Document:

exv4w45

 

Exhibit 4.45

FORM OF WARRANT

(with cashless exercise provision)

NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED UNLESS (A) SUBSEQUENTLY
REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR (B) THE HOLDER HEREOF SHALL HAVE DELIVERED TO THE
COMPANY A WRITTEN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE
COMPANY, TO THE EFFECT THAT THE SHARES TO BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED ARE
BEING OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION.

ELECTRIC CITY CORP.

Warrant To Purchase Common Stock

	Warrant No.: _____ 	Number of Shares:_________
	Original Date of Issuance: ____________

Electric City Corp., a Delaware corporation (the “Company”), hereby certifies that, for good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
_________________________, the registered holder hereof or its permitted assigns registered on the
books of the Company (the “Holder”), is entitled, subject to the terms and conditions set forth
below, to purchase from the Company upon surrender of this Warrant, at any time or times on or
after the date hereof, but not after 5:00 P.M. Eastern Standard Time on _______________ (the
“Expiration Date”), ________________ fully paid and nonassessable shares (the “Warrant Shares”) of
the Company’s common stock, par value $0.0001 per share (the “Common Stock”), at the exercise price
per share equal to $______, subject to adjustment as hereinafter provided (the “Warrant Exercise
Price”) , all on the terms and subject to the conditions hereinafter set forth.

     Section 1. Definitions. In addition to the capitalized terms defined elsewhere
herein, the following terms as used in this Warrant shall have the following meanings:

          (a) “Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in the City of New York are authorized or required by law to remain closed.

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          (b) “Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization or a government or any department or agency
thereof.

          (c) “Securities Act” means the Securities Act of 1933, as amended.

     Section 2. Exercise of Warrant.

          (a) Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder,
in whole or in part, during normal business hours on any Business Day on or after the date hereof
and prior to 5:00 P.M. Eastern Standard Time on the Expiration Date by (i) delivery of a duly
executed written notice, in the form of the subscription notice attached as Exhibit A
hereto (the “Exercise Notice”), of such Holder’s election to exercise this Warrant, which notice
shall specify the number of Warrant Shares to be purchased, (ii) payment to the Company of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant Shares as to which
this Warrant is being exercised (the “Aggregate Exercise Price”) which shall be payable by any one
or any combination of the following: (i) wire transfer of immediately available funds, (ii)
certified or official bank check payable to the order of the Company or (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. An exercise of a Warrant in
accordance with clause (iii) is herein referred to as a “Cashless Exercise.” In the event of any
exercise of the rights represented by this Warrant in compliance with this Section 2(a), the
Company shall, on or before the tenth (10th) Business Day following the date of its
receipt of the Exercise Notice, the Aggregate Exercise Price and this Warrant (or an indemnity and
evidence with respect to this Warrant in the case of its loss, theft, mutilation or destruction as
provided in Section 11) (the “Exercise Delivery Documents”), deliver at the Company’s expense to
the Holder, a certificate or certificates for the Warrant Shares so purchased, in such
denominations as may be requested by Holder and registered in the name of Holder. Upon the
Company’s receipt of the Exercise Delivery Documents, the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares with respect to which this
Warrant has been exercised, irrespective of the date of delivery of certificates evidencing such
Warrant Shares.

          (b) Unless the rights represented by this Warrant shall have expired or shall have been fully
exercised, the Company shall, as soon as practicable and in no event later than ten (10) Business
Days after any exercise and at its own expense, issue a new Warrant identical in all respects to
this Warrant exercised, except it shall represent rights to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant exercised, less the number of
Warrant Shares with respect to which this Warrant is exercised.

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          (c) No fractional shares of Common Stock are to be issued upon the exercise of this Warrant,
but rather the number of shares of Common Stock issued upon exercise of this Warrant shall be
rounded up or down to the nearest whole number.

     Section 3. Covenants. The Company hereby represents, covenants and agrees as follows:

          (a) This Warrant is, and any Warrants issued in substitution for or replacement of this
Warrant will upon issuance be, duly authorized and validly issued.

          (b) All Warrant Shares which may be issued upon the exercise of the rights represented by this
Warrant will, upon issuance, be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof.

          (c) Prior to exercise of this Warrant, the Company shall secure the listing of the Warrant
Shares upon each national securities exchange or market, if any, upon which shares of Common Stock
are then listed (subject to official notice of issuance upon exercise of this Warrant) and shall
maintain such listing of the Warrant Shares so long as any other shares of Common Stock shall be so
listed.

          (d) The Company has full power and authority to enter into this Warrant, and to issue and
deliver this Warrant and the Warrant Shares, and to incur and perform fully the obligations
provided herein, all of which have been duly authorized by all necessary corporate action.

          (e) This Warrant has been duly executed and delivered and is the valid and binding obligation
of the Company enforceable in accordance with its terms.

     Section 4. Taxes. The Company shall pay any and all taxes, except income taxes, which
may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this
Warrant.

     Section 5. Holder Not Deemed a Stockholder. Except as otherwise specifically provided
herein, this Warrant shall not entitle Holder to vote or receive dividends or any other rights of a
stockholder of the Company, including, without limitation, any right to vote, give or withhold
consent to any corporate action (whether a reorganization, issue of stock, reclassification of
stock, consolidation, merger, conveyance or otherwise), receive notice of meetings or receive
subscription rights.

     Section 6. Representations of Holder. The Holder, by the acceptance hereof,
represents and warrants that it (a) is acquiring this Warrant and the Warrant Shares solely for its
own account, for investment and not with a view towards the distribution or resale thereof in
violation of the Securities Act or any applicable state securities laws, (b) has received such
documents, materials and information as Holder deems necessary or appropriate for evaluation of the
acquisition of the Warrant and the Warrant Shares, (c) is an “accredited investor” as such term is
defined in Rule 501 of Regulation D promulgated under the Securities Act and has such knowledge and
experience in financial and business matters that it is capable of evaluating the merits and risks
of an investment in the Warrant and the Warrant Shares, (d) understands that no

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U.S. federal, state or regulatory agency has recommended, approved or endorsed, or passed upon
the fairness or suitability of, an investment in the Warrant or Warrant Shares or passed up on the
accuracy or adequacy of the information provided to Holder, and (e) recognizes that an investment
in the Warrant Shares involves a high degree of financial risk, can bear the economic risk of
losing its entire investment in the Warrant Shares and has sought, or will seek, such accounting,
legal and tax advice as it has considered, or will consider, necessary to make an informed
investment decision with respect to its acquisition of this Warrant and Warrant Shares. If Holder
cannot make any of the foregoing representations at the time of exercising this Warrant because it
would be factually incorrect, Holder shall so notify the Company, and it shall be a condition to
Holder’s exercise of this Warrant that the Company receive such other assurances as the Company
considers reasonably necessary to assure the Company that the issuance of the Warrant Shares upon
exercise of this Warrant shall not violate the Securities Act or any state securities laws.

     Section 7. Restriction on Transfer.

          (a) This Warrant and the rights granted to Holder are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed warrant power in the form of
Exhibit B attached hereto; provided, however, that any transfer or assignment shall be
subject to the approval of the Company, such approval not to be unreasonably withheld, and the
conditions set forth in Section 7(b) below.

          (b) Holder represents and warrants that it understands that the Company is under no obligation
to register this Warrant or the Warrant Shares under the Securities Act and that the Warrant and
Warrant Shares will be characterized as “restricted securities” under the Securities Act because
they are being acquired from the Company in a transaction not involving a public offering. Holder
also represents and warrants that it understands that neither the Warrant nor the Warrant Shares
may be offered for sale, sold, assigned or transferred unless (a) subsequently registered pursuant
to an effective registration statement under the Securities Act and applicable state securities
laws or (b) Holder shall have delivered to the Company a written opinion of counsel, in form,
substance and scope reasonably acceptable to the Company, to the effect that the securities to be
offered for sale, sold, assigned or transferred are being offered for sale, sold, assigned or
transferred pursuant to an exemption from such registration.

          (c) Unless upon their issuance such Warrant Shares are then registered under the Securities
Act pursuant to an effective registration statement, any certificates representing Warrant Shares
issued in accordance with this Warrant shall bear a legend substantially in the following form:

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THE SHARES OF COMMON STOCK OF ELECTRIC CITY CORP. (THE “COMPANY”) REPRESENTED BY
THIS CERTIFICATE (THE “SHARES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED UNLESS (A) SUBSEQUENTLY REGISTERED PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
OR (B) THE HOLDER HEREOF SHALL HAVE DELIVERED TO THE COMPANY A WRITTEN OPINION OF
COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY, TO THE
EFFECT THAT THE SHARES TO BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED ARE
BEING OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO AN EXEMPTION FROM
SUCH REGISTRATION.

     Section 8 
This Section has been left blank intentionally.

     Section 9.

          (a) Adjustment of Warrant Exercise Price and Number of Warrant Shares upon Subdivision or
Combination of Company Stock. If the Company at any time after the date of issuance of this
Warrant subdivides (by any stock split or stock dividend of its Common Stock) its outstanding
shares of Common Stock into a greater number of shares of Common Stock, the Warrant Exercise Price
in effect immediately prior to such subdivision will be proportionately reduced and the number of
Warrant Shares obtainable upon exercise of this Warrant will be proportionately increased. If the
Company at any time after the date of issuance of this Warrant combines (by reverse stock split or
otherwise) its outstanding shares of Common Stock into a smaller number of shares of Common Stock,
the Warrant Exercise Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares obtainable upon exercise of this Warrant will be
proportionately decreased. Any adjustment under this Section 9(a) shall become effective at the
close of business on the date the subdivision or combination becomes effective.

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          (b) Notices. Upon any adjustment of the Warrant Exercise Price or number of issuable
Warrant Shares pursuant to Section 9(a), the Company will give written notice thereof to the
Holder, setting forth in reasonable detail the calculation of such adjustment.

     Section 10. Reorganization, Reclassification, Consolidation, Merger or Sale. If at
any time, as a result of:

          (a) a capital reorganization or reclassification (other than a subdivision or combination
provided for in Section 9), or

          (b) a merger or consolidation of the Company with another corporation (whether or not the
Company is the surviving corporation) or sale of substantially all of the Company’s stock, the
Common Stock issuable upon exercise of this Warrant shall be changed into or exchanged for the same
or a different number of shares of any class or classes of capital stock of the Company or any
other Person, or other securities convertible into such shares, then, as a part of such
reorganization, reclassification, merger, consolidation or sale, appropriate adjustments shall be
made in the terms of this Warrant (or of any securities into which this Warrant is exercised or for
which this Warrant is exchanged), so that Holder shall thereafter be entitled to receive, upon
exercise of this Warrant or of such substitute securities, the kind and amount of shares of stock,
other securities, money and property which Holder would have received at the time of such capital
reorganization, reclassification, merger, consolidation or sale, if Holder had exercised this
Warrant immediately prior to such capital reorganization, reclassification, merger, consolidation
or sale. This Warrant, including, without limitation, the provisions of this Section 10 will be
binding upon any entity succeeding to the Company by merger, consolidation or acquisition of all or
substantially all of the Company’s assets. The provisions of this Section 10 shall similarly apply
to (x) successive capital reorganizations, reclassifications, mergers, consolidations and sale and
(y) the securities of any other Person that are at the time receivable upon the exercise of this
Warrant.

     Section 11. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost,
stolen, mutilated or destroyed, the Company shall promptly, on receipt of evidence reasonably
satisfactory to the Company of the ownership of, and the loss, theft, mutilation or destruction of,
this Warrant, and an indemnity reasonably satisfactory to the Company (or in the case of a
mutilated Warrant, the Warrant), issue in lieu thereof a new Warrant of like denomination and tenor
as this Warrant so lost, stolen, mutilated or destroyed.

     Section 12. Notice. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Warrant must be in writing and will be deemed to
have been made upon receipt when delivered personally, via pre-paid overnight courier or by
certified mail, postage pre-paid, return receipt requested. The addresses for such communications
shall be:

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          If to the Company:

Electric City Corp.

1280 Landmeier Road

Elk Grove Village, IL 60007

Attention: General Counsel

          If to the Holder:

_______________________________________

_______________________________________

_______________________________________

_______________________________________

or such other address as the Company or Holder, as applicable, may specify in written notice given
to the other party in accordance with this Section 12.

     Section 13. Amendments. This Warrant and any term hereof may be changed, waived,
discharged, or terminated only by an instrument in writing signed by the party hereto against which
enforcement of such change, waiver, discharge or termination is sought.

     Section 14. Expiration. This Warrant, in all events, shall be wholly void and of no
effect after 5:00 P.M. Eastern Standard Time on the Expiration Date, except that notwithstanding
any other provisions hereof, the provisions of Section 7 shall continue in full force and effect
after such date as to any Warrant Shares or other securities issued upon the exercise of this
Warrant.

     Section 15. Successors and Assigns. The terms and provisions of this Warrant shall
inure to the benefit of, and be binding upon, the Company and the Holder and their respective
successors and permitted assigns.

     Section 16. Descriptive Headings; Governing Law; Arbitration. The descriptive
headings of the several sections and paragraphs of this Warrant are inserted for convenience only
and do not constitute a part of this Warrant. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by the internal laws of the State
of Illinois, without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Illinois or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois.

In the event of any and all disagreements and controversies arising from this Warrant, 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 in
Chicago, Illinois before one neutral 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 Warrant, 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

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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.

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by a duly authorized
officer, as of the ___ day of _____, 200_.

	 	 	 	 	 
	 	 	ELECTRIC CITY CORP.
	 
	 	 	 	 
	

	 	By:	 
	

	 	 	 	 
	

	 	Name:	 	 
	 
	 	 	 	 
	

	 	Title:	 	 

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EXHIBIT A TO WARRANT

SUBSCRIPTION FORM

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

ELECTRIC CITY CORP.

     The
undersigned Holder hereby exercises the right to purchase
____________ of the shares
of Common Stock (“Warrant Shares”) of Electric City Corp., a Delaware corporation (the “Company”),
evidenced by the attached Warrant (the “Warrant”). The Holder tenders herewith payment of the
Aggregate Exercise Price in full in the amount of
$____________ in the form of cash,
certified check or wire transfer of immediately available funds with
respect to  ____________
 Warrant Shares. Capitalized terms used herein and not otherwise defined shall have the respective
meanings set forth in the Warrant.

Date: _______________ __, 200_

Name of Holder

	 	 	 	 	 
	By: 
	 	 	 
	

	 	 
	 	 
	

	 	Name: 	 	 
	

	 	 	 	 
	

	 	Title:	 	 
	

	 	 	 	 

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EXHIBIT B TO WARRANT

FORM OF WARRANT POWER

FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to ________________, a warrant
to purchase ____________ shares of the Common Stock of Electric City Corp., a Delaware corporation,
represented by warrant certificate no. _____, standing in the name of the undersigned on the books
of said corporation. The undersigned does hereby irrevocably
constitute and appoint __________________, to transfer the warrants of said corporation, with full power of
substitution in the premises.

Dated: _________, 200_

	 	 	 	 	 
	 	 	 
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	 	 	 
	

	 	Its:	 	 
	

	 	 	 	 

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Exhibit 10.38

August 31, 2004

Mr. John Mitola

Electric City Corporation

1280 Landmeier Road

Elk Grove Village, Illinois 60007

Dear Mr. Mitola:

This letter will confirm our agreement (“Agreement”) that Delano Group Securities, LLC (“Advisor”)
is authorized to represent Electric City Corporation and its affiliates and related entities
(collectively, the “Company”) and to assist the Company as its financial advisor on the terms and
conditions set forth herein. This Agreement shall become effective upon the execution hereof by
both Advisor and the Company.

	1.  	Performance of Services. In its capacity as financial advisor, Advisor will assist
the Company by undertaking the following activities, to the extent that such activities are
required by the status of a project. The services being provided by Advisor hereunder are
being rendered solely to the Board of Directors of the Company (the “Board”). These services
are not being rendered by Advisor as an agent or as a fiduciary of the shareholders of the
Company, and Advisor shall not have any obligation or liability with respect to its services
hereunder to such shareholders or any other person, firm or corporation.

	 	A.  	Financial Advisory. Advisor shall make itself available to consult with the
Board and the officers, employees, representatives and agents of the Company at reasonable
times, concerning matters pertaining to investment banking, business and financial
operations, business and market development strategy, fiscal policy, and any other matter
of importance concerning the business of the Company. Advisor may, at the request of the
Company, assist in the preparation of written reports on financial, accounting or marketing
matters, review financial information, analyze markets and business opportunities, develop
short-term and long-term strategic business plans, and report to the Board on proposed
acquisition, merger and investment opportunities. Advisor may provide liaison services to
the Company with respect to the Company’s current or potential relationships with
unaffiliated third parties. The services set forth in this paragraph shall be referred to
herein in as “Financial Advisory Services”.
	 
	 	B.  	Merger and Acquisition. Advisor shall be engaged to advise the Company with
respect to mergers, acquisitions, sales and divestitures, including, without limitation,
identification of counterparties, assessment and identification of reverse merger
opportunities, approach and financial strategy, structure, evaluation, and assistance in
negotiation and execution (“M&A Services”). The obligations of Advisor to perform M&A
Services under this Agreement shall be limited to: (i) transactions that the Company
requests Advisor’s M&A Services, which request is accepted by Advisor; or (ii) transactions
that Advisor identifies and presents to the Company.
	 
	 	C.  	Capital Formation. Advisor shall, on a best efforts basis, raise equity or
debt capital for the Company in private placements or public offerings in such manner and
amounts as determined by the Board in its sole discretion from time to time (“Capital
Formation Services”). The obligations of Advisor to perform Capital Formation Services
under this Agreement shall be limited to private placements and public offerings of equity
or debt capital sourced by the Advisor that the Company and Advisor mutually agree are
financially viable based on the terms and conditions proposed by the Board (“Qualifying
Placement”).

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	   	The parties hereto acknowledge and agree that Advisor is not rendering legal advice or
performing accounting or auditing services as part of the services provided under this Agreement.
Advisor shall be free to provide services for other persons, which services shall not be deemed to
be in conflict with the services to be performed by Advisor under this Agreement.
	 
	2.  	Term. The term of this Agreement shall commence on the date of this Agreement and
continue through December 31, 2005 or for such longer period as mutually agreed to by the
parties in writing (the “Term”). However, either the Company or Advisor may terminate this
Agreement with 30 days’ prior written notice to the other party. Notwithstanding anything
contained herein to the contrary, the provisions of Section 3 (Compensation) and Section 6
(Indemnification) shall survive the termination and expiration of this Agreement.
	 
	3.  	Compensation. As compensation for the services rendered by Advisor under this
Agreement, the Company shall pay Advisor (or its designees) as follows. (Note: This agreement
and the warrants to be issued under this section are subject to approval of the Electric City
board of directors or an independent committee thereof):

	 	A.  	Financial Advisory Services. For the Financial Advisory Services rendered by
Advisor, the Company shall pay Advisor a one-time, non-refundable retainer fee of $10,000
payable upon execution of this Agreement, and shall issue Advisor 30,000 warrants to
purchase the Company’s common stock at 105% of the Average Closing Price (as defined
herein) as of the date this Agreement is executed. Such warrants shall have a term of five
years and contain cashless exercise provisions. Such warrants and the underlying common
stock shall have piggyback registration rights.
	 
	 	B.  	M&A Services. For any Transaction (as defined herein) that the Company
requests Advisor to perform M&A Services or that Advisor identifies and presents to the
Company (“Qualifying Transaction”), the Company shall pay Advisor a monthly retainer fee of
$7,500 during such period that the Company is actively pursuing such Qualifying Transaction
(“M&A Retainer Fees). First retainer to be paid at the end of September, 2004 for services
rendered in September. For any Qualifying Transaction, which is consummated (i) during the
Term hereof, or (ii) during the six-month period after termination or expiration of this
Agreement, the Company agrees to pay Advisor a
Success Fee (as defined herein) for each Qualifying Transaction. With respect to each
Qualifying Transaction, the “Success Fee” shall be equal to 5% of the first five million
dollars of Consideration (as defined herein), plus 2.50% of the next five million
dollars of Consideration, plus 1.5% of the Consideration in excess of ten million
dollars, but in no case will the Success Fee exceed $700,000, except in the event the
Company completes a Qualifying Transaction with            in which case the Success Fee
will not exceed $2 million. The Success Fee shall be due and payable at the closing of the
Qualifying Transaction. The Success Fee will be paid in cash or stock (not to exceed an
amount mutually agreed to by the Company and Advisor) with any non-cash portion of the
Success Fee being paid in the form of the Company’s common stock valued at 100% of the
Average Closing Price as of the closing of the Qualifying Transaction. The common stock to
be issued under this paragraph shall have piggyback registration rights. The Parties
recognize and acknowledge that Transactions structured with other Companies (Selling or
Buying Party) may involve such other company’s advisors and consultants or such other
company’s own perspective on Success Fee structures and therefore, the Selling Party or
other company may desire to reduce the Success Fee herein. Advisor agrees to use all
reasonable efforts to cooperate on any restructuring or reduction of the Success Fee in
order to not block or inhibit the ability of the Company to consummate such a Transaction.
	 
	 	C.  	Capital Formation Services. For the Capital Formation Services rendered by
Advisor, the Company shall pay Advisor a commission equal to 5% of the gross proceeds of
any Qualifying Placement (“Commission”). Any Commission payable under this paragraph
shall be paid at the closing of the Qualifying Placement out of escrow from the gross
proceeds of the Qualifying Placement and out of escrow from the gross proceeds resulting
from the exercise of any investment options upon exercise. In the event Company enters
into a separate equity or debt placement agreement with a third party that is identified
and presented by Advisor, the Company shall pay Advisor a commission equal to 1% of the
gross proceeds from such placement if such placement is completed during the term of this
Agreement or during the twelve-month period after termination or expiration of this
Agreement. Advisor acknowledges that the Company is currently working
with             to
raise capital and that the Advisor will not be entitled to a fee related to any capital
raised by             . In the event the Advisor and a third party are both entitled to a
fee for the same capital raising transaction, Advisor agrees to reduce its fee such that
the total combined fee of both parties does not exceed 6% of the gross proceeds from the
transaction.

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	 	D.  	Expense Reimbursement. The Company shall reimburse Advisor, on at least a
monthly basis, for all reasonable and documented out-of-pocket expenses incurred by Advisor
in connection with the services rendered under this Agreement. Any third party consulting
expenses shall be approved in advance.
	 
	 	E.  	Current Qualifying Transactions. As of the date of this Agreement, Company has
engaged Advisory to work on the following opportunities:
	 
	 	   	Advisor and Company will confirm all specific engagement activities in writing as a
modification to this section 3.E at all times.

	4.  	Definitions. For purposes of this Agreement:

	 	A.  	The term “Transaction” shall mean any transaction or series or combination of
transactions, whereby, directly or indirectly, control of an interest in a company or any
of its businesses or assets, other than in the ordinary course of business, is transferred
to or by the Company or its affiliates for Consideration (as defined herein), including,
without limitation, a sale or exchange of capital stock or assets, a merger or
consolidation, a share exchange, a tender or exchange offer, a reorganization, a leveraged
buyout, the formation of a joint venture, minority investment or partnership, or any
similar transaction.
	 
	 	B.  	The term “Average Closing Price” shall mean the average closing bid price of the
Company’s common stock for the five trading days immediately preceding the applicable
measurement date.
	 
	 	C.  	The term “Consideration” shall mean the value of all cash, securities and other
property paid by the Company or its affiliates to the selling party, or received by the
Company or its shareholders, in connection with a Transaction. The value of such
securities (whether debt or equity) or other property shall be determined as follows: (i)
the value of the Company’s securities that are freely tradable in an established public
market will be determined on the basis of 100% of the Average Closing Price as of the
closing of the Transaction; (ii) the value of securities (other than the Company’s) that
are freely tradable in an established public market will be determined by the last closing
bid price prior to the closing of the Transaction; and (iii) the value of securities that
are not freely tradable or have no established public market, or if the consideration
utilized consists of property other than securities, the value of such other property shall
be the value thereof as determined by the Transaction. Consideration shall also be deemed
to include any indebtedness for borrowed money, including shareholder notes and guaranties,
assumed by the acquiring entity or its affiliates in connection with the Transaction.
Consideration shall also include all amounts placed in escrow and future contingent
payments actually paid. Advisor’s fee to be paid tied to future Consideration will be
paid upon release of such Consideration.

	5.  	Company Information. The Company shall furnish Advisor with all reasonable
information and material requested or required by Advisor, including, without limitation,
information concerning historical and projected financial results and possible and known
litigation, environmental and other contingent liabilities of the Company. The Company also
agrees to make available to Advisor such representatives of the Company, including, among
others, directors, officers, employees, outside counsel and independent certified public
accountants, as Advisor may reasonably request. The Company will promptly advise Advisor of
any material changes in the Company’s business or finances. The Company represents and
warrants that all information provided or made available to Advisor by the Company, at all
times during the Term hereof, is and shall to its knowledge be complete and true in all
material respects and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements thereof not misleading in
light of the circumstances under which such statements are made. The Company further
represents and warrants that any projections provided to Advisor will have been prepared in
good faith and will be based upon assumptions that, in light of the circumstances under which
they are made, are reasonable. The Company acknowledges and agrees that in rendering its
services hereunder Advisor will be using and relying on such information, without independent
investigation, appraisal or verification of such information, as well as publicly available
information, including, without limitation, any of the Company’s assets or those of any
potential acquisition target.

 3

 

	6.  	Indemnification. The Company agrees to indemnify and hold harmless Advisor, its
affiliates and their respective officers, directors, members, partners, employees, agents and
affiliates and control persons of any of the above (each an “Indemnified Person”) from and
against all claims, liabilities, losses or damages (or actions in respect thereof) or other
expenses that (a) are related to or arise out of (i) actions taken or omitted to be taken
(including any untrue statements made or any statements omitted to be made) by the Company, or
(ii) actions taken or omitted to be taken by an Indemnified Person with the consent of or in
conformity with the actions or omissions of the Company; or (b) are otherwise related to arise
out of Advisor’s duly authorized activities on behalf of the Company. The Company shall not
be responsible, however, for any losses, claims, damages, liabilities or expenses pursuant to
the preceding sentence that are finally judicially determined to have resulted solely from
Advisor’s or such other Indemnified Person’s negligence, reckless or wrongful conduct. The
Company agrees to reimburse each Indemnified Person for all out-of-pocket expenses (including
fees and expenses of counsel for such Indemnified Person) of such Indemnified Person in
connection with investigating, preparing, conducting or defending any such action or claim,
whether or not in connection with litigation in which any Indemnified Person is a named party,
or in connection with enforcing the rights of an Indemnified Person under this Agreement. The
indemnity agreements under this Section shall survive the completion of services rendered for
Company by Advisor and the termination or expiration of this Agreement.
	 
	7.  	Disclosure. Any financial or other advice, descriptive memoranda or other
documentation rendered by Advisor pursuant to this Agreement may not be disclosed publicly or
to any third party without the prior written approval of Advisor, except as required by law.
All non-public information provided by the Company to Advisor will be considered confidential
information and shall be maintained as such by Advisor, except as required by law or as
required to enable Advisor to perform its services pursuant to this Agreement, until the same
becomes known to third parties or the public without release thereof by Advisor.
	 
	8.  	Miscellaneous.

	 	A.  	Before the Company releases any information referring to Advisor’s role as the
Company’s financial advisor under this Agreement or uses Advisor’s name in a manner which
may result in public dissemination thereof, the Company shall furnish drafts of all
documents or prepared oral statements to Advisor for comments, and shall not release any
information relating thereto without the prior written consent of Advisor. Nothing herein
shall prevent the Company from releasing any information to the extent that such release is
required by law. Advisor acknowledges that the Company will have to disclose the existence
of this agreement as a related transaction in its public filings with the Security and
Exchange Commission.
	 
	 	B.  	The Company agrees that, following the consummation of any Qualifying Placement or
Qualifying Transaction, Advisor shall have the right to place advertisements in financial
and other newspapers and journals at its own expense, describing its services to the
Company hereunder, provided that Advisor will submit a copy of any such advertisements to
the Company for its prior approval, which approval shall not be unreasonably withheld.
	 
	 	C.  	The Company represents and warrants that this Agreement has been duly authorized and
represents the legal, valid, binding and enforceable obligation of the Company and that
neither this Agreement nor the consummation of any transactions contemplated hereby
requires the approval or consent of any governmental or regulatory agency or violates or
conflicts with any law, regulation, contract or order binding the Company.
	 
	 	D.  	The terms, provision and conditions of this Agreement are solely for the benefit of the
Company and Advisor and the other Indemnified Persons and their respective heirs,
successors and permitted assigns and no other person or entity shall acquire or have a
right by virtue of this Agreement. This Agreement may not be assigned by the Company
without prior written consent of Advisor.
	 
	 	E.  	This Agreement (including all exhibits and any addenda or schedules attached hereto)
contains the entire understanding and agreement between the parties hereto with respect to
Advisor’s engagement hereunder, and all prior discussions are hereby merged into this
Agreement.
	 
	 	F.  	This Agreement shall be governed by and constructed under the laws of the State of
Illinois without regard to such state’s conflicts of law principles, and may be amended,
modified or supplemented only by written instrument executed by parties hereto. The
parties hereto each hereby submits to the jurisdiction and venue of

 4

 

	 	   	the federal courts
located in the County of Cook, sitting in Chicago, Illinois, in connection with any dispute
related to this Agreement or any placement, transaction or other matter contemplated
hereby.
	 
	 	G.  	In the event either party commences litigation against the other to enforce their
rights under the terms and conditions of this Agreement, the prevailing party in such
litigation shall be entitled to recover from the other their reasonable costs and
attorneys’ fees incident to such litigation.
	 
	 	H.  	The Company acknowledges that David R. Asplund, who controls Delano Group Securities,
LLC, serves on the board of directors of the Company. The Company hereby waives any and
all claims of conflicts of interest against Delano Group Securities, LLC arising from or
with respect to the transactions contemplated hereby.

If the forgoing correctly sets forth the entire understanding and agreement between the Company and
Advisor, please so indicate by executing this Agreement as indicated below and returning an
executed copy to Advisor whereupon this Agreement shall constitute a binding agreement as of the
date first above written. A telecopy of the signed original of this Agreement shall be sufficient
to bind the parties whose signatures appear hereon.

     Very truly yours,

	 	 	 	 	 
	 	DELANO GROUP SECURITIES, LLC.

 	 
	 	By:  	/s/ David R. Asplund

	 
	 	 	David R. Asplund, President 	 
	 	 	 	 
	 

ACKNOWLEDGED AND AGREED THIS THE 31st DAY OF August, 2004.

	 	 	 	 
	By: Electric City Corporation
	 
	 	 
	Name:

	 	/s/ John Mitola

	

	 	 
	

	 	John Mitola
	 
	 	 
	Title: Chief Executive Officer

 5

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