-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VZBQGHdM/jfNPXakdrG1FC2OjoG3TixiSyHmDGJ5y60UhwliaU21ZkPXnvZqOTnl pPuL03mwyapf9OgNF4WxhQ== 0000899652-03-000039.txt : 20030710 0000899652-03-000039.hdr.sgml : 20030710 20030710083633 ACCESSION NUMBER: 0000899652-03-000039 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20030710 GROUP MEMBERS: CINERGY TECHNOLOGIES INC. GROUP MEMBERS: CINERGY VENTURES II LLC FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CINERGY CORP CENTRAL INDEX KEY: 0000899652 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 311385023 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 139 E FOURTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5132872644 MAIL ADDRESS: STREET 1: 139 E FOURTH STREET STREET 2: P.O BOX 960 CITY: CINCINATI STATE: OH ZIP: 45202 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ELECTRIC CITY CORP CENTRAL INDEX KEY: 0001065860 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600] IRS NUMBER: 364197337 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-58763 FILM NUMBER: 03781050 BUSINESS ADDRESS: STREET 1: 1280 LANDMEIER ROAD CITY: ELK GROVE STATE: IL ZIP: 60007 BUSINESS PHONE: 8474371666 MAIL ADDRESS: STREET 1: 1280 LANDMEIER ROAD CITY: ELK GROVE VILLAGE STATE: IL ZIP: 60007 SC 13D 1 electriccity13d.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Schedule 13D Under the Securities Exchange Act of 1934 Electric City Corp. (Name of Issuer) Common Stock, $0.0001 par value per share (Title of Class of Securities) 284868106 (CUSIP Number) Marc E. Manly, Executive Vice President, Chief Legal Officer Cinergy Corp. 139 E. Fourth Street Cincinnati, OH 45202 (513) 421-9500 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) June 27, 2003 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 204.13d-1(g), check the following box. [ ] Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for other parties to whom copies are to be sent. The remainder of the cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP NO. 284868106 SCHEDULE 13D - - ------------------------------------------------------------------------------ (1) Names of Reporting Persons Cinergy Ventures II, LLC - - ------------------------------------------------------------------------------ (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) |_| (b) |X| See Items 5 and 6 - - ------------------------------------------------------------------------------ (3) SEC Use Only - - ------------------------------------------------------------------------------ (4) Source of Funds (See Instructions) WC (See Item 3) - - ------------------------------------------------------------------------------ (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) |_| - - ------------------------------------------------------------------------------ (6) Citizenship or Place of Organization Delaware - - ------------------------------------------------------------------------------ Number of 7. Sole Voting Power Shares 5,281,473 Beneficially -------------------------------------------- Owned by 8. Shared Voting Power Each -------------------------------------------- Reporting 9. Sole Dispositive Power Person With 5,281,473 -------------------------------------------- 10. Shared Dispositive Power - - ------------------------------------------------------------------------------ (11) Aggregate Amount Beneficially Owned by Each Reporting Person 5,281,473 - - ------------------------------------------------------------------------------ (12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) |X| See (2) above and Items 5 and 6 - - ------------------------------------------------------------------------------ (13) Percent of Class Represented by Amount in Row (11) 16.3% - - ------------------------------------------------------------------------------ (14) Type of Reporting Person (See Instructions) OO - - ------------------------------------------------------------------------------ CUSIP NO. 284868106 SCHEDULE 13D - - ------------------------------------------------------------------------------ (1) Names of Reporting Persons Cinergy Technologies, Inc. - - ------------------------------------------------------------------------------ (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) |_| (b) |X| See Items 5 and 6 - - ------------------------------------------------------------------------------ (3) SEC Use Only - - ------------------------------------------------------------------------------ (4) Source of Funds (See Instructions) OO (See Item 3) - - ------------------------------------------------------------------------------ (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) |_| - - ------------------------------------------------------------------------------ (6) Citizenship or Place of Organization Delaware - - ------------------------------------------------------------------------------ Number of 7. Sole Voting Power Shares 5,281.473 Beneficially -------------------------------------------- Owned by 8. Shared Voting Power Each -------------------------------------------- Reporting 9. Sole Dispositive Power Person With 5,281,473 -------------------------------------------- 10. Shared Dispositive Power - - ------------------------------------------------------------------------------ (11) Aggregate Amount Beneficially Owned by Each Reporting Person 5,281,473 - - ------------------------------------------------------------------------------ (12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) |X| See (2) above and Items 5 and 6 - - ------------------------------------------------------------------------------ (13) Percent of Class Represented by Amount in Row (11) 16.3% - - ------------------------------------------------------------------------------ (14) Type of Reporting Person (See Instructions) HC - - ------------------------------------------------------------------------------ CUSIP NO. 284868106 SCHEDULE 13D - - ------------------------------------------------------------------------------ (1) Names of Reporting Persons Cinergy Corp. - - ------------------------------------------------------------------------------ (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) |_| (b) |X| See Items 5 and 6 - - ------------------------------------------------------------------------------ (3) SEC Use Only - - ------------------------------------------------------------------------------ (4) Source of Funds (See Instructions) oo (See Item 3) - - ------------------------------------------------------------------------------ (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) |_| - - ------------------------------------------------------------------------------ (6) Citizenship or Place of Organization Delaware - - ------------------------------------------------------------------------------ Number of 7. Sole Voting Power Shares 5,281,473 Beneficially -------------------------------------------- Owned by 8. Shared Voting Power Each -------------------------------------------- Reporting 9. Sole Dispositive Power Person With 5,281,473 -------------------------------------------- 10. Shared Dispositive Power - - ------------------------------------------------------------------------------ (11) Aggregate Amount Beneficially Owned by Each Reporting Person 5,281,473 - - ------------------------------------------------------------------------------ (12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) |X| See (2) above and Items 5 and 6 - - ------------------------------------------------------------------------------ (13) Percent of Class Represented by Amount in Row (11) 16.3% - - ------------------------------------------------------------------------------ (14) Type of Reporting Person (See Instructions) HC - - ------------------------------------------------------------------------------ Item 1. Security and Issuer. Common Stock, $0.0001 par value ("Common Stock"), of Electric City Corp., 1280 Landmeier Road, Elk Grove Village, Illinois 60007 (the "Company"). Item 2. Identity and Background. Cinergy Ventures II, LLC ("Ventures") is a single member limited liability company organized under the laws of the State of Delaware. Ventures' principal business address and office is located at 139 E. Fourth Street, Cincinnati, Ohio 45202. The principal business of Ventures is to engage in energy related investments. The sole member of Ventures is Cinergy Technologies, Inc. ("Technologies"), a Delaware corporation serving primarily as an intermediate holding company for various Cinergy subsidiaries. Technologies' principal business address and office is located at 139 E. Fourth Street, Cincinnati, Ohio 45202. Technologies is a subsidiary of Cinergy Corp. ("Cinergy"), a Delaware corporation, serving primarily as a holding company for its various subsidiaries, which are engaged in energy and related businesses. Cinergy's principal business address and office is located at 139 E. Fourth Street,Cincinnati, Ohio 45202. Information required pursuant to Item 2(d) and (e) for Ventures, Technologies and Cinergy and current information concerning the members of the board of directors and executive officers of Ventures, Technologies and Cinergy is set forth on Schedule I hereto. Item 3. Source and Amount of Funds or Other Consideration. In acquiring the securities, Ventures entered into three separate securities purchase and sale agreements, each dated and consummated on June 27, 2003: a. A Securities Purchase Agreement (the "ECC SPA") with the Company and four additional investors (the "Additional Investors") to acquire certain classes of the Company's securities. b. An EPPF Securities Purchase and Sale Agreement (the "EPPF SPA") with EP Power Finance, L.L.C. ("EPPF") and three additional investors.* c. A Duke Securities Purchase and Sale Agreement (the "Duke SPA," and together with the ECC SPA and the EPPF SPA, the "Securities Purchase Agreements") with Duke Capital Partners, LLC ("Duke") and three additional investors.* * The three additional investors on each of the EPPF SPA and Duke SPA were three of the four Additional Investors. Under the terms of the Securities Purchase Agreements, Ventures purchased $2,000,000 of the Company's securities as described more fully below. The source of funds for Ventures' purchase of the securities pursuant to the Securities Purchase Agreements came from Ventures' working capital that Ventures had received from Technologies as a capital contribution. Ventures is currently deemed to have beneficial ownership of the securities to be issued pursuant to the Securities Purchase Agreements because it owns Common Stock directly or has the right to acquire Common Stock indirectly through the conversion of the Series A Preferred, Series B Preferred (each defined below) or the exercise of warrants to purchase Common Stock or Series D Preferred, as applicable, within sixty days of June 27, 2003. It is anticipated that the source of funds for Ventures' exercise of the warrants issued under the Securities Purchase Agreements will be provided by Ventures' working capital. Item 4. Purpose of Transaction. Ventures acquired, for investment purposes, $2,000,000 of the Company's securities, consisting of: 60,000 shares of Series D Convertible Preferred Stock ("Series D Preferred"); 377,390 of Series A Convertible Preferred Stock ("Series A Preferred"); warrants to purchase 15,000 shares of Series D Preferred; 73,198 shares of Common Stock, and warrants to purchase up to 684,375 shares of Common Stock. The Company's board of directors is currently comprised of 12 directors. Ventures has the right to elect one director of the Company. Ventures expects to evaluate on a continuing basis its goals and objectives and general economic and equity market conditions, as well as the Company's business operations and prospects. Based on such evaluations, from time to time in the future, Ventures may (1) convert the Series A Preferred or Series D Preferred into Common Stock, (2) exercise the warrants to purchase the Series D Preferred, and subsequently convert such stock into Common Stock, or (3) exercise the warrants to purchase Common Stock for investment purposes. Ventures may also make additional purchases of the Company's Common Stock. Ventures may, subject to the Investor Rights Agreement (defined below) and the Stock Trading Agreement (defined below), from time to time sell all or a portion of the Common Stock that it now holds either in private placements, in the open market pursuant to Rule 144, and/or pursuant to available exemptions from the registration requirements of the Securities Act of 1933. Except as set forth above, neither Ventures nor, to the knowledge of Ventures, any of the persons named in Schedule I to this document, has any plans or proposals that relate to or would result in any of the matters referred to in paragraphs (a) through (j) of Item 4 of Schedule 13D. Ventures, however, may at any time and from time to time, review or reconsider its position with respect to any of such matters. Item 5. Interest in Securities of the Issuer. (a) Ventures and the Additional Investors entered into the Securities Purchase Agreements to acquire certain classes of the Company's securities. Under the terms of the Securities Purchase Agreements, Ventures purchased 60,000 shares of Series D Preferred; 377,390 shares of Series A Preferred; warrants to purchase 15,000 shares of Series D Preferred; 73,198 shares of Common Stock, and warrants to purchase up to 684,375 shares of Common Stock. The Additional Investors purchased, in the aggregate, 90,000 shares of Series D Preferred; 566,084 shares of Series A Preferred; warrants to purchase 22,500 shares of Series D Preferred, 109,797 shares of Common Stock and warrants to purchase 1,026,563 shares of Common Stock. Based on the current conversion ratios for the Series D Preferred and the Series A Preferred (each described below), Ventures and the Additional Investors, collectively, are the beneficial owners of 13,203,673 shares of Common Stock. Of this total number of shares, Ventures and the Additional Investors have a right to acquire 13,020,678 shares of Common Stock from the exercise of the warrants to purchase Common Stock and Series D Preferred, and the conversion of Series A Preferred and Series D Preferred. Based on the 34,148,022 shares of Common Stock issued and outstanding as of June 27, 2003, as reported by the Company to Ventures, Ventures and the Additional Investors, as a group, may be deemed to beneficially own approximately 28.0% of the outstanding Common Stock. However, Ventures disclaims beneficial ownership of shares of Common Stock beneficially owned by the Additional Investors. Therefore, Ventures beneficially owns 5,281,473 shares of Common Stock on an as converted basis. This number includes 5,208,275 shares of Common Stock for which Ventures has a right to acquire pursuant to the exercise of the warrants to purchase Common Stock and Series D Preferred and the conversion of the Series A Preferred and Series D Preferred. Based on the 34,148,022 shares of Common Stock issued and outstanding as of June 27, 2003, as reported by the Company, Ventures may be deemed the beneficial owner of approximately 13.4% of the outstanding Common Stock. Except as otherwise described herein, none of the controlling members or members of the board of directors or executive officers of Ventures and the controlling members named in Item 2 are the beneficial owners of any shares of Common Stock purchased or to be purchased by Ventures. (b) Ventures has the sole power to vote and direct the vote or to dispose or direct the disposition of 5,281,473 shares of Common Stock on an as converted basis. Ventures disclaims beneficial ownership of shares of Common Stock beneficially owned by the Additional Investors. No controlling member or member of the board of directors or executive officer of Ventures or a controlling member named in Item 2 has the sole power to vote or direct the vote or dispose or direct the disposition of any shares of Common Stock purchased or to be purchased by Ventures. (c) See Item 6 below. (d) No other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Common Stock purchased or to be purchased by Ventures. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to the Securities of the Issuer. On June 27, 2003, Ventures and the Additional Investors entered into the Securities Purchase Agreements with the Company, EPPF and Duke respectively. The transactions contemplated by the Securities Purchase Agreements were consummated on June 27, 2003. Pursuant to the terms of the Securities Purchase Agreements, Ventures and the Additional Investors collectively purchased $5,000,000 in aggregate amount of Series A Preferred, Series D Preferred, warrants to purchase Series D Preferred, shares of Common Stock and warrants to purchase Common Stock. Ventures purchased the following securities for $2,000,000: 1. 60,000 shares of Series D Convertible Preferred Stock; 2. 377,390 shares of Series A Convertible Preferred Stock; 3. warrants to purchase 15,000 shares of Series D Preferred Stock 4. 73,198 shares of Common Stock; and 5. warrants to purchase up to 684,375 shares of Common Stock. The Series D Preferred is convertible at any time after 60 days of June 27, 2003 into shares of Common Stock at the option of the holder as determined by dividing $10 by the conversion price, which has been initially set at $1, multiplied by each share of Series D Preferred, subject to adjustments as set forth in the original Series D Securities Purchase Agreement. Based on the initial conversion ratio, Ventures has the right to acquire 750,000 shares of Common Stock as a result of the conversion of the Series D Preferred and the exercise of the warrants to purchase Series D Preferred. Each outstanding share of Series D Preferred is entitled to dividends at a rate of 10% per year of its stated value, which is $10.00. The Company may pay dividends in cash or additional shares of Series D Preferred until the first dividend payment that occurs after three years following the initial issuance of the Series D Preferred. After that date, dividends must be paid in cash and the dividend rate increases 0.5% every six months to a maximum rate of 15% per year. The Series A Preferred is convertible at any time after 60 days of September 7, 2001, into shares of Common Stock at the option of the holder as determined by dividing $10 by the conversion price, which has been initially set at $1, multiplied by each share of Series A Preferred, subject to adjustments as set forth in the ECC Securities Purchase Agreement. Based on the current conversion ratio, Ventures has the right to acquire 3,773,900 shares of Common Stock as a result of the conversion of the Series A Preferred. Each outstanding share of Series A Preferred is entitled to dividends at a rate of 10% per year of its stated value, which is $10.00. The Company may pay dividends in cash or additional shares of Series A Preferred until the first dividend payment that occurs after three years following the initial issuance of the Series A Preferred. After that date, dividends must be paid in cash and the dividend rate increases 0.5% every six months to a maximum rate of 15% per year. Pursuant to the terms of the Series A Preferred, Ventures and the Additional Investors have the right to elect up to four directors of the twelve-member board of directors, subject to decrease depending on the number of shares of Series A Preferred outstanding. Depending on the number of shares of Series A Preferred outstanding, the holders will also have special approval rights to approve certain matters in which the Company proposes to engage. In connection with the Securities Purchase Agreements, the Company entered into certain ancillary agreements -- the Joinder and Second Amendment to Investor Rights Agreement, and the Stock Trading Agreement. Under the terms of the Joinder and Second Amendment to Investor Rights Agreement, dated as of June 27, 2003 (the "Investor Rights Agreement"), between the Company, Ventures, the Additional Investors and previous investors (collectively with Ventures and the Additional Investors, "Investors"), which became effective on June 27, 2003, the Investors have the right to require the Company to register the shares of Common Stock received directly or indirectly pursuant to the Securities Purchase Agreements. The Investors, as a group, have the right to demand an aggregate of four registrations provided that each registration represents at least $5 million of market value. The Investors are also entitled to customary "piggyback" registration rights. Under the Investors Rights Agreement, the Investors have preemptive rights with respect to future sales by the Company of its capital stock to permit such parties to maintain their percentage ownership interests. On June 27, 2003, the Company, Ventures and the Additional Investors entered into the Stock Trading Agreement (the "Stock Trading Agreement") that limits the ability of Ventures and the Additional Investors, (the "Restricted Parties") to sell Common Stock into the public market. The Stock Trading Agreement became effective on June 27, 2003. The Restricted Parties may not sell their shares of Common Stock until the Company has completed a qualified primary offering, as set forth in the Stock Trading Agreement, without complying with the sale restrictions set forth in such agreement. If the Company does not complete a qualified public offering within 18 months after the closing of the Securities Purchase Agreement, the parties may sell their shares subject to certain trading volume and block sale limitations set forth in the Stock Trading Agreement. Each of the Restricted Parties and the Company has a right of first offer if any other Restricted Party intends to sell its shares in a private transaction. The Stock Trading Agreement will terminate September 7, 2004. However, if a qualified primary offering is completed within three years after the Stock Trading Agreement becomes effective, the Stock Trading Agreement will terminate 18 months after the completion of the qualified primary offering. Except as set forth above, to the knowledge of Ventures, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between Ventures and any other person with respect to any securities of the Company, including, but not limited to, transfer or voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. On June 27, 2003, Ventures, the Additional Investors, the Company, Duke and EPPF, entered in to an Escrow Agreement that governed the mechanics of the closing of the transactions discussed more fully herein. Item 7. Material to Be Filed as Exhibits. EXHIBIT NO. DESCRIPTION 1. Securities Purchase Agreement, dated as of June 27, 2003, by and among Electric City Corp., Cinergy Ventures II, LLC and the Additional Investors. 2. Joinder and Second Amendment to Investor Rights Agreement, dated as of June 27, 2003, by and among Electric City Corp. and the Investors. 3. Stock Trading Agreement, dated as of June 27, 2003, by and among Electric City Corp., Ventures and the Investors. 4. Duke Securities Agreement, dated as of June 27, 2003, by and among Duke capital Partners, LLC, Ventures and the Additional Investors. 5. EPPF Securities Purchase and Sale Agreement, dated as of June 27, 2003, by and among EP Power Finance, L.L.C., Ventures and the Additional Investors. 6. Escrow Agreement Letter, dated as of June 26, 2003, by and among Electric City Corp., Ventures, EPPF, Duke and the Additional Investors. 7. Joint Filing Agreement - --------------- SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: July 8, 2003 CINERGY VENTURES II, LLC By:/s/Marc E. Manly Marc E. Manly Executive Vice President and Chief Legal Officer Date: July 8, 2003 CINERGY TECHNOLOGIES, INC. By:/s/Marc E. Manly Marc E. Manly Executive Vice President and Chief Legal Officer Date: July 8, 2003 CINERGY CORP. By:/s/Marc E. Manly Marc E. Manly Executive Vice President and Chief Legal Officer SCHEDULE I The name, business address, present principal occupation or employment and the name, principal business address of any corporation or other organization in which such employment is conducted, of each of (i) the members of the board of directors and executive officers of Ventures, (ii) the members of the board of directors and executive officers of Technologies, and(iii) the members of the board of directors and executive officers of Cinergy, are set forth below. Unless otherwise indicated, the business address of each of the directors or executive officers is that of Cinergy at 139 E. Fourth Street, Cincinnati, OH 45202. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to Cinergy. (i) Cinergy Ventures II, LLC Name Capacity in Which Serves Principal Occupation at Ventures R.Foster Duncan President Executive Vice President Chief Financial Officer Marc E. Manly Executive Vice President Executive Vice President Chief Legal Officer Chief Legal Officer Assistant Secretary Bennett L. Gaines Vice President Vice President Chief Technology Officer Chief Technology Officer Theodore R. Murphy II Senior Vice President Senior Vice President Chief Risk Officer Chief Risk Officer Frederick J. Newton III Executive Vice President Executive Vice President Chief Administrative Chief Administrative Officer Officer Bernard F. Roberts Vice President Vice President (ii) Cinergy Technologies, Inc. Name Capacity in Which Serves Principal Occupation at Technologies William J. Grealis Director Executive Vice President James E. Rogers Director President Chief Executive Officer Chairman of the Board R.Foster Duncan Director Executive Vice President President Chief Financial Officer Marc E. Manly Executive Vice President Executive Vice President Chief Legal Officer Chief Legal Officer Assistant Secretary Bennett L. Gaines Vice President Vice President Chief Technology Officer Chief Technology Officer Theodore R. Murphy II Senior Vice President Senior Vice President Chief Risk Officer Chief Risk Officer Frederick J. Newton III Executive Vice President Executive Vice President Chief Administrative Chief Administrative Officer Officer Bernard F. Roberts Vice President Vice President (iii) Cinergy Corp. Name Capacity Business Principal Occupation in Which Address Serves at Cinergy James E. Rogers Director Cinergy Corp. President 139 E. Fourth Street Chief Executive Cincinnati, OH Officer, Chairman of the Board of Cinergy Corp. Michael G. Browning Director Browning Investments, Chairman and Inc. President of 251 N. Illinois Browning Indianapolis, IN Investments, Inc. Phillip R. Cox Director Cox Financial Corp. President and Chief 105 E. 4th Street Executive Officer of Cincinnati, OH Cox Financial Corporation George C. Juilfs Director SENCORP Chairman and Chief 1 Riverfront Pl. Executive Officer of #1000 SENCORP Newport, KY Thomas E. Petry Director The Union Central Life Director of The Insurance Company Union Central Life Insurance Company and U.S. Bancorp Mary L. Schapiro Director NASD Regulation, Inc. Vice Chairman of 1735 K. Street, N.W. NASD and President Washington, D.C. of Regulatory Policy and Oversight John J. Schiff, Jr. Director Cincinnati Financial Chairman, President Corporation Chief Executive 6200 South Gilmore Rd. Officer of Fairfield, OH Cincinnati Financial Corporation and the Cincinnati Insurance Company Philip R. Sharp Director John F. Kennedy Senior Research School of Government Fellow at Harvard Harvard University University's John Cambridge, MA F. Kennedy School of Government Dudley S. Taft Director Taft Broadcasting President Company Chief Executive 312 Walnut Street Officer of Taft Cincinnati, OH Broadcasting Company R. Foster Duncan Executive Vice Executive Vice President President Chief Financial Officer Chief Financial Officer Marc E. Manly Executive Vice Executive Vice President President Chief Legal Officer Chief Legal Officer Assistant Secretary Assistant Secretary Bennett L. Gaines Vice President Vice President Chief Technology Chief Technology Officer Officer Theodore R. Murphy II Senior Vice Senior Vice President President Chief Risk Officer Chief Risk Officer Frederick J. Newton III Executive Vice Executive Vice President President Chief Administrative Chief Administrative Officer Officer Bernard F. Roberts Vice President Vice President - ------------------------------ Item 2(d): To the knowledge of Ventures, none of Ventures, Technologies or Cinergy, or any of the individuals identified in this Schedule I has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). Item 2(e): To the knowledge of Ventures, none of Ventures, Technologies or Cinergy, or any of the individuals identified in this Schedule I has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Item 2(f): Each of the individuals identified in this Schedule I is a citizen of the United States of America. EX-99 2 joinder.txt Exhibit 2 JOINDER AND SECOND AMENDMENT TO INVESTOR RIGHTS AGREEMENT This Joinder and Second Amendment to Investor Rights Agreement (this "Agreement") is dated as of June 27, 2003 and is by and among Electric City Corp., a Delaware corporation (the "Company"), Newcourt Capital USA Inc., a Delaware corporation, Newcourt Capital Securities, Inc., a Delaware corporation, EP Power Finance L.L.C., a Delaware limited liability company, Morgan Stanley Dean Witter Equity Funding, Inc., a Delaware corporation, Originators Investment Plan, L.P., a Delaware limited partnership, Duke Capital Partners, LLC, a Delaware limited liability company, Leaf Mountain Company, LLC, an Illinois limited liability company, Richard P. Kiphart, an individual, Cinergy Ventures II, LLC, a Delaware limited liability company("Cinergy"), SF Capital Partners, a British Virgin Islands company ("SFCP"), John Thomas Hurvis Revocable Trust ("Hurvis Trust") and David R. Asplund, an individual ("Asplund"). W I T N E S S E T H: WHEREAS, the parties hereto other than Cinergy, SFCP, Asplund and Hurvis are parties to that certain Investor Rights Agreement dated as of July 31, 2001, as amended (as in effect on the date hereof, the "Existing Agreement"); and WHEREAS, Cinergy, SFCP, Asplund and Hurvis, along with Richard P. Kiphart and the Company, are parties to that certain Securities Purchase Agreement, dated as of June 27, 2003 (as it may be amended from time to time, the "Series D Securities Purchase Agreement"), whereby the Company has agreed to sell and Cinergy, SFCP, Asplund, Hurvis and Mr. Kiphart (collectively, the "Series D Investors") have agreed to purchase shares of the Company's Series D Preferred Stock (as herein defined) together with shares of the Company's Common Stock (as defined in the Existing Agreement) and warrants to purchase additional shares of Series D Preferred Stock and warrants to purchase additional shares of Common Stock; and WHEREAS, it is a condition precedent to the obligation of each of the Series D Investors to purchase such shares of Series D Preferred Stock and Common Stock and such warrants that the parties hereto enter into this Agreement and the Company and the other parties hereto are agreeable to the same; and WHEREAS, on the date hereof, the Series D Investors will also be acquiring certain shares of Series A Preferred Stock, Common Stock and warrants to purchase shares of Common Stock from EP Power Finance L.L.C. and Duke Capital Partners, LLC and accordingly shall become Series A Investors hereunder and the Parties desire to evidence the same by execution and delivery of this Agreement; NOW, THEREFORE, the Parties agree as follows: 1. Definitions. All terms capitalized but not defined herein shall have the meaning attributable to such terms in the Existing Agreement, except where the context otherwise requires. 2. Amendment of Existing Agreement. The Existing Agreement is hereby amended as follows: A. The following new defined terms are added to the definitions in Section 1.1: "Series D Investors" means, collectively, each of the following in his or its capacity as a holder of Series D Preferred Stock, Richard P. Kiphart, an individual, Cinergy Ventures II, LLC, a Delaware limited liability company, SF Capital Partners, a British Virgin Islands company, John Thomas Hurvis Revocable Trust, an Illinois trust, and David R. Asplund, an individual. "Series D Investor" means any of such entities in such capacity. "Series D Preferred Stock" means shares of the Company's Series D Convertible Preferred Stock, par value $0.01 per share, issued pursuant to the Series D Securities Purchase Agreement, or issued pursuant to the Series D Preferred Stock Warrants, or issued as dividends upon shares of the Series D Preferred Stock issued pursuant to the Series D Securities Purchase Agreement or the Series D Preferred Stock Warrants. "Series D Preferred Stock Warrants" means the warrants issued to the Series D Investors to purchase 37,500 shares of Series D Preferred Stock as evidenced by those certain warrant certificates dated June __, 2003 issued by the Company to the Series D Investors, as they may be amended from time to time, as they may be amended from time to time with the consent of the Investors. "Series D Securities Purchase Agreement" means that certain Securities Purchase Agreement dated as of June __, 2003 by and among the Series D Investors and the Company, as it may be amended from time to time with the consent of the Investors. B. The definition of Common Stock Warrants is amended and restated in its entirety as follows: "Common Stock Warrants" means (a) the warrants issued to the Series A Investors pursuant to the Securities Purchase Agreement and the Additional Purchase Agreement, as each may be amended from time to time, (b) the warrants to purchase up to 281,250 shares of Common Stock issued to the Series C Investor pursuant to the Series C Securities Purchase Agreement, as amended from time to time, and (c) the warrants to purchase up to 22,562 shares of Common Stock issued to the Series D Investors pursuant to the Series D Securities Purchase Agreement, as amended from time to time C. The definition of Eligible Securities is amended and restated in its entirety as follows: "Eligible Securities" means (i) the shares of Common Stock issued or issuable upon the conversion of the Series A Preferred Stock issued or issuable pursuant to the Securities Purchase Agreement or the Additional Purchase Agreement; (ii) the shares of Common Stock issued or issuable upon the conversion of the Series C Preferred Stock issued or issuable pursuant to the Series C Securities Purchase Agreement; (iii) the shares of Common Stock issued or issuable upon the conversion of the Series D Preferred Stock issued or issuable pursuant to the Series D Securities Purchase Agreement or issued or issuable upon exercise of the Series D Preferred Stock Warrants and conversion of the Series D Preferred Stock issued or issuable pursuant to such exercise (iv) the shares of Common Stock issued pursuant to Securities Purchase Agreement; (v) the shares of Common Stock issued pursuant to the Series C Securities Purchase Agreement; (vi) the shares of Common Stock issued pursuant to the Series D Securities Purchase Agreement, (vii) the shares of Common Stock issued or issuable upon exercise of the Common Stock Warrants or upon exercise of the Placement Agent Warrants; and (viii) any other shares of Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to or in exchange for or in replacement of, the shares described in clauses (i), (ii), (iii), (iv), (v), (vi), (vii) and this clause (viii); provided, however, that the foregoing definition shall exclude in all cases any Eligible Securities sold by a Holder in a transaction in which its rights under this Agreement are not also assigned; and provided further that any Eligible Securities sold pursuant to Rule 144 or sold in a registered public offering that has been declared effective shall no longer be Eligible Securities hereunder. D. The definition of Investors is amended and restated in its entirety as follows: "Investors" means the Series A Investors, the Placement Agent, the Series C Investor and the Series D Investors, collectively, and "Investor" means any of them. E. The definition of Parties is amended and restated in its entirety as follows: "Parties" means the Series A Investors, the Placement Agent, the Series C Investor, the Series D Investors and the Company, collectively, and "Party" means any of them. F. The definition of Series A Investors is amended and restated in its entirety as follows: "Series A Investors" means, collectively, each of the following in his or its capacity as a holder of Series A Preferred Stock, Newcourt Capital USA Inc., a Delaware corporation, EP Power Finance L.L.C., a Delaware limited liability company, Morgan Stanley Dean Witter Equity Funding, Inc., a Delaware corporation, Originators Investment Plan, L.P., a Delaware limited partnership, Duke Capital Partners, LLC, a Delaware limited liability company, Richard P. Kiphart, an individual, Cinergy Ventures II, LLC, a Delaware limited liability company, SF Capital Partners, a British Virgin Islands company, David R. Asplund, an individual, and John Thomas Hurvis Revocable Trust, an Illinois trust. "Series A Investor" means any of such entities in such capacity. G. The definition of Series C Investor is amended and restated in its entirety as follows: "Series C Investor" means Richard P. Kiphart, in his capacity as the holder of the Series C Preferred Stock. G. Clause (d) of Section 3.1 is amended and restated in its entirety as follows: (d) The right of first offer in this Section 3.1 shall not be applicable (i) to the issuance or sale of Common Stock (or options therefore) to employees, consultants and directors pursuant to plans or agreements approved by the Board of Directors for the purpose of soliciting or retaining their services, (ii) to the issuance of securities in connection with a bona fide business acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise, (iii) to Common Stock issued upon conversion of the Series A Preferred Stock or the Series C Preferred Stock or the Series D Preferred Stock or the exercise of the Common Stock Warrants or the Placement Agent Warrants, (iv) to any Series D Preferred Stock issued upon the exercise of Series D Preferred Stock Warrants, (v) to the issuance of securities pursuant to options, warrants, notes or other rights to acquire securities of the Company which were outstanding on July 31, 2001, (vi) to a Qualified Primary Offering, (vii) to the issuance of Series A Preferred Stock and Series A Preferred Stock Warrants pursuant to the Additional Purchase Agreement in compliance with Section 2.3 of the Securities Purchase Agreement, or (viii) to stock splits, stock dividends or like transactions. G. Clause (ii) of Section 4.2 is amended and restated in its entirety as follows: (ii) If to an Investor: at the address set forth in the Securities Purchase Agreement, the Additional Purchase Agreement, the Series C Securities Purchase Agreement or the Series D Purchase Agreement, as applicable. H. Schedule I is amended and restated in its entirety as follows: SCHEDULE I - INVESTORS Newcourt Capital USA Inc. Newcourt Capital Securities, Inc. EP Power Finance, L.L.C. Morgan Stanley Dean Witter Equity Funding, Inc. Originators Investment Plan, L.P. Duke Capital Partners, LLC Leaf Mountain Company, LLC Richard P. Kiphart Cinergy Ventures II, LLC SF Capital Partners David R. Asplund John Thomas Hurvis Revocable Trust 3. Joinder. Each of the parties to this Agreement hereby agrees that from and after date hereof each of Cinergy Ventures II, LLC, SF Capital Partners, Asplund and Hurvis Trust shall be a party to and be bound by the Investor Rights Agreement, as amended by this Agreement, as an Investor and a Holder thereunder (as such terms are defined therein). 4. Representations. Each party to this Agreement hereby represents and warrants to each of the other parties to this Agreement that this Agreement has been duly executed and delivered by such party and constitutes the valid and binding obligation of such party, enforceable against such party in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. Each of Cinergy Ventures II, LLC, SF Capital Partners, Asplund and Hurvis Trust hereby acknowledges that it has received a copy of the Investor Rights Agreement. 5. Miscellaneous. (a) All terms, covenants, agreements, representations, warranties and undertakings in this Agreement shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. (b) Changes in or additions to this Agreement may be made or compliance with any term, covenant, agreement, condition or provision set forth herein may be omitted or waived, only in accordance with the provisions of the Investor Rights Agreement, as amended hereby. (c) This Agreement shall be governed and construed in accordance with the laws of the State of New York without giving effect to the conflict of laws principles thereof. (d) This Agreement may be executed in two or more counterparts, all of which shall be deemed but one and the same instrument and each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart for each of the parties hereto. Delivery by facsimile by any of the parties hereto of an executed counterpart of this Agreement shall be effective as an original executed counterpart hereof and shall be deemed a representation that an original executed counterpart hereof will be delivered. (e) The section and paragraph headings herein are for convenience only and shall not effect the construction hereof. (f) The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. (g) The obligations of each Investor under the Investor Rights Agreement are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under the Investor Rights Agreement. Nothing contained in this Agreement or the Investor Rights Agreement, and no action taken by any Investor or other party hereto pursuant hereto or thereto, shall be deemed to constitute the Investors and such parties as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that such parties are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Investor Rights Agreement as amended hereby. [Balance of page intentionally left blank; signature page follows.] IN WITNESS WHEREOF, the parties hereto have caused this Joinder and Second Amendment to Investor Rights Agreement to be executed as of the day and year first above written. COMPANY HOLDERS ELECTRIC CITY CORP., NEWCOURT CAPITAL USA INC., a Delaware corporation a Delaware corporation By:/s/John Mitola By: /s/Karen Scowcroft Name: John Mitola Name: Karen Scowcroft Title:Chief Executive Officer Title: Vice President EP POWER FINANCE, L.L.C., a Delaware limited liability company By: /s/Robert W. Baker Name: Robert W. Baker Title: President MORGAN STANLEY DEAN WITTER EQUITY FUNDING, INC., a Delaware corporation By: /s/James Wilmott Name: James Wilmott Title: Vice President ORIGINATORS INVESTMENT PLAN, L.P., a Delaware limited partnership By: MSDW OIP Investors, Inc., its general partner By: /s/James Wilmott Name: James Wilmott Title: Vice President DUKE CAPITAL PARTNERS, LLC, a Delaware limited liability company By: /s/Dennis Magna Name: Dennis Magna Title: Managing Director NEWCOURT CAPITAL SECURITIES, INC., a Delaware corporation By: /s/Karen Scowcroft Name: Karen Scowcroft Title: Vice President LEAF MOUNTAIN COMPANY, LLC, an Illinois limited liability company By: /s/John J. Jiganti Name: John J. Jiganti Title: Manager /s/Richard P. Kiphart Richard P. Kiphart CINERGY VENTURES II, LLC, a Delaware limited liability company By: /s/R. Foster Duncan Name: R. Foster Duncan Title: President SF CAPITAL PARTNERS LTD, a British Virgin Islands company By: /s/Brian H. Davidson Name: Brian H. Davidson Title: Authorized Signatory JOHN THOMAS HURVIS REVOCABLE TRUST, an Illinois trust By: /s/John Thomas Hurvis Name: John Thomas Hurvis Title: Trustee /s/David R. Asplund David R. Asplund EX-99 3 seriesdspa.txt Exhibit 1 ------------------------------------------------------------------------------ ELECTRIC CITY CORP. SECURITIES PURCHASE AGREEMENT Dated as of June 27, 2003 ------------------------------------------------------------------------------ SECURITIES PURCHASE AGREEMENT This Securities Purchase Agreement (as it may be amended from time to time, this "Agreement"), is entered into as of June __, 2003 by Electric City Corp., a Delaware corporation (the "Company"), and the purchasers whose names appear on the signature page of this Agreement (each, a "Purchaser" and collectively, the "Purchasers"). W I T N E S S E T H: WHEREAS, the Company desires to sell and issue to the Purchasers shares of its Series D Convertible Preferred Stock, par value $0.01 par value per share ("Series D Preferred Stock"), warrants to purchase shares of Series D Preferred Stock, shares of the Company's common stock, par value $0.0001 ("Common Stock"), and warrants to purchase shares of its Common Stock, all as more fully described herein; and WHEREAS, each Purchaser severally and jointly desires to purchase such securities from the Company in the amounts and for the purchase price and otherwise on the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS 1.1 The following terms when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings, such meanings to be equally applicable to the singular and plural forms thereof: "Affiliate" means, as applied to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as applied to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. "Agreement" shall have the meaning set forth in the preamble of this Agreement. "Ancillary Agreements" means the Series D Warrants, the Common Stock Warrants, the Joinder to the Investor Rights Agreement (and the Investor Rights Agreement as amended thereby) and the Stock Trading Agreement. "Assets" shall have the meaning set forth in Section 5.5 hereof. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the City of Chicago are authorized or required by law or executive order to close. "Certificate of Designation" means the Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of Series D Convertible Preferred Stock of Electric City Corp., in substantially the form of Exhibit A hereto, as the same is filed with the Secretary of State of Delaware and as it may be amended from time to time. "Certificate of Incorporation" means the Certificate of Incorporation of the Company, as amended or restated from time to time. "Closing" shall have the meaning set forth in Section 2.2 hereof. "Closing Date" shall have the meaning set forth in Section 2.2 hereof. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the United States Securities and Exchange Commission or any other governmental authority at the time administering the Securities Act or the Exchange Act. "Commission Documents" shall have the meaning set forth in Section 5.16 hereof. "Common Shares" means the shares of Common Stock to be issued by the Company to the Purchasers hereunder. "Common Stock" shall have the meaning set forth in the Recitals hereof. "Common Stock Warrants" means the warrants to be issued by the Company to Purchasers to purchase an aggregate of 210,938 shares of Common Stock, as evidenced by Warrant Certificates, as any of the same may be amended from time to time in accordance with the terms thereof. "Common Stock Warrants Issued to Existing Preferred Holders" means the warrants to purchase common stock of the Company which have been issued to each of the Series A Preferred Stock Holders and the Series C Preferred Stock Holder. "Company" shall have the meaning set forth in the preamble of this Agreement. "Company IP" shall have the meaning set forth in Section 5.13 hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar or successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Governmental Authority" means the government of any nation, state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Investor Rights Agreement" means the Investor Rights Agreement dated as of July 31, 2001, by and among the Company and the Series A Preferred Stock Holders, as amended by the Consent and Amendment of Securities Purchase Agreement, Stock Trading Agreement, Stockholders Agreement and Investor Rights Agreement dated as of November 29, 2001 among the same parties and certain other Persons and by the Joinder and First Amendment to Investor Rights Agreement dated as of June 4, 2002, by and among the same parties, certain other Persons named therein and Richard P. Kiphart, an individual, as amended, restated, modified or supplemented and in effect from time to time. "Joinder to Investor Rights Agreement" means that certain Joinder and Second Amendment to Investor Rights Agreement, substantially in the form of Exhibit B hereto, to be executed and delivered by the parties thereto in connection with Closing hereunder. "Liquidation Amount" shall have the meaning set forth in the Certificate of Designations. "Litigation" shall have the meaning set forth in Section 3.1(e) hereof. "Losses" shall have the meaning set forth in Section 7.1 hereof. "Officer's Certificate" means a certificate of the Company signed by its Chief Executive Officer or Chief Financial Officer. "Person" means an individual, a corporation, a limited liability company, an association, a partnership, a trust or estate, a government or any department or agency thereof. "Placement Agent" shall mean Delano Group Securities, LLC. --------------- "Preferred Stock Certificates of Designation" means, collectively, (i) the Certificate of Designations, (ii) the Series A Certificate of Designations, and (iii) the Series C Certificate of Designations. "Purchaser" shall have the meaning set forth in the preamble of this Agreement. "Registration Statement" shall have the meaning set forth in Section 4.4 hereof. "Regulatory Approvals" means (a) any and all certificates, permits, licenses, franchises, concessions, grants, consents, approvals, orders, registrations, authorizations, waivers, variances, exemptions, declarations, or clearances from, or filings or registrations with, or reports or notices to, any Governmental Authority, and (b) any and all waiting periods imposed by applicable laws. "Securities" shall have the meaning set forth in Section 2.1 hereof. "Securities Act" means the Securities Act of 1933, as amended, and any similar or successor federal statute, and the rules and regulations of the Commission thereunder, all as the same may be in effect from time to time. "Series A Preferred Stock Holders" means, collectively, Newcourt Capital USA Inc., a Delaware corporation, Newcourt Capital Securities, Inc., a Delaware corporation, EP Power Finance L.L.C., a Delaware limited liability company, Morgan Stanley Dean Witter Equity Funding, Inc., a Delaware corporation, Originators Investment Plan, L.P., a Delaware limited partnership, Duke Capital Partners, LLC, a Delaware limited liability company and Leaf Mountain Company, LLC, an Illinois limited liability company. "Series A Certificate of Designations" means the Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of Series A Convertible Preferred Stock of Electric City Corp. which has been filed by the Company with the Secretary of State of Delaware, as it may be amended from time to time. "Series C Preferred Stock Holder" means Richard P. Kiphart, an individual. ------------------------------- "Series C Certificate of Designations" means the Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of Series A Convertible Preferred Stock of Electric City Corp. which has been filed by the Company with the Secretary of State of Delaware, as it may be amended from time to time. "Series D Preferred Stock" shall have the meaning set forth in the Recitals to this Agreement. "Series D Warrants" shall mean the warrants to be issued by the Company to Purchasers to purchase an aggregate of 37,500 shares of Series D Preferred Stock, as evidenced by Warrant Certificates, as any of the same may be amended from time to time in accordance with the terms thereof. "Stated Value" of the Series D Preferred Stock shall mean $10.00 per share. "Stock Trading Agreement" means a Stock Trading Agreement, substantially in the form of Exhibit C hereto, dated as of the Closing Date and entered into by the Company and the Purchasers, as the same may be amended from time to time in accordance with the terms thereof. "Subsidiary" of a Person means any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled, directly or indirectly, by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. "Taxes" means any federal, state, county, local or foreign taxes, charges, fees, levies, or other assessments, including, without limitation, all net income, gross income, sales and use, ad valorem, transfer, gains, profits, excise, franchise, real and personal property, gross receipt, capital stock, business and occupation, disability, employment, payroll, license, estimated, or withholding taxes or charges imposed by any governmental entity, and includes any interest and penalties on or additions to any such taxes (and, in the case of the Company and its Subsidiaries, Taxes for which the Company or any of its Subsidiaries may be liable in its own right, or as the transferee of the assets of, or as successor to, any other corporation, association, partnership, joint venture, or other entity, or under Treasury Regulation Section 1.1502-6 or any similar provision of state or local law). "Tax Return" means a report, return or other information required to be supplied to a Governmental Authority with respect to Taxes including, where permitted or required, combined, unitary, group or consolidated returns for any group of entities that includes the Company or any of its Subsidiaries. "Transactions" shall have the meaning set forth in Section 3.1(e). "Transaction Documents" shall have the meaning set forth in Section 5.1(b) hereof. "Warrant Certificate" means a warrant certificate evidencing Common Stock Warrants or Series D Warrants, duly executed by the Company and delivered to the Purchaser pursuant to this Agreement, and any replacement certificate issued by the Company in respect thereof pursuant to partial exercise, transfer, loss or mutilation of such warrant certificate, as such original or replacement certificate may be amended and in effect from time to time. ARTICLE II ISSUE, PURCHASE AND SALE OF THE SECURITIES 2.1 Authorization of Issuance of Securities. The Company has authorized the initial issuance of (a) 150,000 shares of Series D Preferred Stock, (b) the Series D Warrants, (c) 22,562 Common Shares to be issued hereunder, and (d) the Common Stock Warrants, collectively referred to herein as the "Securities". 2.2 Purchase and Sale of Securities; Closing. Subject to the terms and conditions herein set forth, the Company hereby agrees to sell to each Purchaser, and each Purchaser severally and not jointly agrees to purchase from the Company, at the Closing (as defined herein), shares of Series D Preferred Stock, Series D Warrants, Common Shares and Common Stock Warrants in the amounts indicated on Schedule I attached hereto with respect to such Purchaser for the aggregate purchase price set forth on Schedule I to be paid by such Purchaser. Subject to the satisfaction or waiver of the parties' respective conditions to closing set forth in Sections 3.1 and 3.2, the closing of the purchase and sale of the Securities (the "Closing") shall take place on June __, 2003, or at such other time and on such other date as the Purchasers and the Company may agree (the "Closing Date"), at the offices of the Company or at such other location as the Purchasers and the Company may agree. At the Closing, the Company will deliver to each Purchaser two or more stock certificates, as such Purchaser may request, registered in such Purchaser's name (or in its nominee name if designated by Purchaser) evidencing the shares of Series D Preferred Stock and Common Stock to be purchased by Purchaser, together with the Series D Warrants and Common Stock Warrants to be purchased by such Purchaser, against payment of the applicable purchase price therefore by wire transfer of immediately available funds to or upon the order by the Company. ARTICLE III CONDITIONS OF CLOSING 3.1 Purchasers' Conditions to Closing. Each Purchaser's obligation to purchase and pay for the Securities to be purchased by such Purchaser at the Closing is subject to the satisfaction, as determined by, or waived by, such Purchaser on or before the Closing Date, of the following conditions: (a) Receipt of Securities. Such Purchaser shall have received delivery of the stock certificates and Warrant Certificates evidencing the Securities to be purchased by such Purchaser, duly issued by the Company; (b) Opinion of the Company's Counsel. Such Purchaser shall have received from Schwartz, Cooper, Greenberger & Krauss, Chartered, special counsel to the Company in connection with this transaction, an opinion dated on the Closing Date in form and substance reasonably satisfactory to such Purchaser; (c) Stock Trading Agreement. The Stock Trading Agreement shall have been entered into by the Company and each Purchaser hereunder; (d) No Litigation; No Order. No action, suit or proceeding relating to the transactions contemplated by this Agreement or any Ancillary Agreement (the "Transactions") shall be pending that in the reasonable good faith judgment of such Purchaser (i) seeks to restrain or prevent any of the Transactions and has a reasonable probability of success or (ii) is reasonably likely to have a material adverse effect on the assets, business, prospects, properties, operations or conditions (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, and no order (including, without limitation, a temporary restraining order), decree, writ, judgment or injunction shall be in effect that restrains, enjoins or prevents the consummation of the transactions contemplated by this Agreement or any Ancillary Agreement (collectively, "Litigation"); (e) Proceedings. On or prior to the Closing Date, all corporate and other proceedings required to be taken under applicable laws, rules and all regulations and all rules of The American Stock Exchange in connection with the transactions contemplated by this Agreement or any Ancillary Agreement shall have been taken and all filings and documents incident thereto shall be reasonably satisfactory in form and substance to such Purchaser; (f) Compliance with this Agreement. The Company shall have performed and complied with all of its agreements and conditions set forth or contemplated herein that are required to be performed or complied with by the Company on or before the Closing Date; (g) Officer's Certificate. Such Purchaser shall have received a certificate, dated the Closing Date and signed by the Chief Executive Officer of the Company, certifying that the conditions set forth in Sections 3.1(d), 3.1(e), 3.1(f), 3.1(g), 3.1(k), and 3.1(l) hereof have been satisfied on and as of such date; (h) Secretary's Certificate. Such Purchaser shall have received a certificate, dated the Closing Date and signed by the Secretary of the Company, attaching good standing certificates from the Delaware Secretary of State with respect to the Company and from the respective Secretaries of State for the jurisdictions of incorporation for its Subsidiaries and certifying the authenticity of attached copies of (i) the Certificate of Incorporation and by-laws of the Company and the certificate of incorporation and by-laws of each of its Subsidiaries, in each case as amended; (ii) resolutions of the Board of Directors of the Company approving this Agreement and the Ancillary Agreements and the transactions contemplated by this Agreement and the Ancillary Agreements; (i) Purchase Permitted by Applicable Laws; Legal Investment. The acquisition by such Purchaser of and payment for the Securities to be purchased by such Purchaser and the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements (i) shall not be prohibited by any applicable law or governmental regulation, (ii) shall not subject such Purchaser to any penalty or, in its reasonable judgment, other onerous conditions under or pursuant to any applicable law or governmental regulation and (iii) shall be permitted by the laws and regulations of the jurisdictions to which such Purchaser is subject; (j) Consents and Approvals. All consents, waivers, approvals, exemptions, authorizations, or other actions by, or notices to, or filings with, Governmental Authorities and other Persons necessary or required in connection with the execution, delivery or performance by the Company or enforcement against the Company of this Agreement (including, without limitation, the issuance of the Securities contemplated hereunder), any Ancillary Agreement or any other document executed in connection with the consummation of the transactions contemplated by this Agreement or any Ancillary Agreement shall have been obtained and be in full force and effect, and Purchaser and its special counsel shall have been furnished with appropriate evidence thereof; and (k) Insolvency. The Company shall not have made an assignment for the benefit of creditors, nor shall it have filed with a court of competent jurisdiction an application for appointment of a receiver or similar official with respect to it or any substantial part of its assets, nor shall there have been filed by the Company or any of its Subsidiaries a petition seeking relief under any provision of the Federal Bankruptcy Code or any other federal or state statute now or hereafter in effect affording relief to debtors, nor shall there have been filed against the Company or any of its Subsidiaries any such application or petition. 3.2 Company Conditions to Closing. The Company's obligation to issue and sell the Securities to each Purchaser hereunder at the Closing is subject to the satisfaction, on or before the Closing Date, of the following conditions: (a) Receipt of Purchase Price. The Company shall have received from such Purchaser payment of the purchase price to be paid by such Purchaser hereunder by wire transfer of immediately available funds; (b) Acknowledgement and Agreement. The Stock Trading Agreement shall have been entered into and delivered by the Company and all the Purchasers; (c) No Litigation; No Order. No action, suit or proceeding relating to the Transactions shall be pending that in the reasonable good faith judgment of the Company seeks to restrain or prevent any of the Transactions and has a reasonable probability of success; (d) Purchase Permitted by Applicable Laws; Legal Investment. The acquisition by such Purchaser of and payment for the Securities and the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements (i) shall not be prohibited by any applicable law or governmental regulation, and (ii) shall not subject the Company to any penalty or, in its reasonable judgment, other onerous conditions under or pursuant to any applicable law or governmental regulation; and (e) Consents and Approvals. All consents, waivers, approvals, exemptions, authorizations, or other actions by, or notices to, or filings with, Governmental Authorities and other Persons necessary or required in connection with the execution, delivery or performance by the Company or enforcement against the Company of this Agreement (including, without limitation, the issuance of the Securities contemplated hereunder), any Ancillary Agreement or any other document executed in connection with the consummation of the transactions contemplated by this Agreement or any Ancillary Agreement shall have been obtained and be in full force and effect. ARTICLE IV CERTAIN COVENANTS 4.1 Financial Statements and Other Reports. After the Closing Date, the Company agrees to send the following reports to each holder of Series D Preferred Stock: (a) so long as the Company is subject to the requirements of, or otherwise making filings pursuant to, Section 13 or 15(d) of the Exchange Act, within three (3) days after the filing with the Commission, a copy of its Annual Report on Form 10-KSB or Form 10-K, its Quarterly Reports on Form 10-QSB or Form 10-Q, any proxy statements or information statements and any Current Reports on Form 8-K, together in each case with amendments thereto; (b) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries; (c) promptly upon receipt thereof, copies of reports, if any, submitted to the Company by independent accountants in connection with each annual or interim audit of the books of the Company made by such accountants; and (d) all other information sent to holders of the Common Stock or any other equity security holder. Without limiting the foregoing, the Company shall deliver to each Purchaser until such Purchaser transfers, assigns (except in the case of an assignment to an Affiliate) or sells all of its Series D Preferred Stock (i) as soon as practicable and in any event within 45 days after the end of each fiscal quarter, the following information: consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries for such fiscal period and for the period from the beginning of the then current fiscal year to the end of such fiscal period and a comparison of each such item to the then current budget, and the balance sheet of the Company and its Consolidated Subsidiaries as at the end of such fiscal period, setting forth in each case in comparative form figures for the corresponding periods in the preceding fiscal year, all in reasonable detail, prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, certified as to fair presentation by the principal financial officer of the Company and accompanied by a written discussion of operations in summary form; and (ii) as soon as practicable and in any event within 90 days after the end of each fiscal year of the Company, the following information: statements of income, stockholders' equity and cash flows of the Company and its consolidated Subsidiaries for such year, and a consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such year, setting forth in each case in comparative form corresponding figures from the preceding fiscal year, prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, and accompanied by an opinion of BDO Siedman LP, or another firm of independent public accountants of recognized national standing selected by the Company, to the effect that the consolidated financial statements have been prepared in accordance with generally accepted accounting principles consistently applied (except for changes in application in which such accountants concur and as are noted therein) and present fairly the financial condition of the Company and its consolidated Subsidiaries and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances; and accompanied by a written discussion of operations by management in summary form with respect to such fiscal year, including a comparison to budget. Each Purchaser is hereby authorized to deliver a copy of any financial statement delivered to it pursuant to this Section 4.1 to any regulatory body having jurisdiction over it that requests such information. Subject to compliance with reasonable confidentiality requirements imposed by the Company, each Purchaser shall have reasonable access to the Company, including its management, and its books and records during regular business hours and is further authorized to request information from and to have access to, at the Company's expense, the Company's independent public accountants. The Company shall request such accountants to make available to any Purchaser such information as such Purchaser may reasonably request. Notwithstanding the foregoing, the Company need not provide any Purchaser with any information pursuant to this Section 4.1 which the Company reasonably believes constitutes material, non-public information, unless such Purchaser has entered into an acceptable written confidentiality agreement with the Company. 4.2 Corporate Existence; Licenses and Permits; Maintenance of Properties. The Company shall at all times use commercially reasonable efforts to do or cause to be done all things necessary to maintain, preserve and renew its existence as a corporation organized under the laws of a state of the United States of America, and to preserve and keep in force and effect, and cause each of its consolidated Subsidiaries to apply for on a timely basis, all licenses and permits necessary and material to the conduct of the business of the Company and its Subsidiaries, taken as a whole. 4.3 Securities Exchange. The Company shall use its reasonable best efforts to maintain its Common Stock listing and to continue to have its Common Stock be quoted on The American Stock Exchange or on another national securities exchange, so long as it is subject to Section 13 or 15(d) of the Exchange Act. 4.4 Best Efforts. The Company agrees to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws, rules and regulations to consummate and make effective the transactions contemplated by this Agreement as promptly as practicable. In case at any time after the Closing any further action is reasonably necessary to carry out the purposes of this Agreement, the proper agents, officers and directors of the Company shall take such action. 4.5 Insurance. The Company shall at all times maintain customary directors and officers insurance in amounts as are customary for other publicly traded companies of similar size. 4.6 Public Disclosure. The Company shall: (i) on the Closing Date issue a press release disclosing the material terms of the transactions contemplated hereby (including at least the number of shares sold and proceeds therefrom) and any information disclosed to Purchaser which the Company believes may constitute material, non-public information, and (ii) make such other filings and notices in the manner and time required by the Commission, (including filing of this Agreement with the Commission pursuant to the Exchange Act and other actions required to comply with Section 4.3 hereof). ARTICLE V REPRESENTATIONS, COVENANTS AND WARRANTIES The Company represents, covenants and warrants to the Purchaser as follows: 5.1 Organization; Standing and Qualification of Company and its Subsidiaries; Corporate Authority. (a) Each of the Company and each of its Subsidiaries is a corporation duly organized and existing in good standing under the laws of the jurisdiction of its organization, and has the corporate power to own its property and to carry on its business as now being conducted, is duly qualified and in good standing as a foreign corporation to do business in every jurisdiction where the character of the properties owned or leased by it or the nature of any business transacted by it makes such qualification necessary, except where such nonqualification or lack of good standing would not have a material adverse effect on the business of the Company and its Subsidiaries, taken as a whole. (b) The execution and delivery by the Company of this Agreement and the Ancillary Agreements (collectively, the "Transaction Documents"), and the performance by the Company of all transactions and obligations contemplated hereby and thereby are within its corporate authority. The execution, delivery and performance of the Transaction Documents and each other agreement contemplated by the terms hereof and thereof and the issuance of the Securities have been duly authorized by all necessary corporate proceedings on the part of the Company. Each of the Transaction Documents constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and to equitable principles relating to enforceability. The Common Shares are duly authorized and, when issued, will be validly issued, fully paid and nonassessable and subject to no preemptive rights in favor of other Persons which have not been waived. Assuming the accuracy of the representations of each Purchaser in this Agreement, the Series D Preferred Stock and the Common Shares issuable hereunder will be issued in compliance with all applicable federal and state securities laws. The shares of Series D Preferred Stock issuable upon the exercise of the Series D Warrants are duly authorized and reserved for issuance, and, when issued upon such exercise, will be validly issued, fully paid and nonassessable, and subject to no preemptive rights in favor of other Persons which have not been waived. The shares of Common Stock issuable upon the exercise of the Common Stock Warrants, or the conversion of shares of the Series D Preferred Stock to be issued at Closing hereunder or upon the conversion of shares of the Series D Preferred Stock issuable upon exercise of the Series D Warrants, are duly authorized and reserved for issuance, and, when issued upon such exercise, will be validly issued, fully paid and nonassessable, and subject to no preemptive rights in favor of other Persons which have not been waived. Assuming the accuracy of the representations of each of the Purchasers in this Agreement, when such shares of Series D Preferred Stock and such shares of Common Stock are issued, such shares will be issued in compliance with all applicable federal and state securities laws. The Company has reserved for issuance (i) 210,938 shares of Common Stock issuable upon exercise of the Common Stock Warrants, (ii) 37,500 shares of Series D Preferred Stock issuable upon exercise of the Series D Warrants, (iii) 1,500,000 shares of Common Stock issuable upon conversion of the Series D Preferred Stock to be issued hereunder, and (iv) 375,000 shares of Common Stock issuable upon conversion of the shares of Series D Preferred Stock issuable upon exercise of the Series D Warrants. (c) Great Lakes Controlled Energy Corporation and Switchboard Apparatus, Inc. are the only Subsidiaries of the Company. Each such Subsidiary is wholly owned by the Company. 5.2 Capital Stock. (a) As of the date hereof, the Company has authorized 120,000,000 shares of Common Stock and 5,000,000 shares of preferred stock. As of the date hereof, the Company has 34,125,460 issued and outstanding shares of Common Stock, 2,225,471 issued and outstanding shares of Series A Convertible Preferred Stock and 216,933 issued and outstanding shares of Series C Convertible Preferred Stock. All outstanding shares of the Company Common Stock, the Series A Convertible Preferred Stock and the Series C Convertible Preferred Stock have been duly authorized, validly issued and are fully paid and nonassessable and free of preemptive rights and were issued in compliance with all applicable federal and state securities laws. (b) Except as otherwise stated in this Section 5.2 or in Schedule 5.2 and except for shares of capital stock reserved for issuance in connection with the transactions contemplated by this Agreement and the Ancillary Agreements, the Company has not granted or issued, or agreed to grant or issue, any options, warrants or similar rights to acquire or receive any of the authorized but unissued shares of its capital stock of any class or any securities convertible into shares of its capital stock of any class or any stock appreciation rights. Except as stated in Schedule 5.2, no adjustment to the exercise price of any outstanding options or warrants of the Company will be required as a result of the issuance of any of the Securities. (c) Except as set forth in Schedule 5.2(c), no holder of shares of Common Stock (or securities convertible into or exchangeable or exercisable for Common Stock) has any rights to purchase or receive additional or other securities upon the occurrence of an event that might dilute such holder's percentage interest in the Company. 5.3 No Defaults. Except as set forth in Schedule 5.3, neither the Company nor any of its Subsidiaries, to its knowledge, is in violation of, or in default under, nor has there been any waiver given with respect to, any term or provision of any charter, by-law, mortgage, indenture, agreement, instrument, statute, rule, law, regulation, judgment, decree, order, writ, or injunction applicable to it, such that such violations and defaults in the aggregate could reasonably be expected to result in any material adverse change in the business, assets, properties, condition (financial or otherwise) or results of operations of the Company and its Subsidiaries, taken as a whole, or materially adversely affect the ability of the Company to perform in any material respect its obligations under this Agreement. All Regulatory Approvals required by the Company and its Subsidiaries to conduct their respective business as now conducted by them have been obtained and are in full force and effect, and the Company and its Subsidiaries are in compliance with the terms and requirements of such Regulatory Approvals. Except as set forth on Schedule 5.3 hereto, since December 31, 2002, none of the Company or any of its Subsidiaries has received any written notice or other written communication from any Governmental Entity regarding (i) any revocation, withdrawal, suspension, termination or modification of, or the imposition of any material conditions with respect to, any Regulatory Approval, (ii) any violation of any law by the Company or any of its Subsidiaries, or (iii) any other limitations on the conduct of business by the Company or any of its Subsidiaries. 5.4 Burdensome and Conflicting Agreements and Charter Provisions. Neither the execution or delivery of the Transaction Documents by the Company, nor the offering, issuance and sale of the Securities by the Company, nor fulfillment of, or compliance with, the terms and provisions of the Transaction Documents, nor the issuance by the Company of shares of Series D Preferred Stock upon exercise of the Series D Warrants, shares of Common Stock upon exercise of the Common Stock Warrants and shares of Common Stock upon conversion of shares of Series D Preferred Stock will, except as set forth in Schedule 5.4, conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any lien upon any of the properties or assets of the Company or any of its Subsidiaries, or require any consent, approval or other action by, or notice to, or filing with, any court or administrative or governmental body or any other Person or pursuant to the Certificate of Incorporation or by-laws of the Company or the certificate of incorporation or by-laws of any of the Company's Subsidiaries, any award of any arbitrator or any material agreement (including any agreement with stockholders), instrument, order, judgment, decree, statute, law, rule or regulation to which the Company or any of its Subsidiaries is subject. 5.5 Title to Assets, Etc. The Company has good and marketable fee simple title to the assets reflected on the balance sheet set forth on Schedule 5.5 (the "Assets"). Except as set forth in Schedule 5.5, none of the Assets is subject to any encumbrances, except for minor liens that in the aggregate are not substantial in amount, do not materially detract from the value of the property or assets subject thereto or interfere with the present use thereof and have not arisen other than in the ordinary course of business. There are no pending or threatened condemnation proceedings relating to any of the facilities of the Company. The real property improvements (including leasehold improvements) and fixtures and equipment of the Company are adequately insured and are structurally sound with no known material defects. The facilities, fixtures and equipment of the Company are in good operating condition and repair (except for ordinary wear and tear and any defect for which the cost of repairing would not be material), are sufficient for the operation of the Company's business as presently conducted and are in conformity in all material respects with all applicable laws, ordinances, orders, regulations and other requirements (including applicable zoning, environmental, motor vehicle safety or standards, occupational safety and health laws and regulations) relating thereto currently in effect, except where the failure to conform would not have a material adverse effect on the business or financial condition of the Company. The Assets are valued on the Company's books at or below actual cost less an adequate and proper depreciation charge. The Company has not depreciated any of the Assets on an accelerated basis or in any other manner inconsistent with applicable Internal Revenue Service tax and fiscal guidelines, if any. 5.6 Leases. Each of the Company and Great Lakes Controlled Energy Corporation enjoy peaceful and undisturbed possession of all leases material to them. All such leases are valid and subsisting and are in full force and effect. 5.7 Contracts. Except as set forth in Schedule 5.7, there is no contract, agreement or understanding required to be described in or filed as an exhibit to any Commission Documents that is not described in or filed as required by the Securities Act or the Exchange Act, as the case may be. Except as set forth in Schedule 5.7, each such contract, agreement and understanding is valid and binding and is in full force and effect and enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or as may be limited by equitable principles relating to enforceability), except in the case of such contracts, agreements or understandings that are by their terms no longer in force or effect. Except as set forth on Schedule 5.7, (a) no approval or consent of, or notice to, any Person is needed in order that such contract, agreement or understanding shall continue in full force and effect in accordance with its terms without penalty, acceleration or rights of early termination following the consummation of the transactions contemplated by the Transaction Documents, other than such notices, consents and approvals as have been obtained and (b) the Company and/or its Subsidiaries are not in violation of, breach of, or default under any such contract, agreement or understanding nor, to the Company's knowledge, is any other party to any such contract, agreement or understanding. 5.8 Financial Statements. The Company has furnished the Purchasers with (a) the balance sheet of the Company and its consolidated Subsidiaries as at December 31, 2002 and the related statements of income, stockholders' equity and cash flows of the Company and its consolidated Subsidiaries for the fiscal year ended December 31, 2002, all certified by BDO Seidman LLP, including in each case the related schedules and notes, and (b) an unaudited balance sheet of the Company and its consolidated Subsidiaries as at March 31, 2003 and statements of income, stockholders' equity and cash flows of the Company and its consolidated Subsidiaries for the interim period ended on such date, prepared by the Company and certified by its principal financial officer (item (b) is referred to as the "Interim Financial Statements"). All such financial statements (including any related schedules and notes) have been prepared in accordance with generally accepted accounting principles consistently applied, except to the extent set forth in the notes to such financial statements and except for the absence of footnotes to the Interim Financial Statements and except that the Interim Financial Statements are subject to normal year-end adjustments and to adjustments made in the course of an audit that would not in the aggregate be material, throughout the periods involved and to the extent required by such principles show all liabilities, direct and contingent, of the Company and its Subsidiaries required to be shown thereon in accordance with generally accepted accounting principles. The balance sheets and the related schedules and notes fairly present the financial condition of the Company and its consolidated Subsidiaries. Except as set forth in Schedule 5.8, the Company has incurred no material liabilities since March 31, 2003, other than those incurred in the ordinary course. The net income and stockholders' equity statements and the related schedules and notes fairly present the results of the operations of the Company and its consolidated Subsidiaries for the periods indicated. Except as set forth in Schedule 5.8, there has been no material adverse change in the assets, business, prospects, properties, operations or condition, financial or otherwise, of the Company and its Subsidiaries, taken as a whole, since March 31, 2003. 5.9 Actions Pending. Except as set forth in Schedule 5.9 hereto, there is no action, suit, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries before any court, arbitrator or administrative or governmental body that (a) seeks to enjoin or otherwise prevent the consummation of the sale or issuance of the Securities or (b) materially and adversely affects, or as to which there is a reasonable possibility of an adverse decision that would materially and adversely affect, either individually or collectively, the assets, business, properties, prospects, operations or condition, financial or otherwise, of the Company and its Subsidiaries, taken as a whole. Neither the Company nor any of its Subsidiaries is in violation of any judgment, order, writ, injunction, decree, rule or regulation of any court or governmental department, commission, board, bureau, agency or instrumentality, the violation of which reasonably could be expected to, either individually or collectively, materially and adversely affect the business, property, assets, prospects, operations or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole. 5.10 Offering of Securities. Assuming the accuracy of the representations of each of the Purchasers in this Agreement, the offer, sale and issuance of the Securities are exempt from the registration requirements of the Securities Act. Neither the Company nor any agent on its behalf has solicited or will solicit any offers to sell or has offered to sell or will offer to sell all or any part of the Securities to any Person so as to bring the offering and sale of such Securities by the Company within the registration provisions of the Securities Act. The Company has filed all notices and satisfied all registration or qualification requirements of any state securities or Blue Sky law of any applicable jurisdiction with respect to the offer, issuance and sale of the Securities or required by the Ancillary Agreements. 5.11 Placement Agent Fees; Broker's or Finder's Commissions. The Company will pay the Placement Agent a fee equal to 8% of the gross proceeds received from the sale of the Securities at the Closing hereunder. The Placement Agent is controlled by David Asplund, a director of the Company. Other than the fee payable by the Company to the Placement Agent, no broker's or finder's or placement fee or commission will be payable with respect to the sale or the issuance of the Securities contemplated hereby or by the Ancillary Agreements as a result of any act or omission by the Company, and the Company will hold the Purchasers harmless from any claim, demand or liability for broker's or finder's or placement fees or commissions alleged to have been incurred in connection with the sale or the issuance of the Securities due to any actions or omissions by the Company or its Subsidiaries or any of their respective directors, officers or agents. The Company acknowledges that the Placement Agent has served as placement agent for the Company, Duke Capital Partners, LLC, and EP Power Finance, L.L.C. with respect to the sale of securities of the Company (including the securities to be sold hereunder) and that Mr. Asplund is a Purchaser under this Agreement and an Investor under that certain Duke Securities Purchase and Sale Agreement of even date herewith. The Company hereby waives any and all conflict of interest claims against the Placement Agent and/or Mr. Asplund arising from the Placement Agent's simultaneous agency relationship with the Company, Duke Capital Partners, LLC, and EP Power Finance, L.L.C., his status as a Purchaser hereunder and Mr. Asplund's status as a director of the Company. 5.12 Application of Proceeds. The net proceeds of the sale of the Securities will be used by the Company for working capital and for general corporate purposes. 5.13 Intellectual Property. (a) The Company and its Subsidiaries exclusively own or possess the requisite licenses or rights (on reasonable commercial terms) to use all patents, trade secrets, trademarks, service marks, service names, trade names, copyrights and other intellectual property rights necessary to enable each of them to conduct their respective businesses as now operated (collectively, the "Company IP"). Schedule 5.13(a) sets forth a full and complete list of all intellectual property rights of the Company and its Subsidiaries. There is no claim or action by any Person pertaining to, or proceeding pending, or to the Company's knowledge threatened, that challenges the rights of the Company or its Subsidiaries with respect to any Company IP. To the Company's knowledge, neither the Company's nor any of its Subsidiaries' current and intended products and services infringe on any patents, licenses, trademarks, service marks, service names, trade names, copyrights or other intellectual property rights held by any Person and neither the Company nor any of its Subsidiaries is aware of any facts or circumstances that might give rise to any of the foregoing. (b) Except as set forth in Schedule 5.13(b), no proceedings or claims in which the Company alleges that any Person is infringing upon, or otherwise violating, any Company IP are pending, and none has been served by, instituted or asserted by the Company or any of its Subsidiaries, nor are any proceedings threatened alleging any such violation or infringement. (c) The Company has taken and will take all commercially reasonable actions that are necessary or advisable in order to fully protect the Company IP, in a manner consistent with prudent commercial practice. 5.14 Taxes. The Company and each of its Subsidiaries has timely filed (or caused to be filed) all Tax Returns that are required to be filed by (or with respect to) it on or before the date hereof and has paid all Taxes due on or before the date hereof whether or not reflected on such Tax Returns, including pursuant to any assessment received by it. All such Tax Returns were true, correct and complete in all material respects. None of such Tax Returns has been audited by the relevant taxing authority, and no taxing authority has notified (or threatened) the Company or any of its Subsidiaries, orally or in writing, that such taxing authority will or may audit any such return. The Company and its Subsidiaries have complied with all requirements of the Code, the Treasury Regulations and any state, local or foreign law relating to the payment and withholding of Taxes relating to them, and the Company and each of its Subsidiaries have, within the time and in the manner prescribed by applicable law, paid over to the proper taxing authorities all amounts required to be so withheld and paid over relating to them. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Taxes or other governmental charges are adequate to cover any liability of the Company and its Subsidiaries for Taxes through the date hereof. There are no liens for Taxes with respect to any asset of the Company or any of its Subsidiaries, except for liens with respect to Taxes that are not yet due and payable. No taxing authority in a jurisdiction where the Company or any of its Subsidiaries, as the case may be, does not file tax returns has made a claim, assertion or threat that the Company or any of its Subsidiaries is or may be subject to taxation in such jurisdiction. 5.15 Insurance. The Company maintains or is covered by valid policies of workers' compensation insurance, product liability insurance, and insurance with respect to its properties and business. The Company currently maintains in full force insurance covering the respective risks of the Company and its Subsidiaries of such types and in such amounts, with such deductibles and with such insurance companies as are customary for other companies engaged in similar lines of business. The Company currently maintains key man life insurance for John Mitola in the amount of $5,000,000, which is and will remain in full force and effect through December 31, 2005. 5.16 Commission Documents. Except as set forth in Schedule 5.16, the Company has filed all registration statements, proxy statements, information statements, reports and other documents required to be filed by it under the Securities Act or the Exchange Act, and all amendments thereto (collectively, the "Commission Documents"). Each Commission Document when filed with the Commission was true and accurate in all material respects and in compliance in all material respects with the requirements of its respective report form and the rules and regulations of the Commission. No Commission Document contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which made, not misleading. 5.17 Disclosure. Neither this Agreement nor any other document, certificate or statement prepared by or on behalf of the Company by its authorized representatives or agents and furnished to or made available to the Purchaser in writing by or on behalf of the Company by its authorized representatives or agents in connection herewith, contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements contained herein and therein, in the light of the circumstances under which made, not misleading. ARTICLE VI REPRESENTATIONS OF THE PURCHASERS Each Purchaser represents and warrants, as to itself only, as follows: 6.1 Investment Purpose. Such Purchaser is purchasing the Securities for such Purchaser's own account for investment only and not with a view toward or in connection with the public sale or distribution thereof. Such Purchaser will not resell the Securities except pursuant to sales that are exempt from the registration requirements of the Securities Act and all applicable state securities laws, and/or sales registered under the Securities Act and all applicable state securities laws. Such Purchaser understands that such Purchaser may bear the economic risk of this investment indefinitely, unless the Securities are registered pursuant to the Securities Act and any applicable state securities laws or an exemption from such registration is available. 6.2 Accredited Investor Status/Organization. Such Purchaser is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act. By reason of his or its business and financial experience, sophistication and knowledge, such Purchaser is capable of evaluating the risks and merits of the investment made pursuant to this Agreement. 6.3 Authorization; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of such Purchaser and is the legally valid and binding agreement of such Purchaser enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. As of the Closing Date, each Ancillary Agreement to which such Purchaser is a party will be the legally valid and binding agreement of such Purchaser enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 6.4 Broker's or Finder's Commissions. Other than the fee payable to the Placement Agent (which will be paid by the Company) no broker's or finder's or placement fee or commission will be payable with respect to the sale or the issuance of the Securities as a result of any act or omission by such Purchaser, and such Purchaser will hold the Company harmless from any claim, demand or liability for broker's or finder's or placement fees or commissions alleged to have been incurred in connection with the sale or the issuance of the Securities due to any actions of such Purchaser. The Purchasers acknowledge that the Placement Agent has served as placement agent for the Company, Duke Capital Partners, LLC, and EP Power Finance, L.L.C. with respect to the sale of certain securities of the Company (including the securities to be sold hereunder) and that Mr. Asplund is a Purchaser under this Agreement and an Investor under that certain Duke Securities Purchase and Sale Agreement of even date herewith. The Purchasers hereby waive any and all conflict of interest claims against the Placement Agent and/or Mr. Asplund arising from the Placement Agent's simultaneous agency relationship with Company, Duke Capital Partners, LLC, and EP Power Finance, L.L.C., his status as a Purchaser hereunder and Mr. Asplund's status as a director of the Company. ARTICLE VII INDEMNIFICATION 7.1 Indemnification by Company. In addition to all other sums due hereunder or provided for in this Agreement, the Company agrees to indemnify and hold harmless each Purchaser and its officers, directors, agents, employees and partners (each, an "indemnified party") to the fullest extent permitted by law from and against any and all losses, claims, damages, expenses (including reasonable fees, disbursements and other charges of counsel), damages or other liabilities ("Losses") resulting from: (i) any breach of any representation or warranty, covenant or agreement of the Company in this Agreement, or (ii) any legal, administrative or other actions (including actions brought by any equityholders of the Company or derivative actions brought by any Person claiming through the Company or in the Company's name), proceedings or investigations (whether formal or informal), or written threats thereof, based upon, relating to or arising out of any of the Transaction Documents or the Securities, the transactions contemplated hereby or thereby, or any indemnified person's role therein; provided, however, that the Company shall not be liable under this Section 7.1: (a) for any amount paid in settlement of claims without the Company's consent (which consent shall not be unreasonably withheld or delayed) or (b) to the extent that it is finally judicially determined that such Losses resulted primarily from the willful misconduct, bad faith or gross negligence of such indemnified party or a breach of such Purchaser's representations in Article VI; provided, further, that if and to the extent that such indemnification is unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of such indemnified liability that shall be permissible under applicable laws. In connection with the obligation of the Company to indemnify for expenses as set forth above, the Company further agrees to reimburse each indemnified party for all such expenses (including reasonable fees, disbursements and other charges of counsel) as they are incurred by such indemnified party; provided, however, that in no event shall the Company be required to pay fees and expenses under this Article VII for more than one firm of attorneys in addition to the firm of attorneys representing the Company in any jurisdiction in any one legal action or group of related legal actions; provided, further, that if an indemnified party is reimbursed hereunder for any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined that the Losses in question resulted primarily from the willful misconduct, bad faith or gross negligence of such indemnified party. 7.2 Notification. Each indemnified party under this Article VII shall, promptly (and in any event within 20 days), after the receipt of notice of the commencement of any action or other proceeding against such indemnified party in respect of which indemnity may be sought from the Company under this Article VII, notify the Company in writing of the commencement thereof. The failure of any indemnified party so to notify the Company of any such action shall not relieve the Company from any liability that it may have to such indemnified party pursuant to this Article VII, except to the extent that such failure causes material prejudice to the Company. In case any such action or other proceeding shall be brought against any indemnified party and it shall notify the Company of the commencement thereof, the Company shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that any indemnified party may, at its own expense, retain separate counsel to participate in such defense. Notwithstanding the foregoing, in any action or proceeding in which both the Company and an indemnified party is, or is reasonably likely to become, a party, such indemnified party shall have the right to employ separate counsel at the Company's expense and to control its own defense of such action or proceeding if, in the reasonable written opinion of counsel to such indemnified party (obtained at the expense of the Company), (a) there are or may be legal defenses available to such indemnified party or to other indemnified parties that are different from or additional to those available to the Company or (b) any conflict or potential conflict exists between the Company and such indemnified party that would make such separate representation advisable; provided, however, that in no event shall the Company be required to pay fees and expenses under this Article VII for more than one firm of attorneys in addition to the firm of attorneys representing the Company in any jurisdiction in any one legal action or group of related legal actions. The Company shall not, without the consent of the indemnified party (which consent shall not be unreasonably withheld), consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation or that requires action other than the payment of money by the Company. The rights accorded to indemnified parties hereunder shall be in addition to any rights that any indemnified party may have at common law, by separate agreement or otherwise. 7.3 Payment. No indemnifying party shall be liable for any amounts paid in a settlement effected without the consent of such indemnifying party, which consent shall not be unreasonably withheld or delayed. No indemnifying party shall, without the indemnified party's prior written consent, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the plaintiff to the indemnified party of a release from all liability in respect of such claim or litigation. 7.4 Investor Rights Agreement. Notwithstanding anything to the contrary in this Article VII, the indemnification and contribution provisions of the Investor Rights Agreement shall govern any claim made with respect to registration statements filed pursuant thereto or sales made thereunder. 7.5 Survival of Provisions of Article VII. The obligations of the Company under this Article VII shall survive indefinitely. ARTICLE VIII MISCELLANEOUS 8.1 Expenses. The Company agrees to pay, and save each Purchaser harmless against liability for the payment of, all reasonable out-of-pocket expenses arising in connection with: (a) the negotiation and execution of the Transaction Documents and the issuance of the Securities, including all taxes (including any intangible personal property tax, together in each case with interest and penalties, if any, and also including any filing fees payable to any governmental authority, and any income tax payable by any Purchaser in respect of any reimbursement for any such tax or fee) that may be payable in respect of the execution and delivery of the Transaction Documents or the issuance, delivery or acquisition (but not the holding, ownership or transfer) of any of the Securities issued pursuant to this Agreement or any Series D Preferred Stock issuable upon exercise of the Series D Warrants or any of the shares of Common Stock issuable upon exercise of the Common Stock Warrants or pursuant to conversion of shares of Series D Preferred; (b) the cost and expenses, including reasonable attorney's fees, incurred by any Purchaser in enforcing any of his or its rights hereunder, including, without limitation, costs and expenses incurred in any bankruptcy case. The obligations of the Company under this Section 8.1 shall survive the transfer of any Securities by the Purchasers. 8.2 Restrictive Legends. The Securities shall each bear a legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED, QUALIFIED, APPROVED OR DISAPPROVED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS AND NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY AUTHORITY HAS PASSED ON OR ENDORSED THE MERITS OF THESE SECURITIES. THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO A STOCK TRADING AGREEMENT, AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICES OF THE COMPANY. Said legends shall be removed by the Company, upon the request of the holder thereof, at such time as the restrictions on the transfer of the applicable Security under applicable securities laws and the obligations imposed on the holder thereof under the Investor Rights Agreement and Stock Trading Agreement, as applicable, shall have terminated. 8.3 Consent to Amendments. This Agreement may be amended, and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, if the Company shall obtain the written consent of each Purchaser affected thereby to such amendment, action or omission to act. 8.4 Survival of Representations, Warranties and Indemnities. All representations, warranties, covenants and agreements contained herein or made in writing by the Company in connection herewith shall survive the execution, delivery and performance of this Agreement and the Ancillary Agreements, regardless of any investigation made by the Purchasers or on the Purchasers' behalf. 8.5 Successors and Assigns. Except as otherwise provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. 8.6 Notices. All notices, consents and other communications under this Agreement shall be in writing and shall be deemed to have been duly given when (a) delivered by hand, (b) sent by telecopier (with receipt confirmed), provided that a copy is mailed by certified mail, return receipt requested or (c) when received by the addressee, if sent by Express Mail, Federal Express or other express delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate as to itself by notice to the other parties): (i) If to the Company, to: 1280 Landmeier Road Elk Grove Village, IL 60007 Fax No. 847-437-4969 Attention: Chief Executive Officer (ii) If to a Purchaser: at the address for such Purchaser set forth on Schedule II hereto. 8.7 Accounting Terms. Unless otherwise set forth herein, all accounting terms and provisions in this Agreement or any Ancillary Agreement shall be construed to be as determined in accordance with generally accepted accounting principles in the United States then in effect. 8.8 Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Illinois. This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement is sought. 8.9 Headings. The descriptive headings of the several paragraphs of this Agreement and the table of contents are inserted for convenience only and do not constitute a part of this Agreement. 8.10 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be deemed but one and the same instrument and each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart for each of the parties hereto. Delivery by facsimile by any of the parties hereto of an executed counterpart of this Agreement shall be effective as an original executed counterpart hereof and shall be deemed a representation that an original executed counterpart hereof will be delivered. 8.11 Non-Business Days. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Agreement, shall not be a Business Day, such payment may be made or act performed or right exercised on the next succeeding Business Day, with the same force and effect as if done on the nominal date provided in this Agreement. 8.12 Further Assurances. The Company shall from time to time and at all times hereafter make, do, execute or cause or procure to be made, done and executed such further acts, deeds, conveyances, consents and assurances, without further consideration, that may reasonably be required to effect the transactions contemplated by this Agreement or any Ancillary Agreement. 8.13 Integration. This Agreement and the Ancillary Agreements, together with the exhibits hereto and thereto, embody the entire agreement by and among the parties hereto with respect to the matters set forth herein and supersede any and all previous agreements, whether oral or written, on the same subject matter. 8.14 Obligations Several Not Joint. This The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document. Nothing contained herein or in any Transaction Document, and no action taken by any Investor or other party hereto pursuant thereto, shall be deemed to constitute the Investors and such parties as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that such parties are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.] IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase Agreement as of the day and year first above written. COMPANY: PURCHASERS: ELECTRIC CITY CORP., CINERGY VENTURES II, LLC By: /s/John Mitola By:/s/R. Foster Duncan Name: John Mitola Name: R. Foster Duncan Title:Chief Executive Officer Title: President SF CAPITAL PARTNERS LTD. By: /s/Brian H. Davidson Name: Brian H. Davidson Title: Authorized Signatory JOHN THOMAS HURVIS REVOCABLE TRUST By: /s/John Thomas Hurvis Name: John Thomas Hurvis Title: Trustee /s/Richard P. Kiphart Richard P. Kiphart /s/David R. Asplund David R. Asplund SCHEDULE I Securities Being Purchased Shares of Shares of Shares of Common Series D Series D Common Stock Purchase Purchaser Preferred Warrants Stock Warrants Price - --------- --------- -------- ---------- -------- ----------- Cinergy Ventures 60,000 15,000 9,025 84,375 $600,000 II, LLC Richard P. Kiphart 52,500 13,125 7,897 73,829 $525,000 SF Capital Partners 30,000 7,500 4,512 42,188 $300,000 John Thomas Hurvis Revocable Trust 3,750 938 564 5,273 $37,500 David R Asplund 3,750 937 564 5,273 $37,500 SCHEDULE II Purchasers' Addresses for Notices Name of Purchaser Address For Notices Cinergy Ventures, LLC 139 East 4th Street, 26th Floor Atrium II EA610 Cincinnati, OH 45202 Attn: Kevin Kushman Kevin.kushman@cinergy.com Telephone: 513-287-1245 Facsimile: 513-287-4090 Richard P. Kiphart c/o William Blair & Co. 222 W. Adams Street Chicago, IL 60606 Telephone: 312-364-8420 Facsimile: 312-236-1655 rpk@wmblair.com --------------- SF Capital Partners, Ltd. C/o Stark Asset Management, LLC 3600 South Lake Drive St. Francis, WI 53235 Telephone: 414-294-7016 Facsimile: 414-294-4416 Attn: Brian Davidson bdavidson@starkinvestments.com --------------------------- David R. Asplund c/o Delano Group Securities, LLC 141 W. Jackson Blvd, Suite 2176 Chicago, IL 60604 Telephone: 312-583-1950 Facsimile: 312-583-1949 dasplund@delanosecurities.com --------------------------- John Thomas Hurvis Revocable John Thomas Hurvis, Trustee Trust Dated March 8, 2002 C/o Old World Industries 4065 Commercial Avenue Northbrook, IL 60062 Telephone: 847-559-2000 Facsimile: 847-559-2100 Attn: Tom Hurvis averhulst@oldworldind.com ------------------------- EXHIBIT A Certificate of Designations EXHIBIT B Joinder to Investor Rights Agreement EXHIBIT C Stock Trading Agreement EX-99 4 dukepsa.txt Exhibit 4 DUKE SECURITIES PURCHASE and SALE AGREEMENT This PURCHASE and SALE AGREEMENT (including the exhibits and schedules hereto, this "Agreement") is made and entered into this 27th day of June, 2003, between and among Duke Capital Partners, LLC, a limited liability company organized and existing under the laws of the State of Delaware ("Duke"), and the Investors listed on Schedule I hereto (each, an "Investor" and collectively, the "Investors"). WHEREAS, Duke is the holder of the following securities, including accrued and unpaid dividends thereon, of Electric City Corp.("ECC"), a Delaware corporation (collectively, the "Duke Securities") issued under that certain Securities Purchase Agreement dated as of July 31, 2001 among EEC and the Purchasers listed therein, including Duke (the "Original Agreement"): 1. 471,737 issued shares of Series A Convertible Preferred Stock, par value $0.01 per share: 2. 80,217 issued shares of common stock, par value $0.001 per share; and 3. warrants to purchase 750,000 shares of common stock. WHEREAS, Duke has informed ECC and the Investors that Duke is willing to sell the Duke Securities for a purchase price of $1,750,000 (the "Duke Purchase Price"); and WHEREAS, EP Power Finance, L.L.C., a limited liability company organized and existing under the laws of the State of Delaware ("EPPF"), is the holder of the following securities of ECC (collectively the "EPPF Securities") issued under the Original Agreement: 1. 471,737 issued shares of Series A Convertible Preferred Stock, par value $0.01 per share: 2. 80,217 issued shares of common stock, par value $0.001 per share; and 3. warrants to purchase 750,000 shares of common stock. WHEREAS, EPPF has informed ECC and the Investors that EPPF is willing to sell the EPPF Securities for an aggregate purchase price of $1,750,000 (the "EPPF Purchase Price"); and WHEREAS, ECC desires to raise $1,500,000 of additional capital by issuing and selling the following securities of ECC (collectively, the "ECC Securities"): 1. 150,000 shares of Series D Convertible Preferred Stock, par value $0.01 per share: 2. 37,500 Series D Warrants to purchase an aggregate of 37,500 shares of Series D Convertible Preferred Stock; 3. 22,562 shares of common stock; 4. 210,938 Common Stock Warrants to purchase an aggregate of 210,938 shares of common stock pursuant to the Securities Purchase Agreement made and entered into this 27th day of June, 2003, between and among ECC and the Investors (the "SPA"), (the "ECC Shares"); and WHEREAS, each of the Investors desire to purchase, ratably in proportion to their aggregate investment amount (the "Ratable Portion"), the Duke Securities, the EPPF Securities, and the ECC Shares, as more fully described in Schedule II hereto; WHEREAS, upon the terms and subject to the conditions of this Agreement, Duke desires to sell, transfer, assign and deliver to the Investors, all of Duke's right, title and interest in the Duke Securities; and the Investors, severally, desire to purchase, acquire and accept from Duke each Investor's Ratable Portion of the Duke Securities; NOW, THEREFORE, in consideration of the foregoing and of the mutual representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound by this Agreement, the parties to this Agreement agree as follows: ARTICLE I PURCHASE OF Duke Securities Section 1. 1. Purchase. Upon the terms and subject to the conditions of this Agreement, at the Closing (as defined in Section 1.2) Duke shall sell, transfer, assign and deliver to the Investors, all of Duke's right, title and interest in the Duke Securities, including Duke's right, title, interest and obligations, in to and under the certain contractual rights and obligations, as set forth in the Original Agreement, including the Ancillary Agreements thereto, and each Investor, severally, shall purchase, acquire and accept from Duke, all of Duke's right, title and interest in the Investor's Ratable Portion of the Duke Securities and the Investors shall, as of the Closing, assume the rights and obligations of Duke, in to and under the express written terms of the Original Agreement, including the Ancillary Agreements thereto; and The consideration to be paid by each Investor to Duke for the foregoing sale, transfer, delivery, purchase, acquisition and acceptance of each Investor's Ratable Portion of the Duke Securities shall be each Investor's Ratable Portion of the Duke Purchase Price. Upon the terms and subject to the conditions of this Agreement, at the Closing, each Investor shall pay to Duke the Investor's Ratable Portion of the Duke Purchase Price, in cash by wire transfer of immediately available funds to an account or accounts designated by Andrew H. Connor, Esq. of Schwartz, Cooper, Greenberger & Krauss, Chartered as Escrow Agent pursuant to that certain Escrow Agreement Letter, dated as of June 25, 2003, by and among Andrew H. Connor, Esq., the Investors, ECC, Duke, and EPPF (the "Escrow Agreement"), prior to the Closing. The transactions contemplated by this Section 1.1 are sometimes referred to in this Agreement as the "Purchase". Section 1.2. Time and Place of Closing. Upon the terms and subject to the conditions of this Agreement, the Purchase and the other transactions contemplated by this Agreement and the other Transaction Documents (as defined in Section 2.1) that, by their nature, are to be consummated at the Closing shall be consummated at a closing (the "Closing") to take place at the offices of ECC, at 10:00 a.m. (local time) on the 27th day of June, 2003, subject to all of the conditions specified in this Agreement to each party's obligations to consummate the foregoing transactions (the "Closing Conditions") have been satisfied or waived (or at such other date, place or time as the parties to this Agreement may agree). The date and time on which the Closing occurs and the transactions referenced in the immediately preceding sentence become effective is referred to in this Agreement as the "Closing Date". ARTICLE II REPRESENTATIONS AND WARRANTIES Each party to this Agreement hereby represents and warrants (as to itself only) to the other parties to this Agreement as follows: Section 2.1. Organization; Qualification. Each party is duly organized and validly existing under the laws of its jurisdiction of organization and has all requisite corporate, partnership or other similar power and authority to own the Duke Securities. Each party is duly licensed or duly qualified to do business and in good standing under the laws of its jurisdiction of organization. For all purposes of this Agreement, "Transaction Documents" means this Agreement, and any agreement, instrument, document or other writing contemplated by or executed in connection with this Agreement including, but not limited to, the Electric City Corp. Securities Purchase Agreement, the Certificate of Designations, the Series D Warrants, the Common Stock, the Warrants, the Joinder to the Investors Rights Agreements and the Stock Trading Agreement, each of even date herewith and the Escrow Agreement (as defined herein). Section 2.2. Authorization. Each party has the requisite corporate, partnership or other similar power and authority to execute and deliver the Transaction Documents to which it is party and to consummate the transactions contemplated by the Transaction Documents that are to be consummated by it. The execution and delivery by each party of the Transaction Documents to which it is party and the consummation by each party of the transactions contemplated by the Transaction Documents that are to be consummated by it have been duly authorized and approved by all requisite corporate, partnership or other similar action on the part of each party. Each party has duly and validly executed and delivered the Transaction Documents to which it is party. Each Transaction Document that has been executed and delivered by a party constitutes the legal, valid and binding obligations of the party that has executed and delivered it, enforceable against it in accordance with its terms and conditions, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting or relating to the enforcement of creditors' rights generally and general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law or under applicable legal codes) and assuming that each such Transaction Document has been duly authorized, executed and delivered by each other party thereto. Section 2.3. Consents and Approvals; No Violations. Except as set forth in Schedule 2.3, neither the execution nor the delivery by each party of any of the Transaction Documents to which it is party nor the consummation by each party of the transactions contemplated by the Transaction Documents that are to be consummated by it will: (a) conflict with, result in a breach of or require any consent under any of the terms, conditions or provisions of its certificate of incorporation, bylaws or equivalent governing instruments; (b) violate any provision of, or require any filing, consent, authorization, notice or approval under, any law, statute, rule, regulation, order (including an executive order), award, judgment, writ, injunction or decree applicable to, or binding upon, it; or (c) conflict with, result in a breach of or default (without regard to requirements of notice or the lapse of time or both) under, give rise to any right of termination, cancellation or acceleration under, or require any consent, authorization, notice or approval under, the terms, conditions or provisions of (i) any mortgage, note, bond, indenture, loan or credit agreement or other agreement or instrument evidencing indebtedness for borrowed money to which it is a party or by which it is bound or to which its properties are subject or (ii) any other agreement, contract, lease, license or other instrument to which it is a party or by which it is bound or to which the its properties are subject. Section 2.4. No Brokers. Other than Delano Securities, LLC, no party has, directly or indirectly, employed any broker, finder or intermediary that might be entitled to an investment banking, brokerage, finders' or similar fee or commission in connection with the transactions contemplated by the Transaction Documents. In addition, Duke hereby represents and warrants to the Investors as follows: Section 2.5. Ownership of the Duke Securities. The Duke Securities are the only securities of ECC owned by Duke. Further, Duke owns the Duke Securities, free and clear of all Liens (as defined below) other than any such Liens arising under the Original Agreement and the Ancillary Agreements. For all purposes of this Agreement, "Lien" means any lien, mortgage, security interest, pledge, claim, assignment, option, priority, right, preference or other charge or encumbrance. Duke has the requisite company power and authority to convey the Duke Securities to the Investors, free and clear of all Liens, other than any such Liens arising under the Original Agreement and the Ancillary Agreements. Upon delivery of the Duke Securities to the Investors on the Closing Date, each Investor will acquire good and valid title to their Ratable Portion of the Duke Securities, respectively, free and clear of all Liens, other than any such Liens arising under the Original Agreement and the Ancillary Agreements. There are no outstanding agreements or obligations to offer, sell, transfer, pledge, dispose of or encumber the Duke Securities, other than the obligations applicable under the Original Agreement and the Ancillary Agreements. Other than in connection with the Transaction Documents, Duke has never offered, sold, transferred, pledged, disposed of or encumbered (including by merger) all or any part of the Duke Securities, or any rights or benefits arising therefrom or associated therewith, to any person (including affiliates). Duke has discharged and complied with all of its liabilities, obligations, duties and responsibilities as owner of the Duke Securities (including timely filing of Tax (as defined in Section 3.2) returns and timely payment of Taxes attributable to ownership of the Duke Securities, except that this representation and warranty shall not apply to liabilities, obligations, duties and responsibilities that are to the Investors and that are released and discharged pursuant to the Transaction Documents. Section 2.6. Securities Law Representation. In addition, each Investor represents and warrants as follows: (a) Investor is purchasing the Duke Securities for such Investor's own account for investment only and not with a view toward or in connection with a view toward or in connection with the public sale or distribution thereof. Investor will not resell the Duke Securities except pursuant to sales that are exempt from the registration requirements of the Securities Act and all applicable state securities laws, and/or sales registered under the Securities Act and all applicable state securities laws. Investor understands that it may bear the economic risk of this investment indefinitely, unless the Duke Securities are registered pursuant to the Securities Act and any applicable state securities laws or an exemption from such registration is available. (b) Investor is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act. By reason of his or its business and financial experience, sophistication and knowledge, Investor is capable of evaluating the risks and merits of the investment made pursuant to this Agreement. Section 2.7. Non-disclosure. Each of the Investors and Duke covenant that, except as required by law, the terms and conditions of this transaction will not be disclosed to any third party, other than its broker, Delano Group Securities, LLC. ARTICLE III COVENANTS OF THE PARTIES Section 3.1. Commercially Reasonable Efforts. Each of the Investors and Duke shall cooperate, and use its commercially reasonable efforts, to take all action and do all things necessary, proper or advisable to consummate and in consummating the transactions contemplated by this Agreement and the other Transaction Documents (including as may be required to satisfy the Closing Conditions) to which it is a party. Section 3.2. Tax Matters. Each party to this Agreement shall be responsible for all Taxes (as defined below) assessed against it arising from the Purchase or any other transaction contemplated by this Agreement or any other Transaction Document. Each party to this Agreement shall use its commercially reasonable efforts to cooperate with the others to minimize any Taxes arising from the Purchase and the other transactions contemplated by this Agreement and the other Transaction Documents. Each party to this Agreement shall be liable for and shall indemnify the other parties and hold the other parties harmless from and against any and all liabilities, obligations, responsibilities, Taxes, demands, claims, actions, causes of action, controversies, assessments, losses, damages, costs and expenses (including reasonable attorneys' fees and expenses and whether foreseen or unforeseen, matured or unmatured, known or unknown or accrued or not accrued) (collectively, "Damages") arising out of or relating to any Tax for which the indemnifying party is responsible under this Section 3.2. For all purposes of this Agreement, "Tax" means any tax, fee, levy, duty or charge, including income, capital gains, sales, value added, transfer, customs, stamp, registration and any other tax, fee, levy, duty or charge, that is assessed by any country or any other governmental authority and any fines, penalties or interest with respect to such tax, fee, levy, duty or charge. Section 3.3. Further Assurances. From time to time before, on or after the Closing Date, each of the Investors, and Duke shall, as and when reasonably requested by another party to this Agreement, execute, deliver and record (when appropriate) any and all additional agreements, documents, instruments and writings, and take any and all other further action, that, in the reasonable opinion of another party to this Agreement or its counsel, are required to consummate or evidence the transactions contemplated by this Agreement or any other Transaction Document to which it is a party. Section 3.4 Indemnification. Duke agrees to indemnify and hold harmless each of the Investors: (i) from any claim regarding breach of Duke's representations and warranties in Section 2.5 hereof with respect to title to the Duke Securities, and, (ii) to the extent of the consideration paid by each Investor hereunder but not exceeding in the aggregate the Duke Purchase Price, for a period of one year from the date hereof, against any liabilities or obligations of Duke incurred or relating to Duke's ownership of the Duke Securities prior to Closing. ARTICLE IV CLOSING CONDITIONS AND CLOSING DELIVERIES Section 4.1. Conditions to Each Party's Obligations to Consummate the Closing. The obligations of each party to this Agreement to consummate the transactions contemplated by this Agreement and the other Transaction Documents that, by their nature, are to be consummated at the Closing by it are subject to the satisfaction (or waiver by all parties to this Agreement), at or prior to the Closing, of the following conditions: (a) No law, statute, rule, regulation, order (including an executive order), decree, award, judgment, writ or injunction (permanent or temporary) shall have been enacted, entered, issued, promulgated or enforced by any court or other governmental authority that remains in effect and prohibits the consummation of the transactions contemplated by this Agreement and the other Transaction Documents that have not previously been consummated; (b) There shall not be any suit, action, investigation, inquiry or other proceeding instituted, pending or specifically threatened in writing by any governmental authority that seeks to enjoin or otherwise prevent consummation of the transactions contemplated by this Agreement and the other Transaction Documents that have not previously been consummated; and (c) All licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and other third parties necessary to consummate the transactions contemplated by this Agreement and the other Transaction Documents that, by their nature, are to be consummated prior to or at the Closing and have not previously been consummated shall have been obtained. (d) Duke shall not have received timely notice from one or more of the other parties to the Stock Trading Agreement (as defined in the Sale Notice from Duke dated June 18, 2003, (the "Sale Notices")) with respect to such party's right of first refusal pursuant to Section 2.2 of the Stock Trading Agreement. (e) There shall be simultaneous closings of the transactions to purchase and sell the Duke Securities and the EPPF Securities with all Investors participating in each transaction to the extent of their purchase obligations as indicated on Schedule II hereto. Section 4.2. Further Conditions to the Obligations of Duke to Consummate the Closing. The obligations of Duke to consummate the transactions contemplated by this Agreement and the other Transaction Documents that, by their nature, are to be consummated at the Closing by it are subject to the satisfaction (or waiver by Duke), at or prior to the Closing, of the following conditions: (a) Each of the representations and warranties of the individual Investors contained in this Agreement or any other Transaction Document that is qualified as to materiality shall be true and correct, and each of such representations and warranties that is not so qualified shall be true and correct in all material respects, as of the Closing Date (as though made again on and as of the Closing Date if not then made); (b) Each of the Investors shall have performed and complied in all material respects with all covenants and agreements required by this Agreement and each other Transaction Document to be performed or complied with by it on or prior to the Closing; and (c) Each of the Investors shall have made their respective Closing deliveries. Section 4.3. Further Conditions to the Obligations of the Investors to Consummate the Closing. The obligations of the Investors to consummate the transactions contemplated by this Agreement and the other Transaction Documents that, by their nature, are to be consummated at the Closing are subject to the satisfaction (or waiver by the Investors), at or prior to the Closing, of the following conditions: (a) Each of the representations and warranties of Duke contained in this Agreement or any other Transaction Document that is qualified as to materiality shall be true and correct, and each of such representations and warranties that is not so qualified shall be true and correct in all material respects, as of the Closing Date (as though made again on and as of the Closing Date if not then made); (b) Duke shall have performed and complied in all material respects with all covenants and agreements required by this Agreement and each other Transaction Document to be performed or complied with by it on or prior to the Closing; and (c) Duke shall have made its Closing deliveries. Section 4.4. Closing Deliveries by Duke. Duke shall, at the Closing, deliver to the Escrow Agent the following: (a) Certificates representing the Duke Securities duly endorsed and accompanied by an executed Escrow Agreement and Assignment. (b) All other agreements, documents, instruments and writings required to be delivered by the Duke at or prior to the Closing pursuant to this Agreement or any other Transaction Document to which it is a party . Section 4.5. Closing Deliveries by the Investors. The Investors shall, at the Closing, cause the Escrow Agent to deliver to Duke the following: (a) Each Investor's Ratable Portion of the Duke Purchase Price in cash in immediately available funds according to this Agreement;(b) All other agreements, documents, instruments and writings required to be delivered by the Investors at or prior to the Closing pursuant to this Agreement or any other Transaction Document including, but not limited to the Escrow Agreement. ARTICLE V TERMINATION AND ABANDONMENT Section 5.1. Termination. This Agreement may be terminated and the transactions contemplated by this Agreement and the other Transaction Documents may be abandoned at any time prior to the Closing Date: (a) by mutual written consent of Duke and each of the Investors; (b) by Duke if any of the conditions set forth in Section 4.1 or 4.2 shall have become incapable of fulfillment and shall not have been waived by Duke; or (c) by any Investor if any of the conditions set forth in Section 4.1 or 4.3 shall have become incapable of fulfillment and shall not have been waived by it; provided, however, that the right to terminate this Agreement and abandon the transactions contemplated by this Agreement and the other Transaction Documents pursuant to Section 5.1 (b) or 5.1(c) shall not be available to a party to this Agreement if the event that gives rise to that right is due to the breach by that party of any representation, warranty, covenant or agreement set forth in this Agreement or any other Transaction Document. Section 5.2. Procedure for Valid Effect of Termination. In the event of termination of this Agreement and abandonment of the transactions contemplated by this Agreement and the other Transaction Documents pursuant to Section 5.1 (b) or 5.1(c), notice of that termination and abandonment shall be given by Duke or an Investor, whichever is so terminating and abandoning, to the others and, except as provided in this Section 5.2, this Agreement shall immediately terminate and shall become null and void and of no further force or effect, and the transactions contemplated by this Agreement and the other Transaction Documents shall be abandoned without further action by any party to this Agreement. If such termination and abandonment occurs: (a) All filings, applications and other submissions and requests made pursuant to this Agreement or any other Transaction Document shall be withdrawn from the governmental authority or other person to which made; and (b) There shall be no liability or obligation on the part of any party to this Agreement, except (i) that this Section 5.2 and Article VI shall survive such termination and abandonment and (ii) that a termination and abandonment pursuant to Section 5.1(b) or 5.1(c) shall not relieve any party to this Agreement of the consequences (subject to the terms and conditions of this Agreement) of any prior breach of any warranty, representation, agreement or covenant in this Agreement or any other Transaction Document and all duties, covenants, obligations and liabilities relating to the enforcement of those consequences and applicable provisions of this Agreement creating or relating to such duties, covenants, obligations and liabilities (including Article VI) shall survive such termination and abandonment for purposes of such enforcement. ARTICLE VI INDEMNIFICATION AND LIABILITY Section 6.1. No Special Damages. NO PARTY TO THIS AGREEMENT SHALL BE LIABLE UNDER OR IN CONNECTION WITH THIS AGREEMENT, FOR EXEMPLARY, SPECIAL, PUNITIVE, INDIRECT, REMOTE, SPECULATIVE OR CONSEQUENTIAL DAMAGES, WHETHER IN TORT (INCLUDING NEGLIGENCE OR GROSS NEGLIGENCE), STRICT LIABILITY, BY CONTRACT OR STATUTE. Section 6.2. Limited Recourse. NO PARTY TO THIS AGREEMENT WILL HAVE ANY LIABILITY OR RESPONSIBILITY FOR ANOTHER PARTY'S FAILURE TO PERFORM ANY TERM, COVENANT, CONDITION OR PROVISION OF THIS AGREEMENT , AND IN PURSUING ANY REMEDY FOR ANY PARTY'S BREACH OF ANY TERM, COVENANT, CONDITION OR PROVISION OF THIS AGREEMENT, OR OF ANY DUTY OR STANDARD OF CONDUCT BASED ON NEGLIGENCE, GROSS NEGLIGENCE, STRICT LIABILITY OR OTHER TORT OR VIOLATION OF APPLICABLE LAW, OR OTHERWISE, NO PARTY OR OTHER PERSON WILL HAVE RECOURSE AGAINST ANY PERSON OTHER THAN THE DEFAULTING OR BREACHING PARTY ITSELF NOR AGAINST ANY ASSETS OTHER THAN THE ASSETS OF THE DEFAULTING OR BREACHING PARTY ITSELF. ARTICLE VII MISCELLANEOUS PROVISIONS Section 7.1. Amendment and Modification. This Agreement may be amended, modified or supplemented at any time by the parties to this Agreement but only pursuant to an instrument in writing signed by all parties to this Agreement. Section 7.2. Entire Agreement. This Agreement (including the Exhibits and the Schedules to this Agreement) and the other Transaction Documents, as relevant, constitute the entire agreement between the parties to this Agreement with respect to the subject matter of this Agreement and supersede other prior agreements and understandings, both written and oral, among some or all of the parties to this Agreement with respect to the subject matter of this Agreement. Section 7.3. Severability. If any provision of this Agreement is held invalid or unenforceable, all other provisions will not be affected. With respect to the provision held invalid or unenforceable, the parties to this Agreement will amend this Agreement as necessary to effect the original intent of the parties to this Agreement as closely as possible. Section 7.4. Notices. Except as otherwise expressly provided in this Agreement, all notices and other communications to be given or made under this Agreement shall be in writing, shall be addressed as specified below and shall either be personally delivered, sent by internationally recognized courier (with proof of service) or sent by facsimile (with confirmation of transmittal). Initially, the addresses and facsimile numbers of the Investors are set out in Schedule I hereto. The address and facsimile numbers of Duke is as follows: Duke Capital Partners, LLC 128 South Tryon Street, Suite 1100 Charlotte, NC 28202 Att; Dennis Magna Fax : 704 373 4242 All notices shall be deemed delivered (a) when presented personally at the receiving party's address for notices then in effect, (b) if transmitted on a business day for the receiving patty, when transmitted by facsimile to the receiving party's facsimile number for notices then in effect and, if transmitted on a day that is not a business day for the receiving party, on the first business day following the date transmitted by facsimile to the receiving party's facsimile number for notices then in effect or (c) three (3) calendar days after being delivered to an internationally recognized courier addressed to the receiving party at the receiving party's address for notices then in effect. Any party to this Agreement may by notice change the address or facsimile number, or both, to which notices and communications are to be sent. Section 7.5. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without regard to its rules of conflict of laws that would require the application of laws of a different jurisdiction. Section 7.6. Counterparts; Delivery by Facsimile. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The delivery of an executed counterpart of this Agreement by facsimile shall be deemed to be valid delivery thereof. Section 7.7. Fees and Expenses. Whether or not this Agreement and the other Transaction Document and the transactions contemplated by this Agreement and the other Transaction Documents are consummated, and except as otherwise expressly set forth in this Agreement, all costs and expenses (including legal and financial advisory fees and expenses) incurred in connection with, or in anticipation of, this Agreement, the other Transaction Documents and the transactions contemplated by this Agreement and the other Transaction Documents shall be paid by the person incurring such expenses. Section 7.8. Interpretation. In this Agreement: (a) The headings are for convenience of reference only and shall be ignored in construing this Agreement; (b) Where the context requires, the singular includes the plural and vice versa; (c) The words "include," "includes" and "including" shall be deemed to be followed by the words "without limitation"; (d) Unless the context otherwise indicates, references to articles, sections, exhibits or schedules are references, respectively, to articles, sections, exhibits or schedules of or to this Agreement; and unless the context clearly otherwise indicates, references to "Investors" with respect to securities purchased pursuant to agreements other than this Agreement means the purchasers of such securities under the agreements governing such transactions. (e) All references to contracts, agreements and other documents shall be deemed to refer to such contracts, agreements and other documents as amended, modified and supplemented from time to time; (f) The words "hereof," "herein," "hereto," and "hereunder" and words of similar import shall, unless otherwise expressly specified, refer to this Agreement as a whole and not to any particular portion or provision of this Agreement; (g) The term "affiliate" shall mean, with respect to a referenced person, any other person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such referenced person; and (h) Wherever the consent or approval of any party is required under this Agreement, such consent or approval shall not be unreasonably withheld unless this Agreement provides that such consent or approval is to be given by such party at its sole or absolute discretion or is otherwise qualified. Each of the parties to this Agreement acknowledges that it and its counsel have reviewed and revised this Agreement and that any rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. Section 7.9. No Third Party Beneficiaries. This Agreement is intended solely for the benefit of the parties to this Agreement and nothing in this Agreement shall be construed to create any right in, any duty to, any standard of care with reference to, or any liability to, any person not a party to this Agreement. Section 7.10. Waivers. If on any occasion a party to this Agreement does not insist upon the performance of any term, condition or provision of this Agreement, such forbearance shall not operate or be construed as an acceptance of any variation in any term, condition or provision of this Agreement or relinquishment of any right under this Agreement. No waiver by any party to this Agreement of any right or of any breach by any other party under this Agreement shall operate or be construed as a waiver of any other or further right or as a waiver of any future breach, whether of like or different character or nature. Section 7.11. Assignment; Binding Effect. No party to this Agreement may assign this Agreement without the prior written consent of the other parties, except that any party to this Agreement shall have the right, without the consent of the other parties, to assign this Agreement in connection with a sale (including by merger) of all or substantially all the assets of, or by operation of law in connection with a merger involving, the assigning party and, if a party so assigns this Agreement, the assigning party shall, to the extent the assignee assumes the duties, liabilities, covenants and obligations of the assigning party under this Agreement, be relieved of its duties, liabilities, covenants and obligations under this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns. Section 7.12. Incorporation of Exhibits and Schedules. All exhibits and schedules to this Agreement are hereby incorporated in this Agreement and made a part of this Agreement for all purposes as if fully set forth in this Agreement. The exhibits and schedules as of the date of this Agreement are as follows: Schedule I - Investors and Investor's Notice Addresses Schedule II - Description of each Investor's Ratable Portion Schedule 2.3 - Required Consents Section 7.13. Investor Independence. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document. Nothing contained herein or in any Transaction Document, and no action taken by any Investor or other party hereto pursuant thereto, shall be deemed to constitute the Investors and such parties as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that such parties are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Document. Section 7.14 Waiver of Conflict of Interest. The parties acknowledge that Delano Group Securities, LLC, which is controlled by David R. Asplund, has served as placement agent for ECC, Duke, and EPPF with respect to the sale of securities described herein, that Mr. Asplund serves on the Board of Directors of ECC, and that Mr. Asplund or an entity in which Mr. Asplund holds an equity interest will be an Investor in the Duke Securities and a purchaser of ECC Securities under the Electric Securities Corp. Securities Purchase Agreement of even date herewith. The parties hereby waive any and all claims of conflicts of interest against Delano Group Securities, LLC and/or Mr. Asplund arising from or with respect to the transactions contemplated hereby. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly signed as of the date first above written. DUKE CAPITAL PARTNERS, LLC By:/s/Dennis Magna Name: Dennis Magna Title: Managing Director CINERGY VENTURES II, LLC By:/s/R. Foster Duncan Name: R. Foster Duncan Title: President 139 East 4th Street 26th Floor Atrium II EA610 Cincinnati, OH 45202 /s/Richard P. Kiphart Richard P. Kiphart c/o William Blair & Co. 222 W. Adams Street Chicago, IL 60606 SF CAPITAL PARTNERS LTD. By:/s/Brian H. Davidson Name: Brian H. Davidson Title: Authorized Signatory c/o Stark Asset Management, LLC 3600 South Lake Drive St. Francis, WI 53235 /s/David R. Asplund David R. Asplund c/o Delano Group Securities, LLC 141 W. Jackson Blvd, Suite 2176 Chicago, IL 60604 SCHEDULE I - INVESTORS Cinergy Ventures II, LLC 139 East 4th Street 26th Floor Atrium II EA610 Cincinnati, OH 45202 Attn: Kevin Kushman Kevin.kushman@cinergy.com Telephone: 513-287-1245 Facsimile: 513-287-4090 Richard P. Kiphart c/o William Blair & Co. 222 W. Adams Street Chicago, IL 60606 Telephone: 312-364-8420 Facsimile: 312-236-1655 rpk@wmblair.com - --------------- SF Capital Partners, Ltd. C/o Stark Asset Management, LLC 3600 South Lake Drive St. Francis, WI 53235 Telephone: 414-294-7016 Facsimile: 414-294-4416 Attn: Brian Davidson bdavidson@starkinvestments.com - ------------------------------ David R. Asplund c/o Delano Group Securities, LLC 141 W. Jackson Blvd, Suite 2176 Chicago, IL 60604 Telephone: 312-583-1950 Facsimile: 312-583-1949 dasplund@delanosecurities.com - ----------------------------- (for purposes of the Duke Securities Purchase and Sale Agreement and the ECC Securities Purchase Agreement only) John Thomas Hurvis Revocable Trust C/O Old World Industries 4065 Commercial Avenue Northbrook, IL 60062 (for purposes of the EPPF Securities Purchase and Sale Agreement and the ECC Securities Purchase Agreement only) SCHEDULE II INVESTORS' RATABLE PORTION OF DUKE SECURITIES, EPPF SECURITIES AND ECC SECURITIES Total Purchase Price: $5 Million Pro Rata Payments El Paso Duke ECC Investor Investment Cinergy Ventures II $2, 000,000 = 40% of total $700,000 S700,000 $600,000 Richard Kiphart $1,750,000 = 35% of total $612,500 $612,500 $525,000 Stark Investment $1,000,000 = 20% of total $350,000 $350,000 $300,000 David Asplund $125,000 = 2.5% of total $0 $87,500 $37,500 Hurvis Trust $125,000 = 2.5% of total $87,500 $0 $37,500 Total Proceeds $1,750,000 $1,750,000 $1,500,000 SCHEDULE 2.3 CONSENTS AND APPROVALS The right of first refusal under Section 2.2 of that certain Stock Trading Agreement, dated as of July 31, 2001 (as amended from time to time) made by and among the Purchasers and the Placement Agent, each as defined therein, and John Mitola, Brian Kawamura, Jeff Mistarz, Dennis Enberg (with respect to 50,000 shares of Common Stock), and Michael Pokora, which right of first refusal has been deemed to be waived pursuant to the provisions of the Sale Notice. .. EX-99 5 stocktradingagmt.txt Exhibit 3 STOCK TRADING AGREEMENT This Stock Trading Agreement, dated as of June 27, 2003 (as may be amended from time to time, this "Agreement"), is made by and among Electric City Corp., a Delaware corporation (the "Company"), Richard P. Kiphart, an individual ("Kiphart"), Cinergy Ventures II, LLC, a Delaware limited liability company("Cinergy"), SF Capital Partners, a British Virgin Islands company ("SFCP"), David R. Asplund, an individual ("Asplund") and John Thomas Hurvis Revocable Trust, an Illinois trust ("Hurvis Trust") (collectively, Kiphart, Cinergy, SFCP, Asplund and Hurvis Trust are referred to herein as the "Purchasers"), and shall become effective upon the Closing under the Securities Purchase Agreement (as herein defined). W I T N E S S E T H: WHEREAS, the Purchasers and the Company have entered into that certain Securities Purchase Agreement, dated as of June 27, 2003 (as it may be amended from time to time, the "Securities Purchase Agreement"), whereby the Company will sell and the Purchasers will buy shares of the Company's Series D Convertible Preferred Stock, par value $0.01 per share (the "Series D Preferred Stock"), together with warrants to purchase Series D Preferred Stock, shares of Common Stock and warrants to purchase Common Stock; and WHEREAS, it is a condition to the obligations of the Purchasers to purchase such securities pursuant to the Securities Purchase Agreement that the Parties (as defined below) enter into this Agreement; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows: ARTICLE I DEFINITIONS 1.1 Defined Terms. All terms capitalized but not defined herein shall have the meaning attributable to such terms in the Securities Purchase Agreement, except where the context otherwise requires. The following additional terms when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings, such meanings to be equally applicable to the singular and plural forms thereof: "Affiliate" means, as applied to any Person, any other Person controlling, controlled by or under common control with such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as applied to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any such other Person, whether through the ownership of voting securities or by contract or otherwise. With respect to individuals, the term Affiliate shall also include such individuals parents, spouse, children or grandchildren. "Agreement" shall have the meaning set forth in the preamble hereof. "Average Daily Trading Volume" with respect to any trading day, means the average daily trading volume of the Common Stock as reported on the American Stock Exchange (or, if not traded on the American Stock Exchange, any national securities exchange or automated quotation services on which the Common Stock is then listed for trading) for the twenty (20) consecutive trading days (as adjusted to exclude the highest and the lowest volume trading days for such twenty (20) consecutive trading day period) ending on the date immediately prior to such trading day. "Block Sales" means a sale of at least 10,000 shares of Common Stock. "Closing" shall have the meaning set forth in the Securities Purchase Agreement. "Closing Price" means the closing price of the Common Stock as reported on the American Stock Exchange (or, if not traded on the American Stock Exchange, any national securities exchange or automated quotation services on which the Common Stock is then listed for trading). "Common Stock" means and includes the Company's authorized common stock, par value $0.0001 per share. "Company" shall have the meaning set forth in the preamble hereof. "Effective Date" means the Closing Date (as defined in the Securities Purchase Agreement). "Election Period" shall have the meaning set forth in Section 2.2 hereof. "Parties" means all of the parties that are signatories to this Agreement from time to time, including under any joinders executed pursuant to the terms hereof, other than the Company. "Person" means and includes an individual, a corporation, a limited liability company, an association, a partnership, a trust or estate, a government or any department or agency thereof. "Purchasers" shall have the meaning set forth in the preamble hereof. "Qualified Primary Offering" means a firmly underwritten primary registered public offering of Common Stock by the Company that raises at least $35 million in aggregate gross proceeds at a price of at least $5.00 per share (as adjusted for stock splits, stock combinations and the like). "Sale Notice" shall have the meaning set forth in Section 2.2 hereof. "Securities Purchase Agreement" shall have the meaning set forth in the first recital hereof. "Selling Party" shall have the meaning set forth in Section 2.2 hereof. "Series D Preferred Stock" shall have the meaning set forth in the first recital hereof. "Subject Common Stock" means any shares of Common Stock which a Party acquires pursuant to the Securities Purchase Agreement, the warrants to purchase shares of Common Stock issued thereunder, or conversion of any shares of Series D Preferred Stock. ARTICLE II TRADING RESTRICTIONS 2.1 Public Sales. Each Party shall be subject to the following trading restrictions from time to time concerning its respective holdings of Common Stock: (a) During the term of this Agreement, no Party may sell any of its Subject Common Stock into the public market before the completion of a Qualified Primary Offering; provided, however, that prior to the completion of a Qualified Primary Offering each Party may sell its Subject Common Stock into the public market, severally and not jointly, subject to the following conditions: (i) the Closing Price must exceed $4.00 per share (as adjusted for stock splits, stock combinations and the like) for each of the twenty (20) consecutive trading days immediately prior to the date of sale; (ii) the Average Daily Trading Volume immediately prior to the date of sale must exceed 150,000 shares; (iii) the number of shares of Subject Common Stock sold by such Party on any trading day may not exceed five percent (5%) of the Average Daily Trading Volume; (iv) the number of shares of Subject Common Stock sold by such Party into the public market in any three-month period may not exceed fifteen percent (15%) of such Party's total holdings of Subject Common Stock (calculated assuming the exercise of all rights, options and warrants to purchase Subject Common Stock or securities convertible or exchangeable for shares of Subject Common Stock, and the conversion or exchange of all securities convertible or exchangeable for Subject Common Stock) on the Effective Date (as adjusted for stock splits, stock combinations and the like); and (v) Block Sales must be executed at a minimum price per share of 90% of the ask price as reported on the American Stock Exchange (or, if not traded on the American Stock Exchange, any national securities exchange or automated quotation services on which the Common Stock is then listed for trading). (b) If the Company completes a Qualified Primary Offering during the term of this Agreement, each Party shall comply with its obligations under any "lock-up" agreement entered into by such Party in connection with such Qualified Primary Offering. After any such "lock-up" period expires or is terminated, each Party may sell its Subject Common Stock into the public market, severally and not jointly, subject to the following conditions: (i) the number of shares of Subject Common Stock sold by such Party on any trading day may not exceed five percent (5%) of the Average Daily Trading Volume; (ii) the number of shares of Subject Common Stock sold by such Party into the public market in any three-month period may not exceed twenty percent (20%) of such Party's holdings of Subject Common Stock (calculated assuming the exercise of all rights, options and warrants to purchase Subject Common Stock or securities convertible or exchangeable for shares of Subject Common Stock, and the conversion or exchange of all securities convertible or exchangeable for Subject Common Stock) on the Effective Date (as adjusted for stock splits, stock combinations and the like); and (iii) Block Sales must be executed at a minimum price per share of 90% of the ask price as reported on the American Stock Exchange (or, if not traded on the American Stock Exchange, any national securities exchange or automated quotation services on which the Common Stock is then listed for trading). 2.2 Private Sales. If a Party (the "Selling Party") intends to sell any of its shares of Series D Preferred Stock or Subject Common Stock (or securities exercisable or exchangeable for or convertible into shares of Series D Preferred Stock or Subject Common Stock) in a private transaction (other than to an Affiliate), the Selling Party shall send written notice (the "Sale Notice") of such intent to each other Party. The Sale Notice shall include the following information: (a) the type of Company capital stock or other securities the Selling Party intends to sell; (b) the number of shares or other securities the Selling Party intends to sell; (c) the proposed sale price per share or per security, as applicable, and (d) any other material terms of the offer. The other Parties shall have two (2) business days after receipt of the Sale Notice (the "Election Period") to elect to purchase the capital stock or other securities that are the subject of the Sale Notice by giving the Selling Party written notice thereof within the Election Period, in which case the Selling Party and the Party (or Parties) so electing to purchase shall complete such sale within five (5) business days on the terms set forth in the Sale Notice. If more than one Party elects to purchase the capital stock or other securities set forth in the Sale Notice, then such shares or securities shall be allocated among the Parties so electing to purchase pro rata in proportion to their respective holdings of Subject Common Stock (calculated assuming the exercise of all rights, options and warrants to purchase Subject Common Stock or securities convertible or exchangeable for shares of Subject Common Stock, and the conversion or exchange of all securities convertible or exchangeable for Subject Common Stock held by such Parties so electing to purchase). If none of the Parties provides written notice so electing to purchase within the Election Period, then the Selling Party may sell the capital stock or other securities that are the subject of the Sale Notice on terms no less favorable to the Selling Party than those set forth in the Sale Notice to any third party within 10 business days of the date of the Sale Notice; provided, however, that any sale of shares of Series D Preferred Stock or Subject Common Stock (or securities exercisable or exchangeble for or convertible into shares of Series D Preferred Stock or Subject Common Stock) to a party that is not a party to this Agreement shall have as a condition to such sale that such party shall become a party to and bound by this Agreement. For purposes of Sections 2.1(a)(iv) and 2.1(b)(ii), the purchasing party's holdings (if such party was not a party to the Securities Purchase Agreement) with respect to the shares of capital stock or other securities it purchases shall be the number of shares of Subject Common Stock (calculated assuming the exercise of all rights, options and warrants to purchase Subject Common Stock or securities convertible or exchangeable for shares of Subject Common Stock, and the conversion or exchange of all securities convertible or exchangeable for Subject Common Stock) purchased in the subject sale. 2.3 Transfer to Affiliates. Notwithstanding anything in this Agreement to the contrary, any party may freely sell or otherwise transfer any Series D Preferred Stock or Subject Common Stock (or securities exercisable or exchangeable for or convertible into shares of Series D Preferred Stock or Subject Common Stock) it owns to its Affiliates without such sale or transfer being subject to the terms of this Agreement; provided, however, that any such Affiliate shall become a party to and bound by this Agreement and its ownership and sales of shares of Series D Preferred Stock and Subject Common Stock and other securities exercisable or exchangeable for or convertible into shares of Series D Preferred Stock or Subject Common Stock shall be aggregated with the transferring Party for purposes of Section 2.1. 2.4 Term of Trading Agreement. The term of the Trading Agreement shall commence on the Effective Date and terminate on September 7, 2004. 2.5 Amendments to the Trading Agreement. The Parties may amend this Agreement only upon the written agreement of the Parties hereto at such time and the Company and provided that the prior written consent of holders of at least seventy-five percent (75%) of the outstanding shares of the Company's Series A Convertible Preferred Stock to such amendment is also obtained. ARTICLE III GENERAL PROVISIONS 3.1 Legend on Share Certificates. All Company securities issued at the Closing (as defined in the Securities Purchase Agreement) or otherwise that are subject to the terms and provisions of Article II, in addition to such other legends as may be required by law and any other legend required by any Transaction Document (as defined in the Securities Purchase Agreement) shall bear the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN REQUIREMENTS AS TO TRADING CONTAINED IN THE STOCK TRADING AGREEMENT, DATED JUNE __, 2003, BY AND AMONG THE COMPANY AND CERTAIN SECURITY HOLDERS, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. Upon the termination of this Agreement, each Party shall be entitled to receive, in exchange for any security bearing the legend regarding this Agreement specifically set forth above, a security without such legend. 3.2 Injunctive Relief. It is acknowledged that it is impossible to measure in money the damages that would be suffered if the Parties fail to comply with the obligations imposed on them by this Agreement and that, in the event of any such failure, an aggrieved Party would be irreparably damaged and would not have an adequate remedy at law. Any such Party shall, therefore, be entitled to injunctive relief and/or specific performance to enforce such obligations, and if any action should be brought in equity to enforce any of such provisions of this Agreement, none of the Parties shall raise the defense that there is an adequate remedy at law. 3.3 Governing Law. Except as to matters governed by the General Corporation Law of the State of Delaware and decisions thereunder of the Delaware courts applicable to Delaware corporations, which shall be governed by such laws and decisions, this Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York. 3.4 Entire Agreement; Waiver. This Agreement contains the entire agreement among the parties hereto with respect to the subject matter hereof. No waiver of any term or provision shall be effective unless in writing signed by the party to be charged. 3.5 Binding Effect. This Agreement shall be binding on and inure to the benefit of the Parties and, subject to the terms and provisions hereof, their respective legal representatives, successors and assigns. 3.6 Invalidity of Provision. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction. 3.7 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be deemed but one and the same instrument and each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart for each of the parties hereto. Delivery by facsimile by any of the parties hereto of an executed counterpart of this Agreement shall be effective as an original executed counterpart hereof and shall be deemed a representation that an original executed counterpart hereof will be delivered. 3.8 Notices. All notices, consents and other communications under this Agreement shall be in writing and shall be deemed to have been duly given when (a) delivered by hand, (b) sent by telecopier (with receipt confirmed), provided that a copy is mailed by certified or registered mail, return receipt requested, or (c) when received by the addressee, if sent by Express Mail, Federal Express or other express delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate as to itself by notice to the other parties): If to the Company: 1280 Landmeier Road Elk Grove Village, IL 60007-2410 Fax No. 847-437-4969 Attention: Chief Executive Officer If to another Party: at such Party's address in accordance with the Securities Purchase Agreement. 5.8 Headings. The descriptive headings of the several paragraphs of this Agreement are inserted for convenience only and do not constitute part of this Agreement. [Balance of page intentionally left blank; signature page follows.] IN WITNESS WHEREOF, the parties hereto have executed this Stock Trading Agreement as of the day and year first above written. COMPANY PURCHASERS ELECTRIC CITY CORP., CINERGY VENTURES II, LLC, a a Delaware corporation Delaware limited liability company By: /s/John P. Mitola By: /s/R. Foster Duncan Name: John P. Mitola Name: R. Foster Duncan Title: Chief Executive Officer Title: President /s/Richard P. Kiphart Richard P. Kiphart SF CAPITAL PARTNERS LTD, a British Virgin Islands company By: /s/Brian H. Davidson Name: Brian H. Davidson Title: Authorized Signatory /s/David R. Asplund David R. Asplund JOHN THOMAS HURVIS REVOCABLE TRUST, an Illinois trust By: /s/John Thomas Hurvis Name: John Thomas Hurvis Title: Trustee EX-99 6 eppfpsa.txt Exhibit 5 EPPF SECURITIES PURCHASE and SALE AGREEMENT This PURCHASE and SALE AGREEMENT (including the exhibits and schedules hereto, this "Agreement") is made and entered into this 27th day of June, 2003, between and among EP Power Finance, L.L.C., a limited liability company organized and existing under the laws of the State of Delaware ("EPPF"), and the Investors listed on Schedule I hereto (each, an "Investor" and collectively, the "Investors"). WHEREAS, Duke Capital Partners, LLC, a limited liability company organized and existing under the laws of the State of Delaware ("Duke"), is the holder of the following securities, including accrued and unpaid dividends thereon, of Electric City Corp.("ECC"), a Delaware corporation (collectively, the "Duke Securities") issued under that certain Securities Purchase Agreement dated as of July 31, 2001 among EEC and the Purchasers listed therein, including Duke (the "Original Agreement"): 1. 471,737 issued shares of Series A Convertible Preferred Stock, par value $0.01 per share: 2. 80,217 issued shares of common stock, par value $0.001 per share; and 3. warrants to purchase 750,000 shares of common stock. WHEREAS, Duke has informed ECC and the Investors that Duke is willing to sell the Duke Securities for a purchase price of $1,750,000 (the "Duke Purchase Price"); and WHEREAS, EPPF is the holder of the following securities of ECC (collectively the "EPPF Securities") issued under the Original Agreement: 1. 471,737 issued shares of Series A Convertible Preferred Stock, par value $0.01 per share: 2. 80,217 issued shares of common stock, par value $0.001 per share; and 3. warrants to purchase 750,000 shares of common stock. WHEREAS, EPPF has informed ECC and the Investors that EPPF is willing to sell the EPPF Securities for an aggregate purchase price of $1,750,000 (the "EPPF Purchase Price"); and WHEREAS, ECC desires to raise $1,500,000 of additional capital by issuing and selling the following securities of ECC (collectively, the "ECC Securities"): 1. 150,000 shares of Series D Convertible Preferred Stock, par value $0.01 per share: 2. 37,500 Series D Warrants to purchase an aggregate of 37,500 shares of Series D Convertible Preferred Stock; 3. 22,562 shares of common stock; 4. 210,938 Common Stock Warrants to purchase an aggregate of 210,938 shares of common stock pursuant to the Securities Purchase Agreement made and entered into this 27th day of June, 2003, between and among ECC and the Investors (the "SPA"), (the "ECC Shares"); and WHEREAS, each of the Investors desire to purchase, ratably in proportion to their aggregate investment amount (the "Ratable Portion"), the Duke Securities, the EPPF Securities, and the ECC Shares, as more fully described in Schedule II hereto; WHEREAS, upon the terms and subject to the conditions of this Agreement, EPPF desires to sell, transfer, assign and deliver to the Investors, all of EPPF's right, title and interest in the EPPF Securities; and the Investors, severally, desire to purchase, acquire and accept from EPPF each Investor's Ratable Portion of the EPPF Securities; NOW, THEREFORE, in consideration of the foregoing and of the mutual representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound by this Agreement, the parties to this Agreement agree as follows: ARTICLE I PURCHASE OF EPPF Securities Section 1. 1. Purchase. Upon the terms and subject to the conditions of this Agreement, at the Closing (as defined in Section 1.2) EPPF shall sell, transfer, assign and deliver to the Investors, all of EPPF's right, title and interest in the EPPF Securities, including EPPF's right, title, interest and obligations, in to and under the certain contractual rights and obligations, as set forth in the Original Agreement, including the Ancillary Agreements thereto, and each Investor, severally, shall purchase, acquire and accept from EPPF, all of EPPF's right, title and interest in the Investor's Ratable Portion of the EPPF Securities and the Investors shall, as of the Closing, assume the rights and obligations of EPPF, in to and under the express written terms of the Original Agreement, including the Ancillary Agreements thereto; and The consideration to be paid by each Investor to EPPF for the foregoing sale, transfer, delivery, purchase, acquisition and acceptance of each Investor's Ratable Portion of the EPPF Securities shall be each Investor's Ratable Portion of the EPPF Purchase Price. Upon the terms and subject to the conditions of this Agreement, at the Closing, each Investor shall pay to EPPF the Investor's Ratable Portion of the EPPF Purchase Price, in cash by wire transfer of immediately available funds to an account or accounts designated by Andrew H. Connor, Esq. of Schwartz, Cooper, Greenberger & Krauss, Chartered as Escrow Agent pursuant to that certain Escrow Agreement Letter, dated as of June 25, 2003, by and among Andrew H. Connor, Esq., the Investors, ECC, Duke, and EPPF (the "Escrow Agreement"), prior to the Closing. The transactions contemplated by this Section 1.1 are sometimes referred to in this Agreement as the "Purchase". Section 1.2. Time and Place of Closing. Upon the terms and subject to the conditions of this Agreement, the Purchase and the other transactions contemplated by this Agreement and the other Transaction Documents (as defined in Section 2.1) that, by their nature, are to be consummated at the Closing shall be consummated at a closing (the "Closing") to take place at the offices of ECC, at 10:00 a.m. (local time) on the 27th day of June, 2003, subject to all of the conditions specified in this Agreement to each party's obligations to consummate the foregoing transactions (the "Closing Conditions") have been satisfied or waived (or at such other date, place or time as the parties to this Agreement may agree). The date and time on which the Closing occurs and the transactions referenced in the immediately preceding sentence become effective is referred to in this Agreement as the "Closing Date". ARTICLE II REPRESENTATIONS AND WARRANTIES Each party to this Agreement hereby represents and warrants (as to itself only) to the other parties to this Agreement as follows: Section 2.1. Organization; Qualification. Each party is duly organized and validly existing under the laws of its jurisdiction of organization and has all requisite corporate, partnership or other similar power and authority to own the EPPF Securities. Each party is duly licensed or duly qualified to do business and in good standing under the laws of its jurisdiction of organization. For all purposes of this Agreement, "Transaction Documents" means this Agreement, and any agreement, instrument, document or other writing contemplated by or executed in connection with this Agreement including, but not limited to, the Electric City Corp. Securities Purchase Agreement, the Certificate of Designations, the Series D Warrants, the Common Stock, the Warrants, the Joinder to the Investors Rights Agreements and the Stock Trading Agreement, each of even date herewith and the Escrow Agreement (as defined herein). Section 2.2. Authorization. Each party has the requisite corporate, partnership or other similar power and authority to execute and deliver the Transaction Documents to which it is party and to consummate the transactions contemplated by the Transaction Documents that are to be consummated by it. The execution and delivery by each party of the Transaction Documents to which it is party and the consummation by each party of the transactions contemplated by the Transaction Documents that are to be consummated by it have been duly authorized and approved by all requisite corporate, partnership or other similar action on the part of each party. Each party has duly and validly executed and delivered the Transaction Documents to which it is party. Each Transaction Document that has been executed and delivered by a party constitutes the legal, valid and binding obligations of the party that has executed and delivered it, enforceable against it in accordance with its terms and conditions, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting or relating to the enforcement of creditors' rights generally and general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law or under applicable legal codes) and assuming that each such Transaction Document has been duly authorized, executed and delivered by each other party thereto. Section 2.3. Consents and Approvals; No Violations. Except as set forth in Schedule 2.3, neither the execution nor the delivery by each party of any of the Transaction Documents to which it is party nor the consummation by each party of the transactions contemplated by the Transaction Documents that are to be consummated by it will: (a) conflict with, result in a breach of or require any consent under any of the terms, conditions or provisions of its certificate of incorporation, bylaws or equivalent governing instruments; (b) violate any provision of, or require any filing, consent, authorization, notice or approval under, any law, statute, rule, regulation, order (including an executive order), award, judgment, writ, injunction or decree applicable to, or binding upon, it; or (c) conflict with, result in a breach of or default (without regard to requirements of notice or the lapse of time or both) under, give rise to any right of termination, cancellation or acceleration under, or require any consent, authorization, notice or approval under, the terms, conditions or provisions of (i) any mortgage, note, bond, indenture, loan or credit agreement or other agreement or instrument evidencing indebtedness for borrowed money to which it is a party or by which it is bound or to which its properties are subject or (ii) any other agreement, contract, lease, license or other instrument to which it is a party or by which it is bound or to which the its properties are subject. Section 2.4. No Brokers. Other than Delano Securities, LLC, no party has, directly or indirectly, employed any broker, finder or intermediary that might be entitled to an investment banking, brokerage, finders' or similar fee or commission in connection with the transactions contemplated by the Transaction Documents. In addition, EPPF hereby represents and warrants to the Investors as follows: Section 2.5. Ownership of the EPPF Securities. The EPPF Securities are the only securities of ECC owned by EPPF. Further, EPPF owns the EPPF Securities, free and clear of all Liens (as defined below) other than any such Liens arising under the Original Agreement and the Ancillary Agreements. For all purposes of this Agreement, "Lien" means any lien, mortgage, security interest, pledge, claim, assignment, option, priority, right, preference or other charge or encumbrance. EPPF has the requisite company power and authority to convey the EPPF Securities to the Investors, free and clear of all Liens, other than any such Liens arising under the Original Agreement and the Ancillary Agreements. Upon delivery of the EPPF Securities to the Investors on the Closing Date, each Investor will acquire good and valid title to their Ratable Portion of the EPPF Securities, respectively, free and clear of all Liens, other than any such Liens arising under the Original Agreement and the Ancillary Agreements. There are no outstanding agreements or obligations to offer, sell, transfer, pledge, dispose of or encumber the EPPF Securities, other than the obligations applicable under the Original Agreement and the Ancillary Agreements. Other than in connection with the Transaction Documents, EPPF has never offered, sold, transferred, pledged, disposed of or encumbered (including by merger) all or any part of the EPPF Securities, or any rights or benefits arising therefrom or associated therewith, to any person (including affiliates). EPPF has discharged and complied with all of its liabilities, obligations, duties and responsibilities as owner of the EPPF Securities (including timely filing of Tax (as defined in Section 3.2) returns and timely payment of Taxes attributable to ownership of the EPPF Securities, except that this representation and warranty shall not apply to liabilities, obligations, duties and responsibilities that are to the Investors and that are released and discharged pursuant to the Transaction Documents. Section 2.6. Securities Law Representation. In addition, each Investor represents and warrants as follows: (a) Investor is purchasing the EPPF Securities for such Investor's own account for investment only and not with a view toward or in connection with a view toward or in connection with the public sale or distribution thereof. Investor will not resell the EPPF Securities except pursuant to sales that are exempt from the registration requirements of the Securities Act and all applicable state securities laws, and/or sales registered under the Securities Act and all applicable state securities laws. Investor understands that it may bear the economic risk of this investment indefinitely, unless the EPPF Securities are registered pursuant to the Securities Act and any applicable state securities laws or an exemption from such registration is available. (b) Investor is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act. By reason of his or its business and financial experience, sophistication and knowledge, Investor is capable of evaluating the risks and merits of the investment made pursuant to this Agreement. Section 2.7. Non-disclosure. Each of the Investors and EPPF covenant that, except as required by law, the terms and conditions of this transaction will not be disclosed to any third party, other than its broker, Delano Group Securities, LLC. ARTICLE III COVENANTS OF THE PARTIES Section 3.1. Commercially Reasonable Efforts. Each of the Investors and EPPF shall cooperate, and use its commercially reasonable efforts, to take all action and do all things necessary, proper or advisable to consummate and in consummating the transactions contemplated by this Agreement and the other Transaction Documents (including as may be required to satisfy the Closing Conditions) to which it is a party. Section 3.2. Tax Matters. Each party to this Agreement shall be responsible for all Taxes (as defined below) assessed against it arising from the Purchase or any other transaction contemplated by this Agreement or any other Transaction Document. Each party to this Agreement shall use its commercially reasonable efforts to cooperate with the others to minimize any Taxes arising from the Purchase and the other transactions contemplated by this Agreement and the other Transaction Documents. Each party to this Agreement shall be liable for and shall indemnify the other parties and hold the other parties harmless from and against any and all liabilities, obligations, responsibilities, Taxes, demands, claims, actions, causes of action, controversies, assessments, losses, damages, costs and expenses (including reasonable attorneys' fees and expenses and whether foreseen or unforeseen, matured or unmatured, known or unknown or accrued or not accrued) (collectively, "Damages") arising out of or relating to any Tax for which the indemnifying party is responsible under this Section 3.2. For all purposes of this Agreement, "Tax" means any tax, fee, levy, duty or charge, including income, capital gains, sales, value added, transfer, customs, stamp, registration and any other tax, fee, levy, duty or charge, that is assessed by any country or any other governmental authority and any fines, penalties or interest with respect to such tax, fee, levy, duty or charge. Section 3.3. Further Assurances. From time to time before, on or after the Closing Date, each of the Investors, and EPPF shall, as and when reasonably requested by another party to this Agreement, execute, deliver and record (when appropriate) any and all additional agreements, documents, instruments and writings, and take any and all other further action, that, in the reasonable opinion of another party to this Agreement or its counsel, are required to consummate or evidence the transactions contemplated by this Agreement or any other Transaction Document to which it is a party. Section 3.4 Indemnification. EPPF agrees to indemnify and hold harmless each of the Investors: (i) from any claim regarding breach of EPPF's representations and warranties in Section 2.5 hereof with respect to title to the EPPF Securities, and, (ii) to the extent of the consideration paid by each Investor hereunder but not exceeding in the aggregate the EPPF Purchase Price, for a period of one year from the date hereof, against any liabilities or obligations of EPPF incurred or relating to EPPF's ownership of the EPPF Securities prior to Closing. ARTICLE IV CLOSING CONDITIONS AND CLOSING DELIVERIES Section 4.1. Conditions to Each Party's Obligations to Consummate the Closing. The obligations of each party to this Agreement to consummate the transactions contemplated by this Agreement and the other Transaction Documents that, by their nature, are to be consummated at the Closing by it are subject to the satisfaction (or waiver by all parties to this Agreement), at or prior to the Closing, of the following conditions: (a) No law, statute, rule, regulation, order (including an executive order), decree, award, judgment, writ or injunction (permanent or temporary) shall have been enacted, entered, issued, promulgated or enforced by any court or other governmental authority that remains in effect and prohibits the consummation of the transactions contemplated by this Agreement and the other Transaction Documents that have not previously been consummated; (b) There shall not be any suit, action, investigation, inquiry or other proceeding instituted, pending or specifically threatened in writing by any governmental authority that seeks to enjoin or otherwise prevent consummation of the transactions contemplated by this Agreement and the other Transaction Documents that have not previously been consummated; and (c) All licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and other third parties necessary to consummate the transactions contemplated by this Agreement and the other Transaction Documents that, by their nature, are to be consummated prior to or at the Closing and have not previously been consummated shall have been obtained. (d) EPPF shall not have received timely notice from one or more of the other parties to the Stock Trading Agreement (as defined in the Sale Notice from EPPF dated June 18, 2003(the "Sale Notice")) with respect to such party's right of first refusal pursuant to Section 2.2 of the Stock Trading Agreement. (e) There shall be simultaneous closings of the transactions to purchase and sell the EPPF Securities and the Duke Securities with all Investors participating in each transaction to the extent of their purchase obligations as indicated on Schedule II hereto. Section 4.2. Further Conditions to the Obligations of EPPF to Consummate the Closing. The obligations of EPPF to consummate the transactions contemplated by this Agreement and the other Transaction Documents that, by their nature, are to be consummated at the Closing by it are subject to the satisfaction (or waiver by EPPF), at or prior to the Closing, of the following conditions: (a) Each of the representations and warranties of the individual Investors contained in this Agreement or any other Transaction Document that is qualified as to materiality shall be true and correct, and each of such representations and warranties that is not so qualified shall be true and correct in all material respects, as of the Closing Date (as though made again on and as of the Closing Date if not then made); (b) Each of the Investors shall have performed and complied in all material respects with all covenants and agreements required by this Agreement and each other Transaction Document to be performed or complied with by it on or prior to the Closing; and (c) Each of the Investors shall have made their respective Closing deliveries. Section 4.3. Further Conditions to the Obligations of the Investors to Consummate the Closing. The obligations of the Investors to consummate the transactions contemplated by this Agreement and the other Transaction Documents that, by their nature, are to be consummated at the Closing are subject to the satisfaction (or waiver by the Investors), at or prior to the Closing, of the following conditions: (a) Each of the representations and warranties of EPPF contained in this Agreement or any other Transaction Document that is qualified as to materiality shall be true and correct, and each of such representations and warranties that is not so qualified shall be true and correct in all material respects, as of the Closing Date (as though made again on and as of the Closing Date if not then made); (b) EPPF shall have performed and complied in all material respects with all covenants and agreements required by this Agreement and each other Transaction Document to be performed or complied with by it on or prior to the Closing; and (c) EPPF shall have made its Closing deliveries. Section 4.4. Closing Deliveries by EPPF. EPPF shall, at the Closing, deliver to the Escrow Agent the following: (a) Certificates representing the EPPF Securities duly endorsed and accompanied by an executed Escrow Agreement and Assignments. (b) All other agreements, documents, instruments and writings required to be delivered by the EPPF at or prior to the Closing pursuant to this Agreement or any other Transaction Document to which it is a party . Section 4.5. Closing Deliveries by the Investors. The Investors shall, at the Closing, cause the Escrow Agent to deliver to EPPF the following: (a) Each Investor's Ratable Portion of the EPPF Purchase Price in cash in immediately available funds according to this Agreement;(b) All other agreements, documents, instruments and writings required to be delivered by the Investors at or prior to the Closing pursuant to this Agreement or any other Transaction Document including, but not limited to the Escrow Agreement. ARTICLE V TERMINATION AND ABANDONMENT Section 5.1. Termination. This Agreement may be terminated and the transactions contemplated by this Agreement and the other Transaction Documents may be abandoned at any time prior to the Closing Date: (a) by mutual written consent of EPPF and each of the Investors; (b) by EPPF if any of the conditions set forth in Section 4.1 or 4.2 shall have become incapable of fulfillment and shall not have been waived by EPPF; or (c) by any Investor if any of the conditions set forth in Section 4.1 or 4.3 shall have become incapable of fulfillment and shall not have been waived by it; provided, however, that the right to terminate this Agreement and abandon the transactions contemplated by this Agreement and the other Transaction Documents pursuant to Section 5.1 (b) or 5.1(c) shall not be available to a party to this Agreement if the event that gives rise to that right is due to the breach by that party of any representation, warranty, covenant or agreement set forth in this Agreement or any other Transaction Document. Section 5.2. Procedure for Valid Effect of Termination. In the event of termination of this Agreement and abandonment of the transactions contemplated by this Agreement and the other Transaction Documents pursuant to Section 5.1 (b) or 5.1(c), notice of that termination and abandonment shall be given by EPPF or an Investor, whichever is so terminating and abandoning, to the others and, except as provided in this Section 5.2, this Agreement shall immediately terminate and shall become null and void and of no further force or effect, and the transactions contemplated by this Agreement and the other Transaction Documents shall be abandoned without further action by any party to this Agreement. If such termination and abandonment occurs: (a) All filings, applications and other submissions and requests made pursuant to this Agreement or any other Transaction Document shall be withdrawn from the governmental authority or other person to which made; and (b) There shall be no liability or obligation on the part of any party to this Agreement, except (i) that this Section 5.2 and Article VI shall survive such termination and abandonment and (ii) that a termination and abandonment pursuant to Section 5.1(b) or 5.1(c) shall not relieve any party to this Agreement of the consequences (subject to the terms and conditions of this Agreement) of any prior breach of any warranty, representation, agreement or covenant in this Agreement or any other Transaction Document and all duties, covenants, obligations and liabilities relating to the enforcement of those consequences and applicable provisions of this Agreement creating or relating to such duties, covenants, obligations and liabilities (including Article VI) shall survive such termination and abandonment for purposes of such enforcement. ARTICLE VI INDEMNIFICATION AND LIABILITY Section 6.1. No Special Damages. NO PARTY TO THIS AGREEMENT SHALL BE LIABLE UNDER OR IN CONNECTION WITH THIS AGREEMENT, FOR EXEMPLARY, SPECIAL, PUNITIVE, INDIRECT, REMOTE, SPECULATIVE OR CONSEQUENTIAL DAMAGES, WHETHER IN TORT (INCLUDING NEGLIGENCE OR GROSS NEGLIGENCE), STRICT LIABILITY, BY CONTRACT OR STATUTE. Section 6.2. Limited Recourse. NO PARTY TO THIS AGREEMENT WILL HAVE ANY LIABILITY OR RESPONSIBILITY FOR ANOTHER PARTY'S FAILURE TO PERFORM ANY TERM, COVENANT, CONDITION OR PROVISION OF THIS AGREEMENT, AND IN PURSUING ANY REMEDY FOR ANY PARTY'S BREACH OF ANY TERM, COVENANT, CONDITION OR PROVISION OF THIS AGREEMENT, OR OF ANY DUTY OR STANDARD OF CONDUCT BASED ON NEGLIGENCE, GROSS NEGLIGENCE, STRICT LIABILITY OR OTHER TORT OR VIOLATION OF APPLICABLE LAW, OR OTHERWISE, NO PARTY OR OTHER PERSON WILL HAVE RECOURSE AGAINST ANY PERSON OTHER THAN THE DEFAULTING OR BREACHING PARTY ITSELF NOR AGAINST ANY ASSETS OTHER THAN THE ASSETS OF THE DEFAULTING OR BREACHING PARTY ITSELF. ARTICLE VII MISCELLANEOUS PROVISIONS Section 7.1. Amendment and Modification. This Agreement may be amended, modified or supplemented at any time by the parties to this Agreement but only pursuant to an instrument in writing signed by all parties to this Agreement. Section 7.2. Entire Agreement. This Agreement (including the Exhibits and the Schedules to this Agreement) and the other Transaction Documents, as relevant, constitute the entire agreement between the parties to this Agreement with respect to the subject matter of this Agreement and supersede other prior agreements and understandings, both written and oral, among some or all of the parties to this Agreement with respect to the subject matter of this Agreement. Section 7.3. Severability. If any provision of this Agreement is held invalid or unenforceable, all other provisions will not be affected. With respect to the provision held invalid or unenforceable, the parties to this Agreement will amend this Agreement as necessary to effect the original intent of the parties to this Agreement as closely as possible. Section 7.4. Notices. Except as otherwise expressly provided in this Agreement, all notices and other communications to be given or made under this Agreement shall be in writing, shall be addressed as specified below and shall either be personally delivered, sent by internationally recognized courier (with proof of service) or sent by facsimile (with confirmation of transmittal). Initially, the addresses and facsimile numbers of the Investors are set out in Schedule I hereto. The address and facsimile numbers of EPPF is as follows: EP Power Finance, L.L.C. 1001 Louisiana Houston, TX 77002 Attention: Anthony Ashley Fax: 713-420-5553 All notices shall be deemed delivered (a) when presented personally at the receiving party's address for notices then in effect, (b) if transmitted on a business day for the receiving patty, when transmitted by facsimile to the receiving party's facsimile number for notices then in effect and, if transmitted on a day that is not a business day for the receiving party, on the first business day following the date transmitted by facsimile to the receiving party's facsimile number for notices then in effect or (c) three (3) calendar days after being delivered to an internationally recognized courier addressed to the receiving party at the receiving party's address for notices then in effect. Any party to this Agreement may by notice change the address or facsimile number, or both, to which notices and communications are to be sent. Section 7.5. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without regard to its rules of conflict of laws that would require the application of laws of a different jurisdiction. Section 7.6. Counterparts; Delivery by Facsimile. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The delivery of an executed counterpart of this Agreement by facsimile shall be deemed to be valid delivery thereof. Section 7.7. Fees and Expenses. Whether or not this Agreement and the other Transaction Document and the transactions contemplated by this Agreement and the other Transaction Documents are consummated, and except as otherwise expressly set forth in this Agreement, all costs and expenses (including legal and financial advisory fees and expenses) incurred in connection with, or in anticipation of, this Agreement, the other Transaction Documents and the transactions contemplated by this Agreement and the other Transaction Documents shall be paid by the person incurring such expenses. Section 7.8. Interpretation. In this Agreement: (a) The headings are for convenience of reference only and shall be ignored in construing this Agreement; (b) Where the context requires, the singular includes the plural and vice versa; (c) The words "include," "includes" and "including" shall be deemed to be followed by the words "without limitation"; (d) Unless the context otherwise indicates, references to articles, sections, exhibits or schedules are references, respectively, to articles, sections, exhibits or schedules of or to this Agreement; and unless the context clearly otherwise indicates, references to "Investors" with respect to securities purchased pursuant to agreements other than this Agreement means the purchasers of such securities under the agreements governing such transactions. (e) All references to contracts, agreements and other documents shall be deemed to refer to such contracts, agreements and other documents as amended, modified and supplemented from time to time; (f) The words "hereof," "herein," "hereto," and "hereunder" and words of similar import shall, unless otherwise expressly specified, refer to this Agreement as a whole and not to any particular portion or provision of this Agreement; (g) The term "affiliate" shall mean, with respect to a referenced person, any other person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such referenced person; and (h) Wherever the consent or approval of any party is required under this Agreement, such consent or approval shall not be unreasonably withheld unless this Agreement provides that such consent or approval is to be given by such party at its sole or absolute discretion or is otherwise qualified. Each of the parties to this Agreement acknowledges that it and its counsel have reviewed and revised this Agreement and that any rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. Section 7.9. No Third Party Beneficiaries. This Agreement is intended solely for the benefit of the parties to this Agreement and nothing in this Agreement shall be construed to create any right in, any duty to, any standard of care with reference to, or any liability to, any person not a party to this Agreement. Section 7.10. Waivers. If on any occasion a party to this Agreement does not insist upon the performance of any term, condition or provision of this Agreement, such forbearance shall not operate or be construed as an acceptance of any variation in any term, condition or provision of this Agreement or relinquishment of any right under this Agreement. No waiver by any party to this Agreement of any right or of any breach by any other party under this Agreement shall operate or be construed as a waiver of any other or further right or as a waiver of any future breach, whether of like or different character or nature. Section 7.11. Assignment; Binding Effect. No party to this Agreement may assign this Agreement without the prior written consent of the other parties, except that any party to this Agreement shall have the right, without the consent of the other parties, to assign this Agreement in connection with a sale (including by merger) of all or substantially all the assets of, or by operation of law in connection with a merger involving, the assigning party and, if a party so assigns this Agreement, the assigning party shall, to the extent the assignee assumes the duties, liabilities, covenants and obligations of the assigning party under this Agreement, be relieved of its duties, liabilities, covenants and obligations under this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns. Section 7.12. Incorporation of Exhibits and Schedules. All exhibits and schedules to this Agreement are hereby incorporated in this Agreement and made a part of this Agreement for all purposes as if fully set forth in this Agreement. The exhibits and schedules as of the date of this Agreement are as follows: Schedule I - Investors and Investor's Notice Addresses Schedule II - Description of each Investor's Ratable Portion Schedule 2.3 - Required Consents Section 7.13. Investor Independence. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document. Nothing contained herein or in any Transaction Document, and no action taken by any Investor or other party hereto pursuant thereto, shall be deemed to constitute the Investors and such parties as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that such parties are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Document. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly signed as of the date first above written. EP POWER FINANCE, L.L.C. By: /s/Robert W. Baker Name: Robert W. Baker Title: President CINERGY VENTURES II, LLC By:/s/R. Foster Duncan Name: R. Foster Duncan Title: President 139 East 4th Street 26th Floor Atrium II EA610 Cincinnati, OH 45202 Richard P. Kiphart /s/Richard P. Kiphart c/o William Blair & Co. 222 W. Adams Street Chicago, IL 60606 SF CAPITAL PARTNERS LTD. By: /s/Brian H. Davidson Name: Brian H. Davidson Title: Authorized Signatory C/o Stark Asset Management, LLC 3600 South Lake Drive St. Francis, WI 53235 JOHN THOMAS HURVIS REVOCABLE TRUST By:/s/John Thomas Hurvis Name: John Thomas Hurvis Title: Trustee John Thomas Hurvis Trustee C/o Old World Industries 4065 Commercial Avenue Northbrook, IL 60062 SCHEDULE I - INVESTORS Cinergy Ventures II, LLC 139 East 4th Street 26th Floor Atrium II EA610 Cincinnati, OH 45202 Attn: Kevin Kushman Kevin.kushman@cinergy.com Telephone: 513-287-1245 Facsimile: 513-287-4090 Richard P. Kiphart c/o William Blair & Co. 222 W. Adams Street Chicago, IL 60606 Telephone: 312-364-8420 Facsimile: 312-236-1655 rpk@wmblair.com - --------------- SF Capital Partners, Ltd. C/o Stark Asset Management, LLC 3600 South Lake Drive St. Francis, WI 53235 Telephone: 414-294-7016 Facsimile: 414-294-4416 Attn: Brian Davidson bdavidson@starkinvestments.com - ------------------------------ John Thomas Hurvis Revocable Trust C/O Old World Industries 4065 Commercial Avenue Northbrook, IL 60062 (for purposes of the EPPF Securities Purchase and Sale Agreement and the ECC Securities Purchase Agreement only) David R. Asplund c/o Delano Group Securities, LLC 141 W. Jackson Blvd, Suite 2176 Chicago, IL 60604 Telephone: 312-583-1950 Facsimile: 312-583-1949 dasplund@delanosecurities.com - ----------------------------- (for purposes of the Duke Securities Purchase and Sale Agreement and the ECC Securities Purchase Agreement only) SCHEDULE II INVESTORS' RATABLE PORTION OF DUKE SECURITIES, EPPF SECURITIES AND ECC SECURITIES Total Purchase Price: $5 Million Pro Rata Payments El Paso Duke ECC Investor Investment Cinergy Ventures II $2, 000,000 = 40% of total $700,000 $700,000 $600,000 Richard Kiphart $1,750,000 = 35% of total $612,500 $612,500 $525,000 Stark Investment $1,000,000 = 20% of total $350,000 $350,000 $300,000 David Asplund $125,000 = 2.5% of total $0 $87,500 $37,500 Hurvis Trust $125,000 = 2.5% of total $87,500 $0 $37,500 Total Proceeds $1,750,000 $1,750,000 $1,500,000 SCHEDULE 2.3 CONSENTS AND APPROVALS The right of first refusal under Section 2.2 of that certain Stock Trading Agreement, dated as of July 31, 2001 (as amended from time to time) made by and among the Purchasers and the Placement Agent, each as defined therein, and John Mitola, Brian Kawamura, Jeff Mistarz, Dennis Enberg (with respect to 50,000 shares of Common Stock), and Michael Pokora, which right of first refusal has been deemed to be waived pursuant to the provisions of the Sale Notice. EX-99 7 jointfilingagmt.txt Exhibit 7 JOINT FILING AGREEMENT The undersigned acknowledge and agree that the foregoing statement on Schedule 13D with respect to the Common Stock, par value $.0001 per share, of Electric City Corp., is filed on behalf of each of the undersigned and that all subsequent amendments to this statement on Schedule 13D shall be filed on behalf of each of the undersigned without the necessity of filing additional joint filing agreements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning it contained therein, but shall not be responsible for the completeness and accuracy of the information concerning the others, except to the extent it knows or has reason to believe that such information is inaccurate. Dated: July 8, 2003 Cinergy Ventures II, LLC By: /s/Marc E. Manly Marc E. Manly Executive Vice President and Chief Legal Officer Cinergy Technologies, Inc. By:/s/Marc E. Manly Marc E. Manly Executive Vice President and Chief Legal Officer Cinergy Corp. By: /s/Marc E. Manly Marc E. Manly Executive Vice President and Chief Legal Officer EX-99 9 escrowltr.txt Exhibit 6 June 26, 2003 Andrew H. Connor, Esq. Schwartz, Cooper, Greenberger & Krauss, Chartered 180 North LaSalle Street 27th Floor Chicago, Illinois 60601 Re: Purchase and Sale Agreement (the "Duke Sale Agreement") dated June 27, 2003 between and among Duke Capital Partners, LLC ("Duke") and Cinergy Ventures II, LLC, a Delaware limited liability company ("Cinergy"), SF Capital Partners, a British Virgin Islands company ("SFCP"), Richard P. Kiphart ("Kiphart") and David R. Asplund ("Asplund"); Purchase and Sale Agreement (the "EPPF Sale Agreement") dated June 27, 2003 between and among EP Power Finance, L.L.C. ("EPPF") and Cinergy , SFCP, Kiphart and John Thomas Hurvis Trust ("Hurvis Trust"); and Securities Purchase Agreement (the "ECC Sale Agreement") dated as of June 27, 2003 by and among Electric City Corp., a Delaware corporation ("ECC"), Cinergy , SFCP, Kiphart, Hurvis Trust and Asplund. Mr. Connor: Reference is made to the foregoing Duke Sale Agreement, EPPF Sale Agreement and ECC Sale Agreement (collectively, the "Sale Agreements"). The undersigned, severally and not jointly, hereby agree with you as follows: 1. Schwartz, Cooper, Greenberger & Krauss, Chartered shall act as escrow agent (the "Escrow Agent") for each of the undersigned in respect of delivery of the following specified items for purposes of closing under the Sale Agreements to which the undersigned are respectively parties: a. Deliveries by Duke (the "Duke Deliveries"): i. the Duke Sale Agreement, together with six manually executed undated signature pages of Duke to the Duke Sale Agreement; ii. common stock certificates evidencing ownership of 80,217 shares of ECC common stock, par value $0.0001 per share; iii. preferred stock certificates evidencing ownership of 471,737 shares of Series A Convertible Preferred Stock of ECC, par value $0.01 per share; iv. warrant certificates evidencing ownership of warrants to purchase 750,000 shares of ECC common stock; v. one manually executed undated Assignment assigning and transferring to Cinergy Ventures II, LLC the following: (A) 188,695 shares of Series A Convertible Preferred Stock of ECC, par value $0.01 per share, (B) 32,087 shares of common stock of ECC, par value $0.0001 per share, and (C) 300,000 warrants to purchase shares of common stock of ECC; vi. one manually executed undated Assignment assigning and transferring to Kiphart the following: (A) 165,108 shares of Series A Convertible Preferred Stock of ECC, par value $0.01 per share, (B) 28,076 shares of common stock of ECC, par value $0.0001 per share, and (C) 262,500 warrants to purchase shares of common stock of ECC; vii. one manually executed undated Assignment assigning and transferring to SFCP the following: (A) 94,348 shares of Series A Convertible Preferred Stock of ECC, par value $0.01 per share, (B) 16,044 shares of common stock of ECC, par value $0.0001 per share, and (C) 150,000 warrants to purchase shares of common stock of ECC; viii. one manually executed undated Assignment assigning and transferring to Asplund the following: (A) 23,586 shares of Series A Convertible Preferred Stock of ECC, par value $0.01 per share, (B) 4,010 shares of common stock of ECC, par value $0.0001 per share, and (C) 37,500 warrants to purchase shares of common stock of ECC; ix. the Joinder to Investor Rights Agreement referred to in the ECC Sale Agreement, together with ten manually executed undated original signature pages of Duke thereto; and x. this escrow letter agreement, together with nine manually executed undated original signature pages of Duke hereto. b. Deliveries by EPPF (the "EPPF Deliveries"): i. the EPPF Sale Agreement, together with six manually executed undated signature pages of EPPF to the EPPF Sale Agreement; ii. common stock certificates evidencing ownership of 80,217 shares of ECC common stock, par value $0.0001 per share; iii. preferred stock certificates evidencing ownership of 471,737 shares of Series A Convertible Preferred Stock of ECC, par value $0.01 per share; iv. warrant certificates evidencing ownership of warrants to purchase 750,000 shares of ECC common stock; v. one manually executed undated Assignment assigning and transferring to Cinergy Ventures II, LLC the following: (A) 188,695 shares of Series A Convertible Preferred Stock of ECC, par value $0.01 per share, (B) 32,087 shares of common stock of ECC, par value $0.0001 per share, and (C) 300,000 warrants to purchase shares of common stock of ECC; vi. one manually executed undated Assignment assigning and transferring to Kiphart the following: (A) 165,108 shares of Series A Convertible Preferred Stock of ECC, par value $0.01 per share, (B) 28,076 shares of common stock of ECC, par value $0.0001 per share, and (C) 262,500 warrants to purchase shares of common stock of ECC; vii. one manually executed undated Assignment assigning and transferring to SFCP the following: (A) 94,348 shares of Series A Convertible Preferred Stock of ECC, par value $0.01 per share, (B) 16,044 shares of common stock of ECC, par value $0.0001 per share, and (C) 150,000 warrants to purchase shares of common stock of ECC; viii. one manually executed undated Assignment assigning and transferring to Hurvis Trust the following: (A) 23,586 shares of Series A Convertible Preferred Stock of ECC, par value $0.01 per share, (B) 4,010 shares of common stock of ECC, par value $0.0001 per share, and (C) 37,500 warrants to purchase shares of common stock of ECC; ix. the Joinder to Investor Rights Agreement referred to in the ECC Sale Agreement, together with ten manually executed undated original signature pages of EPPF thereto; and x. this escrow letter agreement, together with nine manually executed undated original signature pages of EPPF hereto. c. Deliveries by ECC (the "ECC Deliveries"): i. the ECC Sale Agreement, together with six manually executed undated signature pages of ECC to the ECC Sale Agreement; ii. letter of direction to LaSalle Bank N.A., transfer agent for ECC's common stock, directing that LaSalle issue new common stock certificates as follows: A. certificate for 9,025 shares to Cinergy; B. certificate for 7,897 shares to Kiphart; C. certificate for 4,512 shares to SFCP; D. certificate for 564 shares to Hurvis Trust; and E. certificate for 564 shares to Asplund. iii. preferred stock certificates, executed by ECC, for shares of ECC's Series D Convertible Preferred Stock, par value $0.01 per share, as follows: A. 60,000 shares to Cinergy; B. 52,500 shares to Kiphart; C. 30,000 shares to SFCP; D. 3,750 shares to Hurvis Trust; and E. 3,750 shares to Asplund; iv. preferred stock certificates, executed by ECC, for shares of ECC's Series A Convertible Preferred Stock, par value $0.01 per share, as follows: A. 377,390 shares to Cinergy; B. 330,216 shares to Kiphart; C. 188,696 shares to SFCP; D. 23,586 shares to Hurvis Trust; and E. 23,586 shares to Asplund. v. preferred stock warrant certificates, executed by ECC, evidencing the right to purchase from ECC shares of Series D Convertible Preferred Stock of ECC, for a purchase price of $10 per share (subject to adjustment), as follows: A. 15,000 warrants to Cinergy; B. 13,125 warrants to Kiphart; C. 7,500 warrants to SFCP; D. 938 warrants to Hurvis Trust; and E. 937 warrants to Asplund. vi. common stock warrant certificates, executed by ECC, evidencing the right to purchase from ECC shares of common stock of ECC, par value $0.0001 per share, for a purchase price of $1 per share (subject to adjustment), as follows; A. 684,375 warrants to Cinergy, consisting of 600,000 warrants having an expiry date of September 7, 2008 and 84,375 warrants having an expiry date of June 27, 2007; B. 598,829 warrants to Kiphart consisting of 525,000 warrants having an expiry date of September 7, 2008 and 73,829 warrants having an expiry date of June 27, 2007; C. 342,188 warrants to SFCP consisting of 300,000 warrants having an expiry date of September 7, 2008 and 42,188 warrants having an expiry date of June 27, 2007; D. 42,773 warrants to Hurvis Trust consisting of 37,500 warrants having an expiry date of September 7, 2008 and 5,273 warrants having an expiry date of June 27, 2007; and E. 42,773 warrants to Asplund consisting of 37,500 warrants having an expiry date of September 7, 2008 and 5,273 warrants having an expiry date of June 27, 2007; vii. the Stock Trading Agreement referred to in the ECC Sale Agreement, together with six manually executed undated original signature pages of ECC thereto; viii. the Joinder to Investor Rights Agreement referred to in the ECC Sale Agreement, together with ten manually executed undated original signature pages of ECC thereto; ix. at least one manually executed undated original signature page to the Joinder to Investor Rights Agreement referred to in the ECC Sale Agreement from each of Newcourt Capital USA Inc., Newcourt Capital Securities, Inc., Morgan Stanley Dean Witter Equity Funding, Inc., Originators Investment Plan, L.P., Leaf Mountain Company, LLC, and Kiphart; and x. this escrow letter agreement, together with nine manually executed undated original signature pages of ECC hereto. d. Deliveries by Cinergy (the "Cinergy Deliveries"): i. the Duke Sale Agreement, together with six manually executed undated signature pages of Cinergy to the Duke Sale Agreement; ii. the EPPF Sale Agreement, together with six manually executed undated signature pages of Cinergy to the EPPF Sale Agreement; iii. the ECC Sale Agreement, together with six manually executed undated signature pages of Cinergy to the ECC Sale Agreement; iv. the Stock Trading Agreement referred to in the ECC Sale Agreement, together with six manually executed undated original signature pages of Cinergy thereto; v. the Joinder to Investor Rights Agreement referred to in the ECC Sale Agreement, together with ten manually executed undated original signature pages of Cinergy thereto; vii. payment by wire transfer to the Disbursement Account (as hereinafter defined) of the sum of $2,000,000; and viii this escrow letter agreement, together with nine manually executed undated original signature pages of Cinergy hereto. e. Deliveries by Kiphart (the "Kiphart Deliveries"): i. the Duke Sale Agreement, together with six manually executed undated signature pages of Kiphart to the Duke Sale Agreement; ii. the EPPF Sale Agreement, together with six manually executed undated signature pages of Kiphart to the EPPF Sale Agreement; iii. the ECC Sale Agreement, together with six manually executed undated signature pages of Kiphart to the ECC Sale Agreement; iv. the Stock Trading Agreement referred to in the ECC Sale Agreement, together with six manually executed undated original signature pages of Kiphart thereto; v. the Joinder to Investor Rights Agreement referred to in the ECC Sale Agreement, together with ten manually executed undated original signature pages of Kiphart thereto; vi. payment by wire transfer to the Disbursement Account (as hereinafter defined) of the sum of $1,750,000; and vii this escrow letter agreement, together with nine manually executed undated original signature pages of Kiphart hereto. f. Deliveries by SFCP (the "SFCP Deliveries"): i. the Duke Sale Agreement, together with six manually executed undated signature pages of SFCP to the Duke Sale Agreement; ii. the EPPF Sale Agreement, together with six manually executed undated signature pages of SFCP to the EPPF Sale Agreement; iii. the ECC Sale Agreement, together with six manually executed undated signature pages of SFCP to the ECC Sale Agreement; iv. the Stock Trading Agreement referred to in the ECC Sale Agreement, together with six manually executed undated original signature pages of SFCP thereto; vii. the Joinder to Investor Rights Agreement referred to in the ECC Sale Agreement, together with ten manually executed undated original signature pages of SFCP thereto; vi. payment by wire transfer to the Disbursement Account (as hereinafter defined) of the sum of $1,000,000; and viii this escrow letter agreement, together with nine manually executed undated original signature pages of SFCP hereto. g. Deliveries by Hurvis Trust (the "Hurvis Trust Deliveries"): i. the EPPF Sale Agreement, together with six manually executed undated signature pages of Hurvis Trust to the EPPF Sale Agreement; ii. the ECC Sale Agreement, together with six manually executed undated signature pages of Hurvis Trust to the ECC Sale Agreement; iii. the Stock Trading Agreement referred to in the ECC Sale Agreement, together with six manually executed undated original signature pages of Hurvis Trust thereto; iv. the Joinder to Investor Rights Agreement referred to in the ECC Sale Agreement, together with ten manually executed undated original signature pages of Hurvis Trust thereto; v. payment by wire transfer to the Disbursement Account (as hereinafter defined) of the sum of $125,000; and vi this escrow letter agreement, together with nine manually executed undated original signature pages of Hurvis Trust hereto. h. Deliveries by Asplund (the "Asplund Deliveries"): i. the Duke Sale Agreement, together with six manually executed undated signature pages of Asplund to the Duke Sale Agreement; ii. the ECC Sale Agreement, together with six manually executed undated signature pages of Asplund to the ECC Sale Agreement; iii. the Stock Trading Agreement referred to in the ECC Sale Agreement, together with six manually executed undated original signature pages of Asplund thereto; iv. the Joinder to Investor Rights Agreement referred to in the ECC Sale Agreement, together with ten manually executed undated original signature pages of Asplund thereto; v. payment by wire transfer to the Disbursement Account (as hereinafter defined) of the sum of $125,000; and vi this escrow letter agreement, together with nine manually executed undated original signature pages of Asplund hereto. 2. The Duke Deliveries, EPPF Deliveries, Cinergy Deliveries, Kiphart Deliveries, SFCP Deliveries, Hurvis Trust Deliveries and Asplund Deliveries are herein referred to collectively as the "Closing Deliveries". The funds to be transferred by Cinergy, Kiphart, SFCP, Hurvis Trust and Asplund are herein referred to collectively as the "Closing Funds". The originals of each party's Closing Deliveries, other than Closing Funds, shall be delivered to the Escrow Agent at the following address by 12:00 noon on Friday, June 27 2003 to be held and delivered pursuant to this Agreement: Andrew H. Connor, Esq. Schwartz, Cooper, Greenberger & Krauss, Chartered 180 North LaSalle Street 27th Floor Chicago, Illinois 60601 (For the convenience of the parties hereto, Mr. Connor's telephone number is 312-845-5118 and his facsimile number is 312-782-8416.) 3. The undersigned each acknowledge that an account (the "Disbursement Account") has been established by the Escrow Agent with LaSalle Bank N.A. for the purpose of receiving the Closing Funds and, subject to the terms hereof, disbursing those funds as provided herein. The Closing Funds of each of Cinergy, Kiphart, SFCP, Hurvis Trust and Asplund shall be sent to the Disbursement Account at the following: LaSalle Bank N.A., Chicago, Illinois ABA # 071000505 For Credit to: 2090067 For Further Credit to: 62-9253-90-7 SCGK Escrow Disbursement Attn: Stacy M Coleman x42936 All Closing Funds are to be transferred by wire transfer to the Disbursement Account at LaSalle Bank by not later than 10:00 a.m. (Chicago time) on June 27, 2003. Funds held in the Disbursement Account will not be invested and will not accrue or earn interest. 4. On Friday, June 27, 2003, by 12:00 noon (Chicago time), the Escrow Agent shall inform each of the other parties hereto as to whether all Closing Deliveries and all Closing Funds have been received. If all Closing Deliveries and all Closing Funds have been received, the Escrow Agent shall additionally request that each other party hereto confirm to the Escrow Agent that such party authorizes the Escrow Agent to proceed with closing under the Sale Agreements to which such party is a party. Each such other party agrees that if it shall be obligated to close under the Sales Agreements to which it is a party, it shall authorize the Escrow Agent to proceed with closing on such party's behalf in accordance herewith. If the Escrow Agent receives authorization from each of the other parties hereto to proceed with closing at any time prior to 5:00 p.m. (Chicago time) on July 2, 2003, then the Escrow Agent shall promptly take the following actions: a. direct LaSalle Bank N.A. to disburse the funds held in the Disbursement Account as follows: $1,610,000 shall be disbursed to Duke by wire transfer to: Duke Capital Partners, LLC JP Morgan Chase Bank ABA No. 021000021 Acct. No. 323198570 $1,610,000 shall be disbursed to EPPF by wire transfer to: EP Power Finance, LLC Mellon Bank ABA No. 043000261 Acct. No. 078-3121 $1,380,000 shall be disbursed to ECC by wire transfer to: Electric City Corp American Chartered Bank ABA No. 071925046 Acct. No. 1137017 $400,000 shall be disbursed to Delano Group Securities, LLC in payment of all placement agent fees owing in respect of the Sale Agreement to Delano Group Securities by Duke, EPPF and ECC, respectively, by wire transfer to: Delano Group Securities, LLC Northern Trust Bank ABA No. 071000152 Acct. No. 1329677 b. cause to be delivered by messenger as soon as possible to LaSalle Bank N.A. as ECC transfer agent, the certificates for ECC common stock received as part of the Duke Deliveries and the EPPF Deliveries along with the original letter of ECC referred to in clause 1.c.ii above directing that LaSalle issue new common stock certificates as follows: A. certificate for 9,025 shares to Cinergy; B. certificate for 7,897 shares to Kiphart; C. certificate for 4,512 shares to SFCP; D. certificate for 564 shares to Hurvis Trust; and E. certificate for 564 shares to Asplund. c. cause sufficient copies of the Duke Sale Agreement to be made for each party thereto to have an original and affix to each counterpart original an original signature of each party thereto and cause such counterpart originals to be distributed to the parties by reputable courier for delivery within two business days thereafter; d. cause sufficient copies of the EPPF Sale Agreement to be made for each party thereto to have an original and affix to each counterpart original an original signature of each party thereto and cause such counterpart originals to be distributed to the parties by reputable courier for delivery within two business days thereafter; e. cause sufficient copies of the ECC Sale Agreement to be made for each party thereto to have an original and affix to each counterpart original an original signature of each party thereto and cause such counterpart originals to be distributed to the parties by reputable courier for delivery within two business days thereafter; f. cause sufficient copies of the Stock Trading Agreement referred to in the ECC Sale Agreement to be made for each party thereto to have an original and affix to each counterpart original an original signature of each party thereto and cause such counterpart originals to be distributed to the parties by reputable courier for delivery within two business days thereafter; g. cause sufficient copies of the Joinder to Investor Rights Agreement referred to in the ECC Sale Agreement to be made for each party thereto to have an original and affix to each counterpart original an original signature of each party thereto and cause such counterpart originals to be distributed to the parties by reputable courier for delivery within two business days thereafter; h. by reputable courier for delivery within two business days, transmit to ECC the certificates for ECC Series A Convertible Preferred Stock and the warrants to purchase shares of common stock received as part of the Duke Deliveries and the EPPF Deliveries i. by reputable courier for delivery within two business days, transmit to Cinergy the following: i the preferred stock certificate in favor of Cinergy referred to in clause 1.c.iii above for 60,000 shares of ECC's Series D Convertible Preferred Stock; ii. the preferred stock certificate in favor of Cinergy referred to in clause 1.c.iv above for 377,390 shares of ECC's Series A Convertible Preferred Stock; iii the preferred stock warrant certificate in favor of Cinergy referred to in clause 1.c.v above for warrants to purchase up to 15,000 shares of ECC's Series D Convertible Preferred Stock; and iv. the common stock warrant certificate in favor of Cinergy referred to in clause 1.c.vi above for warrants to purchase up to 684,375 shares of ECC's common stock. j. by reputable courier for delivery within two business days, transmit to Kiphart the following: i the preferred stock certificate in favor of Kiphart referred to in clause 1.c.iii above for 52,500 shares of ECC's Series D Convertible Preferred Stock; ii. the preferred stock certificate in favor of Kiphart referred to in clause 1.c.iv above for 330,216 shares of ECC's Series A Convertible Preferred Stock; iii the preferred stock warrant certificate in favor of Kiphart referred to in clause 1.c.v above for warrants to purchase up to 13,125 shares of ECC's Series D Convertible Preferred Stock; and iv. the common stock warrant certificate in favor of Kiphart referred to in clause 1.c.vi above for warrants to purchase up to 598,829 shares of ECC's common stock. k. by reputable courier for delivery within two business days, transmit to SFCP the following: i the preferred stock certificate in favor of SFCP referred to in clause 1.c.iii above for 30,000 shares of ECC's Series D Convertible Preferred Stock; ii. the preferred stock certificate in favor of SFCP referred to in clause 1.c.iv above for 188,696 shares of ECC's Series A Convertible Preferred Stock; iii the preferred stock warrant certificate in favor of SFCP referred to in clause 1.c.v above for warrants to purchase up to 7,500 shares of ECC's Series D Convertible Preferred Stock; and iv. the common stock warrant certificate in favor of SFCP referred to in clause 1.c.vi above for warrants to purchase up to 342,188 shares of ECC's common stock. l. by reputable courier for delivery within two business days, transmit to Hurvis Trust the following: i the preferred stock certificate in favor of Hurvis Trust referred to in clause 1.c.iii above for 3,750 shares of ECC's Series D Convertible Preferred Stock; ii. the preferred stock certificate in favor of Hurvis Trust referred to in clause 1.c.iv above for 23,586 shares of ECC's Series A Convertible Preferred Stock; iii the preferred stock warrant certificate in favor of Hurvis Trust referred to in clause 1.c.v above for warrants to purchase up to 938 shares of ECC's Series D Convertible Preferred Stock; and iv. the common stock warrant certificate in favor of Hurvis Trust referred to in clause 1.c.vi above for warrants to purchase up to 42,773 shares of ECC's common stock. m. by reputable courier for delivery within two business days, transmit to Asplund the following: i the preferred stock certificate in favor of Asplund referred to in clause 1.c.iii above for 3,750 shares of ECC's Series D Convertible Preferred Stock; ii. the preferred stock certificate in favor of Asplund referred to in clause 1.c.iv above for 23,586 shares of ECC's Series A Convertible Preferred Stock; iii the preferred stock warrant certificate in favor of Asplund referred to in clause 1.c.v above for warrants to purchase up to 937 shares of ECC's Series D Convertible Preferred Stock; and iv. the common stock warrant certificate in favor of Asplund referred to in clause 1.c.vi above for warrants to purchase up to 42,773 shares of ECC's common stock; and n. cause sufficient copies of this Agreement to be made for each party hereto to have an original and affix to each counterpart original an original signature of each party hereto and cause such counterpart originals to be distributed to the parties by reputable courier for delivery within two business days thereafter 5. The undersigned severally acknowledge that it is their desire and intention to close the transactions contemplated by the various Sale Agreements on June 27, 2003. Notwithstanding the foregoing, if the Escrow Agent has not received authorization from each other party hereto to proceed with closing by 5:00 p.m. (Chicago time) on July 2, 2003, the Escrow Agent shall a. direct LaSalle Bank N.A. to return to each of Cinergy, Kiphart, SFCP, Hurvis Trust and Asplund, without interest, that portion of the Closing Funds which each of them transferred to the Disbursement Account; and b. return to each of the parties hereto the other Closing Deliveries which such party has transmitted to the Escrow Agent prior to such date. Upon taking such actions, the Escrow Agent shall so notify the parties hereto and thereupon this Agreement shall terminate and the Escrow Agent shall have no further responsibilities hereunder, other than to take any action which LaSalle Bank N.A. may reasonably require in connection with carrying out the actions described in clause 3.a above. 6. All notices, consents and other communications under this Agreement shall be in writing and shall be deemed to have been duly given when (a) delivered by hand, (b) sent by email (with receipt confirmed), (c) telecopier (with receipt confirmed), or (d) when received by the addressee, if sent by Express Mail, Federal Express or other express delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth on Schedule I hereto. 7. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Illinois. This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement is sought. 8. This Agreement may be executed in two or more counterparts, all of which shall be deemed but one and the same instrument and each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart for each of the parties hereto. Delivery by facsimile by any of the parties hereto of an executed counterpart of this Agreement or any agreement constituting a Closing Delivery hereunder shall be effective as an original executed counterpart hereof or thereof and shall be deemed a representation that an original executed counterpart hereof or thereof will be delivered and the Escrow Agent may act hereunder in reliance thereon. 9. The Escrow Agent shall not have any duties or responsibilities, except those expressly set forth herein. The Escrow Agent shall not have, nor shall he be deemed to have, any fiduciary relationship with or duty to any other party hereto, and no implied covenants, functions or responsibilities shall be read into this Agreement or otherwise exist against the Escrow Agent. Notwithstanding any provision to the contrary in this Agreement, the Escrow Agent shall not be liable for any action taken or omitted to be taken by him under this Agreement, unless caused by the Escrow Agent's gross negligence or willful misconduct. The Escrow Agent shall not be personally liable with respect to any action taken or omitted to be taken by him in good faith reliance on any provision of this Agreement. The Escrow Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, or email message, statement, order or other document or conversation believed by the Escrow Agent to be genuine and correct and to have been signed, sent or made by the proper person or persons. If, with respect to a proposed action to be taken by it, the Escrow Agent shall determine in good faith that the provisions of this Agreement relating to the functions or responsibilities of the Escrow Agent are or may be ambiguous or inconsistent, the Escrow Agent shall notify the other parties, identifying the proposed action and the provisions that the Escrow Agent considers are or may be ambiguous or inconsistent, and may decline to perform such function or responsibility unless he has received the written confirmation of each other party that he or it concurs in the circumstances that the action proposed to be taken by the Escrow Agent is consistent with the terms of this Agreement or is otherwise appropriate. The Escrow Agent shall be fully protected in acting or refraining from acting upon the confirmation of the other parties in this respect, and such confirmation shall be binding upon the Escrow Agent and the other parties hereto. 10. ECC agrees to pay the reasonable costs and expenses of the Escrow Agent hereunder, including all charges of LaSalle Bank N.A. in connection with the Disbursement Account. No provision of this Agreement shall require the Escrow Agent to expend or risk his own funds or otherwise incur any financial liability in the performance of any of his duties hereunder or in the exercise of any of its rights, authority, or powers, if he shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to the Escrow Agent. 11. ECC agrees to indemnify, defend and hold harmless the Escrow Agent from and against any and all claims, losses, liabilities, penalties, obligations, actions, judgments, suits, damages (including foreseeable and unforeseeable consequential and punitive damages), costs, expenses and disbursements of any kind or nature whatsoever which may at any time (including, without limitation, at any time following the termination of this Agreement) be imposed on, incurred by or asserted against the Escrow Agent in any way relating to or arising out of this Agreement or any documents contemplated by or referred to herein or the transactions contemplated hereby or thereby or the enforcement of any of the terms hereof or thereof; provided that ECC shall not be required to so indemnify the Escrow Agent for any and all such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements incurred by reason of the gross negligence or willful misconduct of the Escrow Agent. This provision shall survive any termination of this Agreement. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW.] IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. DUKE CAPITAL PARTNERS, LLC By:/s/Dennis Magna Name: Dennis Magna Title: Managing Director EP POWER FINANCE, L.L.C. By: /s/Robert W. Baker Name: Robert W. Baker Title: President ELECTRIC CITY CORP. By: /s/John P. Mitola Name: John P. Mitola Title: Chief Executive Officer CINERGY VENTURES II, LLC By: /s/R. Foster Duncan Name: R. Foster Duncan Title: President /s/ Richard P. Kiphart Richard P. Kiphart SF CAPITAL PARTNERS LTD. By: /s/Brian H. Davidson Name: Brian H. Davidson Title: Authorized Signatory JOHN THOMAS HURVIS REVOCABLE TRUST By: /s/John Thomas Hurvis Name: John Thomas Hurvis Title: Trustee /s/David R. Asplund David R. Asplund AGREED AND ACCEPTED BY THE ESCROW AGENT THIS 27th DAY OF JUNE, 2003 SCHWARTZ, COOPER, GREENBERGER & KRAUSS, CHARTERED By: /s/Andrew H. Conner Name: Andrew H. Connor, Esq. Title: Principal SCHEDULE I ADDRESSES FOR NOTICES Duke Capital Partners, LLC 128 South Tryon Street, Suite 1100 Charlotte, NC 28202 Attn: Dennis Magna dmagna@duke-energy.com Telephone: 704 Facsimile: 704-373-4242 EP Power Finance, L.L.C. 1001 Louisiana St. Houston, TX 77002 Attn: Anthony Ashley Anthony.Ashley@ElPaso.com - ------------------------- Telephone: 713-420-2528 Facsimile: 713-420-5553 Electric City Corp. 1280 Landmeier Road Elk Grove Village, IL 60007 Attn: Jeff Mistarz jmistarz@elccorp.com Telephone: 847-437-1666 Facsimile: 847-437-4969 Cinergy Ventures, LLC 139 East 4th Street 26th Floor Atrium II EA610 Cincinnati, OH 45202 Attn: Kevin Kushman Kevin.kushman@cinergy.com Telephone: 513-287-1245 Facsimile: 513-287-4090 Richard P. Kiphart c/o William Blair & Co. 222 W. Adams Street Chicago, IL 60606 Telephone: 312-364-8420 Facsimile: 312-236-1655 rpk@wmblair.com - --------------- SF Capital Partners, Ltd. C/o Stark Asset Management, LLC 3600 South Lake Drive St. Francis, WI 53235 Telephone: 414-294-7016 Facsimile: 414-294-4416 Attn: Brian Davidson bdavidson@starkinvestments.com - ------------------------------ David R. Asplund c/o Delano Group Securities, LLC 141 W. Jackson Blvd, Suite 2176 Chicago, IL 60604 Telephone: 312-583-1950 Facsimile: 312-583-1949 dasplund@delanosecurities.com John Thomas Hurvis Revocable Trust Dated March 8, 2002 John Thomas Hurvis Trustee C/o Old World Industries 4065 Commercial Avenue Northbrook, IL 60062 Telephone: 847-559-2000 Facsimile: 847-559-2100 Attn: Tom Hurvis -----END PRIVACY-ENHANCED MESSAGE-----