<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 000-2791
ELECTRIC CITY CORP.
(Exact name of small business issuer as specified in its charter)
DELAWARE 36-4197337
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1280 Landmeier Road, Elk Grove Village, Illinois 60007-2410
(Address of principal executive offices)
(847) 437-1666
(Issuer's telephone number)
------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days: Yes X No
--- ---
28,269,318 shares of the registrant's common stock, $.0001 par value per share,
were outstanding as of May 10, 2000.
Transitional Small Business Disclosure Format: Yes / / No /X/
1
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ELECTRIC CITY CORP.
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
Part I Financial Information
ITEM 1. Financial Statements:
Balance Sheets
March 31, 2000 and December 31, 1999............................ 4
Statement of Operations
Three Months Ended March 31, 2000 and 1999...................... 6
Statement of Stockholders' Equity (Deficit)
Three Months Ended March 31, 2000............................... 7
Statement of Cash Flows
Three Months Ended March 31, 2000 and 1999...................... 8
Notes to Condensed Consolidated Financial Statements............ 9
ITEM 2. Management Discussion and Analysis of
Financial Condition or Plan of Operations....................... 14
Part II. Other Information:
ITEM 2. Changes in Securities........................................... 17
ITEM 6. Exhibits and Reports on Form 8-K................................ 17
Signatures...................................................... 18
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
3
<PAGE>
Electric City Corp.
Balance Sheet
================================================================================
<TABLE>
<CAPTION>
March 31,
2000 December 31,
(Unaudited) 1999 (1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3,387,347 $ 6,166,197
Accounts receivable, net 1,160,011 1,324,901
Inventories 1,721,994 1,115,817
Other, including $25,000 note receivable from
employee as of March 31, 2000 83,162 600,000
- --------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 6,352,514 9,206,915
Property and Equipment 1,698,882 1,568,509
Less accumulated depreciation (150,296) (112,042)
- --------------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 1,548,586 1,456,467
Costs in Excess of Assets Acquired,
net of amortization of $280,235 and $196,164 at
March 31, 2000 and March 31, 1999, respectively 3,082,580 3,166,651
- --------------------------------------------------------------------------------------------------
$ 10,983,681 $ 13,830,033
==================================================================================================
</TABLE>
4
<PAGE>
Electric City Corp.
Balance Sheet
================================================================================
<TABLE>
<CAPTION>
March 31,
2000 December 31,
(Unaudited) 1999 (1)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Due to seller $ 992,000 $ 1,792,000
Current portion of long-term debt 28,927 28,380
Accounts payable 379,512 820,762
Accrued expenses 264,965 417,265
Amounts refundable from private placement 0 110,000
Deferred revenue 175,000 175,000
- --------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,840,405 3,343,407
Long-Term Deferred Revenue 416,667 429,167
Long-Term Debt 769,417 777,022
- --------------------------------------------------------------------------------------------------------------
COMMON STOCK SUBJECT TO RESCISSION 9,194,982 9,149,982
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value, 30,000,000 shares authorized,
26,095,500 and 26,091,500 shares issued and outstanding as
of March 31, 2000 and December 31, 1999, respectively 2,609 2,609
Additional paid-in capital 8,718,245 8,682,873
Accumulated deficit (9,958,644) (8,555,027)
- --------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY (1,237,790) 130,455
- --------------------------------------------------------------------------------------------------------------
$ 10,983,681 $ 13,830,033
==============================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
(1) Derived from audited December 31, 1999 10-K
5
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ELECTRIC CITY CORP.
STATEMENT OF OPERATIONS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31 2000 1999
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE $ 999,102 $ 94,561
- ---------------------------------------------------------------------------------------------
EXPENSES
Cost of sales 907,028 38,212
Selling, general and administrative 1,622,905 2,851,932
- ---------------------------------------------------------------------------------------------
Total expenses 2,529,933 2,890,144
OPERATING LOSS (1,530,830) (2,795,583)
- ---------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest income 183,769 1,909
Interest expense (56,556) (26,646)
- ---------------------------------------------------------------------------------------------
Total other income (expense) 127,213 (24,737)
- ---------------------------------------------------------------------------------------------
NET LOSS $ (1,403,617) $ (2,820,320)
- ---------------------------------------------------------------------------------------------
BASIC AND DILUTED NET LOSS PER COMMON SHARE (0.05) (0.12)
- ---------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
used in computation of basic and diluted net loss per share 28,255,956 22,743,689
=============================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
ELECTRIC CITY CORP.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Accumluated Shareholders'
Shares Stock Capital Deficit Equity (Deficit)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1999 26,091,500 $ 2,609 $ 8,682,873 $(8,555,027) $ 130,455
Issuance of shares in exchange for
services received 4,000 - 35,372 - 35,372
Net loss for the three months
ended March 31, 2000 - - - (1,403,617) (1,403,617)
- ------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 2000 26,095,500 $ 2,609 $ 8,718,245 $(9,958,644) $ (1,237,790)
==================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
ELECTRIC CITY CORP.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31 2000 1999
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net Loss $ (1,403,617) $ (2,820,320)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 122,324 13,792
Issuance of shares in exchange for services rendered 0 2,387,756
Changes in assets and liabilities,
Accounts receivable 164,890 (31,746)
Inventories (606,177) 18,055
Other current assets (83,162) 3,271
Accounts payable (441,250) (4,653)
Accrued expenses (116,928) (21,265)
Deferred revenue (12,500) 0
- ------------------------------------------------------------------------------------------------------
Net cash used in operating activities (2,376,419) (455,110)
- ------------------------------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
Repayment of stockholder loan 600,000 0
Purchase of property and equipment (130,373) (14,168)
- ------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 469,627 (14,168)
- ------------------------------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Payment of amounts due sellers (800,000) 0
Payment on long-term debt (7,058) (4,285)
Proceeds from private placement - net 45,000 0
Proceeds from stock issuance - net 0 881,978
Amounts refundable from private placement (110,000) 0
Proceeds from loan from stockholders 0 200,000
- ------------------------------------------------------------------------------------------------------
Net cash provided by financing activities (872,058) 1,077,693
- ------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (2,778,850) 608,415
- ------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, at beginning of period 6,166,197 93,799
Cash and Cash Equivalents, at end of period $ 3,387,347 $ 702,214
=======================================================================================================
Supplemental Disclosure of Cash Flow Information
Cash paid during the periods for interest $ 83,436 $ 16,342
Accrual satisfied through issuance of stock 35,372 0
</TABLE>
8
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ELECTRIC CITY CORP.
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. BASIS OF PRESENTATION The financial information included herein is
unaudited; however, such information reflects
all adjustments (consisting solely of normal
recurring adjustments), which, in the opinion
of management, are necessary for a fair
statement of results for the interim periods.
The results of operations for the three-month
period ended March 31, 2000 are not
necessarily indicative of the results to be
expected for the full year.
For further information, refer to the
financial statements and the related footnotes
including in the Electric City Corp. Annual
Report on Form 10-KSB/A.
2. PRIVATE PLACEMENT In July 1999, the Company commenced a private
placement under Regulation D of the Securities
Act of 1933. As of March 31, 2000, the Company
had received cash proceeds, net of commissions
and discounts, of $8,799,382 in exchange for
2,181,179 shares of common stock. (See Note
6).
3. ACQUISITION OF MARINO Effective May 24, 1999, the Company acquired
ELECTRIC ASSETS certain assets of Marino Electric, Inc. from
Joseph Marino, a related party, for
$1,792,000 in cash and 1,600,000 shares
($1,600,000) of the Company's common stock.
The Company is accruing interest expense at
9% per annum on the unpaid cash balance. As
of March 31, 2000, $992,000 of the purchase
price was still unpaid and accruing
interest. As Mr. Marino owns less than 50%
of the common stock of the Company, the
transaction was accounted for by the
purchase method of accounting. The purchase
price of $3,392,000 exceeded the fair value
of the assets acquired by approximately
$2,867,000 which will be amortized on a
straight-line basis over 10 years.
4. STOCK SPLIT The Company effected a two-for-one stock split
effective July 30, 1999. The stock split has
been retroactively reflected in the financial
statements as of and for the three months
ended March 31, 1999.
9
<PAGE>
ELECTRIC CITY CORP.
NOTES TO FINANCIAL STATEMENTS
================================================================================
5. NET LOSS PER SHARE The Company computes net loss per share under
Statement of Financial Accounting Standards
No. 128 "Earnings Per Share." The statement
requires presentation of two amounts, basic
and diluted net loss per share. Basic net loss
per share is computed by dividing net loss
available to common stockholders by the number
of weighed average common shares outstanding.
Included in the computation of weighted
average shares outstanding for the 3 months
ended March 31, 2000 are the 2,181,179 shares
of common stock subject to rescission.
Dilutive net loss per share would include all
common stock equivalents. The Company has not
included the outstanding options or warrants
as common stock equivalents in the computation
of diluted net loss per share for three months
ended March 31, 2000 and 1999, because the
effect would be antidilutive.
6. INVENTORIES Inventories consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
=========================================================================================
<S> <C> <C>
Raw Materials $1,061,712 $742,501
Work in process 417,203 331,053
Finished goods 236,579 42,263
- -----------------------------------------------------------------------------------------
$1,715,494 $1,115,817
=========================================================================================
</TABLE>
7. COMMON STOCK SUBJECT TO In January 2000, the Company completed a
RESCISSION private placement of 2,181,179 shares
of its common stock in an offering
made pursuant to Regulation D and Rule 506 of
the Securities Act of 1933 (the "506
Offering"). The proceeds of this offering were
used for payment of the cash portion of the
Marino Electric acquisition, inventory, to
repay indebtedness to the principal
stockholders and for general working capital
purposes. As a result of the Company's
statements made in certain press releases
issued during the 506 offering, it is
possible, but not altogether certain, that
such statements might be considered general
solicitation which is not permitted in a
nonpublic offering under Rule 506 and
therefore, a violation of the registration
provisions of Section 5 of the Securities Act
of 1933, as amended. As a result, the Company
may be in violation of Section 5 of the
Securities Act of 1933, as amended, and
consequently, certain investors may have
rescission rights as to the shares purchased.
Such investors may have the right to rescind
these purchases of common stock for a period
of one year from the date of purchase of the
common stock. A rescission right could entitle
the holders of the shares to receive a return
of the consideration paid ($4.50 per share),
together with interest from the date of
purchase. Based upon
10
<PAGE>
ELECTRIC CITY CORP.
NOTES TO FINANCIAL STATEMENTS
================================================================================
the close business relationship some investors
have with the Company and its management and
relationships that others have with management
of the Company, the Company does not believe
that investors owning a material amount of
securities purchased in the 506 offering would
demand rescission and any such rescission
would not have a material effect on the
Company's financial position.
As the possibility of rescission does exist,
the shares subject to rescission have been
reported as mezzanine equity in the Company's
financial statements.
8. SWITCHBOARD APPARATUS On March 23, 2000, the Company signed a
non-binding letter of intent to purchase all
the shares of Switchboard Apparatus, Inc., a
manufacturer of electrical switchgear. The
acquisition is contingent on satisfactory
completion of due diligence, execution of a
purchase agreement and satisfaction of
customary closing conditions. The majority of
the consideration to the selling shareholders
will be in the form of Electric City common
stock. The acquisition is expected to close in
June 2000.
9. GREAT LAKES CONTROLLED On April 5, 2000, the Company signed a
ENERGY CORPORATION non-binding letter of intent to purchase all
the shares of Great Lakes Controlled Energy
Corporation, an independent systems integrator
and facility retrofit specialist. The
acquisition is contingent on satisfactory
completion of due diligence, execution of a
purchase agreement and satisfaction of
customary closing conditions. The majority of
the consideration to the selling shareholders
will be in the form of Electric City common
stock. The acquisition is expected to close
in June 2000.
11
<PAGE>
ELECTRIC CITY CORP.
NOTES TO FINANCIAL STATEMENTS
================================================================================
10. LITIGATION a) A consultant has brought suit in the
Circuit Court of Cook County, Illinois
against the Company alleging breach of a
consulting agreement that was entered into
between the parties on April 6, 1999.
Pursuant to that agreement, which
terminated by its own terms on October 6,
1999, the consultant was to perform a
variety of services, including (1)
assisting the Company in obtaining working
capital, (2) facilitating the purchase of
another company, and (3) facilitating the
process of listing the Company as a NASDAQ
small-cap company. The consultant alleges
that he accomplished the first two items
and was prevented from performing the
third item based upon the actions of the
Company. The consultant seeks damages of
approximately $1,450,000. The Company has
answered the first two counts of the
complaint denying that the consultant
performed under the terms of the contract.
The Company has moved to dismiss the
remaining counts of the complaint, arguing
that any claims for services that were not
performed are barred by the terms of the
contract. The Company intends to
vigorously defend itself in this matter;
however, the ultimate outcome of this
situation is not presently determinable.
Accordingly, no adjustments that may
result from the final resolution of this
uncertainty have been made in the
accompanying financial statements.
b) As the result of certain distributors
failing to meet sales quotas and minimum
purchase requirements under their
distribution agreements, the Company has
entered into discussions regarding the
possible termination or restructuring of
those agreements. Three distributors,
representing 11 states have not agreed
with the proposed restructuring of the
distributorship agreements and have
threatened legal action. Management denies
all of the claims made by the distributors
and plans to take action to counterclaim
to collect the minimum purchase amounts
and to enforce all of the Company's rights
under the agreements. The three
distributors have made a variety of
assertions, including, INTER ALIA,
contending that the Company and/or its
officers made misrepresentations regarding
the financial condition of the Company,
the products' capabilities and whether
certain entities were customers of the
Company, which allegedly induced them to
become distributors and stockholders to
their alleged damage. They also claim
breaches of the distribution agreements
including INTER ALIA, failure to provide
adequate support for sales efforts,
failure to furnish products that conform
with contractual requirements and wrongful
efforts to take away and/or interfere with
the exclusivity of the
12
<PAGE>
ELECTRIC CITY CORP.
NOTES TO FINANCIAL STATEMENTS
================================================================================
distributors' rights. The type of claims
they contend they may assert are
securities fraud and RICO claims, breach
of contract, breach of the covenant of
good faith and fair dealing, common law
fraud and tortuous interference. No
complaint has yet been filed and no
specific damage number has been
articulated by the distributors, but they
contend that the damage claims will be in
the millions of dollars. Management denies
all of the claims made by the distributors
and intends to fully and vigorously defend
the claims. If, and when, a legal
proceeding is commenced, it is anticipated
that counterclaims against the
distributors will be filed by the Company
relating to the lack of performance and
other actions of the distributors. The
Company has retained the law firm of
Katten Muchin Zavis Chicago, Illinois, to
advise and defend the Company. While the
Company believes the distributor claims
are frivolous and that the Company will
prevail in its counterclaims, it is not
able to definitively determine the
ultimate outcome of such claims and cannot
estimate the amount of potential losses.
However, if the distributors were
successful, their claims could materially
effect the financial position and results
of operations of the Company.
13
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION OR PLAN OF OPERATION
You should read the following discussion regarding the Company along with the
Company's financial statement and related notes included in this quarterly
report. The following discussion contains forward-looking statements that are
subject to risks, uncertainties and assumptions. Our actual results, performance
and achievements in 2000 and beyond may differ materially from those expressed
in, or implied by these forward-looking statements.
Overview
On May 24, 1999, the Company acquired substantially all of the assets of Marino
Electric, Inc. ("Marino Electric"), a local designer and manufacturer of custom
electrical switchgear and distribution panels. Prior to acquiring Marino
Electric, the Company was considered a development stage company whose primary
activities involved research and development, testing, and the initial marketing
of its EnergySaver product. Since the acquisition of Marino Electric it has
constituted a majority of the Company's revenue, but going forward the
EnergySaver is expected to become the major source of revenue for the Company.
In addition, during the first quarter of 2000, the Company signed letters of
intent to purchase two companies with complementary technologies that will add
significantly to the Company's revenue.
Results of Operations.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH, 1999.
The Company's total revenue for the three-month period ended March 31, 2000 was
$999,102 as compared to $94,561 for the three-month period ended March 31, 1999.
During the first quarter of 2000, the Company sold 29 EnergySavers, accounting
for approximately 25% of the revenue generated during the quarter. The remaining
revenue generated during the first quarter of 2000, was primarily derived from
the sale of switchgear, distribution panels and miscellaneous electrical
components. During the first quarter of 1999, the Company was still considered a
development stage company. Sales during this development period were limited to
a small number of EnergySaver units.
Cost of sales for the three-month period ended March 31, 2000 totaled $907,028
as compared to $38,212 for the three-month period ended March 31, 1999. The
increase in the cost of sales was due to the increase in sales activity
resulting from the addition of Marino Electric in May of 1999 and increased
sales of EnergySaver units. The gross margin earned during the first quarter of
2000 was approximately 9.2%. The Company has experienced inefficiencies related
to the start-up of commercial production of the EnergySaver, which has depressed
margins. As sales of the EnergySaver grows these inefficiencies should be
eliminated and the gross margin will improve.
Selling, general and administrative expenses ("SG&A") for the three-month period
ended March 31, 2000 were $1,622,904 as compared to $2,851,827 for the
three-month period ended March 31, 1999. SG&A during the first three months of
1999 included significant research and development costs and professional fees
for legal and accounting services, which together totaled approximately $2.4
million. While research and development expenses and professional fees continue
to comprise a large portion of SG&A during the first quarter of 2000, totaling
approximately $400,000, personnel costs and sales related expenses have become a
larger portion of the Company's SG&A. As of end of the first quarter of 2000
approximately, 40% of the Company's employees had been with the Company for less
than three months. While some of these new employees were replacements as a
result of normal turnover, the majority filled new positions primarily in sales
and management. Personnel costs for the quater were approximately
14
<PAGE>
$750,000. The Company also incurred some one-time costs during the quarter to
hire and equip these new employees. Management has spent a great deal of its
time and resources on organizational issues during 2000, as it attempts to
position the company to fully exploit the potential of the EnergySaver. The
Company also continues to invest heavily in research and development as it works
to improve and extend the EnergySaver's capabilities in an attempt to reduce
costs and better meet the requirements of existing and new applications.
Other non-operating income for the three-month period ending March 31, 2000
totaled $127,213 as compared to an expense of $24,737 for the three-month period
ended March 31, 1999. The Company recorded $183,769 in interest income during
the first quarter of 2000, $120,000 of which was associated with a $600,000 loan
to a stockholder which was repaid in full during March 2000. The balance of the
interest income was earned on excess cash balances during the quarter. The
interest income was partially offset by interest expense of $56,556, the
majority of which was related to the amounts due to the sellers of Marino
Electric and the mortgage on the Company's facility in Elk Grove Village,
Illinois. Other non-operating expense for the first quarter of 1999 consisted
primarily of mortgage interest and interest on notes to shareholders.
The Company has not recorded any provision for future tax refunds as the
realization of the benefit cannot be assured at this time. The Company's net
operating loss carryforward, which can be used to reduce future taxable income,
as of the end of March 1999 exceeded $4.5 million.
Liquidity and Capital Resources
As of March 31, 2000, the Company has cash and cash equivalents of $3,387,347,
and its only debt consisted of a mortgage of $772,359 on its facility in Elk
Grove Village Illinois and vehicle loans totally $25,986. The Company's
principal cash requirements are for operating expenses, including employee
costs, the costs related to research and development, advertising costs, the
cost of outside consultants including those providing accounting, legal and
engineering services, and the funding of inventory and accounts receivable, and
capital expenditures. The Company has financed its operations since inception
primarily through the private placement of common stock and loans from
stockholders.
In July of 1999, the Company commenced an offering to sell 2,200,000 shares of
its common stock. As of March 31, 2000 the Company had raised $8,799,382, net of
commissions and discounts, through the issuance of 2,181,179 shares of common
stock. As is discussed in note 6 to the financial statements, the funds raised
as part of the private placement may be subject to rescission. Based upon the
close business relationship some investors have with the Company and its
management and relationships that others have with management of the Company,
the Company does not believe that investors owning a material amount of the
securities purchased in the private placement would demand rescission and any
such rescission would likely not have a material effect on the Company's
financial position.
Net cash decreased $2,778,850 during the three-month period ending March 31,
2000 as compared to increasing $608,415 during the same period in 1999. Net cash
consumed by operating activities was $2,367,919 as compared to $455,110 consumed
during the three-month period ended March 31, 1999. Most of the cash consumed in
both periods is attributable to the net losses incurred during the periods. In
addition working capital increased $1,121,999 during the first three-months of
2000 versus a $36,443 decline during the first quarter of 1999. Operations have
not generated cash since the Company's inception, but management believes that
revenues will reach a level sometime in the fourth quarter of 2000 such that
operations will become cash flow positive before changes in working capital.
Cash provided by investing activities totaled $469,627 during the three-month
period ending March 31, 2000, as compared to consuming cash of $14,168 during
the three-month period ending March 31, 1999. The first quarter of 2000
benefited from a $600,000 repayment of a loan to a stockholder, which was
partially offset by a $130,373 investment in property and equipment. The
investment in property and
15
<PAGE>
equipment was primarily for shop equipment and office equipment at the Company's
Elk Grove Village headquarters. The use of cash during the first quarter of 1999
was for the purchase of capital equipment.
Financing activities consumed $880,558 during the period ending March 31, 2000,
versus generating $1,077,693 during the three-months ending March 31, 1999.
During the three-month period in 2000 the Company paid $800,000 on the amounts
due to the seller of Marino Electric and refunded $110,000 to two investors in
the private placement before issuance of their stock. These uses of cash were
partially offset by $45,000 received as part of the private placement. The first
quarter of 1999 benefited from $881,978 generated through the sale of common
stock and $200,000 loaned to the Company by stockholders.
During the first quarter of 2000 the Company received a commitment from LaSalle
Bank NA to provide a $2 million working capital line. Access to the line is
contingent on completion of loan documents and satisfactory completion of a
review of the Company's accounts. Management hopes to have the line available
sometime in June.
Management believes that the cash raised as part of the recent private
placement, along with the new working capital line should provide sufficient
liquidity until internally generated cash reaches a level sufficient to fund
operations. None-the-less, the possibility exists that it may have to seek
additional capital most likely through the issuance of additional common stock.
In the event that it needs to raise additional capital, there is no guarantee
that it will be able to do so on a timely basis or under favorable terms.
As previously disclosed, the possibility exists that a suit could be filed by a
group of the Company's distributors. While the Company believes that if such a
suit is filed it will ultimately prevail, the possibility does exist that the
distributors may be successful, which could have a material adverse effect on
the Company's financial position.
This discussion includes forward-looking statements that reflect Electric City's
current expectations about its future results, performance, prospects and
opportunities. Electric City has tried to identify these forward-looking
statements by using words such as "may," "will," "expects," "anticipates,"
"believes," "intends," "estimates" or similar expressions. These forward-looking
statements are based on information currently available to Electric City and are
subject to a number of risks, uncertainties and other factors that could cause
Electric City's actual results, performance, prospects or opportunities in the
remainder of 2000 and beyond to differ materially from those expressed in, or
implied by, these forward-looking statements. These risks, uncertainties and
other factors include, without limitation, the Company's short operating
history, the uncertainty of product acceptance, the need for additional
financing, the limited trading market for the Company's securities, the possible
volatility of the Company's stock price, the concentration of ownership, and the
potential fluctuation in operating results. Except as required by the federal
securities laws, Electric City undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events, changed circumstances or any other reason after the date of this
document.
16
<PAGE>
ELECTRIC CITY CORP.
PART II. OTHER INFORMATION
ITEM 2. Changes In Securities
During the first three-months of 2000, the Company issued
28,055 shares of common stock at $4.50 per share to six
individual investors as part of the 506 Offering in exchange
for $126,247.50 in cash, a portion of which was received
during 1999.
In February 2000, the Company issued 4,000 shares of its
common stock with an aggregate value of $35,372 to the
Griffing Group Inc., a consultant to the company, for services
rendered during 1999.
ITEM 6. Exhibits And Reports On Form 8-K.
(a) Exhibits
10.1 Employment Agreement dated November 19, 1999 between
John Mitola and Electric City Corp.
10.2 Employment Agreement dated November 19, 1999 between
Brian Kawamura and Electric City Corp.
10.3 Employment Agreement dated November 19, 1999 between
Michael Pokora and Electric City Corp.
10.4 Employment Agreement dated November 19, 1999 between
Jeffrey Mistarz and Electric City Corp.
27 Financial Data for quarter ended March 31, 2000 and
March 31, 1999.
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K dated
January 31, 2000 reporting, pursuant to Item 8, the
change of the Company's fiscal year end to December
31 from April 30.
17
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SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
<TABLE>
<CAPTION>
ELECTRIC CITY CORP.:
<S> <C>
Dated: May 15, 2000 By: /s/ John Mitola
------------------------------------------
John Mitola
Chief Executive Officer (principal
executive officer)
Dated: May 15, 2000 By: / / Brian Kawamura
----------------------------------------
Brian Kawamura
President and Chief Operating Officer
Dated: May 15, 2000 By: / / Jeffrey Mistarz
----------------------------------------
Jeffrey Mistarz
Chief Financial Officer (principal
financial and accounting officer)
</TABLE>
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement"), dated as of the
19th day of November, 1999 (the "Effective Date"), is made by and among John
Mitola ("Mitola" or "Employee") and Electric City Corp., a Delaware corporation
(the "Company").
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Mitola do hereby
agree as follows:
Section 1. EMPLOYMENT AND DUTIES. On the terms and subject to
the conditions set forth in this Agreement, and subject to the ratification of
the board of directors of the Company of this Agreement on or before the
Effective Date, and the execution of an employment agreement between Brian
Kawamura and the Company, the Company agrees to employ Mitola as its Chief
Executive Officer to render such services as would be customary for a chief
executive officer including hiring and termination of the employment of senior
management and to render such other services and discharge such other
responsibilities as the board of directors of the Company may, from time to
time, stipulate and which shall not be inconsistent with the position of Chief
Executive Officer (CEO) and consistent with the organizational chart attached as
Exhibit A hereto. The Company will elect Mitola to the Board of Directors of the
Company and agrees to increase the number of its board of directors to at least
seven members. At each annual meeting of the stockholders at which Mitola's term
of office as a director expires, the Company and its Board of Directors shall
cause Mitola to be nominated for reelection, unless he is not employed by the
Company at the time of any such election.
Section 2. PERFORMANCE. Mitola accepts the employment
described in Section 1 of this Agreement and agrees to concentrate all of his
time and efforts to the performance of the services described therein, including
the performance of such other services and responsibilities as the board of
directors of the Company, may from time to time stipulate and which shall not be
inconsistent with the position of Chief Executive Officer.
Without limiting the generality of the foregoing Mitola
ordinarily shall devote not less than five days per week (except for vacations
and regular business holidays observed by the Company) on a full time basis,
during normal business hours Monday through Friday. Mitola further agrees that
when the performance of his duties reasonably requires, he shall be present on
the Company's premises (if necessary) or engaged in service to or on behalf of
the Company at such times except during vacations, regular business holidays or
weekends.
Notwithstanding the foregoing, the Company agrees that Mitola
has the right to participate in outside activities, including but not limited to
serving on Boards of Directors for civic, charitable or business organizations,
in a paid or unpaid capacity, so long as such activities are not in direct
conflict with Mitola's obligations as outlined herein. Further, Mitola will have
reasonable, limited use of Company resources and his own salaried time, to
pursue such activities so long as such activities do not unreasonably interfere
with his obligations as CEO. When
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reasonable and consistent with the objectives of the Company, the Company agrees
to provide modest financial support to those organizations in which Mr. Mitola
becomes involved, subject to approval of the Chairman, CEO and President. Upon
request from the Company, Mitola agrees to furnish the Company with a list of
outside organizations in which he is involved, an explanation of said
involvement and the amount of remuneration received or expected to be received
for said involvement.
Section 3. TERM. The term of employment under this Agreement
(the "Employment Period") shall commence on January 3, 2000, or earlier if
agreed to by the parties hereto and shall terminate on the 31st day of December,
2002, unless earlier terminated pursuant to the termination provisions set forth
herein. The parties hereby agree and acknowledge that between the Effective Date
and commencement of the Employment Period, Mitola shall discharge certain
responsibilities on behalf of his current employer, and in so doing, Mitola
shall not be in breach of any provision of this Agreement. Notwithstanding
anything to the contrary herein, the parties acknowledge and agree that Mitola's
employment may be terminated only for Due Cause as more fully set forth herein.
At the end of the Employment Period, the continuation of Mitola's employment
with the Company shall be at the will of the Company and Mitola on terms and
conditions agreed to by the Company and Mitola, and there shall be no obligation
on the part of the Company or Mitola to continue such employment, provided;
however, that no later than June 30, 2002, the Company and Mitola shall each
provide reasonably specific notice to the other party of their respective
intentions in regard to continuation of Mitola's employment subsequent to the
conclusion of the Employment Period.
Section 4. COMPENSATION.
4.1. SALARY. For all the services to be rendered by Mitola
hereunder, the Company agrees to pay, during the Employment Period, a salary
at the annual rate of Three Hundred Fifty Thousand ($350,000) payable in
equal monthly installments at the end of each month during the term of this
Agreement, beginning no later than the 1st day of January, 2000, or at such
other intervals, not less frequently than once per month, as may be
consistent with the Company's normal compensation schedule. Mitola's salary
may be subject to annual review by the board of directors, which may not be
reduced from the prior year's salary.
4.2. BONUS. Mitola shall be entitled to a bonus on December
31 of each year, payable by February 15th the year after, up to forty percent
(40%) of his annual salary, provided the Company meets or exceeds the terms
of an annual business plan, with bonus parameters to be established as part
of the plan, to be mutually agreed upon between CEO, the President of the
Company and the Board of Directors of the Company.
4.3. STOCK OPTIONS. The Company hereby agrees to grant to
Mitola an option to purchase shares of the common stock of the Company
subject to and in accordance with the following ( the "Option"):
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(a) OPTIONS. The Company hereby grants options to Mitola
to purchase 1,000,000 shares of the Company's common
stock, subject to the vesting provisions described
below:
(i) On December 31, 2000, unless Mitola has been
terminated for Due Cause prior thereto,
Mitola shall become immediately vested in
options to purchase 333,334 of the issued
and outstanding shares of common stock of
the Company for Seven dollars ($7.00) per
share.
(ii) On December 31, 2001, unless Mitola has been
terminated for Due Cause prior thereto,
Mitola shall become immediately vested in
options to purchase 333,333 of the issued
and outstanding shares of common stock of
the Company for Seven dollars ($7.00) per
share.
(iii) On December 31, 2002, unless Mitola has been
terminated for Due Cause prior thereto,
Mitola shall become immediately vested in
options to purchase 333,333 of the issued
and outstanding shares of common stock of
the Company for Seven dollars ($7.00) per
share.
(b) REGISTRATION RIGHTS. Mitola shall have piggy-back
registration rights for all shares of stock obtained through the
exercise of any options described in Section 4.3(a) above for any
registration statement the Company files with the Securities and
Exchange Commission registering shares of the Company's common stock
that are similar to the shares to be issued hereunder. The Company will
use its best efforts to file an S-8 registration statement covering the
shares underlying the Options when Company becomes eligible to file an
S-8 Registration Statement. The Company will bear the cost of
registering the shares pursuant to this section.
(c) SALE OF ASSETS: CHANGE IN CONTROL. For all purposes
of this Agreement, a Change of Control shall be deemed to have
occurred when (i) the Company is merged or consolidated with another
corporation which is not then controlled by the Company, or (ii) a
majority of the Company's assets are sold or otherwise transferred
to another such corporation or to a partnership, firm or one or more
individuals not so controlled, or (iii) a majority of the members of
the Company's Board of Directors consists of persons who were not
nominated for election as directors by or on behalf of the Board of
Directors, or (iv) a single person, or a group of persons acting in
concert, obtains the power to cause the nominees of such person or
group to be elected as a majority of the directors of the Company.
Upon the occurrence of a Change of Control the options described in
Section 4.3(a) above shall be automatically and immediately vested
and be exercisable by Mitola subject to the terms of this Agreement.
(d) TERMINATION OPTIONS. The term of the Option hereunder
shall be until December 31, 2009. Notwithstanding any other provision
of this Agreement, upon any of
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the Options described above being fully vested, such fully vested
Options may not be terminated unless Options terminate at December 31,
2009 without being exercised. If Mitola is terminated without Due
Cause or for death or disability, the vested Options shall survive
under the terms of this Agreement and the balance of the Options shall
vest in accordance with Section 4.3(a) of this Agreement.
4.4. INSURANCE. During the Employment Period, the Company
shall apply for, procure in Mitola's name and for Mitola's benefit, at the
Company's expense, if Mitola is eligible and qualifies, and subject to the
terms and conditions of the applicable insurance plan, (a) short-term and
permanent disability insurance providing for disability benefits and life
insurance substantially equivalent to the benefit of other executives of the
Company, (b) medical and dental insurance for Mitola and Mitola's family
substantially equivalent to the benefits of other executives of the Company
and (c) officer and director liability insurance, in such amount as may be
determined by the board of directors of the Company or as may be required by
law, and Mitola shall submit to any medical or other examination and execute
and deliver any application or other instrument in writing, reasonably
necessary to effectuate such insurance.
4.5. AUTOMOBILE. Mitola will be entitled to an automobile
allowance of $550.00 per month.
4.6. CELLULAR PHONE. The Company agrees to reimburse Mitola
for all business-related cellular phone calls, subject to the provisions of
Section 5.2.
4.7. OTHER BENEFITS. Except as otherwise specifically provided
herein, during the Employment Period, Mitola shall be eligible for all vacation
and non-wage benefits the Company provides generally for its other executives,
including four weeks paid vacation.
Section 5. BUSINESS EXPENSES.
5.1. REIMBURSEMENT. The Company shall reimburse Mitola for the
reasonable, ordinary, and necessary expenses incurred by him in connection with
the performance of his duties hereunder, including but not limited to, ordinary
and necessary travel expense and entertainment expenses, approved by the
President and the Chief Financial Officer.
5.2. ACCOUNTING. Mitola shall provide the Company with an
accounting of his expenses, which accounting shall clearly reflect which
expenses are reimbursable by the Company, Mitola will provide the Company with
such other supporting documentation and other substantiation of reimbursable
expenses as will conform to Internal Revenue Service or other requirements.
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<PAGE>
Section 6. COVENANTS OF MITOLA.
6.1. CONFIDENTIALITY. During the Employment Period and
following the termination thereof for any reason, Mitola shall not disclose or
make any use of, for his own benefit or for the benefit of a business or entity
other than the Company or any corporation partnership, limited liability company
or other entity, more than 50% of the equity securities or partnership or
membership interests of which are owned directly or indirectly by the Company,
("Subsidiaries") any secret or confidential information, customer lists, and
lists of prospective customers, or any other information of or pertaining to the
Company, its Subsidiaries or their businesses, products, financial affairs,
customers or prospective customers, or services not generally known within the
trade of the Company or its Subsidiaries and which was acquired by him during
his affiliation with the Company or its Subsidiaries unless required by law or
pursuant to a mutual release.
6.2. INVENTIONS AND SECRECY. Except as otherwise provided in
this Section 6.2, Mitola: (a) shall hold in a fiduciary capacity for the benefit
of the Company and its Subsidiaries, all secret or confidential information,
knowledge, or data of the Company, its Subsidiaries or their businesses or
production operations obtained by Mitola during his employment by the Company,
which shall not be generally known to the public or recognized as standard
practice (whether or not developed by Mitola) and shall not, during his
employment by the Company and after the termination of such employment for any
reason, communicate or divulge, any such information, knowledge or data to any
person, firm, or corporation other than the Company or its Subsidiaries, or
persons, firms or corporations designated by the Company; (b) shall promptly
disclose to the Company all inventions ideas, devices, and processes made or
conceived by him alone or jointly with others, from the time of entering the
Company's employ until such employment is terminated and within the one (1) year
period immediately following such termination, relevant or pertinent in any way,
whether directly or indirectly, to the businesses or production operations of
the Company or its Subsidiaries or resulting from or suggested by any work which
he may have done for or at the request of the Company or its Subsidiaries, (c)
shall, at all times during his employment with the Company, assist the Company
and its Subsidiaries in every proper way (entirely at the expense of the
Company) to obtain and develop for the benefit of the Company patents on such
inventions, ideas, devices, and processes, whether or not patented; and (d)
shall do all such acts and execute, acknowledge and deliver all such instruments
as may be necessary or desirable in the opinion of the Company to vest in the
Company, the entire interest in such inventions, ideas, devices, and processes
referred to above.
6.3. COMPETITION FOLLOWING TERMINATION. Within the two (2)
year period immediately following termination of Mitola's employment with the
Company for any reason, Mitola shall not, without the prior written consent of
the Company, which consent may be withheld at the sole discretion of the
Company: (a) engage directly or indirectly, whether as an officer, director,
stockholder (of 10% or more of such entity), partner, majority owner, managerial
employee, creditor, or otherwise with the operation, management, or conduct of
any business which competes with the businesses of the Company or its
Subsidiaries being conducted at the time of such termination within the United
States; (b) solicit, contact, interfere with, or divert any customer served by
the Company or its Subsidiaries, or any prospective customer identified by or on
behalf of the Company or its Subsidiaries if such intention is to divert
business from or compete with the Company, during Mitola's employment with the
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Company or its Subsidiaries; or (c) solicit any person then or previously
employed by the Company or its Subsidiaries to join Mitola, whether as a
partner, agent, employee, or otherwise, in any enterprise engaged in a business
similar to the businesses of the Company or its Subsidiaries being conducted at
the time of such termination.
6.4. ACKNOWLEDGEMENT. Mitola acknowledges that the
restrictions set forth in this Section 6 are reasonable in scope and essential
to the preservation of the businesses and proprietary properties of the Company
and its Subsidiaries and that the enforcement thereof will not in any manner
preclude Mitola, in the event of Mitola's termination of employment with the
Company, from becoming gainfully employed in such manner and to such extent as
to provide a standard of living for himself, the members of his family, and
those dependent upon him of at least the sort and fashion to which he and they
have become accustomed and may expect.
6.5. SEVERABILITY. The covenants of Mitola contained in this
Section 6 shall each be construed as an agreement independent of any other
provision in this Agreement and the existence of any claim or cause of action of
Mitola against the Company or its Subsidiaries, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company or its Subsidiaries of such covenants. The parties hereto expressly
agree and contract that it is not the intention of any party to violate any
public policy, statutory or common law, and that if any sentence, paragraph,
clause, or combination of the same of this Agreement is in violation of the law
of any state where applicable, such sentence, paragraph, clause or combination
of the same shall be void in the jurisdictions where it is unlawful, and the
remainder of such paragraph and this Agreement shall remain binding on the
parties to make the covenants of this Agreement binding only to the extent that
it may be lawfully done under existing applicable laws. In the event that any
part of any covenant of this Agreement is determined by a court of law to be
overly broad thereby making the covenant unenforceable, the parties hereto
agree, and it is their desire, that such court shall substitute a judicially
enforceable limitation in its place, and that as so modified the covenant shall
be binding upon the parties as if originally set forth herein.
Section 7. TERMINATION.
7.1 TERMINATION FOR DUE CAUSE, DEATH OR DISABILITY.
7.1.1 The Employment Period may be terminated only
for the following reasons and upon the terms and conditions set forth
below ("Due Cause"). Company, by a vote, requiring at least 3/4 of the
board of directors ("Termination Vote") may terminate the Employment
Period, effective upon written notice of such termination to Mitola, in
the event of: (a) Intentionally Deleted; (b) material breach by Mitola
of his covenants under this Agreement if unremedied within 15 days
after written notice by the Company; (c) commission by Mitola of theft
or embezzlement of property of the Company or other acts of dishonesty;
(d) commission by Mitola of a crime resulting in material injury to the
businesses, properties or reputations of the Company or its
Subsidiaries or commission of other significant activities materially
harmful to the businesses, properties or reputations of the Company or
its Subsidiaries; (e) commission of an act by Mitola in the
6
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performance of his duties hereunder reasonably determined by a majority
of the board of directors of the Company to amount to gross, willful,
or wanton negligence; (f) willful refusal to perform or substantial
neglect of the duties assigned to Mitola pursuant to Section 1 hereof
if unremedied within 15 days after written notice by the Company; (g)
any significant violation of any statutory or common law duty of
loyalty to the Company or its Subsidiaries. All compensation shall
cease immediately upon termination for Due Cause hereunder except for
accrued and unpaid compensation.
7.1.2 The Employment Period will be terminated upon
the death of Mitola. All compensation shall cease immediately upon
termination for death hereunder except for accrued and unpaid
compensation.
7.1.3 For purposes of Paragraph 7.1(a), Mitola's
employment hereunder will be terminated for Permanent Total Disability,
immediately upon written notice from the Company, if an independent
physician selected jointly by the parties shall have determined that
Mitola has been unable due to illness or a physical or mental
disability, to perform substantially all of the services required
hereunder for a continuous period of 180 days, or for a period
aggregating 180 days in any twelve month period. All compensation shall
cease immediately upon termination for Permanent Total Disability
hereunder except for accrued and unpaid compensation.
7.2 CHANGE OF CONTROL AND TERMINATION OTHER THAN DUE CAUSE.
Mitola's employment shall be deemed terminated for a reason other than Due Cause
by the Board of Directors if a Change of Control occurs. If Mitola's employment
is terminated for a reason other than Due Cause, then the Company shall pay as
severance compensation to Mitola the balance due under the terms of this
Agreement or twelve months compensation, including bonus, whatever is greater,
payable over a twelve month period commencing after the date of the Change of
Control or Mitola's termination without Due Cause as the case may be.
7.3 TERMINATION BY MITOLA. Mitola may terminate the Employment
Period if the Company has breached a material term or condition of this
Agreement which is not cured or remedied within 15 days after the breach,
provided that Mitola's resignation for such breach shall be deemed a termination
by the Company without Due Cause for purposes of the Options vesting schedule in
Section 4.3(a) and the Termination provisions in Section 7.2 of this Agreement.
In the event Mitola terminates the Employment Period for any other reason any
Options not vested shall immediately terminate.
7.4 SURRENDER OF PROPERTIES. Upon termination of Mitola's
employment with the Company, regardless of the cause therefor, Mitola shall
promptly be deemed to have resigned from the Company's Board of Directors and
surrender to the Company or its Subsidiaries all property provided him by the
Company or its Subsidiaries, as applicable, for use in relation to his
employment and in addition, Mitola shall surrender to the Company or its
Subsidiaries, as applicable, any and all sales materials, lists of customers and
prospective customers, price lists, files, patent applications, records, models,
or other materials and information of or pertaining to the Company or its
Subsidiaries or their customers or prospective customers or the products,
businesses, and operations of the Company or its Subsidiaries.
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7.5 SURVIVAL OF COVENANTS. The covenants of Mitola set forth
in Section 6 of this Agreement shall survive the termination of the Employment
Period or termination of this Agreement for Due Cause.
Section 8. GENERAL PROVISIONS.
8.1. NOTICE. Any notice required or permitted hereunder shall
be made in writing (a) either by actual delivery of the notice into the hands of
the party thereunder entitled, or (b) by the mailing of the notice in the United
States mail, certified or registered mail, return receipt requested, all postage
prepaid and addressed to the party to whom the notice is to be given at the
party's respective address set forth below, or such other address as the parties
may from time to time designate by written notice as herein provided.
If to the Company:
Electric City Corp.
1280 Landmeir Road
Elk Grove Village, Illinois 60007
With a copy (which shall not
constitute notice) to:
Kwiatt & Ruben, Ltd.
211 Waukegan Road
Suite 300
Northfield, Illinois 60093
Attn.: Philip E. Ruben
If to CEO:
John Mitola
The notice shall be deemed to be received in case (a) on the date of its actual
receipt by the party entitled thereto and in case (b) on the date of its
mailing.
8.2. AMENDMENT AND WAIVER. No amendment or modification of
this Agreement shall be valid or binding upon: a) the Company unless made in
writing and signed by an officer of the Company, duly authorized by the board of
directors of the Company or; b) Mitola unless made in writing and signed by him.
The waiver by the Company or Mitola of the breach of any Provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach by such party.
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8.3. GOVERNING LAW. The validity and effect of this Agreement
and the rights and obligations of the parties hereto shall be construed and
determined in accordance with the internal law, and not the conflicts law, of
the State of Illinois.
8.4. ENTIRE AGREEMENT. This Agreement contains all of the
terms agreed upon by the parties with respect to the subject matter hereof and
supersedes all prior agreements, arrangements and communications between the
parties dealing with such subject matter, whether oral or written.
8.5. BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the transferees, successors and assigns of the
Company, including any company or corporation with which the Company may merge
or consolidate.
8.6. REMEDIES FOR BREACH. Mitola specifically acknowledges
that his services under this Agreement are unique and extraordinary and that
irreparable injury will result to the Company and its businesses and properties
in the event of a material breach of the terms and conditions of this Agreement
to be performed by him (including, but not limited to, leaving the employment
provided for hereunder except for a termination due to a Change of Control or a
material breach by the Company of this Agreement which is not cured or remedied
within 15 days after the breach). Mitola, therefore, agrees that in the event of
his material breach of any of the terms and conditions of this Agreement to be
performed by him (including, but not limited to leaving the employment provided
for hereunder except for a termination due to a Change of Control or a material
breach by the Company of this Agreement which is not cured or remedied within 15
days after the breach), the Company shall be entitled, if it so elects, to
institute and prosecute proceedings in any court of competent jurisdiction,
either at law or in equity, to enjoin him from performing services for any other
person, firm or corporation in violation of any of the terms of this Agreement,
and to obtain damages for any breach of this Agreement. In the event of the
material breach by the Company of any of the terms and conditions of this
Agreement to be performed by it, Mitola shall have all remedies, legal or
equitable, available to him under the laws of the State of Illinois. The
remedies provided herein shall be cumulative and in addition to any and all
other remedies which either party may have at law or in equity.
8.7. COSTS OF ENFORCEMENT. In the event of any suit or
proceeding seeking to enforce the terms, covenants, or conditions of this
Agreement, the prevailing party shall, in addition to all other remedies and
relief that may be available under this Agreement or applicable law, recover his
or its reasonable attorneys' fees and costs as shall be determined and awarded
by the court.
8.8. HEADINGS. Numbers and titles to paragraphs hereof are for
information purposes only and, where inconsistent with the text, are to be
disregarded.
8.9. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
when taken together, shall be and constitute one and the same instrument.
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8.10. PUBLIC ANNOUNCEMENTS. The parties hereto agree no
announcement shall be made, unless required by law and with legal counsel's
advice, as it relates to this Agreement or the employment of Mitola with the
Company without the joint written approval of Mitola and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the date first set forth above.
ELECTRIC CITY CORP.
By: /ss/ Joseph Marino
-------------------------------------
Its: Joseph Marino, Chairman of the Board
By: /ss/ Brian Kawamura
-------------------------------------
Its: Brian Kawamura, President and Chief Operating
Officer
/ss/ John Mitola
------------------------------------
JOHN MITOLA
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement"), dated as of the
19th day of November, 1999 (the "Effective Date"), is made by and among Brian
Kawamura ("Kawamura" or "Employee") and Electric City Corp., a Delaware
corporation (the "Company").
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Kawamura do hereby
agree as follows:
Section 1. EMPLOYMENT AND DUTIES. On the terms and subject to
the conditions set forth in this Agreement, and subject to the ratification of
the board of directors of the Company of this Agreement on or before the
Effective Date, and the execution of an employment agreement between John Mitola
and the Company, the Company agrees to employ Kawamura as its President and
Chief Operating Officer to render such services as would be customary for a
president and chief operating officer including hiring senior management and to
render such other services and discharge such other responsibilities as the
board of directors of the Company may, from time to time, stipulate and which
shall not be inconsistent with the position of President and Chief Operating
Officer and consistent with the organizational chart attached as Exhibit A
hereto. The Company will elect Kawamura to the Board of Directors of the Company
and agrees to increase the number of its board of directors to at least seven
members. At each annual meeting of the stockholders at which Kawamura's term of
office as a director expires, the Company and its Board of Directors shall cause
Kawamura to be nominated for reelection, unless he is not employed by the
Company at the time of any such election.
Section 2. PERFORMANCE. Kawamura accepts the employment
described in Section 1 of this Agreement and agrees to concentrate all of his
time and efforts to the performance of the services described therein, including
the performance of such other services and responsibilities as the board of
directors of the Company, may from time to time stipulate and which shall not be
inconsistent with the position of President and Chief Operating Officer.
Without limiting the generality of the foregoing Kawamura
ordinarily shall devote not less than five days per week (except for vacations
and regular business holidays observed by the Company) on a full time basis,
during normal business hours Monday through Friday. Kawamura further agrees that
when the performance of his duties reasonably requires, he shall be present on
the Company's premises (if necessary) or engaged in service to or on behalf of
the Company at such times except during vacations, regular business holidays or
weekends.
Notwithstanding the foregoing, the Company agrees that
Kawamura has the right to participate in outside activities, including but not
limited to serving on Boards of Directors for civic, charitable or business
organizations, in a paid or unpaid capacity, so long as such activities are not
in direct conflict with Kawamura's obligations as outlined herein. Further,
Kawamura will have reasonable, limited use of Company resources and his own
salaried time, to pursue
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such activities so long as such activities do not unreasonably interfere with
his obligations as President and Chief Operation Officer. When reasonable and
consistent with the objectives of the Company, the Company agrees to provide
modest financial support to those organizations in which Mr. Kawamura becomes
involved, subject to approval of the Chairman, CEO and President. Upon request
from the Company, Kawamura agrees to furnish the Company with a list of outside
organizations in which he is involved, an explanation of said involvement and
the amount of remuneration received or expected to be received for said
involvement.
Section 3. TERM. The term of employment under this Agreement
(the "Employment Period") shall commence on January 3, 2000, or earlier if
agreed to by the parties hereto, and shall terminate on the 31st day of
December, 2002, unless earlier terminated pursuant to the termination provisions
set forth herein. The parties hereby agree and acknowledge that between the
Effective Date and commencement of the Employment Period, Kawamura shall
discharge certain responsibilities on behalf of his current employer, and in so
doing, Kawamura shall not be in breach of any provision of this Agreement.
Notwithstanding anything to the contrary herein, the parties acknowledge and
agree that Kawamura's employment may be terminated only for Due Cause as more
fully set forth herein. At the end of the Employment Period, the continuation of
Kawamura's employment with the Company shall be at the will of the Company and
Kawamura on terms and conditions agreed to by the Company and Kawamura, and
there shall be no obligation on the part of the Company or Kawamura to continue
such employment, provided; however, that no later than June 30, 2002, the
Company and Kawamura shall each provide reasonably specific notice to the other
party of their respective intentions in regard to continuation of Kawamura's
employment subsequent to the conclusion of the Employment Period.
Section 4. COMPENSATION.
4.1. SALARY. For all the services to be rendered by Kawamura
hereunder, the Company agrees to pay, during the Employment Period, a salary at
the annual rate of Three Hundred Fifty Thousand ($350,000) payable in equal
monthly installments at the end of each month during the term of this Agreement,
beginning no later than the 1st day of January, 2000, or at such other
intervals, not less frequently than once per month, as may be consistent with
the Company's normal compensation schedule. Kawamura's salary may be subject to
annual review by the board of directors, which may not be reduced from the prior
year's salary.
4.2. BONUS. Kawamura shall be entitled to a bonus on December
31 of each year, payable by February 15th the year after, up to forty percent
(40%) of his annual salary, provided the Company meets or exceeds the terms of
an annual business plan, with bonus parameters to be established as part of the
plan, to be mutually agreed upon between the CEO, the President of the Company
and the Board of Directors of the Company.
4.3. STOCK OPTIONS. The Company hereby agrees to grant to
Kawamura an option to purchase shares of the common stock of the Company subject
to and in accordance with the following ( the "Option"):
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(a) OPTIONS. The Company hereby grants options to
Kawamura to purchase 1,500,000 shares of the
Company's common stock, subject to the vesting
provisions described below:
(i) On December 31, 2000, unless Kawamura has
been terminated for Due Cause prior thereto,
Kawamura shall become immediately vested in
options to purchase 500,000 of the issued
and outstanding shares of common stock of
the Company for Seven dollars ($7.00) per
share.
(ii) On December 31, 2001, unless Kawamura has
been terminated for Due Cause prior thereto,
Kawamura shall become immediately vested in
options to purchase 500,000 of the issued
and outstanding shares of common stock of
the Company for Seven dollars ($7.00) per
share.
(iii) On December 31, 2002, unless Kawamura has
been terminated for Due Cause prior thereto,
Kawamura shall become immediately vested in
options to purchase 500,000 of the issued
and outstanding shares of common stock of
the Company for Seven dollars ($7.00) per
share.
(b) REGISTRATION RIGHTS. Kawamura shall have piggy-back
registration rights for all shares of stock obtained through the
exercise of any options described in Section 4.3(a) above for any
registration statement the Company files with the Securities and
Exchange Commission registering shares of the Company's common stock
that are similar to the shares to be issued hereunder. The Company
will use its best efforts to file an S-8 registration statement
covering the shares underlying the Options when Company becomes
eligible to file an S-8 Registration Statement. The Company will
bear the cost of registering the shares pursuant to this section.
(c) SALE OF ASSETS: CHANGE IN CONTROL. For all purposes
of this Agreement, a Change of Control shall be deemed to have
occurred when (i) the Company is merged or consolidated with another
corporation which is not then controlled by the Company, or (ii) a
majority of the Company's assets are sold or otherwise transferred
to another such corporation or to a partnership, firm or one or more
individuals not so controlled, or (iii) a majority of the members of
the Company's Board of Directors consists of persons who were not
nominated for election as directors by or on behalf of the Board of
Directors, or (iv) a single person, or a group of persons acting in
concert, obtains the power to cause the nominees of such person or
group to be elected as a majority of the directors of the Company.
Upon the occurrence of a Change in Control, the options described in
Section 4.3(a) above shall be automatically and immediately vested
and be exercisable by Kawamura subject to the terms of this
Agreement.
(d) TERMINATION OPTIONS. The term of the Option
hereunder shall be until December 31, 2009. Notwithstanding any
other provision of this Agreement, upon any of
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the Options described above being fully vested, such fully vested
Options may not be terminated unless Options terminate at December 31,
2009 without being exercised. If Kawamura is terminated without Due
Cause or for death or disability, the vested Options shall survive
under the terms of this Agreement and the balance of the Options shall
vest in accordance with Section 4.3(a) of this Agreement.
4.4. INSURANCE. During the Employment Period, the Company
shall apply for and procure in Kawamura's name and for Kawamura's benefit, if
Kawamura is eligible and qualifies, and subject to the terms and conditions of
the applicable insurance plan, (a) short-term and permanent disability insurance
providing for disability benefits and life insurance substantially equivalent to
the benefit of other executives of the Company, (b) medical and dental insurance
for Kawamura and Kawamura's family substantially equivalent to the benefits of
other executives of the Company and (c) officer and director liability
insurance, in such amount as may be determined by the board of directors of the
Company or as may be required by law, and Kawamura shall submit to any medical
or other examination and execute and deliver any application or other instrument
in writing, reasonably necessary to effectuate such insurance.
4.5. AUTOMOBILE. Kawamura will be entitled to an automobile
allowance of $550.00 per month.
4.6. CELLULAR PHONE. The Company agrees to reimburse Kawamura
for all business-related cellular phone calls, subject to the provisions of
Section 5.2.
4.7. OTHER BENEFITS. Except as otherwise specifically provided
herein, during the Employment Period, Kawamura shall be eligible for all
vacation and non-wage benefits the Company provides generally for its other
executives, including four weeks paid vacation.
Section 5. BUSINESS EXPENSES.
5.1. REIMBURSEMENT. The Company shall reimburse Kawamura for
the reasonable, ordinary, and necessary expenses incurred by him in connection
with the performance of his duties hereunder, including but not limited to,
ordinary and necessary travel expense and entertainment expenses, approved by
the Chief Executive Officer and the Chief Financial Officer.
5.2. ACCOUNTING. Kawamura shall provide the Company with an
accounting of his expenses, which accounting shall clearly reflect which
expenses are reimbursable by the Company, Kawamura will provide the Company with
such other supporting documentation and other substantiation of reimbursable
expenses as will conform to Internal Revenue Service or other requirements.
Section 6. COVENANTS OF KAWAMURA.
6.1. CONFIDENTIALITY. During the Employment Period and
following the termination thereof for any reason, Kawamura shall not disclose or
make any use of, for his own
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benefit or for the benefit of a business or entity other than the Company or any
corporation partnership, limited liability company or other entity, more than
50% of the equity securities or partnership or membership interests of which are
owned directly or indirectly by the Company, ("Subsidiaries") any secret or
confidential information, customer lists, and lists of prospective customers, or
any other information of or pertaining to the Company, its Subsidiaries or their
businesses, products, financial affairs, customers or prospective customers, or
services not generally known within the trade of the Company or its Subsidiaries
and which was acquired by him during his affiliation with the Company or its
Subsidiaries unless required by law or pursuant to a mutual release.
6.2. INVENTIONS AND SECRECY. Except as otherwise provided in
this Section 6.2, Kawamura: (a) shall hold in a fiduciary capacity for the
benefit of the Company and its Subsidiaries, all secret or confidential
information, knowledge, or data of the Company, its Subsidiaries or their
businesses or production operations obtained by Kawamura during his employment
by the Company, which shall not be generally known to the public or recognized
as standard practice (whether or not developed by Kawamura) and shall not,
during his employment by the Company and after the termination of such
employment for any reason, communicate or divulge, any such information,
knowledge or data to any person, firm, or corporation other than the Company or
its Subsidiaries, or persons, firms or corporations designated by the Company;
(b) shall promptly disclose to the Company all inventions ideas, devices, and
processes made or conceived by him alone or jointly with others, from the time
of entering the Company's employ until such employment is terminated and within
the one (1) year period immediately following such termination, relevant or
pertinent in any way, whether directly or indirectly, to the businesses or
production operations of the Company or its Subsidiaries or resulting from or
suggested by any work which he may have done for or at the request of the
Company or its Subsidiaries, (c) shall, at all times during his employment with
the Company, assist the Company and its Subsidiaries in every proper way
(entirely at the expense of the Company) to obtain and develop for the benefit
of the Company patents on such inventions, ideas, devices, and processes,
whether or not patented; and (d) shall do all such acts and execute, acknowledge
and deliver all such instruments as may be necessary or desirable in the opinion
of the Company to vest in the Company, the entire interest in such inventions,
ideas, devices, and processes referred to above.
6.3. COMPETITION FOLLOWING TERMINATION. Within the two (2)
year period immediately following termination of Kawamura's employment with the
Company for any reason, Kawamura shall not, without the prior written consent of
the Company, which consent may be withheld at the sole discretion of the
Company: (a) engage directly or indirectly, whether as an officer, director,
stockholder (of 10% or more of such entity), partner, majority owner, managerial
employee, creditor, or otherwise with the operation, management, or conduct of
any business which competes with the businesses of the Company or its
Subsidiaries being conducted at the time of such termination within the United
States; (b) solicit, contact, interfere with, or divert any customer served by
the Company or its Subsidiaries, or any prospective customer identified by or on
behalf of the Company or its Subsidiaries if such intention is to divert
business from or compete with the Company, during Kawamura's employment with the
Company or its Subsidiaries; or (c) solicit any person then or previously
employed by the Company or its Subsidiaries to join Kawamura, whether as a
partner, agent, employee, or
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otherwise, in any enterprise engaged in a business similar to the businesses of
the Company or its Subsidiaries being conducted at the time of such termination.
6.4. ACKNOWLEDGEMENT. Kawamura acknowledges that the
restrictions set forth in this Section 6 are reasonable in scope and essential
to the preservation of the businesses and proprietary properties of the Company
and its Subsidiaries and that the enforcement thereof will not in any manner
preclude Kawamura, in the event of Kawamura's termination of employment with the
Company, from becoming gainfully employed in such manner and to such extent as
to provide a standard of living for himself, the members of his family, and
those dependent upon him of at least the sort and fashion to which he and they
have become accustomed and may expect.
6.5. SEVERABILITY. The covenants of Kawamura contained in this
Section 6 shall each be construed as an agreement independent of any other
provision in this Agreement and the existence of any claim or cause of action of
Kawamura against the Company or its Subsidiaries, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company or its Subsidiaries of such covenants. The parties hereto expressly
agree and contract that it is not the intention of any party to violate any
public policy, statutory or common law, and that if any sentence, paragraph,
clause, or combination of the same of this Agreement is in violation of the law
of any state where applicable, such sentence, paragraph, clause or combination
of the same shall be void in the jurisdictions where it is unlawful, and the
remainder of such paragraph and this Agreement shall remain binding on the
parties to make the covenants of this Agreement binding only to the extent that
it may be lawfully done under existing applicable laws. In the event that any
part of any covenant of this Agreement is determined by a court of law to be
overly broad thereby making the covenant unenforceable, the parties hereto
agree, and it is their desire, that such court shall substitute a judicially
enforceable limitation in its place, and that as so modified the covenant shall
be binding upon the parties as if originally set forth herein.
Section 7. TERMINATION.
7.1 TERMINATION FOR DUE CAUSE, DEATH OR DISABILITY.
7.1.1 The Employment Period may be terminated only
for the following reasons and upon the terms and conditions set forth
below ("Due Cause"). Company, by a vote, requiring at least 3/4 of the
board of directors ("Termination Vote") may terminate the Employment
Period, effective upon written notice of such termination to Kawamura,
in the event of: (a) Intentionally Deleted; (b) material breach by
Kawamura of his covenants under this Agreement if unremedied within 15
days after written notice by the Company; (c) commission by Kawamura of
theft or embezzlement of property of the Company or other acts of
dishonesty; (d) commission by Kawamura of a crime resulting in material
injury to the businesses, properties or reputations of the Company or
its Subsidiaries or commission of other significant activities
materially harmful to the businesses, properties or reputations of the
Company or its Subsidiaries; (e) commission of an act by Kawamura in
the performance of his duties hereunder reasonably determined
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by a majority of the board of directors of the Company to amount to
gross, willful, or wanton negligence; (f) willful refusal to perform or
substantial neglect of the duties assigned to Kawamura pursuant to
Section 1 hereof if unremedied within 15 days after written notice by
the Company; (g) any significant violation of any statutory or common
law duty of loyalty to the Company or its Subsidiaries. All
compensation shall cease immediately upon termination for Due Cause
hereunder except for accrued and unpaid compensation.
7.1.2 The Employment Period will be terminated upon
the death of Kawamura. All compensation shall cease immediately upon
termination for death hereunder except for accrued and unpaid
compensation.
7.1.3 For purposes of Paragraph 7.1(a), Kawamura's
employment hereunder will be terminated for Permanent Total Disability,
immediately upon written notice from the Company, if an independent
physician selected jointly by the parties shall have determined that
Kawamura has been unable due to illness or a physical or mental
disability, to perform substantially all of the services required
hereunder for a continuous period of 180 days, or for a period
aggregating 180 days in any twelve month period. All compensation shall
cease immediately upon termination for Permanent Total Disability
hereunder except for accrued and unpaid compensation.
7.2 CHANGE OF CONTROL AND TERMINATION OTHER THAN DUE CAUSE.
Kawamura's employment shall be deemed terminated for a reason other than Due
Cause by the Board of Directors if a Change of Control occurs. If Kawamura's
employment is terminated for a reason other than Due Cause, then the Company
shall pay as severance compensation to Kawamura the balance due under the terms
of this Agreement or twelve months compensation, including bonus, whatever is
greater, payable over a twelve month period commencing after the date of the
Change of Control or Kawamura's termination without Due Cause as the case may
be.
7.3 TERMINATION BY KAWAMURA. Kawamura may terminate the
Employment Period if the Company has breached a material term or condition of
this Agreement which is not cured or remedied within 15 days after the breach,
provided that Kawamura's resignation for such breach shall be deemed a
termination by the Company without Due Cause for purposes of the Options vesting
schedule in Section 4.3(a) and the Termination provisions in Section 7.2 of this
Agreement. In the event Kawamura terminates the Employment Period for any other
reason any Options not vested shall immediately terminate.
7.4 SURRENDER OF PROPERTIES. Upon termination of Kawamura's
employment with the Company, regardless of the cause therefor, Kawamura shall
promptly be deemed to have resigned from the Company's Board of Directors and
surrender to the Company or its Subsidiaries all property provided him by the
Company or its Subsidiaries, as applicable, for use in relation to his
employment and in addition, Kawamura shall surrender to the Company or its
Subsidiaries, as applicable, any and all sales materials, lists of customers and
prospective customers, price lists, files, patent applications, records, models,
or other materials and information of or pertaining to the Company or its
Subsidiaries or their customers or prospective customers or the products,
businesses, and operations of the Company or its Subsidiaries.
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7.5 SURVIVAL OF COVENANTS. The covenants of Kawamura set forth
in Section 6 of this Agreement shall survive the termination of the Employment
Period or termination of this Agreement for Due Cause.
Section 8. GENERAL PROVISIONS.
8.1. NOTICE. Any notice required or permitted hereunder shall
be made in writing (a) either by actual delivery of the notice into the hands of
the party thereunder entitled, or (b) by the mailing of the notice in the United
States mail, certified or registered mail, return receipt requested, all postage
prepaid and addressed to the party to whom the notice is to be given at the
party's respective address set forth below, or such other address as the parties
may from time to time designate by written notice as herein provided.
If to the Company:
Electric City Corp.
1280 Landmeir Road
Elk Grove Village, Illinois 60007
With a copy (which shall
not constitute notice) to:
Kwiatt & Ruben, Ltd.
211 Waukegan Road
Suite 300
Northfield, Illinois 60093
Attn.: Philip E. Ruben
If to President:
Brian Kawamura
The notice shall be deemed to be received in case (a) on the date of its actual
receipt by the party entitled thereto and in case (b) on the date of its
mailing.
8.2. AMENDMENT AND WAIVER. No amendment or modification of
this Agreement shall be valid or binding upon: a) the Company unless made in
writing and signed by an officer of the Company, duly authorized by the board of
directors of the Company or; b) Kawamura unless made in writing and signed by
him. The waiver by the Company or Kawamura of the breach of any Provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any subsequent breach by such party.
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8.3. GOVERNING LAW. The validity and effect of this Agreement
and the rights and obligations of the parties hereto shall be construed and
determined in accordance with the internal law, and not the conflicts law, of
the State of Illinois.
8.4. ENTIRE AGREEMENT. This Agreement contains all of the
terms agreed upon by the parties with respect to the subject matter hereof and
supersedes all prior agreements, arrangements and communications between the
parties dealing with such subject matter, whether oral or written.
8.5. BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the transferees, successors and assigns of the
Company, including any company or corporation with which the Company may merge
or consolidate.
8.6. REMEDIES FOR BREACH. Kawamura specifically acknowledges
that his services under this Agreement are unique and extraordinary and that
irreparable injury will result to the Company and its businesses and properties
in the event of a material breach of the terms and conditions of this Agreement
to be performed by him (including, but not limited to, leaving the employment
provided for hereunder except for a termination due to a Change of Control or a
material breach by the Company of this Agreement). Kawamura, therefore, agrees
that in the event of his material breach of any of the terms and conditions of
this Agreement to be performed by him (including, but not limited to leaving the
employment provided for hereunder except for a termination due to a Change of
Control or a material breach by the Company of this Agreement which is not cured
or remedied within 15 days after the breach), the Company shall be entitled, if
it so elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either at law or in equity, to enjoin him from performing services
for any other person, firm or corporation in violation of any of the terms of
this Agreement, and to obtain damages for any breach of this Agreement. In the
event of the material breach by the Company of any of the terms and conditions
of this Agreement to be performed by it, Kawamura shall have all remedies, legal
or equitable, available to him under the laws of the State of Illinois. The
remedies provided herein shall be cumulative and in addition to any and all
other remedies which either party may have at law or in equity.
8.7. COSTS OF ENFORCEMENT. In the event of any suit or
proceeding seeking to enforce the terms, covenants, or conditions of this
Agreement, the prevailing party shall, in addition to all other remedies and
relief that may be available under this Agreement or applicable law, recover his
or its reasonable attorneys' fees and costs as shall be determined and awarded
by the court.
8.8. HEADINGS. Numbers and titles to paragraphs hereof are for
information purposes only and, where inconsistent with the text, are to be
disregarded.
8.9. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which when taken together, shall be and constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the date first set forth above.
ELECTRIC CITY CORP.
By: /ss/ Joseph Marino
-------------------------------------
Its: Joseph Marino, Chairman of the Board
By: /ss/ John Mitola
-------------------------------------
Its: John Mitola, Chief Executive Officer
/ss/ Brian Kawamura
-----------------------------------------
BRIAN KAWAMURA
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement"), dated as of the
19th day of November, 1999 (the "Effective Date"), is made by and among Michael
Pokora ("Pokora" or "Employee") and Electric City Corp., a Delaware corporation
(the "Company").
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Pokora do hereby
agree as follows:
Section 1. EMPLOYMENT AND DUTIES. On the terms and subject to
the conditions set forth in this Agreement, and subject to the ratification of
the board of directors of the Company on or before the Effective Date, the
Company agrees to employ Pokora as its Executive Vice-President of Sales and
Operations to render such services as would be customary for a Executive
Vice-President of Sales and Operations and to render such other services and
discharge such other responsibilities as the board of directors of the Company
may, from time to time, stipulate and which shall not be inconsistent with the
position of Executive Vice-President of Sales and Operations and consistent with
the organizational chart attached as Exhibit A hereto.
Section 2. PERFORMANCE. Pokora accepts the employment
described in Section 1 of this Agreement and agrees to concentrate all of his
time and efforts to the performance of the services described therein, including
the performance of such other services and responsibilities as the board of
directors of the Company, may from time to time stipulate and which shall not be
inconsistent with the position of Executive Vice-President of Sales and
Operations.
Without limiting the generality of the foregoing Pokora
ordinarily shall devote not less than five days per week (except for vacations
and regular business holidays observed by the Company) on a full time basis,
during normal business hours Monday through Friday. Pokora further agrees that
when the performance of his duties reasonably requires, he shall be present on
the Company's premises (if necessary) or engaged in service to or on behalf of
the Company at such times except during vacations, regular business holidays or
weekends.
Notwithstanding the foregoing, the Company agrees that Pokora
has the right to participate in outside activities, including but not limited to
serving on Boards of Directors for civic, charitable or business organizations,
in a paid or unpaid capacity, so long as such activities are not in direct
conflict with Pokora's obligations as outlined herein. Further, Pokora will have
reasonable, limited use of Company resources and his own salaried time, to
pursue such activities so long as such activities do not unreasonably interfere
with his obligations as Executive Vice-President of Sales and Operations. When
reasonable and consistent with the objectives of the Company, the Company agrees
to provide modest financial support to those organizations in which Mr. Pokora
becomes involved, subject to approval of the Chairman, CEO and President. Upon
request from the Company, Pokora agrees to furnish the Company with a list of
outside organizations in which he is involved, an explanation of said
involvement and the amount of remuneration received or expected to be received
for said involvement.
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Section 3. TERM. The term of employment under this Agreement
(the "Employment Period") shall commence on January 3, 2000 or earlier if agreed
to by the Parties hereto, and shall terminate on the 31st day of December, 2002,
unless earlier terminated pursuant to the termination provisions set forth
herein. The parties hereby agree and acknowledge that between the Effective Date
and commencement of the Employment Period, Kawamura shall discharge certain
responsibilities on behalf of his current employer, and in so doing, Kawamura
shall not be in breach of any provision of this Agreement. Notwithstanding
anything to the contrary herein, the parties acknowledge and agree that Pokora's
employment may be terminated only for Due Cause as more fully set forth herein.
At the end of the Employment Period, the continuation of Pokora's employment
with the Company shall be at the will of the Company and Pokora on terms and
conditions agreed to by the Company and Pokora, and there shall be no obligation
on the part of the Company or Pokora to continue such employment, provided;
however, that no later than June 30, 2002, the Company and Pokora shall each
provide reasonably specific notice to the other party of their respective
intentions in regard to continuation of Pokora's employment subsequent to the
conclusion of the Employment Period.
Section 4. COMPENSATION.
4.1. SALARY. For all the services to be rendered by Pokora
hereunder, the Company agrees to pay, during the Employment Period, a salary at
the annual rate of Two Hundred Fifty Thousand ($250,000) payable in equal
monthly installments at the end of each month during the term of this Agreement,
beginning no later than the 1st day of January, 2000, or at such other
intervals, not less frequently than once per month, as may be consistent with
the Company's normal compensation schedule. Pokora's salary may be subject to
annual review by the board of directors, which may not be reduced from the prior
year's salary.
4.2. BONUS. Pokora shall be entitled to a bonus on December 31
of each year, payable by February 15th the year after, up to forty percent (40%)
of his annual salary, provided the Company meets or exceeds the terms of an
annual business plan, with bonus parameter to be established as part of the
plan, to be mutually agreed upon between the Chief Executive Officer, the
President of the Company and the Board of Directors of the Company.
4.3. STOCK OPTIONS. The Company hereby agrees to grant to
Pokora an option to purchase shares of the common stock of the Company subject
to and in accordance with the following ( the "Option"):
(a) OPTIONS. The Company hereby grants options to Pokora
to purchase 500,000 shares of the Company's common
stock, subject to the vesting provisions described
below:
(i) On December 31, 2000, unless Pokora has been
terminated for Due Cause prior thereto,
Pokora shall become immediately vested in
options to purchase 166,667 of the issued
and outstanding shares of
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common stock of the Company for Seven
dollars ($7.00) per share.
(ii) On December 31, 2001, unless Pokora has been
terminated for Due Cause prior thereto,
Pokora shall become immediately vested in
options to purchase 166,666 of the issued
and outstanding shares of common stock of
the Company for Seven dollars ($7.00) per
share.
(iii) On December 31, 2002, unless Pokora has been
terminated for Due Cause prior thereto,
Pokora shall become immediately vested in
options to purchase 166,666 of the issued
and outstanding shares of common stock of
the Company for Seven dollars ($7.00) per
share.
(b) REGISTRATION RIGHTS. Pokora shall have piggy-back
registration rights for all shares of stock obtained through the
exercise of any options described in Section 4.3(a) above for any
registration statement the Company files with the Securities and
Exchange Commission registering shares of the Company's common stock
that are similar to the shares to be issued hereunder. The Company will
use its best efforts to file an S-8 registration statement covering the
shares underlying the Options when Company becomes eligible to file an
S-8 Registration Statement. The Company will bear the cost of
registering the shares pursuant to this section.
(c) SALE OF ASSETS: CHANGE IN CONTROL. For all purposes of
this Agreement, a Change of Control shall be deemed to have occurred
when (i) the Company is merged or consolidated with another corporation
which is not then controlled by the Company, or (ii) a majority of the
Company's assets are sold or otherwise transferred to another such
corporation or to a partnership, firm or one or more individuals not so
controlled, or (iii) a majority of the members of the Company's Board
of Directors consists of persons who were not nominated for election as
directors by or on behalf of the Board of Directors, or (iv) a single
person, or a group of persons acting in concert, obtains the power to
cause the nominees of such person or group to be elected as a majority
of the directors of the Company. Upon the occurrence of a Change of
Control, the Options described in Section 4.3(a) above shall be
automatically and immediately vested and be exercisable by Pokora
subject to the terms of this Agreement.
(d) TERMINATION OPTIONS. The term of the Option hereunder
shall be until December 31, 2009. Notwithstanding any other provision
of this Agreement, upon any of the Options described above being fully
vested, such fully vested Options may not be terminated unless Options
terminate at December 31, 2009 without being exercised. If Pokora is
terminated without Due Cause or for death or disability, the vested
Options shall survive under the terms of this Agreement and the balance
of the Options shall vest in accordance with the terms of Section
4.3(a) of this Agreement.
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4.4. INSURANCE. During the Employment Period, the Company
shall apply for and procure in Pokora's name and for Pokora's benefit, if Pokora
is eligible and qualifies, and subject to the terms and conditions of the
applicable insurance plan, (a) short-term and permanent disability insurance
providing for disability benefits and life insurance substantially equivalent to
the benefit of other executives of the Company, (b) medical and dental insurance
for Pokora and Pokora's family substantially equivalent to the benefits of other
executives of the Company and (c) officer and director liability insurance, in
such amount as may be determined by the board of directors of the Company or as
may be required by law, and Pokora shall submit to any medical or other
examination and execute and deliver any application or other instrument in
writing, reasonably necessary to effectuate such insurance.
4.5. AUTOMOBILE. Pokora will be entitled to an automobile
allowance of $550.00 per month.
4.6. CELLULAR PHONE. The Company agrees to reimburse Pokora
for all business-related cellular phone calls, subject to the provisions of
Section 5.2.
4.7. OTHER BENEFITS. Except as otherwise specifically provided
herein, during the Employment Period, Pokora shall be eligible for all vacation
and non-wage benefits the Company provides generally for its other executives,
including four weeks paid vacation.
Section 5. BUSINESS EXPENSES.
5.1. REIMBURSEMENT. The Company shall reimburse Pokora for the
reasonable, ordinary, and necessary expenses incurred by him in connection with
the performance of his duties hereunder, including but not limited to, ordinary
and necessary travel expense and entertainment expenses, approved by the
President and the Chief Financial Officer.
5.2. ACCOUNTING. Pokora shall provide the Company with an
accounting of his expenses, which accounting shall clearly reflect which
expenses are reimbursable by the Company, Pokora will provide the Company with
such other supporting documentation and other substantiation of reimbursable
expenses as will conform to Internal Revenue Service or other requirements.
Section 6. COVENANTS OF POKORA.
6.1. CONFIDENTIALITY. During the Employment Period and
following the termination thereof for any reason, Pokora shall not disclose or
make any use of, for his own benefit or for the benefit of a business or entity
other than the Company or any corporation partnership, limited liability company
or other entity, more than 50% of the equity securities or partnership or
membership interests of which are owned directly or indirectly by the Company,
("Subsidiaries") any secret or confidential information, customer lists, and
lists of prospective customers, or any other information of or pertaining to the
Company, its Subsidiaries or their businesses, products, financial affairs,
customers or prospective customers, or services not generally known within the
trade of the Company or its Subsidiaries and which was acquired by
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him during his affiliation with the Company or its Subsidiaries unless required
by law or pursuant to a mutual release.
6.2. INVENTIONS AND SECRECY. Except as otherwise provided in
this Section 6.2, Pokora: (a) shall hold in a fiduciary capacity for the benefit
of the Company and its Subsidiaries, all secret or confidential information,
knowledge, or data of the Company, its Subsidiaries or their businesses or
production operations obtained by Pokora during his employment by the Company,
which shall not be generally known to the public or recognized as standard
practice (whether or not developed by Pokora) and shall not, during his
employment by the Company and after the termination of such employment for any
reason, communicate or divulge, any such information, knowledge or data to any
person, firm, or corporation other than the Company or its Subsidiaries, or
persons, firms or corporations designated by the Company; (b) shall promptly
disclose to the Company all inventions ideas, devices, and processes made or
conceived by him alone or jointly with others, from the time of entering the
Company's employ until such employment is terminated and within the one (1) year
period immediately following such termination, relevant or pertinent in any way,
whether directly or indirectly, to the businesses or production operations of
the Company or its Subsidiaries or resulting from or suggested by any work which
he may have done for or at the request of the Company or its Subsidiaries, (c)
shall, at all times during his employment with the Company, assist the Company
and its Subsidiaries in every proper way (entirely at the expense of the
Company) to obtain and develop for the benefit of the Company patents on such
inventions, ideas, devices, and processes, whether or not patented; and (d)
shall do all such acts and execute, acknowledge and deliver all such instruments
as may be necessary or desirable in the opinion of the Company to vest in the
Company, the entire interest in such inventions, ideas, devices, and processes
referred to above.
6.3. COMPETITION FOLLOWING TERMINATION. Within the two (2)
year period immediately following termination of Pokora's employment with the
Company for any reason, Pokora shall not, without the prior written consent of
the Company, which consent may be withheld at the sole discretion of the
Company: (a) engage directly or indirectly, whether as an officer, director,
stockholder (of 10% or more of such entity), partner, majority owner, managerial
employee, creditor, or otherwise with the operation, management, or conduct of
any business which competes with the businesses of the Company or its
Subsidiaries being conducted at the time of such termination within the United
States; (b) solicit, contact, interfere with, or divert any customer served by
the Company or its Subsidiaries, or any prospective customer identified by or on
behalf of the Company or its Subsidiaries if such intention is to divert
business from or compete with the Company, during Pokora's employment with the
Company or its Subsidiaries; or (c) solicit any person then or previously
employed by the Company or its Subsidiaries to join Pokora, whether as a
partner, agent, employee, or otherwise, in any enterprise engaged in a business
similar to the businesses of the Company or its Subsidiaries being conducted at
the time of such termination.
6.4. ACKNOWLEDGEMENT. Pokora acknowledges that the
restrictions set forth in this Section 6 are reasonable in scope and essential
to the preservation of the businesses and proprietary properties of the Company
and its Subsidiaries and that the enforcement thereof will not in any manner
preclude Pokora, in the event of Pokora's termination of employment with the
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Company, from becoming gainfully employed in such manner and to such extent as
to provide a standard of living for himself, the members of his family, and
those dependent upon him of at least the sort and fashion to which he and they
have become accustomed and may expect.
6.5. SEVERABILITY. The covenants of Pokora contained in this
Section 6 shall each be construed as an agreement independent of any other
provision in this Agreement and the existence of any claim or cause of action of
Pokora against the Company or its Subsidiaries, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company or its Subsidiaries of such covenants. The parties hereto expressly
agree and contract that it is not the intention of any party to violate any
public policy, statutory or common law, and that if any sentence, paragraph,
clause, or combination of the same of this Agreement is in violation of the law
of any state where applicable, such sentence, paragraph, clause or combination
of the same shall be void in the jurisdictions where it is unlawful, and the
remainder of such paragraph and this Agreement shall remain binding on the
parties to make the covenants of this Agreement binding only to the extent that
it may be lawfully done under existing applicable laws. In the event that any
part of any covenant of this Agreement is determined by a court of law to be
overly broad thereby making the covenant unenforceable, the parties hereto
agree, and it is their desire, that such court shall substitute a judicially
enforceable limitation in its place, and that as so modified the covenant shall
be binding upon the parties as if originally set forth herein.
Section 7. TERMINATION.
7.1 TERMINATION FOR DUE CAUSE, DEATH OR DISABILITY.
7.1.1 The Employment Period may be terminated only
for the following reasons and upon the terms and conditions set forth
below ("Due Cause"). Company, by a vote, requiring at least 3/4 of the
board of directors ("Termination Vote") may terminate the Employment
Period, effective upon written notice of such termination to Pokora, in
the event of: (a) Intentionally Deleted; (b) material breach by Pokora
of his covenants under this Agreement if unremedied within 15 days
after written notice by the Company; (c) commission by Pokora of theft
or embezzlement of property of the Company or other acts of dishonesty;
(d) commission by Pokora of a crime resulting in material injury to the
businesses, properties or reputations of the Company or its
Subsidiaries or commission of other significant activities materially
harmful to the businesses, properties or reputations of the Company or
its Subsidiaries; (e) commission of an act by Pokora in the performance
of his duties hereunder reasonably determined by a majority of the
board of directors of the Company to amount to gross, willful, or
wanton negligence; (f) willful refusal to perform or substantial
neglect of the duties assigned to Pokora pursuant to Section 1 hereof
if unremedied within 15 days after written notice by the Company; (g)
any significant violation of any statutory or common law duty of
loyalty to the Company or its Subsidiaries. All compensation shall
cease immediately upon termination for Due Cause hereunder except for
accrued and unpaid compensation.
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7.1.2 The Employment Period will be terminated upon
the death of Pokora. All compensation shall cease immediately upon
termination for death hereunder except for accrued and unpaid
compensation.
7.1.3 For purposes of Paragraph 7.1(a), Pokora's
employment hereunder will be terminated for Permanent Total Disability,
immediately upon written notice from the Company, if an independent
physician selected jointly by the parties shall have determined that
Pokora has been unable due to illness or a physical or mental
disability, to perform substantially all of the services required
hereunder for a continuous period of 180 days, or for a period
aggregating 180 days in any twelve month period. All compensation shall
cease immediately upon termination for Permanent Total Disability
hereunder except for accrued and unpaid compensation.
7.2 CHANGE OF CONTROL AND TERMINATION OTHER THAN DUE CAUSE.
Pokora's employment shall be deemed terminated for a reason other than Due Cause
by the Board of Directors if a Change of Control occurs. If Pokora's employment
is terminated for a reason other than Due Cause, then the Company shall pay as
severance compensation to Pokora the balance due under the terms of this
Agreement or twelve months compensation, including bonus, whatever is greater,
payable over a twelve month period commencing after the date of the Change of
Control or Pokora's termination without Due Cause as the case may be.
7.3 TERMINATION BY POKORA. Pokora may terminate the Employment
Period if the Company has breached a material term or condition of this
Agreement which is not cured or remedied within 15 days after the breach,
provided that Pokora's resignation for such breach shall be deemed a termination
by the Company without Due Cause for purposes of the Options vesting schedule in
Section 4.3(a) and the Termination provisions in Section 7.2 of this Agreement.
In the event Pokora terminates the Employment Period for any other reason any
Options not vested shall immediately terminate.
7.4 SURRENDER OF PROPERTIES. Upon termination of Pokora's
employment with the Company, regardless of the cause therefor, Pokora shall
promptly be deemed to have resigned from the Company's Board of Directors and
surrender to the Company or its Subsidiaries all property provided him by the
Company or its Subsidiaries, as applicable, for use in relation to his
employment and in addition, Pokora shall surrender to the Company or its
Subsidiaries, as applicable, any and all sales materials, lists of customers and
prospective customers, price lists, files, patent applications, records, models,
or other materials and information of or pertaining to the Company or its
Subsidiaries or their customers or prospective customers or the products,
businesses, and operations of the Company or its Subsidiaries.
7.5 SURVIVAL OF COVENANTS. The covenants of Pokora set forth
in Section 6 of this Agreement shall survive the termination of the Employment
Period or termination of this Agreement for Due Cause.
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Section 8. GENERAL PROVISIONS.
8.1. NOTICE. Any notice required or permitted hereunder shall
be made in writing (a) either by actual delivery of the notice into the hands of
the party thereunder entitled, or (b) by the mailing of the notice in the United
States mail, certified or registered mail, return receipt requested, all postage
prepaid and addressed to the party to whom the notice is to be given at the
party's respective address set forth below, or such other address as the parties
may from time to time designate by written notice as herein provided.
If to the Company:
Electric City Corp.
1280 Landmeir Road
Elk Grove Village, Illinois 60007
With a copy (which shall
not constitute notice) to:
Kwiatt & Ruben, Ltd.
211 Waukegan Road
Suite 300
Northfield, Illinois 60093
Attn.: Philip E. Ruben
If to Pokora:
Michael Pokora
The notice shall be deemed to be received in case (a) on the date of its actual
receipt by the party entitled thereto and in case (b) on the date of its
mailing.
8.2. AMENDMENT AND WAIVER. No amendment or modification of
this Agreement shall be valid or binding upon: a) the Company unless made in
writing and signed by an officer of the Company, duly authorized by the board of
directors of the Company or; b) Pokora unless made in writing and signed by him.
The waiver by the Company or Pokora of the breach of any Provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach by such party.
8.3. GOVERNING LAW. The validity and effect of this Agreement
and the rights and obligations of the parties hereto shall be construed and
determined in accordance with the internal law, and not the conflicts law, of
the State of Illinois.
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8.4. ENTIRE AGREEMENT. This Agreement contains all of the
terms agreed upon by the parties with respect to the subject matter hereof and
supersedes all prior agreements, arrangements and communications between the
parties dealing with such subject matter, whether oral or written.
8.5. BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the transferees, successors and assigns of the
Company, including any company or corporation with which the Company may merge
or consolidate.
8.6. REMEDIES FOR BREACH. Pokora specifically acknowledges
that his services under this Agreement are unique and extraordinary and that
irreparable injury will result to the Company and its businesses and properties
in the event of a material breach of the terms and conditions of this Agreement
to be performed by him (including, but not limited to, leaving the employment
provided for hereunder except for a termination due to a Change of Control or a
material breach by the Company of this Agreement). Pokora, therefore, agrees
that in the event of his material breach of any of the terms and conditions of
this Agreement to be performed by him (including, but not limited to leaving the
employment provided for hereunder except for a termination due to a Change of
Control or a material breach by the Company of this Agreement which is not cured
or remedied within 15 days after such breach), the Company shall be entitled, if
it so elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either at law or in equity, to enjoin him from performing services
for any other person, firm or corporation in violation of any of the terms of
this Agreement, and to obtain damages for any breach of this Agreement. In the
event of the material breach by the Company of any of the terms and conditions
of this Agreement to be performed by it, Pokora shall have all remedies, legal
or equitable, available to him under the laws of the State of Illinois. The
remedies provided herein shall be cumulative and in addition to any and all
other remedies which either party may have at law or in equity.
8.7. COSTS OF ENFORCEMENT. In the event of any suit or
proceeding seeking to enforce the terms, covenants, or conditions of this
Agreement, the prevailing party shall, in addition to all other remedies and
relief that may be available under this Agreement or applicable law, recover his
or its reasonable attorneys' fees and costs as shall be determined and awarded
by the court.
8.8. HEADINGS. Numbers and titles to paragraphs hereof are for
information purposes only and, where inconsistent with the text, are to be
disregarded.
8.9. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which when taken together, shall be and constitute one and the same instrument.
8.10 PUBLIC ANNOUNCEMENTS. The parties hereto agree no
announcement shall be made, unless required by law and with legal counsel's
advice, as it relates to this Agreement or the employment of Pokora with the
Company without the joint written approval of Pokora and the Company.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the date first set forth above.
ELECTRIC CITY CORP.
By: /ss/ Joseph Marino
-------------------------------------
Its: Joseph Marino, Chairman of the Board
MICHAEL POKORA
By: /ss/ Brian Kawamura
-------------------------------------
/ss/ Michael Pokora Its: Brian Kawamura, President and Chief
- -------------------------- Operating Officer
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made on the 14th day of
January, 2000, by and between Electric City Corp., a Delaware corporation, with
its principal place of business at 1280 Landmeier Road, Elk Grove Village,
Illinois (the "Company"), and Jeffrey Mistarz, whose residence address is
("Mistarz").
WITNESSETH
WHEREAS, the Company desires to assure itself of the services of
Mistarz, and Mistarz desires to be employed by the Company; and
WHEREAS, the Company and Mistarz desire to clearly define and clarify
all material terms and conditions of this employment relationship through a
written agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Term Of Employment.
1.1 The Company agrees to employ Mistarz, and Mistarz agrees to serve
in the employ of the Company, for the term set forth in paragraph 1.2,
in the position and with the responsibilities, duties and authority set
forth in paragraph 2, and on the other terms and conditions set forth
in this Agreement.
1.2 The term of Mistarz's employment under this Agreement shall be for
a period commencing on January 1, 2000 and continuing through December
31, 2002 unless sooner terminated in accordance with this Agreement.
1.3 As used in this Agreement, the "Company" shall be defined as the
Company, and any of its subsidiaries, affiliates, satellites, branches,
or parent entities, and including, without limitation, the Company's
successors, purchasers and assigns.
2. Position And Duties.
2.1 The Company agrees to employ Mistarz in the position of Chief
Financial Officer, to render such services as would be customary for a
Chief Financial Officer, including, but not limited to, management,
oversight and supervision of the Company's financial affairs, budgets,
financial planning, tax reporting and compliance activities, cash
management, accounting functions, and such other responsibilities,
consistent with Mistarz's position as Chief Financial Officer, as the
Chief Executive Officer or Board of Directors, in their sole and
exclusive discretion, shall assign. In the performance of his
<PAGE>
duties, Mistarz shall report to the Chief Executive Officer, or such
other official as the CEO or Board of Directors may designate.
2.2 Performance. Mistarz agrees to devote his full time and best
efforts to the diligent, loyal, faithful, timely, complete, and
professional performance of all job duties as set forth in paragraph
2.1 or assigned or reassigned from time to time by the Company. Without
limiting the generality of the foregoing, Mistarz is expected to work
full time (not less than five days per week, during normal business
hours Monday through Friday), except for vacations and regular business
holidays observed by the Company, plus any additional hours required by
the Company or reasonably necessary to timely and expeditiously
complete Mistarz's work assignments.
2.3 No Prior Employment Restrictions. Mistarz warrants that he is not
restricted by any restrictive covenant or confidentiality agreement
from any prior employment from performing all of the duties required by
this Agreement. Should a prior employer or such prior employer's
assignee or successor in interest assert claims that Mistarz is so
restricted, Mistarz shall indemnify, defend and hold harmless the
Company from any reasonable attorneys' fees and costs incurred in
defending such claims, and any damages resulting either from a final
judgment or reasonable settlement of any such claims.
3. Compensation.
3.1 Salary. During the term of this Agreement, in consideration of the
performance by Mistarz of the services set forth in paragraph 2 and his
observance of the other covenants set forth herein, the Company shall
pay Mistarz, and Mistarz shall accept a salary at the rate of One
Hundred Seventy-Five Thousand Dollars ($175,000.00) per year, less any
applicable withholdings or deductions, payable in accordance with the
Company's standard payroll practices. Mistarz's salary may be subject
to annual review by the CEO and the Board of Directors.
3.2 Bonus. Mistarz shall be eligible for an annual bonus, if in the
discretion of the Company's senior management, Mistarz's performance
warrants payment of a bonus, as measured by Mistarz's attainment of
performance goals to be mutually established and agreed upon by Mistarz
and the Chief Executive Officer or his designee. The annual bonus for a
calendar year shall be payable on February 15th of the following year,
provided that Mistarz is actively employed by the Company on such date.
If the Company establishes a formal annual bonus plan, Mistarz will be
eligible consistent with the treatment of other senior executives of
the Company.
3.3 Benefits. Mistarz shall be eligible for the vacation and non-wage
benefits the Company provides generally for its other senior
executives, including four weeks paid vacation. Mistarz shall also be
eligible to participate in the group insurance benefits provided by the
Company for senior executives, including short-term and long-term
disability insurance, life insurance, and medical and dental insurance,
subject to the terms and conditions of the applicable insurance benefit
plans. The Company will also provide
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officer liability insurance coverage for Mistarz, in such amount as may
be determined by the Board of Directors or as may be required by law.
Mistarz shall submit to any medical or other examination and execute
and deliver any application or other instrument in writing, reasonably
necessary to effectuate any such insurance benefits.
3.4 Business Expense. The Company shall reimburse Mistarz for the
reasonable, ordinary and necessary expenses incurred by him in
connection with the performance of his duties, including but not
limited to all cellular telephone expense related to Company business,
and ordinary and necessary travel expense and entertainment expenses
approved by the President and Chief Executive Officer. Mistarz shall
provide the Company with an accounting of his expenses, including an
identification of those expenses for which reimbursement by the Company
is sought, and such supporting documentation and receipts as the
Company may require from time to time, in conformance with Internal
Revenue Service or other requirements.
3.5 Stock Options. The Company hereby grants to Mistarz an option to
purchase shares of the common stock of the Company subject to and in
accordance with the following (the "Option"):
(a) Options. During the term of employment with the Company,
the Company hereby grants options to Mistarz to purchase
200,000 shares of the Company's common stock, subject to the
vesting provisions described below:
(i) On December 31, 2000, unless Mistarz has
been terminated for Cause prior thereto or
if Mistarz has resigned voluntarily, Mistarz
shall become immediately vested in options
to purchase 66,667 of the issued and
outstanding shares of the Company's Common
stock for Seven Dollars ($7.00) per share.
Mistarz will have the right to exercise the
options in accordance with the following
schedule:
December 31, 2000 - One-third
December 31, 2001 - An additional one-third
December 31, 2002 - Remaining one-third
(ii) On December 31, 2001, unless Mistarz has
been terminated for Cause prior thereto or
if Mistarz has resigned voluntarily, Mistarz
shall become immediately vested in options
to purchase 66,667 of the issued and
outstanding shares of the Company's Common
stock for Seven Dollars ($7.00) per share.
Mistarz will have the right to exercise the
options in accordance with the following
schedule:
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December 31, 2001 - One-third
December 31, 2002 - An additional one-third
December 31, 2003 - Remaining one-third
(iii) On December 31, 2002, unless Mistarz has
been terminated for Cause prior thereto or
if Mistarz has resigned voluntarily, Mistarz
shall become immediately vested in options
to purchase 66,666 of the issued and
outstanding shares of the Company's Common
stock for Seven Dollars ($7.00) per share.
Mistarz will have the right to exercise the
options in accordance with the following
schedule:
December 31, 2002 - One-third
December 31, 2003 - An additional one-third
December 31, 2004 - Remaining one-third
(b) Registration Rights. Mistarz shall have piggy-back
registration rights for all shares of stock obtained through
the exercise of any options described in paragraph 3.5(a)
above for any registration statement the Company files with
the Securities and Exchange Commission registering shares of
the Company's common stock that are similar to the shares to
be issued hereunder. The Company will use its best efforts to
file an S-8 registration statement covering the shares
underlying the Options when Company becomes eligible to file
an S-8 Registration Statement. The Company will bear the cost
of registering the shares pursuant to this paragraph.
(c) Sale of Assets: Change in Control. Upon the sale of more
than forty percent (40%) of the net assets or shares of stock
of the Company to a person or entity not affiliated with the
Company or its parent company or subsidiaries, all of the
options described in Sections 3.5(a) (i) (ii) and (iii) above
shall be automatically granted to Mistarz and shall
immediately vest and be immediately exercisable by Mistarz
subject to the terms of this Agreement.
(d) Termination of Options. The term of the Options hereunder
shall be until December 31, 2009. Notwithstanding any other
provision of this Agreement, upon any of the Options described
above being granted, such granted but unexercised Options may
not be terminated prior to December 31, 2009. If Mistarz is
terminated without Cause or for death or disability, the
granted Options shall survive under the terms of this
Agreement.
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4. Termination Of Employment.
4.1 Termination for Cause, Death or Disability.
4.1.1 The Company may terminate Mistarz's employment at any
time for Cause, including without limitation: (a) breach by
Mistarz of his covenants under this Agreement if unremedied
within 21 days after written notice by the Company; (b)
commission by Mistarz of theft or embezzlement of property of
the Company or other acts of dishonesty; (c) commission by
Mistarz of a crime resulting in injury to the businesses,
properties or reputation of the Company, (d) commission of an
act by Mistarz in the performance of his duties hereunder
reasonably determined by a majority of the board of directors
of the Company to amount to gross, willful, or wanton
negligence, (e) willful refusal to perform or substantial
neglect of the duties assigned to Mistarz pursuant to
paragraph 1 hereof if unremedied within 21 days after written
notice by the Company; (f) any significant violation of any
statutory or common law duty of loyalty to the Company. All
compensation shall cease immediately upon termination for
Cause hereunder except for accrued and unpaid compensation.
4.1.2 Mistarz's employment will be terminated immediately upon
his death. All compensation shall cease immediately upon
termination for death hereunder except for accrued and unpaid
compensation.
4.1.3 Mistarz's employment hereunder will be terminated for
Permanent Total Disability, immediately upon written notice
from the Company, if an independent physician selected jointly
by the parties shall have determined that Mistarz has been
unable due to illness or a physical or mental disability, to
perform substantially all of the services required hereunder
for a continuous period of 180 days, or for a period
aggregating 180 days in any twelve month period. All
compensation shall cease immediately upon termination for
Permanent Total Disability hereunder except for accrued and
unpaid compensation.
4.2 Surrender of Properties. Upon termination of Mistarz's employment
with the Company, regardless of the cause therefor, or otherwise
immediately upon request of the Company, Mistarz shall promptly
surrender to the Company all property provided to him by the Company
for use in relation to his employment and in addition, Mistarz shall
surrender to the Company any and all financial and accounting
materials, lists of customers and prospective customers, price lists,
files, patent applications, records, models, or other materials and
information of or pertaining to the Company or its customers or
prospective customers or the products, businesses, finances, or
operations of the Company.
4.3 Survival of Covenants. The covenants of Mistarz set forth in
paragraphs 4.2, 5, and 6 of this Agreement shall survive the
termination of his employment hereunder.
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5. Recognition of Company's Rights and Non-Disclosure.
5.1 Non-Disclosure. At all times during Mistarz's employment by the
Company and thereafter, Mistarz will hold in strictest confidence and
will not disclose, use, or otherwise publish in any manner, including
by any electronic medium, any of the Company's "Confidential
Information" (defined below), except as such disclosure, use or
publication may be required in connection with Mistarz's services for
the Company, or unless a senior officer of the Company expressly
authorizes such disclosure, use or publication in writing in advance.
5.2 Confidential Information. The term "Confidential Information" means
trade secrets, confidential knowledge, data and all other proprietary
information of the Company. By way of illustration but not limitation,
"Confidential Information" includes (a) inventions, trade secrets,
ideas, processes, formulas, source and object codes, data, programs,
other works of authorship, know-how, improvements, discoveries,
developments, materials, designs, and techniques regarding any of the
foregoing; and (b) information regarding, or plans for, research,
development, new products, marketing and selling, business plans,
budgets and unpublished financial statements, licenses, prices and
pricing structures, costs, customer lists, the identity of suppliers
and customers, and information regarding the skills and compensation of
employees of the Company.
5.3 Inventions. Mistarz: (a) shall, from the time of entering the
Company's employ until such employment is terminated and within the one
(1) year period immediately following such termination, promptly
disclose to the Company all inventions, ideas, devices, and processes,
made or conceived by him alone or jointly with others, that are
relevant or pertinent in any way, whether directly or indirectly, to
the businesses or production operations of the Company or resulting
from or suggested by any work which he may have done for or at the
request of the Company; (b) shall, at all times during his employment
with the Company, assist the Company in every reasonable way (entirely
at the expense of the Company) to obtain and develop for the benefit of
the Company patents on such inventions, ideas, devices, and processes,
whether or not patented; and (c) shall do all such acts and execute,
acknowledge and deliver all such instruments as may be necessary or
desirable in the opinion of the Company to vest in the Company, the
entire interest in such inventions, ideas, devices, and processes
referred to in this paragraph 5.3.
6. Non-Competition and Non-Solicitation. Mistarz acknowledges that but for
his employment with the Company: (i) Mistarz would not have had contact
with the Company's customers, with many of whom the Company enjoys a
near permanent relationship; (ii) Mistarz would not have had access to
the Company's Confidential Information; and (iii) the Company's
business is national in scope and cannot be confined to any particular
geographic area of the United States or the State of Illinois. In
consideration of the receipt of the Company's Confidential Information
under the terms and conditions of this Agreement, for a period of two
(2) years after termination of employment for any reason, Mistarz shall
not, without the prior written consent of the Company's Chief Executive
Officer, in any manner, directly or indirectly, own, manage, operate,
6
<PAGE>
control, be employed by, participate in, or be connected in any manner
with the ownership, management, operation or control of, any other
business (conducted for profit or not for profit) that is competitive
with the business of the Company (business of the Company is defined by
the business of the Company at the time of termination). The foregoing
restrictions shall not preclude Mistarz from the ownership of not more
than three percent (3%) of the voting securities of any corporation
whose voting securities are registered under Section 12(g) of the
Securities Exchange Act of 1934. Additionally, Mistarz agrees that,
among other things, he shall not during the one (1) year period after
termination of employment for any reason, directly or indirectly:
A. Contact or solicit the trade or patronage of any customer of
the Company for Mistarz or any other entity or person, with
respect to the Company or the business engaged in by Company.
The term "customers" shall for purposes of this Agreement be
deemed to include, without limitation, the officers,
directors, agents, employees, parents, subsidiaries and
affiliates of any person or organization who is a customer at
the time of Mistarz's termination of employment or was a
customer within the twelve-month period immediately preceding
such termination, and with whom Mistarz has been in contact on
behalf of the Company, or with respect to whom Mistarz has
used any Confidential Information.
B. Solicit, induce or attempt to induce any employee of the
Company to leave the Company's employ or engagement to become
connected in any way with, or employ, engage or otherwise
utilize any such employee in, any other business that is
competitive with the Company or is engaged in the business of
the Company.
7. Injunction.
7.1 In view of Mistarz's access to the Company's customer base and
the Company's Confidential Information, and in consideration of
the value of such property to the Company, Mistarz agrees that the
covenants contained in paragraphs 4.2, 5 and 6 hereof are
necessary to protect the interests of the Company in its
Confidential Information, and to protect and maintain near
permanent customer relationships and other legitimate, proprietary
interests of the Company, both actual and potential, which Mistarz
would not have had access to or any involvement in but for his
employment relationship with the Company. Mistarz confirms and
agrees that enforcement of the covenants in paragraphs 4.2, 5 and
6 hereof would not prevent Mistarz from earning a livelihood.
Mistarz further agrees that in the event of an actual or
threatened breach by Mistarz of any of the covenants set forth
herein, the Company would be irreparably harmed and the full
extent of injury resulting therefrom would be impossible to
calculate and the Company therefore will not have an adequate
remedy at law. Accordingly, Mistarz agrees that temporary and
permanent injunctive relief would be appropriate remedies against
such breach, without bond or security; provided, however, that
nothing herein shall be construed as limiting any other legal or
equitable remedies available to the Company. The parties to this
Agreement consent to the jurisdiction of the courts of general
jurisdiction of
7
<PAGE>
the State of Illinois, and to the federal courts situated in the
State of Illinois, for any proceedings under paragraphs 6 or 7 of
this Agreement.
7.2 The Company shall have the right to disclose the contents of
this Agreement or to deliver a copy of this Agreement bearing
Mistarz's signature to any person to whom or for whose benefit the
Company reasonably believes Mistarz has solicited, or has or may
disclose or use any Confidential Information in violation of this
Agreement.
7.3 Mistarz and the Company agree that if, in any proceeding, the
court or other authority shall refuse to enforce the covenants
herein set forth because such covenants cover too extensive a
geographic area or too long a period of time, any such covenant
shall be deemed appropriately amended and modified in keeping with
the intention of the parties to the maximum extent permitted by
law.
8. General Provisions.
8.1 Notice. Any Notice required or permitted hereunder shall be made
in writing (a) either by actual delivery of the notice into the
hands of the party thereunder entitled, or (b) by the mailing of
the notice in the United States mail, certified or registered
mail, return receipt requested, all postage prepaid and addressed
to the party to whom the notice is to be given at the party's
respective address set forth below, or such other address as the
parties may from time to time designate by written notice as
herein provided.
If to the Company: Electric City Corp.
1280 Landmeier Road
Elk Grove Village, Illinois 60007
With a copy (which shall not constitute notice) to:
Wildman, Harrold, Allen & Dixon
225 West Wacker Drive
Chicago, IL 60606
Attn: Neil G. Wolf
If to CFO: Jeffrey Mistarz
This notice shall be deemed to be received in case (a) on the date
of its actual receipt by the party entitled thereto and in case
(b) on the date of its mailing.
8
<PAGE>
8.2. Amendment and Waiver. No amendment or modification of this
Agreement shall be valid or binding upon: a) the Company unless
made in writing and signed by an officer of the Company, duly
authorized by the board of directors of the Company or; b) Mistarz
unless made in writing and signed by him. The waiver by the
Company or Mistarz of the breach of any provision of this
Agreement by the other party shall not operate or be construed as
a waiver of any subsequent breach by such party.
8.3. Governing Law. The validity and effect of this Agreement and
the rights and obligations of the parties hereto shall be
construed and determined in accordance with the internal law, and
not the conflicts law, of the State of Illinois.
8.4. Entire Agreement. This Agreement contains all of the terms
agreed upon by the parties with respect to the subject matter
hereof and supersedes all prior agreements, arrangements and
communications between the parties dealing with such subject
matter, whether oral or written.
8.5. Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the transferees, successors and
assigns of the Company, including, any company or corporation with
which the Company may merge or consolidate.
8.6. Costs of Enforcement. In the event of any suit or proceeding
seeking to enforce the terms, covenants, or conditions of this
Agreement, the prevailing party shall, in addition to all other
remedies and relief that may be available under this Agreement or
applicable law, recover his or its reasonable attorneys' fees and
costs as shall be determined and awarded by the court.
8.7. Headings. Numbers and titles to paragraphs hereof are for
information purposes only and, where inconsistent with the text,
are to be disregarded.
8.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all
of which when taken together, shall be and constitute one and the
same instrument.
8.9. Public Announcements. The parties hereto agree no
announcement shall be made, unless required by law and with legal
counsel's advice, as it relates to this Agreement or the
employment of Mistarz with the Company without the joint written
approval of Mistarz and the Company.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
ELECTRIC CITY CORP.
By: /ss/ John Mitola
-------------------------------------------
John Mitola
Its: Chief Executive Officer
By: /ss/ Brian Kawamura
-------------------------------------------
Brian Kawamura
Its: President and Chief Operating Officer
/ss/ Jeffrey Mistarz
-------------------------------------------
JEFFREY MISTARZ
10
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