Document:

exv10w6

 

EXHIBIT
10.6

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO DIGITAL RECORDERS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

Right to Purchase up to 550,000 Shares of Common Stock of

Digital Recorders, Inc.

(subject to adjustment as provided herein)

COMMON STOCK PURCHASE WARRANT

	 	 	 	 	 
	No.

	 	 	 	Issue Date: March 15, 2006
	 

	 	 

	 	 

     DIGITAL RECORDERS, INC., a corporation organized under the laws of the State of North Carolina
hereby certifies that, for value received, LAURUS MASTER FUND, LTD., or assigns (the “Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company (as defined herein)
from and after the Issue Date of this Warrant, up to 550,000 fully paid and nonassessable shares of
Common Stock (as hereinafter defined), $0.10 par value per share, at the applicable Exercise Price
per share (as defined below). The number and character of such shares of Common Stock and the
applicable Exercise Price per share are subject to adjustment as provided herein.

     As used herein the following terms, unless the context otherwise requires, have the following
respective meanings:

     (a) The term “Company” shall include Digital Recorders, Inc. and any person or entity
which shall succeed, or assume the obligations of, Digital Recorders, Inc. hereunder.

     (b) The term “Common Stock” includes (i) the Company’s Common Stock, par value $0.10
per share; and (ii) any other securities into which or for which any of the securities
described in the preceding clause (i) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.

     (c) The term “Other Securities” refers to any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which the holder of
the Warrant at any time shall be entitled to receive, or shall have received, on the
exercise of the Warrant, in lieu of or in addition to Common Stock, or

Warrant

 

 

which at any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.

     (d) The “Exercise Price” applicable under this Warrant shall be $.10.

     1. Exercise of Warrant.

          1.1 Number of Shares Issuable upon Exercise. From and after the date hereof, the
Holder shall be entitled to receive, upon exercise of this Warrant in whole or in part, by delivery
of an original or fax copy of an exercise notice in the form attached hereto as Exhibit A (the
“Exercise Notice”), up to 550,00 shares of Common Stock of the Company, subject to adjustment
pursuant to Section 4.

          1.2 Fair Market Value. For purposes hereof, the “Fair Market Value” of a share of
Common Stock as of a particular date (the “Determination Date”) shall mean:

     (a) If the Company’s Common Stock is traded on the American Stock Exchange or another
national exchange or is quoted on the National or Capital Market of The Nasdaq Stock Market,
Inc. (“Nasdaq”), then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.

     (b) If the Company’s Common Stock is not traded on the American Stock Exchange or
another national exchange or on the Nasdaq but is traded on the NASD Over The Counter
Bulletin Board, then the mean of the average of the closing bid and asked prices reported
for the last business day immediately preceding the Determination Date.

     (c) Except as provided in clause (d) below, if the Company’s Common Stock is not
publicly traded, then as the Holder and the Company agree or in the absence of agreement by
arbitration in accordance with the rules then in effect of the American Arbitration
Association, before a single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided.

     (d) If the Determination Date is the date of a liquidation, dissolution or winding up,
or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s
charter, then all amounts to be payable per share to holders of the Common Stock pursuant to
the charter in the event of such liquidation, dissolution or winding up, plus all other
amounts to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock
then issuable upon exercise of the Warrant are outstanding at the Determination Date.

          1.3 Company Acknowledgment. The Company will, at the time of the exercise of this
Warrant, upon the request of the holder hereof acknowledge in writing its continuing obligation to
afford to such holder any rights to which such holder shall continue to be entitled after such
exercise in accordance with the provisions of this Warrant. If the holder

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shall fail to make any such request, such failure shall not affect the continuing obligation
of the Company to afford to such holder any such rights.

          1.4 Trustee for Warrant Holders. In the event that a bank or trust company shall have
been appointed as trustee for the holders of this Warrant pursuant to Subsection 3.2, such bank or
trust company shall have all the powers and duties of a warrant agent (as hereinafter described)
and shall accept, in its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may
be, on exercise of this Warrant pursuant to this Section 1.

     2. Procedure for Exercise.

          2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company agrees that the
shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the
Holder as the record owner of such shares as of the close of business on the date on which this
Warrant shall have been surrendered and payment made for such shares in accordance herewith. As
soon as practicable after the exercise of this Warrant in full or in part, and in any event within
three (3) business days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as
such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance
with applicable securities laws, a certificate or certificates for the number of duly and validly
issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such
Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such
holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market
Value of one full share, together with any other stock or other securities and property (including
cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 1
or otherwise.

          2.2 Exercise.

     (a) Payment may be made either (i) in cash or by certified or official bank check
payable to the order of the Company equal to the applicable aggregate Exercise Price, (ii)
by delivery of this Warrant, or shares of Common Stock and/or Common Stock receivable upon
exercise of this Warrant in accordance with the formula set forth in subsection (b) below,
or (iii) by a combination of any of the foregoing methods, for the number of Common Shares
specified in such Exercise Notice (as such exercise number shall be adjusted to reflect any
adjustment in the total number of shares of Common Stock issuable to the Holder per the
terms of this Warrant) and the Holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or
Other Securities) determined as provided herein.

     (b) Notwithstanding any provisions herein to the contrary, if the Fair Market Value of
one share of Common Stock is greater than the Exercise Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the portion
thereof being exercised) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Exercise Notice in which event the

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Company shall issue to the Holder a number of shares of Common Stock computed using the
following formula:

	 	 	 	 	 
	 

	X =	Y(A-B)	 	 
	 

	 	 

A
	 	 

Where X = the number of shares of Common Stock to be issued to the Holder

	 	Y = 	 	the number of shares of Common Stock purchasable under this Warrant or, if
only a portion of this Warrant is being exercised, the portion of this Warrant being
exercised (at the date of such calculation)
	 
	 	A = 	 	 the Fair Market Value of one share of the Company’s Common Stock (at the date
of such calculation)
	 
	 	B = 	 	 the Exercise Price per share (as adjusted to the date of such calculation)

     3. Effect of Reorganization, Etc.; Adjustment of Exercise Price.

          3.1 Reorganization, Consolidation, Merger, Etc. In case at any time or from time to
time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other
person, or (c) transfer all or substantially all of its properties or assets to any other person
under any plan or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and adequate provision shall
be made by the Company whereby the Holder, on the exercise hereof as provided in Section 1 at any
time after the consummation of such reorganization, consolidation or merger or the effective date
of such dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other
Securities) issuable on such exercise prior to such consummation or such effective date, the stock
and other securities and property (including cash) to which such Holder would have been entitled
upon such consummation or in connection with such dissolution, as the case may be, if such Holder
had so exercised this Warrant, immediately prior thereto, all subject to further adjustment
thereafter as provided in Section 4.

          3.2 Dissolution. In the event of any dissolution of the Company following the
transfer of all or substantially all of its properties or assets, the Company, concurrently with
any distributions made to holders of its Common Stock, shall at its expense deliver or cause to be
delivered to the Holder the stock and other securities and property (including cash, where
applicable) receivable by the Holder pursuant to Section 3.1, or, if the Holder shall so instruct
the Company, to a bank or trust company specified by the Holder and having its principal office in
New York, NY as trustee for the Holder.

          3.3 Continuation of Terms. Upon any reorganization, consolidation, merger or transfer
(and any dissolution following any transfer) referred to in this Section 3, this Warrant shall
continue in full force and effect and the terms hereof shall be applicable to the shares of stock
and other securities and property receivable on the exercise of this Warrant after the consummation
of such reorganization, consolidation or merger or the effective date of dissolution following any
such transfer, as the case may be, and shall be binding upon the issuer

Warrant

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of any such stock or other securities, including, in the case of any such transfer, the person
acquiring all or substantially all of the properties or assets of the Company, whether or not such
person shall have expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after the consummation of the
transactions described in this Section 3, then the Company’s securities and property (including
cash, where applicable) receivable by the Holder will be delivered to the Holder or the Trustee as
contemplated by Section 3.2.

     4. Extraordinary Events Regarding Common Stock. In the event that the Company shall
(a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding
Common Stock or any preferred stock issued by the Company, (b) subdivide its outstanding shares of
Common Stock, (c) combine its outstanding shares of the Common Stock into a smaller number of
shares of the Common Stock, then, in each such event, the Exercise Price shall, simultaneously with
the happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding immediately prior to
such event and the denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event, and the product so obtained shall thereafter be the Exercise Price
then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4. The number of
shares of Common Stock that the holder shall thereafter, on the exercise hereof as provided in
Section 1, be entitled to receive shall be adjusted to a number determined by multiplying the
number of shares of Common Stock that would otherwise (but for the provisions of this Section 4) be
issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would
otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the
Exercise Price in effect on the date of such exercise (taking into account the provisions of this
Section 4).

     5. Certificate as to Adjustments. In each case of any adjustment or readjustment in
the shares of Common Stock (or Other Securities) issuable on the exercise of this Warrant, the
Company at its expense will promptly cause its Chief Financial Officer or other appropriate
designee to compute such adjustment or readjustment in accordance with the terms of this Warrant
and prepare a certificate setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of Common Stock (or
Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise
Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in
effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as
provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the
holder and any Warrant agent of the Company (appointed pursuant to Section 11 hereof).

     6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will at
all times reserve and keep available, solely for issuance and delivery on the exercise of this
Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of
this Warrant.

Warrant

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     7. Assignment; Exchange of Warrant. Subject to compliance with applicable securities
laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder
hereof (a “Transferor”) in whole or in part. On the surrender for exchange of this Warrant, with
the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement
Form”) and together with evidence reasonably satisfactory to the Company demonstrating compliance
with applicable securities laws, which shall include, without limitation, a legal opinion from the
Transferor’s counsel (at the Company’s expense) that such transfer is exempt from the registration
requirements of applicable securities laws, the Company at its expense (but with payment by the
Transferor of any applicable transfer taxes) will issue and deliver to or on the order of the
Transferor thereof a new Warrant of like tenor, in the name of the Transferor and/or the
transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock called for on the
face or faces of the Warrant so surrendered by the Transferor.

     8. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such
loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation,
on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver,
in lieu thereof, a new Warrant of like tenor.

     9. Registration Rights. The Holder has been granted certain registration rights by
the Company. These registration rights are set forth in a Registration Rights Agreement entered
into by the Company and Holder dated as of the date hereof, as the same may be amended, modified
and/or supplemented from time to time.

     10. Maximum Exercise. Notwithstanding anything herein to the contrary, in no event
shall the Holder be entitled to exercise any portion of this Warrant in excess of that portion of
this Warrant upon exercise of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion of the Warrant or the
unexercised or unconverted portion of any other security of the Holder subject to a limitation on
conversion analogous to the limitations contained herein) and (2) the number of shares of Common
Stock issuable upon the exercise of the portion of this Warrant with respect to which the
determination of this proviso is being made, would result in beneficial ownership by the Holder and
its Affiliates of any amount greater than 4.99% of the then outstanding shares of Common Stock
(whether or not, at the time of such exercise, the Holder and its Affiliates beneficially own more
than 4.99% of the then outstanding shares of Common Stock). As used herein, the term “Affiliate”
means any person or entity that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a person or entity, as such terms are
used in and construed under Rule 144 under the Securities Act. For purposes of the proviso to the
second preceding sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except
as otherwise provided in clause (1) of such proviso. The limitations set forth herein (x) may be
waived by the Holder upon provision of no

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less than sixty-one (61) days prior notice to the Company and (y) shall automatically become
null and void following notice to the Company upon the occurrence and during the continuance of an
Event of Default (as defined in the Security Agreement dated as of the date hereof among the
Holder, the Company and various subsidiaries of the Company (as amended, modified, restated and/or
supplemented from time to time, the “Security Agreement”)), except that at no time shall the number
of shares of Common Stock beneficially owned by the Holder and its Affiliates exceed 19.99% of the
outstanding shares of Common Stock. Notwithstanding anything contained herein to the contrary, the
number of shares of Common Stock issuable by the Company and acquirable by the Holder at a price
below $[insert the greater of book or market value] per share pursuant to the terms of this
Warrant, the Security Agreement, any Ancillary Agreement (as defined in the Security Agreement) or
otherwise, shall not exceed an aggregate of 1,945,730 shares of Common Stock (subject to
appropriate adjustment for stock splits, stock dividends, or other similar recapitalizations
affecting the Common Stock) (the “Maximum Common Stock Issuance”), unless the issuance of Common
Shares hereunder in excess of the Maximum Common Stock Issuance shall first be approved by the
Company’s shareholders. If at any point in time and from time to time the number of shares of
Common Stock issued pursuant to the terms of this Warrant, the Security Agreement, any Ancillary
Agreement (as defined in the Security Agreement) or otherwise, together with the number of shares
of Common Stock that would then be issuable by the Company to the Holder in the event of a
conversion pursuant to the terms of this Warrant, the Security Agreement, any Ancillary Agreement
(as defined in the Security Agreement) or otherwise, would exceed the Maximum Common Stock Issuance
but for this Section 10, the Company shall promptly call a shareholders meeting to solicit
shareholder approval for the issuance of the shares of Common Stock hereunder in excess of the
Maximum Common Stock Issuance.

11. Warrant Agent. The Company may, by written notice to the each Holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities)
on the exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to
Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.

12. Transfer on the Company’s Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the contrary.

13. Notices, Etc. All notices and other communications from the Company to the
Holder shall be mailed by first class registered or certified mail, postage prepaid, at such
address as may have been furnished to the Company in writing by such Holder or, until any such
Holder furnishes to the Company an address, then to, and at the address of, the last Holder who has
so furnished an address to the Company.

14. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. THIS WARRANT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF

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LAWS. ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE BROUGHT
ONLY IN STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK;
PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION AND BRING AN ACTION OUTSIDE
THE STATE OF NEW YORK. The individuals executing this Warrant on behalf of the Company agree to
submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be
entitled to recover from the other party its reasonable attorneys’ fees and costs. In the event
that any provision of this Warrant is invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not affect the validity or
enforceability of any other provision of this Warrant. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision hereof. The Company acknowledges that legal counsel
participated in the preparation of this Warrant and, therefore, stipulates that the rule of
construction that ambiguities are to be resolved against the drafting party shall not be applied in
the interpretation of this Warrant to favor any party against the other party.

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

	 	 	 	 	 	 	 
	 	 	DIGITAL RECORDERS, INC.	 	 
	 
	 	 	 	 	 	 
	WITNESS:
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	 	 	 	 	 
	 
 

	 	Title:
	 	 
 

	 	 

Warrant

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EXHIBIT A

FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Warrant)

	 	 	 	 	 
	TO:

	 	Digital Recorders, Inc.	 	 
	 

	 	 
 
 
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	Attention:      Chief Financial Officer

     The undersigned, pursuant to the provisions set forth in the attached Warrant (No.                    ),
hereby irrevocably elects to purchase (check applicable box):

	 	 	 
	                    

	 	                                shares of the common stock covered by such warrant; or
	 
	 	 
	                    

	 	the maximum number of shares of common stock covered by such
warrant pursuant to the cashless exercise procedure set forth in
Section 2.

     The undersigned herewith makes payment of the full Exercise Price for such shares at the price
per share provided for in such Warrant, which is $                    . Such payment takes the form of
(check applicable box or boxes):

	 	 	 
	                    

	 	$                     in lawful money of the United States; and/or
	 
	 	 
	                    

	 	the cancellation of such portion of the attached Warrant as is
exercisable for a total of                                 shares of Common Stock (using
a Fair Market Value of $                    per share for purposes of this
calculation); and/or
	 
	 	 
	                    

	 	the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section
2.2, to exercise this Warrant with respect to the maximum number
of shares of Common Stock purchasable pursuant to the cashless
exercise procedure set forth in Section 2.

     The undersigned requests that the certificates for such shares be issued in the name of, and
delivered to                                                                                 whose address is
                                                                                                                                            .

     The undersigned represents and warrants that all offers and sales by the undersigned of the
securities issuable upon exercise of the within Warrant shall be made pursuant to registration of
the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to
an exemption from registration under the Securities Act.

	 	 	 	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(Signature must conform to name of holder as	 	 
	 	 	 	 	 	 	specified on the face of the Warrant)	 	 
	 

	 	 	 	 	 	Address:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
 
	 	 
	 

	 	 	 	 	 	 	 	 	 	 

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EXHIBIT B

FORM OF TRANSFEROR ENDORSEMENT

(To Be Signed Only On Transfer Of Warrant)

     For value received, the undersigned hereby sells, assigns, and transfers unto the person(s)
named below under the heading “Transferees” the right represented by the within Warrant to purchase
the percentage and number of shares of Common Stock of [Newco] into which the within Warrant
relates specified under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to
transfer its respective right on the books of [Newco] with full power of substitution in the
premises.

	 	 	 	 	 	 	 
	Transferees

	 	Address
	 	Percentage

Transferred
	 	Number

Transferred

	 	 	 	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(Signature must conform to name of holder as	 	 
	 	 	 	 	 	 	specified on the face of the Warrant)	 	 
	 

	 	 	 	 	 	Address:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	SIGNED IN THE PRESENCE OF:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(Name)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	ACCEPTED AND AGREED:	 	 	 	 	 	 	 	 
	[TRANSFEREE]	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	(Name)
	 	 	 	 	 	 	 	 

Warrant

11exv10w31

 

Exhibit 10.31

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of May 3rd, 2005
between Maximum Performance Group, Inc., formerly known as MPG Acquisition Corporation, a Delaware
corporation (the “Company”), and Leonard Pisano (“Executive”).

W I T N E S S E T H:

     WHEREAS, Maximum Performance Group, Inc., a Delaware corporation (“MPG”), has been
merged with and into the Company, pursuant to the terms of a certain Agreement and Plan of Merger
dated as of April 29, 2005 (the “Merger Agreement”), among Electric City Corp.
(“ELC”), the Company, MPG, Executive and the other stockholders of MPG; and

     WHEREAS, the Company desires to retain the services of Executive and Executive desires to be
employed by the Company, on and subject to the terms and conditions of this Agreement;

     NOW, THEREFORE, the Company and Executive agree as follows:

     1. Employment and Duties. The Company agrees to employ the Executive as President of
the Company and the executive shall also hold the role of Chief Operating Officer of ELC and the
Executive agrees to be employed by the Company, on and subject to the terms of this Agreement. The
Executive shall report to and be subject to the authority and direction of the Chief Executive
Officer of ELC and the Board of Directors of the Company, shall have responsibility for managing
the Company, and shall have such other responsibilities as may from time to time be reasonably
prescribed by the Chief Executive Officer of ELC and Board of Directors of the Company, which shall
include but not be limited to overseeing integration and operations of the MPG business as
acquired. The Executive agrees to perform such duties as may be assigned by the Chief Executive
Officer of ELC and the Board of Directors of the Company, to devote his full working time to the
business of the Company and ELC, and to use his best efforts to advance the interests of the
Company and ELC. Executive agrees not to engage in any other gainful occupation during the term of
this Agreement and any other Board memberships without the prior written approval of the CEO of
ELC.

     2. Term. The Company’s employment of the Executive under this Agreement shall
commence on the date hereof (the “Commencement Date”), and expire on the day preceding the
third anniversary of the Commencement Date unless terminated earlier according to the terms of this
Agreement (the date of termination being referred to herein as the “Expiration Date”).
Executive’s obligations and the Company’s rights under Sections 6, 7 and 8 shall survive the
expiration of the term of this Agreement.

     3. Compensation. During the term of this Agreement, Executive shall be paid a gross
salary (the “Salary”) at the annual rate of $225,000 as compensation for all services to
the Company and ELC. Such Salary shall be payable in 24 equal installments in accordance with the
Company’s regular payroll practices for salaried employees. The Company shall review Executive’s
compensation on an annual basis and give consideration to whether any increase is warranted, in the
Company’s sole discretion, provided that during the term of this agreement, the Company will
consider structures of compensation for other senior management of the Company in making any
adjustments to the Executive’s compensation. Additionally, the Company shall reimburse Executive
for all reasonable expenses incurred

 

 

by him in the course of performing his duties under this
Agreement, consistent with the Company’s
policies in effect from time to time with respect to reimbursement of business expenses, and
subject to Executive’s submission of appropriate expense reimbursement requests and supporting
documentation.

Automobile Allowance. During the term of this Agreement, Executive shall be entitled to an
automobile allowance of $500.00 per month.

Bonus. The Company shall establish an annual bonus plan of which certain senior executives
of ELC shall be eligible to participate, which annual bonus plan shall comprise a calendar year
(the “Plan Year”). Executive will be eligible to participate in such annual bonus plan during the
term of this Agreement with goals (the “Annual Goals”) established and approved by the
Compensation Committee of the Board of Directors of ELC and subject to approval of the Board of
Directors of ELC. The goals that shall serve as the basis of evaluation for any payments awarded
pursuant to the Company’s annual bonus plan shall be established and approved by the Compensation
Committee of the Board of Directors of ELC and approved by the Board of Directors of ELC. At the
conclusion of the Plan Year, the Compensation Committee of the Board of Directors of ELC shall
determine the level of success achieved by Executive against the Annual Goals and recommend the
amount of the annual bonus plan payment to the Board of Directors of ELC. If Executive’s
employment is terminated for reasons other than Due Cause or his voluntary resignation, he will be
entitled to receive any bonus earned up to the date of termination as reasonably determined by the
Compensation Committee of ELC. All payments related to the annual bonus plan are subject to the
prior approval by the Board of Directors of ELC. It is expected that the Executive’s goals will be
based primarily upon the financial targets established for the “earn out” provisions of the
Acquisition and will include a smaller portion tied to the larger performance of ELC.

Profitability Bonus. Notwithstanding other Bonus plans that may be put in place by the
Company, the Executive shall be entitled to a one-time bonus which shall be awarded upon
achievement by the Company of two consecutive calendar quarter periods of positive EBITDA in
accordance with GAAP. The amount of such Profitability Bonus shall be $50,000, which shall be paid
to the Executive as soon as the Chief Executive Officer of ELC determines is reasonably practical
for balance sheet considerations.

Board Observation Rights. The Executive shall have the right to attend each board meeting
of ELC as an observer during his employment with the Company during the term of this Agreement.
The Executive will not be a member of the board of directors of ELC and shall not have board voting
rights.

Stock Options. The Executive is hereby granted stock options (the “Stock Options”)
to purchase Four-Hundred and Seventy Five Thousand (475,000) shares of ELC’s common stock at a
price per share that is equal to the greater of (X) the closing price per share of the ELC’s common
stock on the Effective Date (the “Exercise Price”), or (Y) $1.00 per share. Such Stock Options
shall vest in accordance with the following schedule:

	 	•	 	Upon execution of this Agreement and the start of employment with the Company, Executive
shall become immediately vested in Stock Options to purchase Seventy-Five Thousand
(75,000) shares of the Company’s common stock at the Exercise Price;
	 
	 	•	 	On the first anniversary of this Agreement, so long as Executive is employed by the
Company as its President on such date, Executive shall become immediately vested in Stock
Options to purchase One-Hundred Thirty-Three Thousand Three-Hundred Thirty-Four (133,334)
shares of the Company’s common stock at the Exercise Price;

 

 

	 	•	 	On the first anniversary of this Agreement, so long as Executive is employed by the
Company as its President on such date, Executive shall become immediately vested in Stock
Options to
purchase One-Hundred Thirty-Three Thousand Three-Hundred Thirty-Three (133,333) shares of
the Company’s common stock at the Exercise Price;
	 
	 	•	 	On the third anniversary of this Agreement, so long as Executive is employed by the
Company as its President on such date, Executive shall become immediately vested in Stock
Options to purchase One-Hundred Thirty-Three Thousand Three-Hundred Thirty-Three (133,333)
shares of the Company’s common stock at the Exercise Price.

Registration Rights. Executive shall have piggy-back registration rights for all shares of
ELC’s common stock obtained through the exercise of any Stock Options granted pursuant to this
Section 3 for any registration statement filed by ELC with the Securities and Exchange Commission,
except that Executive agrees to waive his registration rights for any registration undertaken at
the request of, or registration that includes, the holders of the Company’s Convertible Preferred
Stock and/or the rights of any other holders of the Company’s preferred stock to the extent that
such waiver is requested by such holders. In addition, Executive agrees that his registration
rights shall be subject to underwriter cutbacks as may be requested by an underwriter with respect
to a registration of the Company’s common stock. The Company shall bear the cost of registering the
shares pursuant to this Section 3.

Sale of Assets: Change in Control. For all purposes of this Agreement, a “Change in
Control” shall be deemed to have occurred when (i) ELC is merged or consolidated with another
entity which is not then controlled by ELC and, as a result, such merger or consolidation results
in at least fifty-one percent (51%) or greater of ELC’s common stock being controlled or owned by
another entity, or (ii) a majority of the ELC’s assets are sold or otherwise transferred to another
entity that is not then controlled by or affiliated with ELC. Upon the occurrence of a Change in
Control, the Stock Options granted pursuant to this Section 3 shall be automatically and
immediately vested and become exercisable by Executive subject to the terms of this Agreement.

Terms Governing Stock Options. Unless otherwise provided herein, the terms of the Stock
Options granted pursuant to this Section 3 shall be governed in accordance with the provisions of
ELC’s 2001 Employee Stock Incentive Plan. The Stock Options issued pursuant to this agreement shall
be incentive stock options to the extent permitted by law and the terms of the Plan, and the
balance shall be non-qualified options. If Executive’ employment with the Company is terminated
for “Due Cause” (as hereinafter defined) or a voluntary resignation, such Stock Options not vested
as of such termination date shall terminate. If Executive’ employment with the Company is
terminated for reasons other than Due Cause (except voluntary resignation), then any Stock Options
vested as of such date shall survive under the terms of this Agreement and any unvested Stock
Options as of such date shall then vest pursuant to the terms of this Section 3. All granted but
unexercised Stock Options shall terminate upon the earlier of (i) ten years from the Effective Date
of this agreement, or (ii) one (1) year from the date of termination of the Executive’s employment
with the Company.

     4. Benefits. During the term of this Agreement, Executive shall be entitled to
participate in and receive all benefits generally provided to its senior executives by the Company
and ELC from time to time.

 

 

     5. Disability; Death; Resignation; Termination for Due Cause.

     (a) Termination For Disability. In the event that, during the term of this Agreement,
Executive shall experience a physical or mental disability which impairs his ability to perform in
his usual manner his duties hereunder for a period of 180 consecutive days or for a total of 180
days in any period of twelve consecutive months, then the Company, in its sole discretion, may
terminate this Agreement and the Executive’s employment upon not less than five (5) days written
notice to the Executive. In such event, Executive shall be entitled to receive any unpaid portion
of his Salary earned up to the date when such termination becomes effective. From and after the
date when such termination becomes effective, the Company shall have no further obligation to
provide to Executive any benefits pursuant to this Agreement or which may otherwise be provided to
its employees (but without prejudice to Executive’s COBRA rights or to any benefits which may be
granted to Executive under any other agreement between Executive and the Company).

     All questions under this Section 5(a) as to the existence, commencement, extent and duration
of the disability of Executive shall be determined by a licensed physician selected by the Company;
provided, however, that if Executive contests the determination of the physician designated
by the Company, then all such questions shall be resolved by the majority opinion or vote of three
physicians, one of whom shall be selected by Executive, one of whom shall be selected by the
Company and the third of which shall be selected by the two physicians so selected by Executive and
the Company. The conclusions of such majority shall be binding on both parties hereto. Executive
shall submit to such medical examinations as the Company (or such examining physician(s)) may
reasonably request in order to determine the existence, commencement, extent and duration of any
purported disability for purposes hereof.

     (b) Death. In the event of the Executive’s death, this Agreement and the Executive’s
employment shall terminate upon the date of death. In such event, Executive’s estate shall be
entitled to receive any unpaid portion of his Salary earned up to the date of death. From and
after the date of death, the Company shall have no further obligation to provide to any benefits
pursuant to this Agreement or which may otherwise be provided to its employees, (but without
prejudice to COBRA rights applicable to Executive’s spouse or dependents or to any benefits which
may be granted to Executive or his spouse or dependents under any other agreement between Executive
and the Company), and except that the Executive’s designated beneficiary (or, in the absence of a
designated beneficiary, the Executive’s estate) shall be entitled to receive any benefits payable
as a result of the Executive’s death under the terms of the Company’s employee benefit plans, if
any.

     (c) Resignation. If the Executive’s employment is terminated by reason of Executive’s
voluntary resignation, this Agreement and all of the Company’s obligations hereunder and
Executive’s employment by the Company shall terminate on the date when such resignation becomes
effective (but without prejudice to Executive’s COBRA rights or to any benefits which may be
granted to Executive under any other agreement between Executive and the Company). Notwithstanding
the foregoing, the Executive’s obligations and the Company’s rights under Sections 6, 7 and 8 shall
survive the termination of this Agreement.

 

 

     (d) Termination for Due Cause. The Company shall have the right to terminate this
Agreement and the Executive’s employment for “Due Cause” (as defined below) by giving the Executive
written notice of such termination, and upon any such termination Executive’s employment and all of
the Company’s obligations hereunder shall immediately terminate. As used in this section, “Due
Cause” shall mean any of

     (i) conduct by the Executive that is materially inconsistent with or violates the terms
hereof;

     (ii) failure by the Executive to perform any material and substantial duties to the
Company, which failure is not cured within 15 days after written notice thereof is provided
by the Company to the Executive;

     (iii) Executive’s conviction of or plea of nolo contendre to of a felony charge;

     (iv) misappropriation of Company property by Executive or any act of dishonesty by
Executive directed at the Company or acting on behalf of the Company;

     (v) violation of the Company’s drug and alcohol policy;

     (vi) any conduct, action or behavior by Executive that has a material adverse effect on
the reputation of the Company, its business, customers, employees, prospects, name,
reputation or goodwill, or Executive’s reputation, or that is not befitting of a senior
executive of the Company; or

     (v) Executive’s commission of an act of moral turpitude.

     (vi) Executive’s continued and ongoing failure to perform at a
minimum industry standard level for any similar executive leading to a
determination of material incompetence as determined by the Board of Directors.

Notwithstanding the termination of Executive’s Employment and this Agreement pursuant to this
Section 5(d), the Executive’s obligations and the Company’s rights under Sections 6, 7 and 8 shall
survive such termination.

     (e) Termination/Modifications without Due Cause. In addition, at all times the
Company shall have the right to terminate the Executive’s employment without any reason. While the
Executive’s titles and responsibilities have been established herein based upon the current
structure and needs of ELC and the Company, they may be modified from time to time due to changing
needs of ELC, modifications to corporate structure and any other commercially reasonable needs as
determined by the CEO and the Board of the Company. In the event that the Company terminates the
Executive’s employment for any reason other than for Due Cause or Executive’s disability or
Executive’s death, or, modifies the Executive’s role for any reason other than Due Cause, the
Company shall continue to pay Executive’s Salary and provide the other benefits due to Executive
hereunder through the third anniversary of the date hereof.

 

 

     6. Non-Competition Covenant.

     (a) Executive’s Agreements. For purposes of Sections 6 and 7 of this Agreement, the
term “Company” shall also refer to and include MPG. Executive acknowledges and agrees that
Executive possesses skills and experience qualifying him for employment in other fields, and that
the restrictions and limitations imposed on Executive below will not unduly impair his ability to
earn a living if his employment with the Company is terminated. Further, Executive hereby
acknowledges and agrees that the Company’s products are sold throughout the United States.
Accordingly, Executive agrees that the geographic limitations and restrictions contained in the
non-competition covenant set forth below are reasonable and necessary to protect the market share
and business interests of the Company and its affiliates.

     (b) Non-Compete Covenant. Executive agrees that during the term of his employment by
the Company, and for a period of two (2) years thereafter, Executive shall not, directly or
indirectly, engage in, own, be employed by, become involved or affiliated with, render services to
or in any manner provide services to any business or enterprise which is competitive with the
business of the Company or of ELC or of any other subsidiary of ELC (each, a “Company
Affiliate”). Nor shall Executive, during such period, interfere with, or attempt to interfere
with the relationship between the Company, or of any Company Affiliate and any of its customers,
suppliers, clients, employees or consultants, whether by solicitation or otherwise, whether alone
or as a partner, officer, director, shareholder, employee, consultant or independent contractor of
any other entity. Notwithstanding the foregoing, solely as a passive investor, Executive may own
or invest in interests in a company or entity which competes with the Company or a Company
Affiliate, if such ownership or investment is solely in securities which are traded on any national
or international securities exchange and does not at any time equal or exceed five percent (5%) or
more of any class of outstanding securities of such company or entity.

     7 Confidentiality Covenant.

     (a) Confidential Information. Executive recognizes and acknowledges that, by virtue
of and in the course of his employment with the Company, Executive shall come into contact with, be
exposed to, learn about, discover, develop, generate or contribute to trade secrets, proprietary
information or other Confidential Information. For the purposes of this Agreement, the term
“Confidential Information” means all information or data at any time in the possession of
or accessible to Executive relating to the business and affairs of the Company or a Company
Affiliate and not generally known outside of the Company or the Company Affiliates, whether or not
the Company or a Company Affiliate invokes special measures to protect such information or data,
and shall include, without limitation, the Company’s and the Company Affiliates’ data, designs,
compilations of information, apparatus, computer programs, identity of suppliers, identity of
customers, customer requirements, cost or price data, research data, business plans, marketing or
sales plans and information, financial data, salary and wage information, policies and procedures,
manufacturing and sales know-how and any other information that proprietary to or a trade secret of
the Company or any Company Affiliate, whether or not such information is considered a trade secret
within the meaning of applicable law. All Confidential Information, in whatever form it may exist,
whether in Executive’s memory or in some physical or electronic or computerized form, is and shall
be the sole and exclusive property of the Company and the Company Affiliates. The rights and
protections granted herein with respect to Confidential Information are in addition to the rights,
remedies and protections afforded to the Company under any applicable law, statute or regulation.

 

 

     (b) Agreement Not To Disseminate Confidential Information. Executive agrees that he
will not, at any time or in any manner, either directly or indirectly, publish, communicate or
otherwise reveal to any person or entity, or use for any purpose whatsoever, except as may be
necessary in the course of performing his obligations to the Company, or as may be required by
applicable law, statute or regulation, any Confidential Information. Executive further agrees to
notify the Company before disclosing any Confidential Information under compulsion of law and to
cooperate with the Company in deciding the substance and manner of such disclosure. Executive
hereby specifically agrees that all Confidential Information is valuable, material and
significantly affects the effective and successful conduct of the Company’s and the Company
Affiliates’ businesses and related good will.

     (c) Public Information. Notwithstanding the foregoing, the confidentiality
obligations set forth above shall not apply to any information that now is or hereafter becomes
generally known to the public (other than as a result of a breach of this Agreement or a similar
agreement under which the Company or a Company Affiliate has rights).

     (d) Protection of Confidential Information. Executive will take all necessary steps
and precautions to protect any Confidential Information. Upon termination of Executive’s
employment with the Company or upon the Company’s written request, Executive shall promptly turn
over to the Company any and all correspondence, notes, agreements, memoranda, computer disks and
tapes, documents and other media and other property of the Company in Executive’s control
containing or reflecting Confidential, Information, keeping no copies or extracts.

     (e) Remedies. Executive agrees that money damages may not constitute an adequate
remedy for the violation by Executive of either Section 6 or Section 7 of this Agreement, and any
such violation by Executive is likely to cause irreparable damage to the Company and that such
damages would be difficult to determine. Accordingly, in the event of any such violation or any
threatened violation of Section 6 or Section 7 of this Agreement, in addition to all other legal
and equitable remedies available to the Company, the Company shall be entitled to injunctive
relief, both temporary and permanent, without bond, to enforce the provisions of such Sections.
The non-prevailing party in any final, unappealable decision regarding enforcement of Section 6 or
Section 7 of this Agreement shall be responsible for and indemnify the prevailing party for all
reasonable legal fees, court costs and related expenses incurred by such prevailing party in
seeking enforcement.

     8. Inventions and Discoveries. All discoveries, inventions, processes, methods and
improvements, conceived, developed, or otherwise made by Executive, alone or with others, at any
time while he is employed by the Company or any Company Affiliate, and which

     (i) in any way relates to the Company’s present or proposed business or products, or

     (ii) in any way relates to the Company’s actual or demonstrably anticipated research or
development, or

     (iii) results from work performed by Executive for the Company,

whether or not patentable or subject to copyright protection, and whether or not reduced to
tangible form or practice (“Developments”), shall be the sole property of the Company.
Executive hereby assigns to the Company all proprietary right, title and interest of Executive
throughout the world in and to all Developments. Executive hereby agrees that the Developments
constitute works made for hire under the patent and copyright laws of the United States of America.

 

 

     9. Court Authorized to Modify Covenants. If a court or other body of authority and
competent jurisdiction determines that the covenants contained in Sections 6 and/or 7 of this
Agreement are unenforceable, in whole or in part, due to the duration or geographic scope of the
restrictions or limitations imposed therein or for any other reason, then such court or other body
of authority is hereby authorized and directed by the Company and the Executive to make such
modifications to Sections 6 and/or 7 as are necessary to render said covenants enforceable to the
maximum extent permitted under applicable law.

     10. Miscellaneous Provisions.

     (a) Governing Law. This Agreement has been executed and delivered in the State of
Illinois and its validity, interpretation and enforcement shall be governed by and it shall be
construed in accordance with the internal laws (as opposed to conflicts of laws) and decisions of
the State of Illinois.

     (b) Severability. Subject to the provisions of Section 9 above, if any provision of
this Agreement shall be held to be invalid by reason of the operation of any applicable law, or by
reason of the interpretation placed thereon by any court or other governmental body, (i) this
Agreement shall be construed as not containing such provision and a substitute provision shall be
inserted therefore by such court or other governmental body which effectuates to the maximum extent
permitted by law the intent of the parties hereto, (ii) such provision and the replacement thereof
shall not affect the validity of any other provision hereof, and (iii) any and all other provisions
hereof which otherwise are lawful and valid shall remain in full force and effect.

     (c) No Waiver. The failure of the Company to assert any of its rights under this
Agreement or the delay or partial enforcement of any of its rights hereunder shall not operate or
be construed as a waiver of any breach of this Agreement, except as such waiver may be expressly
set forth in writing and signed by the Company. The waiver by the Company of any breach of any
provision of this Agreement shall not be construed as a waiver of any subsequent breach, whether of
the same or of a different character.

     (d) Notices. All notices, demands and other communications which may or are required
to be given hereunder or with respect hereto shall be in writing, shall be given either by personal
delivery or by recognized overnight delivery service, and shall be deemed to have been given or
made when personally delivered, addressed as follows:

	 	 	 
	If to the Company to:

	 	Maximum Performance Group
	 

	 	C/o Electric City Corporation
	 

	 	1280 Landmeier Road
	 

	 	Elk Grove Village, Illinois 60007
	 

	 	Attn: Chief Financial Officer

or to such other address as the Company may from time to time designate to the Executive in
accordance with this section.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	If to the Executive to:	 	Mr. Leonard Pisano	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Telephone:	 	 	 	 
	 

	 	 	 	 	 	 

 

 

or to such other address as the Executive may from time to time designate to the Company in
accordance with this section.

     (e) Modification. This Agreement shall not be amended, modified or supplemented
except in writing and signed by the Company and Executive.

     (f) Headings. The paragraph headings and captions used herein are intended solely for
convenience of reference and shall not control or effect the interpretation, meaning or
construction of any provision of this Agreement.

     (g) The parties hereto agree that in the event of any disagreements or controversies arising
from this Agreement or any other agreements between the Company and Executive relating to the
breach, termination or validity thereof or the past, present and future dealings between the
parties, such disagreements and controversies shall be subject to binding arbitration as arbitrated
in accordance with the then current Commercial Arbitration Rules of the American Arbitration
Association (the “AAA”) in Chicago, Illinois before one neutral arbitrator. Such arbitrator shall
be selected by mutual agreement of the parties within thirty (30) days of written notice of said
disagreement or controversy. If the parties cannot mutually agree to an arbitrator within thirty
(30) days, then the AAA shall designate the arbitrator. Either party may apply to the arbitrator
seeking injunctive relief until the arbitration award is rendered or the controversy is otherwise
resolved. Without waiving any remedy under this Agreement, either party may also seek from any
court having jurisdiction any interim or provisional relief that is necessary to protect the rights
or property of that party, pending the establishment of the arbitral tribunal (or pending the
arbitral tribunal’s determination of the merits of the controversy). In the event of any such
disagreement or controversy, neither party shall directly or indirectly reveal, report, publish or
disclose any information relating to such disagreement or controversy to any person, firm or
corporation not expressly authorized by the other party to receive such information or use such
information or assist any other person in doing so, except to comply with actual legal obligations
of such party or unless such disclosure is directly related to an arbitration proceeding as
provided herein, including, but not limited to, the prosecution or defense of any claim in such
arbitration. The costs and expenses of the arbitration (excluding attorneys’ fees) shall be paid by
the non-prevailing party or as determined by the arbitrator. This paragraph shall survive the
termination of this Agreement.

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

 

 

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

	 	 	 	 	 
	 	 	MAXIMUM PERFORMANCE GROUP, INC.
	 
	 	 	 	 
	 

	 	By:
	 	   /s/ John Mitola
	 

	 	 	 	 
	 

	 	Name:

Title:
	 	John Mitola

President
	 
	 	 	 	 
	 	 	   /s/ Leonard Pisano
	 	 	 
	 	 	Leonard Pisano

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