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EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), is made as of
October 17, 2000, by and between Electric City Corp., a corporation organized
under the laws of the State of Delaware, U.S.A., with headquarters located at
1280 Landmeir Road, Elk Grove, Illinois 60007 (the "Company") and Augustine
Fund, L.P. (the "Buyer").
RECITALS
A. The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act") and Section 4(2) under the 1933 Act;
B. The Buyer desires to purchase from the Company, and the Company
desires to sell to the Buyer, for the amounts and upon the terms and conditions
stated in this Agreement, in a closing (the "Closing") as herein described,
certain of the Company's convertible preferred stock as listed and described in
Recital B(i) immediately below, and certain warrants as listed and described in
Recital B(ii) below.
(i) At the Closing (the "Closing"), 2,000 shares of the
Company's Series B Convertible Preferred Stock (the
"Preferred Stock"). The designation, rights, preferences and
other terms and provisions of the Preferred Stock are set
forth in the Certificate of Designation of the Relative
Rights and Preferences of the Series B Convertible Preferred
Stock of Electric City Corp. attached hereto as Exhibit A
(the "Certificate of Designations"). The Preferred Stock may
be converted into Common stock of the Company, $0.0001 par
value per share ("Common Stock"), upon the terms and
conditions hereof and upon the terms and conditions of the
Certificate of Designations. The purchase price for the
Preferred Stock sold pursuant to this Agreement shall be as
stated in Section 1(a) below. The total aggregate number of
shares of Preferred Stock to be issued and sold by the
Company at this Closing is 2,000 and the purchase price for
each share of Preferred Stock is $1,000, all in accordance
with the terms of this Agreement and of the Certificate of
Designations.
(ii) At the Closing, as additional consideration for Buyer's
purchase of the Preferred Stock, a warrant (the "Warrants")
to purchase 200,000 shares of Common Stock at a purchase
price per share equal to 120% of the lowest of the closing
bid prices for the Common Stock for the five (5) trading
days prior to the Closing Date (defined below), which
Warrants must be exercised if at all within five (5) years
after the date of issuance. The Warrants shall be
substantially in the form attached hereto as Exhibit B.
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The Common Stock into which the Preferred Stock may (in accordance
with the terms of the Certificate of Designations) be convertible shall be
referred to herein as the "Conversion Shares." Certain shares of Common Stock
may (at the Company's option as described in the Certificate of Designations) be
issued to the Buyer in payment of dividends (the "Dividend Shares"). The Common
Stock received upon exercise of the Warrants shall be referred to as the
"Warrant Shares." The Conversion Shares, the Dividend Shares (if any), the
Warrants and the Warrant Shares may be collectively referred to herein as the
"Securities."
C. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement (the "Registration Rights Agreement") substantially in the form of
Exhibit C attached hereto pursuant to which the Company has agreed to provide
certain registration rights with respect to the Securities under the 1933 Act
and the rules and regulations promulgated thereunder, and applicable state
securities laws.
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, the Company and the
Buyer hereby agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
a. PURCHASE. At the Closing, the Buyer shall purchase from the
Company, and the Company shall sell to the Buyer, 2,000 shares of Preferred
Stock and the Warrants. The purchase price (the "Purchase Price") for the
Preferred Stock and the Warrants purchased by the Buyer shall be $2,000,000.
b. THE CLOSING. The date of the Closing (the "Closing Date") shall
be as of October __ 2000. The Purchase Price shall be delivered to the Company
on or before the Closing Date. On or before the Closing Date, the Company shall
deliver the original certificate(s) representing the Preferred Stock along with
the Warrants (or a facsimile thereof, with the originals to follow via express
courier within five (5) business days) being purchased at the Closing, duly
issued, authorized and executed by the authorized officers on behalf of the
Company to the Buyer.
c. FORM OF PAYMENT. The Buyer shall pay the Purchase Price for the
Securities purchased at the Closing by wire transfer of immediately available
funds in United States Dollars, against delivery of the appropriate number of
shares of duly authorized and issued Preferred Stock and Warrants being
purchased by the Buyer hereunder at such Closing.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer understands, agrees with, and represents and warrants to the
Company with respect to its purchase hereunder, that:
a. INVESTMENT PURPOSES; COMPLIANCE WITH 1933 ACT. The Buyer is
purchasing the Securities for its own account for investment only and not with a
view towards, or in connection with, the public sale or distribution thereof,
except pursuant to sales registered under or exempt
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from the 1933 Act and applicable state securities laws. The Buyer is not
purchasing the Securities for the purpose of covering short sale positions in
the Common Stock established on or prior to the Closing Date. The Buyer agrees
to offer, sell or otherwise transfer the Securities only (i) in accordance with
the terms of this Agreement, the Trading Agreement (Exhibit E), the Certificate
of Designations and the Warrants, as applicable, and (ii) pursuant to
registration under the 1933 Act or to an exemption from registration under the
1933 Act and any other applicable securities laws. Except for the limitations
set forth in the Trading Agreement (Exhibit E hereto), the Buyer does not by its
representations contained in this Section 2(a) agree to hold the Securities for
any minimum or other specific term and reserves the right to dispose of the
Securities at any time pursuant to a registration statement or in accordance
with an exemption from registration under the 1933 Act, in all cases in
accordance with applicable state and federal securities laws. The Buyer
understands that it shall be a condition to the issuance of the Conversion
Shares, the Warrant Shares and the Dividend Shares (if any) that the Conversion
Shares, the Warrant Shares and the Dividend Shares (if any) be and are subject
to the representations set forth in this Section 2(a).
b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited investor"
as that term is defined in Rule 501 (a) of Regulation D. The Buyer has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment made pursuant to this
Agreement. The Buyer is aware that it may be required to bear the economic risk
of an investment made pursuant to this Agreement for an indefinite period of
time, and is able to bear such risk for an indefinite period.
c. RELIANCE ON EXEMPTIONS. The Buyer understands the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of the applicable United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties,
acknowledgments, understandings, agreements and covenants of the Buyer set forth
herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Securities.
d. INFORMATION. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
that have been requested by the Buyer. The Buyer and its advisors, if any, have
been afforded the opportunity to ask all such questions of the Company as they
have in their discretion deemed advisable. The Buyer understands that its
investment in the Securities involves a high degree of risk. The Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
an informed investment decision with respect to the investment made pursuant to
this Agreement.
e. NO GOVERNMENT REVIEW. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
approved or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities, nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
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f. TRANSFER OR RESALE. The Buyer understands that: (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the 1933 Act or any state securities laws, and
may not be offered for sale, sold, assigned or transferred unless either (a)
subsequently registered thereunder or (b) the Buyer shall have delivered to the
Company an opinion by counsel reasonably satisfactory to the Company, in form,
scope and substance reasonably satisfactory to the Company, to the effect that
the securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, (ii) any sale of
such securities made in reliance on Rule 144 (as hereafter defined) may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person though whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder and applicable state securities laws, and (iii) neither the
Company nor any other person is under any obligation to register such securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to
this Agreement or the Registration Rights Agreement).
g. LEGEND. The Buyer understands that the Preferred Stock, the
Warrants, and until such time as the Conversion Shares, the Warrant Shares and
the Dividend Shares (if any) (collectively, the "Registrable Securities"), have
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement or otherwise may be sold by the Buyer pursuant to Rule 144 (as
amended, or any applicable rule which operates to replace said Rule) promulgated
under the 1933 Act ("Rule 144"), the stock certificates representing the
Registrable Securities will bear a restrictive legend (the "Legend") in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES
LAWS (COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM,
SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE LAWS.
The Legend shall be removed and the Company will issue Common Stock
certificates without the Legend to the holder of the applicable Preferred Stock
or any Registrable Securities upon which the Legend is stamped, in accordance
with Section 5(b).
h. AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
by the Buyer and are each and collectively valid and binding agreements of the
Buyer enforceable in accordance with their terms, subject as to enforceability
to general principles of equity and to bankruptcy,
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insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company understands, agrees with, and represents and warrants to
the Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized and existing in good standing under the laws of the jurisdiction in
which it is incorporated, except as would not have a Material Adverse Effect (as
defined below), and has the requisite corporate power to own its properties and
to carry on its business as now being conducted. The Company is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary and where the failure so to qualify would have a
Material Adverse Effect. "Material Adverse Effect" means any material adverse
effect on the operations, properties or financial condition of the Company taken
as a whole. The Common Stock is eligible to trade and is listed for trading on
the OTC Bulletin Board Market. The Company has received no notice, either
written or oral, with respect to the continued eligibility of the Common Stock
for such listing, and the Company has maintained all requirements for the
continuation of such listing, and the Company does not reasonably anticipate,
based upon conditions currently existing and reasonably forecasted that the
Common Stock will be delisted from the OTC Bulletin Board Market for the
reasonably foreseeable future. The Company has complied or will timely comply
with all requirements of the National Association of Securities Dealers and the
OTC Bulletin Board Market with respect to the issuance of the Securities.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and the
Registration Rights Agreement, to issue and sell the Preferred Stock and the
Registrable Securities in accordance with the terms hereof, and to perform its
obligations under the Certificate of Designations in accordance with the
requirements of the same, (ii) the execution, delivery and performance of the
Company's obligations under this Agreement, the Certificate of Designations, the
Warrants and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its stockholders is
required, (iii) this Agreement and the Registration Rights Agreement and, on the
Closing Date, the Preferred Stock and Warrants sold at the Closing, have been
duly and validly authorized, executed and delivered by the Company, and (iv)
this Agreement, the Preferred Stock (when issued) the Warrants (when issued) and
the Registration Rights Agreement constitute the valid and binding obligations
of the Company enforceable against the Company in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting, generally, the enforcement of creditors' rights and
remedies or by other equitable principles of general application. The Company
(and its legal counsel) has examined this Agreement and is satisfied in its sole
discretion that, assuming the accuracy of the representations of the Buyer
contained in Section 2 of this Agreement, this Agreement and the accompanying
Exhibits, Schedules and the Addenda, if any, are in accordance with Regulation D
and the 1933 Act and are effective to accomplish the purposes set forth herein
and therein.
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c. CAPITALIZATION. As of June 30, 2000, the authorized common stock
of the Company consisted of 30,000,000 shares of Common Stock of which
28,276,679 shares were issued and outstanding. There are no other authorized
classes of common stock, nor are there authorized or outstanding classes of
preferred stock or other equity or debt securities other than as disclosed on
Schedule 3(c) hereto. All of such outstanding shares of Common Stock have been
validly issued and are fully paid and nonassessable. No shares of Common Stock
or other securities issued by the Company are subject to preemptive rights or
any other similar rights or any liens or encumbrances. Except for the Securities
issued pursuant to this Agreement and as disclosed in Schedule 3(c) as of the
effective date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or arrangements by
which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries,
(ii) there are no outstanding debt securities, and (iii) there are no agreements
or arrangements under which the Company or any of its subsidiaries is obligated
to register the sale of any of its or their securities under the 1933 Act
(except as provided herein, in Schedule 3 and in the Registration Rights
Agreement). If requested by the Buyer, the Company has furnished to the Buyer,
and the Buyer acknowledges receipt of same by its signature hereafter, true and
correct copies of the Company's Articles of Incorporation, as amended, as in
effect on the date hereof ("Articles of Incorporation"), and the Company's
Bylaws, as in effect on the date hereof (the "Bylaws").
d. ISSUANCE OF SECURITIES. The Registrable Securities are all duly
authorized and reserved for issuance, and in all cases upon issuance shall be
validly issued, fully paid and non-assessable, free from all taxes, liens and
charges with respect to the issue thereof, and will not be subject to preemptive
rights or other similar rights of stockholders of the Company.
e. ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE SECURITIES. The
Company acknowledges and agrees that the Buyer is not acting as financial
advisor to or fiduciary of the Company (or in any similar capacity with respect
to this Agreement or the transactions contemplated hereby), that this Agreement
and the transactions contemplated hereby, and the relationship between the Buyer
and the Company, are and will be considered "arms-length" notwithstanding any
other or prior agreements or nexus between the Buyer and the Company, whether or
not disclosed, and that any statement made by the Buyer, or any of its
representatives or agents, in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation, is merely
incidental to the Buyer's purchase of the Securities and has not been relied
upon in any way by the Company, its officers or directors. The Company further
represents to the Buyer that the Company's decision to enter into this Agreement
and the transactions contemplated hereby have been based solely upon an
independent evaluation by the Company, its officers and directors.
f. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances which would prevent the parties hereto from
consummating the transactions contemplated hereby pursuant to an exemption from
registration under the 1933 Act and specifically in accordance with the
provisions of Regulation D. The transactions contemplated hereby are exempt from
the
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registration requirements of the 1933 Act, assuming the accuracy of the
representations and warranties contained herein of the Buyer.
g. NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Articles of
Incorporation or Bylaws or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Except as set forth in Schedule 3(g)
(attached if applicable), neither the Company nor any of its subsidiaries is in
violation of its Articles of Incorporation or other organizational documents,
and neither the Company nor any of its/subsidiaries is in default (and no event
has occurred which, with notice or lapse of time or both, would put the Company
or any of its subsidiaries in default) under, nor has there occurred any event
giving others (with notice or lapse of time or both) any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, except
for possible defaults or rights as would not, in the aggregate or individually,
have a Material Adverse Effect. The business of the Company and its subsidiaries
is not being conducted, and shall not be conducted so long as the Buyer owns any
of the Securities, in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations which neither singly or in
the aggregate would have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws (any of which exceptions are set forth in
Schedule 3(g)), the Company is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
agency (except for such consents, authorizations or orders as would not have a
Material Adverse Effect) in order for it to execute, deliver or perform any of
its obligations under this Agreement, the Certificate of Designations, the
Warrants, the Registration Rights Agreement in accordance with the terms hereof
and thereof, or to perform its obligations with respect to the Preferred Stock
exactly as described in the Certificate of Designations (once the Preferred
Stock is issued), and with respect to the Warrants exactly as described in the
Warrants (once issued).
h. SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as disclosed on
Schedule 3(h) hereof (attached if applicable), since at least September 9, 1999
(the date on which the Company filed its initial filing, Form 10SB, with the
SEC), the Company has timely filed all reports, schedules, forms, statements and
other documents to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to as
the "SEC Documents"). The Company has delivered to the Buyer as requested by the
Buyer true and complete copies of the SEC Documents, except for such exhibits,
schedules and incorporated documents. As of their respective dates, the SEC
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Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements or are otherwise subject to
normal year-end adjustments) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer (including the
information referred to in Section 2(d) of this Agreement) contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading. Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company
has no material liabilities, contingent or otherwise (to the best of the
knowledge of the Company's Chief Executive Officer, President or any other
senior level officer of the Company (the "Company's Knowledge")), other than (i)
liabilities incurred in the ordinary course of business subsequent to the date
of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in such financial
statements, in each case of clause (i) and (ii) next above which, individually
or in the aggregate, are not material to the financial condition, business,
operations, properties, operating results or prospects of the Company. The SEC
Documents contain a complete and accurate list of all written and oral
contracts, agreements, leases or other instruments to which the Company or any
subsidiary is a party or by which the Company or any subsidiary is subject which
are required by the rules and regulations promulgated by the SEC to be so listed
(each a "Contract"). None of the Company, its subsidiaries or, to the best of
the Company's Knowledge, any of the other parties thereto, is in breach or
violation of any Contract, which breach or violation would, or with the lapse of
time, the giving of notice, or both, have a Material Adverse Effect.
i. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC
Documents, since at least August 11, 2000, there has been no material adverse
change and no material adverse development in the business, properties,
operation, financial condition, results of operations or prospects of the
Company. The Company has not taken any steps, and does not currently have any
reasonable expectation of taking any steps, to seek protection pursuant to any
bankruptcy law nor does the Company have any knowledge that its creditors intend
to initiate involuntary bankruptcy proceedings. The Company shall, at least
until Buyer no longer holds any of the Securities, maintain its corporate
existence in good standing and shall pay all taxes when due except for taxes it
reasonably disputes.
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j. ABSENCE OF LITIGATION. Except as set forth in Schedule 3(j)
(attached if applicable), there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
best of the Company's Knowledge, threatened against or affecting the Company,
wherein an unfavorable decision, ruling or finding would reasonably be expected
to have a Material Adverse Effect or which would reasonably be expected to
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein.
k. FOREIGN CORRUPT PRACTICES. Neither the Company nor any of its
subsidiaries, nor to the best of the Company's Knowledge, any officer, director
or other person acting on behalf of the Company or any subsidiary has, in the
course of his actions for or on behalf of the Company, used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity, made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
l. BROKERS; NO GENERAL SOLICITATION. The Company has taken no action
that would give rise to any claim by any person for brokerage commissions,
finder's fees or similar payments relating to this Agreement and the
transactions contemplated hereby, other than to Delano Group Securities, LLC and
Wall Street Financing Consultants, Inc. ("Wall Street") The Company and the
Buyer both acknowledge that no other broker or finder was involved with respect
to the transactions contemplated hereby, and that only the Company is obligated
to compensate Wall Street. Neither the Company nor any distributor participating
on the Company's behalf in the transactions contemplated hereby nor any person
acting for the Company, or any such distributor, has conducted any "general
solicitation," as described in Rule 502(c) under Regulation D, with respect to
the Securities being offered hereby.
m. ACKNOWLEDGMENT OF DILUTION. The number of Conversion Shares
issuable upon conversion of the Preferred Stock and the number of Warrant Shares
issuable upon exercise of the Warrant may increase substantially in certain
circumstances, including the circumstance wherein the trading price of the
Common Stock declines. The Company's executive officers and directors have
studied and fully understand the nature of the securities being sold hereunder
and recognize they have a potential dilutive effect. The board of directors of
the Company has concluded in its good faith business judgment that such issuance
is in the best interests of the Company. The Company acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Stock is
binding upon it and enforceable regardless of the dilution that such issuance
may have on the ownership interests of other stockholders.
n. ELIGIBILITY TO FILE REGISTRATION STATEMENT. The Company is
currently eligible to file a registration statement with the SEC either on Form
SB-1 or Form SB-2 under the 1933 Act.
o. (Intentionally Omitted.)
p. NON-DISCLOSURE OF NON-PUBLIC INFORMATION. (a) The Company shall
in no event disclose non-public information to the Buyer, advisors to or
representatives of the Buyer unless
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prior to such disclosure of information the Company marks such information as
"non-public information - confidential" and provides the Buyer, such advisors
and representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require the Buyer, its advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Buyer.
(b) Nothing herein shall require the Company to disclose
non-public information to the Buyer, its advisors or representatives, and the
Company represents that it does not disseminate non-public information to
investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts; provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Buyer and, if any,
underwriters, of any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of which it becomes
aware, constituting non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence by such
persons or entities), which, if not disclosed in the prospectus included in the
registration statement to be filed pursuant to the Registration Rights
Agreement, would cause such prospectus to include a material misstatement or to
omit a material fact required to be stated therein in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading. Nothing herein shall be construed to mean that such persons or
entities other than the Buyer (without the written consent of the Buyer prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that, based upon such due diligence by
such persons or entities, that the registration statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
such registration statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
4. COVENANTS.
a. BEST EFFORTS. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. SECURITIES LAWS. The Company agrees to timely file a Form D (and
any equivalent form required by applicable state law) with respect to the
Securities if and as required under Regulation D and applicable state securities
laws and to provide a copy thereof to the Buyer promptly after such filing. The
Company shall, on or before the Closing Date, take such action as is necessary
to sell the Securities being sold to the Buyer on each such date under
applicable securities laws of the United States and the relevant state(s), and
shall if specifically so requested provide evidence of any such action so taken
to the Buyer on or prior to the Closing Date.
c. REPORTING STATUS. So long as the Buyer beneficially owns any of
the Securities, the Company shall file all reports required to be filed with the
SEC pursuant to the 1934 Act, and
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the Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations hereunder
would permit such termination.
d. USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Securities for working capital, including purchase of inventory.
e. FINANCIAL INFORMATION. Until such time as the Buyer no longer
beneficially owns Securities, the Company agrees to send the following reports
to the Buyer: (i) after filing with the SEC, a copy of each of its Annual
Reports, its Quarterly Reports, and any reports filed on Form 8-K; and (ii) as
soon as reasonably practicable after release thereof, copies of all press
releases issued by the Company or any of its subsidiaries.
f. RESERVATION OF SHARES. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the issuance of all of the Conversion
Shares, the Warrant Shares and the Dividend Shares (if any). Prior to complete
conversion of the Preferred Stock, the Company shall not reduce the number of
shares of Common Stock reserved for issuance hereunder without the written
consent of the Buyer except for a reduction proportionate to a reverse stock
split effected for a business purpose other than affecting the requirements of
this Section, which reverse stock split affects all shares of Common Stock
equally.
g. LISTING. Upon the Closing, the Company shall promptly secure the
listing of the Common Stock underlying the Preferred Stock and the Warrants upon
each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of shares of Registrable Securities from time to time
issued under the terms of this Agreement and the Registration Rights Agreement.
The Company shall at all times comply in all respects with the Company's
reporting, filing and other obligations under the by-laws or rules of the
National Association of Securities Dealers and the OTC Bulletin Board Market (or
such other national securities exchange or market on which the Common Stock may
then be listed, as applicable).
h. PROSPECTUS DELIVERY REQUIREMENT. The Buyer understands that the
1933 Act requires delivery of a prospectus relating to the Common Stock in
connection with any sale thereof pursuant to a registration statement under the
1933 Act covering any resale by the Buyer of the Common Stock being sold, and
the Buyer shall comply with any applicable prospectus delivery requirements of
the 1933 Act in connection with any such sale. The Company shall have the
unequivocal right to rely upon the Buyer's representation and covenant to
deliver a prospectus as required by applicable law or regulation contained in
this Section 4(h), and thus, with respect to any resales by the Buyer pursuant
to a registration statement of Common Stock issued to the Buyer upon conversion
of the Preferred Stock (or in payment of dividends on the Preferred Stock), or
upon exercise of the Warrants, such Common Stock shall not contain a restrictive
legend of any kind. The Buyer will indemnify and hold harmless the Company and
its transfer agent for any loss, cost or expense (including reasonable
attorney's fees) incurred by such parties as a result of improper actions taken
by the Buyer in response to the Company's and the transfer agent's compliance
with the provisions of this Section 4(h), including without limitation the sales
of such Common Stock without delivery of a prospectus as required by
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applicable law or regulation. The Company agrees that, upon effectiveness of the
Registration Statement, and from time to time thereafter as reasonably requested
by the Buyer, the Company shall deliver or cause the Company's transfer agent to
deliver to the Buyer one or more stock certificates representing the number of
shares of registered Common Stock into which the Registrable Securities might
then reasonably be convertible or exercisable (as applicable). Such
certificate(s) shall not contain a restrictive legend of any kind.
i. INTENTIONAL ACTS OR OMISSIONS. Neither party shall intentionally
perform any act that if performed, or omit to perform any act that if omitted to
be performed, would prevent or excuse the performance of this Agreement or any
of the transactions contemplated hereby.
j. NO SHORTING. As a material inducement for the Company to enter
into this Agreement, the Buyer represents that it has not as of the date hereof,
and covenants on behalf of itself and its affiliates that neither Buyer nor any
affiliate of Buyer will at any time in which the Buyer or any affiliate of the
Buyer beneficially owns any of the Securities, engage in any short sales of, or
hedging or arbitrage transactions with respect to, the Common Stock, or buy
"put" options or similar instruments with respect to the Common Stock. The
Company acknowledges that a sale of Conversion Shares or Warrant Shares on the
date a conversion of the Preferred Stock (or exercise notice for the Warrants)
is made, even if such sale is made prior to delivery of the notice of conversion
with respect to such Conversion Shares (or exercise notice with respect to such
Warrant Shares), is not a "short sale" for purposes of this Section 4(j).
k. EXPENSES. The Company agrees to pay to or at the direction of the
Buyer the sum of $10,000 at the Closing as reimbursement for the attorney's fees
and expenses of the Buyer incurred by it in connection with the transactions
contemplated by this Agreement.
l. NO ADDITIONAL ISSUANCE OF SERIES B PREFERRED STOCK. The Company
agrees that it will not issue Series B Preferred Stock to any person other than
to the Buyer.
m. RESTRICTION ON BELOW MARKET ISSUANCE OF SECURITIES. Until the
date which is the earlier of twelve (12) months from the Closing Date or the
date the Preferred Stock has been redeemed or converted in full, the Company
shall not issue or agree to issue (other than (i) to the Buyer pursuant to the
transactions contemplated herein, (ii) pursuant to any employee stock option
plan or employee stock purchase plan of the Company established during the term
of this restriction for a legitimate business purpose and not to avoid the
restrictions imposed in this Section 4(m), (iii) pursuant to any existing
security, option, warrant, scrip, call or commitment or right, including the
proposed transaction with CIT Corporation, in each case as disclosed on Schedule
3(c) hereof, (iv) with the consent of the Buyer, not to be unreasonably
withheld), (v) to consultants and other service providers or (vi) to
shareholders of companies to be acquired by the Company or companies to be
merged into the Company any equity securities of the Company (or any security
convertible into or exercisable or exchangeable, directly or indirectly, for
equity securities of the Company) or debt securities of the Company if such
securities are issued at a price (or provide for a conversion, exercise or
exchange price) which may be less than the current market price for the Common
Stock on the date of issuance (in the case of Common Stock) or the date of
conversion, exercise or exchange (in the case of securities convertible into or
exercisable or exchangeable, directly or indirectly, for Common Stock). In the
event the Company seeks to offer such securities as permitted in subsection
4(m)(iv) of this Section, the Company shall first
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offer to the Buyer to purchase such securities on the same terms and conditions
as proposed by the Company (the "First Offer"). The Buyer shall have ten (10)
days to advise the Company in writing that it accepts the First Offer. If the
Buyer does not so advise the Company, the Company shall be free, for a period of
sixty (60) days, to issue such securities as proposed to such other party, after
which sixty (60) day period the restrictions contained in this Section 4(m)
shall apply as if the Buyer had not given its consent and the First Offer had
not been made to the Buyer. Except as provided with respect to resales of Common
Stock originally issued in connection with private placements, mergers and
acquisitions, the transactions contemplated herein (including also the issuance
of certain warrants to Buyer) and in subsections (i), (ii), (iii), (iv), (v), or
(vi) above of this Section 4(m), for a period equal to 120 days after the
registration statement referred to in the Registration Rights Agreement is
declared effective, the Company shall not grant any additional so-called
"registration rights."
5. LEGEND AND TRANSFER INSTRUCTIONS.
a. TRANSFER AGENT INSTRUCTIONS. The Company shall instruct its
transfer agent to issue certificates, registered in the name of the Buyer or its
permitted nominee, for the Conversion Shares, the Warrant Shares and the
Dividend Shares (if any) in accordance with the terms of the applicable
Preferred Stock and Warrants and in such amounts as are set forth in the
Certificate of Designation and Warrants, respectively, upon conversion of the
Preferred Stock or exercise of the Warrants (as applicable). All such
certificates shall bear the restrictive legend specified in Section 2(g) of this
Agreement only to the extent required by applicable law and as specified in this
Agreement and the Exhibits and Addenda hereto, and with consideration to Section
4(h) hereof. The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof in the case of the Conversion Shares, the
Warrant Shares and the Dividend Shares (if any) prior to the registration of
same under the 1933 Act, will be given by the Company to its transfer agent and
that the Conversion Shares, the Warrant Shares and the Dividend Shares (if any)
shall otherwise be freely transferable on the books and records of the Company
as and to the extent permitted by applicable law and provided by this Agreement,
the Warrants and the Registration Rights Agreement. Nothing in this Section
shall affect in any way the Buyer's obligations and agreement to comply with all
applicable securities laws upon resale of the Conversion Shares, the Warrant
Shares and/or the Dividend Shares (if any). If the Buyer (x) provides the
Company with an opinion of counsel reasonably satisfactory to Company that
registration by the Buyer of the Preferred Stock, the Warrants, the Warrant
Shares, the Conversion Shares and/or the Dividend Shares (if any) is not
required under the 1933 Act and that resale is otherwise permitted under
applicable securities laws, or (y) transfers Securities to an affiliate which is
an accredited investor (in accordance with the provisions of this Agreement) or
in compliance with Rule 144, then in either instance the Company shall permit
the said transfer, and if applicable promptly (and in all events within two (2)
trading days) instruct its transfer agent to issue one or more certificates in
such name and in such denominations as specified by the Buyer.
b. REMOVAL OF LEGENDS. The Legend shall be removed and the Company
shall issue a certificate without such Legend to the holder of any Security upon
which it is stamped, and a certificate for a security shall be originally issued
without the Legend, if, unless otherwise required by state securities laws, (x)
the sale of such Security is registered under the 1933 Act, or (y) such holder
provides the Company with an opinion by counsel reasonably satisfactory to the
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Company, that is in form, substance and scope reasonably satisfactory to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the 1933 Act or (z) such holder provides the
Company with assurances reasonably satisfactory to the Company and its counsel,
that such Security can be sold pursuant to Rule 144. The Buyer agrees that its
sale of all Securities, including those represented by a certificate(s) from
which the Legend has been removed, or which were originally issued without the
Legend, shall be made only pursuant to an effective registration statement (and
to deliver a prospectus in connection with such sale) or in compliance with an
exemption from the registration requirements of the 1933 Act. In the event the
Legend is removed from any Security or any Security is issued without the Legend
and thereafter the effectiveness of a registration statement covering the sales
of such Security is suspended or the Company determines that a supplement or
amendment thereto is required by applicable securities laws, then upon
reasonable advance notice to the holder of such Security, the Company shall be
entitled to require that the Legend be placed upon any such Security which
cannot then be sold pursuant to an effective registration statement or Rule 144
or with respect to which the opinion referred to in clause (y) next above has
not been rendered, which Legend shall be removed when such Security may be sold
pursuant to an effective registration statement or Rule 144 (or such holder
provides the opinion with respect thereto described in clause (y) next above.
c. CONVERSION OF PREFERRED STOCK. The Buyer shall have the right to
convert the Preferred Stock sold by delivering via facsimile an executed and
completed Notice of Conversion (as defined in the Certificate of Designations)
to the Company and delivering within two (2) business days thereafter the
original Notice of Conversion and the original Preferred Stock certificate being
converted (but only at such time as such original Preferred Stock certificate
being converted is converted in full into Common Stock, unless otherwise
specifically requested by the Company) by express courier to the Company. Each
date on which a Notice of Conversion is faxed to the Company in accordance with
the provisions hereof shall be deemed a "Conversion Date." The Company will
transmit the certificates (each a "Certificate" and collectively the
"Certificates") representing the shares of Common Stock issuable upon conversion
of any Preferred Stock, including also any applicable Dividend Shares (along
with a replacement certificate representing the number of preferred shares not
so converted, if applicable) to the Buyer via express courier, within three (3)
business days after the relevant Conversion Date (with respect to each
conversion, the "Deadline"). Time is of the essence with respect to the
requirements of the first clause of the immediately preceding sentence.
d. INJUNCTIVE RELIEF FOR BREACH. The Company acknowledges that a
breach of its obligations under Sections 5(a), 5(b) and 5(c) above will cause
irreparable harm to the Buyer by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly the Company agrees that the remedy
at law for a breach of its obligations under such Sections would be inadequate
and agrees, in the event of a breach or threatened breach by the Company of the
provisions of such Sections, the Buyer shall be entitled, in addition to all
other remedies at law or in equity, to an injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
e. LIQUIDATED DAMAGES FOR NON-DELIVERY OF CERTIFICATES. In addition
to the provisions of Section 5(d) above, the Company understands and agrees that
a delay in the issuance
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of any of the Certificates beyond the Deadline will result in substantial
economic loss and other damages to the Buyer. As partial compensation to the
Buyer for such loss, the Company agrees to pay liquidated damages (and which the
Company acknowledges is not a penalty) to the Buyer for issuance and delivery of
any Certificate after the Deadline, in accordance with the following schedule
(where "No. Business Days Late" is defined as the number of business days beyond
three (3) business days from the date of delivery by the Buyer to the Company of
a facsimile Notice of Conversion (or, if later, from the date on which all other
necessary documentation duly executed and in proper form required for conversion
of Preferred Stock as described in this Agreement, including the original Notice
of Conversion, all in accordance with this Agreement ONLY IF such necessary
documentation has not been delivered to the Company within the two (2) business
day period after the facsimile delivery to the Company of the Notice of
Conversion as required in this Agreement)):
<TABLE>
<CAPTION>
NO. BUSINESS DAYS LATE LIQUIDATED DAMAGES
(IN US$)
<S> <C>
1 $300
2 $400
3 $500
4 $600
5 $700
6 $800
7 $900
8 $1,000
9 $1,000
10 $1,500
11+ $1,500 + $500 for each Business Day Late
beyond 11 days
</TABLE>
The Company shall pay the Buyer any liquidated damages incurred as
called for under this Section 5(e) by certified or cashier's check upon the
earlier of (i) issuance of the relevant Certificate(s) to the Buyer or (ii) each
monthly anniversary of the receipt by the Company of the Buyer's Notice of
Conversion. Nothing herein shall limit the Buyer's right to pursue actual
damages for the Company's failure to issue and deliver all Certificates to the
Buyer in accordance with the terms of this Agreement or for breach by the
Company of this Agreement.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to sell Preferred Stock and
Warrants at the Closing is subject to the satisfaction, on or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion:
a. The parties shall have executed this Agreement, the Registration
Rights Agreement, and the parties shall have delivered the respective documents
or signature pages thereof to the Buyer.
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b. The Buyer shall have delivered to the Buyer on behalf of the
Company the Purchase Price for the Preferred Stock and Warrants purchased at the
Closing, by wire transfer of immediately available funds pursuant to the wiring
instructions provided by the Buyer.
c. The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date made and as of the Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
e. The Company's Board of Directors (and if necessary, the
shareholders of the Company) shall have approved this Agreement and the related
documentation referred to herein.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer to purchase Preferred Stock and Warrants
is subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, provided that these conditions are for the sole benefit of
the Buyer and may be waived by the Buyer at any time in its sole discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, the parties shall have delivered the respective
documents or signature pages thereof to the Buyer on behalf of each other. The
Company shall have filed the Certificate of Designations with the State of
Delaware and shall have delivered to the Buyer a copy thereof stamped "filed" by
the Delaware Secretary of State.
b. The representations and warranties of the Company shall be true
and correct in all material respects as of the date made and as of Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. The Buyer may require a certificate,
executed by the Chief Executive Officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may be reasonably
requested by the Buyer.
c. With respect to the Closing, the Company shall have issued and
have duly executed by the authorized officers of the Company, and delivered to
the Buyer on behalf of the Buyer, the Preferred Stock certificate(s) and
Warrants being sold at the Closing (via facsimile.
d. The Common Stock shall be authorized for quotation on the OTC
Bulletin Board Market (or another national securities exchange or market) and
trading in the Common Stock on
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such market shall not have been suspended by the SEC, the NASD or any other
relevant regulatory agency.
e. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
f. The Buyer shall have received the opinion of Company counsel,
dated as of the Closing Date, substantially in the form attached hereto as
Exhibit D.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement will be governed by and construed
and enforced in accordance with the laws of the State of Illinois without giving
effect to any conflicts of laws provisions that might cause this Agreement to be
governed by or construed or enforced in accordance with the laws of any other
jurisdiction. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall (a) be reformed by the Parties to
reflect the intent of the Parties, or (b) if reformation is not possible, be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
In the event of any and all disagreements and controversies arising
from this Agreement or any other written agreements between the Company and the
Buyer, such disagreements and controversies shall be subject to binding
arbitration as arbitrated in accordance with the then current Commercial
Arbitration Rules of the American Arbitration Association in Chicago, Illinois
before one neutral arbitrator. Either party may apply to the arbitrator seeking
injunctive relief until the arbitration award is rendered or the controversy is
otherwise resolved. Without waiving any remedy under this Agreement, either
party may also seek from any court having jurisdiction any interim or
provisional relief that is necessary to protect the rights or property of that
party, pending the establishment of the arbitral tribunal (or pending the
arbitral tribunal's determination of the merits of the controversy). In the
event of any such disagreement or controversy, neither party shall directly or
indirectly reveal, report, publish or disclose any information relating to such
disagreement or controversy to any person, firm or corporation not expressly
authorized by the other party to receive such information or use such
information or assist any other person in doing so, except to comply with actual
legal obligations of such party, or unless such disclosure is directly related
to an arbitration proceeding as provided herein, including, but not limited to,
the prosecution or defense of any claim in such arbitration. The costs and
expenses of the arbitration (excluding attorneys' fees) shall be paid by the
non-prevailing party or as determined by the arbitrator.
b. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and signature pages from such counterparts have been delivered to the
Buyer on behalf of the other party. In the event any
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<PAGE>
signature page is delivered by facsimile transmission (which the parties agree
is an acceptable form of delivery), the party using such means of delivery shall
cause three (3) additional originally executed signature pages to be physically
delivered to the other party within one (1) business day of the execution and
delivery hereof.
c. HEADINGS; GENDER, ETC. The headings of this Agreement are for
convenience of reference and shall not form a part of, or affect the
interpretation of this Agreement. As used herein, the masculine shall refer to
the feminine and neuter, the feminine to the masculine and neuter, and the
neuter to the masculine and feminine, as the context may require. As used
herein, unless the context clearly requires otherwise, the words "herein,"
"hereunder" and "hereby," shall refer to this entire Agreement and not only to
the Section or paragraph in which such word appears. If any date specified
herein falls upon a Saturday, Sunday or public or legal holidays, the date shall
be construed to mean the next business day following such Saturday, Sunday or
public or legal holiday. For purposes of this Agreement, a "business day" is any
day other than a Saturday, Sunday or public or legal holiday.
d. SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
f. NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by U. S. Mail or delivered personally or
by courier or via facsimile (if via facsimile, to be followed within three (3)
business days by an original of the notice document via U.S. Mail or courier)
and shall be effective five (5) days after being placed in the mail, if mailed,
certified or registered, return receipt requested, or upon receipt, if delivered
personally or by courier or by facsimile, in each case properly addressed to the
party to receive the same. The addresses for such communications shall be:
If to the Company: Electric City Corp.
1280 Landmeir Road
Elk Grove, Illinois 60007
Telephone: (847) 437-1666
Facsimile: (847) 437-4969
Attention: John Mitola, CEO
If to the Buyer, at the address on the signature page of this
Agreement. Each party shall provide written notice to the other party of any
change in address.
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<PAGE>
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other (which
consent shall not be unreasonably withheld), and in any event any assignee of
the Buyer shall be an accredited investor (as defined in Regulation D), in the
written opinion of counsel who is reasonably satisfactory to the Company and in
form, substance and scope reasonably satisfactory to the Company.
Notwithstanding the foregoing, if applicable, any of the entities constituting
the Buyer (if greater than one (1) entity) may assign its rights hereunder to
any of its "affiliates," as that term is defined under the 1934 Act, without the
consent of the Company; provided, however, that any such assignment shall not
release such assigning entity from its obligations hereunder unless such
obligations are assumed by such affiliate and the Company has prior to such
assignment and assumption consented in writing to the same; and no such
assignment shall be made unless it is made in accordance with any applicable
securities laws of any applicable jurisdiction. Any request for an assignment
made hereunder by the Buyer shall be accompanied by a legal opinion in form,
substance and scope reasonably satisfactory to the Company, that such assignment
is proper under applicable law. Notwithstanding anything herein to the contrary,
Buyer may pledge the Securities as collateral for a bona fide loan pursuant to a
security agreement with a third party lender, and such pledge shall not be
considered an assignment in violation of this Agreement so long as it is made in
compliance with all applicable law.
h. NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto, any other buyer who execute an Agreement of like
tenor with this Agreement, and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. SURVIVAL. Unless this Agreement is terminated under Section 8(1),
the representations and warranties of the Company and the Buyer contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and
8 shall survive the Closing of the purchase and sale of Securities purchased and
sold hereby.
j. PUBLICITY. The Company and the Buyer shall have the right to
review before issuance by the other, any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without prior consultation with or
approval of the Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law and regulations.
k. FURTHER ASSURANCE. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. TERMINATION. In the event that the Closing shall not have
occurred on or before ten (10) business days from the date hereof, this
Agreement shall terminate at the close of business on such date. Neither party
may unilaterally terminate this Agreement after the Closing
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<PAGE>
for any reason other than a material breach of this Agreement by the non-
breaching party. Such termination shall not be the sole remedy for a breach of
this Agreement by the non-breaching party, and each party shall retain all of
its rights hereunder at law or in equity. Notwithstanding anything herein to the
contrary, a party whose breach of a covenant or representation and warranty or
failure to satisfy a condition prevented the Closing shall not be entitled to
terminate this Agreement.
m. REMEDIES. No provision of this Agreement providing for any
specific remedy to a party shall be construed to limit such party to the
specific remedy described, and any other remedy that would otherwise be
available to such party at law or in equity shall be so available. Nothing in
this Agreement shall limit any rights a party may have with any applicable
federal or state securities laws with respect to the transactions contemplated
hereby.
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
[SIGNATURE PAGE FOLLOWS]
List of Exhibits
<TABLE>
<CAPTION>
<S> <C>
Exhibit A Form of Certificate of Designations for Series B Convertible Preferred Stock
Exhibit B Warrant to Purchase Common Stock
Exhibit C Registration Rights Agreement
Exhibit D Opinion of Counsel
Exhibit E Trading Agreement
</TABLE>
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<PAGE>
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT DATED
AS OF OCTOBER 17, 2000]
ELECTRIC CITY CORP.
By: /s/ Jeffrey Mistarz
-------------------------------------
(Name of Authorized Signatory)
BUYER:
AUGUSTINE FUND, L.P.
By: Augustine Capital Management, L.L.C.,
its General Partner
By: /s/ Thomas F. Duszynski
-------------------------------------
(Duly Authorized Member)
BUYER'S ADDRESS:
141 West Jackson Boulevard
Suite 2182
Chicago, Illinois 60604
Telephone: 312-427-5457
Telecopier: 312-427-5396
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<PAGE>
SECURITIES PURCHASE AGREEMENT
Schedule 3(c)
OUTSTANDING OPTIONS TO PURCHASE COMMON STOCK:
See Exhibit A
OUTSTANDING WARRANTS TO PURCHASE COMMON STOCK:
See Exhibit B
OTHER STOCK PURCHASE RIGHTS
None
OTHER REGISTRATION RIGHTS
See Exhibit C
Selling Shareholders of Switchboard Apparatus 551,226 Shares
COMMITMENTS TO ISSUE SECURITIES
CIT/Newcourt Capital Securities
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<PAGE>
SECURITIES PURCHASE AGREEMENT
Schedule 3(g)
Registration of all the Registrable Securities under the Securities
Act of 1933, as amended, requires the filing of a registration statement with
the Securities and Exchange Commission and a declaration of effectiveness of the
registration statement by the Securities and Exchange Commission.
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