Exhibit 1
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ELECTRIC CITY CORP.
SECURITIES PURCHASE AGREEMENT
Dated as of June 27, 2003
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SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (as it may be amended from time to
time, this "Agreement"), is entered into as of June __, 2003 by Electric City
Corp., a Delaware corporation (the "Company"), and the purchasers whose names
appear on the signature page of this Agreement (each, a "Purchaser" and
collectively, the "Purchasers").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Purchasers shares
of its Series D Convertible Preferred Stock, par value $0.01 par value per share
("Series D Preferred Stock"), warrants to purchase shares of Series D Preferred
Stock, shares of the Company's common stock, par value $0.0001 ("Common Stock"),
and warrants to purchase shares of its Common Stock, all as more fully described
herein; and
WHEREAS, each Purchaser severally and jointly desires to purchase such
securities from the Company in the amounts and for the purchase price and
otherwise on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 The following terms when used in this Agreement, including its
preamble and recitals, shall, except where the context otherwise requires, have
the following meanings, such meanings to be equally applicable to the singular
and plural forms thereof:
"Affiliate" means, as applied to any Person, any other Person
that, directly or indirectly, controls, is controlled by or is under
common control with such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled
by" and "under common control with"), as applied to any Person, shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or
otherwise.
"Agreement" shall have the meaning set forth in the preamble
of this Agreement.
"Ancillary Agreements" means the Series D Warrants, the Common
Stock Warrants, the Joinder to the Investor Rights Agreement (and the
Investor Rights Agreement as amended thereby) and the Stock Trading
Agreement.
"Assets" shall have the meaning set forth in Section 5.5
hereof.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the City of Chicago are
authorized or required by law or executive order to close.
"Certificate of Designation" means the Certificate of
Designations, Preferences and Relative, Participating, Optional and
Other Special Rights of Preferred Stock and Qualifications, Limitations
and Restrictions Thereof of Series D Convertible Preferred Stock of
Electric City Corp., in substantially the form of Exhibit A hereto, as
the same is filed with the Secretary of State of Delaware and as it may
be amended from time to time.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Company, as amended or restated from time to time.
"Closing" shall have the meaning set forth in Section 2.2
hereof.
"Closing Date" shall have the meaning set forth in Section 2.2
hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange
Commission or any other governmental authority at the time
administering the Securities Act or the Exchange Act.
"Commission Documents" shall have the meaning set forth in
Section 5.16 hereof.
"Common Shares" means the shares of Common Stock to be issued
by the Company to the Purchasers hereunder.
"Common Stock" shall have the meaning set forth in the
Recitals hereof.
"Common Stock Warrants" means the warrants to be issued by the
Company to Purchasers to purchase an aggregate of 210,938 shares of
Common Stock, as evidenced by Warrant Certificates, as any of the same
may be amended from time to time in accordance with the terms thereof.
"Common Stock Warrants Issued to Existing Preferred Holders"
means the warrants to purchase common stock of the Company which have
been issued to each of the Series A Preferred Stock Holders and the
Series C Preferred Stock Holder.
"Company" shall have the meaning set forth in the preamble of
this Agreement.
"Company IP" shall have the meaning set forth in Section 5.13
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
"Governmental Authority" means the government of any nation,
state or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other
entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"Investor Rights Agreement" means the Investor Rights
Agreement dated as of July 31, 2001, by and among the Company and the
Series A Preferred Stock Holders, as amended by the Consent and
Amendment of Securities Purchase Agreement, Stock Trading Agreement,
Stockholders Agreement and Investor Rights Agreement dated as of
November 29, 2001 among the same parties and certain other Persons and
by the Joinder and First Amendment to Investor Rights Agreement dated
as of June 4, 2002, by and among the same parties, certain other
Persons named therein and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual, as
amended, restated, modified or supplemented and in effect from time to
time.
"Joinder to Investor Rights Agreement" means that certain
Joinder and Second Amendment to Investor Rights Agreement,
substantially in the form of Exhibit B hereto, to be executed and
delivered by the parties thereto in connection with Closing hereunder.
"Liquidation Amount" shall have the meaning set forth in the
Certificate of Designations.
"Litigation" shall have the meaning set forth in Section
3.1(e) hereof.
"Losses" shall have the meaning set forth in Section 7.1
hereof.
"Officer's Certificate" means a certificate of the Company
signed by its Chief Executive Officer or Chief Financial Officer.
"Person" means an individual, a corporation, a limited
liability company, an association, a partnership, a trust or estate, a
government or any department or agency thereof.
"Placement Agent" shall mean Delano Group Securities, LLC.
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"Preferred Stock Certificates of Designation" means,
collectively, (i) the Certificate of Designations, (ii) the Series A
Certificate of Designations, and (iii) the Series C Certificate of
Designations.
"Purchaser" shall have the meaning set forth in the preamble
of this Agreement.
"Registration Statement" shall have the meaning set forth in
Section 4.4 hereof.
"Regulatory Approvals" means (a) any and all certificates,
permits, licenses, franchises, concessions, grants, consents,
approvals, orders, registrations, authorizations, waivers, variances,
exemptions, declarations, or clearances from, or filings or
registrations with, or reports or notices to, any Governmental
Authority, and (b) any and all waiting periods imposed by applicable
laws.
"Securities" shall have the meaning set forth in Section 2.1
hereof.
"Securities Act" means the Securities Act of 1933, as amended,
and any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same may be in
effect from time to time.
"Series A Preferred Stock Holders" means, collectively,
Newcourt Capital USA Inc., a Delaware corporation, Newcourt Capital
Securities, Inc., a Delaware corporation, EP Power Finance L.L.C., a
Delaware limited liability company, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Equity
Funding, Inc., a Delaware corporation, Originators Investment Plan,
L.P., a Delaware limited partnership, Duke Capital Partners, LLC, a
Delaware limited liability company and Leaf Mountain Company, LLC, an
Illinois limited liability company.
"Series A Certificate of Designations" means the Certificate
of Designations, Preferences and Relative, Participating, Optional and
Other Special Rights of Preferred Stock and Qualifications, Limitations
and Restrictions Thereof of Series A Convertible Preferred Stock of
Electric City Corp. which has been filed by the Company with the
Secretary of State of Delaware, as it may be amended from time to time.
"Series C Preferred Stock Holder" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
an individual.
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"Series C Certificate of Designations" means the Certificate
of Designations, Preferences and Relative, Participating, Optional and
Other Special Rights of Preferred Stock and Qualifications, Limitations
and Restrictions Thereof of Series A Convertible Preferred Stock of
Electric City Corp. which has been filed by the Company with the
Secretary of State of Delaware, as it may be amended from time to time.
"Series D Preferred Stock" shall have the meaning set forth in
the Recitals to this Agreement.
"Series D Warrants" shall mean the warrants to be issued by
the Company to Purchasers to purchase an aggregate of 37,500 shares of
Series D Preferred Stock, as evidenced by Warrant Certificates, as any
of the same may be amended from time to time in accordance with the
terms thereof.
"Stated Value" of the Series D Preferred Stock shall mean
$10.00 per share.
"Stock Trading Agreement" means a Stock Trading Agreement,
substantially in the form of Exhibit C hereto, dated as of the Closing
Date and entered into by the Company and the Purchasers, as the same
may be amended from time to time in accordance with the terms thereof.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than
50% of the voting stock or other equity interests (in the case of
Persons other than corporations), is owned or controlled, directly or
indirectly, by the Person, or one or more of the Subsidiaries of the
Person, or a combination thereof.
"Taxes" means any federal, state, county, local or foreign
taxes, charges, fees, levies, or other assessments, including, without
limitation, all net income, gross income, sales and use, ad valorem,
transfer, gains, profits, excise, franchise, real and personal
property, gross receipt, capital stock, business and occupation,
disability, employment, payroll, license, estimated, or withholding
taxes or charges imposed by any governmental entity, and includes any
interest and penalties on or additions to any such taxes (and, in the
case of the Company and its Subsidiaries, Taxes for which the Company
or any of its Subsidiaries may be liable in its own right, or as the
transferee of the assets of, or as successor to, any other corporation,
association, partnership, joint venture, or other entity, or under
Treasury Regulation Section 1.1502-6 or any similar provision of state
or local law).
"Tax Return" means a report, return or other information
required to be supplied to a Governmental Authority with respect to
Taxes including, where permitted or required, combined, unitary, group
or consolidated returns for any group of entities that includes the
Company or any of its Subsidiaries.
"Transactions" shall have the meaning set forth in Section
3.1(e).
"Transaction Documents" shall have the meaning set forth in
Section 5.1(b) hereof.
"Warrant Certificate" means a warrant certificate evidencing
Common Stock Warrants or Series D Warrants, duly executed by the
Company and delivered to the Purchaser pursuant to this Agreement, and
any replacement certificate issued by the Company in respect thereof
pursuant to partial exercise, transfer, loss or mutilation of such
warrant certificate, as such original or replacement certificate may be
amended and in effect from time to time.
ARTICLE II
ISSUE, PURCHASE AND SALE OF THE SECURITIES
2.1 Authorization of Issuance of Securities. The Company has authorized
the initial issuance of (a) 150,000 shares of Series D Preferred Stock, (b) the
Series D Warrants, (c) 22,562 Common Shares to be issued hereunder, and (d) the
Common Stock Warrants, collectively referred to herein as the "Securities".
2.2 Purchase and Sale of Securities; Closing. Subject to the terms and
conditions herein set forth, the Company hereby agrees to sell to each
Purchaser, and each Purchaser severally and not jointly agrees to purchase from
the Company, at the Closing (as defined herein), shares of Series D Preferred
Stock, Series D Warrants, Common Shares and Common Stock Warrants in the amounts
indicated on Schedule I attached hereto with respect to such Purchaser for the
aggregate purchase price set forth on Schedule I to be paid by such Purchaser.
Subject to the satisfaction or waiver of the parties' respective conditions to
closing set forth in Sections 3.1 and 3.2, the closing of the purchase and sale
of the Securities (the "Closing") shall take place on June __, 2003, or at such
other time and on such other date as the Purchasers and the Company may agree
(the "Closing Date"), at the offices of the Company or at such other location as
the Purchasers and the Company may agree. At the Closing, the Company will
deliver to each Purchaser two or more stock certificates, as such Purchaser may
request, registered in such Purchaser's name (or in its nominee name if
designated by Purchaser) evidencing the shares of Series D Preferred Stock and
Common Stock to be purchased by Purchaser, together with the Series D Warrants
and Common Stock Warrants to be purchased by such Purchaser, against payment of
the applicable purchase price therefore by wire transfer of immediately
available funds to or upon the order by the Company.
ARTICLE III
CONDITIONS OF CLOSING
3.1 Purchasers' Conditions to Closing. Each Purchaser's obligation to
purchase and pay for the Securities to be purchased by such Purchaser at the
Closing is subject to the satisfaction, as determined by, or waived by, such
Purchaser on or before the Closing Date, of the following conditions:
(a) Receipt of Securities. Such Purchaser shall have received
delivery of the stock certificates and Warrant Certificates evidencing
the Securities to be purchased by such Purchaser, duly issued by the
Company;
(b) Opinion of the Company's Counsel. Such Purchaser shall
have received from Schwartz, Cooper, ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Chartered,
special counsel to the Company in connection with this transaction, an
opinion dated on the Closing Date in form and substance reasonably
satisfactory to such Purchaser;
(c) Stock Trading Agreement. The Stock Trading Agreement shall
have been entered into by the Company and each Purchaser hereunder;
(d) No Litigation; No Order. No action, suit or proceeding
relating to the transactions contemplated by this Agreement or any
Ancillary Agreement (the "Transactions") shall be pending that in the
reasonable good faith judgment of such Purchaser (i) seeks to restrain
or prevent any of the Transactions and has a reasonable probability of
success or (ii) is reasonably likely to have a material adverse effect
on the assets, business, prospects, properties, operations or
conditions (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, and no order (including, without
limitation, a temporary restraining order), decree, writ, judgment or
injunction shall be in effect that restrains, enjoins or prevents the
consummation of the transactions contemplated by this Agreement or any
Ancillary Agreement (collectively, "Litigation");
(e) Proceedings. On or prior to the Closing Date, all
corporate and other proceedings required to be taken under applicable
laws, rules and all regulations and all rules of The American Stock
Exchange in connection with the transactions contemplated by this
Agreement or any Ancillary Agreement shall have been taken and all
filings and documents incident thereto shall be reasonably satisfactory
in form and substance to such Purchaser;
(f) Compliance with this Agreement. The Company shall have
performed and complied with all of its agreements and conditions set
forth or contemplated herein that are required to be performed or
complied with by the Company on or before the Closing Date;
(g) Officer's Certificate. Such Purchaser shall have received
a certificate, dated the Closing Date and signed by the Chief Executive
Officer of the Company, certifying that the conditions set forth in
Sections 3.1(d), 3.1(e), 3.1(f), 3.1(g), 3.1(k), and 3.1(l) hereof have
been satisfied on and as of such date;
(h) Secretary's Certificate. Such Purchaser shall have
received a certificate, dated the Closing Date and signed by the
Secretary of the Company, attaching good standing certificates from the
Delaware Secretary of State with respect to the Company and from the
respective Secretaries of State for the jurisdictions of incorporation
for its Subsidiaries and certifying the authenticity of attached copies
of (i) the Certificate of Incorporation and by-laws of the Company and
the certificate of incorporation and by-laws of each of its
Subsidiaries, in each case as amended; (ii) resolutions of the Board of
Directors of the Company approving this Agreement and the Ancillary
Agreements and the transactions contemplated by this Agreement and the
Ancillary Agreements;
(i) Purchase Permitted by Applicable Laws; Legal Investment.
The acquisition by such Purchaser of and payment for the Securities to
be purchased by such Purchaser and the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements (i) shall
not be prohibited by any applicable law or governmental regulation,
(ii) shall not subject such Purchaser to any penalty or, in its
reasonable judgment, other onerous conditions under or pursuant to any
applicable law or governmental regulation and (iii) shall be permitted
by the laws and regulations of the jurisdictions to which such
Purchaser is subject;
(j) Consents and Approvals. All consents, waivers, approvals,
exemptions, authorizations, or other actions by, or notices to, or
filings with, Governmental Authorities and other Persons necessary or
required in connection with the execution, delivery or performance by
the Company or enforcement against the Company of this Agreement
(including, without limitation, the issuance of the Securities
contemplated hereunder), any Ancillary Agreement or any other document
executed in connection with the consummation of the transactions
contemplated by this Agreement or any Ancillary Agreement shall have
been obtained and be in full force and effect, and Purchaser and its
special counsel shall have been furnished with appropriate evidence
thereof; and
(k) Insolvency. The Company shall not have made an assignment
for the benefit of creditors, nor shall it have filed with a court of
competent jurisdiction an application for appointment of a receiver or
similar official with respect to it or any substantial part of its
assets, nor shall there have been filed by the Company or any of its
Subsidiaries a petition seeking relief under any provision of the
Federal Bankruptcy Code or any other federal or state statute now or
hereafter in effect affording relief to debtors, nor shall there have
been filed against the Company or any of its Subsidiaries any such
application or petition.
3.2 Company Conditions to Closing. The Company's obligation to
issue and sell the Securities to each Purchaser hereunder at the Closing is
subject to the satisfaction, on or before the Closing Date, of the following
conditions:
(a) Receipt of Purchase Price. The Company shall have received
from such Purchaser payment of the purchase price to be paid by such
Purchaser hereunder by wire transfer of immediately available funds;
(b) Acknowledgement and Agreement. The Stock Trading Agreement
shall have been entered into and delivered by the Company and all the
Purchasers;
(c) No Litigation; No Order. No action, suit or proceeding
relating to the Transactions shall be pending that in the reasonable
good faith judgment of the Company seeks to restrain or prevent any of
the Transactions and has a reasonable probability of success;
(d) Purchase Permitted by Applicable Laws; Legal Investment.
The acquisition by such Purchaser of and payment for the Securities and
the consummation of the transactions contemplated by this Agreement and
the Ancillary Agreements (i) shall not be prohibited by any applicable
law or governmental regulation, and (ii) shall not subject the Company
to any penalty or, in its reasonable judgment, other onerous conditions
under or pursuant to any applicable law or governmental regulation; and
(e) Consents and Approvals. All consents, waivers, approvals,
exemptions, authorizations, or other actions by, or notices to, or
filings with, Governmental Authorities and other Persons necessary or
required in connection with the execution, delivery or performance by
the Company or enforcement against the Company of this Agreement
(including, without limitation, the issuance of the Securities
contemplated hereunder), any Ancillary Agreement or any other document
executed in connection with the consummation of the transactions
contemplated by this Agreement or any Ancillary Agreement shall have
been obtained and be in full force and effect.
ARTICLE IV
CERTAIN COVENANTS
4.1 Financial Statements and Other Reports. After the Closing
Date, the Company agrees to send the following reports to each holder of Series
D Preferred Stock:
(a) so long as the Company is subject to the requirements of,
or otherwise making filings pursuant to, Section 13 or 15(d) of the
Exchange Act, within three (3) days after the filing with the
Commission, a copy of its Annual Report on Form 10-KSB or Form 10-K,
its Quarterly Reports on Form 10-QSB or Form 10-Q, any proxy statements
or information statements and any Current Reports on Form 8-K, together
in each case with amendments thereto;
(b) within one (1) day after release, copies of all press
releases issued by the Company or any of its Subsidiaries;
(c) promptly upon receipt thereof, copies of reports, if any,
submitted to the Company by independent accountants in connection with
each annual or interim audit of the books of the Company made by such
accountants; and
(d) all other information sent to holders of the Common Stock
or any other equity security holder.
Without limiting the foregoing, the Company shall deliver to each Purchaser
until such Purchaser transfers, assigns (except in the case of an assignment to
an Affiliate) or sells all of its Series D Preferred Stock (i) as soon as
practicable and in any event within 45 days after the end of each fiscal
quarter, the following information: consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for such
fiscal period and for the period from the beginning of the then current fiscal
year to the end of such fiscal period and a comparison of each such item to the
then current budget, and the balance sheet of the Company and its Consolidated
Subsidiaries as at the end of such fiscal period, setting forth in each case in
comparative form figures for the corresponding periods in the preceding fiscal
year, all in reasonable detail, prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
certified as to fair presentation by the principal financial officer of the
Company and accompanied by a written discussion of operations in summary form;
and (ii) as soon as practicable and in any event within 90 days after the end of
each fiscal year of the Company, the following information: statements of
income, stockholders' equity and cash flows of the Company and its consolidated
Subsidiaries for such year, and a consolidated balance sheet of the Company and
its consolidated Subsidiaries as at the end of such year, setting forth in each
case in comparative form corresponding figures from the preceding fiscal year,
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, and accompanied by an
opinion of BDO ▇▇▇▇▇▇▇ ▇▇, or another firm of independent public accountants of
recognized national standing selected by the Company, to the effect that the
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application in which such accountants concur and as are noted
therein) and present fairly the financial condition of the Company and its
consolidated Subsidiaries and that the examination of such accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and accordingly included such tests of the
accounting records and such other auditing procedures as were considered
necessary in the circumstances; and accompanied by a written discussion of
operations by management in summary form with respect to such fiscal year,
including a comparison to budget.
Each Purchaser is hereby authorized to deliver a copy of any financial
statement delivered to it pursuant to this Section 4.1 to any regulatory body
having jurisdiction over it that requests such information. Subject to
compliance with reasonable confidentiality requirements imposed by the Company,
each Purchaser shall have reasonable access to the Company, including its
management, and its books and records during regular business hours and is
further authorized to request information from and to have access to, at the
Company's expense, the Company's independent public accountants. The Company
shall request such accountants to make available to any Purchaser such
information as such Purchaser may reasonably request.
Notwithstanding the foregoing, the Company need not provide any
Purchaser with any information pursuant to this Section 4.1 which the Company
reasonably believes constitutes material, non-public information, unless such
Purchaser has entered into an acceptable written confidentiality agreement with
the Company.
4.2 Corporate Existence; Licenses and Permits; Maintenance of
Properties. The Company shall at all times use commercially reasonable efforts
to do or cause to be done all things necessary to maintain, preserve and renew
its existence as a corporation organized under the laws of a state of the United
States of America, and to preserve and keep in force and effect, and cause each
of its consolidated Subsidiaries to apply for on a timely basis, all licenses
and permits necessary and material to the conduct of the business of the Company
and its Subsidiaries, taken as a whole.
4.3 Securities Exchange. The Company shall use its reasonable best
efforts to maintain its Common Stock listing and to continue to have its Common
Stock be quoted on The American Stock Exchange or on another national securities
exchange, so long as it is subject to Section 13 or 15(d) of the Exchange Act.
4.4 Best Efforts. The Company agrees to use its reasonable best efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things reasonably necessary, proper or advisable under applicable laws, rules
and regulations to consummate and make effective the transactions contemplated
by this Agreement as promptly as practicable. In case at any time after the
Closing any further action is reasonably necessary to carry out the purposes of
this Agreement, the proper agents, officers and directors of the Company shall
take such action.
4.5 Insurance. The Company shall at all times maintain customary
directors and officers insurance in amounts as are customary for other publicly
traded companies of similar size.
4.6 Public Disclosure. The Company shall: (i) on the Closing Date issue
a press release disclosing the material terms of the transactions contemplated
hereby (including at least the number of shares sold and proceeds therefrom) and
any information disclosed to Purchaser which the Company believes may constitute
material, non-public information, and (ii) make such other filings and notices
in the manner and time required by the Commission, (including filing of this
Agreement with the Commission pursuant to the Exchange Act and other actions
required to comply with Section 4.3 hereof).
ARTICLE V
REPRESENTATIONS, COVENANTS AND WARRANTIES
The Company represents, covenants and warrants to the Purchaser as
follows:
5.1 Organization; Standing and Qualification of Company and its
Subsidiaries; Corporate Authority.
(a) Each of the Company and each of its Subsidiaries is a corporation
duly organized and existing in good standing under the laws of the jurisdiction
of its organization, and has the corporate power to own its property and to
carry on its business as now being conducted, is duly qualified and in good
standing as a foreign corporation to do business in every jurisdiction where the
character of the properties owned or leased by it or the nature of any business
transacted by it makes such qualification necessary, except where such
nonqualification or lack of good standing would not have a material adverse
effect on the business of the Company and its Subsidiaries, taken as a whole.
(b) The execution and delivery by the Company of this Agreement and the
Ancillary Agreements (collectively, the "Transaction Documents"), and the
performance by the Company of all transactions and obligations contemplated
hereby and thereby are within its corporate authority. The execution, delivery
and performance of the Transaction Documents and each other agreement
contemplated by the terms hereof and thereof and the issuance of the Securities
have been duly authorized by all necessary corporate proceedings on the part of
the Company. Each of the Transaction Documents constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and to equitable principles relating to enforceability. The Common Shares are
duly authorized and, when issued, will be validly issued, fully paid and
nonassessable and subject to no preemptive rights in favor of other Persons
which have not been waived. Assuming the accuracy of the representations of each
Purchaser in this Agreement, the Series D Preferred Stock and the Common Shares
issuable hereunder will be issued in compliance with all applicable federal and
state securities laws. The shares of Series D Preferred Stock issuable upon the
exercise of the Series D Warrants are duly authorized and reserved for issuance,
and, when issued upon such exercise, will be validly issued, fully paid and
nonassessable, and subject to no preemptive rights in favor of other Persons
which have not been waived. The shares of Common Stock issuable upon the
exercise of the Common Stock Warrants, or the conversion of shares of the Series
D Preferred Stock to be issued at Closing hereunder or upon the conversion of
shares of the Series D Preferred Stock issuable upon exercise of the Series D
Warrants, are duly authorized and reserved for issuance, and, when issued upon
such exercise, will be validly issued, fully paid and nonassessable, and subject
to no preemptive rights in favor of other Persons which have not been waived.
Assuming the accuracy of the representations of each of the Purchasers in this
Agreement, when such shares of Series D Preferred Stock and such shares of
Common Stock are issued, such shares will be issued in compliance with all
applicable federal and state securities laws. The Company has reserved for
issuance (i) 210,938 shares of Common Stock issuable upon exercise of the Common
Stock Warrants, (ii) 37,500 shares of Series D Preferred Stock issuable upon
exercise of the Series D Warrants, (iii) 1,500,000 shares of Common Stock
issuable upon conversion of the Series D Preferred Stock to be issued hereunder,
and (iv) 375,000 shares of Common Stock issuable upon conversion of the shares
of Series D Preferred Stock issuable upon exercise of the Series D Warrants.
(c) Great Lakes Controlled Energy Corporation and Switchboard
Apparatus, Inc. are the only Subsidiaries of the Company. Each such Subsidiary
is wholly owned by the Company.
5.2 Capital Stock.
(a) As of the date hereof, the Company has authorized 120,000,000
shares of Common Stock and 5,000,000 shares of preferred stock. As of the date
hereof, the Company has 34,125,460 issued and outstanding shares of Common
Stock, 2,225,471 issued and outstanding shares of Series A Convertible Preferred
Stock and 216,933 issued and outstanding shares of Series C Convertible
Preferred Stock. All outstanding shares of the Company Common Stock, the Series
A Convertible Preferred Stock and the Series C Convertible Preferred Stock have
been duly authorized, validly issued and are fully paid and nonassessable and
free of preemptive rights and were issued in compliance with all applicable
federal and state securities laws.
(b) Except as otherwise stated in this Section 5.2 or in Schedule 5.2
and except for shares of capital stock reserved for issuance in connection with
the transactions contemplated by this Agreement and the Ancillary Agreements,
the Company has not granted or issued, or agreed to grant or issue, any options,
warrants or similar rights to acquire or receive any of the authorized but
unissued shares of its capital stock of any class or any securities convertible
into shares of its capital stock of any class or any stock appreciation rights.
Except as stated in Schedule 5.2, no adjustment to the exercise price of any
outstanding options or warrants of the Company will be required as a result of
the issuance of any of the Securities.
(c) Except as set forth in Schedule 5.2(c), no holder of shares of
Common Stock (or securities convertible into or exchangeable or exercisable for
Common Stock) has any rights to purchase or receive additional or other
securities upon the occurrence of an event that might dilute such holder's
percentage interest in the Company.
5.3 No Defaults. Except as set forth in Schedule 5.3, neither the
Company nor any of its Subsidiaries, to its knowledge, is in violation of, or in
default under, nor has there been any waiver given with respect to, any term or
provision of any charter, by-law, mortgage, indenture, agreement, instrument,
statute, rule, law, regulation, judgment, decree, order, writ, or injunction
applicable to it, such that such violations and defaults in the aggregate could
reasonably be expected to result in any material adverse change in the business,
assets, properties, condition (financial or otherwise) or results of operations
of the Company and its Subsidiaries, taken as a whole, or materially adversely
affect the ability of the Company to perform in any material respect its
obligations under this Agreement. All Regulatory Approvals required by the
Company and its Subsidiaries to conduct their respective business as now
conducted by them have been obtained and are in full force and effect, and the
Company and its Subsidiaries are in compliance with the terms and requirements
of such Regulatory Approvals. Except as set forth on Schedule 5.3 hereto, since
December 31, 2002, none of the Company or any of its Subsidiaries has received
any written notice or other written communication from any Governmental Entity
regarding (i) any revocation, withdrawal, suspension, termination or
modification of, or the imposition of any material conditions with respect to,
any Regulatory Approval, (ii) any violation of any law by the Company or any of
its Subsidiaries, or (iii) any other limitations on the conduct of business by
the Company or any of its Subsidiaries.
5.4 Burdensome and Conflicting Agreements and Charter Provisions.
Neither the execution or delivery of the Transaction Documents by the Company,
nor the offering, issuance and sale of the Securities by the Company, nor
fulfillment of, or compliance with, the terms and provisions of the Transaction
Documents, nor the issuance by the Company of shares of Series D Preferred Stock
upon exercise of the Series D Warrants, shares of Common Stock upon exercise of
the Common Stock Warrants and shares of Common Stock upon conversion of shares
of Series D Preferred Stock will, except as set forth in Schedule 5.4, conflict
with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in any violation of, or result in the
creation of any lien upon any of the properties or assets of the Company or any
of its Subsidiaries, or require any consent, approval or other action by, or
notice to, or filing with, any court or administrative or governmental body or
any other Person or pursuant to the Certificate of Incorporation or by-laws of
the Company or the certificate of incorporation or by-laws of any of the
Company's Subsidiaries, any award of any arbitrator or any material agreement
(including any agreement with stockholders), instrument, order, judgment,
decree, statute, law, rule or regulation to which the Company or any of its
Subsidiaries is subject.
5.5 Title to Assets, Etc. The Company has good and marketable fee
simple title to the assets reflected on the balance sheet set forth on Schedule
5.5 (the "Assets"). Except as set forth in Schedule 5.5, none of the Assets is
subject to any encumbrances, except for minor liens that in the aggregate are
not substantial in amount, do not materially detract from the value of the
property or assets subject thereto or interfere with the present use thereof and
have not arisen other than in the ordinary course of business. There are no
pending or threatened condemnation proceedings relating to any of the facilities
of the Company. The real property improvements (including leasehold
improvements) and fixtures and equipment of the Company are adequately insured
and are structurally sound with no known material defects. The facilities,
fixtures and equipment of the Company are in good operating condition and repair
(except for ordinary wear and tear and any defect for which the cost of
repairing would not be material), are sufficient for the operation of the
Company's business as presently conducted and are in conformity in all material
respects with all applicable laws, ordinances, orders, regulations and other
requirements (including applicable zoning, environmental, motor vehicle safety
or standards, occupational safety and health laws and regulations) relating
thereto currently in effect, except where the failure to conform would not have
a material adverse effect on the business or financial condition of the Company.
The Assets are valued on the Company's books at or below actual cost less an
adequate and proper depreciation charge. The Company has not depreciated any of
the Assets on an accelerated basis or in any other manner inconsistent with
applicable Internal Revenue Service tax and fiscal guidelines, if any.
5.6 Leases. Each of the Company and Great Lakes Controlled Energy
Corporation enjoy peaceful and undisturbed possession of all leases material to
them. All such leases are valid and subsisting and are in full force and effect.
5.7 Contracts. Except as set forth in Schedule 5.7, there is no
contract, agreement or understanding required to be described in or filed as an
exhibit to any Commission Documents that is not described in or filed as
required by the Securities Act or the Exchange Act, as the case may be. Except
as set forth in Schedule 5.7, each such contract, agreement and understanding is
valid and binding and is in full force and effect and enforceable in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally or as may be limited by equitable principles relating to
enforceability), except in the case of such contracts, agreements or
understandings that are by their terms no longer in force or effect. Except as
set forth on Schedule 5.7, (a) no approval or consent of, or notice to, any
Person is needed in order that such contract, agreement or understanding shall
continue in full force and effect in accordance with its terms without penalty,
acceleration or rights of early termination following the consummation of the
transactions contemplated by the Transaction Documents, other than such notices,
consents and approvals as have been obtained and (b) the Company and/or its
Subsidiaries are not in violation of, breach of, or default under any such
contract, agreement or understanding nor, to the Company's knowledge, is any
other party to any such contract, agreement or understanding.
5.8 Financial Statements. The Company has furnished the Purchasers with
(a) the balance sheet of the Company and its consolidated Subsidiaries as at
December 31, 2002 and the related statements of income, stockholders' equity and
cash flows of the Company and its consolidated Subsidiaries for the fiscal year
ended December 31, 2002, all certified by BDO ▇▇▇▇▇▇▇ LLP, including in each
case the related schedules and notes, and (b) an unaudited balance sheet of the
Company and its consolidated Subsidiaries as at March 31, 2003 and statements of
income, stockholders' equity and cash flows of the Company and its consolidated
Subsidiaries for the interim period ended on such date, prepared by the Company
and certified by its principal financial officer (item (b) is referred to as the
"Interim Financial Statements").
All such financial statements (including any related schedules and
notes) have been prepared in accordance with generally accepted accounting
principles consistently applied, except to the extent set forth in the notes to
such financial statements and except for the absence of footnotes to the Interim
Financial Statements and except that the Interim Financial Statements are
subject to normal year-end adjustments and to adjustments made in the course of
an audit that would not in the aggregate be material, throughout the periods
involved and to the extent required by such principles show all liabilities,
direct and contingent, of the Company and its Subsidiaries required to be shown
thereon in accordance with generally accepted accounting principles. The balance
sheets and the related schedules and notes fairly present the financial
condition of the Company and its consolidated Subsidiaries. Except as set forth
in Schedule 5.8, the Company has incurred no material liabilities since March
31, 2003, other than those incurred in the ordinary course. The net income and
stockholders' equity statements and the related schedules and notes fairly
present the results of the operations of the Company and its consolidated
Subsidiaries for the periods indicated.
Except as set forth in Schedule 5.8, there has been no material adverse
change in the assets, business, prospects, properties, operations or condition,
financial or otherwise, of the Company and its Subsidiaries, taken as a whole,
since March 31, 2003.
5.9 Actions Pending. Except as set forth in Schedule 5.9 hereto, there
is no action, suit, investigation or proceeding pending or, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries before
any court, arbitrator or administrative or governmental body that (a) seeks to
enjoin or otherwise prevent the consummation of the sale or issuance of the
Securities or (b) materially and adversely affects, or as to which there is a
reasonable possibility of an adverse decision that would materially and
adversely affect, either individually or collectively, the assets, business,
properties, prospects, operations or condition, financial or otherwise, of the
Company and its Subsidiaries, taken as a whole. Neither the Company nor any of
its Subsidiaries is in violation of any judgment, order, writ, injunction,
decree, rule or regulation of any court or governmental department, commission,
board, bureau, agency or instrumentality, the violation of which reasonably
could be expected to, either individually or collectively, materially and
adversely affect the business, property, assets, prospects, operations or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole.
5.10 Offering of Securities. Assuming the accuracy of the
representations of each of the Purchasers in this Agreement, the offer, sale and
issuance of the Securities are exempt from the registration requirements of the
Securities Act. Neither the Company nor any agent on its behalf has solicited or
will solicit any offers to sell or has offered to sell or will offer to sell all
or any part of the Securities to any Person so as to bring the offering and sale
of such Securities by the Company within the registration provisions of the
Securities Act. The Company has filed all notices and satisfied all registration
or qualification requirements of any state securities or Blue Sky law of any
applicable jurisdiction with respect to the offer, issuance and sale of the
Securities or required by the Ancillary Agreements.
5.11 Placement Agent Fees; Broker's or Finder's Commissions. The
Company will pay the Placement Agent a fee equal to 8% of the gross proceeds
received from the sale of the Securities at the Closing hereunder. The Placement
Agent is controlled by ▇▇▇▇▇ ▇▇▇▇▇▇▇, a director of the Company. Other than the
fee payable by the Company to the Placement Agent, no broker's or finder's or
placement fee or commission will be payable with respect to the sale or the
issuance of the Securities contemplated hereby or by the Ancillary Agreements as
a result of any act or omission by the Company, and the Company will hold the
Purchasers harmless from any claim, demand or liability for broker's or finder's
or placement fees or commissions alleged to have been incurred in connection
with the sale or the issuance of the Securities due to any actions or omissions
by the Company or its Subsidiaries or any of their respective directors,
officers or agents.
The Company acknowledges that the Placement Agent has served as
placement agent for the Company, Duke Capital Partners, LLC, and EP Power
Finance, L.L.C. with respect to the sale of securities of the Company (including
the securities to be sold hereunder) and that ▇▇. ▇▇▇▇▇▇▇ is a Purchaser under
this Agreement and an Investor under that certain Duke Securities Purchase and
Sale Agreement of even date herewith. The Company hereby waives any and all
conflict of interest claims against the Placement Agent and/or ▇▇. ▇▇▇▇▇▇▇
arising from the Placement Agent's simultaneous agency relationship with the
Company, Duke Capital Partners, LLC, and EP Power Finance, L.L.C., his status as
a Purchaser hereunder and ▇▇. ▇▇▇▇▇▇▇'▇ status as a director of the Company.
5.12 Application of Proceeds. The net proceeds of the sale of the
Securities will be used by the Company for working capital and for general
corporate purposes.
5.13 Intellectual Property.
(a) The Company and its Subsidiaries exclusively own or possess the
requisite licenses or rights (on reasonable commercial terms) to use all
patents, trade secrets, trademarks, service marks, service names, trade names,
copyrights and other intellectual property rights necessary to enable each of
them to conduct their respective businesses as now operated (collectively, the
"Company IP"). Schedule 5.13(a) sets forth a full and complete list of all
intellectual property rights of the Company and its Subsidiaries. There is no
claim or action by any Person pertaining to, or proceeding pending, or to the
Company's knowledge threatened, that challenges the rights of the Company or its
Subsidiaries with respect to any Company IP. To the Company's knowledge, neither
the Company's nor any of its Subsidiaries' current and intended products and
services infringe on any patents, licenses, trademarks, service marks, service
names, trade names, copyrights or other intellectual property rights held by any
Person and neither the Company nor any of its Subsidiaries is aware of any facts
or circumstances that might give rise to any of the foregoing.
(b) Except as set forth in Schedule 5.13(b), no proceedings or claims
in which the Company alleges that any Person is infringing upon, or otherwise
violating, any Company IP are pending, and none has been served by, instituted
or asserted by the Company or any of its Subsidiaries, nor are any proceedings
threatened alleging any such violation or infringement.
(c) The Company has taken and will take all commercially reasonable
actions that are necessary or advisable in order to fully protect the Company
IP, in a manner consistent with prudent commercial practice.
5.14 Taxes. The Company and each of its Subsidiaries has timely filed
(or caused to be filed) all Tax Returns that are required to be filed by (or
with respect to) it on or before the date hereof and has paid all Taxes due on
or before the date hereof whether or not reflected on such Tax Returns,
including pursuant to any assessment received by it. All such Tax Returns were
true, correct and complete in all material respects. None of such Tax Returns
has been audited by the relevant taxing authority, and no taxing authority has
notified (or threatened) the Company or any of its Subsidiaries, orally or in
writing, that such taxing authority will or may audit any such return. The
Company and its Subsidiaries have complied with all requirements of the Code,
the Treasury Regulations and any state, local or foreign law relating to the
payment and withholding of Taxes relating to them, and the Company and each of
its Subsidiaries have, within the time and in the manner prescribed by
applicable law, paid over to the proper taxing authorities all amounts required
to be so withheld and paid over relating to them. The charges, accruals and
reserves on the books of the Company and its Subsidiaries in respect of Taxes or
other governmental charges are adequate to cover any liability of the Company
and its Subsidiaries for Taxes through the date hereof. There are no liens for
Taxes with respect to any asset of the Company or any of its Subsidiaries,
except for liens with respect to Taxes that are not yet due and payable. No
taxing authority in a jurisdiction where the Company or any of its Subsidiaries,
as the case may be, does not file tax returns has made a claim, assertion or
threat that the Company or any of its Subsidiaries is or may be subject to
taxation in such jurisdiction.
5.15 Insurance. The Company maintains or is covered by valid policies
of workers' compensation insurance, product liability insurance, and insurance
with respect to its properties and business. The Company currently maintains in
full force insurance covering the respective risks of the Company and its
Subsidiaries of such types and in such amounts, with such deductibles and with
such insurance companies as are customary for other companies engaged in similar
lines of business. The Company currently maintains key man life insurance for
▇▇▇▇ ▇▇▇▇▇▇ in the amount of $5,000,000, which is and will remain in full force
and effect through December 31, 2005.
5.16 Commission Documents. Except as set forth in Schedule 5.16, the
Company has filed all registration statements, proxy statements, information
statements, reports and other documents required to be filed by it under the
Securities Act or the Exchange Act, and all amendments thereto (collectively,
the "Commission Documents"). Each Commission Document when filed with the
Commission was true and accurate in all material respects and in compliance in
all material respects with the requirements of its respective report form and
the rules and regulations of the Commission. No Commission Document contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which made, not
misleading.
5.17 Disclosure. Neither this Agreement nor any other document,
certificate or statement prepared by or on behalf of the Company by its
authorized representatives or agents and furnished to or made available to the
Purchaser in writing by or on behalf of the Company by its authorized
representatives or agents in connection herewith, contains any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements contained herein and
therein, in the light of the circumstances under which made, not misleading.
ARTICLE VI
REPRESENTATIONS OF THE PURCHASERS
Each Purchaser represents and warrants, as to itself only, as follows:
6.1 Investment Purpose. Such Purchaser is purchasing the Securities for
such Purchaser's own account for investment only and not with a view toward or
in connection with the public sale or distribution thereof. Such Purchaser will
not resell the Securities except pursuant to sales that are exempt from the
registration requirements of the Securities Act and all applicable state
securities laws, and/or sales registered under the Securities Act and all
applicable state securities laws. Such Purchaser understands that such Purchaser
may bear the economic risk of this investment indefinitely, unless the
Securities are registered pursuant to the Securities Act and any applicable
state securities laws or an exemption from such registration is available.
6.2 Accredited Investor Status/Organization. Such Purchaser is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act. By reason of his or its business and
financial experience, sophistication and knowledge, such Purchaser is capable of
evaluating the risks and merits of the investment made pursuant to this
Agreement.
6.3 Authorization; Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Purchaser and is
the legally valid and binding agreement of such Purchaser enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability. As of
the Closing Date, each Ancillary Agreement to which such Purchaser is a party
will be the legally valid and binding agreement of such Purchaser enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
6.4 Broker's or Finder's Commissions. Other than the fee payable to the
Placement Agent (which will be paid by the Company) no broker's or finder's or
placement fee or commission will be payable with respect to the sale or the
issuance of the Securities as a result of any act or omission by such Purchaser,
and such Purchaser will hold the Company harmless from any claim, demand or
liability for broker's or finder's or placement fees or commissions alleged to
have been incurred in connection with the sale or the issuance of the Securities
due to any actions of such Purchaser.
The Purchasers acknowledge that the Placement Agent has served as
placement agent for the Company, Duke Capital Partners, LLC, and EP Power
Finance, L.L.C. with respect to the sale of certain securities of the Company
(including the securities to be sold hereunder) and that ▇▇. ▇▇▇▇▇▇▇ is a
Purchaser under this Agreement and an Investor under that certain Duke
Securities Purchase and Sale Agreement of even date herewith. The Purchasers
hereby waive any and all conflict of interest claims against the Placement Agent
and/or ▇▇. ▇▇▇▇▇▇▇ arising from the Placement Agent's simultaneous agency
relationship with Company, Duke Capital Partners, LLC, and EP Power Finance,
L.L.C., his status as a Purchaser hereunder and ▇▇. ▇▇▇▇▇▇▇'▇ status as a
director of the Company.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification by Company. In addition to all other sums due
hereunder or provided for in this Agreement, the Company agrees to indemnify and
hold harmless each Purchaser and its officers, directors, agents, employees and
partners (each, an "indemnified party") to the fullest extent permitted by law
from and against any and all losses, claims, damages, expenses (including
reasonable fees, disbursements and other charges of counsel), damages or other
liabilities ("Losses") resulting from:
(i) any breach of any representation or warranty, covenant or
agreement of the Company in this Agreement, or
(ii) any legal, administrative or other actions (including
actions brought by any equityholders of the Company or derivative
actions brought by any Person claiming through the Company or in the
Company's name), proceedings or investigations (whether formal or
informal), or written threats thereof, based upon, relating to or
arising out of any of the Transaction Documents or the Securities, the
transactions contemplated hereby or thereby, or any indemnified
person's role therein;
provided, however, that the Company shall not be liable under this Section 7.1:
(a) for any amount paid in settlement of claims without the Company's consent
(which consent shall not be unreasonably withheld or delayed) or (b) to the
extent that it is finally judicially determined that such Losses resulted
primarily from the willful misconduct, bad faith or gross negligence of such
indemnified party or a breach of such Purchaser's representations in Article VI;
provided, further, that if and to the extent that such indemnification is
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of such indemnified liability that shall be
permissible under applicable laws. In connection with the obligation of the
Company to indemnify for expenses as set forth above, the Company further agrees
to reimburse each indemnified party for all such expenses (including reasonable
fees, disbursements and other charges of counsel) as they are incurred by such
indemnified party; provided, however, that in no event shall the Company be
required to pay fees and expenses under this Article VII for more than one firm
of attorneys in addition to the firm of attorneys representing the Company in
any jurisdiction in any one legal action or group of related legal actions;
provided, further, that if an indemnified party is reimbursed hereunder for any
expenses, such reimbursement of expenses shall be refunded to the extent it is
finally judicially determined that the Losses in question resulted primarily
from the willful misconduct, bad faith or gross negligence of such indemnified
party.
7.2 Notification. Each indemnified party under this Article VII shall,
promptly (and in any event within 20 days), after the receipt of notice of the
commencement of any action or other proceeding against such indemnified party in
respect of which indemnity may be sought from the Company under this Article
VII, notify the Company in writing of the commencement thereof. The failure of
any indemnified party so to notify the Company of any such action shall not
relieve the Company from any liability that it may have to such indemnified
party pursuant to this Article VII, except to the extent that such failure
causes material prejudice to the Company. In case any such action or other
proceeding shall be brought against any indemnified party and it shall notify
the Company of the commencement thereof, the Company shall be entitled to
participate therein and, to the extent that it may wish, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that any indemnified party may, at its own expense, retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
in any action or proceeding in which both the Company and an indemnified party
is, or is reasonably likely to become, a party, such indemnified party shall
have the right to employ separate counsel at the Company's expense and to
control its own defense of such action or proceeding if, in the reasonable
written opinion of counsel to such indemnified party (obtained at the expense of
the Company), (a) there are or may be legal defenses available to such
indemnified party or to other indemnified parties that are different from or
additional to those available to the Company or (b) any conflict or potential
conflict exists between the Company and such indemnified party that would make
such separate representation advisable; provided, however, that in no event
shall the Company be required to pay fees and expenses under this Article VII
for more than one firm of attorneys in addition to the firm of attorneys
representing the Company in any jurisdiction in any one legal action or group of
related legal actions. The Company shall not, without the consent of the
indemnified party (which consent shall not be unreasonably withheld), consent to
the entry of any judgment or enter into any settlement that does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation or that requires action other than the payment of money by the
Company. The rights accorded to indemnified parties hereunder shall be in
addition to any rights that any indemnified party may have at common law, by
separate agreement or otherwise.
7.3 Payment. No indemnifying party shall be liable for any amounts paid
in a settlement effected without the consent of such indemnifying party, which
consent shall not be unreasonably withheld or delayed. No indemnifying party
shall, without the indemnified party's prior written consent, consent to entry
of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the plaintiff to the indemnified party
of a release from all liability in respect of such claim or litigation.
7.4 Investor Rights Agreement. Notwithstanding anything to the contrary
in this Article VII, the indemnification and contribution provisions of the
Investor Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or sales made thereunder.
7.5 Survival of Provisions of Article VII. The obligations of the
Company under this Article VII shall survive indefinitely.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses. The Company agrees to pay, and save each Purchaser
harmless against liability for the payment of, all reasonable out-of-pocket
expenses arising in connection with:
(a) the negotiation and execution of the Transaction Documents
and the issuance of the Securities, including all taxes (including any
intangible personal property tax, together in each case with interest
and penalties, if any, and also including any filing fees payable to
any governmental authority, and any income tax payable by any Purchaser
in respect of any reimbursement for any such tax or fee) that may be
payable in respect of the execution and delivery of the Transaction
Documents or the issuance, delivery or acquisition (but not the
holding, ownership or transfer) of any of the Securities issued
pursuant to this Agreement or any Series D Preferred Stock issuable
upon exercise of the Series D Warrants or any of the shares of Common
Stock issuable upon exercise of the Common Stock Warrants or pursuant
to conversion of shares of Series D Preferred;
(b) the cost and expenses, including reasonable attorney's
fees, incurred by any Purchaser in enforcing any of his or its rights
hereunder, including, without limitation, costs and expenses incurred
in any bankruptcy case.
The obligations of the Company under this Section 8.1 shall survive the transfer
of any Securities by the Purchasers.
8.2 Restrictive Legends. The Securities shall each bear a legend
in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED, QUALIFIED, APPROVED OR DISAPPROVED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT OR SUCH LAWS AND NEITHER THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY AUTHORITY
HAS PASSED ON OR ENDORSED THE MERITS OF THESE SECURITIES.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO A STOCK TRADING
AGREEMENT, AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICES OF THE COMPANY.
Said legends shall be removed by the Company, upon the request of the holder
thereof, at such time as the restrictions on the transfer of the applicable
Security under applicable securities laws and the obligations imposed on the
holder thereof under the Investor Rights Agreement and Stock Trading Agreement,
as applicable, shall have terminated.
8.3 Consent to Amendments. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
of each Purchaser affected thereby to such amendment, action or omission to act.
8.4 Survival of Representations, Warranties and Indemnities. All
representations, warranties, covenants and agreements contained herein or made
in writing by the Company in connection herewith shall survive the execution,
delivery and performance of this Agreement and the Ancillary Agreements,
regardless of any investigation made by the Purchasers or on the Purchasers'
behalf.
8.5 Successors and Assigns. Except as otherwise provided herein, all
covenants and agreements contained in this Agreement by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
8.6 Notices. All notices, consents and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by certified mail, return receipt requested or (c) when
received by the addressee, if sent by Express Mail, Federal Express or other
express delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate as to itself by notice to the other
parties):
(i) If to the Company, to: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
Attention: Chief Executive
Officer
(ii) If to a Purchaser: at the
address for such Purchaser
set forth on Schedule II
hereto.
8.7 Accounting Terms. Unless otherwise set forth herein, all accounting
terms and provisions in this Agreement or any Ancillary Agreement shall be
construed to be as determined in accordance with generally accepted accounting
principles in the United States then in effect.
8.8 Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Illinois. This Agreement may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement is sought.
8.9 Headings. The descriptive headings of the several paragraphs of
this Agreement and the table of contents are inserted for convenience only and
do not constitute a part of this Agreement.
8.10 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be deemed but one and the same instrument and
each of which shall be deemed an original, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart for each of the parties hereto. Delivery by facsimile by any of the
parties hereto of an executed counterpart of this Agreement shall be effective
as an original executed counterpart hereof and shall be deemed a representation
that an original executed counterpart hereof will be delivered.
8.11 Non-Business Days. If the date for making any payment or the last
date for performance of any act or the exercising of any right, as provided in
this Agreement, shall not be a Business Day, such payment may be made or act
performed or right exercised on the next succeeding Business Day, with the same
force and effect as if done on the nominal date provided in this Agreement.
8.12 Further Assurances. The Company shall from time to time and at all
times hereafter make, do, execute or cause or procure to be made, done and
executed such further acts, deeds, conveyances, consents and assurances, without
further consideration, that may reasonably be required to effect the
transactions contemplated by this Agreement or any Ancillary Agreement.
8.13 Integration. This Agreement and the Ancillary Agreements, together
with the exhibits hereto and thereto, embody the entire agreement by and among
the parties hereto with respect to the matters set forth herein and supersede
any and all previous agreements, whether oral or written, on the same subject
matter.
8.14 Obligations Several Not Joint. This The obligations of each
Investor under any Transaction Document are several and not joint with the
obligations of any other Investor, and no Investor shall be responsible in any
way for the performance of the obligations of any other Investor under any
Transaction Document. Nothing contained herein or in any Transaction Document,
and no action taken by any Investor or other party hereto pursuant thereto,
shall be deemed to constitute the Investors and such parties as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that such parties are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the day and year first above written.
COMPANY: PURCHASERS:
ELECTRIC CITY CORP., CINERGY VENTURES II, LLC
By: /s/▇▇▇▇ ▇▇▇▇▇▇ By:/s/▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇ Name: ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title:Chief Executive Officer Title: President
SF CAPITAL PARTNERS LTD.
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Authorized Signatory
▇▇▇▇ ▇▇▇▇▇▇ HURVIS REVOCABLE TRUST
By: /s/▇▇▇▇ ▇▇▇▇▇▇ Hurvis
Name: ▇▇▇▇ ▇▇▇▇▇▇ Hurvis
Title: Trustee
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
SCHEDULE I
Securities Being Purchased
Shares of Shares of Shares of Common
Series D Series D Common Stock Purchase
Purchaser Preferred Warrants Stock Warrants Price
--------- --------- -------- ---------- -------- -----------
Cinergy
Ventures 60,000 15,000 9,025 84,375 $600,000
II, LLC
▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ 52,500 13,125 7,897 73,829 $525,000
SF Capital
Partners 30,000 7,500 4,512 42,188 $300,000
▇▇▇▇ ▇▇▇▇▇▇
Hurvis Revocable
Trust 3,750 938 564 5,273 $37,500
▇▇▇▇▇ ▇
▇▇▇▇▇▇▇ 3,750 937 564 5,273 $37,500
SCHEDULE II
Purchasers' Addresses for Notices
Name of Purchaser Address For Notices
Cinergy Ventures, LLC ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ Floor
Atrium II EA610
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇@▇▇▇▇▇▇▇.▇▇▇
---------------
SF Capital Partners, Ltd. C/▇ ▇▇▇▇▇ Asset Management, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ c/o Delano Group Securities, LLC
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
---------------------------
▇▇▇▇ ▇▇▇▇▇▇ Hurvis Revocable ▇▇▇▇ ▇▇▇▇▇▇ Hurvis, Trustee
Trust Dated March 8, 2002 C/o Old World Industries
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
-------------------------
EXHIBIT A
Certificate of Designations
EXHIBIT B
Joinder to Investor Rights Agreement
EXHIBIT C
Stock Trading Agreement