-----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, DFHeUcAtPsyKsOPejmldsaUKEpffJR+1gGLcDgTInt0sj2Qhx/D5COQKxZzBvz2F NqVcyMbU9xonj4mZ5YlgJw== 0000950152-04-002602.txt : 20040401 0000950152-04-002602.hdr.sgml : 20040401 20040401172339 ACCESSION NUMBER: 0000950152-04-002602 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20040401 GROUP MEMBERS: CINERGY TECHNOLOGIES, INC. GROUP MEMBERS: CINERGY VENTURES II, LLC 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-58763 FILM NUMBER: 04710557 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 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/A 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 SC 13D/A 1 l06611asc13dza.htm CINERGY CORP/ELECTRIC CITY SC 13D/A Cinergy Corp/Electric City
 

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

________________________

SCHEDULE 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)

(Amendment No. 1)

Electric City Corp.

(Name of Issuer)

Common Stock, par value $0.0001 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)

March 19, 2004
(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 that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [  ].

(Continued on following pages)

(Page 1 of 9 Pages)

 

 

     
  CUSIP No.  284868106 13D   Page 2 of 9 Pages
             
1   NAME OF REPORTING PERSON        
 
    Cinergy Ventures II, LLC        
2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP   (a)
(b) 		  o
o
 
  Not Applicable    
3   SEC USE ONLY        
 
4   SOURCE OF FUNDS        
 
    WC        
5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) 		      o
 
    Not Applicable        
6   CITIZENSHIP OR PLACE OF ORGANIZATION        
 
    Delaware        
    7   SOLE VOTING POWER
 
NUMBER OF                 3,941,074
SHARES
BENEFICIALLY   8   SHARED VOTING POWER
OWNED BY        
EACH                 Not Applicable
REPORTING
PERSON   9   SOLE DISPOSITIVE POWER
WITH      
                3,941,074
 
    10   SHARED DISPOSITIVE POWER
 
                  Not Applicable
11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON    
 
    3,941,074    
12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES   o
 
    Not Applicable    
13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)    
 
    10.4%    
14   TYPE OF REPORTING PERSON    
 
    OO    

 

 

     
  CUSIP No.  284868106 13D   Page 3 of 9 Pages
             
1   NAME OF REPORTING PERSON        
 
    Cinergy Technologies, Inc.        
2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP   (a)
(b) 		  o
o
 
  Not Applicable    
3   SEC USE ONLY        
 
4   SOURCE OF FUNDS        
 
    Not Applicable        
5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) 		      o
 
    Not Applicable        
6   CITIZENSHIP OR PLACE OF ORGANIZATION        
 
    Delaware        
    7   SOLE VOTING POWER
 
NUMBER OF                 3,941,074
SHARES
BENEFICIALLY   8   SHARED VOTING POWER
OWNED BY        
EACH                 Not Applicable
REPORTING
PERSON   9   SOLE DISPOSITIVE POWER
WITH      
                3,941,074
 
    10   SHARED DISPOSITIVE POWER
 
                  Not Applicable
11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON    
 
    3,941,074    
12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES   o
 
    Not Applicable    
13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)    
 
    10.4%    
14   TYPE OF REPORTING PERSON    
 
    CO    

 

 

     
  CUSIP No.  284868106 13D   Page 4 of 9 Pages
             
1   NAME OF REPORTING PERSON        
 
    Cinergy Corp.        
2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP   (a)
(b) 		  o
o
 
  Not Applicable    
3   SEC USE ONLY        
 
4   SOURCE OF FUNDS        
 
    Not Applicable        
5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) 		      o
 
    Not Applicable        
6   CITIZENSHIP OR PLACE OF ORGANIZATION        
 
    Delaware        
    7   SOLE VOTING POWER
 
NUMBER OF                 3,941,074
SHARES
BENEFICIALLY   8   SHARED VOTING POWER
OWNED BY        
EACH                 Not Applicable
REPORTING
PERSON   9   SOLE DISPOSITIVE POWER
WITH      
                3,941,074
 
    10   SHARED DISPOSITIVE POWER
 
                  Not Applicable
11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON    
 
    3,941,074    
12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES   o
 
    Not Applicable    
13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)    
 
    10.4%    
14   TYPE OF REPORTING PERSON    
 
    CO    

 

 

     
  CUSIP No.  284868106 13D   Page 5 of 9 Pages

     This Amendment No. 1 (this “Amendment”) to Schedule 13D, which was originally filed on July 8, 2003 (the “Original Schedule 13D”), relating to the Common Stock of Electric City Corp., a Delaware corporation (the “Company”), is being filed by Cinergy Ventures II, LLC (“Cinergy Ventures”), Cinergy Technologies, Inc. (“Cinergy Technologies”) and Cinergy Corp. (“Cinergy”), with Cinergy Ventures, Cinergy Technologies and Cinergy being sometimes referred to hereinafter as the “Reporting Persons.” Except as set forth in this Amendment, the information contained in the Original Schedule 13D has not changed.

     This Amendment is being filed in connection a repurchase and exchange transaction undertaken on March 19, 2004 by the Company with Cinergy Ventures and the other investors in the Company’s shares of preferred stock and warrants to purchase shares of preferred stock (the “Other Investors”), pursuant to a Redemption and Exchange Agreement, dated March 19, 2004, by and among the Company, Cinergy Ventures and the Other Investors (the “Redemption and Exchange Agreement”). Pursuant to the Redemption and Exchange Agreement, the Company repurchased certain of its outstanding shares of preferred stock and exchanged its remaining shares of preferred stock and warrants to purchase shares of preferred stock for newly issued shares of Series E Preferred Stock and warrants to purchase shares of Series E Preferred Stock (the “Repurchase and Exchange Transaction”).

Item 4. Purpose of Transaction.

     Cinergy Ventures acquired shares of Series E Preferred Stock of the Company and a Warrant to purchase shares of Series E Preferred Stock of the Company in connection with the Repurchase and Exchange Transaction for investment purposes.

     Cinergy Ventures expects to evaluate on a continuing basis its goals and objectives with respect to its investment in the Company, the Company’s business operations and prospects, and general economic and equity market conditions. Based on such evaluations, Cinergy Ventures may from time to time in the future (1) convert the shares of Series E Preferred Stock beneficially owned by it into Common Stock, (2) exercise its Warrant to purchase shares of Series E Preferred Stock, and subsequently convert such stock into Common Stock, or (3) exercise its Warrants to purchase shares of Common Stock. Cinergy Ventures may make additional purchases of Common Stock or other securities of the Company at any time or from time to time. Cinergy Ventures may also at any time or from time to time, subject to the terms of its agreements with the Company and the Other Investors described below, sell all or a portion of the Common Stock or other securities of the Company that it beneficially owns either in private placements, in the open market pursuant to Rule 144 or registrations effected by the Company for Cinergy Ventures and/or the Other Investors pursuant to the Investor Rights Agreement described below, and/or pursuant to available exemptions from the registration requirements of the Securities Act of 1933.

Item 5. Interest in Securities of the Issuer.

     (a)-(c) As of March 19, 2004, prior to the completion of the Repurchase and Exchange Transaction, Cinergy Ventures beneficially owned 5,627,734 shares of Common Stock of the Company, on an as converted basis, through the following holdings:

•   406,408 shares of Series A Preferred Stock, which are convertible into shares of Common Stock on a ten-for-one basis;

 

 

     
  CUSIP No.  284868106 13D   Page 6 of 9 Pages

•   63,108 shares of Series D Preferred Stock, which are convertible into shares of Common Stock on a ten-for-one basis;
 
•   Warrant to acquire 15,000 shares of Series D Preferred Stock;
 
•   Warrants to purchase 684,375 shares of Common Stock;
 
•   Options to purchase 25,000 shares of Common Stock; and
 
•   73,199 shares of Common Stock.

     In connection with the Repurchase and Exchange Transaction, the Company repurchased 145,993 shares of Series A Preferred and 22,670 shares of Series D Preferred Stock beneficially owned by Cinergy Ventures at a price of $13.00 per share; exchanged 260,415 shares of Series A Preferred Stock and 40,438 shares of Series D Preferred Stock beneficially owned by Cinergy Ventures for 30,085 shares of Series E Preferred Stock; and exchanged the Warrant to purchase 15,000 shares of Series D Preferred Stock beneficially owned by Cinergy Ventures for a Warrant to purchase 1,500 shares of Series E Preferred Stock.

     Following the completion of the Repurchase and Exchange Transaction, Cinergy Ventures beneficially owns 3,941,074 shares of Common Stock of the Company, on an as converted basis, through the following holdings:

•   30,085 shares of Series E Preferred Stock, which are convertible into shares of Common Stock on a 100-for-one basis;
 
•   Warrant to acquire 1,500 shares of Series E Preferred Stock;
 
•   Warrants to purchase 684,375 shares of Common Stock;
 
•   Options to purchase 25,000 shares of Common Stock; and
 
•   73,199 shares of Common Stock.

     Based on the 34,172,021 outstanding shares of Common Stock of the Company as of October 31, 2003, as reported in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2003, the shares of Common Stock beneficially owned by Cinergy Ventures represent approximately 10.4% of the Company’s outstanding shares of Common Stock. Cinergy Ventures has the sole power to vote or direct the vote and to dispose or direct the disposition of each of the 3,941,074 shares of Common Stock beneficially owned by it. No other person has the sole or shared power to vote or direct the vote or dispose or direct the disposition of any shares of Common Stock beneficially owned by Cinergy Ventures.

     (d) No person other than Cinergy Ventures has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock beneficially owned by Cinergy Ventures.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

     The Repurchase and Exchange Transaction was effected by the Company on March 19, 2004 pursuant to the Redemption and Exchange Agreement. In connection with the Repurchase and Exchange

 

 

     
  CUSIP No.  284868106 13D   Page 7 of 9 Pages

Transaction, Cinergy Ventures received shares of Series E Preferred Stock of the Company and a Warrant to purchase shares of Series E Preferred Stock of the Company (the “Warrant”). The Company, Cinergy Ventures and the Other Investors also entered into an Amended and Restated Stockholders Agreement (the “Stockholders Agreement”), an Amended and Restated Investor Rights Agreement (the “Investor Rights Agreement”), and an Amended and Restated Stock Trading Agreement (the “Stock Trading Agreement”).

     The Series E Preferred Stock is convertible at any time, at the option of the holder, into shares of Common Stock at an initial conversion rate of 100-for-one, subject to adjustment for certain dilutive issuances by the Company. Each outstanding share of Series E Preferred Stock is entitled to dividends at a rate of 6% per year of its stated value, which is $100.00, and to receive upon a liquidation of the Company proceeds equal to at least two times the stated value before any payments are made to holders of the Company’s Common Stock. The Company may pay dividends in cash or additional shares of Series E Preferred Stock. Pursuant to the terms of the Series E Preferred Stock and the Stockholders Agreement, the holders of Series E Preferred Stock have the right to elect up to four directors to the Company’s board of directors, subject to reduction based on the number of shares of Series E Preferred Stock outstanding. Currently, under these provisions, Cinergy Ventures has the right to elect one director to the Company’s board of directors. Pursuant to the terms of the Series E Preferred Stock and the Stockholders Agreement, the holders of Series E Preferred Stock have the right to approve certain major corporate and operational actions proposed to be undertaken by the Company, depending on the number of shares of Series E Preferred Stock outstanding.

     The Warrant issued to Cinergy Ventures provides for the right to purchase 1,500 shares of Series E Preferred Stock at an exercise price of $100 per share. The Warrant will expire on June 27, 2004, provided that the Company has agreed to extend the expiration date to October 31, 2004 if the Company’s board of directors approves the extension.

     Pursuant to the terms of the Investor Rights Agreement, Cinergy Ventures and the Other Investors together have the right to require the Company to register the shares of Common Stock that are held by them or that are issuable to them upon the conversion or exercise of the Series E Preferred Stock, any warrants to purchase shares of Series E Preferred Stock, and certain warrants to purchase shares of Common Stock. Cinergy Ventures and the Other Investors, as a group, have the right to demand an aggregate of four registrations, provided that each registration includes Common Stock representing a value of at least $5.0 million. Cinergy Ventures and the Other Investors are also entitled to certain customary “piggyback” registration rights. Cinergy Ventures and the Other Investors have been granted preemptive rights with respect to future sales by the Company of any shares its capital stock, or any securities convertible into or exercisable for any shares of its capital stock, to allow such parties to maintain their percentage ownership interests in the Company.

     Pursuant to the terms of the Stock Trading Agreement, Cinergy Ventures and the Other Investors may not sell shares of Common Stock at any time that the closing market price of the Company’s Common Stock is less than $4.00 per share without complying with certain volume and sale price restrictions. Transfers to affiliates or effected through private transactions outside of any securities exchange are not subject to the trading restrictions, provided that the transferee in any such transfer is required to become a party to and subject to the restrictions of the Stock Trading Agreement. The Stock Trading Agreement will terminate on September 7, 2007.

     Copies of the Redemption and Exchange Agreement, Stockholders Agreement, Investor Rights Agreement, Stock Trading Agreement and Warrant are filed with this Amendment as Exhibits 99.3, 99.4, 99.5, 99.6 and 99.7, respectively, each of which is hereby incorporated herein by reference.

 

 

     
  CUSIP No.  284868106 13D   Page 8 of 9 Pages

Item 7. Material to Be Filed as Exhibits.

     
99.1
  Schedule of Directors and Executive Officers of the Reporting Persons.
 
    
99.2
  Joint Filing Agreement (incorporated by reference to Exhibit 7 of the Original Schedule 13D).
 
    
99.3
  Redemption and Exchange Agreement, dated March 19, 2004, by and among Electric City Corp., Cinergy Ventures II, LLC and the other investors party thereto.
 
    
99.4
  Amended and Restated Stockholders Agreement, dated March 19, 2004, by and among Electric City Corp., Cinergy Ventures II, LLC and the other investors party thereto.
 
    
99.5
  Amended and Restated Investor Rights Agreement, dated March 19, 2004, by and among Electric City Corp., Cinergy Ventures II, LLC and the other investors party thereto.
 
    
99.6
  Amended and Restated Stock Trading Agreement, dated March 19, 2004, by and among Electric City Corp., Cinergy Ventures II, LLC and the other investors party thereto.
 
    
99.7
  Warrant to purchase shares of Series E Preferred Stock of Electric City Corp. issued on March 19, 2004 to Cinergy Ventures II, LLC.

 

 

     
  CUSIP No.  284868106 13D   Page 9 of 9 Pages

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.

     
April 1, 2004   CINERGY VENTURES II, LLC
    By: /s/ Julia S. Janson
Name: Julia S. Janson
Title: Corporate Secretary
    CINERGY TECHNOLOGIES, INC.
    By: /s/ Julia S. Janson
Name: Julia S. Janson
Title: Corporate Secretary
    CINERGY CORP.
    By: /s/ Julia S. Janson
Name: Julia S. Janson
Title: Corporate Secretary

 

EX-99.1 3 l06611aexv99w1.txt EXHIBIT 99.1 SCHEDULE OF DIRECTORS AND EXEC OFFCRS EXHIBIT 99.1 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 Cinergy Ventures II, LLC, (ii) the members of the board of directors and executive officers of Cinergy Technologies, Inc., and (iii) the members of the board of directors and executive officers of Cinergy Corp. are set forth below. Unless otherwise indicated, the business address of each of the directors or executive officers is that of Cinergy Corp. at 139 E. Fourth Street, Cincinnati, OH 45202. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to the individual's occupation at Cinergy Corp. (i) Cinergy Ventures II, LLC
Capacity in Which Serves Name at Ventures Principal Occupation 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 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
(ii) Cinergy Technologies, Inc.
Capacity in Which Serves Name at Technologies Principal Occupation 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 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
(iii) Cinergy Corp.
Capacity in Which Business Name Serves at Cinergy Address Principal Occupation 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 Michael J. Cyrus Executive Vice Executive Vice President Cincinnati, OH 45202 Chief Executive Officer, Commercial Business Unit R. Foster Duncan Executive Vice 139 E. Fourth Street President Cincinnati, OH 45202 Chief Financial Officer Douglas F. Esamann President, PSI 139 E. Fourth Street Energy, Inc. Cincinnati, OH 45202 Gregory C. Ficke President, The 139 E. Fourth Street Cincinnati Gas & Cincinnati, OH 45202 Electric Company Lynn J. Good Vice President and 139 E. Fourth Street Controller Cincinnati, OH 45202 William J. Grealis Executive Vice 139 E. Fourth Street President Cincinnati, OH 45202 Marc E. Manly Executive Vice 139 E. Fourth Street President Cincinnati, OH 45202 Chief Legal Officer Assistant Secretary Theodore R. Murphy II Senior Vice 139 E. Fourth Street President Cincinnati, OH 45202 Chief Risk Officer Frederick J. Newton III Executive Vice 139 E. Fourth Street President Cincinnati, OH 45202 Chief Administrative Officer James L. Turner Executive Vice 139 E. Fourth Street President Cincinnati, OH 45202 Chief Executive Officer, Regulated Business Unit
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-99.3 4 l06611aexv99w3.txt EXHIBIT 99.3 REDEMPTION AND EXCHANGE AGMT EXHIBIT 99.3 REDEMPTION AND EXCHANGE AGREEMENT This Redemption and Exchange Agreement (the "Agreement") is entered into as of March 19, 2004, by and among Electric City Corp., a Delaware corporation (the "Company"), and the undersigned holders of Preferred Stock of the Company listed on the Schedule of Investors (the "Schedule of Investors") attached hereto as Schedule A (each, a "Participating Investor", and collectively, the "Participating Investors"). RECITALS WHEREAS, the Participating Investors are holders of shares of the Company's Series A Convertible Preferred Stock, Series C Convertible Preferred Stock, and/or Series D Convertible Preferred Stock (collectively, the "Prior Preferred Stock") and certain of the Participating Investors are also holders of warrants to purchase shares of Series D Convertible Preferred Stock (the "Prior Warrants"); and WHEREAS, the Company desires to redeem and/or exchange all of the outstanding shares of Prior Preferred Stock and all the outstanding Prior Warrants from the Participating Investors, and the Participating Investors desire to have such shares and warrants redeemed and/or exchanged; and WHEREAS, the Company shall grant to all Participating Investors the option to (i) have certain of their shares of Prior Preferred Stock redeemed and all their remaining shares of Prior Preferred Stock exchanged for shares of the Company's newly issued Series E Convertible Preferred Stock, par value $0.01 per share (the "Series E Preferred Stock") all their Prior Warrants exchanged for new warrants in substantially the form attached hereto as Exhibit A (the "Series E Warrants") to purchase shares of Series E Preferred Stock (the "Series E Warrant Shares"), or (ii) not have any of their shares of Prior Preferred Stock redeemed and instead have all of their shares of Prior Preferred Stock exchanged for shares of the Series E Preferred Stock and all of their Prior Warrants exchanged for Series E Warrants; and WHEREAS, the Participating Investors desire to enter into this Agreement to provide for the redemption and/or exchange of the Prior Preferred Stock and Prior Warrants as described above; NOW THEREFORE, in consideration of the foregoing and of the mutual promises and covenants contained herein, and subject to the terms and conditions hereof, the parties hereby agree as follows: 1. Redemption of Prior Preferred Stock. Subject to the terms and conditions of this Agreement, each Participating Investor (each, a "Redeeming Investor" and collectively, the "Redeeming Investors") listed on Schedule B attached hereto (the "Redemption Schedule"), agrees, severally and not jointly, to sell, and the Company agrees to purchase from each Redeeming Investor, the number and type of shares of Prior Preferred Stock (the "Redeemed -1- Shares") set forth opposite such Redeeming Investor's name on the Redemption Schedule at the cash purchase price per share set forth opposite such Redeeming Investor's name on the Redemption Schedule and at the aggregate purchase price set forth opposite such Redeeming Investor's name on the Redemption Schedule (the "Redemption Price"). The Company's agreement with each Redeeming Investor is a separate agreement, and the purchase of the Redeemed Shares from each Redeeming Investor is a separate purchase. 2. Series E Authorization. The Company has authorized (a) 300,000 shares of Series E Preferred Stock (the "Series E Shares"), having the rights, privileges, preferences and restrictions set forth in the Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of Series E Convertible Preferred Stock of the Company, in the form attached hereto as Exhibit B (the "Series E Certificate of Designations"), (b) the issuance of Series E Warrants for the purchase of Series E Warrant Shares, and (c) the reservation of shares of the Company's Common Stock for issuance upon conversion of the Series E Shares and Series E Warrant Shares (the "Series E Conversion Shares"). 3. Exchange of Prior Preferred Stock for Series E Preferred Stock. Subject to the terms and conditions of this Agreement and immediately after the consummation of the redemption in accordance with Section 1 and the other provisions of this Agreement, each Participating Investor, severally and not jointly, agrees to exchange, and the Company hereby agrees to issue Series E Shares to each Participating Investor in exchange for, such Participating Investor's remaining shares of Prior Preferred Stock held by such Redeeming Investor, at a ratio of one (1) Series E Share for every ten (10) shares of Prior Preferred Stock, in each case in the amount set forth on Schedule C attached hereto (the "Series E Exchange Schedule"). The Series E Shares issued pursuant to this Agreement shall have the rights, preferences, privileges and restrictions as set forth in the Series E Certificate of Designations and shall be subject to the terms set forth in the Amended and Restated Stockholders Agreement (the "Stockholders Agreement") and the Amended and Restated Investor Rights Agreement (the "Investor Rights Agreement"), each dated of even date herewith (collectively, the "Ancillary Agreements"). 4. Exchange of Prior Warrants for Series E Warrants. Subject to the terms and conditions of this Agreement, the Company hereby agrees to issue to each Participating Investor holding any Prior Warrants, in exchange for such Prior Warrants, Series E Warrants to purchase up to the number of Series E Warrant Shares equal to the number of shares of Prior Preferred Stock for which the Prior Warrant is exercisable divided by ten, as set forth on Schedule D attached hereto (the "Warrant Exchange Schedule"). The Series E Warrants shall be exercisable at a price per share equal to the exercise price of the Prior Warrants multiplied by ten, subject to adjustment in certain circumstances, and shall have an expiration date which is the same as that of the Prior Warrants. The Company's agreement with each Participating Investor holding Prior Warrants is a separate agreement, and the issuance of a Series E Warrant to each such Participating Investor is a separate issuance. 5. Closing. -2- 5.1 The Closing Date. The closing of the foregoing redemptions and exchanges (the "Closing") shall take place at the offices of Schwartz, Cooper, Greenberger & Krauss, Chartered, 180 N. LaSalle St., Chicago, Illinois 60601, at 2:00 p.m. Chicago time on March 19, 2004 or such other date, time and/or location as the Company and a majority in interest of Participating Investors shall agree. 5.2 Delivery. At the Closing, (a) each Participating Investor will deliver to the Company, as applicable, (i) a stock certificate or stock certificates representing the shares of Prior Preferred Stock to be redeemed and/or exchanged, registered in the name of such Participating Investor, together with (ii) an executed Stock Power in the form of Exhibit C attached hereto, and (iii) the Prior Warrants, if any, held by such Participating Investor; (b) the Company shall deliver to each Participating Investor, as applicable, (i) the Redemption Price set forth opposite such Participating Investor's name on the Redemption Schedule as payment for the shares of Prior Preferred Stock being redeemed by check or by wire transfer pursuant to such Participating Investor's instructions, (ii) stock certificates representing the number of Series E Shares set forth opposite such Participating Investor's name on the Series E Exchange Schedule, (iii) Series E Warrants replacing any Prior Warrants of such Participating Investor, (iv) an opinion of counsel to the Company in substantially the form attached hereto as Exhibit D. 5.3 Ancillary Agreements. At the Closing, the Company and the Participating Investors shall enter into the Ancillary Agreements. 5.4 Restatement of Stock Trading Agreements. In addition, the Stock Trading Agreement dated as of July 31, 2001 by and among certain of the Participating Investors and certain other persons and entities (the "2001 Stock Trading Agreement"), the Stock Trading Agreement dated as of June 4, 2002 by the Company and Richard P. Kiphart (the "2002 Stock Trading Agreement"); and the Stock Trading Agreement dated as of June 27, 2003 by and among the Company and certain of the Participating Investors (the "2003 Stock Trading Agreement" and, collectively with the 2001 Stock Trading Agreement and the 2002 Stock Trading Agreement, the "Stock Trading Agreements") shall collectively be combined, amended and restated into a single Amended and Restated Stock Trading Agreement in the form of Exhibit E hereto (the "Amended and Restated Stock Trading Agreement". 6. Representations and Warranties of the Company. In connection with the redemption of Prior Preferred Stock and the exchange of shares of Prior Preferred Stock and Prior Warrants for shares of Series E Preferred Stock or Series E Warrants, as the case may be, hereunder, the Company hereby represents and warrants as follows: 6.1 Organization of the Company. The Company has been duly organized and is validly existing in good standing under the laws of the jurisdiction of its organization, with the -3- requisite power and authority to perform its obligations under this Agreement, to consummate the transactions contemplated hereby and to conduct its business as currently conducted. 6.2 Authority. The Company has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by the Company of this Agreement, and the performance by the Company of its obligations hereunder, have been duly and validly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly and validly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, moratorium and other laws affecting the rights and remedies of creditors and secured parties and (ii) rules of law governing specific performance, injunctive relief or other equitable remedies and by general principles of equity. Each of the Series E Warrants, when executed and delivered by the Company under this Agreement, will have been duly and validly executed and delivered by the Company and will constitute a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, moratorium and other laws affecting the rights and remedies of creditors and secured parties and (ii) rules of law governing specific performance, injunctive relief or other equitable remedies and by general principles of equity. The shares of Series E Preferred Stock to be issued hereunder, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 6.3 Capitalization. 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 34,922,021 issued and outstanding shares of Common Stock, 2,351,589 issued and outstanding shares of Series A Convertible Preferred Stock, 233,613 issued and outstanding shares of Series C Convertible Preferred Stock and 157,769 issued and outstanding shares of Series D Convertible Preferred Stock. Other than the securities described in this Section 6.3 and other outstanding options, rights and warrants to purchase up to 20,017,048 shares of Common Stock and the Prior Warrants to purchase up to 375,000 shares of Series D Preferred Stock, the Company does not have any other securities or rights to purchase its securities outstanding. The Series E Certificate of Designations in the form of Exhibit B hereto has been duly filed in the office of the Secretary of State of Delaware and is effective. Upon closing of the transactions contemplated hereby, the Company will not have outstanding any shares of Prior Preferred Stock or any Prior Warrants and will have outstanding 210,469 shares of Series E Preferred Stock and Series E Warrants to purchase up to 3,750 additional shares of Series E Preferred Stock. All shares of Series E Preferred Stock which will be issued and outstanding upon closing of the transactions contemplated hereby will be fully paid and non-assessable and subject to no preemptive rights in favor of other persons or entities which have not been waived. Assuming the accuracy of the representations of each Participating Investor in this Agreement, the shares of Series E Preferred Stock and Series E Warrants issued to such Participating Investor hereunder will be issued in compliance with all applicable federal and state -4- securities laws. The Company has reserved for issuance under the Series E Warrants 3,750 shares of Series E Preferred Stock. Shares of Series E Preferred Stock which are issued pursuant to exercise of the Series E Warrants in accordance with the terms thereof will be fully-paid and non-assessable and subject to no preemptive rights in favor of other persons or entities which have not been waived. The Company has also reserved for issuance pursuant to conversion of the shares of Series E Preferred Stock to be issued hereunder or upon exercise of the Series E Warrants, 21,421,900 shares of its Common Stock, par value $0.0001 per share. Shares of such Common Stock which are issued pursuant to conversion of shares of Series E Preferred Stock in accordance with the terms thereof will be fully-paid and non-assessable and subject to no preemptive rights in favor of other persons or entities which have not been waived. 6.4 No Conflicts. The execution and delivery by the Company of this Agreement does not, and the performance by the Company of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not, (a) conflict with or result in a violation or breach of any of the terms, conditions or provisions of the Certificate of Incorporation (including the Certificates of Designations of Prior Preferred Stock) or the bylaws, as amended, of the Company; or (b) conflict with or result in a material violation or material breach of any term or provision of any agreement to which the Company is a party, after giving effect to the consents and waivers of the Participating Investors set forth in this Agreement; or (c) result in a material violation of any applicable law, statute or any order, judgment, decree, rule or regulation of any court or governmental authority having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets. No consent, approval, authorization, order, registration or qualification of or with any such court or governmental authority is required for the valid authorization, execution, delivery and performance by the Company of this Agreement, the issue of the shares of Series E Preferred Stock and Series E Warrants hereunder or the consummation by the Company of the other transactions on its part contemplated by this Agreement, except for such consents, approvals, authorizations, registrations or qualifications as may be required under Federal securities law or Applicable State Law, American Stock Exchange listing requirements or with respect to requirements applicable to the Participating Investors. Giving effect to Section 7.12 hereof, the Company has obtained all consents, approvals, waivers of rights and other authorizations from securityholders of the Company and other persons and entities necessary to permit the Company to consummate the transactions contemplated by this Agreement. 6.5 SEC Filings. Since March 31, 2003, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the Securities and Exchange Commission (the "Commission") pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (all of the foregoing filed prior to the date hereof (including all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein) being hereinafter referred to as the "Commission Documents"). As of their respective dates, the Commission Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder applicable to the Commission Documents, except that the Company's filing of the pro forma financial information which is set -5- forth in the Company's current report on Form 8-K filed on July 2, 2003 was not timely filed within 15 days after the Company's sale of the assets of Switchboard Apparatus, Inc. The Commission Documents, taken as a whole, do not as of the date hereof contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein in light of the circumstances in which they were made not misleading. The Commission Documents, including the financial statements, when they were filed with the Commission, conformed in all material respects with the applicable accounting requirements and the published rules and regulations of the Commission with respect thereto, except that the Company's filing of the pro forma financial information which is set forth in the Company's current report on Form 8-K filed on July 2, 2003 was not timely filed within 15 days after the Company's sale of the assets of Switchboard Apparatus, Inc. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended. The Company is not required to file and will not be required to file any agreement, note, lease, mortgage, deed or other instrument entered into prior to the date hereof or the Closing Date and to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound which has not been previously filed as an exhibit to the Company's reports filed or made with the Commission under the Exchange Act. 6.6 No Material Loss. Since December 31, 2002, neither the Company nor any of its subsidiaries has sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree. 6.7 Cancellation of Prior Preferred Stock. Upon consummation of the redemption and exchange transactions contemplated by Sections 1, 3 and 4 hereof, all shares of Prior Preferred Stock shall be cancelled and thereafter treated as authorized shares of the Company's preferred stock undesignated as to series and no further shares of Prior Preferred Stock shall be issued by the Company. 6.8 Required Registration. The Company agrees that, on or before July 7, 2004, shall use commercially reasonable efforts, subject to receipt of all necessary information from the Participating Investors who desire to have shares registered thereunder, the Company will prepare and file with the Commission a registration statement covering the resale of the shares of Common Stock which may be acquired by pursuant to conversion of shares of Series E Preferred Stock through the American Stock Exchange, the over-the-counter market or in privately-negotiated transactions or otherwise. Such registration shall otherwise be in accordance with the provisions of the Investor Rights Agreement applicable to a "Requested Registration" thereunder but shall not be deemed to be a "Requested Registration" for purposes thereof. -6- 7. Representations, Warranties and Covenants of the Participating Investor. In connection with the transactions contemplated hereunder, each Participating Investor hereby represents, warrants and covenants to the Company as follows: 7.1 Ownership of Shares. The Participating Investor owns, beneficially and of record, all the shares of Prior Preferred Stock and Prior Warrants tendered hereunder and has good and valid title to all such shares of Prior Preferred Stock and Prior Warrants, free and clear of all liens, charges, pledges, claims, restrictions on transfer, mortgages, security interests or encumbrances of any kind whatsoever, and of any rights of first refusal of any kind (other than those under the Stock Trading Agreement dated as of July 31, 2001 by and among the Participating Investors, certain other parties and the Company, as amended, which restrictions are being waived under Section 7.12 hereof), and the Participating Investor has not granted any rights to purchase such shares of Prior Preferred Stock to any other person or entity. The Participating Investor has the unrestricted power and authority to transfer its shares of Prior Preferred Stock to the Company. Upon delivery to the Company of the stock certificates representing its shares of Prior Preferred Stock and/or Prior Warrants, as the case may be, and upon the Closing of the redemptions and/or exchanges set forth herein, the Company shall acquire good and valid title to such shares of Prior Preferred Stock and/or Prior Warrants, as the case may be, free and clear of all liens, charges, pledges, claims, restrictions on transfer, mortgages, security interests or encumbrances of any kind whatsoever. 7.2 Authorization; No Violation. The Participating Investor has, and will have on the Closing Date, full legal capacity, power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Participating Investor and constitutes his, her or its legal, valid and binding obligation, enforceable against him, her or it in accordance with its terms, except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, moratorium and other laws affecting the rights and remedies of creditors and secured parties and (ii) rules of law governing specific performance, injunctive relief or other equitable remedies and by general principles of equity. Neither the execution, delivery and performance of this Agreement by the Participating Investor nor the consummation of any of the transactions provided for hereby will result in any violation or breach of or default (or an event which with notice or the passage of time or both would constitute a default) under any contract, franchise or permit to which the Participating Investor is a party, or by which the Participating Investor is bound, after giving effect to the consents and waivers of the Participating Investors set forth in this Agreement. 7.3 Broker's or Finder's Commissions. No broker's or finder's or placement fee or commission or other remuneration has been paid or given directly or indirectly by the Participating Investor for soliciting the redemption or the exchange of shares of Prior Preferred Stock or Prior Warrants for shares of Series E Preferred Stock or Series E Warrants hereunder, and the Participating Investor will hold the Company harmless from any claim, demand or liability for broker's or finder's or placement fees or commissions or other remuneration alleged to have been incurred in connection with the sale and issuance of the Series E Shares and/or the Series E Warrants due to any actions of the Participating Investor. -7- 7.4 Restricted Securities. The Participating Investor understands that the Series E Shares, the Series E Warrants, the Series E Warrant Shares and the Series E Conversion Shares (i) have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), (ii) are "restricted securities" under Rule 144 of the Securities Act and (iii) are being issued pursuant to an exemption from registration contained in the Securities Act based in part upon the representations of the Participating Investor contained herein. 7.5 Acquisition for Investment. The Participating Investor is acquiring the Series E Shares, the Series E Warrants, the Series E Warrant Shares and the Series E Conversion Shares, as the case may be, for his, her or its own account for investment and not as a nominee and not with a view to the distribution thereof. The Participating Investor understands that the Participating Investor must bear the economic risk of such investment indefinitely unless such Series E Shares, Series E Warrants, Series E Warrant Shares or Series E Conversion Shares are registered pursuant to the Securities Act, or an exemption from such registration is available, and that the Company has no present intention of registering the Series E Shares, the Series E Warrants, the Series E Warrant Shares or the Series E Conversion Shares other than as contemplated by the Investor Rights Agreement. 7.6 Economic Risk. By reason of the Participating Investor's business or financial experience, the Participating Investor has the capacity to protect its own interests in connection with the acquisition of the Series E Shares, the Series E Warrants, the Series E Warrant Shares and the Series E Conversion Shares, as the case may be, and has the ability to bear the economic risk (including the risk of total loss) of the Participating Investor's investment. 7.7 Disclosure. The Participating Investor represents that it or he has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of participating in the transactions contemplated hereby and making an informed investment decision with respect thereto, and acknowledges that it or he has sole responsibility for its or his own due diligence investigation and its own investment decision, and that in connection with its investigation and its investment decision, it or he has not relied on any representation by or on behalf of the Company not set forth in the Commission Documents or in this Agreement, or on the fact that any other person or entity has decided to participate in such transactions or invest in any securities or in capital stock of the Company. 7.8 Legends. The Participating Investor understands and acknowledges that the certificates evidencing the Series E Shares, the Series E Warrants and the Series E Warrant Shares to be issued hereunder will be imprinted with the following legends (in addition to any legend required by state securities laws or any of the Ancillary Agreements): THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE -8- STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THE SHARES OF COMMON STOCK ISSUABLE UPON THE [CONVERSION] [EXERCISE] OF THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO AN AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT, AN AMENDED AND RESTATED STOCKHOLDERS AGREEMENT AND AN AMENDED AND RESTATED STOCK TRADING AGREEMENT, EACH AS IT MAY BE AMENDED FROM TIME TO TIME, COPIES OF WHICH ARE AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICES OF THE COMPANY. 7.9 Accredited Investor. The Participating Investor is an "accredited investor" as defined in Rule 501(a) of Regulation D under the Securities Act. 7.10 Understanding of Terms of Series E Preferred Stock. The Participating Investor acknowledges that it has had an opportunity to review the provisions of the Series E Certificate of Designations and understands the differences in rights, preferences, privileges and restrictions between the shares of Prior Preferred Stock and Series E Preferred Stock. 7.11 Advice of Counsel and Other Advisors. Each Participating Investor has reviewed this Agreement in its entirety, has had an opportunity to obtain the advice of counsel and any other advisors deemed appropriate by the Participating Investor prior to executing this Agreement and fully understands all provisions hereof. Each Participating Investor has reviewed with such Participating Investor's own tax advisors the federal, state, local and foreign tax consequences of the transactions contemplated by this Agreement, and is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Each Participating Investor understands that each Participating Investor (and not the Company) shall be responsible for each Participating Investor's own tax liability that may arise as a result of the transactions contemplated by this Agreement. 7.12 Consents and Waivers. (a) Each Participating Investor hereby consents to the Company's and each other Participating Investor's entering into this Agreement and performing his, her or its obligations hereunder, including effecting the redemption of certain shares of Prior Preferred Stock and the exchange of shares of Prior Preferred Stock for shares of Series E Preferred and the exchange of Prior Warrants for Series E Warrants, all as provided herein. Each Participating Investor also consents to the Company's and each other Participating Investor's entering into the Ancillary Agreements and performing his, her or its obligations thereunder. Each Participating Investor also consents to the Company's and each other Participating Investor's entering into the Amended and Restated Stock Trading Agreement and performing his, her or its obligations thereunder. (b) Each Participating Investor hereby waives any and all defaults and events of default which arise or may arise pursuant to or by reason of any the actions described in -9- Section 7.12(a) above on the part of the Company or any other Participating Investor under any agreements, instruments or documents to which or by which any Participating Investor and the Company may be bound immediately prior to the execution of this Agreement, including, without limitation, (i) the Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of Series A Convertible Preferred Stock of the Company; (ii) the Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of Series C Convertible Preferred Stock of the Company; and (iii) 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 the Company; and (iv) any and all agreements entered into in connection with such Participating Investor's original purchase of Prior Preferred Stock from the Company, including without limitation, any securities purchase agreement, investor rights agreement and any stockholders agreement and any supplements or amendments thereto. (c) Each Participating Investor and the Company hereby acknowledges that this Agreement is being entered into in connection with (i) the Company's issuance of up to 5,000,000 shares of Common Stock and warrants to purchase up to 1,750,000 additional shares of Common Stock to Security Benefit Group, Inc. and/or affiliates thereof (the "Purchaser") for gross proceeds of up to $11,000,000, a portion of which gross proceeds will be used by the Company to effect the redemptions under Section 1 hereof, and (ii) the concurrent sale by Morgan Stanley and OIP of an aggregate of 1,000,000 shares of Common Stock to the Purchaser (which will be issued pursuant to the concurrent conversion of 100,000 shares of Series A Preferred by Morgan Stanley and OIP). Each Participating Investor and the Company hereby further acknowledges that the sale by Morgan Stanley and OIP described in clause (ii) preceding is for a per share price which is below the current market price of the Common Stock and is being consummated as a requirement of the Purchaser to its agreement to purchase the Common Stock and warrants from the Company described in clause (ii) preceding. Each Participating Investor and the Company hereby further acknowledges that the Purchaser has required, as a condition to entering into such transactions, that the securities which the Purchaser is to acquire from the Company and from Morgan Stanley and OIP shall not be subject to the Ancillary Agreements or any of the existing Stock Trading Agreements and the Purchaser shall not be a party to any of such agreements, and each Participating Investor and the Company hereby agrees and consents thereto. Each Participating Investor further acknowledges that the Purchaser has required, as a condition to entering into such transactions, that the securities which the Purchaser is to acquire from the Company and from Morgan Stanley and OIP shall be registered by the Company under the Securities Act of 1933, as amended, and further required that the parties to the Investor Rights Agreement dated as of July 31, 2001, as amended (the "Prior Investor Rights Agreement") and the parties to the Investor Rights Agreement to be executed in connection with Closing under this Agreement agree to waive their piggyback registration rights and the provisions of section 2.8 of the Prior Investor Rights Agreement and the Investor Rights Agreement in respect of such registration for the Purchasers, and each Participating Investor hereby agrees and consents thereto and waives its piggyback registration rights and rights under -10- section 2.8 under each of the Prior Investor Rights Agreement and the Investor Rights Agreement with respect to such registration. (d) Each Participating Investor, other than Asplund, hereby acknowledges that Asplund is also a director of the Company and hereby waives any and all claims of conflicts of interest against Asplund arising from or with respect to Asplund's participation in the transactions contemplated hereby. (e) Each Participating Investor hereby agrees that, for purposes of the remaining term of the 2001 Stock Trading Agreement referred to in Section 5.3 hereof, the number of shares of "Uncovered Stock" of Leaf Mountain Company, LLC thereunder immediately following the Closing Date hereunder shall remain unchanged as a result of the transaction (calculated in accordance with the provisions of the 2001 Stock Trading Agreement). (f) Each Participating Investor other than SF Capital hereby consents to the termination of the Stock Trading Agreement dated as of February 27, 2003 between the Company and SF Capital, effective upon consummation of the redemption and exchange transactions pursuant to Sections 1, 3 and 4 hereof. (g) Each Participating Investor hereby consents to the Company and Cinergy Ventures II, LLC entering into an amendment to the Series E Warrant issued to Cinergy Ventures at Closing hereunder to extend the expiration date thereunder to October 31, 2004, provided that the Company's board of directors shall have approved such action by the Company. 7.13 Termination of Rights Associated with Redeemed Shares. With respect to a Participating Investor who is a Redeeming Investor, such Redeeming Investor acknowledges that upon the Closing, all of the Redeeming Investor's rights under any and all agreements entered into in connection with the Redeeming Investor's original purchase of the Redeemed Shares, including without limitation, any securities purchase agreement, investor rights agreement and any stockholders agreement and any supplements or amendments thereto, shall immediately terminate and be of no further force and effect with respect to the Redeemed Shares. The Redeeming Holder further agrees to execute and deliver any additional instruments necessary to document such termination of rights and to fully carry out the purposes of these covenants. 7.14 Accrued Dividends On Prior Preferred Shares Up To Closing. The Company hereby agrees that each Participating Investor shall receive credit for accrued dividends on its Prior Preferred Shares for the period from and including January 1, 2004 up to but not including the Closing Date at the dividend rate applicable under the Prior Preferred Shares. The Participating Investors agree that the Company may satisfy this obligation by calculating and paying the initial dividend payable with respect to the Series E Shares following the Closing Date on a basis that equitably reflects such agreement by the Company. -11- 8. Conditions to Investors' Obligations to Close. Each Participating Investor's obligation to redeem and/or exchange its Prior Preferred Shares or Prior Warrants at the Closing is subject to the fulfillment on or before the Closing of each of the following conditions, unless waived by the applicable Participating Investor: 8.1 Receipt of Consideration. Such Participating Investor shall have received delivery of the cash to be issued to such Participating Investor in accordance with Section 1, if applicable, and the Series E Shares and Series E Warrants to be issued to such Participating Investor in accordance with Sections 3 and 4. 8.2 Representations and Warranties. The representations and warranties made by the Company in Section 6 shall be true and correct in all material respects as of the date of the Closing 8.3 Covenants. All covenants agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing shall have been performed or complied with in all material respects (it being understood that the Company shall be deemed to have certified as to the satisfaction of the conditions set forth in Section 8..2 above and this Section 8.3 by consummating the transactions hereunder). 8.4 Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Series E Shares, the Series E Warrants, the Series E Warrant Shares and the Series E Conversion Shares pursuant to this Agreement shall be obtained and effective as of the Closing. 8.5 Certificates of Designations. The Series E Certificate of Designations and shall have been duly authorized, executed and filed with and accepted by the Secretary of State of the State of Delaware. 8.6 Investor Rights Agreement. The Company and the Participating Investors shall have executed and delivered the Investor Rights Agreement. 8.7 Stockholders Agreement. The Company and the Participating Investors shall have executed and delivered the Stockholders Agreement. 8.8 Amended and Restated Stock Trading Agreement. The Company and the Participating Investors and certain officers of the Company shall have executed and delivered the Amended and Restated Stock Trading Agreement. 8.9 Proceedings and Documents. All corporate and other proceedings required to carry out the transactions contemplated by this Agreement, and all instruments and other documents relating to such transactions, shall be reasonably satisfactory in form and substance to the Participating Investors, and the Participating Investors shall have been furnished with such instruments and documents as they shall have reasonably requested. -12- 8.10 Consents and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for the performance by the Company of its obligations pursuant to the Agreement. 8.11 No Litigation; No Order. No action, suit or proceeding relating to the transactions contemplated by this Agreement shall be pending that in the reasonable good faith judgment of the Participating Investors seeks to restrain or prevent any of such transactions and has a reasonable probability of success. 8.12 Full Participation By Holders. All holders of any shares of Prior Preferred Stock and all holders of any Prior Warrants shall be signatories hereto and shall participate in the redemption and exchange transactions contemplated hereby, such that upon closing hereunder no shares of Prior Preferred Stock and no Prior Warrants shall remain outstanding or be issuable by the Company. 9. Conditions to Company's Obligation to Close. The Company's obligation to redeem the shares of Prior Preferred Stock and to accept for exchange shares of Prior Preferred Stock and Prior Warrants and issue the Series E Shares and the Series E Warrants at the Closing is subject to the fulfillment on or before the Closing of the following conditions, unless waived by the Company: 9.1 Receipt of Consideration. The Company shall have received from each Participating Investor stock certificates representing the shares of Prior Preferred Stock to be redeemed or exchanged pursuant hereto, accompanied by executed stock powers in acceptable form, and any Prior Warrants of such Participating Investor, as the case may be. 9.2 Representations and Warranties. The representations and warranties made by the Participating Investors in Section 7 shall be true and correct in all material respects as of the date of the Closing. 9.3 Covenants. All covenants, agreements and conditions contained in the Agreements to be performed by Participating Investors on or prior to the date of the Closing shall have been performed or complied with in all material respects as of the date of the Closing (it being understood that each Participating Investors shall be deemed to have certified as to himself, herself or itself, as to the satisfaction of the conditions set forth in Section 9.2 above and this Section 9.3 by consummating the transactions hereunder). 9.4 Compliance with Securities Laws. The Company shall be satisfied that the offer and sale of the Series E Shares, the Series E Warrants, the Series E Warrant Shares and the Series E Conversion Shares shall be qualified or exempt from registration or qualification under all applicable federal and state securities laws (including receipt by the Company of all necessary blue sky law permits and qualifications required by any state, if any). -13- 9.5 Certificate of Designations. The Series E Certificate of Designations shall have been duly authorized, executed and filed with and accepted by the Secretary of State of the State of Delaware. 9.6 Investor Rights Agreement. The Company and the Participating Investors shall have executed and delivered the Investors Rights Agreement. 9.7 Stockholders Agreement. The Company and the Participating Investors shall have executed and delivered the Stockholders Agreement. 9.8 Amended and Restated Stock Trading Agreement. The Company and the Participating Investors and certain officers of the Company shall have executed and delivered the Amended and Restated Stock Trading Agreement. 9.9 Consents and Waivers. The Company and the Participating Investors shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by the Agreement. 9.10 Proceedings and Documents. All corporate and other proceedings required to carry out the transactions contemplated by this Agreement, and all instruments and other documents relating to such transactions, shall be reasonably satisfactory in form and substance to the Company, and the Company shall have been furnished with such instruments and documents as it shall have reasonably requested. 9.11 No Litigation; No Order. No action, suit or proceeding relating to the transactions contemplated by this Agreement shall be pending that in the reasonable good faith judgment of the Company seeks to restrain or prevent any of such transactions and has a reasonable probability of success. 10. Other Provisions. 10.1 Governing Law; Consent to Jurisdiction. 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 ILLINOIS. FURTHERMORE, EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. -14- 10.2 Further Assurances. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement. 10.3 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. 10.4 Entire Agreement. This Agreement represents the entire agreement between the parties with respect to the subject matter hereof and may be modified or amended only in a writing signed by the Company and a majority in interest of Participating Investors. 10.5 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 10.6 Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally or transmitted by facsimile, or, if sent within the U.S., mailed by first-class mail, postage prepaid, addressed (i) if to a Participating Investor, at such Participating Investor's address set forth in the Schedule of Investors, or at such other address as such Participating Investor shall have furnished to the Company in writing, or (ii) if to the Company, at its address set forth below Electric City Corp. 1280 Landmeier Road Elk Grove Village, Illinois 60007 Attention: Chief Financial Officer Facsimile No.: (847)-437-4969 or at such other address as the Company shall have furnished to such Participating Investor in writing. All such notices and other communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; three (3) business days after being deposited in the mail, postage prepaid, first class registered or certified, if mailed, and when receipt is mechanically acknowledged, if telecopied. 10.7 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. -15- 10.8 Amendment and Waiver. No failure or delay on the part of the parties hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Any amendment, to any provision of this Agreement shall be effective only if it is made or given in writing and signed by the Company and each of the Participating Investors. Any waiver of any provision of this Agreement, and any consent to any departure by the Company or any Participating Investor from the terms of any provision of this Agreement, shall be effective only if it is made or given in writing and signed by each party which is entitled to the benefit of enforcement of such provision. 10.9 Survival of Representations, Warranties and Agreements. Notwithstanding any investigation made by any party to this Agreement, all covenants, agreements, representations and warranties made by the Company and the Participating Investors herein shall survive the execution of this Agreement and consummation of the redemption and exchange transactions contemplated by Sections 1, 3 and 4 hereof. [Balance of page intentionally left blank; signature page follows.] -16- IN WITNESS WHEREOF, the undersigned have executed this Redemption and Exchange Agreement as of the date set forth above. COMPANY PARTICIPATING INVESTORS ELECTRIC CITY CORP., NEWCOURT CAPITAL USA INC., By: _____________________________ By: __________________________________ Name: John Mitola Name: ________________________________ Title: Chief Executive Officer Title: _______________________________ MORGAN STANLEY DEAN WITTER EQUITY FUNDING, INC. By: __________________________________ Name: ________________________________ Title: _______________________________ ORIGINATORS INVESTMENT PLAN, L.P. By: __________________________________ Name: ________________________________ Title: _______________________________ CINERGY VENTURES II, LLC, By: __________________________________ Name: ________________________________ Title: _______________________________ LEAF MOUNTAIN COMPANY, LLC By: __________________________________ Name: ________________________________ -17- Title: _______________________________ SF CAPITAL PARTNERS, LTD. By: __________________________________ Name: ________________________________ Title: _______________________________ ______________________________________ RICHARD KIPHART ______________________________________ DAVID P. ASPLUND JOHN THOMAS HURVIS REVOCABLE TRUST By: __________________________________ Name: ________________________________ Title: _______________________________ ______________________________________ JOHN DONOHUE AUGUSTINE FUND, LP By: __________________________________ Name: ________________________________ Title: _______________________________ TECHNOLOGY TRANSFORMATION VENTURE FUND, LP By: __________________________________ -18- Name: ________________________________ Title: _______________________________ -19- EX-99.4 5 l06611aexv99w4.txt EXHIBIT 99.4 AMD & RSTD INVESTOR RIGHTS AGMT EXHIBIT 99.4 AMENDED AND RESTATED STOCKHOLDERS AGREEMENT This Amended and Restated Stockholders Agreement, dated as of March 19, 2004 (as it may be amended, restated or modified and in effect from time to time, this "Agreement"), is made by and among Electric City Corp., a Delaware corporation (the "Company"), and the following persons and entities (each, a "Holder," and collectively the "Holders", except that, for purposes of this Agreement, Originators Investment Plan, L.P. and Morgan Stanley Dean Witter Equity Funding, Inc. shall be considered together as one "Holder"), Newcourt Capital USA, Inc. ("Newcourt Capital"), Originators Investment Plan, L.P. ("OIP"), Morgan Stanley Dean Witter Equity Funding, Inc., ("Morgan Stanley"), Cinergy Ventures II, LLC ("Cinergy Ventures"), Leaf Mountain Company, LLC ("Leaf Mountain"), Augustine Fund LP, ("Augustine"), Technology Transformation Venture Fund, LP ("TVF"), John Donohue ("Donohue"), Richard P. Kiphart ("Kiphart"), David R. Asplund ("Asplund") and John Thomas Hurvis Revocable Trust ("Hurvis Trust"). W I T N E S S E T H: WHEREAS, each of the Holders is a holder of certain shares of the Company's outstanding Series A Convertible Preferred Stock ("Series A Preferred"), Series C Convertible Preferred Stock ("Series C Preferred") and/or Series D Convertible Preferred Stock ("Series D Preferred" and, together with the Series A Preferred and the Series C Preferred, the "Existing Preferred Stock"); and WHEREAS, the Company and certain Holders have previously entered into that certain Stockholders Agreement, dated as of July 31, 2001, as amended (the "Prior Agreement"); and WHEREAS, the Company and the Holders and SF Capital Partners, Ltd. ("SF Capital") have entered into that certain Redemption and Exchange Agreement, dated as of the date hereof (as it may be amended, restated or modified and in effect from time to time, the "Redemption and Exchange Agreement"), whereby the Company will redeem for cash and/or exchange for shares of the Company's newly created Series E Convertible Preferred Stock, par value $0.01 per share (the "Series E Preferred Stock"), all of the outstanding shares of Existing Preferred Stock held by the Holders and by SF Capital, and certain Holders will also exchange certain warrants to purchase shares of the Series D Preferred for warrants to purchase shares of Series E Preferred Stock, all as more fully described in the Redemption and Exchange Agreement; and WHEREAS, it is a condition to the obligations of the Holders to exchange such securities pursuant to the Redemption and Exchange Agreement that the parties hereto enter into this Agreement; and WHEREAS, the Company and the Holders desire that this Agreement supersede and replace the Prior Agreement in its entirety; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: -1- ARTICLE I DEFINITIONS 1.1 Defined Terms. All terms capitalized but not defined herein shall have the meaning attributable to such terms in the Redemption and Exchange 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. "Agreement" shall have the meaning set forth in the preamble hereof. "Board Observer" means an individual who shall not be a member of the Board and who shall have the rights set forth in Section 2.3 hereof. "Board" means the Board of Directors of the Company. "Change of Control Transaction" means a transaction that results in the occurrence of any of the following events: (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40% of the total outstanding voting stock of the Company; (ii) the Company consolidates with or merges with or into another person or conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any person, or any person consolidates with or merges with or into the Company, in any such event, pursuant to a transaction in which the outstanding voting stock of the Company is converted into or exchanged for cash, securities or other property; (iii) any person consolidates with or merges with or into a subsidiary of the Company and such consolidation or merger results in the transfer of fifty percent (50%) or more of the outstanding voting power of the Company or results in the holders of the outstanding voting securities of this Company immediately prior to such transaction holding less than a majority of the voting securities of this Company or the surviving entity immediately thereafter; or (iv) the Company is liquidated, dissolved or a special resolution is passed by the stockholders of the Company approving the plan of liquidation or dissolution. "Closing Date" shall have the meaning given to it in the Redemption and Exchange Agreement. "Commission" means the United States Securities and Exchange Commission or any other governmental authority at the time administering the Securities Act of 1933, as amended. -2- "Common Stock" means and includes the Company's authorized common stock, par value $0.0001 per share. "Company" shall have the meaning set forth in the preamble. "Director" means a director of the Company. "Holders" means the entities (or groups of entities, as the case may be) set forth in the preamble. "Information" shall have the meaning set forth in Section 3.13. "Other Companies" means Persons that may directly or indirectly compete with any or all of the business of the Company or its subsidiaries. "Parity Stock" shall have the meaning given to it in the Series E Certificate of Designations. "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. "Redemption and Exchange Agreement" shall have the meaning set forth in the third WHEREAS clause hereof. "Senior Stock" shall have the meaning given to it in the Series E Certificate of Designations. "Series E 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 E Convertible Preferred Stock of Electric City Corp., as filed with the Secretary of State of Delaware and as may be amended and in effect from time to time. "Series E Preferred Stock" shall have the meaning set forth in the third WHEREAS clause hereof. "Unlimited Parties" shall have the meaning set forth in Section 3.13. ARTICLE II VOTING 2.1 Board Nominations. The Company and the Holders hereby agree that: (a) For so long as the aggregate number of issued and outstanding shares of Series E Preferred Stock is at least 90,000 shares (as adjusted for stock splits, stock combinations, recapitalizations and the like), the four Holders holding the greatest number of shares of Series E Preferred Stock, for so long as each such Holder and its Affiliates hold in the aggregate at least 12.5% of the aggregate number of issued and outstanding shares of Series E Preferred Stock as -3- of the Closing Date (as adjusted for stock splits, stock combinations, recapitalizations and the like, but excluding any unissued shares which such Holder may have the right to acquire pursuant to any warrants to purchase Series E Preferred Stock), shall each be entitled, through a nominating committee or other procedure adopted by the Board, to designate for nomination by the Board one nominee for election to the Board by the holders of the Series E Preferred Stock, voting as a single class to the exclusion of all other classes of the Company's capital stock, each time Directors of the Company are to be elected. (b) For so long as the aggregate number of issued and outstanding shares of Series E Preferred Stock is at least 65,000 shares but less than 90,000 shares (as adjusted for stock splits, stock combinations, recapitalizations and the like), the three Holders holding the greatest number of shares of Series E Preferred Stock, for so long as each such Holder and its Affiliates hold in the aggregate at least 9.375% of the aggregate issued and outstanding shares of Series E Preferred Stock as of the Closing Date (as adjusted for stock splits, stock combinations, recapitalizations and the like, but excluding any unissued shares which such Holder may have the right to acquire pursuant to any warrants to purchase Series E Preferred Stock) shall each be entitled, through a nominating committee or other procedure adopted by the Board, to designate for nomination by the Board one nominee for election to the Board by the holders of the Series E Preferred Stock, voting as a single class to the exclusion of all other classes of the Company's capital stock, each time Directors of the Company are to be elected. (c) For so long as the aggregate number of issued and outstanding shares of Series E Preferred Stock is at least 45,000 shares but less than 65,000 shares (as adjusted for stock splits, stock combinations, recapitalizations and the like), a majority-in-interest of the outstanding shares of Series E Preferred Stock shall be entitled, through a nominating committee or other procedure adopted by the Board, to designate for nomination by the Board two nominees for election to the Board by the holders of the Series E Preferred Stock, voting as a single class to the exclusion of all other classes of the Company's capital stock, each time Directors of the Company are to be elected. (d) For so long as the aggregate number of issued and outstanding shares of Series E Preferred Stock is at least 20,000 shares but less than 45,000 shares (as adjusted for stock splits, stock combinations, recapitalizations and the like), a majority-in-interest of the outstanding shares of Series E Preferred Stock shall be entitled, through a nominating committee or other procedure adopted by the Board, to designate for nomination by the Board one nominee for election to the Board by the holders of the Series E Preferred Stock, voting as a single class to the exclusion of all other classes of the Company's capital stock, each time Directors of the Company are to be elected. (e) For the purposes of Sections 2.1(a) and 2.1(b), within 30 days of the first day that any Holder and its Affiliates hold less than 12.5% in the case of Section 2.1(a), or 9.375% in the case of Section 2.1(b), of the aggregate issued and outstanding shares of Series E Preferred Stock as of the Closing Date (as adjusted for stock splits, stock combinations, recapitalizations and the like, but excluding any unissued shares which such Holder may have the right to acquire pursuant to any warrants to purchase Series E Preferred Stock), such Holder shall cause the Director nominated by such Holder to resign from the Board. -4- 2.2 Board of Directors of the Company. (a) So long as a Holder shall hold any shares of Series E Preferred Stock, such Holder shall vote all of its shares of Series E Preferred Stock for the election of all Directors nominated pursuant to Section 2.1 hereof. The nominee designated by each Holder or Holders shall be identified in a proxy statement delivered to the Company stockholders in connection with any annual meeting of stockholders or to the Holders in connection with a special meeting of the Holders of Series E Preferred Stock, if such nominees have not been already elected by written consent of the Holders. (b) Each Holder shall appear in person or by proxy at all annual or special meetings of stockholders and at all special meetings of the holders of Series E Preferred Stock for the purpose of obtaining a quorum and shall vote or cause the vote of the Series E Preferred Stock owned by such Holder or by any Affiliate of such Holder, either in person or by proxy, to be cast in accordance with the provisions of this Article II. (c) Each Holder shall vote all of its Series E Preferred Stock in favor of removal from the Board, upon notice by a Holder or Holders that an individual designated by it or them, as the case may be, pursuant to Section 2.1 should be removed, and to use its best efforts to cause the Board to fill the vacancy so vacated with another person designated by a Holder in accordance with this Agreement (unless such removal resulted from circumstances requiring a resignation pursuant to Section 2.1(e) which resignation has not occurred). Each Holder shall cooperate fully in connection with the nomination of Directors, the voting of its shares of Series E Preferred Stock, the execution of written consents (if then permissible under the Certificate of Incorporation (as amended and restated from time to time) of the Company), the calling of meetings and other stockholder matters to effect the provisions of this Article II. (d) If any Director nominated pursuant to Section 2.1 is unable to serve, or once having commenced to serve, is removed or withdraws from the Board, the Holder or Holders, as the case may be, who designated such Director will be entitled to designate an individual to fill the vacancy on the Board so created and each Holder will use its best efforts to cause the Board to fill the vacancy so created with the individual so designated, in accordance with the Certificates of Designations (unless such removal or withdrawal resulted from circumstances requiring a resignation pursuant to Section 2.1(e) which resignation has not occurred). (e) Each Holder shall not and shall not permit any of its Affiliates to grant any proxy or enter into or be bound by any voting trust or voting agreement with respect to its Series E Preferred Stock, or enter into any arrangements of any kind with any Person with respect to its Series E Preferred Stock, in any case in a manner that is inconsistent with the provisions of this Agreement. (f) The Company shall take such actions as may be necessary to permit the Holders to elect the nominees of the Holders pursuant to the provisions of this Article II or to appoint such nominees to the Board to fill any vacancy resulting from the death, resignation, removal or other withdrawal from the Board of a Director previously designated by the Holders of the Series E Preferred Stock (unless such removal or withdrawal resulted from from circumstances requiring a resignation pursuant to Section 2.1(e) which resignation has not occurred), and if -5- necessary, to be included in the slate of nominees recommended by the Board to the Company's stockholders for election as Directors. (g) For so long as any shares of Series E Preferred Stock remain outstanding, the number of Directors serving on the Board shall be fixed by resolution of the Board at twelve (12) and shall not be increased or decreased except in accordance with Section 6(e) of the Series E Certificate of Designations. 2.3 Board Observation Rights. If a Holder possesses the right to designate for nomination to the Board its nominee pursuant to Section 2.1(a) or Section 2.1(b), or no longer possesses a right to designate for nomination to the Board a nominee pursuant to Section 2.1(a) or Section 2.1(b), but such Holder and its Affiliates hold at least an aggregate of 2,000,000 shares of the Common Stock (calculated assuming the exercise of all rights, options and warrants to purchase Common Stock or securities convertible or exchangable for shares of Common Stock, and the exchange or conversion of all securities convertible or exchangeable for Common Stock), then such Holder shall be entitled to designate one individual to serve as a Board Observer, provided that, notwithstanding the foregoing, (i) while Leaf Mountain holds 10,000 or more shares of Series E Preferred Stock (as adjusted for stock splits, stock combinations and the like), Leaf Mountain shall be entitled to designate one individual to serve as a Board Observer , and (ii) while Morgan Stanley and OIP collectively holds 7,500 or more shares of Series E Preferred Stock (as adjusted for stock splits, stock combinations and the like), Morgan Stanley shall be entitled to designate one individual to serve as a Board Observer. Such Board Observer will be invited to attend all meetings of the Board and any Board committees as an observer and to receive copies of all materials and communications provided to the Board and Board committees when so distributed. The Board Observer will not be excluded from any portion of Board meetings, Board committee meetings or Board discussions except for those portions (a) in which the Company's counsel communicates with the Board on matters where Board Observer's attendance would result in loss of the attorney-client privilege for the Company and (b) in which, in the good faith judgment of counsel to the Company, participation by the Board Observer is not appropriate under applicable law. 2.4 Conversion of Series E Preferred Stock. Any Holder (including its Affiliates) who converts more than 50% of the shares of Series E Preferred Stock (as adjusted for stock splits, stock combinations and the like) received by it upon closing under the Redemption and Exchange Agreement shall, at the written request of the Company, convert all of its remaining shares of Series E Preferred Stock, if any, within five (5) Business Days of receipt of such request, in accordance with Section 7(c) of the Series E Certificate of Designations. Any transferee of a Holder (other than a Holder's Affiliates) who converts more than 50% of the shares of Series E Preferred Stock transferred to it by a Holder shall, at the written request of the Company, convert all of its remaining shares of Series E Preferred Stock, if any, within five (5) Business Days of receipt of such request, in accordance with Section 7(c) of the Series E Certificate of Designations. 2.5 Approval of Certain Actions by Holders. (a) For so long as any shares of Series E Preferred Stock remain issued and outstanding, the Company shall not, without the affirmative consent or approval of the holders of -6- record representing 75% or more of the aggregate number of shares of Series E Preferred Stock then outstanding, voting as a single class to the exclusion of all other classes of the Company's capital stock (such consent or approval to be given by written consent in lieu of a meeting if allowable under the Company's Certificate of Incorporation or by vote at a meeting called for such purpose for which notice shall have been given to the holders of the Series E Preferred Stock) (i) enter into any agreement that would restrict the Company's ability to perform under the Redemption and Exchange Agreement; (ii) amend its Certificate of Incorporation (including the Series E Certificate of Designations) or By-laws in any way that could adversely affect, alter or change the rights, powers or preferences of the Series E Preferred Stock, through merger, consolidation, recapitalization, reclassification or otherwise; (iii) engage in any transaction that would directly impair or reduce the rights, powers or preferences of the Series E Preferred Stock as a class; or (iv) complete any Change of Control Transaction (provided that if the aggregate number of shares of the Series E Preferred Stock outstanding is less than 45,000 shares (as adjusted for stock splits, stock combinations, recapitalizations and the like)) and the then holders of Series E Preferred Stock refuse to consent to such Change of Control Transaction, the Company may, at its option, redeem all, but not less than all, of such Series E Preferred Stock pursuant to Section 6(e)(i)(D) of the Series E Certificate of Designations. (b) For so long as the aggregate number of issued and outstanding shares of Series E Preferred Stock is at least 90,000 shares (as adjusted for stock splits, stock combinations, recapitalizations and the like), the Company shall not, without the affirmative consent or approval of the holders of record of shares representing 66-2/3% of the aggregate number of shares of Series E Preferred Stock then outstanding, voting as a single class to the exclusion of all other classes of the Company's capital stock (such consent or approval to be given by written consent in lieu of a meeting if allowable under the Company's Certificate of Incorporation or by vote at a meeting called for such purpose for which notice shall have been given to the holders of the Series E Preferred Stock): (i) authorize or issue any Senior Stock or Parity Stock or any securities convertible or exchangeable into such securities, other than (x) the Series E Preferred Stock Warrants, (y) Series E Preferred Stock issued upon exercise of such Series E Preferred Stock Warrants, or (z) Series E Preferred Stock issued as payment in kind of any accrued but unpaid dividends on the Series E Preferred Stock; (ii) enter into any agreement or amendment with respect to any outstanding options, rights or warrants to purchase capital stock of the Company that reduces or that has the effect of reducing the per share exercise price for any such options, rights or warrants; (iii) authorize or issue any debt securities of the Company, other than debt under the existing credit facilities in effect as of March 12, 2004 or the replacement thereof on substantially similar terms, and any additional debt up to $1,000,000 in the aggregate issued or incurred in the ordinary course of business (excluding trade payables incurred in the ordinary course of business); (iv) purchase, redeem, or otherwise acquire any of the Company's capital stock, other than the redemption of the Series E Preferred Stock; (v) enter into any acquisition, sale, merger, joint venture, consolidation or reorganization involving the Company or any of its subsidiaries; (vi) sell or lease assets of the Company or any of its subsidiaries, except in the ordinary course of business; (vii) declare or pay any cash dividends or make any distributions on any of its capital stock, other than on the Series E Preferred Stock; (viii) authorize the payment or pay to any individual employee of the Company of cash compensation in excess of $500,000 per annum; or (ix) enter into any transactions (or series of transactions), including loans, with any employee, officer or director of the Company or to or with his, her or its Affiliates or family members (other than with respect to payment of compensation to actual full-time employees in -7- the ordinary course of business) involving $50,000 or more per year individually or $250,000 or more per year in the aggregate. (c) For so long as the aggregate number of issued and outstanding shares of Series E Preferred Stock is at least 130,000 shares (as adjusted for stock splits, stock combinations, recapitalizations and the like), the Company shall not, without the affirmative consent or approval of the holders of record of shares of Series E Preferred Stock representing at least 66-2/3% of the aggregate number of shares of Series E Preferred Stock then outstanding, voting as a single class to the exclusion of all other classes of the Company's capital stock (such consent or approval to be given by written consent in lieu of a meeting if allowable under the Company's Certificate of Incorporation or by vote at a meeting called for such purpose for which notice shall have been given to the holders of the Series E Preferred Stock): (i) terminate or newly appoint the chief executive officer of the Company; (ii) approve any annual capital budget if such budget provides for annual capital expenditures by the Company and its subsidiaries in excess of $1,000,000 in the aggregate in any year; or (iii) approve the incurrence of any single capital expenditure (or series of related capital expenditures) in excess of $500,000; provided, however, the Company shall have the right to make any reasonable emergency capital expense that the Board of Directors determines is necessary to maintain operations as a result of a catastrophic event. 2.6 Successors. The provisions of this Agreement shall be binding upon the successor in interest to any Holder of shares of the Series E Preferred Stock. The Company shall not permit the transfer of any shares of the Series E Preferred Stock on its books or issue a new certificate representing any shares of the Series E Preferred Stock unless and until the Person to whom such shares of Series E Preferred Stock are to be transferred shall have executed a written agreement, substantially in the form of this Agreement, pursuant to which such Person becomes a party to this Agreement and agrees to be bound by all the provisions hereof as if such Person were a Holder hereunder; provided, however, that such successor Persons shall not have any rights to designate any Directors pursuant to Section 2.1(a) or Section 2.1(b) nor any rights under Section 2.3 (except in the case of Section 2.1(a) or Section 2.1(b) or Section 2.3 if such Person is an Affiliate of a Holder having rights thereunder). 2.7 Aggregation. For purposes of determining the number of shares of Series E Preferred Stock held (or converted) by a Holder pursuant to this Article II, the number of shares of Series E Preferred Stock held (or converted) by all of such Holder's Affiliates shall be aggregated with the number of shares of Series E Preferred Stock held (or converted) by such Holder. ARTICLE III GENERAL PROVISIONS 3.1 Legend on Share Certificates. All certificates for shares of Series E Preferred Stock that are subject to the terms and provisions of Article 2, in addition to such other legends as may be required by law, shall bear the legend set forth in Section 7.08 of the Redemption and Exchange Agreement (and any other -8- legend required by any other agreement contemplated by the Redemption and Exchange Agreement), as applicable, and the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN REQUIREMENTS AS TO VOTING CONTAINED IN THE AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF MARCH 19, 2004 (AS SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME), BETWEEN THE COMPANY AND CERTAIN STOCKHOLDERS, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. (B) Upon the termination of this Agreement, each Holder shall be entitled to receive, in exchange for any certificate bearing the legend described in this Section 3.1(a), a certificate that no longer bears the legend set forth in this Section 3.1(a), unless the Company shall have sooner determined (based upon advice of legal counsel) that such legend is no longer required by law. 3.2 Injunctive Relief. It is acknowledged that it is impossible to measure in money the damages that would be suffered if the parties fail to comply with the obligations imposed on them by this Agreement and that, in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law. Any such Person shall, therefore, be entitled to injunctive relief and/or specific performance to enforce such obligations, and if any action should be brought in equity to enforce any of such provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. 3.3 Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 3.4 Governing Law. Except as to matters governed by the General Corporation Law of the State of Delaware and decisions thereunder of the Delaware courts applicable to Delaware corporations, which shall be governed by such laws and decisions, this Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Illinois. 3.5 Entire Agreement; Amendment; Waiver. Effective as of the date hereof, this Agreement amends and restates in its entirety the Prior Agreement. This Agreement is intended by the parties as a final expression of their agreement and a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings other than those set forth or referred to herein or therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. This Agreement may not be amended or supplemented except by an instrument or counterparts thereof in writing signed -9- by the Holders and by the Company. Any such amendment so approved shall be binding on all Holders and all other Persons bound by this Agreement. No waiver of any term or provision shall be effective unless in writing signed by the party to be charged. 3.6 Binding Effect. This Agreement shall be binding on and inure to the benefit of the parties hereto and, subject to the terms and provisions hereof, their respective legal representatives, successors and assigns. 3.7 Invalidity of Provision. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction. 3.8 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be deemed but one and the same instrument and each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart for each of the parties hereto. Delivery by facsimile by any of the parties hereto of an executed counterpart of this Agreement shall be effective as an original executed counterpart hereof and shall be deemed a representation that an original executed counterpart hereof will be delivered. 3.9 Notices. All notices, consents and other communications under this Agreement shall be in writing and shall be deemed to have been duly given when (a) delivered by hand, (b) sent by telecopier (with receipt confirmed), provided that a copy is mailed by certified or registered mail, return receipt requested, or (c) when received by the addressee, if sent by Express Mail, Federal Express or other express delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate as to itself by notice to the other parties): (i) If to the Company: 1280 Landmeier Road Elk Grove Village, IL 60007-2410 Fax No. 847-437-4969 Attention: General Counsel (ii) If to a Holder: at the address set forth in the Redemption and Exchange Agreement. 3.10 Headings. The descriptive headings of the several paragraphs of this Agreement are inserted for convenience only and do not constitute part of this Agreement. 3.11 Representations and Warranties. Each party to this Agreement represents and warrants to the other parties to this Agreement that (i) all action on the part of such party necessary for the authorization, execution, delivery and performance of this Agreement has been taken and (ii) this Agreement is the legally valid and binding obligation of such party, enforceable against such party in accordance with its terms, subject to applicable bankruptcy, -10- insolvency, reorganization, moratorium, and similar laws affecting creditors' rights and remedies generally and to equitable principles relating to enforceability. 3.12 No Conflict. The Company shall not enter into any agreement that is inconsistent with or that would in any way interfere with the rights of the parties hereto. The Company shall ensure that its Certificate of Incorporation and By-laws do not at any time conflict with the provisions of this Agreement then in effect. In the event that any such conflict should nevertheless exist, the provisions of this Agreement shall control to the extent permitted under applicable law. 3.13 Unlimited Parties. All parties to this Agreement hereby acknowledge and agree that: (a) Nothing in this Agreement shall in any way limit or be construed as limiting the ability of a Holder or its Affiliates or Directors or Board Observers designated by such Holders (collectively, the "Unlimited Parties"), and such Unlimited Parties may, in the past, present or future, carry out and engage in any and all activities associated with their businesses, including, without limitation, underwriting (including, without limitation, underwriting investments of private equity of the Unlimited Parties or other persons in the business of designing, developing, manufacturing or marketing of power conservation and reliability systems, including, without limitation, direct competitors of the Company), trading, brokerage, financing, derivatives, foreign exchange, asset management activities and principal investment, and for the avoidance of doubt and without limiting the generality of the foregoing, the Unlimited Parties may: (i) purchase and hold long or short positions, otherwise make investments, trade or otherwise effect transactions, for their own account or the account of their customers, in the debt or equity securities or loans of persons which may directly or indirectly compete with any or all of the business of the Company (the "Other Companies"); and (ii) provide financial advice to the Other Companies; and (b) The Unlimited Parties may have information that may be of interest or value to the Company ("Information") regarding various matters including without limitation, (i) an Unlimited Party's products, plans, services and technology, and plan and strategies relating thereto, (ii) current and future investments an Unlimited Party has made, may make, may consider or may become aware of with respect to other companies and other products, services and technology, including without limitation, Other Companies, and (iii) developments with respect to the technologies, products and services, and plans and strategies relating thereto, including, without limitation, Other Companies. The Company agrees that the Unlimited Parties shall have no duty to disclose any Information to the Company or permit the Company to participate in any investments or transactions based on any Information, or to otherwise take advantage of any opportunity that may be of interest to the Company if it were aware of such Information. [Balance of page intentionally left blank; signature pages follow.] -11- IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Stockholders Agreement 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: _____________________________ By: _______________________________ Name: John Mitola Name: _______________________________ Title: Chief Executive Officer Title: _______________________________ MORGAN STANLEY DEAN WITTER EQUITY FUNDING, INC., a Delaware corporation By: _______________________________ Name: _______________________________ Title: _______________________________ ORIGINATORS INVESTMENT PLAN, L.P., a Delaware limited partnership By: _______________________________ Name: _______________________________ Title: _______________________________ CINERGY VENTURES II, LLC, a Delaware limited liability company By: _______________________________ Name: _______________________________ Title: _______________________________ -12- LEAF MOUNTAIN COMPANY, LLC, an Illinois limited liability company By: _______________________________ Name: _______________________________ Title: _______________________________ AUGUSTINE FUND LP, an Illinois limited partnership By: _______________________________ Name: _______________________________ Title: _______________________________ TECHNOLOGY TRANSFORMATION VENTURE FUND, LP, a Delaware limited partnership By: _______________________________ Name: _______________________________ Title: _______________________________ ______________________________________ RICHARD P. KIPHART, an individual ______________________________________ DAVID R. ASPLUND, an individual ______________________________________ JOHN DONOHUE, an individual -13- JOHN THOMAS HURVIS REVOCABLE TRUST, an Illinois trust By: _______________________________ Name: _______________________________ Title: _______________________________ -14- EX-99.5 6 l06611aexv99w5.txt EXHIBIT 99.5 AMD & RSTD INVESTOR RIGHTS AGREEMENT EXHIBIT 99.5 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT This Amended and Restated Investor Rights Agreement, dated as of March 19, 2004 (as it may be amended, restated or modified and in effect from time to time, this "Agreement"), is made by and among Electric City Corp., a Delaware corporation (the "Company"), and each of the parties set forth on Schedule I attached hereto from time to time (collectively, the "Investors" and, together with the Company, the "Parties") and shall become effective on the Closing Date (as defined in the Redemption and Exchange Agreement (as defined below)). WITNESSETH WHEREAS, each of the Investors (other than CIT Capital Securities Inc.) is a holder of certain shares of the Company's outstanding Series A Convertible Preferred Stock ("Series A Preferred"), Series C Convertible Preferred Stock ("Series C Preferred") and/or Series D Convertible Preferred Stock ("Series D Preferred" and, together with the Series A Preferred and the Series C Preferred, the "Existing Preferred Stock"), and of shares of the Company's Common Stock; and WHEREAS, each of the Investors is a holder of Common Stock Warrants (as herein defined); and certain of the Investors are also holders of certain warrants to purchase additional shares of Series D Preferred Stock; and WHEREAS, the Parties have previously entered into that certain Investor Rights Agreement dated as of July 31, 2001, as amended (the "Prior Agreement"); WHEREAS, the Company and each of the Investors (other than CIT Capital Securities Inc.) have entered into that certain Redemption and Exchange Agreement, dated as of the date hereof (as it may be amended, restated or modified and in effect from time to time, the "Redemption and Exchange Agreement"), whereby the Company will redeem for cash and/or exchange for shares of the Company's newly created Series E Convertible Preferred Stock, par value $0.01 per share (the "Series E Preferred Stock"), all of the outstanding shares of Existing Preferred Stock held by the Investors, and certain Investors will also exchange certain warrants to purchase shares of the Series D Preferred for warrants to purchase shares of Series E Preferred Stock, all as more fully described in the Redemption and Exchange Agreement; and WHEREAS, it is a condition to the obligations of such Investors to exchange such securities pursuant to the Redemption and Exchange Agreement that the parties hereto enter into this Agreement; and WHEREAS, the Parties desire that this Agreement supersede and replace the Prior Agreement in its entirety; 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- 1.1 Definitions. All terms capitalized but not defined herein shall have the meaning attributable to such terms in the Redemption and Exchange Agreement, except where the context otherwise requires. The following additional terms when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following respective meanings, such meanings to be equally applicable to the singular and plural forms thereof: "Additional Securities Purchase Agreement" means the Securities Purchase Agreement dated as of November 29, 2001 between the Company and Leaf Mountain, as amended and in effect from time to time. "Agreement" shall have the meaning set forth in the preamble of this Agreement. "Closing Date" shall have the meaning given to it in the Redemption and Exchange Agreement. "Commission" means the United States Securities and Exchange Commission or other governmental authority at the time administering the Securities Act. "Common Stock" means and includes the Company's authorized common stock, par value $0.0001 per share. "Common Stock Warrants" means, collectively, the warrants to purchase Common Stock which are listed on Schedule II to this Agreement, and any warrants which may hereafter be issued by the Company pursuant to transfer, partial exercise or subdivision of such warrants as provided therein. "Company" shall have the meaning set forth in the preamble of this Agreement. "Eligible Securities" means (i) the shares of Common Stock issued or issuable upon the conversion of the Series E Preferred Stock issued or issuable pursuant to the Redemption and Exchange Agreement; (ii) the shares of Common Stock issued or issuable upon exercise of the Series E Preferred Stock Warrants and conversion of the Series E Preferred Stock issued or issuable pursuant to such exercise; (iii) the shares of Common Stock issued or issuable pursuant to conversion of any shares of Series E Preferred Stock issued as dividends in respect of outstanding shares of Series E Preferred Stock; (iv) the shares of Common Stock issued or issuable upon exercise of the Common Stock Warrants; (v) the shares of Common Stock issued pursuant to the Securities Purchase Agreement, the Additional Securities Purchase Agreement, the Series C Securities Purchase Agreement and the Series D Securities Purchase Agreement; (vi) the shares of Common Stock issued prior to the Closing Date pursuant to conversion of shares of Series A Preferred; and (vii) 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) and this clause (vii); 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 -2- pursuant to Rule 144 or sold in a registered public offering that has been declared effective shall no longer be Eligible Securities hereunder. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and any similar or successor federal statute, and the rules and regulations of the Commission thereunder, all as the same may be in effect at the time. "Existing Preferred Stock" shall have the meaning set forth in the first WHEREAS clause of this Agreement. "Fully-Exercising Investor" shall have the meaning set forth in Section 3.1 hereof. "Holder" means a registered holder of record of outstanding Eligible Securities or securities convertible into or exercisable for, directly or indirectly, Eligible Securities. "Investors" shall have the meaning set forth in the preamble hereto. "Leaf Mountain" means Leaf Mountain Company, LLC, an Illinois limited liability company. "Notice" shall have the meaning set forth in Section 3.1 hereof. "Parties" shall have the meaning set forth in the preamble hereto. "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. "Piggyback Request" shall have the meaning set forth in Section 2.2(a) hereof. "Qualified Primary Offering" means a firmly underwritten primary registered public offering of the Common Stock by the Company that raises at least $35 million in gross proceeds at a price of at least $5.00 per share (as adjusted for stock splits, stock combinations, recapitalizations and the like). "Redemption and Exchange Agreement" shall have the meaning set forth in the fourth WHEREAS clause of this Agreement. "Registration Request" shall have the meaning set forth in Section 2.1 hereof. "Requesting Holder" shall have the meaning set forth in Section 2.1 hereof. "Rule 144" means Rule 144 promulgated by the Commission under the Securities Act, as in effect from time to time. "Securities Act" means the Securities Act of 1933, as amended, and any similar or successor federal statute, and the rules and regulations of the Commission thereunder, all as the same may be in effect at the time. -3- "Securities Purchase Agreement" means that certain Securities Purchase Agreement, dated as of July 31, 2001, by and among the Company, certain of the Investors and certain other Persons, as amended and in effect from time to time. "Series C Securities Purchase Agreement" means that certain Securities Purchase Agreement, dated as of May 31, 2002, between the Company and Richard Kiphart, as amended and in effect from time to time. "Series D Securities Purchase Agreement" means that certain Securities Purchase Agreement, dated as of June 27, 2003, by and among the Company and certain of the Investors, as amended and in effect from time to time. "Series E Preferred Stock" shall have the meaning set forth in the fourth WHEREAS clause of this Agreement. "Series E Preferred Stock Warrants" means the warrants to purchase shares of Series E Preferred Stock issued to certain of the Investors pursuant to the Redemption and Exchange Agreement. "Shares" shall have the meaning set forth in Section 3.1 hereof. ARTICLE II REGISTRATION RIGHTS 2.1 Requested Registration. (a) At any time after the Closing Date, Holders holding at least a majority of the shares constituting Eligible Securities may deliver to the Company a written request that the Company file and use its best efforts to cause to become effective a registration statement under the Securities Act with respect to such number of the Eligible Securities owned by the Holders as shall be specified in such request (a "Registration Request"), including, if specified in the Registration Request, a "shelf" registration statement on Form S-3 (or if Form S-3 is not then available, Form S-1 or such other form that the Company is eligible to use with respect to the Eligible Securities) for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act; provided, however, that the Company shall not be obligated to effect any such registration pursuant to this Section 2.1 if the aggregate value on the date of the Registration Request of the Eligible Securities to be registered thereon is less than $5,000,000. The Company shall not be required to file and use its best efforts to cause to become effective, pursuant to a Registration Request under this Section 2.1 more than four (4) registration statements at the demand of the Holders. The party (or parties) delivering a Registration Request is hereinafter referred to as the "Requesting Holder." (b) As soon as practicable following the receipt of a Registration Request, the Company will use its best efforts to register under the Securities Act, for public sale in accordance with the method of disposition specified in such Registration Request, the number of shares of Eligible Securities specified in such Registration Request (and the number of Eligible Securities specified in all notices received from Holders within 20 business days after notice of the Registration Request has been delivered pursuant to Section 2.2 hereof). The Company shall -4- also be entitled to include in any registration statement filed pursuant to a Registration Request, for sale in accordance with the method of disposition specified in such Registration Request, such number of shares of Common Stock as the Company shall desire to sell for its own account or for the account of other security holders or both. If the method of sale designated is an underwritten public offering, the managing underwriter or underwriters must be reasonably acceptable to both the Requesting Holder (or the holders of a majority of the shares of Eligible Securities held by all parties comprising the Requesting Holder if more than one party is the Requesting Holder) and the Company, which acceptance shall not be unreasonably withheld. Notwithstanding the foregoing provisions of this Section 2.1(b), to the extent that, in the opinion of the underwriter or underwriters (if the method of disposition shall be an underwritten public offering), marketing considerations require the reduction of the number of shares of Common Stock covered by any such registration, the number of shares of Common Stock to be registered and sold pursuant to such registration shall be reduced as follows: (i) first, the number of shares of Common Stock to be registered on behalf of the Company shall be reduced (to zero, if necessary); and (ii) second, the number of shares of Common Stock to be registered on behalf of Persons other than the Holders and their Affiliates, if any, shall be reduced (to zero, if necessary) pro rata according to the number of shares of restricted Common Stock held by each; and (iii) third, the number of shares of Eligible Securities to be registered on behalf of the Holders and their Affiliates shall be reduced pro rata according to the number of shares of Eligible Securities held by each. (c) Notwithstanding anything to the contrary contained herein, the exercise by any Holder of any right hereunder with respect to shares of Eligible Securities shall not affect or diminish any other rights of such Holder hereunder with respect to any other securities of the Company held by such Holder. (d) In addition to any rights Leaf Mountain may have under clause (a) above, while it is the holders of not less than an aggregate of 750,000 shares of the Common Stock (calculated assuming the exercise of all rights, options, warrants to purchase Common Stock or securities convertible or exchangeable for shares of Common Stock), may deliver to the Company, on a single occasion, a Registration Request that the Company file and use its best efforts to cause to become effective, a registration statement under the Securities Act with respect to Eligible Securities comprising not less than 750,000 shares of Common Stock, on the terms and subject to the other conditions applicable to any Registration Request under this Section. Within forty-eight (48) hours of receipt of such Registration Request, the Company shall provide written notice to all of holders of Series E Preferred Stock of such Registration Request. 2.2 Piggyback Registration. (a) If the Company at any time after the Closing Date proposes to register Common Stock under the Securities Act for sale to the public (including registrations pursuant to Section 2.1 hereof), whether for its own account or for the account of other security holders or both -5- (except registration statements on Form S-8, S-4 or another form not available for registering the Eligible Securities for sale to the public), each such time it will give written notice to all Holders of its intention to do so. Upon the written request of any Holder (a "Piggyback Request"), given within 20 business days after receipt of any such notice, to register any of its Eligible Securities, the Company shall, subject to Section 2.2(b) below, cause the Eligible Securities as to which registration shall have been so requested to be covered by the registration statement proposed to be filed by the Company. (b) In the event that any registration statement described in this Section 2.2 shall relate, in whole or in part, to an underwritten public offering of shares of Common Stock, the Eligible Securities to be registered must be sold through the same underwriters as have been selected by the Company (or agreed to pursuant to Section 2.1 hereof, if applicable). Otherwise, the method of distribution of the Eligible Securities to be sold by any Holder making a Piggyback Request shall be as specified therein. Except with respect to all Holders (and their respective Affiliates) in the case of a registration statement filed pursuant to a Registration Request under Section 2.1 hereof, the number of shares of Common Stock to be included in such registration statement on account of any Person may be reduced if and to the extent that the underwriter or underwriters shall be of the opinion that such inclusion would materially adversely affect the marketing of the total number of shares of Common Stock proposed to be sold, and the number of shares to be registered and sold by each Person (other than the Company) shall be reduced pro rata according to the relative number of fully diluted shares of Common Stock owned by such Person. Notwithstanding the foregoing provisions of this Section 2.2, the Company may withdraw any registration statement referred to in this Section 2.2 (other than a registration statement filed pursuant to a Registration Request under Section 2.1) without thereby incurring any liability for such withdrawal to any requesting Holder. 2.3 Registration Procedures. If and whenever the Company is required by the provisions of Sections 2.1 or 2.2 to effect the registration of any Eligible Securities under the Securities Act, the Company shall: (a) prepare and file with the Commission a registration statement with respect to such securities that will permit the public sale thereof in accordance with the method of distribution specified in the applicable Registration Request, and the Company shall use its best efforts (i) to cause such registration statement to be filed within 60 days of receipt of the Registration Request, (ii) to cause such registration statement to be declared effective as promptly as practicable and (iii) to maintain the effectiveness of such registration statement for a period of not less than 90 days or, in the case of a registration statement pursuant to a Registration Request under Section 2.1, until such times as all securities registered thereunder have been sold; (b) promptly prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to effect and maintain the effectiveness of such registration statement for the period specified in Section 2.3(a) and as to comply with the provisions of the Securities Act with respect to the disposition of all Eligible Securities covered by such registration statement in accordance with the intended method of disposition set forth in such registration statement for such period, including such amendments or supplements as are necessary to cure any untrue statement or omission referred to in Section 2.3(e)(vi); -6- (c) provide to the managing underwriter or underwriters and not more than one counsel for all underwriters, and provide to the Holders of Eligible Securities to be included in such registration statement and not more than one counsel for all such Holders, the opportunity to participate in the preparation of (i) such registration statement, (ii) each prospectus relating thereto and included therein or filed with the Commission, and (iii) each amendment or supplement thereto; (d) make available for inspection by the parties referred to in Section 2.3(c) such financial and other information and books and records of the Company, and cause the officers, directors and employees of the Company, and counsel and independent certified public accountants of the Company, to respond to such inquiries, as shall be reasonably necessary, in the judgment of respective counsel to such Holders and such underwriter or underwriters, to conduct a reasonable investigation within the meaning of the Securities Act; provided, however, that each such Person shall be required to retain in confidence and not to disclose to any other Person any information or records reasonably designated by the Company in writing as being confidential until such time as such information becomes a matter of public record (whether by virtue of its inclusion in such registration statement or otherwise), unless (i) such Person shall be required to disclose such information pursuant to the subpoena or order of any court or other governmental agency or body having jurisdiction over the matter or (ii) such information is required to be set forth in such registration statement or the prospectus included therein or in an amendment to such registration statement or an amendment or supplement to such prospectus in order that such registration statement, prospectus, amendment or supplement, as the case may be, shall not contain an untrue statement of a material fact or omit to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and such information has not been so set forth after the request by a Holder to such effect; (e) immediately notify the Persons referred to in Section 2.3(c) and (if requested by any such Person) confirm such advice in writing, (i) when such registration statement or any prospectus included therein or any amendment or supplement thereto has been filed and, with respect to such registration statement or any such amendment, when the same has become effective; (ii) of any written or material comments by the Commission with respect thereto or any request by the Commission for amendments or supplements to such registration statement or prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of such registration statement or the initiation of any proceedings for that purpose; (iv) if at any time the representations and warranties of the Company contemplated by Section 2.3(1)(i) cease to be true and correct in all material respects; (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Eligible Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; or (vi) at any time when a prospectus is required to be delivered under the Securities Act, of the occurrence or failure to occur of any event, or any other change in law, fact or circumstance, as a result of which such registration statement, prospectus or any amendment or supplement thereto, or any document incorporated by reference in any of the foregoing, contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; -7- (f) take reasonable efforts to prevent or obtain the withdrawal at the earliest practicable date of any order suspending the effectiveness of such registration statement or any post-effective amendment thereto; (g) if requested by the managing underwriter or underwriters or the Holders of at least a majority of the Eligible Securities being sold in connection with an underwritten public offering, promptly incorporate in a prospectus supplement or post-effective amendment such information as such managing underwriter or underwriters or such Holders reasonably specify should be included therein relating to the terms of the sale of such Eligible Securities, including, without limitation, information with respect to the number of Eligible Securities being sold to such underwriters, the names and descriptions of such Holders, the purchase price being paid therefore by such underwriters and any other terms of the underwritten (or best efforts underwritten) offering of the Eligible Securities to be sold in such offering, and make all required filings of such prospectus supplement or post-effective amendment promptly after notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; (h) furnish to each Holder of Eligible Securities included in such registration and each underwriter and counsel for Holder, if any, thereof a copy of such executed registration statement, each such amendment and supplement thereto (in each case including all exhibits thereto, whether or not such exhibits are incorporated by reference therein) and such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus) and each amendment or supplement thereto, in conformity with the requirements of the Securities Act, as such Holder and the managing underwriter, if any, may reasonably request in order to facilitate the disposition of such Eligible Securities by such Holder or by the participating underwriters; (i) use its best efforts to (i) register or qualify the Eligible Securities to be included in such registration statement under such other securities laws or blue sky laws of such jurisdictions as any Holder of such Eligible Securities and each managing underwriter, if any, thereof shall reasonably request, (ii) keep such registrations or qualifications in effect for so long as is necessary to effect the disposition of such Eligible Securities in the manner contemplated by the registration statement, the prospectus included therein and any amendment or supplement thereto and (iii) take any and all such actions as may be reasonably necessary or advisable to enable such Holder and any participating underwriter or underwriters to consummate the disposition in such jurisdictions of such Eligible Securities; (j) cooperate with the Holders of the Eligible Securities included in such registration and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Eligible Securities to be sold, which certificates shall be printed, lithographed or engraved, or produced by any combination of such methods, and which shall not bear any restrictive legends; and, in the case of an underwritten public offering, enable such Eligible Securities to be registered in such names as the underwriter or underwriters may request at least two (2) business days prior to any sale of such Eligible Securities; (k) provide not later than the effective date of the registration statement a transfer agent and registrar for such Eligible Securities and a CUSIP number for all Eligible Securities; -8- (l) enter into an underwriting agreement, engagement letter, agency agreement, "best efforts" underwriting agreement or similar agreement, as appropriate, and take such other actions in connection therewith as the Holders of at least a majority of the Eligible Securities to be included in such registration shall reasonably request in order to expedite or facilitate the disposition of such Eligible Securities, and in connection therewith, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten public offering, (i) make such representations and warranties to the Holders of such Eligible Securities included in such registration and the underwriters, if any, in form, substance and scope as are customarily made in an underwritten public offering; (ii) obtain an opinion of counsel to the Company in customary form and covering such matters as are customarily covered by such an opinion as the Holders of at least a majority of such Eligible Securities and the underwriters, if any, may reasonably request, addressed to each participating Holder and the underwriters, if any, and dated the effective date of such registration statement (or, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement); (iii) obtain a "cold comfort" letter from the independent certified public accountants of the Company addressed to the Holders of the Eligible Securities included in such registration and the underwriters, if any, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, also dated the date of the closing under the underwriting agreement), such letter to be in customary form and covering such matters as are customarily covered by such letters; (iv) deliver such documents and certificates as may be reasonably requested by the Holders of at least a majority of the Eligible Securities included in such registration and the underwriters, if any, to evidence compliance with clause (i) of this Section 2.3(1) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company; and (v) undertake such obligations relating to expense reimbursement, indemnification and contribution as are provided in Sections 2.4, 2.5 and 2.6 hereof; (m) cause all such Eligible Securities registered hereunder to be listed on each securities exchange or over-the-counter market on which similar securities issued by the Company are then listed, and, if not so listed, to be listed on the NASD automated quotation system and, if listed on the NASD automated quotation system, use its commercially reasonable efforts to secure designation of all such Eligible Securities covered by the registration statement as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of the Commission or, failing that, to secure NASDAQ authorization for such Eligible Securities and, without limiting the generality of the foregoing, to use its commercially reasonable efforts to arrange for at least two market makers to register as such with respect to such Eligible Securities with the NASD; (n) make available on a reasonable basis senior management personnel of the Company to participate in, and cause them to cooperate with the selling Holders of Eligible Securities or the managing underwriter in any underwritten offering in connection with "road show" and other customary marketing activities, including "one-on-one" meetings with prospective purchasers of the Eligible Securities to be sold in the underwritten offering and otherwise to facilitate, cooperate with, and participate in each proposed offering contemplated herein and customary selling efforts related thereto, in each case to the same extent as if the Company were engaged in a primary registered offering of its capital stock; and -9- (o) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission. Notwithstanding the provisions of Section 2.3(a), the Company's obligation to file a registration statement, or cause such registration statement to become effective, shall be suspended, without incurring any liability to any Holder, for a period not to exceed 90 days if there exists at the time material non-public information relating to the Company that, in the reasonable opinion of the Company, should not be disclosed, provided that any such suspension shall occur no more than once in any 12-month period. In such an event, the Company shall promptly inform all Holders of the Company's decision to defer filing of a registration statement and shall notify all Holders promptly (but in any event not later than upon the expiration of the 90-day period specified in the immediately preceding sentence) of the recommencement of the Company's best efforts to file the registration statement and to cause the registration statement to become effective. If the Company shall so postpone the filing of a registration statement, (i) the Company shall use its reasonable best efforts to limit the delay to as short a period as is practicable and (ii) the Holders shall have the right to withdraw the request for registration by giving written notice to the Company at any time. In the event of such withdrawal, such request shall not be counted for purposes of the number of requests for registration to which the Holders are entitled pursuant to Section 2.1(a). In connection with each registration of Eligible Securities hereunder, each Holder thereof will furnish to the Company in writing such information with respect to it and its Affiliates and the proposed distribution by it and its Affiliates as shall be reasonably necessary in order to assure compliance with applicable federal and state securities laws. Each such Holder also agrees to notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished by such Holder to the Company or of the occurrence of any other event, in either case as a result of which any prospectus relating to such registration contains an untrue statement of a material fact regarding such Holder or the distribution of such Eligible Securities or omits to state any material fact regarding such Holder or the distribution of such Eligible Securities required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly to furnish to the Company any additional information required to correct and update such previously furnished information or required so that such prospectus shall not contain, with respect to such Holder or the distribution of such Eligible Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances then existing. Each Holder further agrees that upon receipt of any notice referred to in the immediately preceding sentence, or upon receipt of any notice from the Company pursuant to Section 2.3(e)(vi) hereof, such Holder and its Affiliates shall forthwith discontinue the disposition of Eligible Securities pursuant to the registration statement applicable to such Eligible Securities until such Holder shall have received copies of an amended or supplemented registration statement or prospectus, and if so directed by the Company, such Holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's (and its Affiliates') possession of the prospectus covering such Eligible Securities at the time of receipt of such notice. 2.4 Expense. The Company shall pay all expenses incurred in complying with Sections 2.1 and 2.2, including without limitation all registration and filing fees, printing -10- expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses of one counsel for the selling Holders, fees and expenses (including counsel fees) incurred in connection with complying with state securities or "blue sky" laws (other than those that by law must be paid by the selling security holders), transfer taxes, fees of transfer agents and registrars and stock exchange listing fees, but excluding all fees and expenses of counsel for the underwriters, if any, and all underwriting discounts and selling commissions applicable to the sale of Eligible Securities. All expenses of participating sellers other than those assumed by the Company in this Agreement shall be borne by such sellers in proportion to the number of shares of Eligible Securities sold by each seller or as they may otherwise agree. 2.5 Indemnification. (a) In the event of a registration of Eligible Securities under the Securities Act pursuant to Sections 2.1 or 2.2, the Company shall indemnify and hold harmless, to the fullest extent permitted by law, each selling Holder, its Affiliates, each of their respective officers, directors, employees and agents, each underwriter of such Eligible Securities and each other Person, if any, who controls such selling Holder or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such selling Holder, Affiliate, their respective officer, director, employee, agent, underwriter or controlling Person may become subject under the Securities Act or otherwise or in any action in respect thereof, and will reimburse each such Person for any legal or other expenses reasonably incurred by he, she or it in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Eligible Securities were registered under the Securities Act pursuant to Sections 2.1 or 2.2, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company shall not be liable to any such selling Holder, Affiliate, officer, director, employee, agent, underwriter or controlling Person in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in conformity with information furnished by such selling Holder, Affiliate officer, director, employee, agent, underwriter or controlling Person in writing specifically for use in such registration statement or prospectus. (b) Each selling Holder of such Eligible Securities, severally and not jointly, will indemnify and hold harmless the Company, each underwriter and each Person, if any, who controls the Company or any underwriter within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each other seller of securities registered by the registration statement covering such Eligible Securities and each Person, if any, who controls such seller, against all losses, claims, damages or liabilities, joint or several, to which the Company or any such officer, director, underwriter, other seller or controlling Person may become subject under the Securities Act or otherwise, and shall reimburse the Company and each such officer, director, underwriter, other seller and controlling Person for any legal or other expenses reasonably incurred by them in connection with -11- investigating or defending any such loss, claim, damage, liability or action, insofar as such losses, claims, damages or liabilities (or action in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of material fact or omission or alleged omission of a material fact required to be stated therein made in reliance upon and in conformity with information pertaining to such Holder furnished in writing to the Company by such Holder specifically for use in the registration statement or prospectus relating to such Eligible Securities. Notwithstanding the immediately preceding sentence, the aggregate liability of each such Holder hereunder shall not in any event exceed the net proceeds received by such Holder from the sale of Eligible Securities covered by such registration statement. (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party, if a claim in respect thereof is to be made against an indemnifying party hereunder, shall notify such indemnifying party in writing thereof, but the omission so to notify such indemnifying party shall not relieve such indemnifying party from any liability that it may have to any indemnified party other than under this Section 2.5 and, unless the failure to so provide notice materially adversely affects or prejudices such indemnifying party's defense against any action, shall not relieve such indemnifying party from any liability that it may have to any indemnified party under this Section 2.5. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, such indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party, and, after notice from such indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, such indemnifying party shall not be liable to such indemnified party under this Section 2.5 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it that are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume and undertake the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such defense to be reimbursed by the indemnifying party as incurred. (d) No indemnifying party shall be liable for any amounts paid in a settlement effected without the consent of such indemnifying party, which consent shall not be unreasonably withheld or delayed. No indemnifying party shall, without the indemnified party's prior written consent, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the plaintiff to the indemnified party of a release from all liability in respect of such claim or litigation. (e) The reimbursements required by this Section 2.5 shall be made by periodic payment during the course of the investigation or defense, as and when bills are received and expenses incurred. -12- (f) The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director, employee, agent, or controlling Person of such indemnified party and shall survive the transfer of securities. 2.6 Contribution. If for any reason the indemnity set forth in Section 2.5 is unavailable or is insufficient to hold harmless an indemnified party, then the indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by said indemnity (a) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and such indemnified party on the other hand (determined by reference to, among other things, whether the actual or alleged untrue statement of a material fact or actual or alleged omission to state a material fact relates to information supplied by the indemnifying party or such indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission) or (b) if the allocation provided by Section 2.6(a) above is not permitted by applicable law or provides a lesser sum to such indemnified party than the amount hereinafter calculated, in such proportion as is appropriate to reflect not only the relative fault of the indemnifying party and such indemnified party but also the relative benefits received by the indemnifying party on the one hand and such indemnified party on the other hand, as well as any other relevant equitable considerations. The Parties agree that it would not be just and equitable if contribution pursuant to this Section 2.6 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to in such paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 2.6, a Holder shall not be required to contribute any amount in excess of the amount by which the net proceeds of the sale of Eligible Securities sold by such Holder and distributed to the public exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person that is not guilty of such fraudulent misrepresentation. 2.7 Underwriting Agreement. If Eligible Securities are to be sold pursuant to a registration statement in an underwritten offering pursuant to Sections 2.1 or 2.2, the Company and each selling Holder of Eligible Securities shall enter into a written agreement with the managing underwriter or underwriters selected in the manner herein provided in such form and containing such provisions as are reasonably satisfactory to the Company and each such selling Holder and as are customary in the securities business for such an arrangement among such underwriter or underwriters, each such selling Holder and companies of the Company's size and investment stature. No Holder of Eligible Securities may participate in any underwritten sale of Eligible Securities pursuant to Sections 2.1 or 2.2 hereof unless such Holder agrees to sell such Holder's securities in accordance with any underwriting arrangements approved by the Persons entitled hereunder to specify the method of distribution of the securities being registered and -13- completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. Notwithstanding anything to the contrary contained herein, no Holder of Eligible Securities shall be required to make any representations and warranties to the Company or the underwriters other than representations or warranties regarding the identity of such Holder, such Holder's Eligible Securities, such Holder's ability to transfer title to such Holder's Eligible Securities and such Holder's intended method of distribution or any other representations required by applicable law. 2.8 Limitations on Subsequent Registration Rights. If, subsequent to the date hereof, the Company grants to any holders or prospective holders of the Company's securities the right to require that the Company register any securities of the Company under the Securities Act, such registration rights shall be granted subject to the rights of the Holders to include all or part of their Eligible Securities in any such registration on the terms and conditions set forth in Section 2.2. 2.9 Reports Under Securities Exchange Act of 1934. With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit the Holders to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144, at all times so long as the Company remains subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Holders to use Form S-3 for the sale of its Eligible Securities; (c) file with the SEC in a timely manner all reports and other documents as may be required of the Company under the Securities Act and the Exchange Act; and (d) furnish to each Holder, so long as such Holder owns any Eligible Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 2.10 Market-Standoff Agreement. (a) Market-Standoff Period; Agreement. If requested by the Company and the managing underwriter of Common Stock of the Company, each Holder agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any -14- securities of the Company (other than those included in the registration) without the prior written consent of such underwriter, for such period of time (not to exceed 180 days) from the effective date of a registration statement filed under the Securities Act as may be requested by such underwriter and to execute an agreement reflecting the foregoing as may be requested by such underwriter at the time of the Company's underwritten public offering; provided that such agreement shall only apply to the first such registration statement of the Company including securities to be sold on its behalf to the public after the date hereof. (b) Limitations. The obligations described in Section 2.10(a) shall apply only if all officers and directors of the Company and all significant equity holders of the Company enter into similar agreements, and shall not apply to a registration relating solely to employee benefit plans, or to a registration relating solely to a transaction pursuant to Rule 145 under the Act. If any Person, including any officer or director of the Company and any equity holder of the Company, is released from its obligations under Section 2.10(a) or such similar arrangements, all Holders shall be released from such obligations. 2.11 Subsequent Public Offering. At any time following the Closing, upon request of Holders holding a majority of the Eligible Securities, the Company shall use its best efforts to conduct a firmly underwritten primary registered public offering of its Common Stock as promptly as practical following the receipt of such notice, if, in the opinion of a major investment banking firm selected by Holders holding a majority of the Eligible Securities, the public equity markets would be receptive to such an offering. ARTICLE III PARTICIPATION RIGHTS 3.1 Right of First Offer. Subject to the terms and conditions specified in this Section 3.1, the Company hereby grants to each Investor a right of first offer with respect to future sales by the Company of its Shares (as hereinafter defined). Each time the Company proposes to offer any shares of, or securities convertible into or exercisable for any shares of, any class of its capital stock ("Shares"), the Company shall first make an offering of such Shares to each Investor in accordance with the following provisions: (a) The Company shall deliver a notice by registered or certified mail ("Notice") to the Investors stating (i) its bona fide intention to offer such Shares, (ii) the number of such Shares to be offered and (iii) the price and terms, if any, upon which it proposes to offer such Shares. (b) Within 30 calendar days after delivery of the Notice, each Investor may elect to purchase or obtain, at the price and on the terms specified in the Notice, up to that portion of such Shares that equals the proportion that the sum of Common Stock acquired from time to time pursuant to this Article III and the number of shares of Eligible Securities held by such Investor (and its Affiliates) bears to the total number of shares of Common Stock then outstanding (assuming full conversion and exercise of all convertible or exercisable securities). The Company shall promptly, in writing, inform each Investor that elects to purchase all the Shares available to it (each, a "Fully- -15- Exercising Investor") of any other Investor's failure to do likewise. During the 10-day period commencing after receipt of such information, each Fully-Exercising Investor (and its Affiliates) shall be entitled to obtain its initial allocation of the Shares, plus, if desired, that portion of the Shares for which Investors were entitled to subscribe but that were not subscribed for by the Investors that is equal to the proportion that the number of shares of Eligible Securities issued and held by such Fully-Exercising Investor (and its Affiliates) bears to the total number of shares of Eligible Securities issued and held by all such Fully-Exercising Investors (and their Affiliates) desiring to purchase such unsubscribed Shares. (c) The Company may, during the 90-day period following the expiration of the periods provided in Section 3.1(b) hereof, offer the remaining unsubscribed portion of the Shares to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than those specified in, the Notice. If the Company does not enter into an agreement for the sale of the Shares within such period, or if such agreement is not consummated within 90 days of the execution thereof, the rights provided hereunder shall be deemed to be revived and such Shares shall not be offered unless first reoffered to the Investors in accordance herewith. (d) The right of first offer in this Section 3.1 shall not be applicable (i) to the issuance or sale of Common Stock (or options therefor) to employees, consultants and directors, pursuant to plans or agreements approved by the Board of Directors for the purpose of soliciting or retaining their services, (ii) to the issuance of securities in connection with a bona fide business acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise, (iii) to Common Stock issued upon conversion of shares of Series E Preferred Stock or the exercise of the Common Stock Warrants, or the Series E Preferred Stock issued upon the exercise of Series E Preferred Stock Warrants, (iv) to the issuance of securities pursuant to currently outstanding options, warrants, notes or other rights to acquire securities of the Company, (v) to a Qualified Primary Offering, (vi) to the issuance of Series E Preferred Stock as dividends upon outstanding Series E Preferred Stock, or (vii) to stock splits, stock dividends or like transactions. ARTICLE IV MISCELLANEOUS 4.1 Assignment; Third Party Beneficiaries. All covenants and agreements contained in this Agreement by or on behalf of any of the signatories shall bind and inure to the benefit of the respective successors and assigns of the signatories, whether so expressed or not. If any transferee of any Holder of Eligible Securities shall acquire Eligible Securities in any manner (other than by way of a registered public offering), whether by operation of law or otherwise, such Eligible Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Eligible Securities such transferee shall be entitled to receive the benefits of a Holder and be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement. The benefits to which any such permitted transferee shall be entitled shall include, without limitation, the rights to register Eligible Securities under Sections 2.1 or 2.2 hereof; provided, however, that any such transferee shall not be entitled to -16- deliver to the Company a Registration Request pursuant to Section 2.1 hereof unless such permitted transferee acquired from its transferor at least 1,000,000 Eligible Securities; provided, however, that the transfer of registration rights held pursuant to this Agreement to an Affiliate, shareholder, equity holder or officer of any Investor or its Affiliates shall be without restriction as to minimum shareholding. 4.2 Notices. All notices, consents and other communications under this Agreement shall be in writing and shall be deemed to have been duly given when (a) delivered by hand, (b) sent by telecopier (with receipt confirmed), provided that a copy is mailed by registered or certified mail, return receipt requested or (c) when received by the addressee, if sent by Express Mail, Federal Express or other express delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate as to itself by notice to the other parties): (i) If to the Company: 1280 Landmeier Road Elk Grove Village, IL 60007-2410 Fax No. 847-437-4969 Attention: General Counsel. (ii) If to an Investor: at the address set forth in the Redemption and Exchange Agreement. (iii) If to a Holder other than an Investor, at the most recent address for such Holder maintained in the books and records of the Company. 4.3 Governing Law. 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 Illinois. 4.4 Amendments. This Agreement may not be amended or modified, and no provision hereof may be waived, except in writing, and any such writing shall only be effective with respect to a Party who has executed such writing. The failure of any of the Parties to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of that term or deprive such Party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. 4.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart for each of the parties hereto. Delivery by facsimile by any of the parties hereto of an executed counterpart of this Agreement shall be effective as an original executed counterpart hereof and shall be deemed an original executed counterpart hereof and a representation that an original executed counterpart hereof will be delivered. -17- 4.6 Remedies. The Parties acknowledge that there may be no adequate remedy at law if any Party fails to perform any of its obligations hereunder and that each Party may be irreparably harmed by any such failure, and accordingly agree that each Party, in addition to any other remedy that it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of any other Party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any state thereof having jurisdiction. 4.7 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 4.8 Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the Investors and Holders shall be enforceable to the fullest extent permitted by law. 4.9 Entire Agreement. Effective as of the date hereof, this Agreement amends and restates in its entirety the Prior Agreement. This Agreement is intended by the Parties as a final expression of their agreement and a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings other than those set forth or referred to herein or therein. This Agreement supersedes all prior agreements and understandings between the Parties with respect to such subject matter. [Balance of page intentionally left blank; signature page follows.] -18- IN WITNESS WHEREOF, the Parties have executed this Amended and Restated Investor Rights Agreement as of the day and year first above written. COMPANY INVESTORS ELECTRIC CITY CORP., NEWCOURT CAPITAL USA INC., a Delaware corporation a Delaware corporation By: _____________________________ By: __________________________________ Name: John Mitola Name: ________________________________ Title: Chief Executive Officer Title: _______________________________ CIT CAPITAL SECURITIES, INC. a Delaware corporation By: __________________________________ Name: ________________________________ Title: _______________________________ MORGAN STANLEY DEAN WITTER EQUITY FUNDING, INC., a Delaware corporation By: __________________________________ Name: ________________________________ Title: _______________________________ ORIGINATORS INVESTMENT PLAN, L.P., a Delaware limited partnership By: MSDW OIP Investors, Inc., its general partner By: __________________________________ Name: ________________________________ Title: _______________________________ -19- CINERGY VENTURES II, LLC, a Delaware limited liability company By: __________________________________ Name: ________________________________ Title: _______________________________ LEAF MOUNTAIN COMPANY, LLC, an Illinois limited liability company By: __________________________________ Name: ________________________________ Title: _______________________________ SF CAPITAL PARTNERS LTD., a British Virgin Islands company By: __________________________________ Name: ________________________________ Title: _______________________________ AUGUSTINE FUND LP, an Illinois limited partnership By: __________________________________ Name: ________________________________ Title: _______________________________ TECHNOLOGY TRANSFORMATION VENTURE FUND, LP, a Delaware limited partnership By: __________________________________ Name: ________________________________ Title: _______________________________ ______________________________________ RICHARD P. KIPHART, an individual -20- ______________________________________ DAVID R. ASPLUND, an individual ______________________________________ JOHN DONOHUE, an individual JOHN THOMAS HURVIS REVOCABLE TRUST, an Illinois trust By: __________________________________ Name: ________________________________ Title: _______________________________ -21- EX-99.6 7 l06611aexv99w6.txt EXHIBIT 99.6 AMD & RSTD STOCK TRADING AGREEMENT EXHIBIT 99.6 AMENDED AND RESTATED STOCK TRADING AGREEMENT This Amended and Restated Stock Trading Agreement, dated as of March 19, 2004 (as it may be amended, restated or modified and in effect from time to time, this "Agreement"), is made by and among Electric City Corp., a Delaware corporation (the "Company"), Newcourt Capital USA, Inc., a Delaware corporation ("Newcourt Capital"), Originators Investment Plan, L.P., a Delaware limited partnership ("OIP), Morgan Stanley Dean Witter Equity Funding, Inc., a Delaware corporation ("Morgan Stanley"), Cinergy Ventures II, LLC, a Delaware limited liability company ("Cinergy Ventures"), Leaf Mountain Company LLC, an Illinois limited liability company ("Leaf Mountain"), SF Capital Partners Ltd., a British Virgin Islands company ("SF Capital"), Richard P. Kiphart, an individual ("Kiphart" ), David R. Asplund, an individual ("Asplund"), John Thomas Hurvis Revocable Trust, an Illinois trust ("Hurvis Trust"), John Donohue, an individual ("Donohue"), Augustine Fund, LP, an Illinois limited partnership ("Augustine"), and Technology Transformation Venture Fund, LP, a Delaware limited partnership ("TVP") (collectively, Newcourt Capital, OIP, Morgan Stanley, Cinergy Ventures, Leaf Mountain, SF Capital, Kiphart, Asplund, Hurvis Trust, Donohue, Augustine and TVP are referred to herein as the "Investors"), CIT Capital Securities, Inc. (formerly known as Newcourt Capital Securities, Inc.), a Delaware corporation ("CIT Capital Securities") , and each of the members of management of the Company set forth on the signature pages hereto, and shall become effective on September 8, 2004, as more fully set forth below. W I T N E S S E T H: WHEREAS, each of the Investors is a holder of certain shares of the Company's outstanding Series A Convertible Preferred Stock ("Series A Preferred"), Series C Convertible Preferred Stock ("Series C Preferred") and/or Series D Convertible Preferred Stock ("Series D Preferred" and, together with the Series A Preferred and the Series C Preferred, the "Existing Preferred Stock"), and each Investor is also a holder of shares of Common Stock (as hereinafter defined), and each Investor is also a holder of certain warrants to purchase additional shares of Common Stock of the Company and certain Investors are also holders of warrants to purchase additional shares of Series D Preferred; and WHEREAS, CIT Capital Securities also holds a warrant to purchase shares of Common Stock of the Company; and WHEREAS, the parties hereto have previously entered into one or more of the following: that certain Stock Trading Agreement, dated as of July 31, 2001, as amended, that certain Stock Trading Agreement, dated as of June 4, 2002 or that certain Stock Trading Agreement dated as of June 27, 2003 (collectively, the "Prior Agreements"); and WHEREAS, the Company and the Investors have entered into that certain Redemption and Exchange Agreement, dated as of March 19, 2004 (as it may be amended, restated or modified and in effect from time to time, the "Redemption and Exchange Agreement"), whereby the Company will redeem certain shares of Existing Preferred Stock held by some Investors and all of the Investors will exchange their remaining shares of the Company's Existing Preferred Stock for shares of the Company's Series E Convertible Preferred Stock, par value $0.01 per share (the "Series E Preferred Stock") and the Investors holding warrants to purchase shares of -1- the Series D Preferred will exchange such warrants for replacement warrants to purchase shares of Series E Preferred Stock, all as more fully described in the Redemption and Exchange Agreement; and WHEREAS, it is a condition to the obligations of the Investors and the Company to closing of the transactions contemplated by the Redemption and Exchange Agreement that the Company and the Parties enter into this Agreement; and WHEREAS, the Company and the Parties hereto desire that this Agreement supersede and replace all three of the Prior Agreements in their entirety; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 Defined Terms. All terms capitalized but not defined herein shall have the meaning attributable to such terms in the Redemption and Exchange 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 individual's 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 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 -2- 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. "Investors" shall have the meaning set forth in the preamble 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. "Redemption and Exchange Agreement" shall have the meaning set forth in the fourth WHEREAS clause hereof. ARTICLE II TRADING RESTRICTIONS 2.1 Agreement for Benefit of Company. Each Party hereby agrees that its obligations under this Agreement are for the benefit of the Company and further agrees that the Company shall be entitled to enforce such Party's obligations under this Agreement. 2.2 Effective Date; Public Sales. This Agreement shall become effective on September 8, 2004. Until such date, the Prior Agreements shall continue in full force and effect. On September 8, 2004, the Prior Agreements shall each terminate and be of no further force or effect. On and after September 8, 2004, during the term of this Agreement, no Party may sell any of its Common Stock into the public market except in accordance with the following trading restrictions: (a) During the term of this Agreement and at any time the Closing Price on the then prior trading day is $4.00 per share or more, no restrictions hereunder shall apply. (b) During the term of this Agreement and at any time the Closing Price on the then prior trading day is at least $2.00 per share but less than $4.00 per share, such Party may sell any of its Common Stock into the public market, subject to the following conditions: (i) the number of shares of Common Stock sold by such Party on any trading day may not exceed fifteen percent (15%) of the Average Daily Trading Volume; and (ii) Block Sales by such Party must be executed at a minimum price per share of 90% of the ask price as reported on the American Stock Exchange (or, -3- 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). (c) During the term of this Agreement and at any time the Closing Price on the then prior trading day is at least $1.00 per share but less than $2.00 per share, such Party may sell any of its Common Stock into the public market, subject to the following conditions: (i) the number of shares of Common Stock sold by such Party on any trading day may not exceed ten percent (10%) of the Average Daily Trading Volume; and (ii) Block Sales by such Party 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). (d) During the term of this Agreement and at any time the Closing Price on the then prior trading day is less than $1.00 per share, such Party may sell any of its Common Stock into the public market, subject to the following conditions: (i) the number of shares of Common Stock sold by such Party on any trading day may not exceed five percent (5%) of the Average Daily Trading Volume; and (ii) Block Sales by such Party 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). 2.3. Private Sales. Any Party may sell any of its shares of Series E Preferred Stock or Common Stock (or securities exercisable or exchangeable for or convertible into shares of Series E Preferred Stock or Common Stock) it owns in a private transaction not effected over any securities exchange; provided, however, that any such private sale of shares of Series E Preferred Stock or Common Stock (or securities exercisable or exchangeable for or convertible into shares of Series E Preferred Stock or Common Stock) to a party that is not a Party to this Agreement shall have as a condition to such sale that such acquiring party shall become a Party to this Agreement by executing a joinder hereto with the Company acknowledging that the shares of Series E Preferred Stock or Common Stock (or securities exercisable or exchangeable for or convertible into shares of Series E Preferred Stock or Common Stock) being acquired shall be subject to the terms hereof while this Agreement remains in effect. 2.4 Transfer to Affiliates. Notwithstanding anything in this Agreement to the contrary, any party may freely sell or otherwise transfer any Series E Preferred Stock or Common Stock (or securities exercisable or exchangeable for or convertible into shares of Series -4- E Preferred Stock or 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 E Preferred Stock or Common Stock or other securities exercisable or exchangeable for or convertible into shares of Series E Preferred Stock or Common Stock shall be aggregated with the transferring Party for purposes of Sections 2.1 and 2.2. 2.5 Term of Trading Agreement. The term of this Agreement shall terminate on September 7, 2007. 2.6 Amendments to the Trading Agreement. This Agreement may only be amended upon the prior written consent of the Company and all other Parties at the time of such amendment. 2.7 Purchases by Management in the Public Market. Notwithstanding anything in this Article II to the contrary, all shares of Common Stock purchased by members of management that are signatories hereto in the public market from other than the Company or its underwriters shall not be subject to this Article II. 2.8 Agreement Not Applicable to Michael Pokora or Brian Kawamura. The Parties and the Company acknowledge that Michael Pokora and Brian Kawamura were each signatories to the 2001 Stock Trading Agreement and that Messrs. Pokora and Kawamura have since ceased to be officers or employees of the Company or any of its Subsidiaries. Accordingly, the Parties and the Company each hereby agree that Messrs. Pokora and Kawamura shall not be Parties to this Agreement, without prejudice to any of their rights or obligations under the 2001 Stock Trading Agreement. 2.9 Agreement Not Applicable to Certain SF Capital Partners, Ltd Common Stock. The Parties and the Company acknowledge that SF Capital Securities, Ltd. and the Company were signatories to a Stock Trading Agreement dated as of February 27, 2003 (the "SF Capital Trading Agreement") which was entered into in connection with the purchase by SF Capital Partners, Ltd. from the Company of 1,086,957 shares of Common Stock (including any adjustments occurring thereto after the date hereof for stock splits, stock combinations and the like, the "Excluded SF Capital Common Shares") and warrants (the "Excluded SF Capital Common Stock Warrants") evidenced by Warrant No. 32 issued by the Company to purchase up to 300,000 additional shares of Common Stock (including any adjustments occurring thereto after the date hereof for stock splits, stock combinations and the like, the "Excluded SF Capital Warrant Shares"). The Parties and the Company hereby agree that (a) this Agreement does not apply with respect to any Excluded SF Capital Common Shares or any Excluded SF Capital Common Stock Warrants or any Excluded SF Capital Warrant Shares; and (b) that the SF Capital Trading Agreement has been terminated, effective March 20, 2004. 2.10 Agreement Not Applicable to Certain Kiphart Common Stock. The Parties and the Company acknowledge that Richard P. Kiphart and the Company are signatories to a Stock Trading Agreement dated as of April 23, 2003 (the "Kiphart Trading Agreement") which was entered into in connection with the purchase by Richard P. Kiphart from the Company of 456,429 shares of Common Stock (including any adjustments occurring thereto after the date -5- hereof for stock splits, stock combinations and the like, the "Excluded Kiphart Common Shares") and warrants (the "Excluded Kiphart Common Stock Warrants") evidenced by Warrant No. 41 issued by the Company to purchase up to 125,974 additional shares of Common Stock (including any adjustments occurring thereto after the date hereof for stock splits, stock combinations and the like, the "Excluded Kiphart Warrant Shares"). The Parties and the Company hereby agree that (a) this Agreement does not apply with respect to any Excluded Kiphart Common Shares or any Excluded Kiphart Common Stock Warrants or any Excluded Kiphart Warrant Shares; and (b) that this Agreement does not amend, modify, supersede or otherwise in any manner change or affect the Kiphart Trading Agreement, which remains in full force and effect in accordance with its terms. ARTICLE III GENERAL PROVISIONS 3.1 Legend on Share Certificates. (a) After this Agreement becomes effective, all Company securities 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 the Redemption and Exchange Agreement or any Ancillary Agreements (as defined in the Redemption and Exchange Agreement) shall bear the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN REQUIREMENTS AS TO TRADING CONTAINED IN THE AMENDED AND RESTATED STOCK TRADING AGREEMENT, DATED MARCH 19, 2004, BY AND AMONG THE COMPANY AND CERTAIN SECURITY HOLDERS, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. (b) Upon the termination of this Agreement, each Party shall be entitled to receive, in exchange for any security bearing the legend regarding this Agreement specifically set forth in Section 3.1(a), a security without such legend. ARTICLE IV MISCELLANEOUS 4.1 Injunctive Relief. It is acknowledged that it is impossible to measure in money the damages that would be suffered if the Parties fail to comply with the obligations imposed on them by this Agreement and that, in the event of any such failure, an aggrieved Party would be irreparably damaged and would not have an adequate remedy at law. Any such Party shall, therefore, be entitled to injunctive relief and/or specific performance to enforce such obligations, and if any action should be brought in equity to enforce any of such provisions of this Agreement, none of the Parties shall raise the defense that there is an adequate remedy at law. 4.2 Governing Law. Except as to matters governed by the General Corporation Law of the State of Delaware and decisions thereunder of the Delaware courts applicable to Delaware corporations, which shall be governed by such laws and decisions, this Agreement shall be -6- construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Illinois. 4.3 Entire Agreement; Waiver. As among the Parties and the Company, this Agreement supersedes the Prior Agreements and 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. This Agreement does not modify, amend or otherwise affect either the SF Capital Trading Agreement (as defined in Section 2.8) or the Kiphart Trading Agreement (as defined in Section 2.9). 4.4 Binding Effect. This Agreement shall be binding on and inure to the benefit of the Parties and, subject to the terms and provisions hereof, their respective legal representatives, successors and assigns. 4.5 Invalidity of Provision. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction. 4.6 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be deemed but one and the same instrument and each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart 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. 4.7 Notices. All notices, consents and other communications under this Agreement shall be in writing and shall be deemed to have been duly given when (a) delivered by hand, (b) sent by telecopier (with receipt confirmed), provided that a copy is mailed by certified or registered mail, return receipt requested, or (c) when received by the addressee, if sent by Express Mail, Federal Express or other express delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate as to itself by notice in accordance herewith given to each of the other parties): -7- (i) If to the Company: 1280 Landmeier Road Elk Grove Village, IL 60007-2410 Fax No. 847-437-4969 Attention: Chief Financial Officer (ii) If to a Party: at the address set forth in the Redemption and Exchange Agreement or the signature page to this Agreement. 4.8 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.] -8- IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Stock Trading Agreement to be executed as of the day and year first above written. COMPANY INVESTORS ELECTRIC CITY CORP., NEWCOURT CAPITAL USA INC., By:_____________________________ By: __________________________________ Name: John Mitola Name: ________________________________ Title: Chief Executive Officer Title: _______________________________ MANAGEMENT CIT CAPITAL SECURITIES, INC. JOHN MITOLA By: __________________________________ Name: ________________________________ _________________________________ Title: _______________________________ MORGAN STANLEY DEAN WITTER EQUITY FUNDING, INC. JEFFREY MISTARZ By: __________________________________ Name: ________________________________ _________________________________ Title: _______________________________ ORIGINATORS INVESTMENT PLAN, L.P. DENNIS ENBERG By: MSDW OIP Investors, Inc., its general partner _________________________________ By: __________________________________ Name: Thomas A. Clayton Title: Vice President CINERGY VENTURES II, LLC By: __________________________________ Name: ________________________________ Title: _______________________________ -9- LEAF MOUNTAIN COMPANY, LLC By: __________________________________ Name: ________________________________ Title: _______________________________ SF CAPITAL PARTNERS, LTD. By: __________________________________ Name: ________________________________ Title: _______________________________ RICHARD KIPHART ______________________________________ DAVID R. ASPLUND ______________________________________ JOHN THOMAS HURVIS REVOCABLE TRUST By: __________________________________ Name: ________________________________ Title: _______________________________ JOHN DONOHUE ______________________________________ -10- AUGUSTINE FUND LP By: __________________________________ Name: ________________________________ Title: _______________________________ TECHNOLOGY TRANSFORMATION VENTURE FUND, LP By: __________________________________ Name: ________________________________ Title: _______________________________ -11- EX-99.7 8 l06611aexv99w7.txt EXHIBIT 99.7 SERIES E CONV PREFERRED STOCK WARRANT EXHIBIT 99.7 SERIES E CONVERTIBLE PREFERRED STOCK WARRANT THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED, QUALIFIED, APPROVED OR DISAPPROVED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS AND NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY AUTHORITY HAS PASSED ON OR ENDORSED THE MERITS OF THESE SECURITIES. THE SERIES E PREFERRED STOCK ISSUABLE UPON THE EXERCISE OF THE SECURITIES REPRESENTED HEREBY AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SERIES E PREFERRED STOCK ARE SUBJECT TO AN AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, AN AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT AND AN AMENDED AND RESTATED STOCK TRADING AGREEMENT, AS EACH OF THE SAME MAY BE AMENDED FROM TIME TO TIME, COPIES OF WHICH ARE AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICES OF THE COMPANY. WARRANT NO. E2 WARRANT CERTIFICATE TO PURCHASE SHARES OF SERIES E CONVERTIBLE PREFERRED STOCK, PAR VALUE $0.01 PER SHARE OF ELECTRIC CITY CORP. THIS IS TO CERTIFY THAT CINERGY VENTURES II, LLC, or its registered assigns (the "Holder"), is the owner of FIFTEEN HUNDRED (1,500) warrants (the "Warrants"), each of which entitles the registered Holder to purchase from Electric City Corp., a Delaware corporation (the "Company"), one fully paid, duly authorized and nonassessable share of Series E Convertible Preferred Stock, par value $0.01 per share (the "Series E Preferred Stock"), of the Company at any time or from time to time on or before 5:00 p.m., New York City time, on the Warrant Expiration Date, at an exercise price of $100.00 per share, subject to adjustment from time to time as set forth herein (the "Exercise Price"), all on the terms and subject to the conditions hereinafter set forth. The number of shares of Series E Preferred Stock issuable upon exercise of each Warrant (the "Number Issuable") shall be determined for each Warrant by dividing $100.00 by the Exercise Price in effect at the time of such exercise, and is initially one (1) share of Series E Preferred Stock. Capitalized terms used herein but not otherwise defined shall have the meanings given them in Section 13 hereof. Section 1. Exercise Of Warrants. Subject to the last paragraph of this Section 1, the Warrants evidenced hereby may be exercised, in whole or in part, by the registered Holder hereof at any time or from time to time, on or before 5:00 p.m., New York City time, on the Warrant Expiration Date upon delivery to the Company at the principal executive office of the Company in the United States of America, of (a) this Warrant Certificate, (b) a written notice stating that such Holder elects to exercise the Warrants evidenced hereby in accordance with the provisions of this Section 1 and specifying the number of Warrants being exercised and the name or names in which such Holder wishes the certificate or certificates for shares of Series E Preferred Stock to be issued and (c) payment of the Exercise Price for the shares of Series E Preferred Stock issuable upon exercise of such Warrants, which shall be payable by any one or any combination of the following: (i) cash or (ii) certified or official bank check payable to the order of the Company. The documentation and consideration delivered in accordance with clauses (a), (b) and (c) of this paragraph above are collectively referred to herein as the "Warrant Exercise Documentation." As promptly as practicable, and in any event within two (2) Business Days after receipt of the Warrant Exercise Documentation, the Company shall deliver or cause to be delivered certificates representing the number of validly issued, fully paid and nonassessable shares of Series E Preferred Stock issuable in connection with such exercise, and if less than the full number of Warrants evidenced hereby are being exercised, a new Warrant Certificate or Certificates, of like tenor, for the number of Warrants evidenced by this Warrant Certificate, less the number of Warrants then being exercised; provided, however, that no new Warrant Certificate need be delivered if the Warrant Expiration Date has occurred. Such exercise shall be deemed to have been made at the close of business on the date of delivery of the Warrant Exercise Documentation so that the Person entitled to receive shares of Series E Preferred Stock upon such exercise shall be treated for all purposes as having become the record holder of such shares of Series E Preferred Stock at such time. The Company shall pay all expenses in connection with, and all taxes and other governmental charges (other than income taxes of the Holder) that may be imposed in respect of the issue or delivery of any shares of Series E Preferred Stock issuable upon the exercise of the Warrants evidenced hereby. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Series E Preferred Stock in any name other than that of the registered Holder of the Warrants evidenced hereby. In connection with the exercise of any Warrants evidenced hereby, at the Company's option, no fractions of shares of Series E Preferred Stock shall be issued, but in lieu thereof the Company may elect to pay a cash adjustment in respect of such fractional interest in an amount equal to any such fractional interest multiplied by $100.00 per share of Series E Preferred Stock. If more than one such Warrant shall be exercised by the Holder thereof at the same time, the -2- number of full shares of Series E Preferred Stock issuable on such exercise shall be computed on the basis of the total number of Warrants so exercised. Section 2. Adjustments. (a) Subdivision or Combination of Stock or Stock Dividends. In case the Company shall at any time subdivide its outstanding shares of Series E Preferred Stock into a greater number of shares, by split or otherwise, or issue additional shares of Series E Preferred Stock as a dividend (other than as a dividend in respect of the outstanding Preferred Stock in accordance with any of the Certificates of Designations), or make any other distribution upon any class or series of stock payable in shares of common stock or Convertible Securities of the Company, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and, conversely, in case the outstanding shares of Series E Preferred Stock of the Company shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased. (b) Reorganization; Reclassification; Consolidation; Merger or Sale of Assets. In case of any capital reorganization or reclassification or other change of outstanding shares of Series E Preferred Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another Person (other than a consolidation or merger in which the Company is the resulting or surviving person and that does not result in any reclassification or change of outstanding Series E Preferred Stock) (any of the foregoing, a "Transaction"), the Company, or such successor or purchasing Person, as the case may be, shall execute and deliver to each Holder of the Warrants evidenced hereby, at least five (5) Business Days prior to effecting any of the foregoing Transactions, a certificate that the Holder of each such Warrant then outstanding shall have the right thereafter to exercise such Warrant into the kind and amount of shares of stock or other securities (of the Company or another issuer) or property or cash receivable upon such Transaction by a holder of the number of shares of Series E Preferred Stock into which such Warrant could have been exercised immediately prior to such Transaction (or, if the Series E Preferred Stock did not participate in any such Transaction, the kind and amount of shares of stock or other securities (of the Company or another issuer) or property or cash receivable upon such Transaction by a holder of the number of shares of Common Stock into which such Series E Preferred Stock could have been converted immediately prior to such Transaction). Such certificate shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 2 and shall contain other terms identical to the terms hereof. If, in the case of any such Transaction, the stock, other securities, cash or property receivable thereupon by a holder of Series E Preferred Stock (or, if applicable, by a holder of Common Stock issuable upon conversion of the Series E Preferred Stock) includes shares of stock or other securities of a Person other than the successor or purchasing Persons and other than the Company, who controls or is controlled by the successor or purchasing Person or who, in connection with such Transaction, issues stock, securities, other property or cash to holders of Series E Preferred Stock or Common Stock, then such certificate also shall be executed by such Person, and such Person shall, in such certificate, specifically assume the obligations of such successor or purchasing Person and acknowledge its obligations to issue such stock, securities, other property or cash to -3- Holders of the Warrants upon exercise thereof as provided above. The provisions of this Section 2(b) similarly shall apply to successive Transactions. (c) Special Distributions. In the event that the Company shall declare a dividend or make any other distribution (including, without limitation, in cash, in notes or other debt securities or in capital stock (which shall include, without limitation, any options, warrants or other rights to acquire capital stock)) of the Company, whether or not pursuant to a stockholder rights plan, "poison pill" or similar arrangement (but excluding any dividend or distribution that results in an adjustment to the Exercise Price pursuant to Section 2(a)) in other property or assets, to holders of Series E Preferred Stock (a "Special Distribution"), then the Board of Directors shall set aside the amount of such dividend or distribution that each Holder of Warrants would have been entitled to receive had it exercised such Warrants prior to the record date for such dividend or distribution. Upon the exercise of a Warrant evidenced hereby, the Holder shall be entitled to receive such dividend or distribution that such Holder would have received had such Warrant been exercised immediately prior to the record date for such dividend or distribution. Section 3. Notice of Certain Events. In case at any time or from time to time the Company shall declare any dividend or any other distribution to the holders of its Series E Preferred Stock or Common Stock, or shall authorize the granting to the holders of its Series E Preferred Stock or Common Stock of rights or warrants to subscribe for or purchase any additional shares of stock of any class or any other right, or shall authorize the issuance or sale of any other shares or rights that would result in an adjustment to the Exercise Price pursuant to Section 2(a) or would result in a Special Distribution described in Section 2(c), or there shall be any capital reorganization or reclassification of the Series E Preferred Stock or Common Stock or consolidation or merger of the Company with or into another Person, or any sale or other disposition of all or substantially all the assets of the Company, or there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company, then, in any one or more of such cases the Company shall mail to each Holder of the Warrants evidenced hereby at such Holder's address as it appears on the transfer books of the Company, as promptly as practicable but in any event at least ten (10) Business Days prior to the applicable date hereinafter specified, a notice stating (a) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants or, if a record is not to be taken, the date as of which the holders of Series E Preferred Stock or Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, (b) the issue date of such dividend, distribution, rights or warrants, and (c) the date on which such reorganization, reclassification, consolidation, merger, sale, disposition, dissolution, liquidation or winding up is expected to become effective. Such notice also shall specify the date as of which it is expected that the holders of Series E Preferred Stock or Common Stock of record shall be entitled to exchange their Series E Preferred Stock or Common Stock for shares of stock or other securities or property or cash deliverable -4- upon such reorganization, reclassification, consolidation, merger, sale, disposition, dissolution, liquidation or winding up. Section 4. Certain Covenants. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Series E Preferred Stock or its authorized and issued Series E Preferred Stock held as treasury stock, for the purpose of enabling it to satisfy any obligation to issue Series E Preferred Stock upon exercise of the Warrants, the maximum number of shares of Series E Preferred Stock that may then be deliverable upon the exercise of all outstanding Warrants. The Company shall take all action required to increase the authorized number of shares of Series E Preferred Stock if at any time the aggregate number of authorized but unissued shares of Series E Preferred Stock plus any shares of Series E Preferred Stock held as treasury stock are not sufficient to permit such reservation or to permit the exercise of all outstanding Warrants. The Company or, if appointed, the transfer agent for the Series E Preferred Stock (the "Transfer Agent") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights of purchase aforesaid will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Warrant Certificate on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented hereby. Before taking any action that would cause an adjustment pursuant to Section 2 hereof to reduce the Exercise Price below the then par value (if any) of the Series E Preferred Stock, the Company will take any corporate action that may, in the opinion of its counsel (which may be counsel employed by the Company), be necessary in order that the Company may validly and legally issue fully paid and nonassessable Series E Preferred Stock at the Exercise Price as so adjusted. The Company covenants that all Series E Preferred Stock that may be issued upon exercise of the Warrants will, upon issue, be validly issued, fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof. Section 5. Registered Holder. The person in whose name this Warrant Certificate is registered shall be deemed the owner hereof and of the Warrants evidenced hereby for all purposes. Section 6. Transfer of Warrants. Any transfer of the rights represented by this Warrant Certificate shall be effected by the surrender of this Warrant Certificate, along with the form of assignment attached hereto, properly completed and executed by the registered Holder hereof, at the principal executive office of the Company in the United States of America. Thereupon, the Company shall issue in the name or names specified by the registered Holder hereof and, in the event of a partial transfer, in the name of the registered Holder hereof, a new Warrant Certificate or Certificates evidencing the right to purchase such number of shares of Series E Preferred Stock as shall be equal to the number of shares of Series E Preferred Stock then purchasable hereunder. -5- Section 7. Restrictive Legend. Each certificate representing the Series E Preferred Stock issued upon exercise of this Warrant shall be stamped or otherwise imprinted with a legend in the following form (in addition to any legend required under applicable state securities laws): THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED, QUALIFIED, APPROVED OR DISAPPROVED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS AND NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY AUTHORITY HAS PASSED ON OR ENDORSED THE MERITS OF THESE SECURITIES. THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO AN AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, AN AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT AND AN AMENDED AND RESTATED STOCK TRADING AGREEMENT, AS EACH OF THE SAME MAY BE AMENDED FROM TIME TO TIME, COPIES OF WHICH ARE AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICES OF THE COMPANY. Said legends shall be removed by the Company, upon the request of the holder thereof, at such time as the restrictions on the transfer of the applicable security under applicable securities laws and the obligations imposed on the holder thereof under the Amended and Restated Stockholders Agreement, the Amended and Restated Investor Rights Agreement and the Amended and/or Restated Stock Trading Agreement, as applicable, shall have terminated. Section 8. Denominations. The Company will, at its expense, promptly upon surrender of this Warrant Certificate at the principal executive office of the Company in the United States of America, execute and deliver to the registered Holder hereof a new Warrant Certificate or Certificates in denominations specified by such Holder for an aggregate number of Warrants equal to the number of Warrants evidenced by this Warrant Certificate. Section 9. Replacement of Warrants. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant Certificate and, in the case of loss, theft or destruction, upon delivery of an indemnity reasonably satisfactory to the Company (in the case of an insurance company or other institutional investor, its own unsecured indemnity agreement shall be deemed to be reasonably satisfactory), or, in the case of mutilation, upon surrender and cancellation of such mutilated Warrant Certificate, the Company will issue a new Warrant Certificate of like tenor for a number of Warrants equal to the number of Warrants evidenced by this Warrant Certificate. -6- Section 10. Governing Law. Except as to matters governed by the General Corporation Law of the State of Delaware and decisions thereunder of the Delaware courts applicable to Delaware corporations, which shall be governed by such laws and decisions, this Warrant Certificate shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Illinois applicable to agreements made and to be performed entirely within such State. Section 11. Rights Inure to Registered Holder. The Warrants evidenced by this Warrant Certificate will inure to the benefit of and be binding upon the registered Holder thereof and the Company and their respective successors and permitted assigns. Nothing in this Warrant Certificate shall be construed to give to any Person other than the Company and the registered Holder and their respective successors and permitted assigns any legal or equitable right, remedy or claim under this Warrant Certificate, and this Warrant Certificate shall be for the sole and exclusive benefit of the Company and such registered Holder. Nothing in this Warrant Certificate shall be construed to give the registered Holder hereof any rights as a Holder of shares of Series E Preferred Stock or Common Stock until such time, if any, as the Warrants evidenced by this Warrant Certificate are exercised in accordance with the provisions hereof. Section 12. Notices. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be given by registered or certified first-class mail, return receipt requested, nationally recognized overnight delivery service or personal delivery, (a) if to the Holder of a Warrant, at such Holder's last known address appearing on the books of the Company; and (b) if to the Company, at its principal executive office in the United States located at the address designated for notices in the Redemption and Exchange Agreement, or such other address as shall have been furnished to the party given or making such notice, demand or other communication. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered if delivered by a nationally recognized overnight delivery service; and five (5) Business Days after being deposited in the mail, certified or registered as aforesaid, postage prepaid, if mailed. Section 13. Definitions. For the purposes of this Warrant Certificate, the following terms shall have the meanings indicated below: "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law or executive order to close. "Certificates of Designations" means the Series E Certificate of Designations. "Common Stock" means shares of the Company's common stock, par value $0.0001 per share. "Company" shall have the meaning set forth in the preamble hereof. -7- "Convertible Securities" means any rights to subscribe for or to purchase, or any options or warrants for the purchase of, Series E Preferred Stock. "Exercise Price" shall have the meaning set forth in the preamble hereof. "Holder" shall have the meaning set forth in the preamble. "Number Issuable" shall have the meaning set forth in the preamble. "Person" means any individual, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Preferred Stock" means shares of any of the Series E Preferred Stock. "Redemption and Exchange Agreement" means that certain Redemption and Exchange Agreement, dated as of March 19, 2004, among the Company, the Holder and the other parties signatory thereto, as the same may be amended, modified or otherwise supplemented from time to time in accordance with its terms. "Series E 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 E Convertible Preferred Stock of Electric City Corp., as filed with the Secretary of State of Delaware and as may be amended and in effect from time to time. "Series E Preferred Stock" shall have the meaning set forth in the preamble hereof. "Special Distribution" shall have the meaning set forth in Section 2(c) hereof. "Transaction" shall have the meaning set forth in Section 2(b) hereof. "Transfer Agent" shall have the meaning set forth in Section 4 hereof. "Warrants" shall have the meaning set forth in the preamble hereof. "Warrant Exercise Documentation" shall have the meaning set forth in Section 1 hereof. "Warrant Expiration Date" means June 27, 2004. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS] -8- IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed and delivered on March 22, 2004. COMPANY: ELECTRIC CITY CORP., By: ______________________________ Name: John Mitola Title: Chief Executive Officer ATTEST: _____________________________ -9- Form of Assignment Form [To be executed upon assignment of Warrants] The undersigned hereby assigns and transfers unto _________________, whose Social Security Number or Tax ID Number is ____________________ and whose record address is ___________________________________ the rights represented by the attached Warrant Certificate with respect to ___ Warrants to which the attached Warrant Certificate relates, and irrevocably appoints _______________ as agent to transfer this security on the books of the Company. Such agent may substitute another to act for such agent. Signature: ___________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant Certificate) Signature Guarantee: ___________________________________ Date: _____________________ (SUBSCRIPTION FORM TO BE EXECUTED UPON EXERCISE OF SOME OR ALL OF THE WARRANTS) The undersigned, registered Holder, successor or assignee of such registered Holder of the within Warrant Certificate, hereby: (a) subscribes for ___ shares of Series E Preferred Stock which the undersigned is entitled to purchase under the terms of the within Warrant Certificate, (b) makes the full cash payment therefor called for by the within Warrant Certificate, and (c) directs that the Series E Preferred Stock issuable upon exercise of said Warrants be issued as described hereunder. ___________________________________ (Name) ___________________________________ (Address) ___________________________________ SIGNATURE Dated: ____________________ -----END PRIVACY-ENHANCED MESSAGE-----