Exhibit 3
STOCK TRADING AGREEMENT
This Stock Trading Agreement, dated as of June 27, 2003 (as may be
amended from time to time, this "Agreement"), is made by and among Electric City
Corp., a Delaware corporation (the "Company"), Xxxxxxx X. Xxxxxxx, an individual
("Xxxxxxx"), Cinergy Ventures II, LLC, a Delaware limited liability
company("Cinergy"), SF Capital Partners, a British Virgin Islands company
("SFCP"), Xxxxx X. Xxxxxxx, an individual ("Xxxxxxx") and Xxxx Xxxxxx Hurvis
Revocable Trust, an Illinois trust ("Hurvis Trust") (collectively, Xxxxxxx,
Cinergy, SFCP, Xxxxxxx and Hurvis Trust are referred to herein as the
"Purchasers"), and shall become effective upon the Closing under the Securities
Purchase Agreement (as herein defined).
W I T N E S S E T H:
WHEREAS, the Purchasers and the Company have entered into that certain
Securities Purchase Agreement, dated as of June 27, 2003 (as it may be amended
from time to time, the "Securities Purchase Agreement"), whereby the Company
will sell and the Purchasers will buy shares of the Company's Series D
Convertible Preferred Stock, par value $0.01 per share (the "Series D Preferred
Stock"), together with warrants to purchase Series D Preferred Stock, shares of
Common Stock and warrants to purchase Common Stock; and
WHEREAS, it is a condition to the obligations of the Purchasers to
purchase such securities pursuant to the Securities Purchase Agreement that the
Parties (as defined below) enter into this 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 Defined Terms. 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 meanings, such
meanings to be equally applicable to the singular and plural forms thereof:
"Affiliate" means, as applied to any Person, any other Person
controlling, controlled by or under common control with such Person.
For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"),
as applied to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of any such other Person, whether through the
ownership of voting securities or by contract or otherwise. With
respect to individuals, the term Affiliate shall also include such
individuals parents, spouse, children or grandchildren.
"Agreement" shall have the meaning set forth in the preamble
hereof.
"Average Daily Trading Volume" with respect to any trading
day, means the average daily trading volume of the Common Stock as
reported on the American Stock Exchange (or, if not traded on the
American Stock Exchange, any national securities exchange or automated
quotation services on which the Common Stock is then listed for
trading) for the twenty (20) consecutive trading days (as adjusted to
exclude the highest and the lowest volume trading days for such twenty
(20) consecutive trading day period) ending on the date immediately
prior to such trading day.
"Block Sales" means a sale of at least 10,000 shares of Common
Stock.
"Closing" shall have the meaning set forth in the Securities
Purchase Agreement.
"Closing Price" means the closing price of the Common Stock as
reported on the American Stock Exchange (or, if not traded on the
American Stock Exchange, any national securities exchange or automated
quotation services on which the Common Stock is then listed for
trading).
"Common Stock" means and includes the Company's authorized
common stock, par value $0.0001 per share.
"Company" shall have the meaning set forth in the preamble
hereof.
"Effective Date" means the Closing Date (as defined in the
Securities Purchase Agreement).
"Election Period" shall have the meaning set forth in Section
2.2 hereof.
"Parties" means all of the parties that are signatories to
this Agreement from time to time, including under any joinders executed
pursuant to the terms hereof, other than the Company.
"Person" means and includes an individual, a corporation, a
limited liability company, an association, a partnership, a trust or
estate, a government or any department or agency thereof.
"Purchasers" shall have the meaning set forth in the preamble
hereof.
"Qualified Primary Offering" means a firmly underwritten
primary registered public offering of Common Stock by the Company that
raises at least $35 million in aggregate gross proceeds at a price of
at least $5.00 per share (as adjusted for stock splits, stock
combinations and the like).
"Sale Notice" shall have the meaning set forth in Section 2.2
hereof.
"Securities Purchase Agreement" shall have the meaning set
forth in the first recital hereof.
"Selling Party" shall have the meaning set forth in Section
2.2 hereof.
"Series D Preferred Stock" shall have the meaning set forth in
the first recital hereof.
"Subject Common Stock" means any shares of Common Stock which
a Party acquires pursuant to the Securities Purchase Agreement, the
warrants to purchase shares of Common Stock issued thereunder, or
conversion of any shares of Series D Preferred Stock.
ARTICLE II
TRADING RESTRICTIONS
2.1 Public Sales. Each Party shall be subject to the following
trading restrictions from time to time concerning its respective holdings of
Common Stock:
(a) During the term of this Agreement, no Party may sell
any of its Subject Common Stock into the public
market before the completion of a Qualified Primary
Offering; provided, however, that prior to the
completion of a Qualified Primary Offering each Party
may sell its Subject Common Stock into the public
market, severally and not jointly, subject to the
following conditions:
(i) the Closing Price must exceed $4.00 per share (as
adjusted for stock splits, stock combinations and the
like) for each of the twenty (20) consecutive trading
days immediately prior to the date of sale;
(ii) the Average Daily Trading Volume immediately prior to
the date of sale must exceed 150,000 shares;
(iii) the number of shares of Subject Common Stock sold by
such Party on any trading day may not exceed five
percent (5%) of the Average Daily Trading Volume;
(iv) the number of shares of Subject Common Stock sold by
such Party into the public market in any three-month
period may not exceed fifteen percent (15%) of such
Party's total holdings of Subject Common Stock
(calculated assuming the exercise of all rights,
options and warrants to purchase Subject Common Stock
or securities convertible or exchangeable for shares
of Subject Common Stock, and the conversion or
exchange of all securities convertible or
exchangeable for Subject Common Stock) on the
Effective Date (as adjusted for stock splits, stock
combinations and the like); and
(v) Block Sales must be executed at a minimum price per
share of 90% of the ask price as reported on the
American Stock Exchange (or, if not traded on the
American Stock Exchange, any national securities
exchange or automated quotation services on which the
Common Stock is then listed for trading).
(b) If the Company completes a Qualified Primary Offering
during the term of this Agreement, each Party shall
comply with its obligations under any "lock-up"
agreement entered into by such Party in connection
with such Qualified Primary Offering. After any such
"lock-up" period expires or is terminated, each Party
may sell its Subject Common Stock into the public
market, severally and not jointly, subject to the
following conditions:
(i) the number of shares of Subject Common Stock sold by
such Party on any trading day may not exceed five
percent (5%) of the Average Daily Trading Volume;
(ii) the number of shares of Subject Common Stock sold by
such Party into the public market in any three-month
period may not exceed twenty percent (20%) of such
Party's holdings of Subject Common Stock (calculated
assuming the exercise of all rights, options and
warrants to purchase Subject Common Stock or
securities convertible or exchangeable for shares of
Subject Common Stock, and the conversion or exchange
of all securities convertible or exchangeable for
Subject Common Stock) on the Effective Date (as
adjusted for stock splits, stock combinations and the
like); and
(iii) Block Sales must be executed at a minimum price per
share of 90% of the ask price as reported on the
American Stock Exchange (or, if not traded on the
American Stock Exchange, any national securities
exchange or automated quotation services on which the
Common Stock is then listed for trading).
2.2 Private Sales. If a Party (the "Selling Party") intends to sell any
of its shares of Series D Preferred Stock or Subject Common Stock (or securities
exercisable or exchangeable for or convertible into shares of Series D Preferred
Stock or Subject Common Stock) in a private transaction (other than to an
Affiliate), the Selling Party shall send written notice (the "Sale Notice") of
such intent to each other Party. The Sale Notice shall include the following
information: (a) the type of Company capital stock or other securities the
Selling Party intends to sell; (b) the number of shares or other securities the
Selling Party intends to sell; (c) the proposed sale price per share or per
security, as applicable, and (d) any other material terms of the offer. The
other Parties shall have two (2) business days after receipt of the Sale Notice
(the "Election Period") to elect to purchase the capital stock or other
securities that are the subject of the Sale Notice by giving the Selling Party
written notice thereof within the Election Period, in which case the Selling
Party and the Party (or Parties) so electing to purchase shall complete such
sale within five (5) business days on the terms set forth in the Sale Notice. If
more than one Party elects to purchase the capital stock or other securities set
forth in the Sale Notice, then such shares or securities shall be allocated
among the Parties so electing to purchase pro rata in proportion to their
respective holdings of Subject Common Stock (calculated assuming the exercise of
all rights, options and warrants to purchase Subject Common Stock or securities
convertible or exchangeable for shares of Subject Common Stock, and the
conversion or exchange of all securities convertible or exchangeable for Subject
Common Stock held by such Parties so electing to purchase). If none of the
Parties provides written notice so electing to purchase within the Election
Period, then the Selling Party may sell the capital stock or other securities
that are the subject of the Sale Notice on terms no less favorable to the
Selling Party than those set forth in the Sale Notice to any third party within
10 business days of the date of the Sale Notice; provided, however, that any
sale of shares of Series D Preferred Stock or Subject Common Stock (or
securities exercisable or exchangeble for or convertible into shares of Series D
Preferred Stock or Subject Common Stock) to a party that is not a party to this
Agreement shall have as a condition to such sale that such party shall become a
party to and bound by this Agreement. For purposes of Sections 2.1(a)(iv) and
2.1(b)(ii), the purchasing party's holdings (if such party was not a party to
the Securities Purchase Agreement) with respect to the shares of capital stock
or other securities it purchases shall be the number of shares of Subject Common
Stock (calculated assuming the exercise of all rights, options and warrants to
purchase Subject Common Stock or securities convertible or exchangeable for
shares of Subject Common Stock, and the conversion or exchange of all securities
convertible or exchangeable for Subject Common Stock) purchased in the subject
sale.
2.3 Transfer to Affiliates. Notwithstanding anything in this Agreement
to the contrary, any party may freely sell or otherwise transfer any Series D
Preferred Stock or Subject Common Stock (or securities exercisable or
exchangeable for or convertible into shares of Series D Preferred Stock or
Subject Common Stock) it owns to its Affiliates without such sale or transfer
being subject to the terms of this Agreement; provided, however, that any such
Affiliate shall become a party to and bound by this Agreement and its ownership
and sales of shares of Series D Preferred Stock and Subject Common Stock and
other securities exercisable or exchangeable for or convertible into shares of
Series D Preferred Stock or Subject Common Stock shall be aggregated with the
transferring Party for purposes of Section 2.1.
2.4 Term of Trading Agreement. The term of the Trading Agreement shall
commence on the Effective Date and terminate on September 7, 2004.
2.5 Amendments to the Trading Agreement. The Parties may amend this
Agreement only upon the written agreement of the Parties hereto at such time and
the Company and provided that the prior written consent of holders of at least
seventy-five percent (75%) of the outstanding shares of the Company's Series A
Convertible Preferred Stock to such amendment is also obtained.
ARTICLE III
GENERAL PROVISIONS
3.1 Legend on Share Certificates. All Company securities issued at the
Closing (as defined in the Securities Purchase Agreement) or otherwise that are
subject to the terms and provisions of Article II, in addition to such other
legends as may be required by law and any other legend required by any
Transaction Document (as defined in the Securities Purchase Agreement) shall
bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
CERTAIN REQUIREMENTS AS TO TRADING CONTAINED IN THE STOCK TRADING
AGREEMENT, DATED JUNE __, 2003, BY AND AMONG THE COMPANY AND CERTAIN
SECURITY HOLDERS, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
Upon the termination of this Agreement, each Party shall be entitled to receive,
in exchange for any security bearing the legend regarding this Agreement
specifically set forth above, a security without such legend.
3.2 Injunctive Relief. It is acknowledged that it is impossible to
measure in money the damages that would be suffered if the Parties fail to
comply with the obligations imposed on them by this Agreement and that, in the
event of any such failure, an aggrieved Party would be irreparably damaged and
would not have an adequate remedy at law. Any such Party shall, therefore, be
entitled to injunctive relief and/or specific performance to enforce such
obligations, and if any action should be brought in equity to enforce any of
such provisions of this Agreement, none of the Parties shall raise the defense
that there is an adequate remedy at law.
3.3 Governing Law. Except as to matters governed by the General
Corporation Law of the State of Delaware and decisions thereunder of the
Delaware courts applicable to Delaware corporations, which shall be governed by
such laws and decisions, this Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
3.4 Entire Agreement; Waiver. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter hereof. No
waiver of any term or provision shall be effective unless in writing signed by
the party to be charged.
3.5 Binding Effect. This Agreement shall be binding on and inure to the
benefit of the Parties and, subject to the terms and provisions hereof, their
respective legal representatives, successors and assigns.
3.6 Invalidity of Provision. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction.
3.7 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be deemed but one and the same instrument and
each of which shall be deemed an original, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart for each of the parties hereto. Delivery by facsimile by any of the
parties hereto of an executed counterpart of this Agreement shall be effective
as an original executed counterpart hereof and shall be deemed a representation
that an original executed counterpart hereof will be delivered.
3.8 Notices. All notices, consents and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by certified or registered mail, return receipt requested,
or (c) when received by the addressee, if sent by Express Mail, Federal Express
or other express delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate as to itself by notice
to the other parties):
If to the Company: 0000 Xxxxxxxxx Xxxx
Xxx Xxxxx Xxxxxxx, XX 00000-0000
Fax No. 000-000-0000
Attention: Chief Executive Officer
If to another Party: at such Party's address in
accordance with the Securities
Purchase Agreement.
5.8 Headings. The descriptive headings of the several paragraphs
of this Agreement are inserted for convenience only and do not constitute part
of this Agreement.
[Balance of page intentionally left blank; signature page follows.]
IN WITNESS WHEREOF, the parties hereto have executed this
Stock Trading Agreement as of the day and year first above written.
COMPANY PURCHASERS
ELECTRIC CITY CORP., CINERGY VENTURES II, LLC, a
a Delaware corporation Delaware limited liability company
By: /s/Xxxx X. Xxxxxx By: /s/X. Xxxxxx Xxxxxx
Name: Xxxx X. Xxxxxx Name: X. Xxxxxx Xxxxxx
Title: Chief Executive Officer Title: President
/s/Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
SF CAPITAL PARTNERS LTD, a British Virgin
Islands company
By: /s/Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
/s/Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx
XXXX XXXXXX HURVIS REVOCABLE
TRUST, an Illinois trust
By: /s/Xxxx Xxxxxx Hurvis
Name: Xxxx Xxxxxx Hurvis
Title: Trustee
