Document:

exv4w4

 

Exhibit 4.4

COMMON STOCK WARRANT

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

WARRANT NO. 77

WARRANT CERTIFICATE

TO PURCHASE SHARES OF COMMON STOCK,

PAR VALUE $0.0001 PER SHARE

OF

ELECTRIC CITY CORP.

     THIS IS TO CERTIFY THAT UMBTRU for benefit of SBL FUND, SERIES J, a Kansas
corporation, or its registered assigns is the owner of 645,750 warrants (the
“Warrants”), each of which entitles the registered Holder thereof to
purchase from Electric City Corp., a Delaware corporation (the
“Company”), one fully paid, duly authorized and nonassessable share of
Common Stock, par value $0.0001 per share (the “Common Stock”), of the
Company at any time or from time to time on or before 5:00 p.m., New York City
time, on the Warrant Expiration Date, at an exercise price of $2.42 per share,
subject to adjustment from time to time as set forth herein (the “Exercise
Price”), all on the terms and subject to the conditions hereinafter set
forth.

     The number of shares of Common Stock issuable upon exercise of each
Warrant shall be determined for each Warrant by dividing $2.42 by the Exercise
Price in effect at the time of such exercise, and is initially one (1) share of
Common Stock. Capitalized terms used herein but not otherwise defined shall
have the meanings given them in Section 15 hereof or, if not therein
defined, in the Securities Purchase Agreement (as defined herein).

     Section 1. Exercise Of Warrants. Subject to the last
paragraph of this Section 1, the Warrants evidenced hereby may be
exercised, in whole or in part, by the registered Holder hereof at any time or
from time to time on or before 5:00 p.m., New York City time, on the Warrant
Expiration Date, upon delivery to the Company at the principal executive office
of the Company in the United States of America, of (a) this Warrant
Certificate, (b) a written notice, in the form of the exercise notice attached hereto
(the “Exercise Notice”), stating that such Holder

 

 

elects to exercise the
Warrants evidenced hereby in accordance with the provisions of this Section
1 and specifying the number of Warrants being exercised and (i) the name or
names in which, and the address to which, such Holder wishes the certificate or
certificates for shares of Common Stock to be issued or (ii) if the transfer
agent (the “Transfer Agent”) for the Common Stock participates in The
Depository Trust Company (“DTC”) Fast Automated Securities Transfer
Program, Holder’s DTC account information so that such account may be credited
with the shares of Common Stock to be issued through DTC’s Deposit Withdrawal
Agent Commision (“DWAC”) system and (c) payment of the Exercise Price
for the shares of Common Stock issuable upon exercise of such Warrants, which
shall be payable by any one or any combination of the following:

     (i) wire transfer of immediately available funds, or

     (ii) certified or official bank check payable to the order of the
Company.

The documentation and consideration, if any, delivered in accordance with
clauses (a), (b) and (c) of this paragraph above are collectively referred to
herein as the “Warrant Exercise Documentation.”

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

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

     In connection with the exercise of any Warrants evidenced hereby, no
fractions of shares of Common Stock shall be issued. If, due to adjustments, a
Holder is entitled to fractions of shares, the Company shall round such
Holder’s shares up or down to the nearest whole share.

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

     (a) If after March 19, 2004 (the “Issue Date”), the Company shall
issue or sell any shares of its Common Stock (except upon exercise of the
Warrants and shares issued as a result of adjustments made under the terms of
the Warrants), for a price per share less than (including, without limitation
those circumstances described in paragraphs (i) through (vii) below), the lower
of the Market Price and the Exercise Price in effect on the date immediately
prior to the date of such issue or sale, then, except as otherwise set forth in
paragraph (vi) below, immediately upon such issue or sale, the Exercise Price
then in effect shall be reduced to such lower price per share.

     (i) Issuance of Rights or Options. In case at any time after
the Issue Date the Company shall in any manner grant (whether directly or
by assumption in a merger or otherwise), any rights to subscribe for or
to purchase, or any options or warrants for the purchase of, Common Stock
or any stock, notes or securities convertible into or exchangeable for
Common Stock (such convertible or exchangeable stock, notes or securities
being herein called “Convertible Securities”), whether or not such
rights, options or warrants or the right to convert or exchange any such
Convertible Securities are immediately exercisable, such grant shall be
deemed a sale by the Company of its Common Stock and the price per share
for such deemed sale of Common Stock shall be determined by dividing (A)
the total amount, if any, in cash or in property received or receivable
by the Company as consideration for the granting of such rights, options
or warrants, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of such
rights, options or warrants, plus, in the case of such rights, options or
warrants that relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, options or warrants or upon
the conversion or exchange of all such Convertible Securities issuable
upon the exercise of such rights, options or warrants. Except as
provided in Section 2(a)(iii), no further adjustment of the
Exercise Price shall be made upon the actual issue of such Common Stock
or of such Convertible Securities upon exercise of such rights, options
or warrants or upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities.

     (ii) Issuance of Convertible Securities. In case at any time
after the Issue Date the Company shall in any manner issue (whether
directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, such issuance or sale of
Convertible Securities shall be deemed a sale by the Company of its
Common Stock and the price per share for such Common Stock shall be
determined by dividing (A) the total amount received or receivable in
cash or in property by the Company as consideration for
the issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange
of all such Convertible Securities; provided, however,

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that
(I) except as otherwise provided in Section 2(a)(iii), no further
adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible
Securities, and (II) if any such issue or sale of such Convertible
Securities is made upon exercise of any rights to subscribe for or to
purchase or any option to purchase any such Convertible Securities for
which adjustments of the Exercise Price have been or are to be made
pursuant to other provisions of this Section 2(a), no further
adjustment of the Exercise Price shall be made by reason of such issue or
sale.

     (iii) Change in Option Price or Exercise Price. If the
purchase price provided for in any right or option referred to in
Section 2(a)(i), the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities referred to
in Section 2(a)(i) or 2(a)(ii), or the rate at which any
Convertible Securities referred to in Section 2(a)(i) or
2(a)(ii) are convertible into or exchangeable for Common Stock
shall change (other than under or by reason of provisions designed to
protect against dilution), the Exercise Price then in effect hereunder
shall forthwith be readjusted (increased or decreased, as the case may
be) to the Exercise Price that would have been in effect at such time had
such rights, options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold.
No readjustment pursuant to the preceding sentence shall have the effect
of increasing the Exercise Price by an amount in excess of the amount of
the adjustment thereof originally made in respect of the issue, sale,
grant or assumption of rights, options or Convertible Securities. On the
expiration of any such option or right referred to in Section
2(a)(i) or the termination of any such right to convert or exchange
any such Convertible Securities referred to in Section 2(a)(i) or
2(a)(ii), the Exercise Price then in effect hereunder shall
forthwith be readjusted (increased or decreased, as the case may be) to
the Exercise Price that would have been in effect at the time of such
expiration or termination had such right, option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination, never been granted, issued or sold. If the
purchase price provided for in any such right or option referred to in
Section 2(a)(i) or the rate at which any Convertible Securities
referred to in Section 2(a)(ii) are convertible into or
exchangeable for Common Stock shall be reduced at any time under or by
reason of provisions with respect thereto designed to protect against
dilution, then in case of the delivery of shares of Common Stock upon the
exercise of any such right or option or upon conversion or exchange of
any such Convertible Securities, the Exercise Price then in effect
hereunder shall, if not already adjusted, forthwith be adjusted to such
amount as would have obtained had such right, option or Convertible
Securities never been issued as to such shares of Common Stock and had
adjustments been made upon the issuance of the shares of Common Stock
delivered as aforesaid, but only if as a result of such adjustment the
Exercise Price then in effect hereunder is thereby reduced.

     (iv) Consideration for Stock. Anything herein to the
contrary notwithstanding, in case at any time any shares of Common Stock
or Convertible Securities or any rights, options or warrants to purchase
any such Common Stock or Convertible Securities shall be issued or sold
for cash, the consideration received therefor shall be deemed to be the
amount received by the Company therefor, without deduction therefrom of
any expenses

4

 

incurred or any underwriting commissions or concessions paid
or allowed by the Company in connection therewith.

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

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

     (vi)
   Adjustment to Determination of Exercise Price. When
making the calculations and determinations described in this Section
2(a), there shall not be taken into account

	(A)	 	the issuance of Common Stock upon the exercise of options or
warrants outstanding on the Issue Date;
	 
	(B)	 	the issuance of Common Stock upon the conversion of (I) any shares of convertible preferred stock of the Company outstanding on
the Issue Date, or (II) any shares of Series E Preferred Stock
issued pursuant to consummation of the transactions contemplated by the Redemption and Exchange Agreement,
or (III) any shares of preferred stock issued after the Issue Date as dividends upon shares of the Company’s preferred stock, or (IV) shares of Series E Preferred Stock pursuant to exercise of the
Series E Warrants;

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	(C)	 	the issuance of options to purchase Common Stock pursuant to
the Company’s Stock Incentive Plan;
	 
	(D)	 	the issuance of Common Stock pursuant to exercise of options
granted under the Company’s Stock Incentive Plan;
	 
	(E)	 	the issuance of options to purchase Common Stock under the
Company’s directors’ stock plan;
	 
	(F)	 	the issuance of Common Stock pursuant to exercise of options
granted under the Company’s directors’ stock plan;
	 
	(G)	 	the issuance of shares of preferred stock as dividends upon shares of the Company’s preferred stock;
	 
	(H)	 	the issuance of Series E Preferred Stock and Series E
Warrants pursuant to consummation of the transactions contemplated
by the Redemption and Exchange Agreement;
	 
	(I)	 	the issuance of Series E Preferred Stock pursuant to exercise
of the Series E Warrants;
	 
	(J)	 	the issuance of options or warrants after the Issue Date;
provided that (x) such options or warrants are granted as
compensation to consultants, employees or other providers of
services to the Company or its subsidiaries, or in connection with
employment of new employees of the Company or its subsidiaries, and
(y) the number of shares of Common Stock which are subject to such
options and warrants granted in any year shall be not exceed 500,000 shares); or
	 
	(L)	 	the issuance of Common Stock pursuant to exercise of any
warrant or option described in clause (J) preceding.

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

     (viii) Notice of Change in Exercise Price. The Company promptly
shall deliver to each registered Holder of Warrants at least five (5)
Business Days prior to effecting any transaction that would result in an
increase or decrease in the Exercise Price pursuant

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to this Section 2, a
statement, signed by its independent certified public accountants,
setting forth in reasonable detail the event requiring the adjustment and
the method by which such adjustment was calculated and specifying the
increased or decreased Exercise Price then in effect following such
adjustment.

     (b) Subdivision; Combination of Stock or Stock Dividends. In case
the Company shall at any time subdivide its outstanding shares of Common Stock
into a greater number of shares, by split or otherwise, or issue additional
shares of Common Stock as a dividend (except for any dividends described in
Subsection 2(a)(vi)(G)), the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and, conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, by reverse stock split or otherwise, the Exercise
Price in effect immediately prior to such combination shall be proportionately
increased.

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

	 	 	 	 	 	 	 	 	 
	E’

	 	=
	 	E
	 	x
	 	M    -    F
	

	 	 	 	 	 	 	 	M

	 	 	 	 	 	 	 
	

	 	where:	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	E’
	 	=
	 	the adjusted Exercise Price.
	 
	 	 	 	 	 	 
	

	 	E
	 	=
	 	the current Exercise Price.
	 
	 	 	 	 	 	 
	

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

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

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

     (d) Reorganization; Reclassification; Consolidation; Merger or Sale of
Assets. In case of (i) any capital reorganization or reclassification or
other change of outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), (ii) any consolidation or merger
of the Company with or into another Person (other than a consolidation or
merger in which the Company is the resulting or surviving Person and that does
not result in any

7

 

reclassification or change of outstanding Common Stock) or
(iii) transfer or sale of all or substantially all of the Company’s Assets to
another person (any of the foregoing, a “Transaction”), the Company, or
such successor or purchasing Person, as the case may be, shall execute and
deliver to the Holder of the Warrants evidenced hereby, at least five (5)
Business Days prior to effecting any of the foregoing Transactions, a
certificate that the Holder of each such Warrant then outstanding shall have
the right thereafter to exercise such Warrant into the kind and highest amount
of shares of stock or other securities (of the Company or another issuer) or
property or cash receivable upon such Transaction by a holder of the number of
shares of Common Stock into which such Warrant could have been exercised
immediately prior to such Transaction. Such certificate shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 2 and shall contain other terms
identical to the terms hereof. If, in the case of any such Transaction, the
stock, other securities, cash or property receivable thereupon by a holder of
Common Stock includes shares of stock or other securities of a Person other
than the successor or purchasing Persons and other than the Company, who
controls or is controlled by the successor or purchasing Person or who, in
connection with such Transaction, issues stock, securities, other property or
cash to holders of Common Stock, then such certificate also shall be executed
by such Person, and such Person shall, in such certificate, specifically assume
the obligations of such successor or purchasing Person and acknowledge its
obligations to issue such stock, securities, other property or cash to Holders
of the Warrants upon exercise thereof as provided above. The provisions of
this Section 2(c) similarly shall apply to successive
Transactions.

     (e) Upon the occurrence of each adjustment pursuant to this Section 2 the
Company, at its expense, will promptly calculate such adjustment in accordance
with the terms of this Warrant Certificate and prepare and deliver to each
Holder a certificate setting forth the calculation, including a statement of
the adjusted Exercise Price and adjusted number of shares of Common Stock
issuable upon exercise of each Warrant (as applicable), and describing the
transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based.

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

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liquidation or winding up is expected to become effective. Such
notice also shall specify the date as of which it is expected that the holders
of Common Stock of record shall be entitled to exchange their Common Stock for
shares of stock or other securities or property or cash deliverable upon such
reorganization, reclassification, consolidation, merger, sale, disposition,
dissolution, liquidation or winding up.

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

     The Company or, if appointed, the Transfer Agent for the Common Stock and
every subsequent transfer agent for any shares of the Company’s capital stock
issuable upon the exercise of any of the rights of purchase aforesaid will be
irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be required for such purpose. At all times prior to
the earlier of the Warrant Expiration Date or the exercise of this Warrant
Certificate in full the Company will keep a copy of this Warrant Certificate on
file with the Transfer Agent and with every subsequent transfer agent for any
shares of the Company’s capital stock issuable upon the exercise of the rights
of purchase represented by the Warrants.

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

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

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

     Section 6. Transfer of Warrants. Any transfer of the
rights represented by this Warrant Certificate shall be effected by the
surrender of this Warrant Certificate, along with the form of assignment
attached hereto, properly completed and executed by the Holder hereof, at the
principal executive office of the Company in the United States of America.
Thereupon, the Company shall issue in the name or names specified by the
registered Holder hereof and, in the event of a partial transfer, in the name
of the registered Holder hereof, a new Warrant Certificate

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or Certificates
evidencing the right to purchase such number of shares of Common Stock as shall
be equal to the number of shares of Common Stock then purchasable
hereunder.

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

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

Said legend shall be removed by the Company, upon the request of the holder of
such shares, at such time as the restrictions on the transfer of the applicable
security under applicable securities laws shall have terminated.

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

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

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

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     Section 11. Rights Inure to Registered Holder. The
Warrants evidenced by this Warrant Certificate will inure to the benefit of and
be binding upon the registered Holder hereof and the Company and their
respective successors and permitted assigns. Nothing in this Warrant
Certificate shall be construed to give to any Person other than the Company and
the registered Holder and their respective successors and permitted assigns any
legal or equitable right, remedy or claim under this Warrant Certificate, and
this Warrant Certificate shall be for the sole and exclusive benefit of the
Company and such registered Holder.

     Section 12. Notice. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing and
shall be given by registered or certified first-class mail, return receipt
requested, nationally recognized overnight delivery service or personal
delivery,

     (a) if to the Holder, at the Holder’s last known address appearing
on the books of the Company; and

     (b) if to the Company, at its principal executive office in the
United States located at the address designated for notices in the
Securities Purchase Agreement,

or such other address as shall have been furnished to the party given or making
such notice, demand or other communication. All such notices and
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; when delivered if delivered by a nationally recognized
overnight delivery service; and five (5) Business Days after being deposited in
the mail, as aforesaid, postage prepaid, if mailed.

     Section 13. Amendments. This Warrant Certificate may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the Holder hereof.

     Section 14. Holder Not a Stockholder; Limitation of
Liability. The Warrants do not confer upon the Holder any right to vote or
to consent as a stockholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a stockholder, prior to the
exercise hereof as hereinbefore provided. No provision hereof, in the absense
of affirmative action by the Holder to purchase Common Stock, and to
enumeration herein of the rights or privileges of the Holder shall give rise to
any liability of such Holder for
the Exercise Price of Common Stock acquirable by exercise hereof or as a
stockholder of the Company.

     Section 15. Definitions. For the purposes of this Warrant
Certificate, the following terms shall have the meanings indicated
below:

     “Business Day” means any day other than a Saturday, Sunday or other
day on which commercial banks in the City of Chicago are authorized or required
by law or executive order to close.

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

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

11

 

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

     “Holder” shall mean the registered holder of this Warrant
Certificate, as reflected on the books of the Company at the relevant time.

     “Issue Date” shall mean March 19, 2004.

     “Market Price” means the last reported sale price of the applicable
security as reported by (i) The American Stock Exchange or the National
Association of Securities Dealers, Inc. Automatic Quotations System, (ii) if
the applicable security is listed or admitted for trading on another securities
exchange, the last reported sales price of the applicable security on the
principal exchange on which the applicable security is listed or admitted for
trading (which shall be for consolidated trading if applicable to such
exchange), (iii) if neither so reported or listed or admitted for trading, the
last reported bid price of the applicable security by the OTC Bulletin Board,
or (iv) if the applicable security is not quoted on any such market, listed on
any such exchange or quoted on the OTC Bulletin Board, then the last price
quoted on such day as reported on the “pink sheets” by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding its
functions of reporting prices). In the event that the Market Price cannot be
determined as aforesaid, the Board of Directors of the Company shall determine
the Market Price on the basis of such quotations as it in good faith considers
appropriate, in consultation with a nationally recognized investment bank. The
Market Price shall be such price averaged over a period of ten (10) consecutive
Business Days ending two (2) days prior to the day as of which “Market Price”
is being determined.

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

     “Redemption and Exchange Agreement” means that certain Redemption
and Exchange Agreement, dated as of March 19, 2004, by and among the Company
and the Persons referred to as Participating Investors therein, as the same may
be amended, modified or otherwise supplemented from time to time in accordance
with its terms.

     “Securities Purchase Agreement” means that certain Securities
Purchase Agreement, dated as of March 19, 2004, by and among the Company and
the Persons referred to as Purchasers therein, as the same may be amended,
modified or otherwise supplemented from time to time in accordance with its
terms.

     “Series E Preferred Stock” shall have the meaning given such term
in the Redemption and Exchange Agreement.

     “Series E Warrants” shall have the meaning given such term in the
Redemption and Exchange Agreement.

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

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

12

 

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

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

     “Warrant Expiration Date” means March 19, 2009.

[SIGNATURE PAGE FOLLOWS]

13

 

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

	 	 	 	 	 
	 	 	COMPANY
	 
	 	 	 	 
	 	 	ELECTRIC CITY CORP.,
	 	 	a Delaware corporation
	 
	 	 	 	 
	

	 	By:
	 	Jeffrey Mistarz
	

	 	 	 	

	 	 	Name: Jeffrey Mistarz
	 	 	Title: Chief Financial Officer and Treasurer

ATTEST:

Andrew Connor

14

 

Form of Assignment Form

[To be executed upon assignment of Warrants]

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

	 	 	 	 
	

	 	 	Signature:
	 
	 	 	 
	

	 	 	

	

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

	 	 	Signature Guarantee:
	 
	 	 	 
	

	 	 	

	Date:

	
	 	 

 

(EXERCISE NOTICE TO BE EXECUTED UPON EXERCISE OF

SOME OR ALL OF THE WARRANTS)

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

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

	 	 	 	 
	

	 	 	

(Name)
	 
	 	 	 
	

	 	 	

	

	 	 	(Address)
	 
	 	 	 
	

	 	 	

	

	 	 	SIGNATURE
	 
	 	 	 
	Dated:

	
	 	 

          Deliver shares of Common Stock issuable upon exercise of the Warrants to
the following DTC account through the DWAC system:
                             .

          Deliver certificates representing shares of Common Stock issuable upon
exercise of the Warrants in the name of, and to the following person at the
following address:

	 	 	 	 
	 	Name:

	
	 
	 
	 	Address:exv4w5

 

Exhibit 4.5

CERTIFICATE OF DESIGNATIONS, PREFERENCES

AND RELATIVE, PARTICIPATING, OPTIONAL AND

OTHER SPECIAL RIGHTS OF PREFERRED STOCK

AND QUALIFICATIONS, LIMITATIONS

AND RESTRICTIONS THEREOF

OF

SERIES E CONVERTIBLE

PREFERRED STOCK

OF

ELECTRIC CITY CORP.

PURSUANT TO SECTION 151 OF THE

GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

     Electric City Corp., a Delaware corporation (the “Corporation”), certifies
that pursuant to the authority contained in Article 4 of its Certificate of
Incorporation, as amended (the “Certificate of Incorporation”) and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Corporation at a meeting
called and held on March 12, 2004 adopted the following resolution, which
remains in full force and effect on the date hereof:

RESOLVED, that there is hereby established a series of
authorized preferred stock having a par value of $.01 per
share, which series shall be designated as “Series E
Convertible Preferred Stock,” shall consist of 300,000 shares and shall have the following voting powers,
preferences and relative, participating, optional and other
special rights, and qualifications, limitations and
restrictions thereof as follows:

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

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

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

     “By-laws” means the by-laws of the Corporation.

 

 

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

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

     “Common Stock” means the Corporation’s authorized common stock, par value
$.0001 per share.

     “Conversion Date” shall have the meaning set forth in Section 7(c) hereof.

     “Conversion Price” shall have the meaning set forth in Section 7(a)
hereof.

     “Conversion Shares” shall have the meaning set forth in Section 7(a)
hereof.

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

     “Dividend Payment Date” shall have the meaning set forth in Section 3(a)
hereof.

     “Dividend Rate” shall have the meaning set forth in Section 3(a) hereof.

     “Dividend Record Date” shall have the meaning set forth in Section 3(a)
hereof.

     “Junior Stock” shall have the meaning set forth in Section 3(b) hereof.

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

 

 

     “Market Price” shall have the meaning set forth in Section 7(e)(vi)
hereof.

     “Notice of Redemption” shall have the meaning set forth in Section 5(c)
hereof.

     “Parity Stock” means any class or series of stock of the Corporation
authorized after the date of issuance of the Series E Preferred Stock in
accordance with Section 6(e) hereof ranking on a parity with the Series E
Preferred Stock in respect of the right to receive dividends or the right to
participate in any distribution upon liquidation.

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

     “Purchase Rights” shall have the meaning set forth in Section 7(f)(ii)
hereof.

     “Redemption Date” shall have the meaning set forth in Section 5(c) hereof.

     “Redemption Price” shall have the meaning set forth in Section 5(b)
hereof.

     “Redemption and Exchange Agreement” means that certain Redemption and
Exchange Agreement dated as of March 19, 2004 by and among the Corporation and
certain investors party thereto, as the same may be amended, restated, modified
or supplemented from time to time.

     “Senior Stock” means any class or series of stock of the Corporation
authorized after the date of issuance of the Series E Preferred Stock in
accordance with Section 6(e) hereof ranking senior to the Series E Preferred
Stock in respect of the right to receive dividends or the right to participate
in any distribution upon liquidation.

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

     “Series E Preferred Stock Issue Date” means the date of the Closing (as
defined therein) under the Redemption and Exchange Agreement.

     “Stated Value” shall have the meaning set forth in Section 2 hereof.

     2. Designation and Amount. The designation of the series of the Preferred
Stock shall be “Series E Convertible Preferred Stock,” par value $0.01 per
share (the “Series E Preferred Stock”). The number of shares of Series E
Preferred Stock shall be 300,000. The Series E Preferred Stock shall be
assigned a stated value of $100.00 per share (as adjusted for stock splits,
stock combinations, recapitalizations and the like, the “Stated Value”).

     3. Dividends.

               (a) Rate, etc. The holders of shares of Series E Preferred Stock shall be
entitled to receive, when and if declared by the Board of Directors out of
funds legally available therefor, cumulative dividends from the date of issue
thereof, on the Stated Value plus any accrued but unpaid dividends, at an
annual rate equal to six percent (6%) (the “Dividend Rate”). Dividends
hereunder shall be calculated on the basis of a 360-day year consisting of

 

 

twelve 30-day months, accruing and payable quarterly, in arrears, on the
last day in March, June, September and December of each year (each a “Dividend
Payment Date”), commencing on March 31, 2004 until such time as the Series E
Preferred Stock is retired in full; provided, however, that with respect to
such first Dividend Payment Date, the holders of shares of Series E Preferred
Stock shall be entitled to receive, when and if declared by the Board of
Directors out of funds legally available therefor, a cumulative dividend in
respect of each share of Series E Preferred Stock in the amount of (i) $1.50
multiplied by (ii) a fraction equal to (A) the number of days from (and
including) the date of the Series E Preferred Stock Issue Date to (but
excluding) such Dividend Payment Date divided by (B) 90. If any Dividend
Payment Date occurs on a day that is not a Business Day, any accrued dividends
otherwise payable on such Dividend Payment Date shall be paid on the next
succeeding Business Day with the same effect as though made on such Dividend
Payment Date. Dividends on the Series E Preferred Stock may be paid in cash or
additional shares of Series E Preferred Stock at the sole discretion of the
Board. The cash equivalent of a share of Series E Preferred Stock shall be the
Stated Value. Dividends shall accrue and be cumulative with respect to each
share of Series E Preferred Stock from the date of original issuance whether or
not earned or declared. Except as otherwise required by law, the “Dividend
Record Date” with respect to the next succeeding Dividend Payment Date shall be
the date ten (10) Business Days prior to such Dividend Payment Date. Upon
conversion of any shares of Series E Preferred Stock, dividends shall be paid
as provided in Section 7 hereof.

               (b) Rank, etc. Unless full dividends, if applicable, on all outstanding
shares of Series E Preferred Stock that have previously become due and payable,
have been paid or are contemporaneously declared and paid (or declared and a
sum sufficient for the payment thereof is set apart for such payment), the
Corporation shall not (i) declare or pay any dividend on (A) the Series E
Preferred Stock, except if such dividend is allocated pro rata on a
share-by-share basis among all shares of Series E Preferred Stock at that time
outstanding, (B) any other class of Parity Stock, except if such dividend is
allocated pro rata on a share-by-share basis among all shares of Series E
Preferred Stock and any other class of Parity Stock at that time outstanding
taken together as a class, (C) the Common Stock or (D) on any other class or
series of stock ranking junior to the Series E Preferred Stock as to dividends
or upon liquidation (the Common Stock and any such junior class or series being
the “Junior Stock”) or make any payment on account of, or set apart money for,
a sinking or other analogous fund for the purchase, redemption or other
retirement of, any Parity Stock or Junior Stock or make any distribution in
respect thereof, either directly or indirectly and whether in cash or property
or in obligations or shares of the Corporation or (ii) purchase or redeem any
of the shares of Series E Preferred Stock, unless such purchase or redemption
is pursuant to Section 5 or Section 6(e)(i)(D), or purchase or redeem any
shares of Parity Stock or Junior Stock then outstanding, unless such purchase
or redemption is approved in accordance with Section 6(e) hereof. If any
dividend is paid on the Common Stock, the holders of shares of Series E
Preferred Stock shall be entitled to receive, in addition to dividends as
provided in Section 3(a) hereof, additional dividends to the extent necessary
so that the aggregate additional dividends paid on Series E Preferred Stock
from the issue date thereof shall not be less than the aggregate dividends paid
on Common Stock during the corresponding period.

 

 

     4. Liquidation.

               (a) Preference Upon Liquidation, Dissolution or Winding Up. In the event
of any liquidation, dissolution or winding up of the affairs of the Corporation
(any or all of such events, a “liquidation”), whether voluntary or involuntary,
subject to the prior preferences and other rights of any Senior Stock, if any,
as to liquidation preferences, the holders of shares of Series E Preferred
Stock then outstanding shall be entitled first as if members of a single class
of securities with the holders of any Parity Stock, if any, to be paid out of
the assets of the Corporation, before any payment shall be made to the holders
of the Junior Stock, the Liquidation Amount per outstanding share. Except as
provided in this Section 4(a), holders of Series E Preferred Stock shall not be
entitled to any distribution in the event of a liquidation.

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

               (c) Rights of Other Holders. In the event of any liquidation, dissolution
or winding up of the affairs of the Corporation, after payment shall have been
made to the holders of the Series E Preferred Stock and Parity Stock, if any,
of all preferential amounts to which they shall be entitled pursuant to
Sections 4(a) and (b), the holders of shares of Junior Stock shall receive such
amounts as to which they are entitled by the terms thereof.

     5. Redemption.

               (a) Mandatory Redemption. The Series E Preferred Stock shall not be
subject to mandatory redemption by the Corporation.

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

               (c) Mechanics of Redemption. To effect a redemption under Section 5(b), a
notice of redemption (“Notice of Redemption”) shall be sent by or on behalf of
the Corporation not less than fifteen (15) Business Days nor more than thirty
(30) days prior to the

 

 

date specified for redemption in such notice (the “Redemption Date”), by
first class mail, postage prepaid, to all holders of record of the Series E
Preferred Stock at their last addresses as they shall appear on the books of
the Corporation; provided, however, that no failure to give such notice or any
defect therein or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any shares of Series E Preferred Stock except
as to the holder to whom the Corporation has failed to give notice or except as
to the holder to whom notice was defective. In addition to any information
required by law or by the applicable rules of any exchange upon which the
Series E Preferred Stock or the Common Stock may be listed or admitted to
trading, such notice shall state: (i) that such redemption is being made
pursuant to the optional redemption provisions hereof; (ii) the Redemption
Date; (iii) a description of the formula for calculating the Redemption Price
and the estimated amount of the Redemption Price by component as of the date of
the Notice of Redemption; (iv) that all the outstanding shares of Series E
Preferred Stock are to be redeemed; (v) the place or places where certificates
for such shares are to be surrendered for payment of the Redemption Price; and
(vi) that dividends on the shares of Series E Preferred Stock will cease to
accumulate on the Redemption Date. Upon the mailing of any such Notice of
Redemption, the Corporation shall become obligated to redeem at the time of
redemption specified therein all outstanding shares of Series E Preferred
Stock.

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

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

     6. Voting Rights.

               (a) General. Except as to the election of directors and as to any special
approvals required under Section 6(e), as to which Sections 6(b)-(f) shall
apply to the exclusion of any voting rights under this Section 6(a), the holder
of record of each share of Series E Preferred Stock shall have the right to one
vote for each share of Common Stock into which such share of Series E Preferred
Stock could then be converted, and with respect to such vote, such holder of
record shall have full voting rights and powers equal to the voting rights and

 

 

powers of the holders of Common Stock, and shall be entitled to notice of
any stockholders’ meeting in accordance with the By-laws of the Corporation,
and shall be entitled to vote together with the holders of Common Stock as a
single class, with respect to any question upon which holders of record of
Common Stock have the right to vote, except as otherwise required by applicable
law. Fractional votes shall not, however, be permitted and any fractional
voting rights available on an as-converted basis (after aggregating all shares
into which shares of Series E Preferred Stock held by each holder of record
could be converted) shall be rounded to the nearest whole number (with one-half
being rounded upward).

               (b) Election of Directors.

                    (i) For so long as the aggregate number of issued and outstanding shares
of Series E Preferred Stock is at least 90,000 shares (as adjusted for stock
splits, stock combinations, recapitalizations and the like), the holders of
record of the outstanding shares of Series E Preferred Stock, voting as a
single class to the exclusion of all other classes of the Corporation’s capital
stock, and with each share of Series E Preferred Stock entitled to one (1) vote
per share, shall be entitled to elect four (4) directors of the Board of
Directors of the Corporation and shall not otherwise be permitted to vote with
the holders of record of Common Stock as to the election of directors of the
Corporation. If the holders of record of the Series E Preferred Stock for any
reason fail to elect anyone to fill any such directorship, such position shall
remain vacant until such time as the holders of record of the Series E
Preferred Stock elect a director to fill such position, and shall not be filled
by resolution or vote of the Corporation’s Board of Directors or the
Corporation’s other stockholders.

                    (ii) For so long as the aggregate number of issued and outstanding shares
of Series E Preferred Stock is at least 65,000 shares but less than 90,000
shares (as adjusted for stock splits, stock combinations, recapitalizations and
the like), the holders of record of the outstanding shares of Series E
Preferred Stock, voting as a single class to the exclusion of all other classes
of the Corporation’s capital stock, and with each share of Series E Preferred
Stock entitled to one (1) vote per share, shall be entitled to elect three (3)
directors of the Board of Directors of the Corporation and shall not otherwise
be permitted to vote with the holders of record of Common Stock as to the
election of directors of the Corporation. If the holders of record of the
Series E Preferred Stock for any reason fail to elect anyone to fill any such
directorship, such position shall remain vacant until such time as the holders
of record of the Series E Preferred Stock elect a director to fill such
position, and shall not be filled by resolution or vote of the Corporation’s
Board of Directors or the Corporation’s other stockholders.

                    (iii) For so long as the aggregate number of issued and outstanding shares
of Series E Preferred Stock is at least 45,000 shares but less than 65,000
shares (as adjusted for stock splits, stock combinations, recapitalizations and
the like), the holders of record of the outstanding shares of Series E
Preferred Stock, voting as a single class to the exclusion of all other classes
of the Corporation’s capital stock, and with each share of Series E Preferred
Stock entitled to one (1) vote per share, shall be entitled to elect two (2)
directors of the Board of Directors of the Corporation and shall not otherwise
be permitted to vote with the holders of record of Common Stock as to the
election of directors of the Corporation. If the holders of record of the
Series E Preferred Stock for any reason fail to elect anyone to fill any

 

 

such directorship, such position shall remain vacant until such time as
the holders of record of the Series E Preferred Stock elect a director to fill
such position, and shall not be filled by resolution or vote of the
Corporation’s Board of Directors or the Corporation’s other stockholders.

                    (iv) For so long as the aggregate number of issued and outstanding shares
of Series E Preferred Stock is at least 20,000 shares but less than 45,000
shares (as adjusted for stock splits, stock combinations, recapitalizations and
the like), the holders of record of the outstanding shares of Series E
Preferred Stock, voting as a single class to the exclusion of all other classes
of the Corporation’s capital stock, and with each share of Series E Preferred
Stock entitled to one (1) vote per share, shall be entitled to elect one (1)
director of the Board of Directors of the Corporation and shall not otherwise
be permitted to vote with the holders of record of Common Stock as to the
election of directors of the Corporation. If the holders of record of the
Series E Preferred Stock for any reason fail to elect anyone to fill any such
directorship, such position shall remain vacant until such time as the holders
of record of the Series E Preferred Stock elect a director to fill such
position, and shall not be filled by resolution or vote of the Corporation’s
Board of Directors or the Corporation’s other stockholders.

                    (v) If less than 20,000 shares of the Series E Preferred Stock in the
aggregate remain issued and outstanding (as adjusted for stock splits, stock
combinations, recapitalizations and the like), each holder of record of the
outstanding shares of Series E Preferred Stock shall have the right to one vote
for each share of Common Stock into which such share of Series E Preferred
Stock could then be converted, and with respect to such vote, such holder of
record shall have full voting rights and powers equal to the voting rights and
powers of the holders of Common Stock, and shall be entitled to notice of any
stockholders’ meeting in accordance with law and the By-laws of the
Corporation, and shall be entitled to vote together with holders of Common
Stock as a single class, with respect to the election of directors. Fractional
votes shall not, however, be permitted and any fractional voting rights
available on an as-converted basis (after aggregating all shares into which
shares of Series E Preferred Stock held by each holder of record could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).

               The rights granted pursuant to Section 6(b)(i)-(iv) may be exercised by
written consent of the holders of Series E Preferred Stock, at a special
meeting of the holders of Series E Preferred Stock called as provided for in
Section 6(c), or at any annual meeting of stockholders held for the purpose of
electing directors.

               (c) Vacancies. If any director so elected by the holders of the Series E
Preferred Stock shall cease to serve as a director before his or her term shall
have expired, the holders of Series E Preferred Stock then outstanding, voting
as a single class, by the written consent of the holders of Series E Preferred
Stock or at a special meeting of the holders of Series E Preferred Stock, may
elect the successor to hold such office. A special meeting of the holders of
Series E Preferred Stock may be called for upon the written request of the
holders of record of more than fifty percent (50%) of the aggregate number of
shares of Series E Preferred Stock then outstanding, addressed to the Secretary
of the Corporation. Thereafter, a proper officer of the Corporation shall call
a special meeting of the holders of Series E Preferred Stock, which shall

 

 

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

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

               (e) Special Approval Rights.

                    (i) For so long as any shares of Series E Preferred Stock remain issued
and outstanding, the Corporation shall not, without the affirmative written
consent or approval of the holders of record representing 75% or more of the
aggregate number of shares of Series E Preferred Stock then outstanding, voting
as a single class to the exclusion of all other classes of the Corporation’s
capital stock (such consent or approval to be given by written consent in lieu
of a meeting if allowable under the Corporation’s Certificate of Incorporation
or by vote at a meeting called for such purpose for which notice shall have
been given to the holders of the Series E Preferred Stock): (A) enter into any
agreement that would restrict the Corporation’s ability to perform under the
Redemption and Exchange Agreement; (B) amend its Certificate of Incorporation
(including this resolution) or By-laws in any way that could adversely affect,
alter or change the rights, powers or preferences of the Series E Preferred
Stock, through merger, consolidation, recapitalization, reclassification or
otherwise; (C) engage in any transaction that would directly impair or reduce
the rights, powers or preferences of the Series E Preferred Stock as a class;
(D) complete any Change of Control Transaction (provided that if the aggregate
number of shares of the Series E Preferred Stock outstanding is less than
45,000 (as adjusted for stock splits, stock combinations, recapitalizations and
the like) and the then holders of Series E Preferred Stock refuse to consent to
such Change of Control Transaction pursuant to this Section 6(e)(i), the
Corporation may, at its option, redeem all, but not less than all, of such
outstanding shares of Series E Preferred Stock in connection with the
completion of such Change of Control Transaction at a redemption price per
share equal to the Liquidation Amount, in accordance with the procedures set
forth in Sections 5(c)-(e) above; but provided further, that

 

 

any such redemption shall be made subject to, and expressly conditioned
upon, the consummation of the proposed Change of Control Transaction; or (E)
change the authorized number of directors of the Board of Directors of the
Corporation, except pursuant to Section 6(f).

                    (ii) For so long as the aggregate number of issued and outstanding shares
of Series E Preferred Stock is at least 90,000 shares (as adjusted for stock
splits, stock combinations, recapitalizations and the like), the Corporation
shall not, without the affirmative written consent or approval of the holders
of record of shares of Series E Preferred Stock representing at least 66-2/3%
of the aggregate number of shares of Series E Preferred Stock then outstanding,
voting as a single class to the exclusion of all other classes of the
Corporation’s capital stock (such consent or approval to be given by written
consent in lieu of a meeting if allowable under the Corporation’s Certificate
of Incorporation or by vote at a meeting called for such purpose for which
notice shall have been given to the holders of the Series E Preferred Stock):
(A) authorize or issue any Senior Stock or Parity Stock or any securities
convertible, exercisable or exchangeable into such securities, other than (x)
the Series E Preferred Stock Warrants (as defined in the Redemption and
Exchange Agreement), (y) Series E Preferred Stock issued upon exercise of such
Series E Preferred Stock Warrants, or (z) Series E Preferred Stock issued as
payment in kind of any accrued but unpaid dividends on the Series E Preferred
Stock; (B) enter into any agreement or amendment with respect to any
outstanding options, rights or warrants to purchase capital stock of the
Corporation that reduces or that has the effect of reducing the per share
exercise price for any such options, rights or warrants; (C) authorize or issue
any debt securities of the Corporation or any of its subsidiaries, other than
debt under the existing credit facilities in effect as of March 12, 2004 (which
is the date of adoption of this resolution) or the replacement thereof on
substantially similar terms, and any additional debt up to $1,000,000 in the
aggregate issued or incurred in the ordinary course of business (excluding from
the meaning of the term “debt” for this provision trade payables incurred in
the ordinary course of business); (D) purchase, redeem, or otherwise acquire
any of the Corporation’s capital stock, other than the redemptions contemplated
by the Redemption and Exchange Agreement and other than the redemption of the
Series E Preferred Stock pursuant to Section 5 or Section 6(e)(i)(D) hereof;
(E) enter into an acquisition, sale, merger, joint venture, consolidation or
reorganization involving the Corporation or any of its subsidiaries; (F) sell
or lease assets of the Corporation or any of its subsidiaries, except in the
ordinary course of business; (G) declare or pay any cash dividends or make any
distributions on any of its capital stock, other than on the Series E Preferred
Stock; (H) authorize the payment or pay to any individual employee of the
Corporation of cash compensation in excess of $500,000 per annum; or (I) enter
into any transaction (or series of transactions), including loans, with any
employee, officer or director of the Corporation or to or with his, her or its
affiliates or family members (other than with respect to payment of
compensation to actual full-time employees in the ordinary course of business)
involving $50,000 or more per year individually or $250,000 or more per year in
the aggregate.

                    (iii) For so long as the aggregate number of issued and outstanding shares
of Series E Preferred Stock is at least 130,000 shares (as adjusted for stock
splits, stock combinations, recapitalizations and the like), the Corporation
shall not, without the affirmative written consent or approval of the holders
of record of shares of Series E Preferred Stock representing at least 66-2/3%
of the aggregate number of shares of Series E Preferred Stock then outstanding,
voting as a single class to the exclusion of all other classes of the

 

 

Corporation’s capital stock (such consent or approval to be given by
written consent in lieu of a meeting if allowable under the Corporation’s
Certificate of Incorporation or by vote at a meeting called for such purpose
for which notice shall have been given to the holders of the Series E Preferred
Stock): (A) terminate or newly appoint the chief executive officer of the
Corporation; (B) approve any annual capital expense budget if such budget
provides for annual capital expenditures by the Corporation and its
subsidiaries in excess of $1,000,000 in the aggregate in any year; or (C)
approve the incurrence of any single capital expenditure (or series of related
capital expenditures) in excess of $500,000; provided, however, the Corporation
may make any reasonable emergency capital expenditure that the Board of
Directors determines is necessary to maintain the operations of the Corporation
as a result of a catastrophic event.

Notwithstanding any other provision in this Certificate of Designations, (I)
upon the consent or approval of holders of record of shares representing at
least 75% of the aggregate shares of Series E Preferred Stock then outstanding,
voting as a single class, with respect to Section 6(e)(i) and at least 66-2/3%
of the aggregate shares of Series E Preferred Stock then outstanding, voting as
a single class, with respect to Sections 6(e)(ii) and 6(e)(iii) and (II) with
such other votes or consents as may be required by Delaware law, the rules and
regulations of the Securities and Exchange Commission, the regulations of the
American Stock Exchange or other securities exchange applicable to the
Corporation or pursuant to the Corporation’s Certificate of Incorporation, the
Corporation may take any such action referenced in this Section 6(e).

               (f) Violation of Special Approval Rights. If the Corporation takes any
action without first obtaining the requisite approval of the holders of record
of the Series E Preferred Stock pursuant to any of the special approval rights
set forth in Section 6(e) (each, an “Event of Default”) it shall provide notice
of such violation to all holders of Series E Preferred Stock. Any holder of
Series E Preferred Stock may send written notice of any Event of Default,
whether or not the Corporation gave notice pursuant to the preceding sentence,
to the Secretary of the Corporation and demand that such Event of Default be
cured within ten (10) days of the Corporation’s receipt of such notice (or,
solely in the case of the first such Event of Default, within thirty (30) days
of the Corporation’s receipt of such notice). If the Corporation does not cure
such Event of Default within such ten-day or thirty-day period, as applicable,
by obtaining the required consent of holders of the aggregate shares of
outstanding Series E Preferred Stock, then, in addition to any rights and
remedies which may be available in equity or at law to the holders of the
Series E Preferred Stock, (i) the holders of record of the shares of Series E
Preferred Stock then outstanding (in addition to their rights to vote, as a
single class, to elect directors pursuant to Section 6(b)) shall be entitled to
vote, as a single class to the exclusion of all other classes of the
Corporation’s capital stock, to elect that number of additional directors of
the Board so that, when such additional number of directors is added to the
number of directors then elected to the Board of Directors by the holders of
record of the Series E Preferred Stock pursuant to Section 6(b), that sum shall
constitute a majority of the total number of directors of the Corporation’s
Board of Directors, and (ii) in connection therewith, the authorized number of
directors of the Corporation’s Board of Directors shall be immediately and
automatically increased by such number of additional directors. The term of
office of all directors so elected pursuant to this Section 6(f) shall
terminate immediately when the aggregate number of issued and outstanding
shares of Series E Preferred Stock is less than 20,000 shares (as adjusted for
stock splits, stock combinations, recapitalizations and the like). The rights
granted pursuant to this Section 6(f) may be exercised by written consent of
the holders of Series E Preferred Stock,

 

 

at a special meeting of the holders of Series E Preferred Stock, called as
provided for in Section 6(c), or at any annual meeting of stockholders held for
the purpose of electing directors. If any director elected by the holders of
the Series E Preferred Stock pursuant to this Section 6(f) shall cease to serve
as a director before his or her term shall have expired, any such vacancy shall
be filled solely in the manner set forth in Section 6(c). Any director elected
by the holders of the Series E Preferred Stock pursuant to this Section 6(f)
may be removed during such director’s term of office solely in the manner set
forth in Section 6(d).

     7. Conversion Rights.

               (a) Optional Conversion of Series E Preferred Stock. The holder of any
shares of Series E Preferred Stock shall have the right, at such holder’s
option, at any time or from time to time to convert any or all of such holder’s
shares of Series E Preferred Stock into such number of fully paid and
nonassessable shares of Common Stock (the “Conversion Shares”) as determined
for each share of Series E Preferred Stock by dividing the Stated Value by the
“Conversion Price” in effect at the time of such conversion. The initial
“Conversion Price” shall be $1.00 (One Dollar). The Conversion Shares and the
Conversion Price are subject to certain adjustments as set forth herein, and
the terms Conversion Shares and Conversion Price as used herein shall as of any
time be deemed to include all such adjustments to be given effect as of such
time in accordance with the terms hereof; provided, that under no circumstances
shall the Conversion Price be reduced to a level that is less than the par
value of the Common Stock.

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

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

 

 

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

               (d) No Fractional Shares of Common Stock.

                    (i) No fractional shares of Common Stock shall be issued upon conversion
of shares of Series E Preferred Stock and in lieu thereof, the Corporation
shall pay a cash adjustment in respect of such fractional interest in an amount
equal to the then current Market Price (as defined in Section 7(e)(vi) below)
of a share of Common Stock multiplied by such fractional interest. The holders
of fractional interests shall not be entitled to any rights as

 

 

stockholders of the Corporation in respect of such fractional interests.
In determining the number of shares of Common Stock and the payment, if any, in
lieu of fractional shares that a holder of Series E Preferred Stock shall
receive, the total number of shares of Series E Preferred Stock such holder
which are being converted shall be aggregated.

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

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

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

                    (i) Issuance of Rights or Options. In case at any time after the Series
E Preferred Stock Issue Date the Corporation shall in any manner grant (whether
directly or by assumption in a merger or otherwise, except in the circumstances
described in Section 7(f) below) any rights to subscribe for or to purchase, or
any options or warrants for the purchase of, Common Stock or any stock, notes
or securities convertible into or exchangeable for Common Stock, excluding (x)
the Series E Preferred Stock Warrants (as defined in the Redemption and
Exchange Agreement), (y) any Series E Preferred Stock issued upon exercise of
such Series E Preferred Stock Warrants, or (z) Series E Preferred Stock issued
as payment in kind of any accrued but unpaid dividends on the Series E
Preferred Stock, (such convertible or exchangeable stock, notes or securities
being herein called “Convertible Securities”), whether or not such rights,
options or warrants or the right to convert or exchange any such Convertible
Securities are immediately exercisable, such grant shall be deemed a sale by
the Corporation of its Common Stock and the price per share for such deemed
sale of Common Stock shall be determined by dividing (A) the total amount, if
any, in cash or property received or receivable by the Corporation as
consideration for the granting of such rights, options or warrants, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the exercise of such rights, options or warrants, plus, in the
case of such rights, options or warrants that relate to Convertible Securities,
the minimum aggregate amount of additional consideration, if any, payable upon
the issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, options or warrants or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights, options or warrants.

 

 

Except as provided in Section 7(e)(iii), no further adjustment of the
Conversion Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such rights, options or warrants
or upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities.

                    (ii) Issuance of Convertible Securities. In case at any time after the
Series E Preferred Stock Issue Date the Corporation shall in any manner issue
(whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, such issuance or sale of Convertible
Securities shall be deemed to be a sale by the Corporation of its Common Stock
and the price per share for such Common Stock shall be determined by dividing
(A) the total amount in cash or in property received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities; provided, however, that (I)
except as otherwise provided in Section 7(e)(iii), no further adjustment of the
Conversion Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities, and (II) if any such
issue or sale of such Convertible Securities is made upon exercise of any
rights to subscribe for or to purchase or any option to purchase any such
Convertible Securities for which adjustments of the Conversion Price have been
or are to be made pursuant to other provisions of this Section 7(e), no further
adjustment of the Conversion Price shall be made by reason of such issue or
sale.

                    (iii) Change in Option Price or Conversion Price. If the purchase price
provided for in any right or option referred to in Section 7(e)(i), the
additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in Section 7(e)(i) or 7(e)(ii), or the
rate at which any Convertible Securities referred to in Section 7(e)(i) or
7(e)(ii) are convertible into or exchangeable for Common Stock shall change
(other than under or by reason of provisions designed to protect against
dilution), the Conversion Price then in effect hereunder shall forthwith be
readjusted (increased or decreased, as the case may be) to the Conversion Price
that would have been in effect at such time had such rights, options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold. No readjustment pursuant to the
preceding sentence shall have the effect of increasing the Conversion Price by
an amount in excess of the amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of rights, options or
Convertible Securities. On the expiration of any such option or right referred
to in Section 7(e)(i) or the termination of any such right to convert or
exchange any such Convertible Securities referred to in Section 7(e)(i) or
7(e)(ii), the Conversion Price then in effect hereunder shall forthwith be
readjusted (increased or decreased, as the case may be) to the Conversion Price
that would have been in effect at the time of such expiration or termination
had such right, option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been granted, issued
or sold. If the purchase price provided for in any such right or option
referred to in Section 7(e)(i) or the rate at which any Convertible Securities
referred to in Section 7(e)(i) or Section 7(e)(ii) are convertible into or
exchangeable for Common Stock shall be reduced at any time under or by reason
of provisions with respect thereto designed to protect

 

 

against dilution, then in case of the delivery of shares of Common Stock
upon the exercise of any such right or option or upon conversion or exchange of
any such Convertible Securities, the Conversion Price then in effect hereunder
shall, if not already adjusted, forthwith be adjusted to such amount as would
have obtained had such right, option or Convertible Securities never been
issued as to such shares of Common Stock and had adjustments been made upon the
issuance of the shares of Common Stock delivered as aforesaid, but only if as a
result of such adjustment the Conversion Price then in effect hereunder is
thereby reduced.

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

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

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

                    (vi) Definition of Market Price. Unless otherwise set forth in this
resolution, “Market Price” shall mean the last reported sale price of the
applicable security as

 

 

reported by the American Stock Exchange, the National Association of
Securities Dealers, Inc. Automatic Quotations System, or, if the applicable
security is listed or admitted for trading on another securities exchange, the
last reported sales price of the applicable security on the principal exchange
on which the applicable security is listed or admitted for trading (which shall
be for consolidated trading if applicable to such exchange), or if not so
reported or listed or admitted for trading, the last reported bid price of the
applicable security in the over-the-counter market. The Market Price shall be
such price averaged over a period of ten (10) consecutive Business Days ending
two (2) days prior to the day as of which “Market Price” is being determined.
In the event that the Market Price cannot be determined as aforesaid, the Board
of Directors of the Corporation shall determine the Market Price on the basis
of such quotations as it in good faith considers appropriate, in consultation
with a nationally recognized investment bank.

                    (vii) Adjustment to Determination of Conversion Price. When making the
calculations and determinations described in this Section 7(e), there shall not
be taken into account (A) the issuance of Common Stock upon the exercise of
outstanding options or warrants outstanding on the Series E Preferred Stock
Issue Date, (B) the issuance of Common Stock upon conversion of any shares of
the Series E Preferred Stock, and (C) the issuance of Series E Preferred Stock
upon exercise of any Series E Preferred Stock Warrants (as defined in the
Redemption and Exchange Agreement).

               (f) Dividends and Distributions; Purchase Rights.

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

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

 

 

               (g) Subdivision or Combination of Stock or Stock Dividends. In case the
Corporation shall at any time subdivide its outstanding shares of Common Stock
into a greater number of shares, by split or otherwise, or issue additional
shares of Common Stock as a dividend (other than a dividend in accordance with
Section 3 hereof), or make any other distribution upon any class or series of
stock payable in shares of Common Stock or Convertible Securities, the
Conversion Price in effect immediately prior to such subdivision shall be
proportionately reduced and, conversely, in case the outstanding shares of
Common Stock of the Corporation shall be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased.

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

                    (i) Certain Events. If any event occurs as to which in the reasonable
opinion of the Board of Directors of the Corporation, in good faith, the other
provisions of this Section 7 are not strictly applicable or if strictly
applicable would not fairly protect the conversion rights of the holders of the
Series E Preferred Stock in accordance with the essential intent and principles
of such provisions, then such Board of Directors, acting by a vote of at least
a majority of the members thereof, shall provide for the benefit of holders of
shares of Series E

 

 

Preferred Stock an adjustment, if any, on a basis consistent with such
essential intent and principles, necessary to preserve, without dilution, the
rights of the holders of the Series E Preferred Stock. Upon such vote by the
Board of Directors, the Corporation shall forthwith make the adjustments
described therein; provided, however, that no such adjustments shall have the
effect of increasing the Conversion Price as otherwise determined pursuant to
this Section 7 except in the event of a combination of shares of the type
contemplated in Section 7(g) and then in no event to an amount larger than the
Conversion Price as adjusted pursuant to Section 7(g).

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

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

               (l) Preferred Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Series E Preferred Stock,
solely for the purpose of issue upon the declaration of a dividend on the
outstanding Series E Preferred Stock, such number of shares of Series E
Preferred Stock as shall then be issuable as a dividend on the Series E
Preferred Stock. The Corporation covenants that all shares of Series E
Preferred Stock that shall be issued as such dividends shall, upon issuance, be
duly authorized, validly issued, fully

 

 

paid and nonassessable, free from preemptive or similar rights on the part
of the holders of any shares of capital stock or securities of the Corporation,
and free from all liens and charges with respect to the issue thereof. The
Corporation will take all such action as may be necessary to assure that such
shares of Series E Preferred Stock may be so issued without violation by the
Corporation of any applicable law or regulation or agreement, or of any
requirements of any domestic securities exchange upon which the Series E
Preferred Stock or the Common Stock may be listed. If at any time the
Corporation should not have a sufficient number of authorized shares of Series
E Preferred Stock to issue as dividends on the then outstanding shares of
Series E Preferred Stock, the Corporation covenants to amend this resolution to
increase the number of shares of authorized Series E Preferred Stock to the
extent necessary.

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

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

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

               (p) Notice. In the event the Corporation shall propose to take any action
of the types described in Section 7(e), Section 7(f), Section 7(g) or Section
7(h) above, the Corporation shall give notice to each holder of shares of
Series E Preferred Stock. The notice shall specify the record date, if any,
with respect to any such action and the date on which such

 

 

action is to take place. Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Conversion Price and the number, kind or class of shares or other
securities or property or cash that shall be deliverable or purchasable upon
the occurrence of such action or deliverable upon conversion of shares of
Series E Preferred Stock. In the case of any action that would require the
fixing of a record date, such notice shall be given at least twenty (20) days
prior to the date so fixed, and in case of all other action, such notice shall
be given at least thirty (30) days prior to the taking of such proposed action.

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

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

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

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

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

 

 

               IN WITNESS WHEREOF, Electric City Corp. has caused these presents to be
signed in its name and on its behalf by its Chief Executive Officer on March
18, 2004.

	 	 	 	 	 
	 	ELECTRIC CITY CORP.

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

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