Exhibit 10.2

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 AND SUCH COMMON
SHARES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO ELECTRIC CITY CORP. THAT SUCH REGISTRATION IS
NOT REQUIRED.

SECURED CONVERTIBLE REVOLVING NOTE

          FOR VALUE RECEIVED, ELECTRIC CITY CORP., a Delaware corporation (the
“Company”), promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate
Services Limited, P.O. Box 309 GT, Ugland House, South Church Street, George
Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”) or its
registered assigns or successors in interest, on order, the sum of Two Million
Dollars ($2,000,000), without duplication of any amounts owing by the Company to
Holder under the Minimum Borrowing Notes (as defined in the Security Agreement
referred to below), or, if different, the aggregate principal amount of all
Loans (as defined in the Security Agreement referred to below), together with
any accrued and unpaid interest hereon, on September 1, 2006 (the “Maturity
Date”) if not sooner paid.

          Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Security Agreement among the Company and
the Holder dated as of the date hereof (as amended, modified and supplemented
from time to time, the “Security Agreement”).

          The following terms shall apply to this Secured Revolving Note (this
“Note”):

ARTICLE I
CONTRACT RATE AND MINIMUM BORROWING NOTE

          1.1 Contract Rate. Subject to Sections 3.2 and 4.10, interest payable
on the outstanding principal amount of this Note (the “Principal Amount”) shall
accrue at a rate per annum equal to the “prime rate” published in The Wall
Street Journal from time to time (the “Prime Rate”), plus one and three quarters
percent (1.75%) (the “Contract Rate”). The Contract 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 the Prime Rate.

          1.2 Allocation of Principal to Minimum Borrowing Note. In the event
that the amount due and payable hereunder should equal or exceed $1,000,000, to
the extent that the outstanding balance on any Minimum Borrowing Note shall be
less than or equal to $1,000,000

 

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(the difference of $2,000,000 less the actual balance of such Minimum Borrowing
Note, the “Available Minimum Borrowing”), such portion of the balance hereof as
shall equal the Available Minimum Borrowing shall be deemed to be simultaneously
extinguished on this Note and transferred to, and evidenced by, such Minimum
Borrowing Note.

          1.3 Optional Prepayment in Cash. The Company shall have the option of
prepaying this Note in full or in part in cash at any time without premium or
penalty.

ARTICLE II
CONVERSION RIGHTS AND FIXED CONVERSION PRICE

          2.1 Optional Conversion. Subject to the terms of this Article II, the
Holder shall have the right, but not the obligation, at any time until the
Maturity Date, or during an Event of Default (as defined in Article III), and,
subject to the limitations set forth in Section 2.2 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 restricted shares of the
Common Stock at the Fixed Conversion Price (defined below). For purposes hereof,
subject to Section 2.6 hereof, the initial “Fixed Conversion Price” means $1.05.
The shares of Common Stock to be issued upon such conversion are herein referred
to as the “Conversion Shares.”

          2.2 Conversion Limitations. (i) 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 (i) 4.99% of the
outstanding shares of Common Stock and (ii) the number of shares of Common Stock
beneficially owned by the Holder. For 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 Conversion Shares
limitation described in this Section 2.2 shall automatically become null and
void without any notice to the Company upon the occurrence and during the
continuance of an Event of Default, or upon 75 days prior notice to the Company.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 2.2 are irrevocable and may not be waived by the Holder or the
Company.

     (ii) Notwithstanding anything to the contrary contained herein, in the
Security Agreement, any Ancillary Agreement or any document, instrument or
agreement entered into in connection with any other transactions between the
Holder and the Company, the Holder may not acquire stock in the Company
(including, without limitation, pursuant to a contract to purchase, by
exercising an option or warrant, by converting any other security or instrument,
by acquiring or exercising any other right to acquire shares of stock or other
security convertible into shares of stock in the Company, or otherwise, and such
contracts, options, warrants, conversion or other rights shall not be
enforceable or exercisable) to the extent such stock acquisition would cause any
interest (including any original issue discount) payable by the Company to the
Holder not to qualify as “portfolio interest” within the meaning of
Section 881(c)(2) of the Code, by reason of Section 881(c)(3) of the Code,
taking into account the constructive ownership rules under Section 871(h)(3)(C)
of the Code (the “Stock Acquisition Limitation”). The Stock Acquisition
Limitation shall automatically become null and void without any notice to the
Company upon the earlier to occur of either (a) the Company’s delivery

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to the Holder of a Notice of Redemption or (b) the existence of an Event of
Default at a time when the average closing price of the Company’s common stock
as reported by Bloomberg, L.P. on the Principal Market for the immediately
preceding five trading days is greater than or equal to 150% of the Fixed
Conversion Price.

          2.3 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 Company 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 Company within two (2) Business Days after the Conversion Date. Each date on
which a Notice of Conversion is delivered or telecopied to the Company in
accordance with the provisions hereof shall be deemed a Conversion Date (the
“Conversion Date”). A form of Notice of Conversion is annexed hereto as
Exhibit A. Pursuant to the terms of the Notice of Conversion, the Company will
issue instructions to the transfer agent accompanied by an opinion of counsel
within one (1) Business Day of the date of the delivery to the Company of the
Notice of Conversion and shall 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 Company 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 Company of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of the Conversion
Shares, unless the Holder provides the Company written instructions to the
contrary.

          2.4 Late Payments. The Company understands that a delay in the
delivery of the Conversion Shares 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 Company shall pay late payments to
the Holder for any late issuance of Conversion Shares in the form required
pursuant to this Article II upon conversion of this Note, in the amount equal to
$250 per Business Day after the Delivery Date. The Company shall make any
payments incurred under this Section in immediately available funds upon demand.

          2.5 Conversion Mechanics. The number of shares of Common Stock to be
issued upon each conversion of this Note shall be determined by dividing that
portion of the principal and interest and fees to be converted, if any, by the
then applicable Fixed Conversion Price.

          2.6 Adjustment Provisions. The Fixed Conversion Price and number and
kind of shares or other securities to be issued upon conversion determined
pursuant to Section 2.1 shall be subject to adjustment from time to time upon
the happening of certain events while this conversion right remains outstanding,
as follows:

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               (a) Reclassification. If the Company 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 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 (i) immediately prior to or (ii) immediately after,
such reclassification or other change at the sole election of the Holder.

               (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 or any
preferred stock issued by the Company in shares of Common Stock (other than a
dividend paid in connection with the Series E Convertible Preferred Stock of the
Company issued prior to the date of this Note), 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 2.6, if the Company shall at any time prior to the conversion or
repayment in full of the Principal Amount issue any shares of Common Stock or
securities convertible into Common Stock to a Person other than the Holder
(except (i) pursuant to Sections 2.6(a) or (b) above; (ii) pursuant to options,
warrants, or other obligations to issue shares outstanding or proposed to be
issued on the date hereof as disclosed to the Holder in writing; (iii) pursuant
to options that may be issued under any employee incentive stock option and/or
any qualified stock option plan adopted by the Company (including without
limitation, pursuant to the Company’s director stock option plan); or (iv) with
respect to warrants or options exercisable into up to 370,000 shares of Common
Stock (as calculated on the date hereof and appropriately adjusted for any
subdivision, combination or similar event) issued to consultants of the Company,
so long as, in the case of this clause (iv), such warrants and options are
exercisable into the Common Stock at an exercise price no less than the greater
of (x) $0.75 (as adjusted for any subdivision, combination or similar event with
respect to the Common Stock) and (y) the average closing price of the Common
Stock for the immediately preceding five (5) trading day period) 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 Company convertible into or exercisable or exchangeable
for Common Stock shall result in an adjustment to the Fixed Conversion Price
upon the issuance of such securities.

               (d) Computation of Consideration. For purposes of any computation
respecting consideration received pursuant to Section 2.6(c) above, the
following shall apply:

               (i) 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 Company for any underwriting of the issue or otherwise
in connection therewith;

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               (ii) 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 Company (irrespective of the accounting
treatment thereof); and

               (iii) upon any such exercise, the aggregate consideration
received for such securities shall be deemed to be the consideration received by
the Company for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the conversion or
exchange thereof (the consideration in each case to be determined in the same
manner as provided in subsections (i) and (ii) of this Section 2.6(d)).

          2.7 Reservation of Shares. During the period the conversion right
exists, the Company will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Conversion Shares
upon the full conversion of this Note. The Company represents that upon
issuance, the Conversion Shares will be duly and validly issued, fully paid and
non-assessable. The Company 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 the Conversion Shares upon the conversion
of this Note.

ARTICLE III
EVENTS OF DEFAULT AND DEFAULT RELATED PROVISIONS

          3.1 Events of Default. The occurrence of an Event of Default under the
Security Agreement shall constitute an event of default (“Event of Default”)
hereunder.

          3.2 Default Interest. Following the occurrence and during the
continuance of an Event of Default, the Contract Rate 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 at
such additional interest rate from the date of such Event of Default until the
date such Event of Default is cured or waived. Furthermore, in addition to the
foregoing contained in this Section 4.2, a default interest rate of five percent
(5%) per annum above the then applicable interest rate hereunder shall apply to
any monetary amounts that are due and remain unpaid in accordance with the terms
of this Note, the Security Agreement or any Ancillary Agreement, in each case,
following a three (3) business day grace period.

          3.3 Default Payment. Following the occurrence and during the
continuance of an Event of Default, the Holder, at its option, may elect, in
addition to all rights and remedies of the Holder under the Security Agreement
and the Ancillary Agreements and all obligations of the Company under the
Security Agreement and the Ancillary Agreements, to require the Company to make
a Default Payment (“Default Payment”). The Default Payment shall be one hundred
percent (100%) of the outstanding principal amount of the Note, plus accrued but
unpaid interest, all other fees then remaining unpaid, and all other amounts
payable hereunder. The Default Payment shall be applied first to any fees due
and payable to the Holder pursuant to the Notes and/or the Ancillary Agreements,
then to accrued and unpaid interest due on the Notes and then

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to the outstanding principal balance of the Notes. The Default Payment shall be
due and payable immediately on the date that the Holder has exercised its rights
pursuant to this Section 3.3.

ARTICLE IV
MISCELLANEOUS

          4.1 Conversion Privileges. The conversion privileges set forth in
Article II shall remain in full force and effect immediately from the date
hereof until the date this Note is indefeasibly paid in full and irrevocably
terminated.

          4.2 Cumulative Remedies. The remedies under this Note shall be
cumulative.

          4.3 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 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.

          4.4 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.

          4.5 Amendment Provision. The term “Note” and all references 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 such successor instrument may be
amended or supplemented.

          4.6 Assignability. This Note shall be binding upon the Company 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. The Company may not assign any of its
obligations under this Note without the prior written consent of the Holder, any
such purported assignment without such consent being null and void.

          4.7 Cost of Collection. In case of any Event of Default under this
Note, the Company shall pay the Holder the Holder’s reasonable costs of
collection, including reasonable attorneys’ fees.

          4.8 Governing Law, Jurisdiction and Waiver of Jury Trial.

               (a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW.

               (b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE
COMPANY, ON THE ONE

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HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE, THE SECURITY
AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT
OF OR RELATED TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY
AGREEMENTS; PROVIDED, THAT THE COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW
YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL
BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON
THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. THE COMPANY EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH
IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE
SECURITY AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT
IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

               (c) THE COMPANY HEREBY DESIRES THAT ITS DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY HEREBY
WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE
HOLDER, AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE
SECURITY AGREEMENT, ANY OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED
HERETO OR THERETO.

          4.9 Severability. 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 enforceability of any other provision of this
Note.

          4.10 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

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charges hereunder exceed the maximum rate permitted by such law, any payments in
excess of such maximum rate shall be credited against amounts owed by the
Company to the Holder and thus refunded to the Company.

          4.11 Security Interest. The Holder has been granted a security
interest in certain assets of the Company as more fully described in the
Security Agreement

          4.12 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 Company has caused this Secured Revolving Note to
be signed in its name effective as of this ___day of February, 2005,

            ELECTRIC CITY CORP.
      By:   /s/ Jeffrey Mistarz         Name:   Jeffrey Mistarz        Title:  
Chief Financial Officer & Treasurer     

WITNESS:

/s/ Tammy Koeller

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EXHIBIT A

NOTICE OF CONVERSION

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

     The undersigned hereby elects to convert $___of the principal and $___of
the interest due on the Secured Revolving Note dated as of February ___, 2005
(the “Note”) issued by Electric City Corp. (the “Company”) into shares of Common
Stock of the Company in accordance with the terms and conditions set forth in
the Note, as of the date written below.

     
Date of Conversion:
 

 

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Conversion Price:
   

 

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Shares To Be Delivered:
   

 

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Signature:
   

 

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Print Name:
 

 

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Address:
 

 

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Holder DWAC instructions
   

 

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