall have
the right thereafter to exercise such Warrant into the kind and amount of
shares of stock or other securities (of the Company or another issuer) or
property or cash receivable upon such Transaction by a holder of the number of
shares of Series A Preferred Stock into which such Warrant could have been
exercised immediately prior to such Transaction (or, if the Series A Preferred
Stock did not participate in any such Transaction, the kind and amount of
shares of stock or other securities (of the Company or another issuer) or
property or cash receivable upon such Transaction by a holder of the number of
shares of Common Stock into which such Series A Preferred Stock could have been
converted immediately prior to such Transaction).  Such certificate shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 2 and shall contain other terms identical to the terms
hereof.   If, in the case of any such
Transaction, the stock, other securities, cash or property receivable thereupon
by a holder of Series A Preferred Stock (or, if applicable, by a holder of
Common Stock issuable upon conversion of the Series A Preferred Stock) includes
shares of stock or other securities of a Person other than the successor or
purchasing Persons and other than the Company, who controls or is controlled by
the successor or purchasing Person or who, in connection with such Transaction,
issues stock, securities, other property or cash to holders of Series A
Preferred Stock or Common Stock, then such certificate also shall be executed
by such Person, and such Person shall, in such certificate, specifically assume
the obligations of such successor or purchasing Person and acknowledge its
obligations to issue such stock, securities, other property or cash to Holders
of the Warrants upon exercise thereof as provided above.  The provisions of this Section 2(b)
similarly shall apply to successive Transactions. 

                           (c)         Special Distributions.  In the event that the Company shall declare
a dividend or make any other distribution (including, without limitation, in
cash, in notes or other debt securities or in capital stock (which shall
include, without limitation, any options, warrants or other rights to acquire
capital stock)) of the Company, whether or not pursuant to a stockholder rights
plan, “poison pill” or similar arrangement (but excluding any dividend or
distribution that results in an adjustment to the Exercise Price pursuant to
Section 2(a)) in other property or assets, to holders of Series A
Preferred Stock (a “Special Distribution”), then the Board of Directors
shall set aside the amount of such dividend or distribution that each Holder of
Warrants would have been entitled to receive had it exercised such Warrants
prior to the record date for such dividend or distribution.  Upon the exercise of a Warrant evidenced
hereby, the Holder shall be entitled to receive such dividend or distribution
that such Holder would have received had such Warrant been exercised
immediately prior to the record date for such dividend or distribution.

                           Section
3.         Notice of Certain Events.  In case at any time or from time to time the
Company shall declare any dividend or any other distribution to the holders of
its Series A Preferred Stock or Common Stock, or shall authorize the granting
to the holders of its Series A Preferred Stock or Common Stock of rights or
warrants to subscribe for or purchase any additional shares of stock of any
class or any other right, or shall authorize the issuance or sale of any other
shares or rights that would result in an adjustment to the Exercise Price
pursuant to Section 2(a) or would result in a Special Distribution
described in Section 2(c), or there shall be any capital
reorganization or reclassification of the Series A Preferred Stock or Common
Stock or consolidation or merger of the Company with or into another Person, or
any sale or other disposition of all or substantially all the assets of the
Company, or there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company, then, in any one or more of such cases the
Company shall mail to each Holder of the Warrants evidenced hereby at such
Holder’s address as it appears on the transfer books of the Company, as
promptly as practicable but in any event at least  ten (10) Business Days prior to the applicable date hereinafter
specified, a notice stating (a) the date on which a record is to be taken for
the purpose of such dividend, distribution, rights or warrants or, if a record
is not to be taken, the date as of which the holders of Series A Preferred
Stock or Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined, (b) the issue date of such dividend,
distribution, rights or warrants and (c) the date on which such reorganization,
reclassification, consolidation, merger, sale, disposition, dissolution,
liquidation or winding up is expected to become effective.  Such notice also shall specify the date as
of which it is expected that the holders of Series A Preferred Stock or Common
Stock of record shall be entitled to exchange their Series A Preferred Stock or
Common Stock for shares of stock or other securities or property or cash
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, disposition, dissolution, liquidation or winding up.

                           Section
4.         Certain Covenants.  The Company will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Series A Preferred Stock or its authorized and issued
Series A Preferred Stock held in its treasury, for the purpose of enabling it
to satisfy any obligation to issue Series A Preferred Stock upon exercise of
the Warrants, the maximum number of shares of Series A Preferred Stock that may
then be deliverable upon the exercise of all outstanding Warrants. The Company
shall take all action required to increase the authorized number of shares of
Series A Preferred Stock if at any time there shall be insufficient authorized
but unissued shares of Series A Preferred Stock to permit such reservation or
to permit the exercise of all outstanding Warrants.

                           The
Company or, if appointed, the transfer agent for the Series A Preferred Stock
(the “Transfer Agent”) and every subsequent transfer agent for any
shares of the Company’s capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably authorized and directed at all
times to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Warrant Certificate on file with
the Transfer Agent and with every subsequent transfer agent for any shares of
the Company’s capital stock issuable upon the exercise of the rights of
purchase represented by the Warrants.

                           Before
taking any action that would cause an adjustment pursuant to Section 2
hereof to reduce the Exercise Price below the then par value (if any) of the
Series A Preferred Stock, the Company will take any corporate action that may,
in the opinion of its counsel (which may be counsel employed by the Company),
be necessary in order that the Company may validly and legally issue fully paid
and nonassessable Series A Preferred Stock at the Exercise Price as so
adjusted.

                           The
Company covenants that all Series A Preferred Stock that may be issued upon
exercise of the Warrants will, upon issue, be validly issued, fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens,
charges and security interests with respect to the issue thereof.

                           Section
5.         Registered Holder.  The person in whose name this Warrant
Certificate is registered shall be deemed the owner hereof and of the Warrants
evidenced hereby for all purposes.

                           Section
6.         Transfer of Warrants.  Any transfer of the rights represented by
this Warrant Certificate shall be effected by the surrender of this Warrant
Certificate, along with the form of assignment attached hereto, properly
completed and executed by the registered Holder hereof, at the principal
executive office of the Company in the United States of America.  Thereupon, the Company shall issue in the
name or names specified by the registered Holder hereof and, in the event of a
partial transfer, in the name of the registered Holder hereof, a new Warrant Certificate
or Certificates evidencing the right to purchase such number of shares of
Series A Preferred Stock as shall be equal to the number of shares of Series A
Preferred Stock then purchasable hereunder.

                           Section
7.         Restrictive Legend.  Each certificate representing the Series A
Preferred Stock issued upon exercise of this Warrant shall be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):

 

	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.
	 
	THE
  SECURITIES REPRESENTED HEREBY ARE SUBJECT TO AN INVESTOR RIGHTS AGREEMENT, A
  STOCKHOLDERS AGREEMENT AND A STOCK 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.

Said legends shall be removed by the
Company, upon the request of the holder thereof, at such time as the
restrictions on the transfer of the applicable security under applicable
securities laws and the obligations imposed on the holder thereof under the
Investor Rights Agreement, Stockholders Agreement and Stock Trading Agreement,
as applicable, shall have terminated.

                           Section
8.         Denominations.  The Company will, at its expense, promptly
upon surrender of this Warrant Certificate at the principal executive office of
the Company in the United States of America, execute and deliver to the
registered Holder hereof a new Warrant Certificate or Certificates in
denominations specified by such Holder for an aggregate number of Warrants
equal to the number of Warrants evidenced by this Warrant Certificate.

                           Section
9.         Replacement of Warrants.  Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant Certificate
and, in the case of loss, theft or destruction, upon delivery of an indemnity
reasonably satisfactory to the Company (in the case of an insurance company or
other institutional investor, its own unsecured indemnity agreement shall be
deemed to be reasonably satisfactory), or, in the case of mutilation, upon
surrender and cancellation thereof, the Company will issue a new Warrant
Certificate of like tenor for a number of Warrants equal to the number of
Warrants evidenced by this Warrant Certificate.

                           Section
10.       Governing Law.  Except as to matters governed by the General
Corporation Law of the State of Delaware and decisions thereunder of the
Delaware courts applicable to Delaware corporations, which shall be governed by
such laws and decisions, this Warrant Certificate shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the laws of the State of New York applicable to agreements made and to be
performed entirely within such State.

                           Section
11.       Rights Inure to
Registered Holder.  The Warrants
evidenced by this Warrant Certificate will inure to the benefit of and be
binding upon the registered Holder thereof and the Company and their respective
successors and permitted assigns. 
Nothing in this Warrant Certificate shall be construed to give to any
Person other than the Company and the registered Holder and their respective
successors and permitted assigns any legal or equitable right, remedy or claim
under this Warrant Certificate, and this Warrant Certificate shall be for the
sole and exclusive benefit of the Company and such registered Holder.  Nothing in this Warrant Certificate shall be
construed to give the registered Holder hereof any rights as a Holder of shares
of Series A Preferred Stock or Common Stock until such time, if any, as the
Warrants evidenced by this Warrant Certificate are exercised in accordance with
the provisions hereof.

                           Section
12.       Notice. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be given
by registered or certified first–class mail, return receipt requested,
nationally recognized overnight delivery service or personal delivery, (a) if
to the Holder of a Warrant, at such Holder’s last known address appearing on
the books of the Company; and (b) if to the Company, at its principal executive
office in the United States located at the address designated for notices in
the Securities Purchase Agreement, or such other address as shall have been
furnished to the party given or making such notice, demand or other
communication.  All such notices and
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; when delivered if delivered by a nationally recognized
overnight delivery service; and five (5) Business Days after being deposited in
the mail, as aforesaid, postage prepaid, if mailed.

                           Section
13.       Definitions.  For the purposes of this Warrant
Certificate, the following terms shall have the meanings indicated below:

                            “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.

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

                           “Series
A Preferred Stock” shall have the meaning set forth in the preamble hereof.

                           “Convertible
Securities” means any rights to subscribe for or to purchase, or any
options or warrants for the purchase of, Series A Preferred Stock or any stock,
notes or securities convertible into or exchangeable for Series A Preferred
Stock.

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

                           “Holder”
shall have the meaning set forth in the preamble.

                           “Number
Issuable” shall have the meaning set forth in the preamble.

                           “Person”
means any individual, corporation, limited liability company, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind.

                           “Securities
Purchase Agreement” means that certain Securities Purchase Agreement, dated
as of July 31, 2001, among the Company, the Holder and the other parties
signatory thereto, as the same may be amended, modified or otherwise
supplemented from time to time in accordance with its terms.

                           “Special
Distribution” shall have the meaning set forth in Section 2(c)
hereof.

                           “Transaction”
shall have the meaning set forth in Section 2(b) hereof.

                           “Transfer
Agent” shall have the meaning set forth in Section 4 hereof.

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

                           “Warrant
Exercise Documentation” shall have the meaning set forth in Section 1
hereof.

                           “Warrant
Expiration Date” means September _____, 2002.

[SIGNATURE PAGE FOLLOWS]

 

             IN WITNESS
WHEREOF, the Company has caused this Warrant Certificate to be duly executed as
of the Closing Date (as defined in the Securities Purchase Agreement).

 

	 	COMPANY
	 	 
	 	ELECTRIC
  CITY CORP.,
	 	a
  Delaware corporation
	 	 
	 	By:
	 	 	

	 
	 	Name:
	 	 	

	 
	 	Title:
	 	 	

	 
	 	 
	ATTEST:	 
	 	 
	

	 
						

 

Form
of Assignment Form

[To
be executed upon assignment of Warrants]

             The
undersigned hereby assigns and transfers unto ______________________, whose
Social Security Number or Tax ID Number is ____________________ and whose
record address is ___________________________________ the rights represented by
the attached Warrant Certificate with respect to ___ Warrants to which the
attached Warrant Certificate relates, and irrevocably appoints _______________
as agent to transfer this security on the books of the Company.  Such agent may substitute another to act for
such agent.

	 	Signature: 
	 	 
	 	 
	 	

(Signature must
  conform in all respects to name of holder as specified on the face of the Warrant
  Certificate)
	 	 
	 	Signature Guarantee:
	 	 
	 	 
	 	

	 	 
	Date:____________________________	 
	 	 

 

(SUBSCRIPTION
FORM TO BE EXECUTED UPON EXERCISE OF

SOME OR ALL OF THE WARRANTS)

             The undersigned, registered Holder,
successor or assignee of such registered Holder of the within Warrant
Certificate, hereby:

             (a) subscribes for ___ shares
of Series A Preferred Stock which the undersigned is entitled to purchase under
the terms of the within Warrant Certificate, (b) makes the full cash
payment therefor called for by the within Warrant Certificate, and
(c) directs that the Series A Preferred Stock issuable upon exercise of
said Warrants be issued as described hereunder.

	 	

	 	(Name)
	 	

	 	(Address)

 

	 	 	

	 	 	SIGNATURE
	Dated:  	 	 
	 	

	 
				

 

EXHIBIT "E"

FORM OF COMMON STOCK WARRANT

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.

THE SHARES OF COMMON STOCK ISSUABLE UPON
THE EXERCISE OF THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO AN INVESTOR
RIGHTS AGREEMENT, A STOCKHOLDERS AGREEMENT AND A STOCK 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.

WARRANT
NO.     

WARRANT CERTIFICATE

TO PURCHASE SHARES OF COMMON STOCK,

PAR VALUE $0.0001 PER SHARE

OF

ELECTRIC CITY CORP.

                           THIS
IS TO CERTIFY THAT [Purchaser] or its registered assigns (the “Holder”),
is the owner of 750,000 warrants (the “Warrants”), each of which
entitles the registered Holder thereof to purchase from Electric City Corp., a
Delaware corporation (the “Company”), one fully paid, duly authorized
and nonassessable share of Common Stock, par value $0.0001 per share (the “Common
Stock”), of the Company at any time or from time to time after sixty (60)
days from the Issue Date (as defined in Section 2(a)), but on or before
5:00 p.m., New York City time, on the Warrant Expiration Date, at an exercise
price of $1.00 per share, subject to adjustment from time to time as set forth
herein (the “Exercise Price”), all on the terms and subject to the
conditions hereinafter set forth.

                           The
number of shares of Common Stock issuable upon exercise of each Warrant (the “Number
Issuable”) shall be determined for each Warrant by dividing $1.00 by the
Exercise Price in effect at the time of such exercise, and is initially one (1)
share of Common Stock.  Capitalized
terms used herein but not otherwise defined shall have the meanings given them
in Section 13 hereof or, if not therein defined, in the Securities
Purchase Agreement.

                           Section
1.         Exercise Of Warrants.
Subject to the last paragraph of this Section 1, the Warrants
evidenced hereby may be exercised, in whole or in part, by the registered
Holder hereof at any time or from time to time after sixty (60) days from the
Issue Date, but on or before 5:00 p.m., New York City time, on the Warrant
Expiration Date, upon delivery to the Company at the principal executive office
of the Company in the United States of America, of (a) this Warrant
Certificate, (b) a written notice stating that such Holder elects to exercise
the Warrants evidenced hereby in accordance with the provisions of this Section 1
and specifying the number of Warrants being exercised and the name or names in
which such Holder wishes the certificate or certificates for shares of Common
Stock to be issued and (c) payment of the Exercise Price for the shares of
Common Stock issuable upon exercise of such Warrants, which shall be payable by
any one or any combination of the following: (i) cash, (ii) certified or
official bank check payable to the order of the Company, (iii) by the surrender
(which surrender shall be evidenced by cancellation of the relevant number of
Warrants represented by any Warrant certificate presented in connection with a
Cashless Exercise (as defined below)) of a Warrant or Warrants (represented by
one or more relevant Warrant certificates), and without the payment of the
Exercise Price in cash, in return for the delivery to the surrendering Holder
of such number of shares of Common Stock equal to the number of shares of
Common Stock for which such Warrant is exercised as of the date of exercise (if
the Exercise Price were being paid in cash) reduced by that number of shares of
Common Stock equal to the number of shares for which such Warrant is exercised
multiplied by a fraction, the numerator of which is (A) the Exercise Price and
the denominator of which is (B) the Market Price of one share of Common Stock
on the Business Day that immediately precedes the day of exercise of the
Warrant or (iv) by the delivery of shares of Common Stock that are valued at
the Market Price on the Business Day immediately preceding the day of the
exercise of the Warrant that are either held by the Holder or are acquired in
connection with such exercise, and without payment of the Exercise Price in
cash.  Any share of Common Stock
delivered as payment of the Exercise Price in connection with an In–Kind
Exercise (as defined below) shall be deemed to have a value equal to the Market
Price of one share of Common Stock on the Business Day that immediately
precedes the day of exercise of the Warrant. 
An exercise of a Warrant in accordance with clause (iii) is herein
referred to as a “Cashless Exercise” and an exercise of a Warrant in
accordance with clause (iv) is herein referred to as an “In–Kind
Exercise.” The documentation and consideration, if any, delivered in
accordance with clauses (a), (b) and (c) of this paragraph above are
collectively referred to herein as the “Warrant Exercise Documentation.”
For the purposes of this Section 1, Market Price shall be
calculated without reference to the last sentence of the definition thereof.

                           As
promptly as practicable, and in any event within two (2) Business Days after
receipt of the Warrant Exercise Documentation, the Company shall deliver or
cause to be delivered certificates representing the number of validly issued,
fully paid and nonassessable shares of Common Stock issuable in connection with
such exercise, and if less than the full number of Warrants evidenced hereby
are being exercised, a new Warrant Certificate or Certificates, of like tenor,
for the number of Warrants evidenced by this Warrant Certificate, less the
number of Warrants then being exercised or surrendered; provided, however,
that no new Warrant Certificate need be delivered if the Warrant Expiration
Date has occurred.  Such exercise shall
be deemed to have been made at the close of business on the date of delivery of
the Warrant Exercise Documentation so that the Person entitled to receive
shares of Common Stock upon such exercise shall be treated for all purposes as
having become the record holder of such shares of Common Stock at such time.

                           The
Company shall pay all expenses in connection with, and all taxes and other
governmental charges (other than income taxes of the Holder) that may be
imposed in respect of the issue or delivery of any shares of Common Stock
issuable upon the exercise of the Warrants evidenced hereby.  The Company shall not be required, however,
to pay any tax or other charge imposed in connection with any transfer involved
in the issue of any certificate for shares of Common Stock in any name other
than that of the registered Holder of the Warrants evidenced hereby.

                           In
connection with the exercise of any Warrants evidenced hereby, at the Company’s
option, no fractions of shares of Common Stock shall be issued, but in lieu
thereof the Company may elect to pay a cash adjustment in respect of such
fractional interest in an amount equal to any such fractional interest
multiplied by the current Market Price per share of Common Stock on the
Business Day that precedes the day of exercise.  If more than one such Warrant shall be exercised by the Holder
thereof at the same time, the number of full shares of Common Stock issuable on
such exercise shall be computed on the basis of the total number of Warrants so
exercised.

                           Section
2.         Adjustments.  The Exercise Price shall be subject to
adjustment from time to time as provided in this Section 2.

                           (a)         Adjustment of Exercise Price Upon
Issuance of Common Stock. If after September _____, 2001 (the “Issue
Date”) the Company shall issue or sell any shares of its Common Stock
(except upon exercise of the Warrants and shares issued as a result of
adjustments made under the terms of the Warrants) for a price per share less
than (including, without limitation, those circumstances described in
paragraphs (i) through (vii) below), the Exercise Price in effect on the date
immediately prior to the date of such issue or sale, then, immediately upon
such issue or sale, the Exercise Price then in effect shall be reduced to such
lower price per share.

                           (i)          Issuance of Rights or Options.  In case at any time after the Issue Date the
Company shall in any manner grant (whether directly or by assumption in a
merger or otherwise), 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 Company 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 in property
received or receivable by the Company as consideration for the granting of such
rights, options or warrants, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company 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 2(a)(iii), no further adjustment of the Exercise 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 Issue Date the
Company 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 to exchange or convert thereunder are immediately exercisable, such
issuance or sale of Convertible Securities shall be deemed a sale by the
Company of its Common Stock and the price per share for such Common Stock shall
be determined by dividing (A) the total amount received or receivable in cash
or in property by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company 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 2(a)(iii), no
further adjustment of the Exercise 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 Exercise
Price have been or are to be made pursuant to other provisions of this
Section 2(a), no further adjustment of the Exercise Price shall be made by
reason of such issue or sale.

                           (iii)        Change in Option Price or Exercise
Price.  If the purchase price
provided for in any right or option referred to in Section 2(a)(i), the
additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in Section 2(a)(i) or 2(a)(ii), or
the rate at which any Convertible Securities referred to in
Section 2(a)(i) or 2(a)(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 Exercise Price then in effect hereunder shall
forthwith be readjusted (increased or decreased, as the case may be) to the
Exercise 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 Exercise 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 2(a)(i) or the termination of any such right to
convert or exchange any such Convertible Securities referred to in
Section 2(a)(i) or 2(a)(ii), the Exercise Price then in effect hereunder
shall forthwith be readjusted (increased or decreased, as the case may be) to
the Exercise 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 2(a)(i) or the rate at which any Convertible Securities referred
to in Section 2(a)(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
Exercise 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
Exercise Price then in effect hereunder is thereby reduced.

                           (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 Company
therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith.

                           In
case at any time any shares of Common Stock or Convertible Securities or any
rights or options 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 Company 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
Company, without deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith.  In case at any time any
shares of Common Stock or Convertible Securities or any rights or options to
purchase such shares of Common Stock or Convertible Securities shall be issued
in connection with any merger or consolidation in which the Company is the
surviving company, 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 Company of such portion of the assets and business of
the nonsurviving corporation as the Board may determine to be attributable to
such shares of Common Stock, Convertible Securities, rights or options, as the
case may be.  In case at any time any
rights or options 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 Company, together comprising one integral transaction in
which no consideration is allocated to such rights or options by the parties
thereto, such rights or options 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 Company.

                           (v)        Record Date.  In case the Company 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)       Adjustment to Determination of
Exercise Price.  When making the
calculations and determinations described in this Section 2(a), there
shall not be taken into account (A) the issuance of Common Stock upon the
exercise of options or warrants outstanding on the Issue Date, (B) the issuance
of Common Stock upon the conversion of the Series A Preferred Stock of the
Company, (C) the issuance of Common Stock upon exercise of the Warrants
evidenced by this Warrant Certificate, any other warrants to purchase Common
Stock issued pursuant to the Securities Purchase Agreement, or the Placement
Agent Warrants (as defined in the Securities Purchase Agreement), (D) the
issuance of Series A Preferred Stock upon exercise of the Series A Preferred
Stock Warrants (as defined in the Securities Purchase Agreement) issued
pursuant to the Securities Purchase Agreement Agreement or the Additional
Purchase Agreement and (E) the issuance of 320,868 shares of Common Stock
pursuant to the Securities Purchase Agreement.

                           (vii)      Good Faith.  If any event occurs as to which in the
reasonable opinion of the Board of Directors of the Company, in good faith, the
other provisions of this Section 2 are not strictly applicable but the
lack of any adjustment in the Exercise Price or the Number Issuable or both
would not in the opinion of the Board of Directors of the Company fairly
protect the exercise rights of the Holder, in accordance with the basic intent
and principles of such provisions, then the Board of Directors of the Company
shall appoint a firm of independent certified public accountants (which may be
the regular auditors of the Company) of recognized national standing, which
shall give their opinion upon the adjustment, if any, to the Exercise Price or
Number Issuable or both, as the case may be, on a basis consistent with the
basic intent and principles of this Section 2, necessary to preserve,
without dilution, the exercise rights of all the registered Holders of the
Warrants in accordance with this Warrant Certificate.

                           (viii)     Notice of Change in Exercise Price.  The Company promptly shall deliver to each
registered Holder of Warrants at least five (5) Business Days prior to
effecting any transaction that would result in an increase or decrease in the
Exercise Price pursuant to this Section 2, a statement, signed by its
independent certified public accountants, setting forth in reasonable detail
the event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Exercise Price then in
effect following such adjustment. 

             (b)        Subdivision; Combination of Stock or
Stock Dividends.  In case the
Company 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 of the Certificate of Designations (as defined in the Securities
Purchase Agreement) in respect of the Series A Preferred Stock), or make any
other distribution upon any class or series of stock payable in shares of
Common Stock or Convertible Securities, the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced and,
conversely, in case the outstanding shares of Common Stock of the Company shall
be combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased.

             (c)         Reorganization; Reclassification;
Consolidation; Merger or Sale of Assets. 
In case of (i) any capital reorganization or reclassification or other
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation or merger of
the Company with or into another Person (other than a consolidation or merger
in which the Company is the resulting or surviving Person and that does not
result in any reclassification or change of outstanding Common Stock) or (iii)
transfer or sale of all or substantially all of the Company’s Assets to another
person (any of the foregoing, a “Transaction”), the Company, or such successor
or purchasing Person, as the case may be, shall execute and deliver to each
Holder of the Warrants evidenced hereby, at least five (5) Business Days prior
to effecting any of the foregoing Transactions, a certificate that the Holder
of each such Warrant then outstanding shall have the right thereafter to
exercise such Warrant into the kind and highest amount of shares of stock or
other securities (of the Company or another issuer) or property or cash
receivable upon such Transaction by a holder of the number of shares of Common
Stock into which such Warrant could have been exercised immediately prior to
such Transaction.  Such certificate
shall provide for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 2 and shall
contain other terms identical to the terms hereof.   If, in the case of any such Transaction, the stock, other
securities, cash or property receivable thereupon by a holder of Common Stock
includes shares of stock or other securities of a Person other than the
successor or purchasing Persons and other than the Company, who controls or is
controlled by the successor or purchasing Person or who, in connection with
such Transaction, issues stock, securities, other property or cash to holders
of Common Stock, then such certificate also shall be executed by such Person,
and such Person shall, in such certificate, specifically assume the obligations
of such successor or purchasing Person and acknowledge its obligations to issue
such stock, securities, other property or cash to Holders of the Warrants upon
exercise thereof as provided above.  The
provisions of this Section 2(c) similarly shall apply to successive
Transactions.

             (d)        Adjustment for Other Distributions.  If the Company distributes to all holders of
its Common Stock any of its assets (including but not limited to cash), debt
securities, preferred stock, or any rights or warrants to purchase debt
securities, preferred stock, assets or other securities of the Company, the
Exercise Price shall be adjusted in accordance with the following formula:

	E'	=	E	x	M	-	F
	 	 	 	 	

	 	 	 	 	 	M	 

             where

             E’          =           the
adjusted Exercise Price.

             E           =           the
current Exercise Price.

             M         =           the
Market Price of one share of Common Stock on the record date mentioned below.

             F           =           the
fair market value (determined in good faith
by the Board of Directors of the Company) on the record date of the
assets, securities, rights or warrants applicable to one share of Common Stock.

             The
adjustment shall be made successively whenever any such distribution is made
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution.  This Section 2(d) does not apply
to any dividend or distribution that results in an adjustment to the Exercise
Price pursuant to Section 2(a) or Section 2(b) above.

             Section
3.         Notice of Certain Events.  In case at any time or from time to time the
Company shall declare any dividend or any other distribution to the holders of
its Common Stock, or shall authorize the granting to the holders of its Common
Stock of rights or warrants to subscribe for or purchase any additional shares
of stock of any class or any other right, or shall authorize the issuance or
sale of any other shares or rights that would result in an adjustment to the
Exercise Price pursuant to Section 2(a) or Section 2(d),
or there shall be any capital reorganization or reclassification of the Common
Stock or consolidation or merger of the Company with or into another Person, or
any sale or other disposition of all or substantially all the assets of the
Company, or there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company, then, in any one or more of such cases the
Company shall mail to each Holder of the Warrants evidenced hereby at such
Holder’s address as it appears on the transfer books of the Company, as
promptly as practicable but in any event at least ten (10) Business Days prior
to the applicable date hereinafter specified, a notice stating (a) the date on
which a record is to be taken for the purpose of such dividend, distribution,
rights or warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined, (b) the issue date of
such dividend, distribution, rights or warrants or (c) the date on which such
reorganization, reclassification, consolidation, merger, sale, disposition,
dissolution, liquidation or winding up is expected to become effective.  Such notice also shall specify the date as
of which it is expected that the holders of Common Stock of record shall be
entitled to exchange their Common Stock for shares of stock or other securities
or property or cash deliverable upon such reorganization, reclassification,
consolidation, merger, sale, disposition, dissolution, liquidation or winding
up.

             Section
4.         Certain Covenants.  The Company will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Common Stock or its authorized and issued Common Stock
held as treasury stock, for the purpose of enabling it to satisfy any
obligation to issue Common Stock upon exercise of the Warrants, the maximum
number of shares of Common Stock that may then be deliverable upon the exercise
of all outstanding Warrants. The Company shall take all action required to
increase the authorized number of shares of Common Stock if at any time there
shall be insufficient authorized but unissued shares of Common Stock to permit
such reservation or to permit the exercise of all outstanding Warrants.

             The
Company or, if appointed, the transfer agent for the Common Stock (the “Transfer
Agent”) and every subsequent transfer agent for any shares of the Company’s
capital stock issuable upon the exercise of any of the rights of purchase
aforesaid will be irrevocably authorized and directed at all times to reserve
such number of authorized shares as shall be required for such purpose. The
Company will keep a copy of this Warrant Certificate on file with the Transfer
Agent and with every subsequent transfer agent for any shares of the Company’s
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrants.  The Company will
furnish such Transfer Agent a copy of all notices of adjustments and
certificates related thereto transmitted to each Holder pursuant to Section 2(a)(viii)
hereof.

             Before
taking any action that would cause an adjustment pursuant to Section 2
hereof to reduce the Exercise Price below the then par value (if any) of the
Common Stock, the Company will take any corporate action that may, in the
opinion of its counsel (which may be counsel employed by the Company), be
necessary in order that the Company may validly and legally issue fully paid
and nonassessable Common Stock at the Exercise Price as so adjusted.

             The
Company covenants that all Common Stock that may be issued upon exercise of the
Warrants will, upon issue, be validly issued, fully paid, nonassessable, free
of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.

             Section
5.         Registered Holder.  The person in whose name this Warrant
Certificate is registered shall be deemed the owner hereof and of the Warrants
evidenced hereby for all purposes.

             Section
6.         Transfer of Warrants.  Any transfer of the rights represented by
this Warrant Certificate shall be effected by the surrender of this Warrant
Certificate, along with the form of assignment attached hereto, properly
completed and executed by the registered Holder hereof, at the principal
executive office of the Company in the United States of America.  Thereupon, the Company shall issue in the
name or names specified by the registered Holder hereof and, in the event of a
partial transfer, in the name of the registered Holder hereof, a new Warrant
Certificate or Certificates evidencing the right to purchase such number of
shares of Common Stock as shall be equal to the number of shares of Common
Stock then purchasable hereunder.

             Section
7.         Restrictive Legend.  Each certificate representing the Common
Stock issued upon exercise of this Warrant shall be stamped or otherwise
imprinted with a legend in the following form (in addition to any legend
required under applicable state securities laws):

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.

THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO AN INVESTOR RIGHTS AGREEMENT, A
STOCKHOLDERS AGREEMENT AND A STOCK 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.

 

Said legends shall be removed by the
Company, upon the request of the holder thereof, at such time as the
restrictions on the transfer of the applicable security under applicable
securities laws and the obligations imposed on the holder thereof under the
Investor Rights Agreement, the Stockholders Agreement and the Stock Trading
Agreement, as applicable, shall have terminated.

             Section
8.         Denominations.  The Company will, at its expense, promptly
upon surrender of this Warrant Certificate at the principal executive office of
the Company in the United States of America, execute and deliver to the
registered Holder hereof a new Warrant Certificate or Certificates in
denominations specified by such Holder for an aggregate number of Warrants
equal to the number of Warrants evidenced by this Warrant Certificate.

             Section
9.         Replacement of Warrants.  Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant
Certificate and, in the case of loss, theft or destruction, upon delivery of an
indemnity reasonably satisfactory to the Company (in the case of an insurance
company or other institutional investor, its own unsecured indemnity agreement
shall be deemed to be reasonably satisfactory), or, in the case of mutilation,
upon surrender and cancellation thereof, the Company will issue a new Warrant
Certificate of like tenor for a number of Warrants equal to the number of
Warrants evidenced by this Warrant Certificate.

             Section
10.       Governing Law.  Except as to matters governed by the General
Corporation Law of the State of Delaware and decisions thereunder of the
Delaware courts applicable to Delaware corporations, which shall be governed by
such laws and decisions, this Warrant Certificate shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the laws of the State of New York applicable to agreements made and to be
performed entirely within such State.

             Section
11.       Rights
Inure to Registered Holder.  The
Warrants evidenced by this Warrant Certificate will inure to the benefit of and
be binding upon the registered Holder thereof and the Company and their
respective successors and permitted assigns. 
Nothing in this Warrant Certificate shall be construed to give to any
Person other than the Company and the registered Holder and their respective
successors and permitted assigns any legal or equitable right, remedy or claim
under this Warrant Certificate, and this Warrant Certificate shall be for the
sole and exclusive benefit of the Company and such registered Holder.  Nothing in this Warrant Certificate shall be
construed to give the registered Holder hereof any rights as a Holder of shares
of Common Stock until such time, if any, as the Warrants evidenced by this
Warrant Certificate are exercised in accordance with the provisions hereof.

             Section
12.       Notice. All notices,
demands and other communications provided for or permitted hereunder shall be
made in writing and shall be given by registered or certified first–class
mail, return receipt requested, nationally recognized overnight delivery
service or personal delivery, (a) if to the Holder of a Warrant, at such
Holder’s last known address appearing on the books of the Company; and (b) if
to the Company, at its principal executive office in the United States located
at the address designated for notices in the Securities Purchase Agreement, or
such other address as shall have been furnished to the party given or making
such notice, demand or other communication. 
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered if
delivered by a nationally recognized overnight delivery service; and five (5)
Business Days after being deposited in the mail, as aforesaid, postage prepaid,
if mailed.

             Section
13.       Definitions.  For the purposes of this Warrant
Certificate, the following terms shall have the meanings indicated below:

             “Additional
Purchase Agreement” means the securities purchase agreement providing for
the issuance and sale of Series A Preferred Stock and Series A Preferred Stock
Warrants to the Additional Purchasers, as contemplated by Section 2.3 of the
Securities Purchase Agreement.

             “Additional
Purchaser” shall mean each purchaser under the Additional Purchase
Agreement.

             “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.

             “Cashless
Exercise” shall have the meaning set forth in Section 1 hereof.

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

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

             “Convertible
Securities” shall have the meaning set forth in Section 2(a)(i)
hereof.

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

             “Holder”
shall have the meaning set forth in the preamble.

             “In-Kind
Exercise” shall have the meaning set forth in Section 1 hereof.

             “Issue
Date” shall have the meaning set forth in Section 2(a) hereof.

             “Market
Price” means the last reported sale price of the applicable security as
reported by the American Stock Exchange or 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 Company 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 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.

             “Number
Issuable” shall have the meaning set forth in the preamble.

             “Person”
means any individual, corporation, limited liability company, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind.

             “Securities
Purchase Agreement” means that certain Securities Purchase Agreement, dated
July 31, 2001, among the Company, the Holder and the other parties signatory
thereto, as the same may be amended, modified or otherwise supplemented from
time to time in accordance with its terms.

             “Transaction”
shall have the meaning set forth in Section 2(c) hereof.

             “Transfer
Agent” shall have the meaning set forth in Section 4 hereof.

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

             “Warrant
Exercise Documentation” shall have the meaning set forth in Section 1
hereof.

             “Warrant
Expiration Date” means September _____, 2008.

[SIGNATURE PAGE FOLLOWS]

             IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the Issue Date.

 

	 	COMPANY
	 	ELECTRIC
  CITY CORP.,
	 	a
  Delaware corporation
	 	 	 
	 	By:
	 	 	

	 	Name:
	 	 	

	 	Title:
	 	 	

						

 

ATTEST:

 

Form
of Assignment Form

[To
be executed upon assignment of Warrants]

             The
undersigned hereby assigns and transfers unto ______________________, whose
Social Security Number or Tax ID Number is ____________________ and whose
record address is ___________________________________ the rights represented by
the attached Warrant Certificate with respect to ___ Warrants to which the
attached Warrant Certificate relates, and irrevocably appoints _______________
as agent to transfer this security on the books of the Company.  Such agent may substitute another to act for
such agent.

 

	 	:	Signature
	 	 	 
	 	 	 
	 	 	 
	 	 	

	 	 	(Signature must conform in all respects
  to name of holder as specified on the face of the Warrant Certificate)
	 	 	 
	 	 	Signature Guarantee:
	 	 	 
	 	 	 
	 	 	 
	 	 	

	Date:	 	 
	 	

	 	 
				

 

(SUBSCRIPTION
FORM TO BE EXECUTED UPON EXERCISE OF

SOME OR ALL OF THE WARRANTS)

             The
undersigned, registered Holder, successor or assignee of such registered Holder
of the within Warrant Certificate, hereby:

             (a) subscribes
for ___ shares of Common Stock which the undersigned is entitled to purchase
under the terms of the within Warrant Certificate, (b) makes the full cash
payment therefor called for by the within Warrant Certificate or elects a
Cashless Exercise or In-Kind Exercise as provided therein, and (c) directs
that the Common Stock issuable upon exercise of said Warrants be issued as
described hereunder.

 

	 	 	 	

	 	 	 	(Name)
	 	 	 	 
	 	 	 	 
	 	 	 	

	 	 	 	(Address)
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	

	 	 	 	SIGNATURE
	Dated:	 	 	 
	 	

	 	 
						

 

EXHIBIT F

STOCK TRADING AGREEMENT

             This
Stock Trading Agreement, dated as of 
July 31, 2001 (as may be amended from time to time, this “Agreement”),
is made by and among Newcourt Capital USA Inc., a Delaware corporation, EP
Power Finance, L.L.C., a Delaware limited liability company, Morgan Stanley
Dean Witter Equity Funding, Inc., a Delaware corporation, Originators Investment
Plan, L.P, a Delaware limited partnership, Duke Capital Partners, LLC, a
Delaware limited liability company (collectively, the “Purchasers”),
Newcourt Capital Securities, Inc., a Delaware corporation (the “Placement
Agent”) and each of the members of management of Electric City Corp., a
Delaware corporation (the “Company”), set forth on the signature pages
hereto, and shall become effective upon the Closing under the Securities
Purchase Agreement.

WITNESSETH

             WHEREAS,
the Purchasers and the Company have entered into that certain Securities
Purchase Agreement, dated as of July 31, 2001 (as it may be amended from time
to time, the “Securities Purchase Agreement”), whereby the Company will
sell and the Purchasers will buy shares of the Company’s Series A Convertible
Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”),
together with warrants to purchase Series A Preferred Stock, shares of Common
Stock and warrants to purchase Common Stock; and

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

AGREEMENT

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

ARTICLE I

DEFINITIONS

             1.1        Defined Terms.  All terms capitalized but not defined herein
shall have the meaning attributable to such terms in the Securities Purchase
Agreement, except where the context otherwise requires.  The following additional terms when used in
this Agreement, including its preamble and recitals, shall, except where the
context otherwise requires, have the following meanings, such meanings to be
equally applicable to the singular and plural forms thereof:

             “Additional
Purchase Agreement” means the securities purchase agreement, if any,
providing for the issuance and sale of Series A Preferred Stock and Series A
Preferred Stock Warrants to the Additional Purchasers, as contemplated by
Section 2.3 of the Securities Purchase Agreement.

             

             “Additional Purchaser”
shall mean each purchaser under the Additional Purchase Agreement.

             “Affiliate” means, as applied to any Person, any other
Person controlling, controlled by or under common control with such
Person.  For purposes of this
definition, “control” (including, with correlative meanings, the terms
“controlled by” and “under common control with”), as applied to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of any such other Person,
whether through the ownership of voting securities or by contract or
otherwise.  With respect to individuals,
the term Affiliate shall also include such individuals parents, spouse,
children or grandchildren.

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

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

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

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

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

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

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

             “Covered
Stock” means 75% of an Additional Purchaser’s total holdings of Common
Stock (calculated assuming the exercise of all rights, options and warrants to
purchase Common Stock or securities convertible or exchangeable for shares of
Common Stock, and the conversion or exchange of all securities convertible or
exchangeable for Common Stock) purchased under the Additional Purchase
Agreement (as adjusted for stock splits, stock combinations and the like).

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

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

             

             “Existing Stockholder”
shall have the meaning set forth in Section 3.1 hereof.

             “MSDW”
shall have the meaning set forth in Section 2.5 hereof.

             “Parties”
means all of the parties that are signatories to this Agreement.

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

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

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

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

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

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

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

             “Uncovered
Stock” means any Additional Purchaser’s total holdings of Common Stock that
is not Covered Stock.

ARTICLE
II

TRADING RESTRICTIONS

             2.1        Public Sales.  Each Party (other than an Additional
Purchaser with respect to its Uncovered Stock) shall be subject to the
following trading restrictions from time to time concerning its respective
holdings of Common Stock:

                           (a)         During the term of this Agreement, no
Party may sell any of its Common Stock into the public market before the
completion of a Qualified Primary Offering; provided, however,
that if a Qualified Primary Offering is not completed within eighteen (18)
months after the Effective Date, each Party may sell its Common Stock into the
public market, severally and not jointly, subject to the following conditions:

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

 

	 	(ii)	the
  Average Daily Trading Volume immediately prior to the date of sale must
  exceed 150,000 shares;
	 	 	 
	 	(iii)	the
  number of shares of Common Stock sold by such Party on any trading day may
  not exceed five percent of the Average Daily Trading Volume;
	 	 	 
	 	(iv)	the
  number of shares of Common Stock sold by such Party into the public market in
  any three-month period may not exceed fifteen percent of such Party’s total
  holdings of Common Stock (calculated assuming the exercise of all rights,
  options and warrants to purchase Common Stock or securities convertible or
  exchangeable for shares of Common Stock, and the conversion or exchange of
  all securities convertible or exchangeable for Common Stock) on the Effective
  Date (as adjusted for stock splits, stock combinations and the like); and
	 	 	 
	 	(v)	Block
  Sales must be executed at a minimum price per share of 90% of the ask price
  as reported on the American Stock Exchange (or, if not traded on the American
  Stock Exchange, any national securities exchange or automated quotation
  services on which the Common Stock is then listed for trading).

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

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

 

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

 

             2.2        Private Sales.  If a Party (the “Selling Party”)
intends to sell any of its shares of Company capital stock (or securities
exercisable or exchangeable for or convertible into shares of Company capital
stock) in a private transaction (other than to an Affiliate), the Selling Party
shall send written notice (the “Sale Notice”) of such intent to each
other Party.  The Sale Notice shall
include the following information:  (a)
the type of Company capital stock or other securities the Selling Party intends
to sell; (b) the number of shares or other securities the Selling Party intends
to sell; (c) the proposed sale price per share or per security, as applicable,
and (d) any other material terms of the offer. 
The  other Parties shall have two
(2) business days after receipt of the Sale Notice (the “Election Period”)
to elect to purchase the capital stock or other securities that are the subject
of the Sale Notice by giving the Selling Party written notice thereof within
the Election Period, in which case the Selling Party and the Party (or Parties)
so electing to purchase shall complete such sale within five (5) business days
on the terms set forth in the Sale Notice. 
If more than one Party elects to purchase the capital stock or other
securities set forth in the Sale Notice, then such shares or securities shall
be allocated among the Parties so electing to purchase pro rata in proportion
to their respective holdings of Company Common Stock (calculated assuming the
exercise of all rights, options and warrants to purchase Common Stock or
securities convertible or exchangeable for shares of Common Stock, and the
conversion or exchange of all securities convertible or exchangeable for Common
Stock held by such Parties so electing to purchase).  If none of the Parties provides written notice so electing to
purchase within the Election Period, then the Selling Party may sell the
capital stock or other securities that are the subject of the Sale Notice on
terms no less favorable to the Sellng Party than those set forth in the Sale
Notice to any third party within 10 business days of the date of the Sale
Notice; provided, however, that any sale of shares of Company
capital stock (or securities exercisable or exchangeble for or convertible into
shares of Company capital stock) to a party that is not a party to this
Agreement shall have as a condition to such sale that such party shall become a
Party to this Agreement.  For purposes
of Sections 2.1(a)(iv) and 2.1(b)(ii), the purchasing party’s
holdings (if such party was not a party to the Securities Purchase Agreement)
with respect to the shares of capital stock or other securities it purchases
shall be the number of shares of Common Stock (calculated assuming the exercise
of all rights, options and warrants to purchase Common Stock or securities
convertible or exchangeable for shares of Common Stock, and the conversion or
exchange of all securities convertible or exchangeable for Common Stock)
purchased in the subject sale.

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

             2.4        Term of Trading Agreement.  The term of the Trading Agreement shall
commence on the Effective Date and terminate three years from the Effective
Date; provided, however, that if a Qualified Primary Offering is
completed within three years from the Effective Date, the term of this Agreement
shall terminate at 5:00 p.m., New York time, on the eighteen (18) month
anniversary of the initial closing date of such Qualified Primary Offering.

             2.5        Amendments to the Trading Agreement.

                           (a)         The Parties may amend the Trading
Agreement only upon the prior written consent of at least three (3) out of the
following Purchasers (i) Morgan Stanley Dean Witter Equity Funding Inc. (“MSDW”)
and Originators Investment Plan, L.P. (“OIP”) (MSDW and OIP shall be
deemed to be a single Purchaser with MSDW acting on behalf of both such
entities); (ii)  Newcourt Capital USA
Inc.; (iii) EP Power Finance, L.L.C.; and (iv) Duke Capital Partners, LLC;
provided, however, the Parties shall not make any amendment regarding the
Uncovered Stock or that disproportionately affects the Covered Stock without
the approval of each Additional Purchaser.

                           (b)        The Company may enter into the
Additional Purchase Agreement.  Each
Investor agrees that upon each Additional Purchaser’s acquisition of Series A
Preferred Stock and Series A Preferred Stock Warrants in compliance with
Section 2.3 of the Securities Purchase Agreement and execution and delivery of
a signature page to the joinder agreement between the Company and each such
Additional Purchaser pursuant to which such Additional Purchaser agrees to
become a Party and to be bound by the terms hereof, each such Additional
Purchaser shall become a Party to this Agreement for all intents and purposes
and shall then be an Investor hereunder. 
The Company shall then revise Schedule I to reflect the addition
of each such Additional Purchaser.  The
addition of such new parties and revision of Schedule I shall not
constitute a modification, waiver or amendment of this Agreement that requires
the consent of or any writing from any of the Parties hereto.

             2.6        Uncovered Stock. During the term
of this Agreement, no Additional Purchaser may sell any shares of its Uncovered
Stock into the public market before the completion of a Qualified Primary
Offering; provided, however, that if a Qualified Primary Offering
is not completed within twelve (12) months after the Effective Date, each
Additional Purchaser may sell its shares of Uncovered Stock into the public
market without any restrictions under this Agreement.

             2.7        Purchases by Management in the Public
Market.  Notwithstanding anything in
this Article II to the contrary, all shares of Common Stock purchased by
members of management that are signatories hereto in the public market from
other than the Company or its underwriters shall not be subject to this Article
II.

ARTICLE
III

CONDITIONS TO EFFECTIVENESS OF AGREEMENT

             3.1        Additional Conditions.  This Agreement shall not become effective
until each of Nickolas Konstant, Victor Conant, Kevin McEneely, Michael Stelter
and Joseph Marino (each an “Existing Stockholder”) shall amend his
existing trade agreement (in a form reasonably satisfactory to each of the
Purchasers) to include the following trading restrictions with respect to sales
of his (and his Affiliates’) Common Stock in the public market:

                           (a)         the number of shares of Common Stock
sold by such Existing Stockholder (including his Affiliates) on any trading day
may not exceed five percent of the Average Daily Trading Volume; and

                           (b)        the number of shares of Common Stock
sold by each Existing Stockholder (including his Affiliates) in any three-month
period shall not exceed fifteen percent of such Existing Stockholder’s
(including his Affiliates) total holdings of Common Stock (calculated assuming
the exercise of all rights, options and warrants to purchase Common Stock or
securities convertible or exchangeable for shares of Common Stock, and the
conversion or exchange of all securities convertible or exchangeable for Common
Stock) on the Effective Date (as adjusted for stock splits, stock combinations
and the like).

             In
addition, each Existing Stockholder shall amend his trading agreement to state
that if requested by the Company and the managing underwriter, such Existing
Stockholder shall agree not to sell, make any short sale of, loan, grant any option
for the purchase of, or otherwise dispose of any securities of the Company
(other than those included in the registration) without the prior written
consent of such underwriter, for such period of time (not to exceed 180 days)
from the effective date of a registration statement filed under the Securities
Act of 1933, as amended, as may be requested by such underwriter and to execute
an agreement reflecting the foregoing as may be requested by such underwriter
in connection with a Qualified Primary Offering.

ARTICLE IV

GENERAL PROVISIONS

             4.1        Legend on Share
Certificates.

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

	 	THE
  SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN REQUIREMENTS
  AS TO TRADING CONTAINED IN THE STOCK TRADING AGREEMENT, DATED JULY 31, 2001,
  BY AND AMONG THE COMPANY AND CERTAIN SECURITY HOLDERS, A COPY OF WHICH IS ON
  FILE WITH THE SECRETARY OF THE COMPANY.	 

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

ARTICLE V

MISCELLANEOUS

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

             5.2        Governing Law.  Except as to matters governed by the General
Corporation Law of the State of Delaware and decisions thereunder of the
Delaware courts applicable to Delaware corporations, which shall be governed by
such laws and decisions, this Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws
of the State of New York.

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

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

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

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

             5.7        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:
	 	 	 
	 	 	1280 Landmeier Road
	 	 	Elk Grove Village, IL 60007-2410
	 	 	Fax No. 847-437-4969
	 	 	Attention:  General Counsel

 

                           (ii)         If to another Party: at the address set
forth in the Securities Purchase Agreement or the Additional Purchase Agreement
or the signature page to this Agreement.

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

[SIGNATURE PAGE TO FOLLOW]

             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.

	MANAGEMENT	 	PURCHASERS
	 	 	 
	 	 	NEWCOURT
  CAPITAL USA, INC.,
	 	 	a
  Delaware corporation
	

	 	 
	John  Mitola	 	By:	 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	

	

	 	 
	Brian
  Kawamura	 	EP
  POWER FINANCE, L.L.C.,
	 	 	a
  Delaware limited liability company
	 	 	 
	

	 	By:	 
	 	 	 	

	Jeff
  Mistarz	 	Name:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	

	 	 	 	 
	

	 	MORGAN
  STANLEY DEAN WITTER EQUITY
	Dennis
  Enberg (with respect to	 	FUNDING,
  INC., a Delaware corporation
	50,000
  shares of Common Stock)	 	 
	 	 	By:	 
	 	 	 	

	 	 	Name:	Thomas
  A. Clayton
	 	 	 	

	

	 	Title:	Vice
  President
	 	 	 	

	Michael
  Pokora	 	 	 
	PLACEMENT
  AGENT	 	ORIGINATORS
  INVESTMENT PLAN, L.P., a Delaware limited partnership
	 	 	 
	NEWCOURT
  CAPITAL SECURITIES INC., a Delaware corporation	 	By:	MSDW
  OIP Investors, Inc., its general partner
	 	 	 
	By:	 	 	 
	 	

	 	 
	Name:	 	 	By:	 
	 	

	 	 	

	Title:	 	 	Name:	Thomas
  A. Clayton
	 	

	 	 	

	 	 	Title:	Vice
  President
	 	 	 	

	 	 	 	 
	 	 	DUKE
  CAPITAL PARTNERS, L.L.C.,
	 	 	a
  Delaware limited liability company
	 	 	 
	 	 	By:	 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	

[Signature Page to Stock Trading Agreement]

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