Exhibit 10.6

 

THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS.  THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATES SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ELECTRIC CITY CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.

 

FORM OF SECURED CONVERTIBLE REVOLVING NOTE

 

FOR VALUE RECEIVED, ELECTRIC CITY CORP. a Delaware corporation (the “Borrower”)
promises to pay to LAURUS MASTER FUND, LTD., c/o Ironshore Corporate Services
Ltd., P.O. Box 1234 G.T., Queensgate House, South Church Street, Grand Cayman,
Cayman Islands, Fax: 345-949-9877 (the “Holder”) or its registered assigns, on
order, the sum of [up to TWO MILLION DOLLARS ($2,000,000)], of, if different,
the aggregate principal amount of all “Loans” (as such term is defined in the
Security Agreement referred to below), together with any accrued and unpaid
interest hereon, on September 11, 2005 (the “Maturity Date”).

 

Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Security Agreement between Borrower and the Holder
dated as of September 11, 2003 (as amended, modified and supplemented from time
to time, the “Security Agreement”).

 

The following terms shall apply to this Note:

 

ARTICLE I
INTEREST

 

1.1.          INTEREST RATE AND PAYMENTS.  SUBJECT TO SECTIONS 5.3 AND 6.7
HEREOF, INTEREST PAYABLE ON THIS NOTE SHALL ACCRUE AT A RATE PER ANNUM EQUAL TO
THE “PRIME RATE” PUBLISHED IN THE WALL STREET JOURNAL FROM TIME TO TIME, PLUS
ONE AND THREE QUARTERS PERCENT (1.75%).  INTEREST SHALL BE PAYABLE MONTHLY IN
ARREARS COMMENCING ON OCTOBER 1, 2003 AND ON THE FIRST DAY OF EACH CONSECUTIVE
CALENDAR MONTH THEREAFTER  THE PRIME RATE SHALL BE INCREASED OR DECREASED AS THE
CASE MAY BE FOR EACH INCREASE OR DECREASE IN THE PRIME RATE IN AN AMOUNT EQUAL
TO SUCH INCREASE OR DECREASE IN THE PRIME RATE; EACH CHANGE TO BE EFFECTIVE AS
OF THE DAY OF THE CHANGE IN SUCH RATE IN ACCORDANCE WITH THE TERMS OF THE
SECURITY AGREEMENT.

 

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ARTICLE II
ADVANCES, BORROWER CONVERSION RIGHTS, PAYMENTS UNDER NOTE

 

2.1.          MECHANICS OF ADVANCES.  ALL LOANS EVIDENCED BY THIS NOTE SHALL BE
MADE IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THE SECURITY AGREEMENT.

 

2.2.          Borrower’s Conversion Rights.  Subject to the terms hereof, the
Borrower shall have the sole option to determine whether to satisfy payment of
any payment of principal or interest when due either in cash or in shares of
Common Stock (as defined in the Security Agreement), or a combination of both. 
Each month by the tenth (10th) day of such month, the Borrower shall deliver to
the Holder a written irrevocable notice in the form of Exhibit A attached hereto
electing to pay the amount specified therein payable on the first day of the
next month in either cash or Common Stock, or a combination of both (each, a
“Repayment Election Notice”).  Each Repayment Election Notice shall be delivered
to the Holder not later than the tenth (10th) day of the month prior to the
applicable payment date (the date by which such notice is required to be given
being hereinafter referred to as the “Notice Date”).  If, for any amount which
is due on any repayment date, a Repayment Election Notice is not delivered to
the Holder by the applicable Notice Date for such repayment date, then the
amount due on such repayment date shall be paid in cash.  If the Borrower repays
all or a portion of the amount due on any payment date in shares of Common
Stock, the number of such shares to be issued for such payment date shall be the
number determined by dividing (x) the amount to be paid in shares of Common
Stock, by (y) the Fixed Conversion Price.  For purposes hereof, the “Fixed
Conversion Price” means $2.12.

 

2.3.          NO EFFECTIVE REGISTRATION.  NOTWITHSTANDING ANYTHING TO THE
CONTRARY HEREIN, THE BORROWER SHALL BE PROHIBITED FROM EXERCISING ITS RIGHT TO
REPAY ANY AMOUNT HEREUNDER IN SHARES OF COMMON STOCK IF AT ANY TIME FROM THE
NOTICE DATE FOR SUCH PAYMENT THROUGH THE DATE UPON WHICH SUCH PAYMENT IS MADE BY
DELIVERY OF CERTIFICATES FOR SHARES OF COMMON STOCK THERE FAILS TO EXIST AN
EFFECTIVE CURRENT REGISTRATION STATEMENT (AS DEFINED IN THE REGISTRATION RIGHTS
AGREEMENT) COVERING THE SHARES OF COMMON STOCK TO BE ISSUED, OR IF AN EVENT OF
DEFAULT HEREUNDER EXISTS AND IS CONTINUING, UNLESS SUCH REQUIREMENT IS OTHERWISE
WAIVED IN WRITING BY THE HOLDER IN WHOLE OR IN PART AT THE HOLDER’S OPTION.

 

2.4.          COMMON STOCK PAYMENT GUIDELINES.  NOTWITHSTANDING ANYTHING TO THE
CONTRARY HEREIN, IF THE BORROWER HAS ELECTED TO MAKE A PAYMENT HEREUNDER IN
SHARES OF COMMON STOCK AND THE CLOSING PRICE OF THE COMMON STOCK AS REPORTED BY
BLOOMBERG, L.P. ON THE PRINCIPAL MARKET FOR ANY OF THE 11 TRADING DAYS PRECEDING
THE SCHEDULED PAYMENT DATE WAS LESS THAN 115% OF THE FIXED CONVERSION PRICE,
THEN THE HOLDER SHALL HAVE THE OPTION TO REFUSE TO ACCEPT ANY PORTION OF SUCH
PAYMENT IN SHARES OF COMMON STOCK.

 

2.5.          OPTIONAL PREPAYMENTS IN COMMON STOCK.  IN THE EVENT THAT THE
AVERAGE CLOSING PRICE OF THE COMMON STOCK ON THE PRINCIPAL MARKET IS GREATER
THAN 115% OF THE FIXED CONVERSION PRICE FOR A PERIOD OF AT LEAST FIVE (5)
CONSECUTIVE TRADING DAYS, THEN THE BORROWER MAY, AT ITS SOLE OPTION, PROVIDE THE
HOLDER WRITTEN NOTICE (A “CALL NOTICE”) REQUIRING THE CONVERSION AT THE FIXED
CONVERSION PRICE OF ALL OR A PORTION OF THE OUTSTANDING PRINCIPAL OF THIS NOTE
(SUBJECT TO COMPLIANCE WITH SECTION 3.2 IF PAYMENT IS LESS THAN ALL OF THE
PRINCIPAL AND INTEREST THEN DUE), TOGETHER WITH ACCRUED INTEREST ON THE AMOUNT
BEING PREPAID, AS OF THE DATE SET

 

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forth in such Call Notice (the “Call Date”).  The Call Date shall be at least
eleven (11) trading days following the date of the Call Notice.  Provided that;

 

(i)            on the Call Date there has been filed with the Securities and
Exchange Commission and declared effective a current registration statement
covering the shares of Common Stock which are to be issued pursuant to the Call
Notice,

 

then on the Call Date the Borrower shall deliver to the Holder certificates
evidencing the shares of Common Stock issued in satisfaction of the principal
and interest being retired.  Notwithstanding the foregoing, the Borrower’s right
to issue shares of Common Stock in payment of obligations under this Note shall
be subject to the limitation that the number of shares of Common Stock issued in
connection with any Call Notice shall not exceed  25% of the aggregate dollar
trading volume of the Common Stock for the eleven (11) trading days immediately
preceding the Call Date (as such volume is reported by Bloomberg, L.P.  If the
price of the Common Stock falls below 115% of the Fixed Conversion Price during
the eleven (11) trading day period immediately preceding the Call Date, then the
Holder will then be required to convert only such amount of the Note as shall
equal twenty five percent (25%) of the aggregate dollar trading volume (as such
volume is reported by Bloomberg L.P.) for each day that the Common Stock has
exceeded 115% of the then applicable Fixed Conversion Price.

 

 

The Borrower shall not be permitted to give the Holder more than one Call Notice
under this Note during any 22-day period.

 

2.6.          OPTIONAL PREPAYMENT IN CASH.  THE BORROWER WILL HAVE THE OPTION OF
PREPAYING THIS NOTE IN FULL OR IN PART AT ANY TIME WITHOUT PENALTY OR PREMIUM .

 

ARTICLE III
HOLDER’S CONVERSION RIGHTS

 

3.1.          OPTIONAL CONVERSION. SUBJECT TO THE TERMS OF THIS ARTICLE III, THE
HOLDER SHALL HAVE THE RIGHT, BUT NOT THE OBLIGATION, AT ANY TIME UNTIL THE
MATURITY DATE, OR THEREAFTER DURING AN EVENT OF DEFAULT (AS DEFINED IN ARTICLE
V), AND, SUBJECT TO THE LIMITATIONS SET FORTH IN SECTION 3.2 HEREOF, TO CONVERT
ALL OR ANY PORTION OF THE OUTSTANDING PRINCIPAL AMOUNT AND/OR ACCRUED INTEREST
AND FEES DUE AND PAYABLE INTO FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON
STOCK AT THE FIXED CONVERSION PRICE. THE SHARES OF COMMON STOCK TO BE ISSUED
UPON SUCH CONVERSION ARE HEREIN REFERRED TO AS THE “CONVERSION SHARES.”

 

3.2.          CONVERSION LIMITATION. NOTWITHSTANDING ANYTHING CONTAINED HEREIN
TO THE CONTRARY, THE HOLDER SHALL NOT BE ENTITLED TO CONVERT PURSUANT TO THE
TERMS OF THIS NOTE AN AMOUNT THAT WOULD BE CONVERTIBLE INTO THAT NUMBER OF
CONVERSION SHARES WHICH WOULD EXCEED THE DIFFERENCE BETWEEN THE NUMBER OF SHARES
OF COMMON STOCK BENEFICIALLY OWNED BY SUCH HOLDER OR ISSUABLE UPON EXERCISE OF
WARRANTS HELD BY SUCH HOLDER AND 4.99% OF THE OUTSTANDING SHARES

 

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of Common Stock of the Borrower.  For the purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and Regulation 13d-3 thereunder.  The Holder may void
the Conversion Share limitation described in this Section 3.2 upon 75 days prior
notice to the Borrower or without any notice requirement upon an Event of
Default.

 

3.3.          MECHANICS OF HOLDER’S CONVERSION. IN THE EVENT THAT THE HOLDER
ELECTS TO CONVERT THIS NOTE INTO COMMON STOCK, THE HOLDER SHALL GIVE NOTICE OF
SUCH ELECTION BY DELIVERING AN EXECUTED AND COMPLETED NOTICE OF CONVERSION
(“NOTICE OF CONVERSION”) TO THE BORROWER AND SUCH NOTICE OF CONVERSION SHALL
PROVIDE A BREAKDOWN IN REASONABLE DETAIL OF THE  PRINCIPAL AMOUNT, ACCRUED
INTEREST AND FEES THAT ARE BEING CONVERTED.  ON EACH CONVERSION DATE (AS
HEREINAFTER DEFINED) AND IN ACCORDANCE WITH ITS NOTICE OF CONVERSION, THE HOLDER
SHALL MAKE THE APPROPRIATE REDUCTION TO THE PRINCIPAL AMOUNT, ACCRUED INTEREST
AND FEES AS ENTERED IN ITS RECORDS AND SHALL PROVIDE WRITTEN NOTICE THEREOF TO
THE BORROWER WITHIN TWO (2) BUSINESS DAYS AFTER THE CONVERSION DATE.  EACH DATE
ON WHICH A NOTICE OF CONVERSION IS DELIVERED OR TELECOPIED TO THE BORROWER IN
ACCORDANCE WITH THE PROVISIONS HEREOF SHALL BE DEEMED A CONVERSION DATE (THE
“CONVERSION DATE”).  A FORM OF NOTICE OF CONVERSION TO BE EMPLOYED BY THE HOLDER
IS ANNEXED HERETO AS EXHIBIT A.  THE BORROWER WILL CAUSE THE TRANSFER AGENT TO
TRANSMIT THE CERTIFICATES REPRESENTING THE CONVERSION SHARES TO THE HOLDER BY
CREDITING THE ACCOUNT OF THE HOLDER’S DESIGNATED BROKER WITH THE DEPOSITORY
TRUST CORPORATION (“DTC”) THROUGH ITS DEPOSIT WITHDRAWAL AGENT COMMISSION
(“DWAC”) SYSTEM WITHIN THREE (3) BUSINESS DAYS AFTER RECEIPT BY THE BORROWER OF
THE NOTICE OF CONVERSION (THE “DELIVERY DATE”).

 

IN THE CASE OF THE EXERCISE OF THE CONVERSION RIGHTS SET FORTH HEREIN THE
CONVERSION PRIVILEGE SHALL BE DEEMED TO HAVE BEEN EXERCISED AND THE CONVERSION
SHARES ISSUABLE UPON SUCH CONVERSION SHALL BE DEEMED TO HAVE BEEN ISSUED UPON
THE DATE OF RECEIPT BY THE BORROWER OF THE NOTICE OF CONVERSION.  THE HOLDER
SHALL BE TREATED FOR ALL PURPOSES AS THE RECORD HOLDER OF SUCH COMMON STOCK,
UNLESS THE HOLDER PROVIDES THE BORROWER WRITTEN INSTRUCTIONS TO THE CONTRARY.

 

3.4.          LATE PAYMENTS. THE BORROWER UNDERSTANDS THAT A DELAY IN THE
DELIVERY OF THE SHARES OF COMMON STOCK IN THE FORM REQUIRED PURSUANT TO THIS
ARTICLE BEYOND THE DELIVERY DATE COULD RESULT IN ECONOMIC LOSS TO THE HOLDER. 
AS COMPENSATION TO THE HOLDER FOR SUCH LOSS, THE BORROWER AGREES TO PAY LATE
PAYMENTS TO THE HOLDER FOR LATE ISSUANCE OF SUCH SHARES IN THE FORM REQUIRED
PURSUANT TO THIS ARTICLE III UPON CONVERSION OF THE NOTE, IN THE AMOUNT EQUAL TO
THE GREATER OF (I) $250 PER BUSINESS DAY AFTER THE DELIVERY DATE AND (II) THE
HOLDER’S ACTUAL DAMAGES FROM SUCH DELAYED DELIVERY.  THE BORROWER SHALL PAY ANY
PAYMENTS INCURRED UNDER THIS SECTION IN IMMEDIATELY AVAILABLE FUNDS UPON DEMAND
AND, IN THE CASE OF ACTUAL DAMAGES, ACCOMPANIED BY REASONABLE DOCUMENTATION OF
THE AMOUNT OF SUCH DAMAGES.

 

3.5.          ADJUSTMENT PROVISIONS. THE FIXED CONVERSION PRICE AND NUMBER AND
KIND OF SHARES OR OTHER SECURITIES TO BE ISSUED UPON CONVERSION DETERMINED
PURSUANT TO SECTION 3.1 SHALL BE SUBJECT TO ADJUSTMENT FROM TIME TO TIME UPON
THE HAPPENING OF CERTAIN EVENTS WHILE THIS CONVERSION RIGHT REMAINS OUTSTANDING,
AS FOLLOWS:

 

A.            RECLASSIFICATION, ETC.  IF THE BORROWER AT ANY TIME SHALL, BY
RECLASSIFICATION OR OTHERWISE, CHANGE THE COMMON STOCK INTO THE SAME OR A
DIFFERENT NUMBER OF SECURITIES OF ANY CLASS OR CLASSES, THIS NOTE, AS TO THE
UNPAID PRINCIPAL AMOUNT AND ACCRUED

 

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interest thereon, shall thereafter be deemed to evidence the right to purchase
an adjusted number of such securities and kind of securities as would have been
issuable as the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change.

 

B.            STOCK SPLITS, COMBINATIONS AND DIVIDENDS.  IF THE SHARES OF COMMON
STOCK ARE SUBDIVIDED OR COMBINED INTO A GREATER OR SMALLER NUMBER OF SHARES OF
COMMON STOCK, OR IF A DIVIDEND IS PAID ON THE COMMON STOCK IN SHARES OF COMMON
STOCK, THE FIXED CONVERSION PRICE SHALL BE PROPORTIONATELY REDUCED IN CASE OF
SUBDIVISION OF SHARES OR STOCK DIVIDEND OR PROPORTIONATELY INCREASED IN THE CASE
OF COMBINATION OF SHARES, IN EACH SUCH CASE BY THE RATIO WHICH THE TOTAL NUMBER
OF SHARES OF COMMON STOCK OUTSTANDING IMMEDIATELY AFTER SUCH EVENT BEARS TO THE
TOTAL NUMBER OF SHARES OF COMMON STOCK OUTSTANDING IMMEDIATELY PRIOR TO SUCH
EVENT.

 

C.            SHARE ISSUANCES.  SUBJECT TO THE PROVISIONS OF THIS SECTION 3.6,
IF THE BORROWER SHALL AT ANY TIME PRIOR TO THE CONVERSION OR REPAYMENT IN FULL
OF THE PRINCIPAL AMOUNT ISSUE ANY SHARES OF COMMON STOCK TO A PERSON OTHER THAN
THE HOLDER (OTHERWISE THAN (I) PURSUANT TO SUBSECTIONS A OR B ABOVE; (II)
PURSUANT TO OPTIONS, WARRANTS, OR OTHER OBLIGATIONS TO ISSUE SHARES OUTSTANDING
ON THE DATE HEREOF AS DISCLOSED TO HOLDER IN WRITING; OR (III) PURSUANT TO
OPTIONS THAT MAY BE ISSUED UNDER ANY EMPLOYEE INCENTIVE STOCK OPTION AND/OR ANY
QUALIFIED STOCK OPTION PLAN ADOPTED BY THE BORROWER) FOR A CONSIDERATION PER
SHARE (THE “OFFER PRICE”) LESS THAN THE FIXED CONVERSION PRICE IN EFFECT AT THE
TIME OF SUCH ISSUANCE, THEN THE FIXED CONVERSION PRICE SHALL BE IMMEDIATELY
RESET TO SUCH LOWER OFFER PRICE. FOR PURPOSES HEREOF, THE ISSUANCE OF ANY
SECURITY OF THE BORROWER CONVERTIBLE INTO OR EXERCISABLE OR EXCHANGEABLE FOR
COMMON STOCK SHALL RESULT IN AN ADJUSTMENT TO THE FIXED CONVERSION PRICE ONLY
UPON THE CONVERSION, EXERCISE OR EXCHANGE OF SUCH SECURITIES.

 

D.            COMPUTATION OF CONSIDERATION. FOR PURPOSES OF ANY COMPUTATION
RESPECTING CONSIDERATION RECEIVED PURSUANT TO SUBSECTION C ABOVE, THE FOLLOWING
SHALL APPLY:

 

(A)           IN THE CASE OF THE ISSUANCE OF SHARES OF COMMON STOCK FOR CASH,
THE CONSIDERATION SHALL BE THE AMOUNT OF SUCH CASH, PROVIDED THAT IN NO CASE
SHALL ANY DEDUCTION BE MADE FOR ANY COMMISSIONS, DISCOUNTS OR OTHER EXPENSES
INCURRED BY THE BORROWER FOR ANY UNDERWRITING OF THE ISSUE OR OTHERWISE IN
CONNECTION THEREWITH;

 

(B)           IN THE CASE OF THE ISSUANCE OF SHARES OF COMMON STOCK FOR A
CONSIDERATION IN WHOLE OR IN PART OTHER THAN CASH, THE CONSIDERATION OTHER THAN
CASH SHALL BE DEEMED TO BE THE FAIR MARKET VALUE THEREOF AS DETERMINED IN GOOD
FAITH BY THE BOARD OF DIRECTORS OF THE BORROWER (IRRESPECTIVE OF THE ACCOUNTING
TREATMENT THEREOF); AND

 

(C)           IN THE CASE OF THE ISSUANCE OF SECURITIES CONVERTIBLE INTO OR
EXCHANGEABLE FOR SHARES OF COMMON STOCK, NO ADJUSTMENT TO THE OFFER PRICE SHALL
BE MADE UNTIL ACTUAL EXERCISE OF ANY SUCH RIGHTS OF CONVERSION OR EXCHANGE. 
UPON ANY SUCH EXERCISE, THE AGGREGATE CONSIDERATION RECEIVED FOR SUCH SECURITIES
SHALL BE DEEMED TO BE THE CONSIDERATION RECEIVED BY THE BORROWER FOR THE
ISSUANCE OF SUCH SECURITIES PLUS THE ADDITIONAL MINIMUM CONSIDERATION, IF ANY,
TO BE RECEIVED BY THE BORROWER UPON THE CONVERSION OR EXCHANGE THEREOF (THE
CONSIDERATION IN EACH CASE TO BE DETERMINED IN THE SAME MANNER AS PROVIDED IN
CLAUSES (A) AND (B) OF THIS SUBSECTION (D)).

 

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3.6.          RESERVATION OF SHARES. DURING THE PERIOD THE CONVERSION RIGHT
EXISTS, THE BORROWER WILL RESERVE FROM ITS AUTHORIZED AND UNISSUED COMMON STOCK
A SUFFICIENT NUMBER OF SHARES TO PROVIDE FOR THE ISSUANCE OF COMMON STOCK UPON
THE FULL CONVERSION OF THIS NOTE.  THE BORROWER REPRESENTS THAT UPON ISSUANCE,
SUCH SHARES WILL BE DULY AND VALIDLY ISSUED, FULLY PAID AND NON-ASSESSABLE.  THE
BORROWER AGREES THAT ITS ISSUANCE OF THIS NOTE SHALL CONSTITUTE FULL AUTHORITY
TO ITS OFFICERS, AGENTS, AND TRANSFER AGENTS WHO ARE CHARGED WITH THE DUTY OF
EXECUTING AND ISSUING STOCK CERTIFICATES TO EXECUTE AND ISSUE THE NECESSARY
CERTIFICATES FOR SHARES OF COMMON STOCK UPON THE CONVERSION OF THIS NOTE.

 

3.7.          REGISTRATION RIGHTS.  THE HOLDER HAS BEEN GRANTED REGISTRATION
RIGHTS WITH RESPECT TO THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE AS MORE FULLY SET FORTH IN A REGISTRATION RIGHTS AGREEMENT DATED THE
DATE HEREOF.

 

ARTICLE IV
EVENTS OF DEFAULT

 

The occurrence of any of the following events is an Event of Default (“Event of
Default”):

 

4.1.          FAILURE TO PAY PRINCIPAL, INTEREST OR OTHER FEES.  THE BORROWER
FAILS TO PAY WHEN DUE ANY INSTALLMENT OF PRINCIPAL, INTEREST OR OTHER FEES
HEREON OR ON ANY OTHER PROMISSORY NOTE ISSUED PURSUANT TO THE SECURITY
AGREEMENT, WHEN DUE IN ACCORDANCE WITH THE TERMS OF SUCH NOTE.

 

4.2.          BREACH OF COVENANT.  THE BORROWER BREACHES ANY COVENANT OR OTHER
TERM OR CONDITION OF THIS NOTE IN ANY MATERIAL RESPECT AND SUCH BREACH, IF
SUBJECT TO CURE, CONTINUES FOR A PERIOD OF THIRTY (30) DAYS AFTER THE OCCURRENCE
THEREOF.

 

4.3.          BREACH OF REPRESENTATIONS AND WARRANTIES.  ANY MATERIAL
REPRESENTATION OR WARRANTY OF THE BORROWER MADE HEREIN, OR THE SECURITY
AGREEMENT, OR IN ANY ANCILLARY AGREEMENT SHALL BE MATERIALLY FALSE OR
MISLEADING.

 

4.4.          STOP TRADE.  AN SEC STOP TRADE ORDER OR PRINCIPAL MARKET TRADING
SUSPENSION OF THE COMMON STOCK SHALL BE IN EFFECT FOR 5 CONSECUTIVE DAYS OR 5
DAYS DURING A PERIOD OF 10 CONSECUTIVE DAYS, EXCLUDING IN ALL CASES A SUSPENSION
OF ALL TRADING ON A PRINCIPAL MARKET, PROVIDED THAT THE BORROWER SHALL NOT HAVE
BEEN ABLE TO CURE SUCH TRADING SUSPENSION WITHIN 30 DAYS OF THE NOTICE THEREOF
OR LIST THE COMMON STOCK ON ANOTHER PRINCIPAL MARKET WITHIN 60 DAYS OF SUCH
NOTICE.  THE “PRINCIPAL MARKET” FOR THE COMMON STOCK SHALL INCLUDE THE NASD OTC
BULLETIN BOARD, NASDAQ SMALLCAP MARKET, NASDAQ NATIONAL MARKET SYSTEM, AMERICAN
STOCK EXCHANGE, OR NEW YORK STOCK EXCHANGE (WHICHEVER OF THE FOREGOING IS AT THE
TIME THE PRINCIPAL TRADING EXCHANGE OR MARKET FOR THE COMMON STOCK), OR ANY
SECURITIES EXCHANGE OR OTHER SECURITIES MARKET ON WHICH THE COMMON STOCK IS THEN
BEING LISTED OR TRADED.

 

4.5.          DEFAULT UNDER RELATED AGREEMENT.  THE OCCURRENCE OF AN EVENT OF
DEFAULT UNDER AND AS DEFINED IN THE SECURITY AGREEMENT.

 

4.6           FAILURE TO DELIVER COMMON STOCK OR REPLACEMENT NOTE.  THE
BORROWER’S FAILURE TO TIMELY DELIVER COMMON STOCK TO THE HOLDER PURSUANT TO AND
IN THE FORM REQUIRED BY

 

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this Note, and Section 9 of the Securities Purchase Agreement, or if required, a
replacement Note if such failure to timely deliver Common Stock shall not be
cured within two (2) days or such failure to deliver a replacement Note is not
cured within seven (7) Business Days.

 

4.7           Payment Grace Period.  The Borrower shall have a three (3)
business day grace period  to pay any monetary amounts due under this Note or
the Purchase Agreement or any Related Document, after which grace period a
default interest rate of five percent (5%) per annum above the then applicable
interest rate hereunder shall apply to the monetary amounts due.

 

ARTICLE V
DEFAULT PAYMENTS

 

5.1.          DEFAULT PAYMENT.  IF AN EVENT OF DEFAULT OCCURS, THE HOLDER, AT
ITS OPTION, MAY ELECT, IN ADDITION TO ALL RIGHTS AND REMEDIES OF HOLDER UNDER
THE SECURITY AGREEMENT AND ALL OBLIGATIONS OF BORROWER UNDER THE SECURITY
AGREEMENT, TO REQUIRE THE BORROWER TO MAKE A DEFAULT PAYMENT (“DEFAULT
PAYMENT”).  THE DEFAULT PAYMENT SHALL BE THE OUTSTANDING PRINCIPAL AMOUNT OF THE
NOTE, PLUS ACCRUED BUT UNPAID INTEREST, ALL OTHER FEES THEN REMAINING UNPAID,
AND ALL OTHER AMOUNTS PAYABLE HEREUNDER.

 

5.2.          DEFAULT PAYMENT DATE AND DEFAULT NOTICE PERIOD.  THE DEFAULT
PAYMENT SHALL BE DUE AND PAYABLE ON THE FIFTH BUSINESS DAY AFTER THE DATE
WRITTEN NOTICE IS SENT FROM THE HOLDER TO THE BORROWER OF AN EVENT OF DEFAULT AS
DEFINED IN ARTICLE IV (“DEFAULT PAYMENT DATE”).  THE PERIOD BETWEEN THE DATE OF
THE WRITTEN NOTICE FROM THE HOLDER TO THE BORROWER OF AN EVENT OF DEFAULT AND
THE DEFAULT PAYMENT DATE SHALL BE THE “DEFAULT NOTICE PERIOD.”  IF DURING THE
DEFAULT NOTICE PERIOD, THE BORROWER CURES THE EVENT OF DEFAULT, THE EVENT OF
DEFAULT WILL NO LONGER EXIST AND ANY RIGHTS THE HOLDER HAD PERTAINING TO THE
EVENT OF DEFAULT WILL NO LONGER EXIST.  IF THE EVENT OF DEFAULT IS NOT CURED
DURING THE DEFAULT NOTICE PERIOD, ALL AMOUNTS PAYABLE HEREUNDER SHALL BE DUE AND
PAYABLE ON THE DEFAULT PAYMENT DATE, ALL WITHOUT FURTHER DEMAND, PRESENTMENT OR
NOTICE, OR GRACE PERIOD, ALL OF WHICH HEREBY ARE EXPRESSLY WAIVED.

 

5.3.          DEFAULT INTEREST RATE.  FOLLOWING THE OCCURRENCE AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT, INTEREST ON THIS NOTE SHALL AUTOMATICALLY BE
INCREASED TO ONE AND ONE HALF PERCENT (1.5%) PER MONTH, AND ALL OUTSTANDING
OBLIGATIONS, INCLUDING UNPAID INTEREST, SHALL CONTINUE TO ACCRUE INTEREST FROM
THE DATE OF SUCH EVENT OF DEFAULT AT SUCH INTEREST RATE APPLICABLE TO SUCH
OBLIGATIONS UNTIL SUCH EVENT OF DEFAULT IS CURED OR WAIVED.

 

5.4.          CUMULATIVE REMEDIES.  THE REMEDIES UNDER THIS NOTE SHALL BE
CUMULATIVE.

 

ARTICLE VI
MISCELLANEOUS

 

6.1.          FAILURE OR INDULGENCE NOT WAIVER.  NO FAILURE OR DELAY ON THE PART
OF THE HOLDER HEREOF IN THE EXERCISE OF ANY POWER, RIGHT OR PRIVILEGE HEREUNDER
SHALL OPERATE AS A WAIVER

 

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thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.  All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise available.

 

6.2.          NOTICES.  ANY NOTICE HEREIN REQUIRED OR PERMITTED TO BE GIVEN
SHALL BE IN WRITING AND PROVIDED IN ACCORDANCE WITH THE TERMS OF THE SECURITY
AGREEMENT.

 

6.3.          AMENDMENT PROVISION.  THE TERM “NOTE” AND ALL REFERENCE THERETO,
AS USED THROUGHOUT THIS INSTRUMENT, SHALL MEAN THIS INSTRUMENT AS ORIGINALLY
EXECUTED, OR IF LATER AMENDED OR SUPPLEMENTED, THEN AS SO AMENDED OR
SUPPLEMENTED, AND ANY SUCCESSOR INSTRUMENT AS IT MAY BE AMENDED OR SUPPLEMENTED.

 

6.4.          ASSIGNABILITY.  THIS NOTE SHALL BE BINDING UPON THE BORROWER AND
ITS SUCCESSORS AND ASSIGNS, AND SHALL INURE TO THE BENEFIT OF THE HOLDER AND ITS
SUCCESSORS AND ASSIGNS, AND MAY BE ASSIGNED BY THE HOLDER IN ACCORDANCE WITH THE
REQUIREMENTS OF THE SECURITY AGREEMENT.

 

6.5.          COST OF COLLECTION.  IF DEFAULT IS MADE IN THE PAYMENT OF THIS
NOTE, THE BORROWER SHALL PAY THE HOLDER HEREOF REASONABLE COSTS OF COLLECTION,
INCLUDING REASONABLE ATTORNEYS’ FEES.

 

6.6.          GOVERNING LAW.  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.  ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER
CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE BROUGHT ONLY
IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF
NEW YORK.  BOTH PARTIES AND THE INDIVIDUAL SIGNING THIS NOTE ON BEHALF OF THE
BORROWER AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS.  THE PREVAILING
PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ITS REASONABLE
ATTORNEY’S FEES AND COSTS.  IN THE EVENT THAT ANY PROVISION OF THIS NOTE IS
INVALID OR UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH
PROVISION SHALL BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT
THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF
LAW.  ANY SUCH PROVISION WHICH MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW
SHALL NOT AFFECT THE VALIDITY OR UNENFORCEABILITY OF ANY OTHER PROVISION OF THIS
NOTE.  NOTHING CONTAINED HEREIN SHALL BE DEEMED OR OPERATE TO PRECLUDE THE
HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION AGAINST THE BORROWER IN
ANY OTHER JURISDICTION TO COLLECT ON THE BORROWER’S OBLIGATIONS TO HOLDER, TO
REALIZE ON ANY COLLATERAL OR ANY OTHER SECURITY FOR SUCH OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF HOLDER.

 

6.7.          MAXIMUM PAYMENTS.  NOTHING CONTAINED HEREIN SHALL BE DEEMED TO
ESTABLISH OR REQUIRE THE PAYMENT OF A RATE OF INTEREST OR OTHER CHARGES IN
EXCESS OF THE MAXIMUM PERMITTED BY APPLICABLE LAW.  IN THE EVENT THAT THE RATE
OF INTEREST REQUIRED TO BE PAID OR OTHER CHARGES HEREUNDER EXCEED THE MAXIMUM
PERMITTED BY SUCH LAW, ANY PAYMENTS IN EXCESS OF SUCH MAXIMUM SHALL BE CREDITED
AGAINST AMOUNTS OWED BY THE BORROWER TO THE HOLDER AND THUS REFUNDED TO THE
BORROWER.

 

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6.8.          SECURITY INTEREST.  THE HOLDER OF THIS NOTE HAS BEEN GRANTED A
SECURITY INTEREST IN CERTAIN ASSETS OF THE BORROWER MORE FULLY DESCRIBED IN A
SECURITY AGREEMENT DATED AS OF SEPTEMBER 11, 2003.

 

6.9.          CONSTRUCTION.  EACH PARTY ACKNOWLEDGES THAT ITS LEGAL COUNSEL
PARTICIPATED IN THE PREPARATION OF THIS NOTE AND, THEREFORE, STIPULATES THAT THE
RULE OF CONSTRUCTION THAT AMBIGUITIES ARE TO BE RESOLVED AGAINST THE DRAFTING
PARTY SHALL NOT BE APPLIED IN THE INTERPRETATION OF THIS NOTE TO FAVOR ANY PARTY
AGAINST THE OTHER.

 

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]

 

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IN WITNESS WHEREOF, the Borrower has caused this Secured Convertible Revolving
Note to be signed in its name effective as of this 11th day of September, 2003.

 

 

ELECTRIC CITY CORP.

 

 

 

 

 

By:

/s/ John Mitola

 

Name:

John Mitola

 

Title:

Chief Executive Officer

 

 

WITNESS:

 

 

 

/s/ Jeffrey Mistarz

 

 

 

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NOTICE OF CONVERSION

 

(To be executed by the Holder in order to convert the Note)

 

The undersigned hereby elects to convert $                    of the principal
and $                   of the interest due on the Secured Convertible Revolving
Note issued by Electric City Corp. on September 11, 2003 into Shares of Common
Stock of Electric City Corp. (the “Borrower”) according to the conditions set
forth in such Note, as of the date written below.

 

Date of Conversion:

 

 

 

Conversion Price:

 

 

 

Shares To Be Delivered:

 

 

 

Signature:

 

 

 

Print Name:

 

 

 

Address:

 

 

 

 

 

 

 

Holder  DWAC
instructions

 

 

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