EXHIBIT 2
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement, dated as of July 31, 2001
(as it may be amended from time to time, this "Agreement"), is
made by and among Electric City Corp., a Delaware corporation
(the "Company"), and each of the parties set forth on Schedule I
attached hereto from time to time (collectively, the "Investors"
and, together with the Company, the "Parties") and shall become
effective on the Closing Date (as defined in the Securities
Purchase Agreement).
WITNESSETH
WHEREAS, the Parties are parties to the Securities Purchase
Agreement, dated as of July 31, 2001 (as it may be amended from
time to time, the "Securities Purchase Agreement"), whereby the
Company will sell and certain of the Investors will buy shares
of the Company's Series A Convertible Preferred Stock, par value
$0.01 per share (the "Series A Preferred Stock"), together with
shares of Common Stock, warrants to purchase Common Stock, and
warrants to purchase Series A Preferred Stock (collectively, the
"Securities"); and
WHEREAS, it is a condition to the obligations of the
Investors to purchase the Securities pursuant to the Securities
Purchase Agreement that the Parties execute and deliver this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. All terms capitalized but not defined
herein shall have the meaning attributable to such terms in the
Securities Purchase Agreement, except where the context
otherwise requires. The following additional terms when used in
this Agreement, including its preamble and recitals, shall,
except where the context otherwise requires, have the following
respective meanings, such meanings to be equally applicable to
the singular and plural forms thereof:
"Additional Purchase Agreement" means the securities
purchase agreement, if any, providing for the issuance and sale
of Series A Preferred Stock and Series A Preferred Stock
Warrants to the Additional Purchasers, as contemplated by
Section 2.3 of the Securities Purchase Agreement.
"Additional Purchaser" shall mean each purchaser under
the Additional Purchase Agreement.
"Agreement" shall have the meaning set forth in the
preamble of this Agreement.
"Certificate of Designations" means the Certificate of
Designations, Preferences and Relative, Participating, Optional
and Other Special Rights of Preferred Stock and Qualifications,
Limitations and Restrictions Thereof of Series A Convertible
Preferred Stock of Electric City Corp. referenced in the
Securities Purchase Agreement.
"Closing Date" shall have the meaning given to it in
the Securities Purchase Agreement.
"Commission" means the United States Securities and
Exchange Commission or other governmental authority at the time
administering the Securities Act.
"Common Stock" means and includes the Company's
authorized common stock, par value $0.0001 per share.
"Common Stock Warrants" means the warrants issued to
each Investor pursuant to the Securities Purchase Agreement to
purchase 750,000 shares of Common Stock as evidenced by those
certain Warrant Certificates, of even date herewith, between
each Investor and the Company, as each such Warrant Certificate
may be amended from time to time.
"Company" shall have the meaning set forth in the
preamble of this Agreement.
"Eligible Securities" means (i) the shares of Common
Stock issued or issuable upon the conversion of the Series A
Preferred Stock issued or issuable pursuant to the Securities
Purchase Agreement or the Additional Purchase Agreement or
issued or issuable upon exercise of the Series A Preferred Stock
Warrants and conversion of the Series A Preferred Stock issued
or issuable pursuant to such exercise; (ii) the shares of Common
Stock issued or issuable upon exercise of the Placement Agent
Warrants; (iii) the shares of Common Stock issued pursuant to
Securities Purchase Agreement; (iv) the shares of Common Stock
issued or issuable upon exercise of the Common Stock Warrants;
and (v) any other shares of Common Stock issued as (or issuable
upon the conversion or exercise of any warrant, right or other
security that is issued as) a dividend or other distribution
with respect to or in exchange for or in replacement of, the
shares described in clauses (i), (ii), (iii), (iv) and this
clause (v); provided, however, that the foregoing definition
shall exclude in all cases any Eligible Securities sold by a
Holder in a transaction in which its rights under this Agreement
are not also assigned; and provided further that any Eligible
Securities sold pursuant to Rule 144 or sold in a registered
public offering that has been declared effective shall no longer
be Eligible Securities hereunder.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and any similar or successor federal statute,
and the rules and regulations of the Commission thereunder, all
as the same may be in effect at the time.
"Fully-Exercising Investor" shall have the meaning set
forth in Section 3.1 hereof.
"Holder" means a registered holder of record of
outstanding Eligible Securities or securities convertible into
or exercisable for, directly or indirectly, Eligible Securities.
"Investors" shall have the meaning set forth in the
preamble hereto.
"Notice" shall have the meaning set forth in Section
3.1 hereof.
"Parties" shall have the meaning set forth in the
preamble hereto.
"Placement Agent Warrants" means the warrants issued
by the Company to Newcourt Capital Securities, Inc. to purchase
3,314,830 shares of Common Stock as evidenced by that certain
Warrant Certificate of even date herewith between the Company
and Newcourt Capital Securities Inc., as the same may be amended
from time to time.
"Piggyback Request" shall have the meaning set forth
in Section 2.2(a) hereof.
"Qualified Primary Offering" means a firmly
underwritten primary registered public offering of the Common
Stock by the Company that raises at least $35 million in gross
proceeds at a price of at least $5.00 per share (as adjusted
for stock splits, stock combinations, recapitalizations and the
like).
"Registration Request" shall have the meaning set
forth in Section 2.1 hereof.
"Requesting Holder" shall have the meaning set forth
in Section 2.1 hereof.
"Rule 144" means Rule 144 promulgated by the
Commission under the Securities Act, as in effect from time to
time.
"Securities" shall have the meaning set forth in the
first recital of this Agreement.
"Securities Act" means the Securities Act of 1933, as
amended, and any similar or successor federal statute, and the
rules and regulations of the Commission thereunder, all as the
same may be in effect at the time.
"Securities Purchase Agreement" shall have the meaning
set forth in the first recital of this Agreement.
"Series A Preferred Stock" shall have the meaning set
forth in the first recital of this Agreement.
"Series A Preferred Stock Warrants" means the warrants
issued to certain of the Investors pursuant to the Securities
Purchase Agreement or the Additional Purchase Agreement to
purchase 100,000 shares of Series A Preferred Stock as evidenced
by those certain Warrant Certificates, of even date herewith,
between each such Investor and the Company, as each such Warrant
Certificate may be amended from time to time.
"Shares" shall have the meaning set forth in Section
3.1 hereof.
ARTICLE II
REGISTRATION RIGHTS
2.1 Requested Registration.
(a) At any time after the Closing Date, Holders
holding at least a majority of the shares constituting Eligible
Securities may deliver to the Company a written request that the
Company file and use its best efforts to cause to become
effective a registration statement under the Securities Act with
respect to such number of the Eligible Securities owned by the
Holders as shall be specified in such request (a "Registration
Request"), including, if specified in the Registration Request,
a "shelf" registration statement on Form S-3 (or if Form S-3 is
not then available, Form S-1 or such other form that the Company
is eligible to use with respect to the Eligible Securities) for
an offering to be made on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act; provided, however, that
the Company shall not be obligated to effect any such
registration pursuant to this Section 2.1 if the aggregate value
on the date of the Registration Request of the Eligible
Securities to be registered thereon is less than $5,000,000.
The Company shall not be required to file and use its best
efforts to cause to become effective, pursuant to a Registration
Request under this Section 2.1 more than four (4) registration
statements at the demand of the Holders. The party (or parties)
delivering a Registration Request is hereinafter referred to as
the "Requesting Holder."
(b) As soon as practicable following the receipt of a
Registration Request, the Company will use its best efforts to
register under the Securities Act, for public sale in accordance
with the method of disposition specified in such Registration
Request, the number of shares of Eligible Securities specified
in such Registration Request (and the number of Eligible
Securities specified in all notices received from Holders within
20 business days after notice of the Registration Request
delivered pursuant to Section 2.2 hereof). The Company shall
also be entitled to include in any registration statement filed
pursuant to a Registration Request, for sale in accordance with
the method of disposition specified in such Registration
Request, such number of shares of Common Stock as the Company
shall desire to sell for its own account or for the account of
other security holders or both. If the method of sale
designated is an underwritten public offering, the managing
underwriter or underwriters must be reasonably acceptable to
both the Requesting Holder (or the holders of a majority of the
shares of Eligible Securities held by all parties comprising the
Requesting Holder if more than one party is the Requesting
Holder) and the Company, which acceptance shall not be
unreasonably withheld. Notwithstanding the foregoing provisions
of this Section 2.1(b), to the extent that, in the opinion of
the underwriter or underwriters (if the method of disposition
shall be an underwritten public offering), marketing
considerations require the reduction of the number of shares of
Common Stock covered by any such registration, the number of
shares of Common Stock to be registered and sold pursuant to
such registration shall be reduced as follows:
(i) first, the number of shares of Common Stock
to be registered on behalf of the Company shall be reduced (to
zero, if necessary); and
(ii) second, the number of shares of Common Stock
to be registered on behalf of Persons other than the Holders and
their Affiliates, if any, shall be reduced (to zero, if
necessary) pro rata according to the number of shares of
restricted Common Stock held by each; and
(iii) third, the number of shares of Eligible
Securities to be registered on behalf of the Holders and their
Affiliates shall be reduced pro rata according to the number of
shares of Eligible Securities held by each.
(c) Notwithstanding anything to the contrary
contained herein, the exercise by any Holder of any right
hereunder with respect to shares of Eligible Securities shall
not effect or diminish any other rights of such Holder hereunder
with respect to any other securities of the Company held by such
Holder.
2.2 Piggyback Registration.
(a) If the Company at any time after the Closing Date
proposes to register Common Stock under the Securities Act for
sale to the public (including registrations pursuant to Section
2.1 hereof, but excluding the registration on Form SB-2 that the
Company intends to file by September 30, 2001 with respect to
certain options, warrants and shares of Common Stock outstanding
as of the date of the Securities Purchase Agreement), whether
for its own account or for the account of other security holders
or both (except registration statements on Form X-0, X-0 or
another form not available for registering the Eligible
Securities for sale to the public), each such time it will give
written notice to all Holders of its intention to do so. Upon
the written request of any Holder (a "Piggyback Request"), given
within 20 business days after receipt of any such notice, to
register any of its Eligible Securities, the Company shall,
subject to Section 2.2(b) below, cause the Eligible Securities
as to which registration shall have been so requested to be
covered by the registration statement proposed to be filed by
the Company.
(b) In the event that any registration statement
described in this Section 2.2 shall relate, in whole or in part,
to an underwritten public offering of shares of Common Stock,
the Eligible Securities to be registered must be sold through
the same underwriters as have been selected by the Company (or
agreed to pursuant to Section 2.1 hereof, if applicable).
Otherwise, the method of distribution of the Eligible Securities
to be sold by any Holder making a Piggyback Request shall be as
specified therein. Except with respect to all Holders (and
their respective Affiliates) in the case of a registration
statement filed pursuant to a Registration Request under Section
2.1 hereof, the number of shares of Common Stock to be included
in such registration statement on account of any person may be
reduced if and to the extent that the underwriter or
underwriters shall be of the opinion that such inclusion would
materially adversely affect the marketing of the total number of
shares of Common Stock proposed to be sold, and the number of
shares to be registered and sold by each person (other than the
Company) shall be reduced pro rata according to the relative
number of fully diluted shares of Common Stock owned by such
person. Notwithstanding the foregoing provisions of this
Section 2.2, the Company may withdraw any registration statement
referred to in this Section 2.2 (other than a registration
statement filed pursuant to a Registration Request under Section
2.1) without thereby incurring any liability for such withdrawal
to any requesting Holder.
2.3 Registration Procedures. If and whenever the Company
is required by the provisions of Sections 2.1 or 2.2 to effect
the registration of any Eligible Securities under the Securities
Act, the Company shall:
(a) prepare and file with the Commission a
registration statement with respect to such securities that will
permit the public sale thereof in accordance with the method of
distribution specified in the applicable Registration Request,
and the Company shall use its best efforts (i) to cause such
registration statement to be filed within 60 days of receipt of
the Registration Request, (ii) to cause such registration
statement to be declared effective as promptly as practicable
and (iii) to maintain the effectiveness of such registration
statement for a period of not less than 90 days or, in the case
of a registration statement pursuant to a Registration Request
under Section 2.1, until such times as all securities registered
thereunder have been sold;
(b) promptly prepare and file with the Commission
such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be
necessary to effect and maintain the effectiveness of such
registration statement for the period specified in Section
2.3(a) and as to comply with the provisions of the Securities
Act with respect to the disposition of all Eligible Securities
covered by such registration statement in accordance with the
intended method of disposition set forth in such registration
statement for such period, including such amendments or
supplements as are necessary to cure any untrue statement or
omission referred to in Section 2.3(e)(vi);
(c) provide to the managing underwriter or
underwriters and not more than one counsel for all underwriters,
the Holders of Eligible Securities to be included in such
registration statement and not more than one counsel for all
such Holders the opportunity to participate in the preparation
of (i) such registration statement, (ii) each prospectus
relating thereto and included therein or filed with the
Commission and (iii) each amendment or supplement thereto;
(d) make available for inspection by the parties
referred to in Section 2.3(c) such financial and other
information and books and records of the Company, and cause the
officers, directors and employees of the Company, and counsel
and independent certified public accountants of the Company, to
respond to such inquiries, as shall be reasonably necessary, in
the judgment of respective counsel to such Holders and such
underwriter or underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act;
provided, however, that each such person shall be required to
retain in confidence and not to disclose to any other person any
information or records reasonably designated by the Company in
writing as being confidential until such time as such
information becomes a matter of public record (whether by virtue
of its inclusion in such registration statement or otherwise),
unless (i) such person shall be required to disclose such
information pursuant to the subpoena or order of any court or
other governmental agency or body having jurisdiction over the
matter or (ii) such information is required to be set forth in
such registration statement or the prospectus included therein
or in an amendment to such registration statement or an
amendment or supplement to such prospectus in order that such
registration statement, prospectus, amendment or supplement, as
the case may be, shall not contain an untrue statement of a
material fact or omit to state therein a material fact required
to be stated therein or necessary to make the statements therein
not misleading, and such information has not been so set forth
after the request by a Holder to such effect;
(e) immediately notify the persons referred to in
Section 2.3(c) and (if requested by any such person) confirm
such advice in writing, (i) when such registration statement or
any prospectus included therein or any amendment or supplement
thereto has been filed and, with respect to such registration
statement or any such amendment, when the same has become
effective, (ii) of any written or material comments by the
Commission with respect thereto or any request by the Commission
for amendments or supplements to such registration statement or
prospectus or for additional information, (iii) of the issuance
by the Commission of any stop order suspending the effectiveness
of such registration statement or the initiation of any
proceedings for that purpose, (iv) if at any time the
representations and warranties of the Company contemplated by
Section 2.3(1)(i) cease to be true and correct in all material
respects, (v) of the receipt by the Company of any notification
with respect to the suspension of the qualification of any
Eligible Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose or
(vi) at any time when a prospectus is required to be delivered
under the Securities Act, of the occurrence or failure to occur
of any event, or any other change in law, fact or circumstance,
as a result of which such registration statement, prospectus or
any amendment or supplement thereto, or any document
incorporated by reference in any of the foregoing, contains an
untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances
then existing;
(f) take reasonable efforts to prevent or obtain the
withdrawal at the earliest practicable date of any order
suspending the effectiveness of such registration statement or
any post-effective amendment thereto;
(g) if requested by the managing underwriter or
underwriters or the Holders of at least a majority of the
Eligible Securities being sold in connection with an
underwritten public offering, promptly incorporate in a
prospectus supplement or post-effective amendment such
information as such managing underwriter or underwriters or such
Holders reasonably specify should be included therein relating
to the terms of the sale of such Eligible Securities, including,
without limitation, information with respect to the number of
Eligible Securities being sold to such underwriters, the names
and descriptions of such Holders, the purchase price being paid
therefor by such underwriters and any other terms of the
underwritten (or best efforts underwritten) offering of the
Eligible Securities to be sold in such offering, and make all
required filings of such prospectus supplement or post-effective
amendment promptly after notification of the matters to be
incorporated in such prospectus supplement or post-effective
amendment;
(h) furnish to each Holder of Eligible Securities
included in such registration and each underwriter and counsel
for Holder, if any, thereof a copy of such executed registration
statement, each such amendment and supplement thereto (in each
case including all exhibits thereto, whether or not such
exhibits are incorporated by reference therein) and such number
of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary
prospectus) and each amendment or supplement thereto, in
conformity with the requirements of the Securities Act, as such
Holder and managing underwriter, if any, may reasonably request
in order to facilitate the disposition of such Eligible
Securities by such Holder or by the participating underwriters;
(i) use its best efforts to (i) register or qualify
the Eligible Securities to be included in such registration
statement under such other securities laws or blue sky laws of
such jurisdictions as any Holder of such Eligible Securities and
each managing underwriter, if any, thereof shall reasonably
request, (ii) keep such registrations or qualifications in
effect for so long as is necessary to effect the disposition of
such Eligible Securities in the manner contemplated by the
registration statement, the prospectus included therein and any
amendment or supplement thereto and (iii) take any and all such
actions as may be reasonably necessary or advisable to enable
such Holder and any participating underwriter or underwriters to
consummate the disposition in such jurisdictions of such
Eligible Securities;
(j) cooperate with the Holders of the Eligible
Securities included in such registration and the managing
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Eligible Securities to be
sold, which certificates shall be printed, lithographed or
engraved, or produced by any combination of such methods, and
which shall not bear any restrictive legends; and, in the case
of an underwritten public offering, enable such Eligible
Securities to be registered in such names as the underwriter or
underwriters may request at least two (2) business days prior to
any sale of such Eligible Securities;
(k) provide not later than the effective date of the
registration statement a transfer agent and registrar for such
Eligible Securities and a CUSIP number for all Eligible
Securities;
(l) enter into an underwriting agreement, engagement
letter, agency agreement, "best efforts" underwriting agreement
or similar agreement, as appropriate, and take such other
actions in connection therewith as the Holders of at least a
majority of the Eligible Securities to be included in such
registration shall reasonably request in order to expedite or
facilitate the disposition of such Eligible Securities, and in
connection therewith, whether or not an underwriting agreement
is entered into and whether or not the registration is an
underwritten public offering, (i) make such representations and
warranties to the Holders of such Eligible Securities included
in such registration and the underwriters, if any, in form,
substance and scope as are customarily made in an underwritten
public offering; (ii) obtain an opinion of counsel to the
Company in customary form and covering such matters as are
customarily covered by such an opinion as the Holders of at
least a majority of such Eligible Securities and the
underwriters, if any, may reasonably request, addressed to each
participating Holder and the underwriters, if any, and dated the
effective date of such registration statement (or, if such
registration includes an underwritten public offering, dated the
date of the closing under the underwriting agreement); (iii)
obtain a "cold comfort" letter from the independent certified
public accountants of the Company addressed to the Holders of
the Eligible Securities included in such registration and the
underwriters, if any, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, also dated the date of the closing
under the underwriting agreement), such letter to be in
customary form and covering such matters as are customarily
covered by such letters; (iv) deliver such documents and
certificates as may be reasonably requested by the Holders of at
least a majority of the Eligible Securities included in such
registration and the underwriters, if any, to evidence
compliance with clause (i) of this Section 2.3(1) and with any
customary conditions contained in the underwriting agreement or
other agreement entered into by the Company and (v) undertake
such obligations relating to expense reimbursement,
indemnification and contribution as are provided in Sections
2.4, 2.5 and 2.6 hereof;
(m) cause all such Eligible Securities registered
hereunder to be listed on each securities exchange or over-the-
counter market on which similar securities issued by the Company
are then listed, and, if not so listed, to be listed on the NASD
automated quotation system and, if listed on the NASD automated
quotation system, use its commercially reasonable efforts to
secure designation of all such Eligible Securities covered by
the registration statement as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 of the Commission
or, failing that, to secure NASDAQ authorization for such
Eligible Securities and, without limiting the generality of the
foregoing, to use its commercially reasonable efforts to arrange
for at least two market makers to register as such with respect
to such Eligible Securities with the NASD;
(n) make available on a reasonable basis senior
management personnel of the Company to participate in, and cause
them to cooperate with the selling Holders of Eligible
Securities or the managing underwriter in any underwritten
offering in connection with "road show" and other customary
marketing activities, including "one-on-one" meetings with
prospective purchasers of the Eligible Securities to be sold in
the underwritten offering and otherwise to facilitate, cooperate
with, and participate in each proposed offering contemplated
herein and customary selling efforts related thereto, in each
case to the same extent as if the Company were engaged in a
primary registered offering of its capital stock; and
(o) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission.
Notwithstanding the provisions of Section 2.3(a), the
Company's obligation to file a registration statement, or cause
such registration statement to become effective, shall be
suspended, without incurring any liability to any Holder, for a
period not to exceed 90 days if there exists at the time
material non-public information relating to the Company that,
in the reasonable opinion of the Company, should not be
disclosed, provided that any such suspension shall occur no
more than once in any 12-month period. In such an event, the
Company shall promptly inform all Holders of the Company's
decision to defer filing of a registration statement and shall
notify all Holders promptly (but in any event not later than
upon the expiration of the 90-day period specified in the
immediately preceding sentence) of the recommencement of the
Company's best efforts to file the registration statement and
to cause the registration statement to become effective. If
the Company shall so postpone the filing of a registration
statement, (i) the Company shall use its reasonable best
efforts to limit the delay to as short a period as is
practicable and (ii) the Holders shall have the right to
withdraw the request for registration by giving written notice
to the Company at any time. In the event of such withdrawal,
such request shall not be counted for purposes of the number of
requests for registration to which the Holders are entitled
pursuant to Section 2.1(a).
In connection with each registration of Eligible
Securities hereunder, each Holder thereof will furnish to the
Company in writing such information with respect to it and the
proposed distribution by it as shall be reasonably necessary in
order to assure compliance with applicable federal and state
securities laws. Each such Holder also agrees to notify the
Company as promptly as practicable of any inaccuracy or change
in information previously furnished by such Holder to the
Company or of the occurrence of any other event, in either case
as a result of which any prospectus relating to such
registration contains an untrue statement of a material fact
regarding such Holder or the distribution of such Eligible
Securities or omits to state any material fact regarding such
Holder or the distribution of such Eligible Securities required
to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then
existing, and promptly to furnish to the Company any additional
information required to correct and update such previously
furnished information or required so that such prospectus shall
not contain, with respect to such Holder or the distribution of
such Eligible Securities, an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, in light of the circumstances then existing. Each
Holder further agrees that upon receipt of any notice referred
to in the immediately preceding sentence, or upon receipt of
any notice from the Company pursuant to Section 2.2(e)(vi)
hereof, such Holder shall forthwith discontinue the disposition
of Eligible Securities pursuant to the registration statement
applicable to such Eligible Securities until such Holder shall
have received copies of an amended or supplemented registration
statement or prospectus, and if so directed by the Company,
such Holder shall deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in
such Holder's possession of the prospectus covering such
Eligible Securities at the time of receipt of such notice.
2.4 Expense. The Company shall pay all expenses incurred
in complying with Sections 2.1 and 2.2, including without
limitation all registration and filing fees, printing expenses,
fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses of one counsel
for the selling Holders, fees and expenses (including counsel
fees) incurred in connection with complying with state
securities or "blue sky" laws (other than those that by law must
be paid by the selling security holders), fees of the transfer
taxes, fees of transfer agents and registrars and stock exchange
listing fees, but excluding all fees and expenses of counsel for
the underwriters, if any, and all underwriting discounts and
selling commissions applicable to the sale of Eligible
Securities. All expenses of participating sellers other than
those assumed by the Company in this Agreement shall be borne by
such sellers in proportion to the number of shares of Eligible
Securities sold by each seller or as they may otherwise agree.
2.5 Indemnification.
(a) In the event of a registration of Eligible
Securities under the Securities Act pursuant to Sections 2.1 and
2.2, the Company shall indemnify and hold harmless, to the
fullest extent permitted by law, each selling Holder, its
Affiliates, each of their respective officers, directors,
employees and agents, each underwriter of such Eligible
Securities and each other person, if any, who controls such
selling Holder or underwriter within the meaning of the
Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such selling Holder,
Affiliate, their respective officer, director, employee, agent,
underwriter or controlling person may become subject under the
Securities Act or otherwise or in any action in respect thereof,
and will reimburse each such person for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred, insofar as
such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in any registration statement under which such
Eligible Securities were registered under the Securities Act
pursuant to Sections 2.1 or 2.2, any preliminary prospectus or
final prospectus contained therein, or any amendment or
supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the
Company shall not be liable to any such selling Holder,
Affiliate, officer, director, employee, agent, underwriter or
controlling person in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in conformity with information
furnished by such selling Holder, Affiliate officer, director,
employee, agent, underwriter or controlling person in writing
specifically for use in such registration statement or
prospectus.
(b) Each selling Holder of such Eligible Securities,
severally and not jointly, will indemnify and hold harmless the
Company, each underwriter and each person, if any, who controls
the Company or any underwriter within the meaning of the
Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each other
seller of securities registered by the registration statement
covering such Eligible Securities and each person, if any, who
controls such seller, against all losses, claims, damages or
liabilities, joint or several, to which the Company or any such
officer, director, underwriter, other seller or controlling
person may become subject under the Securities Act or otherwise,
and shall reimburse the Company and each such officer, director,
underwriter, other seller and controlling person for any legal
or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action, insofar as such losses, claims, damages or
liabilities (or action in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of
material fact or omission or alleged omission of a material fact
required to be stated therein made in reliance upon and in
conformity with information pertaining to such Holder furnished
in writing to the Company by such Holder specifically for use in
the registration statement or prospectus relating to such
Eligible Securities. Notwithstanding the immediately preceding
sentence, the aggregate liability of each such Holder hereunder
shall not in any event exceed the net proceeds received by such
Holder from the sale of Eligible Securities covered by such
registration statement.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such
indemnified party, if a claim in respect thereof is to be made
against an indemnifying party hereunder, shall notify such
indemnifying party in writing thereof, but the omission so to
notify such indemnifying party shall not relieve such
indemnifying party from any liability that it may have to any
indemnified party other than under this Section 2.5 and, unless
the failure to so provide notice materially adversely affects or
prejudices such indemnifying party's defense against any action,
shall not relieve such indemnifying party from any liability
that it may have to any indemnified party under this Section
2.5. In case any such action shall be brought against any
indemnified party and it shall notify an indemnifying party of
the commencement thereof, such indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from
such indemnifying party to such indemnified party of its
election so to assume and undertake the defense thereof, such
indemnifying party shall not be liable to such indemnified party
under this Section 2.5 for any legal expenses subsequently
incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation and
of liaison with counsel so selected; provided, however, that, if
the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses
available to it that are different from or additional to those
available to the indemnifying party or if the interests of the
indemnified party reasonably may be deemed to conflict with the
interests of the indemnifying party, the indemnified party shall
have the right to select a separate counsel and to assume and
undertake the defense of such action, with the expenses and fees
of such separate counsel and other expenses related to such
defense to be reimbursed by the indemnifying party as incurred.
(d) No indemnifying party shall be liable for any
amounts paid in a settlement effected without the consent of
such indemnifying party, which consent shall not be unreasonably
withheld or delayed. No indemnifying party shall, without the
indemnified party's prior written consent, consent to entry of
any judgment or enter into any settlement that does not include
as an unconditional term thereof the giving by the plaintiff to
the indemnified party of a release from all liability in respect
of such claim or litigation.
(e) The reimbursements required by this Section 2.5
shall be made by periodic payment during the course of the
investigation or defense, as and when bills are received and
expenses incurred.
(f) The indemnification provided for under this
Agreement shall remain in full force and effect regardless of
any investigation made by or on behalf of the indemnified party
or any officer, director, employee, agent, or controlling person
of such indemnified party and shall survive the transfer of
securities.
2.6 Contribution. If for any reason the indemnity set
forth in Section 2.5 is unavailable or is insufficient to hold
harmless an indemnified party, then the indemnifying party
shall contribute to the amount paid or payable by such
indemnified party as a result of the aggregate losses, claims,
damages, liabilities and expenses of the nature contemplated
by said indemnity (a) in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the
one hand and such indemnified party on the other hand
(determined by reference to, among other things, whether the
actual or alleged untrue statement of a material fact or
actual or alleged omission to state a material fact relates to
information supplied by the indemnifying party or such
indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent
such untrue statement or omission) or (b) if the allocation
provided by Section 2.6(a) above is not permitted by
applicable law or provides a lesser sum to such indemnified
party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative
fault of the indemnifying party and such indemnified party but
also the relative benefits received by the indemnifying party
on the one hand and such indemnified party on the other hand,
as well as any other relevant equitable considerations.
The Parties agree that it would not be just and
equitable if contribution pursuant to this Section 2.6 were
determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable
consideration referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, liabilities or
expenses referred to in such paragraph shall be deemed to
include, subject to the limitations set forth above, any legal
or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 2.6,
a Holder shall not be required to contribute any amount in
excess of the amount by which the net proceeds of the sale of
Eligible Securities sold by such Holder and distributed to the
public exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person that is not guilty of
such fraudulent misrepresentation.
2.7 Underwriting Agreement. If Eligible Securities are to
be sold pursuant to a registration statement in an underwritten
offering pursuant to Sections 2.1 or 2.2, the Company and each
selling Holder of Eligible Securities shall enter into a written
agreement with the managing underwriter or underwriters selected
in the manner herein provided in such form and containing such
provisions as are reasonably satisfactory to the Company and
each such selling Holder and as are customary in the securities
business for such an arrangement among such underwriter or
underwriters, each such selling Holder and companies of the
Company's size and investment stature. No Holder of Eligible
Securities may participate in any underwritten sale of Eligible
Securities pursuant to Sections 2.1 or 2.2 hereof unless such
Holder agrees to sell such Holder's securities in accordance
with any underwriting arrangements approved by the persons
entitled hereunder to specify the method of distribution of the
securities being registered and completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the
terms of such underwriting arrangements. Notwithstanding
anything to the contrary contained herein, no Holder of Eligible
Securities shall be required to make any representations and
warranties to the Company or the underwriters other than
representations or warranties regarding the identity of such
Holder, such Holder's Eligible Securities, such Holder's ability
to transfer title to such Holder's Eligible Securities and such
Holder's intended method of distribution or any other
representations required by applicable law.
2.8 Limitations on Subsequent Registration Rights. If,
subsequent to the date hereof, the Company grants to any holders
or prospective holders of the Company's securities the right to
require that the Company register any securities of the Company
under the Securities Act, such registration rights shall be
granted subject to the rights of the Holders to include all or
part of their Eligible Securities in any such registration on
the terms and conditions set forth in Section 2.2.
2.9 Reports Under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144
and any other rule or regulation of the SEC that may at any time
permit the Holders to sell securities of the Company to the
public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in Rule 144, at all times
so long as the Company remains subject to the periodic reporting
requirements under Sections 13 or 15(d) of the Exchange Act;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the
Exchange Act, as is necessary to enable the Holders to use Form
S-3 for the sale of its Eligible Securities;
(c) file with the SEC in a timely manner all reports
and other documents as may be required of the Company under the
Securities Act and the Exchange Act; and
(d) furnish to each Holder, so long as such Holder
owns any Eligible Securities, forthwith upon request (i) a
written statement by the Company that it has complied with the
reporting requirements of Rule 144, the Securities Act and the
Exchange Act (at any time after it has become subject to such
reporting requirements), or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant
to such form.
2.10 Market-Standoff Agreement.
(a) Market-Standoff Period; Agreement. If requested
by the Company and the managing underwriter of Common Stock of
the Company, each Holder agrees not to sell, make any short sale
of, loan, grant any option for the purchase of, or otherwise
dispose of any securities of the Company (other than those
included in the registration) without the prior written consent
of such underwriter, for such period of time (not to exceed 180
days) from the effective date of a registration statement filed
under the Act as may be requested by such underwriter and to
execute an agreement reflecting the foregoing as may be
requested by such underwriter at the time of the Company's
underwritten public offering; provided that such agreement shall
only apply to the first such registration statement of the
Company including securities to be sold on its behalf to the
public after the date hereof.
(b) Limitations. The obligations described in
Section 2.10(a) shall apply only if all officers and directors
of the Company and all significant equity holders of the Company
enter into similar agreements, and shall not apply to a
registration relating solely to employee benefit plans, or to a
registration relating solely to a transaction pursuant to Rule
145 under the Act. If any Person, including any officer or
director of the Company and any equity holder of the Company, is
released from its obligations under Section 2.10(a) or such
similar arrangements, all Holders shall be released from such
obligations.
2.11 Subsequent Public Offering. At any time following the
Closing, upon request of Holders holding a majority of the
Eligible Securities, the Company shall use its best efforts to
conduct a firmly underwritten primary registered public offering
of its Common Stock as promptly as practical following the
receipt of such notice, if, in the opinion of a major investment
banking firm selected by Holders holding a majority of the
Eligible Securities, the public equity markets would be
receptive to such an offering.
ARTICLE III
PARTICIPATION RIGHTS
3.1 Right of First Offer. Subject to the terms and
conditions specified in this Section 3.1, the Company hereby
grants to each Investor a right of first offer with respect to
future sales by the Company of its Shares (as hereinafter
defined).
Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of,
any class of its capital stock ("Shares"), the Company shall
first make an offering of such Shares to each Investor in
accordance with the following provisions:
(a) The Company shall deliver a notice by registered
or certified mail ("Notice") to the Investors stating (i) its
bona fide intention to offer such Shares, (ii) the number of
such Shares to be offered and (iii) the price and terms, if any,
upon which it proposes to offer such Shares.
(b) Within 30 calendar days after delivery of the
Notice, each Investor may elect to purchase or obtain, at the
price and on the terms specified in the Notice, up to that
portion of such Shares that equals the proportion that the sum
of Common Stock acquired from time to time pursuant to this
Article III and the number of shares of Eligible Securities held
by such Investor (and its Affiliates) bears to the total number
of shares of Common Stock then outstanding (assuming full
conversion and exercise of all convertible or exercisable
securities). The Company shall promptly, in writing, inform
each Investor that elects to purchase all the Shares available
to it (each, a "Fully-Exercising Investor") of any other
Investor's failure to do likewise. During the 10-day period
commencing after receipt of such information, each Fully-
Exercising Investor (and its Affiliates) shall be entitled to
obtain its initial allocation of the Shares, plus, if desired,
that portion of the Shares for which Investors were entitled to
subscribe but that were not subscribed for by the Investors that
is equal to the proportion that the number of shares of Eligible
Securities issued and held by such Fully-Exercising Investor
(and its Affiliates) bears to the total number of shares of
Eligible Securities issued and held by all such Fully-Exercising
Investors (and their Affiliates) desiring to purchase such
unsubscribed Shares.
(c) The Company may, during the 90-day period
following the expiration of the periods provided in
Section 3.1(b) hereof, offer the remaining unsubscribed portion
of the Shares to any person or persons at a price not less than,
and upon terms no more favorable to the offeree than those
specified in, the Notice. If the Company does not enter into an
agreement for the sale of the Shares within such period, or if
such agreement is not consummated within 90 days of the
execution thereof, the rights provided hereunder shall be deemed
to be revived and such Shares shall not be offered unless first
reoffered to the Investors in accordance herewith.
(d) The right of first offer in this Section 3.1
shall not be applicable (i) to the issuance or sale of Common
Stock (or options therefor) to employees, consultants and
directors, pursuant to plans or agreements approved by the Board
of Directors for the purpose of soliciting or retaining their
services, (ii) to the issuance of securities in connection with
a bona fide business acquisition of or by the Company, whether
by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise, (iii) to Common Stock issued upon conversion
of the Series A Preferred Stock or the exercise of the Common
Stock Warrants or the Placement Agent Warrants, or the Series A
Preferred Stock issued upon the exercise of Series A Preferred
Stock Warrants, (iv) to the issuance of securities pursuant to
currently outstanding options, warrants, notes or other rights
to acquire securities of the Company, (v) to a Qualified Primary
Offering, (vi) to the issuance of Series A Preferred Stock and
Series A Preferred Stock Warrants pursuant to the Additional
Purchase Agreement, in compliance with Section 2.3 of the
Securities Purchase Agreement or (vii) to stock splits, stock
dividends or like transactions.
ARTICLE IV
MISCELLANEOUS
4.1 Assignment; Third Party Beneficiaries. All covenants
and agreements contained in this Agreement by or on behalf of
any of the signatories shall bind and inure to the benefit of
the respective successors and assigns of the signatories,
whether so expressed or not. If any transferee of any Holder of
Eligible Securities shall acquire Eligible Securities in any
manner (other than by way of a registered public offering),
whether by operation of law or otherwise, such Eligible
Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Eligible Securities
such transferee shall be entitled to receive the benefits of a
Holder and be conclusively deemed to have agreed to be bound by
and to perform all of the terms and provisions of this
Agreement. The benefits to which any such permitted transferee
shall be entitled shall include, without limitation, the rights
to register Eligible Securities under Sections 2.1 or 2.2
hereof; provided, however, that any such transferee shall not be
entitled to deliver to the Company a Registration Request
pursuant to Section 2.1 hereof unless such permitted transferee
acquired from its transferor at least 1,000,000 Eligible
Securities; provided, however, that the transfer of registration
rights held pursuant to this Agreement to an Affiliate,
shareholder, equity holder or officer of any Investor or its
Affiliates shall be without restriction as to minimum
shareholding.
4.2 Notices. All notices, consents and other
communications under this Agreement shall be in writing and
shall be deemed to have been duly given when (a) delivered by
hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by registered or certified mail, return
receipt requested or (c) when received by the addressee, if sent
by Express Mail, Federal Express or other express delivery
service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such
other addresses and telecopier numbers as a party may designate
as to itself by notice to the other parties):
(i) If to the Company:
0000 Xxxxxxxxx Xxxx
Xxx Xxxxx Xxxxxxx, XX
00000-0000
Fax No. 000-000-0000
Attention: General
Counsel.
(ii) If to an Investor: at the address set forth in
the Securities Purchase Agreement or Additional Purchase
Agreement, as applicable.
(iii) If to a Holder other than an Investor, at
the most recent address for such Holder maintained in the books
and records of the Company.
4.3 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New
York.
4.4 Amendments.
(a) This Agreement may not be amended or modified,
and no provision hereof may be waived, except in writing, and
any such writing shall only be effective with respect to a Party
who has executed such writing. The failure of any of the
Parties to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver of
that term or deprive such Party of the right thereafter to
insist upon strict adherence to that term or any other term of
this Agreement.
(b) The Company may enter into the Additional
Purchase Agreement. Each Investor agrees that upon each
Additional Purchaser's acquisition of Series A Preferred Stock
and Series A Preferred Stock Warrants in compliance with Section
2.3 of the Securities Purchase Agreement and execution and
delivery of a signature page to the joinder agreement between
the Company and each such Additional Purchaser pursuant to which
such Additional Purchaser agrees to become a Party and to be
bound by the terms hereof, each such Additional Purchaser shall
become a Party to this Agreement for all intents and purposes
and shall then be an Investor hereunder. The Company shall then
revise Schedule I to reflect the addition of each such
Additional Purchaser. The addition of such new parties and
revision of Schedule I shall not constitute a modification,
waiver or amendment of this Agreement that requires the consent
of or any writing from any of the Parties hereto.
4.5 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument. It shall not be necessary in making proof of this
Agreement to produce or account for more than one such
counterpart for each of the parties hereto. Delivery by
facsimile by any of the parties hereto of an executed
counterpart of this Agreement shall be effective as an original
executed counterpart hereof and shall be deemed an original
executed counterpart hereof and a representation that an
original executed counterpart hereof will be delivered.
4.6 Remedies. The Parties acknowledge that there may be
no adequate remedy at law if any Party fails to perform any of
its obligations hereunder and that each Party may be irreparably
harmed by any such failure, and accordingly agree that each
Party, in addition to any other remedy that it may be entitled
at law or in equity, shall be entitled to compel specific
performance of the obligations of any other Party under this
Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any state thereof
having jurisdiction.
4.7 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
4.8 Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in
any circumstances, is held invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and
of the remaining provisions contained herein shall not be in any
way impaired thereby, it being intended that all of the rights
and privileges of the Investors and Holders shall be enforceable
to the fullest extent permitted by law.
4.9 Entire Agreement. This Agreement is intended by the
Parties as a final expression of their agreement and a complete
and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties or
undertakings other than those set forth or referred to herein or
therein. This Agreement supersedes all prior agreements and
understandings between the Parties with respect to such subject
matter.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Parties have caused this Agreement
to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
COMPANY INVESTORS
ELECTRIC CITY CORP., NEWCOURT CAPITAL USA
INC.,
a Delaware corporation a Delaware corporation
By:
By:_____________________________
Name: Xxxx Xxxxxx
Name:___________________________
Title: Chief Executive Officer
Title:____________________________
NEWCOURT CAPITAL SECURITIES,
INC. a Delaware corporation
By:
Name:
Title:
EP POWER FINANCE, L.L.C.,
a Delaware limited liability
company
By:
Name:
Title:
XXXXXX XXXXXXX XXXX XXXXXX
EQUITY FUNDING, INC., a
Delaware corporation
By:
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
ORIGINATORS INVESTMENT PLAN,
L.P., a Delaware limited
partnership
By: MSDW OIP Investors,
Inc., its
general partner
By:
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
DUKE CAPITAL PARTNERS, LLC,
a Delaware limited liability
company
By:
Name:
Title:
SCHEDULE I
INVESTORS
Newcourt Capital USA Inc.
Newcourt Capital Securities, Inc.
EP Power Finance, L.L.C.
Xxxxxx Xxxxxxx Xxxx Xxxxxx Equity Funding, Inc.
Originators Investment Plan, X.X.
Xxxx Capital Partners, LLC
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