Exhibit 10.5

 

FORM OF COMMON STOCK WARRANT

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED,
QUALIFIED, APPROVED OR DISAPPROVED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS AND NEITHER THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY
AUTHORITY HAS PASSED ON OR ENDORSED THE MERITS OF THESE SECURITIES.

 

THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THE SECURITIES
REPRESENTED HEREBY ARE SUBJECT TO AN INVESTOR RIGHTS AGREEMENT AND A STOCK
TRADING AGREEMENT, AS EACH OF THE SAME MAY BE AMENDED FROM TIME TO TIME, COPIES
OF WHICH ARE AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICES OF THE COMPANY.

 

WARRANT NO.     

 

WARRANT CERTIFICATE

 

TO PURCHASE SHARES OF COMMON STOCK,

 

PAR VALUE $0.0001 PER SHARE

 

OF

 

ELECTRIC CITY CORP.

 

THIS IS TO CERTIFY THAT [Purchaser], a                             company, or
its registered assigns (the “Holder”), is the owner of                    
warrants (the “Warrants”), each of which entitles the registered Holder thereof
to purchase from Electric City Corp., a Delaware corporation (the “Company”),
one fully paid, duly authorized and nonassessable share of Common Stock, par
value $0.0001 per share (the “Common Stock”), of the Company at any time or from
time to time after sixty (60) days from the Issue Date (as defined in Section
2(a)), but on or before 5:00 p.m., New York City time, on the Warrant Expiration
Date, at an exercise price of $1.00 per share, subject to adjustment from time
to time as set forth herein (the “Exercise Price”), all on the terms and subject
to the conditions hereinafter set forth.

 

The number of shares of Common Stock issuable upon exercise of each Warrant (the
“Number Issuable”) shall be determined for each Warrant by dividing $1.00 by the
Exercise Price in effect at the time of such exercise, and is initially one (1)
share of Common Stock.  Capitalized terms used herein but not otherwise defined
shall have the meanings given them in Section 13 hereof or, if not therein
defined, in the Securities Purchase Agreement.

 

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Section 1.                                            Exercise Of Warrants. 
Subject to the last paragraph of this Section 1, the Warrants evidenced hereby
may be exercised, in whole or in part, by the registered Holder hereof at any
time or from time to time after sixty (60) days from the Issue Date, but on or
before 5:00 p.m., New York City time, on the Warrant Expiration Date, upon
delivery to the Company at the principal executive office of the Company in the
United States of America, of

 

(a)                                  this Warrant Certificate,

 

(b)                                 a written notice stating that such Holder
elects to exercise the Warrants evidenced hereby in accordance with the
provisions of this Section 1 and specifying the number of Warrants being
exercised and the name or names in which such Holder wishes the certificate or
certificates for shares of Common Stock to be issued, and

 

(c)                                  payment of the Exercise Price for the
shares of Common Stock issuable upon exercise of such Warrants, which shall be
payable by any one or any combination of the following:

 

(i)                                     cash,

 

(ii)                                  certified or official bank check payable
to the order of the Company,

 

(iii)                               by the surrender (which surrender shall be
evidenced by cancellation of the relevant number of Warrants represented by any
Warrant certificate presented in connection with a Cashless Exercise (as defined
below)) of a Warrant or Warrants (represented by one or more relevant Warrant
certificates), and without the payment of the Exercise Price in cash, in return
for the delivery to the surrendering Holder of such number of shares of Common
Stock equal to the number of shares of Common Stock for which such Warrant is
exercised as of the date of exercise (if the Exercise Price were being paid in
cash) reduced by that number of shares of Common Stock equal to the number of
shares for which such Warrant is exercised multiplied by a fraction, the
numerator of which is (A) the Exercise Price and the denominator of which is (B)
the Market Price of one share of Common Stock on the Business Day that
immediately precedes the day of exercise of the Warrant, or

 

(iv)                              by the delivery of shares of Common Stock that
are valued at the Market Price on the Business Day immediately preceding the day
of the exercise of the Warrant that are either held by the Holder or are
acquired in connection with such exercise, and without payment of the Exercise
Price in cash.

 

Any share of Common Stock delivered as payment of the Exercise Price in
connection with an In-Kind Exercise (as defined below) shall be deemed to have a
value equal to the Market Price of one share of Common Stock on the Business Day
that immediately precedes the day of exercise of the Warrant.  An exercise of a
Warrant in accordance with clause (iii) above is herein referred to as a
“Cashless Exercise” and an exercise of a Warrant in accordance with clause (iv)
above is herein referred to as an “In-Kind Exercise.”  The documentation and
consideration, if any, delivered in accordance with clauses (a), (b) and (c) of
this paragraph above are collectively referred to herein as the “Warrant
Exercise Documentation.”  For the purposes of this Section 1, Market Price shall
be calculated without reference to the last sentence of the definition thereof.

 

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As promptly as practicable, and in any event within two (2) Business Days after
receipt of the Warrant Exercise Documentation, the Company shall deliver or
cause to be delivered certificates representing the number of validly issued,
fully paid and nonassessable shares of Common Stock issuable in connection with
such exercise, and if less than the full number of Warrants evidenced hereby are
being exercised, a new Warrant Certificate or Certificates, of like tenor, for
the number of Warrants evidenced by this Warrant Certificate, less the number of
Warrants then being exercised or surrendered; provided, however, that no new
Warrant Certificate need be delivered if the Warrant Expiration Date has
occurred.  Such exercise shall be deemed to have been made at the close of
business on the date of delivery of the Warrant Exercise Documentation so that
the Person entitled to receive shares of Common Stock upon such exercise shall
be treated for all purposes as having become the record holder of such shares of
Common Stock at such time.

 

The Company shall pay all expenses in connection with, and all taxes and other
governmental charges (other than income taxes of the Holder) that may be imposed
in respect of the issue or delivery of any shares of Common Stock issuable upon
the exercise of the Warrants evidenced hereby.  The Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer involved in the issue of any certificate for shares of Common Stock in
any name other than that of the registered Holder of the Warrants evidenced
hereby.

 

In connection with the exercise of any Warrants evidenced hereby, at the
Company’s option, no fractions of shares of Common Stock shall be issued, but in
lieu thereof the Company may elect to pay a cash adjustment in respect of such
fractional interest in an amount equal to any such fractional interest
multiplied by the current Market Price per share of Common Stock on the Business
Day that precedes the day of exercise.  If more than one such Warrant shall be
exercised by the Holder thereof at the same time, the number of full shares of
Common Stock issuable on such exercise shall be computed on the basis of the
total number of Warrants so exercised.

 

Notwithstanding anything to the contrary contained herein:

 

(a)                                  the number of shares of Common Stock that
may be acquired by the Holder upon any exercise of this Warrant (or otherwise in
respect hereof) shall be limited to the extent necessary to insure that,
following such exercise (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its Affiliates and any
other Persons whose beneficial ownership of Common Stock would be aggregated
with the Holder’s for purposes of Section 13(d) of the Exchange Act does not
exceed 4.999% of the total number of issued and outstanding shares of Common
Stock (including for such purpose the shares of Common Stock issuable upon such
exercise).  For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder.  Each delivery of an exercise notice hereunder will
constitute a representation by the Holder that it has evaluated the limitation
set forth in this paragraph and determined that issuance of the full number of
shares of Common Stock requested in such exercise notice is permitted under this
paragraph.  By written notice to the Company, the Holder may waive the
provisions of this paragraph but (i) any such waiver will not be effective until
the 61st

 

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day after such notice is delivered to the Company, and (ii) any such waiver will
apply only to the Holder and not to any other holder of Warrants.  This
provision shall not restrict the number of shares of Common Stock which a Holder
may receive or beneficially own in order to determine the amount of securities
or other consideration that such Holder may receive in the event of a merger or
other business combination or reclassification involving the Company as
contemplated in Section 2 of this Warrant.

 

(b)                                 the number of shares of Common Stock that
may be acquired by the Holder upon any exercise of this Warrant (or otherwise in
respect hereof) shall be limited to the extent necessary to insure that,
following such exercise (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its Affiliates and any
other Persons whose beneficial ownership of Common Stock would be aggregated
with the Holder’s for purposes of Section 13(d) of the Exchange Act does not
exceed 9.999% of the total number of issued and outstanding shares of Common
Stock (including for such purpose the shares of Common Stock issuable upon such
exercise).  For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder.  Each delivery of an exercise notice hereunder will
constitute a representation by the Holder that it has evaluated the limitation
set forth in this paragraph and determined that issuance of the full number of
shares of Common Stock requested in such exercise notice is permitted under this
paragraph.  This provision shall not restrict the number of shares of Common
Stock which a Holder may receive or beneficially own in order to determine the
amount of securities or other consideration that such Holder may receive in the
event of a merger or other business combination or reclassification involving
the Company as contemplated in Section 2 of this Warrant.

 

Section 2.                                            Adjustments.  The Exercise
Price shall be subject to adjustment from time to time as provided in this
Section 2.

 

(a)                                  Adjustment of Exercise Price Upon Issuance
of Common Stock.  If after June 27, 2003 (the “Issue Date”) the Company shall
issue or sell any shares of its Common Stock (except upon exercise of the
Warrants and shares issued as a result of adjustments made under the terms of
the Warrants) for a price per share less than (including, without limitation,
those circumstances described in paragraphs (i) through (vii) below), the
Exercise Price in effect on the date immediately prior to the date of such issue
or sale, then, immediately upon such issue or sale, the Exercise Price then in
effect shall be reduced to such lower price per share.

 

(i)                                     Issuance of Rights or Options.  In case
at any time after the Issue Date the Company shall in any manner grant (whether
directly or by assumption in a merger or otherwise), any rights to subscribe for
or to purchase, or any options or warrants for the purchase of, Common Stock or
any stock, notes or securities convertible into or exchangeable for Common Stock
(such convertible or exchangeable stock, notes or securities being herein called
“Convertible Securities”), whether or not such rights, options or warrants or
the right to convert or exchange any such Convertible Securities are immediately
exercisable, such grant shall be deemed a sale by the Company of its Common
Stock and the price per share for such deemed sale of Common Stock shall be
determined by dividing (A) the total amount, if any, in cash or in property
received or

 

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receivable by the Company as consideration for the granting of such rights,
options or warrants, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of such rights,
options or warrants, plus, in the case of such rights, options or warrants that
relate to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the exercise of such rights,
options or warrants or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights, options or warrants. 
Except as provided in Section 2(a)(iii), no further adjustment of the Exercise
Price shall be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such rights, options or warrants or upon
the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.

 

(ii)                                  Issuance of Convertible Securities.  In
case at any time after the Issue Date the Company shall in any manner issue
(whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, such issuance or sale of Convertible
Securities shall be deemed a sale by the Company of its Common Stock and the
price per share for such Common Stock shall be determined by dividing (A) the
total amount received or receivable in cash or in property by the Company as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (B) the total maximum number
of shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities; provided, however, that (I) except as otherwise provided
in Section 2(a)(iii), no further adjustment of the Exercise Price shall be made
upon the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities, and (II) if any such issue or sale of such Convertible
Securities is made upon exercise of any rights to subscribe for or to purchase
or any option to purchase any such Convertible Securities for which adjustments
of the Exercise Price have been or are to be made pursuant to other provisions
of this Section 2(a), no further adjustment of the Exercise Price shall be made
by reason of such issue or sale.

 

(iii)                               Change in Option Price or Exercise Price. 
If the purchase price provided for in any right or option referred to in
Section 2(a)(i), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in
Section 2(a)(i) or 2(a)(ii), or the rate at which any Convertible Securities
referred to in Section 2(a)(i) or 2(a)(ii) are convertible into or exchangeable
for Common Stock shall change (other than under or by reason of provisions
designed to protect against dilution), the Exercise Price then in effect
hereunder shall forthwith be readjusted (increased or decreased, as the case may
be) to the Exercise Price that would have been in effect at such time had such
rights, options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold.  No readjustment pursuant
to the preceding sentence shall have the effect of increasing the Exercise Price
by an amount in excess of the amount of the adjustment thereof originally made
in respect of the issue,

 

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sale, grant or assumption of rights, options or Convertible Securities.  On the
expiration of any such option or right referred to in Section 2(a)(i) or the
termination of any such right to convert or exchange any such Convertible
Securities referred to in Section 2(a)(i) or 2(a)(ii), the Exercise Price then
in effect hereunder shall forthwith be readjusted (increased or decreased, as
the case may be) to the Exercise Price that would have been in effect at the
time of such expiration or termination had such right, option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination, never been granted, issued or sold.  If the purchase price provided
for in any such right or option referred to in Section 2(a)(i) or the rate at
which any Convertible Securities referred to in Section 2(a)(ii) are convertible
into or exchangeable for Common Stock shall be reduced at any time under or by
reason of provisions with respect thereto designed to protect against dilution,
then in case of the delivery of shares of Common Stock upon the exercise of any
such right or option or upon conversion or exchange of any such Convertible
Securities, the Exercise Price then in effect hereunder shall, if not already
adjusted, forthwith be adjusted to such amount as would have obtained had such
right, option or Convertible Securities never been issued as to such shares of
Common Stock and had adjustments been made upon the issuance of the shares of
Common Stock delivered as aforesaid, but only if as a result of such adjustment
the Exercise Price then in effect hereunder is thereby reduced.

 

(iv)                              Consideration for Stock.  Anything herein to
the contrary notwithstanding, in case at any time any shares of Common Stock or
Convertible Securities or any rights, options or warrants to purchase any such
Common Stock or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Company therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith.  In case at any time any shares of Common Stock or
Convertible Securities or any rights or options to purchase any such shares of
Common Stock or Convertible Securities shall be issued or sold for a
consideration other than cash, in whole or in part, the amount of the
consideration other than cash received by the Company shall be deemed to be the
fair value of such consideration as determined reasonably and in good faith by
the Board of Directors of the Company, without deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Company in connection therewith.  In case at any time any shares of Common Stock
or Convertible Securities or any rights or options to purchase such shares of
Common Stock or Convertible Securities shall be issued in connection with any
merger or consolidation in which the Company is the surviving company, the
amount of consideration received therefor shall be deemed to be the fair value
as determined reasonably and in good faith by the Board of Directors of the
Company of such portion of the assets and business of the nonsurviving
corporation as the Board may determine to be attributable to such shares of
Common Stock, Convertible Securities, rights or options, as the case may be.  In
case at any time any rights or options to purchase any shares of Common Stock or
Convertible Securities shall be issued in connection with the issue and sale of
other securities of the Company, together comprising one integral transaction in
which no consideration is allocated to such rights or options by the parties
thereto, such rights or options shall be deemed to have been issued for an
amount of consideration

 

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equal to the fair value thereof as determined reasonably and in good faith by
the Board of Directors of the Company.

 

(v)                                 Record Date.  In case the Company shall take
a record of the holders of its Common Stock for the purpose of entitling them to
subscribe for or purchase shares of Common Stock or Convertible Securities, then
such record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold as a result of the
granting of such right of subscription or purchase.

 

(vi)                              Adjustment to Determination of Exercise
Price.  When making the calculations and determinations described in this
Section 2(a), there shall not be taken into account (A) the issuance of Common
Stock upon the exercise of options or warrants outstanding on the Issue Date,
(B) the issuance of Common Stock upon the conversion of the Series A Preferred
Stock of the Company, (C) the issuance of Common Stock upon the conversion of
the Series C Preferred Stock of the Company (D) the issuance of Common Stock
upon exercise of the Warrants evidenced by this Warrant Certificate or any other
warrants to purchase Common Stock issued pursuant to the Securities Purchase
Agreement, (E) the issuance of shares of Series A Preferred Stock in payment of
dividends upon shares of Series A Preferred Stock, (F) the issuance of shares of
Series C Preferred Stock in payment of dividends upon shares of Series C
Preferred Stock, (G) the issuance of shares of Series D Preferred Stock in
payment of dividends upon shares of Series D Preferred Stock, and (H) the
issuance of 22,562 shares of Common Stock pursuant to the Securities Purchase
Agreement.

 

(vii)                           Good Faith.  If any event occurs as to which in
the reasonable opinion of the Board of Directors of the Company, in good faith,
the other provisions of this Section 2 are not strictly applicable but the lack
of any adjustment in the Exercise Price or the Number Issuable or both would not
in the opinion of the Board of Directors of the Company fairly protect the
exercise rights of the Holder, in accordance with the basic intent and
principles of such provisions, then the Board of Directors of the Company shall
appoint a firm of independent certified public accountants (which may be the
regular auditors of the Company) of recognized national standing, which shall
give their opinion upon the adjustment, if any, to the Exercise Price or Number
Issuable or both, as the case may be, on a basis consistent with the basic
intent and principles of this Section 2, necessary to preserve, without
dilution, the exercise rights of all the registered Holders of the Warrants in
accordance with this Warrant Certificate.

 

(viii)                        Notice of Change in Exercise Price.  The Company
promptly shall deliver to each registered Holder of Warrants at least five (5)
Business Days prior to effecting any transaction that would result in an
increase or decrease in the Exercise Price pursuant to this Section 2, a
statement, signed by its independent certified public accountants, setting forth
in reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the increased or decreased
Exercise Price then in effect following such adjustment.

 

(b)                                 Subdivision; Combination of Stock or Stock
Dividends.  In case the Company shall at any time subdivide its outstanding
shares of Common Stock into a greater

 

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number of shares, by split or otherwise, or issue additional shares of Common
Stock as a dividend (other than a dividend in respect of the Series A Preferred
Stock, the Series C Preferred Stockand/or the Series D Preferred Stock in
accordance with Section 3 of each of the Preferred Stock Certificates of
Designations (as defined in the Securities Purchase Agreement)), or make any
other distribution upon any class or series of stock payable in shares of Common
Stock or Convertible Securities, the Exercise Price in effect immediately prior
to such subdivision shall be proportionately reduced and, conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased.

 

(c)                                  Reorganization; Reclassification;
Consolidation; Merger or Sale of Assets.  In case of (i) any capital
reorganization or reclassification or other change of outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), (ii) any consolidation or merger of the Company with or into
another Person (other than a consolidation or merger in which the Company is the
resulting or surviving Person and that does not result in any reclassification
or change of outstanding Common Stock) or (iii) transfer or sale of all or
substantially all of the Company’s Assets to another person (any of the
foregoing, a “Transaction”), the Company, or such successor or purchasing
Person, as the case may be, shall execute and deliver to each Holder of the
Warrants evidenced hereby, at least five (5) Business Days prior to effecting
any of the foregoing Transactions, a certificate that the Holder of each such
Warrant then outstanding shall have the right thereafter to exercise such
Warrant into the kind and highest amount of shares of stock or other securities
(of the Company or another issuer) or property or cash receivable upon such
Transaction by a holder of the number of shares of Common Stock into which such
Warrant could have been exercised immediately prior to such Transaction.  Such
certificate shall provide for adjustments that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 2 and shall
contain other terms identical to the terms hereof.   If, in the case of any such
Transaction, the stock, other securities, cash or property receivable thereupon
by a holder of Common Stock includes shares of stock or other securities of a
Person other than the successor or purchasing Persons and other than the
Company, who controls or is controlled by the successor or purchasing Person or
who, in connection with such Transaction, issues stock, securities, other
property or cash to holders of Common Stock, then such certificate also shall be
executed by such Person, and such Person shall, in such certificate,
specifically assume the obligations of such successor or purchasing Person and
acknowledge its obligations to issue such stock, securities, other property or
cash to Holders of the Warrants upon exercise thereof as provided above.  The
provisions of this Section 2(c) similarly shall apply to successive
Transactions.

 

(d)                                 Adjustment for Other Distributions.  If the
Company distributes to all holders of its Common Stock any of its assets
(including but not limited to cash), debt securities, preferred stock, or any
rights or warrants to purchase debt securities, preferred stock, assets or other
securities of the Company, the Exercise Price shall be adjusted in accordance
with the following formula:

 

E’

=

E

x

M    -    F

 

 

 

 

M

 

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where:

 

E’                                     =                                        
the adjusted Exercise Price.

 

E                                        
=                                         the current Exercise Price.

 

M                                    =                                        
the Market Price of one share of Common Stock on the record date mentioned
below.

 

F                                        
=                                         the fair market value (determined in
good faith by the Board of Directors of the Company) on the record date of the
assets, securities, rights or warrants applicable to one share of Common Stock.

 

The adjustment shall be made successively whenever any such distribution is made
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution.  This
Section 2(d) does not apply to any dividend or distribution that results in an
adjustment to the Exercise Price pursuant to Section 2(a) or Section 2(b) above.

 

Section 3.                                            Notice of Certain Events. 
In case at any time or from time to time the Company shall declare any dividend
or any other distribution to the holders of its Common Stock, or shall authorize
the granting to the holders of its Common Stock of rights or warrants to
subscribe for or purchase any additional shares of stock of any class or any
other right, or shall authorize the issuance or sale of any other shares or
rights that would result in an adjustment to the Exercise Price pursuant to
Section 2(a) or Section 2(d), or there shall be any capital reorganization or
reclassification of the Common Stock or consolidation or merger of the Company
with or into another Person, or any sale or other disposition of all or
substantially all the assets of the Company, or there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Company, then, in any
one or more of such cases the Company shall mail to each Holder of the Warrants
evidenced hereby at such Holder’s address as it appears on the transfer books of
the Company, as promptly as practicable but in any event at least ten (10)
Business Days prior to the applicable date hereinafter specified, a notice
stating (a) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights or warrants or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, rights or warrants are to be determined, (b) the
issue date of such dividend, distribution, rights or warrants or (c) the date on
which such reorganization, reclassification, consolidation, merger, sale,
disposition, dissolution, liquidation or winding up is expected to become
effective.  Such notice also shall specify the date as of which it is expected
that the holders of Common Stock of record shall be entitled to exchange their
Common Stock for shares of stock or other securities or property or cash
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, disposition, dissolution, liquidation or winding up.

 

Section 4.                                            Certain Covenants.  The
Company will at all times reserve and keep available, free from preemptive
rights, out of the aggregate of its authorized but unissued Common Stock or its
authorized and issued Common Stock held as treasury stock, for the purpose of
enabling it to satisfy any obligation to issue Common Stock upon exercise of the
Warrants, the maximum number of shares of Common Stock that may then be
deliverable upon

 

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the exercise of all outstanding Warrants.  The Company shall take all action
required to increase the authorized number of shares of Common Stock if at any
time there shall be insufficient authorized but unissued shares of Common Stock
to permit such reservation or to permit the exercise of all outstanding
Warrants.

 

The Company or, if appointed, the transfer agent for the Common Stock (the
“Transfer Agent”) and every subsequent transfer agent for any shares of the
Company’s capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose. 
The Company will keep a copy of this Warrant Certificate on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company’s capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants.  The Company will furnish such Transfer Agent a
copy of all notices of adjustments and certificates related thereto transmitted
to each Holder pursuant to Section 2(a)(viii) hereof.

 

Before taking any action that would cause an adjustment pursuant to Section 2
hereof to reduce the Exercise Price below the then par value (if any) of the
Common Stock, the Company will take any corporate action that may, in the
opinion of its counsel (which may be counsel employed by the Company), be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Common Stock at the Exercise Price as so adjusted.

 

The Company covenants that all Common Stock that may be issued upon exercise of
the Warrants will, upon issue, be validly issued, fully paid, nonassessable,
free of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.

 

Section 5.                                            Registered Holder.  The
person in whose name this Warrant Certificate is registered shall be deemed the
owner hereof and of the Warrants evidenced hereby for all purposes.

 

Section 6.                                            Transfer of Warrants.  Any
transfer of the rights represented by this Warrant Certificate shall be effected
by the surrender of this Warrant Certificate, along with the form of assignment
attached hereto, properly completed and executed by the registered Holder
hereof, at the principal executive office of the Company in the United States of
America.  Thereupon, the Company shall issue in the name or names specified by
the registered Holder hereof and, in the event of a partial transfer, in the
name of the registered Holder hereof, a new Warrant Certificate or Certificates
evidencing the right to purchase such number of shares of Common Stock as shall
be equal to the number of shares of Common Stock then purchasable hereunder.

 

Section 7.                                            Restrictive Legend.  Each
certificate representing the Common Stock issued upon exercise of this Warrant
shall be stamped or otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities laws):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED,
QUALIFIED, APPROVED OR DISAPPROVED

 

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UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT
OR SUCH LAWS AND NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
NOR ANY OTHER FEDERAL OR STATE REGULATORY AUTHORITY HAS PASSED ON OR ENDORSED
THE MERITS OF THESE SECURITIES.

 

THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO AN INVESTOR RIGHTS AGREEMENT
AND A STOCK TRADING AGREEMENT, AS EACH OF THE SAME MAY BE AMENDED FROM TIME TO
TIME, COPIES OF WHICH ARE AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICES OF
THE COMPANY.

 

Said legends shall be removed by the Company, upon the request of the holder
thereof, at such time as the restrictions on the transfer of the applicable
security under applicable securities laws and the obligations imposed on the
holder thereof under the Investor Rights Agreement and the Stock Trading
Agreement, as applicable, shall have terminated.

 

Section 8.                                            Denominations.  The
Company will, at its expense, promptly upon surrender of this Warrant
Certificate at the principal executive office of the Company in the United
States of America, execute and deliver to the registered Holder hereof a new
Warrant Certificate or Certificates in denominations specified by such Holder
for an aggregate number of Warrants equal to the number of Warrants evidenced by
this Warrant Certificate.

 

Section 9.                                            Replacement of Warrants. 
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant Certificate and, in the case of loss,
theft or destruction, upon delivery of an indemnity reasonably satisfactory to
the Company (in the case of an insurance company or other institutional
investor, its own unsecured indemnity agreement shall be deemed to be reasonably
satisfactory), or, in the case of mutilation, upon surrender and cancellation
thereof, the Company will issue a new Warrant Certificate of like tenor for a
number of Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.

 

Section 10.                                      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 Warrant Certificate
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 applicable to
agreements made and to be performed entirely within such State.

 

Section 11.                                      Rights Inure to Registered
Holder.  The Warrants evidenced by this Warrant Certificate will inure to the
benefit of and be binding upon the registered Holder thereof and the Company and
their respective successors and permitted assigns.  Nothing in this Warrant
Certificate shall be construed to give to any Person other than the Company and
the

 

11

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registered Holder and their respective successors and permitted assigns any
legal or equitable right, remedy or claim under this Warrant Certificate, and
this Warrant Certificate shall be for the sole and exclusive benefit of the
Company and such registered Holder.  Nothing in this Warrant Certificate shall
be construed to give the registered Holder hereof any rights as a Holder of
shares of Common Stock until such time, if any, as the Warrants evidenced by
this Warrant Certificate are exercised in accordance with the provisions hereof.

 

Section 12.                                      Notice.  All notices, demands
and other communications provided for or permitted hereunder shall be made in
writing and shall be given by registered or certified first-class mail, return
receipt requested, nationally recognized overnight delivery service or personal
delivery, (a) if to the Holder of a Warrant, at such Holder’s last known address
appearing on the books of the Company; and (b) if to the Company, at its
principal executive office in the United States located at the address
designated for notices in the Securities Purchase Agreement, or such other
address as shall have been furnished to the party given or making such notice,
demand or other communication.  All such notices and communications shall be
deemed to have been duly given: when delivered by hand, if personally delivered;
when delivered if delivered by a nationally recognized overnight delivery
service; and five (5) Business Days after being deposited in the mail, as
aforesaid, postage prepaid, if mailed.

 

Section 13.                                      Definitions.  For the purposes
of this Warrant Certificate, the following terms shall have the meanings
indicated below:

 

“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in the City of New York are authorized or required by law or
executive order to close.

 

“Cashless Exercise” shall have the meaning set forth in Section 1 hereof.

 

“Company” shall have the meaning set forth in the preamble hereof.

 

“Common Stock” shall have the meaning set forth in the preamble hereof.

 

“Convertible Securities” shall have the meaning set forth in Section 2(a)(i)
hereof.

 

“Exercise Price” shall have the meaning set forth in the preamble hereof.

 

“Holder” shall have the meaning set forth in the preamble.

 

“In-Kind Exercise” shall have the meaning set forth in Section 1 hereof.

 

“Issue Date” shall have the meaning set forth in Section 2(a) hereof.

 

“Market Price” means the last reported sale price of the applicable security as
reported by the American Stock Exchange or the National Association of
Securities Dealers, Inc. Automatic Quotations System or, if the applicable
security is listed or admitted for trading on another securities exchange, the
last reported sales price of the applicable security on the principal exchange
on which the applicable security is listed or admitted for trading (which shall
be for consolidated trading if applicable to such exchange), or if neither so
reported or listed or

 

12

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admitted for trading, the last reported bid price of the applicable security in
the over-the-counter market.  In the event that the Market Price cannot be
determined as aforesaid, the Board of Directors of the Company shall determine
the Market Price on the basis of such quotations as it in good faith considers
appropriate, in consultation with a nationally recognized investment bank.  The
Market Price shall be such price averaged over a period of ten (10) consecutive
Business Days ending two (2) days prior to the day as of which “Market Price” is
being determined.

 

“Number Issuable” shall have the meaning set forth in the preamble.

 

“Person” means any individual, corporation, limited liability company,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or an agency or political subdivision thereof)
or other entity of any kind.

 

“Securities Purchase Agreement” means that certain Securities Purchase
Agreement, dated as of June 27, 2003, among the Company, the Holder and the
other parties signatory thereto, as the same may be amended, modified or
otherwise supplemented from time to time in accordance with its terms.

 

“Transaction” shall have the meaning set forth in Section 2(c) hereof.

 

“Transfer Agent” shall have the meaning set forth in Section 4 hereof.

 

“Warrants” shall have the meaning set forth in the preamble hereof.

 

“Warrant Exercise Documentation” shall have the meaning set forth in Section 1
hereof.

 

“Warrant Expiration Date” means June 27, 2007.

 

[Balance of page intentionally left blank; signature page follows.]

 

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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly
executed as of the Issue Date.

 

 

 

COMPANY

 

 

 

ELECTRIC CITY CORP.,
a Delaware corporation

 

 

 

 

 

By:

/s/ John P. Mitola

 

 

Name:

John P. Mitola

 

Title:

Chief Executive Officer

 

 

 

 

ATTEST:

 

 

 

 

 

/s/ Jeffrey Mistarz

 

 

 

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Form of Assignment Form

 

[To be executed upon assignment of Warrants]

 

The undersigned hereby assigns and transfers unto
                                          , whose Social Security Number or Tax
ID Number is                                            and whose record address
is                                                           the rights
represented by the attached Warrant Certificate with respect to         Warrants
to which the attached Warrant Certificate relates, and irrevocably appoints
                           as agent to transfer this security on the books of
the Company.  Such agent may substitute another to act for such agent.

 

 

Signature:

 

 

 

 

 

(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate)

 

 

 

Signature Guarantee:

 

 

 

 

 

 

Date:

 

 

 

 

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(SUBSCRIPTION FORM TO BE EXECUTED UPON EXERCISE OF
SOME OR ALL OF THE WARRANTS)

 

The undersigned, registered Holder, successor or assignee of such registered
Holder of the within Warrant Certificate, hereby:

 

(a) subscribes for         shares of Common Stock which the undersigned is
entitled to purchase under the terms of the within Warrant Certificate,
(b) makes the full cash payment therefor called for by the within Warrant
Certificate or elects a Cashless Exercise or In-Kind Exercise as provided
therein, and (c) directs that the Common Stock issuable upon exercise of said
Warrants be issued as described hereunder.

 

 

 

 

 

(Name)

 

 

 

 

 

(Address)

 

 

 

 

 

SIGNATURE

 

 

Dated:

 

 

 

 

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