Exhibit 10.1
Employee Stock Option Agreement
     This Employee Stock Option Agreement (this “Agreement”) is made this 11th
day of July, 2006, between Electric City Corp., a Delaware corporation
(“Electric City”) and David Asplund (the “Holder”).
W I T N E S S E T H:
     WHEREAS, Holder is an executive of Electric City (the “Company”), and
Electric City desires, by affording Holder an opportunity to purchase shares of
Electric City’s common stock, par value $0.0001 per share (the “Common Stock”)
as hereinafter provided, to help align the long-term economic interests of the
Holder with the long-term economic interests of the Company;
     NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:
     1. Grant of Options. Electric City hereby agrees to grant to the Holder, on
the date hereof (the “Grant Date”), options (the “Options”) to purchase up to an
aggregate of 4,300,000 shares (the “Option Shares”) of the Common Stock, subject
to the terms and conditions set forth herein.
     2. Exercise Price. The exercise price per Option Share, subject to
adjustment as hereinafter provided (the “Exercise Price”), under the Options
shall be equal to the following prices per share:
     (i) options with respect to One Million Five Hundred Thousand (1,500,000)
shares shall be at a price per share of $1.02 and such options shall become
vested and exercisable on December 31, 2006, so long as Holder is employed by
the Company as its Chief Executive Officer on such date;
     (ii) options with respect to One Million Four Hundred Thousand (1,400,000)
shares shall be at a price per share equal to the higher of (x) the average
closing price of the Company’s common stock as measured over the thirty
(30) trading day period prior to December 31, 2007, or (y) the closing price of
the Company’s common stock on December 31, 2007. Such options shall become
vested and exercisable on December 31, 2007, so long as Holder is employed by
the Company as its Chief Executive Officer on such date; and
     (iii) options with respect to One Million Four Hundred Thousand (1,400,000)
shares shall be at a price per share equal to the higher of (x) the average
closing price of the Company’s common stock as measured over the thirty
(30) trading day period prior to December 31, 2008, or (y) the closing price of
the Company’s common stock on December 31, 2008. Such options shall become
vested and exercisable on December 31, 2009, so long as Holder is employed by
the Company as its Chief Executive Officer on such date.

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In addition to the vesting rights set forth above, any unvested Stock Options
shall automatically and immediately terminate and be of no further force or
effect if the Holder shall voluntarily cease working for the Company. All
unvested Stock Options shall immediately vest and become exercisable if i) the
Company is merged or consolidated with another entity which is not then
controlled by the Company and, as a result, such merger or consolidation results
in at least fifty-one percent (51%) or greater of the Company’s common stock
being controlled or owned by another entity, or (ii) a majority of the Company’s
assets are sold or otherwise transferred to another entity that is not then
controlled by or affiliated with the Company (i and ii collectively a “Change of
Control”), or iii) the employment of the Holder by the Company is terminated by
the Company for any reason other than Due Cause. As used in this Agreement, “Due
Cause” shall mean any of:

(i)   Failure by the Holder to perform any material and substantial duties to
the Company;   (ii)   Holder’s conviction of, or plea of guilty or of nolo
contendre to, of a felony charge;   (iii)   misappropriation of Company property
by Holder or any act of dishonesty by Holder directed at the Company or acting
on behalf of the Company;   (iv)   violation of the Company’s drug and alcohol
policy;   (v)   any conduct, action or behavior by Holder that has a material
adverse effect on the reputation of the Company, its business, customers,
employees, prospects, name, reputation or goodwill;   (vi)   Holder’s commission
of an act of moral turpitude.

The provisions of this Section relate only to the vesting of the Stock Options
and do not in anyway change the at-will nature of the employment of Holder by
the Company.
3. Exercise of the Stock Options. Any vested Stock Options may be exercised at
any time after vesting by delivering the Exercise Price, paid in cash, along
with a notice of exercise to Electric City at its headquarters address
(currently, 1280 Landmeier Road, Elk Grove Village, Illinois 60007). The
Exercise Price of the shares as to which any Stock Options are being exercised
shall be paid in full, in cash, at the time of exercise, provided, that if the
Fair Market Value of one share of Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below), in lieu of exercising the
Stock Options for cash, the Holder may elect to receive shares of Common Stock
equal to the value (as determined below) of the Stock Options (or the portion
thereof being exercised) by surrender of this Agreement with respect to the
Stock Options being exercised at the principal office of the Company, together
with the executed Exercise Notice, in which event Electric City shall issue to
the Holder a number of shares of Common Stock computed using the following
formula:

             
X
  =   Y   (A-B)
 
           
 
          A

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Where:
  X = the number of shares of Common Stock to be issued to the Holder;
 
   
 
  Y = the number of shares of Common Stock purchasable under the Stock Options
or, if only a portion of the Stock Options is being exercised, the portion of
the Stock Options being exercised (at the date of such calculation);
 
   
 
  A = the Fair Market Value of one share of the Common Stock (at the date of
such calculation); and
 
   
 
  B = Exercise Price (as adjusted to the date of such calculation)

4. Transferability. The Stock Options shall not be transferable.
5. Expiration of the Options. The Stock Options will only be exercisable by the
Holder and only after vesting in accordance with paragraph 2 of this Agreement,
and all Stock Options, vested or unvested, will expire on the earliest of
(i) the tenth anniversary of the date of this Agreement, or (ii) six months
following the date the Holder ceases to be a full time employee of the Company
if such cessation is not by reason of termination by the Company for Due Cause,
or (iii) immediately upon any termination of the employment of the Holder for
Due Cause. In the event of the death of the Holder, all then vested Stock
Options will be exercisable by the Holder’s estate (or the executor thereof) for
a period of six months following the date of death, whereupon all unexercised
Stock Options will automatically terminate. In the event of a Change of Control
all options will expire twelve months following the date of such Change of
Control.
6. Adjustments. The number of shares issuable as a result of the exercise of any
unexercised Stock Options, and the purchase price payable therefore, may be
adjusted from time to time to give effect to stock splits, both forward and
reverse, and any stock dividends which may be declared payable to the holders of
the outstanding Common Stock.
7. Nonqualified Stock Options. The Stock Options are not being issued as part of
a qualified incentive stock option plan.
8. Taxes. Electric City will have the right to deduct from all cash or property
payments made to the Holder upon exercise of any Stock Option, any and all
federal, state or local taxes required to be withheld with respect to such
payments.
9. Trading Restrictions. Electric City shall have the right at any time to
impose trading restrictions on the Option Shares which may limit the number of
shares that can be sold on any trading day or during any 90 day period and/or
prohibit the sale of the Option Shares on any trading day, not to exceed thirty
(30) trading days a year.
[Balance of page intentionally left blank; signature page follows.]

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     IN WITNESS WHEREOF, Electric City Corp. and the Holder have duly executed
this Employee Stock Option Agreement effective as of the date first written
above.

                  ELECTRIC CITY CORP.       HOLDER    
 
               
By:
  /s/ Jeffrey Mistarz       /s/ David Asplund    
 
               
 
  Jeffrey Mistarz       David Asplund    
 
  Chief Financial Officer            

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