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 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.
CONVERTIBLE TERM NOTE
     FOR VALUE RECEIVED, ELECTRIC CITY CORP., a Delaware corporation (the
“Borrower”), hereby 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 or successors in interest, the sum of FIVE MILLION DOLLARS
($5,000,000), together with any accrued and unpaid interest hereon, on
November 22, 2009 (the “Maturity Date”) if not sooner paid.
     Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof between the Borrower and the Holder (the “Purchase Agreement”).
The following terms shall apply to this Note:
ARTICLE I
INTEREST & AMORTIZATION
     1.1 Interest Rate and Payments. Subject to Sections 4.9 and 5.6 hereof,
interest payable on this Note shall accrue at a rate per annum (the “Contract
Rate”) equal to the “prime rate” published in The Wall Street Journal from time
to time, plus two percent (2.00%). Interest shall be payable monthly in arrears
commencing on December 1, 2005 and on the first day of each consecutive calendar
month thereafter (each, a “Repayment Date”), and on the Maturity Date,

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accelerated or otherwise. 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 no event shall the Contract Rate be
less than six percent (6.75%). The Contract Rate shall be calculated on the last
business day of each calendar month hereafter (other than for increases or
decreases in the Prime Rate which shall be calculated and become effective in
accordance with the terms of Section 1.1) until the Maturity Date (each a
“Determination Date”) and shall be subject to adjustment as set forth herein. If
(i) the Company shall have registered the shares of the Common Stock underlying
the conversion of this Note and each Warrant on a registration statement
declared effective by the Securities and Exchange Commission (the “SEC”), and
(ii) the market price (the “Market Price”) of the Common Stock as reported by
Bloomberg, L.P. on the Principal Market for the five (5) trading days
immediately preceding a Determination Date exceeds the then applicable Fixed
Conversion Price by at least twenty-five percent (25%), the Contract Rate for
the succeeding calendar month shall automatically be reduced by 200 basis points
(200 b.p.) (2%) for each incremental twenty-five percent (25%) increase in the
Market Price of the Common Stock above the then applicable Fixed Conversion
Price. Notwithstanding the foregoing (and anything to the contrary contained
herein), in no event shall the Contract Rate at any time be less than zero
percent (0%).
     1.2 Contingent Interest. Additional interest shall be payable quarterly
hereunder on the last day of each April, July, October and January, as follows:
     (a) Performance Interest. So long as any portion of the Note remains
outstanding the Company shall pay to the Holder an amount equal to the lesser
(but not less than zero) of (i) two-thirds (2/3) of the Project Cash Flow
generated by all Projects for the most recently ended calendar quarter, and
(ii) the Target Return for such calendar quarter.
     (b) Bonus Interest. So long as any portion of the Note remains outstanding
the Company shall pay to the Holder an amount equal to one-third (1/3) of Excess
Cash Flow for such calendar quarter.
     (c) Post Repayment and Conversion Performance Interest. For twenty
(20) quarters immediately following irrevocable payment in full of the Note,
including all accrued and unpaid interest and fees thereon (whether through
scheduled amortization and/or conversion, or otherwise), the Company will pay
the Holder as additional interest: (i) 50% of the Project Cash Flow generated by
all Projects each quarter for four consecutive quarters commencing in the
quarter immediately following retirement of the Note (the “First Post Retirement
Period”); (ii) 40% of the Project Cash Flow generated by all Projects each
quarter for four consecutive quarters commencing in the quarter immediately
following the First Post Retirement Period (the “Second Post Retirement
Period”); (iii)

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30% of the Project Cash Flow generated by all Projects each quarter for four
consecutive quarters commencing in the quarter immediately following the Second
Post Retirement Period (the “Third Post Retirement Period”); (iv) 20% of the
Project Cash Flow generated by all Projects each quarter for four consecutive
quarters commencing in the quarter immediately following the Third Post
Retirement Period (the “Fourth Post Retirement Period”); (v)10% of the Project
Cash Flow generated by all Projects each quarter for four consecutive quarters
commencing in the quarter immediately following the Fourth Post Retirement
Period. Notwithstanding any provision contained herein, in the Purchase
Agreement or any Related Agreement to the contrary, (i) the Company’s
obligations under this Section 1.2 shall (a) constitute separate independent
obligations of the Company that shall survive until indefeasibly paid to the
Holder in full notwithstanding the prior payment in full of the outstanding
Principal Amount and interest thereon in accordance with the terms hereof and
(b) at all times constitute Obligations under and as defined in the Master
Security Agreement which shall be secured until indefeasibly paid in full by the
Collateral (as defined in the Master Security Agreement), and (ii) neither this
Note nor the Master Security Agreement shall be deemed satisfied or terminated,
as applicable, unless and until all obligations of the Company to the Holder
under this Section 1.2 shall have been indefeasibly paid in full. Upon the
irrevocable payment in full of the Obligations (as defined in the Master
Security Agreement), other than Obligations arising in connection with the
payment of Post Retirement Performance and Bonus Interest, the Holder
acknowledges that it may be desireable for the Holder to restructure its secured
interests in the Collateral granted by Company to Holder under the Master
Security Agreement. Should the Holder determine, in its sole discretion, that
adequate provision for the payment of its Post Retirement Performance and Bonus
Interest have been made, it will cooperate with the Company to make commercially
reasonable provision to restructure its secured interests to allow the Company
to acquire additional financing.

  (d)   Definitions. For purposes of this Section 1.2, the following definitions
shall apply:         Base Interest — determined for any calendar quarter for a
Project, an amount equal to interest at the Contract Rate on the principal
amount of Note proceeds which were used to finance such Project.         Excess
Cash Flow — determined for any calendar quarter, the greater of (i) the Project
Cash Flow for all Projects for such quarter less all Performance Interest for
such quarter, and (ii) zero.

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      Project — an individual ‘VNPP program (including the ComEd VNPP and
PacifiCorp VNPP) or customer specific Shared Savings Arrangement financed in
whole or in part with proceeds from this Note.         Project Cash Flow — the
cash flow generated by a Project, which, for any calendar quarter, shall be
equal to the total revenue of such Project for such quarter less the aggregate
of the following for such Project for such quarter: (i) Project Operating Costs,
(ii) Project Maintenance Costs and (iii) Project Debt Service Costs.        
Project Debt — with respect to a specific Project, that portion of the proceeds
of this Note used to fund such Project.         Project Debt Service Costs — for
any calendar quarter with respect to a specific Project, the Base Interest
expense for such quarter, scheduled principal payments for the related Project
Debt for such quarter and all fees for the related Project Debt for such
quarter.         Project Maintenance Costs — for any Project for any calendar
quarter, the sum of all direct costs of maintaining such Project, including the
cost of repairing, servicing and/or replacing Project equipment including the
cost of preventative maintenance and the cost of removing equipment from a
customer’s location if necessary.         Project Operating Costs — for any
Project for any calendar quarter, the sum of all direct costs of operating such
Project, including the costs of communications, customer billing and
collections, computer networking support and other expenses directly
attributable to the operation of such Project, excluding the Company’s cost of
sales and marketing which includes the cost of enrolling customer hosts for such
Project.         Shared Savings Arrangement — a written arrangement between the
Company (or a subsidiary of the Company) and a third party under which the third
party agrees to pay the Company (or such subsidiary) periodic payments at a rate
determined based upon the savings on electric power costs experienced by such
third party pursuant to the operation of equipment provided by the Company or
such subsidiary.         Target Return — determined for the most recent calendar
quarter ended as of any date of determination, an amount equal to [$5,000,000]
[average daily outstanding total Project Debt during such quarter] multiplied by
0.05, less (ii) Base Interest and fees for all Projects for such quarter.

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      VNPP — a ‘virtual negawatt power project’ established by the Company
pursuant to a written agreement with a public utility under which the utility
agrees to pay the Company periodic payments at a rate determined based upon the
demand capability reduction which the Company has installed in the utility’s
service area and dedicated to providing such demand reduction capability to the
utility.

     1.3 Monthly Principal Payments. Although Borrower shall make payments of
accrued and unpaid interest under this Note beginning on December 1, 2005 ,
amortization of the aggregate principal amount outstanding under this Note (the
“Principal Amount”) shall begin on June 1, 2006 (the “Amortization Date”).
Subject to Section 2.1 below with respect to cash payments made on any Repayment
Date, beginning on the Amortization Date, the Borrower shall make monthly
payments to the Holder on each Repayment Date, each in the amount of $43,759.64,
together with any accrued and unpaid interest to date on such portion of the
Principal Amount plus any and all other amounts which are then owing under this
Note but have not been paid (collectively, the “Monthly Amount”).
ARTICLE II
BORROWER PAYMENT OPTIONS
     2.1 Forced Conversions (a) Subject to the terms hereof, the Borrower shall
have the sole option to determine whether to satisfy payment of the Monthly
Amount on each Repayment Date either in cash or in shares of Common Stock (as
defined in the Purchase 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 B attached hereto electing to
pay the Monthly Amount payable on the next Repayment Date 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 Repayment Date (the
date by which such notice is required to be given being hereinafter referred to
as the “Notice Date”). If, for the Monthly Amount 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 Monthly Amount due on such
Repayment Date shall be paid in cash. If the Borrower elects or is required to
repay all or a portion of the Principal Amount in cash on a Repayment Date, then
on such Repayment Date the Borrower shall pay to the Holder an amount equal to
102% of the Principal Amount then due in satisfaction of such obligation. If the
Borrower pays all or a portion of the Monthly Amount in shares of Common Stock,
the number of such shares to be issued for such Repayment Date shall be the
number determined by dividing (x) the portion of the Monthly Amount to be paid
in shares of Common Stock, by (y) the Fixed Conversion Price. For purposes
hereof, the “Fixed Conversion Price” means $1.16.

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     In the event that the average closing price of the Common Stock on the
Principal Market is greater than 200% of the Fixed Conversion Price for a period
of at least ten (10) consecutive trading days following payment in full of any
then due and payable Monthly Amount, 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 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 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 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 twenty two
(22) 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 200%
of the Fixed Conversion Price during the twenty two (22) 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 200% 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.
     Any principal amount of this Note which is prepaid pursuant to this
Section 2.4 shall be deemed to constitute payments of outstanding principal
applying to Monthly Amounts for the remaining Repayment Dates in chronological
order.

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     2.2 No Effective Registration. Notwithstanding anything to the contrary
herein, the Borrower shall be prohibited from exercising its right to repay any
part of any Monthly Amount in shares of Common Stock (and must deliver cash in
respect thereof) on any applicable Repayment Date if at any time from the Notice
Date for such Repayment Date through the date upon which such payment is made by
delivery of certificates for shares of Common Stock (i) 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 (ii) an Event of
Default hereunder exists and is continuing, unless such Event of Default is
cured within any applicable cure period or is otherwise waived in writing by the
Holder in whole or in part at the Holder’s option.
     2.3 Conversion limitations. Subject to Sections 2.1 and 2.2 hereof, the
Borrower may elect to provide the Holder with a Repayment Election Notice
requiring the conversion of the Monthly Amount, at a conversion price equal to
eighty five percent (85%) of the average daily volume weighted average closing
prices of the Common Stock during the twenty (20) trading days immediately prior
to the date of the delivery of such respective Repayment Election Notice,
provided, however, that such conversion of the Monthly Amount due on each
Repayment Date does not exceed twenty five percent (25%) of the aggregate dollar
trading volume of the Common Stock for the twenty two (22) trading days
immediately preceding delivery of a Repayment Election Notice. Any part of the
Monthly Amount due on such Repayment Date that the Holder has not been able to
convert into shares of Common Stock as set forth in this Section 2.3 shall be
paid in cash, with that portion that represents the Principal Amount paid at the
rate of 102% of the Principal Amount otherwise due on such Repayment Date,
within three (3) business days of the applicable Repayment Date. In no event
shall the Borrower be permitted to convert the Monthly Amount pursuant to this
Section 2.3 if the market price of the Borrower’s stock is less than $1.00.
     2.4 Optional Prepayment in Cash. The Borrower will have the option of
prepaying this Note in full (“Optional Redemption”) by paying to the Holder a
sum of money equal to one hundred ten percent (110%) of the principal amount of
this Note together with accrued but unpaid interest thereon and any and all
other sums due, accrued or payable to the Holder arising under this Note or the
Purchase Agreement or any Related Document (as defined in the Purchase
Agreement) (the “Redemption Amount”) outstanding on the day written notice of
redemption (the “Notice of Redemption”) is given to the Holder, which Notice of
Redemption shall specify the date for such Optional Redemption (the “Redemption
Payment Date”). A Notice of Redemption shall not be effective with respect to
any portion of this Note for which the Holder has a pending election to convert
pursuant to Section 3.1 and the Redemption Amount shall be determined as if such
election to convert had been completed immediately prior to the date of the
Notice of Redemption. The Redemption Payment Date shall be not earlier than the
day after the date of the Notice of

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Redemption and not later than seven (7) days after the date of the Notice of
Redemption. On the Redemption Payment Date, the Redemption Amount must be paid
in good funds to the Holder. In the event the Borrower fails to pay the
Redemption Amount by the Redemption Payment Date, then such Redemption Notice
will be null and void.
ARTICLE III
CONVERSION RIGHTS
     3.1. Holder’s Conversion Rights. If the closing price of the Common Stock
on the Conversion Date (as defined below) is greater than the Fixed Conversion
Price, and a Registration Statement covering the shares of Common Stock which
are issuable pursuant to conversion hereof has been declared effective by the
Securities and Exchange Commission and is effective and current on the
Conversion Date, the Holder shall have the right, but not the obligation, to
convert all or any portion of the then aggregate outstanding principal amount of
this Note, together with interest and fees due hereon, into shares of Common
Stock subject to the terms and conditions set forth in this Article III. The
Holder may exercise such right by delivery to the Borrower of a written notice
of conversion not less than one (1) day prior to the date upon which such
conversion shall occur. The date upon which such conversion (or any conversion
pursuant to Section 3.3)shall occur is the “Conversion Date”.
     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 (i) 4.99% of the issued and
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 Share
limitation described in this Section 3.2 shall automatically become null and
void following notice to the Company upon the occurrence and during the
continuance of an Event of Default, upon 75 days prior notice to the Company, or
upon receipt by the Holder of a Notice of Redemption. Notwithstanding anything
contained herein to the contrary, the number of shares of Common Stock issuable
by the Company and acquirable by the Holder shall not exceed an aggregate of
10,154,300 shares of Common Stock (subject to appropriate adjustment for stock
splits, stock dividends, or other similar recapitalizations affecting the Common
Stock) (the “Maximum Common Stock Issuance”), unless the issuance of Common
Stock hereunder shall first be approved by the Company’s shareholders. If at any
point in time and from time to time the number of shares of Common Stock
issuable pursuant to the terms of

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this Note, the Purchase Agreement or any other Related Agreement, together with
the number of shares of Common Stock that would then be issuable by the Company
to the Holder in the event of a conversion or exercise pursuant to the terms of
this Note, the Purchase Agreement or any other Related Agreement, would exceed
the Maximum Common Stock Issuance but for this Section 3.2, the Company shall
promptly call a shareholders meeting to solicit shareholder approval for the
issuance of the shares of Common Stock hereunder . Notwithstanding anything
contained herein to the contrary, the provisions of this Section 3.2 are
irrevocable and may not be waived by the Holder or the Company.
     3.3 Mandatory Conversion of Monthly Amount. If the closing price of the
Common Stock on the business date immediately preceding the date when any
Monthly Amount is due is 115% or greater than the Fixed Conversion Price, and a
Registration Statement covering the shares of Common Stock which are issuable
pursuant to conversion hereof has been declared effective by the Securities and
Exchange Commission and is effective and current on the date when such Monthly
Amount is due, then, subject to the limitations set forth in Section 3.2, the
Holder shall automatically convert the Monthly Amount then due into shares of
Common Stock on such due date; provided that (i) such conversion shall not be
required if an Event of Default hereunder exists and is continuing; and
(ii) such conversion of the Monthly Amount due shall be limited to an amount
equal to twenty five percent (25%) of the aggregate dollar trading volume of the
Common Stock for the twenty two (22) trading days immediately preceding the date
when such Monthly Amount is due. Any part of the Monthly Amount due that is not
converted into shares of Common Stock as set forth in this Section 3.3 shall be
paid in cash, with that portion that represents the Principal Amount paid at the
rate of 102% of such portion of the Principal Amount otherwise due on such date.
     3.4 Mechanics of Holder’s Conversion. In the event that the Holder elects
or is required to convert any of all of 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 being converted. On each Conversion Date 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. 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 Conversion Date (the “Delivery Date”).

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          In the case of the exercise of the conversion rights set forth herein
the conversion 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 Conversion Date. 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 naming a nominee or
transferee.
     3.5 Conversion Mechanics.
     (a) Except as otherwise provided in Section 2.3 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 Fixed Conversion Price. In the event of any conversions of
outstanding principal amount under this Note in part pursuant to this
Article III, such conversions shall be deemed to constitute conversions of
outstanding principal amount applying to Monthly Amounts for the remaining
Repayment Dates in chronological order. By way of example, if the original
principal amount of this Note is $5,000,000 and the Holder converted $125,000 of
such original principal amount prior to the first Repayment Date, then (1) the
principal amount of the Monthly Amount due on the first Repayment Date would
equal $0, (2) the principal amount of the Monthly Amount due on the second
Repayment Date would equal $0 and (3) the principal amount of the Monthly Amount
due on the third Repayment Dates would be $6,578.92.
     (b) The Fixed Conversion Price and number and kind of shares or other
securities to be issued upon conversion is subject to adjustment from time to
time upon the occurrence of certain events, as follows:
     A. 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 or the Conversion Price, as the case may be, 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.
     B. Shares Reserved. 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

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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.
     3.6 Issuance of New Note. Upon any partial conversion of this Note, a new
Note containing the same date and provisions of this Note shall, at the request
of the Holder, be issued by the Borrower to the Holder for the principal balance
of this Note and interest which shall not have been converted or paid. The
Borrower will pay no costs, fees or any other consideration to the Holder for
the production and issuance of a new Note.
ARTICLE IV
EVENTS OF DEFAULT
     If an Event of Default (as defined below) occurs and is continuing, the
Borrower’s rights under Sections 2.1, 2.3 and 2.4 shall immediately cease and be
of no further effect until such time as the Event of Default has been cured, or
has been waived by the Holder. Upon the occurrence and continuance of an Event
of Default beyond any applicable grace period, the Holder may make all sums of
principal, interest and other fees then remaining unpaid hereon and all other
amounts payable hereunder due and payable within five (5) days after written
notice from Holder to Borrower (each occurrence being a “Default Notice
Period”). In the event of such an acceleration, the amount due and owing to the
Holder shall be 110% of the outstanding principal amount of the Note (plus
accrued and unpaid interest and fees, if any). If, with respect to any Event of
Default other than a payment default described in Section 4.1 below, within the
Default Notice Period the Borrower cures the Event of Default, the Event of
Default will be deemed to no longer exist and any rights and remedies of Holder
pertaining to such Event of Default will be of no further force or effect.
     The occurrence of any of the following events is an “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 in
accordance herewith, or the Borrower fails to pay when due any amount due under
any other promissory note issued by Borrower to the Holder in accordance with
the terms of such other promissory note, and such failure continues for a period
of three (3) days after the due date.
     4.2 Breach of Covenant. The Borrower breaches any material covenant or
other term or condition of this Note or the Purchase Agreement in any material
respect and such breach, if subject to cure, continues for a period of thirty
(30) days after the occurrence thereof.

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     4.3 Breach of Representations and Warranties. Any material representation
or warranty of the Borrower made herein, in the Purchase Agreement, or in any
Related Document (as defined in the Purchase Agreement) shall be materially
false or misleading and shall not be cured for a period of ten (10) days after
written notice thereof is received by the Borrower from the Holder.
     4.4 Receiver or Trustee. The Borrower shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business; or such
a receiver or trustee shall otherwise be appointed.
     4.5 Judgments. Any money judgment, writ or similar final process shall be
entered or filed against the Borrower or any of its property or other assets for
more than $250,000, and shall remain unvacated, unbonded or unstayed for a
period of ninety (90) days.
     4.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower.
     4.7 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.
     4.8 (a) 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 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.
     4.8 (b) Any Guarantor shall fail to (i) pay per when due any installment of
principal, interest or other fees under any other promissory note issued by such
Guarantor, or (ii) performance or observe any term or condition of any agreement
to which the undersigned is a party if the effect of such default is to cause,
or permit the holder of any obligation under such agreement to cause, such
obligation to become due prior to its stated maturity.

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     4.8 (c) The Company shall fail to satisfy the debt coverage ratio set forth
in Section 6.15 of the Purchase Agreement.
DEFAULT RELATED PROVISIONS
     4.9 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.
     4.10 Conversion Privileges. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date
hereof and until this Note is paid in full.
ARTICLE V
MISCELLANEOUS
     5.1 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 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.
     5.2 Notices. Any notice herein required or permitted to be given shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one business day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Borrower at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for such Holder, with a copy to John E. Tucker, Esq., 825 Third Avenue
, 14th Floor, New York, New York 10022, facsimile number (212) 541-4434, or at
such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto. A Notice of Conversion shall
be deemed given when made to the Borrower pursuant to the Purchase Agreement.
     5.3 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 issued pursuant to Section 3.5 hereof, as it may be amended
or supplemented.

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     5.4 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 Purchase Agreement.
     5.5 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.
     5.6 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.
     5.7 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 November 22, 2005.
     5.8 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, each Borrower has caused this Convertible Term Note to
be signed in its name effective as of this 22nd day of November, 2005.

            ELECTRIC CITY CORP.
      By:   /s/ John Mitola         Name:   John Mitola        Title:   Chief
Executive Officer     

WITNESS:
   /s/ Jeffrey Mistarz          

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EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert all or part of the Note into
Common Stock
[Name and Address of Holder]
The Undersigned hereby elects to convert $___of the principal due on [specify
applicable Repayment Date] under the Convertible Term Note issued by ELECTRIC
CITY CORP. dated November ___, 2005 by delivery of Shares of Common Stock of
ELECTRIC CITY CORP. on and subject to the conditions set forth in Article II of
such Note.

         
1.
  Date of Conversion                                           
 
       
2.
  Shares To Be Delivered:                                           

Date:                     

                  By:         Name:        Title:     

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EXHIBIT B
REPAYMENT ELECTION NOTICE
(To be executed by the Borrower in order to pay all or part of a Monthly Amount
with Common Stock)
[Name and Address of Holder]
ELECTRIC CITY CORP. hereby elects to pay $                     of the Monthly
Amount due on [specify applicable Repayment Date] under the Convertible Term
Note issued by ELECTRIC CITY CORP. dated November___, 2005 by delivery of Shares
of Common Stock of ELECTRIC CITY CORP. on and subject to the conditions set
forth in Article II of such Note.

         
1.
  Fixed Conversion Price:   $                                        
 
       
2.
  Amount to be paid:   $                                        
 
       
3.
  Shares To Be Delivered (2 divided by 1):  
                                        
 
       
Date:                              
  ELECTRIC CITY CORP.
 
       
 
      By:                                        
 
       
 
      Name:                                        
 
       
 
      Title:                                        

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