Exhibit 10.5


 


THIS WARRANT AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT 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.


 


Right to Purchase 140,000 Shares of Common Stock of Electric City
Corporation (subject to adjustment as provided herein)


 


COMMON STOCK PURCHASE WARRANT


 


	
  No. 58

  	
   

  	
  Issue Date:  September 11,
  2003

  



 


ELECTRIC CITY
CORP., a corporation organized under the laws of the State of Delaware, hereby
certifies that, for value received, LAURUS MASTER FUND, LTD., or assigns (the “Holder”), is entitled, subject to the terms
set forth below, to purchase from the Company (as defined herein) from and
after the Issue Date of this Warrant and at any time or from time to time
before 5:00 p.m., New York time, through the close of business (Chicago time)
September 11, 2008 (the “Expiration Date”),
up to 140,000 fully paid and nonassessable shares of Common Stock (as
hereinafter defined), $.0001 par value per share, at the applicable Exercise
Price per share (as defined below).  The
number and character of such shares of Common Stock and the applicable Exercise
Price per share are subject to adjustment as provided herein.


 


As used herein
the following terms, unless the context otherwise requires, have the following
respective meanings:


 


(a)                                  The
term “Company” shall include
Electric City Corp. and any corporation which shall succeed, or assume the
obligations of, Electric City Corp. hereunder.


 


(b)                                 The
term “Common Stock” includes (a)
the Company’s Common Stock, par value $.0001 per share, and (b) any other
securities into which or for which any of the securities described in (a) may
be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.


 


(c)                                  The
term “Other Securities” refers to
any stock (other than Common Stock) and other securities of the Company or any
other person (corporate or otherwise) which the holder of


 

















 


the Warrant at any time shall
be entitled to receive, or shall have received, on the exercise of the Warrant,
in lieu of or in addition to Common Stock, or which at any time shall be
issuable or shall have been issued in exchange for or in replacement of Common
Stock or Other Securities pursuant to Section 4 or otherwise.


 


(d)                                 The
“Exercise Price” applicable under
this Warrant shall be as follows:


 


a.                                       a
price of $2.44 per share  for the first
40,000 shares acquired hereunder;


 


b.                                      a
price of $2.65 per share  for the next
50,000 shares acquired hereunder; and


 


c.                                       a
price of $3.07 per share  for any
additional shares acquired hereunder.


 


1.                                       Exercise of Warrant.


 


1.1.                              Number of Shares Issuable
upon Exercise.  From and
after the date hereof through and including the Expiration Date, the Holder
shall be entitled to receive, upon exercise of this Warrant in whole or in
part, by delivery of an original or fax copy of an exercise notice in the form
attached hereto as Exhibit A (the “Exercise
Notice”), shares of Common Stock of the Company, subject to
adjustment pursuant to Section 4.


 


1.2.                              Fair Market Value.  For purposes hereof, the “Fair Market Value” of a share of Common
Stock as of a particular date (the “Determination
Date”) shall mean:


 


(a)                                  If the Company’s Common Stock is traded
on the American Stock Exchange or 
another national exchange or is quoted on the National or SmallCap
Market of The Nasdaq Stock Market, Inc.(“Nasdaq”),
then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.


 


(b)                                 If the Company’s Common Stock is not
traded on the American Stock Exchange or another national exchange or on the
Nasdaq but is traded on the NASD OTC Bulletin Board, then the mean of the
average of the closing bid and asked prices reported for the last business day
immediately preceding the Determination Date.


 


(c)                                  Except as provided in clause (d) below,
if the Company’s Common Stock is not publicly traded, then as the Holder and
the Company agree or in the absence of agreement by arbitration in accordance
with the rules then in effect of the American Arbitration Association, before a
single arbitrator to be chosen from a panel of persons qualified by education
and training to pass on the matter to be decided.


 


(d)                                 If the Determination Date is the date of
a liquidation, dissolution or winding up, or any event deemed to be a
liquidation, dissolution or winding up pursuant to the Company’s charter, then
all amounts to be payable per share to holders of the Common Stock


 


2

















 


pursuant to the charter in the
event of such liquidation, dissolution or winding up, plus all other amounts to
be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Warrant are outstanding at the
Determination Date.


 


1.3.                              Company
Acknowledgment. The Company will, at the time of the exercise of the
Warrant, upon the request of the holder hereof acknowledge in writing its
continuing obligation to afford to such holder any rights to which such holder
shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to
afford to such holder any such rights.


 


1.4.                              Trustee
for Warrant Holders. In the event that a bank or trust company shall have
been appointed as trustee for the holders of the Warrant pursuant to Subsection
3.2, such bank or trust company shall have all the powers and duties of a
warrant agent (as hereinafter described) and shall accept, in its own name for
the account of the Company or such successor person as may be entitled thereto,
all amounts otherwise payable to the Company or such successor, as the case may
be, on exercise of this Warrant pursuant to this Section 1.


 


2.                                       Procedure for Exercise.


 


2.1                                 Delivery of Stock
Certificates, etc. on Exercise. The Company agrees that
the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered
and payment made for such shares in accordance herewith.  As soon as practicable after the exercise of
this Warrant in full or in part, and in any event within three (3) business
days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the Holder, or as such Holder (upon payment by such Holder of any applicable
transfer taxes) may direct in compliance with applicable securities laws, a
certificate or certificates for the number of duly and validly issued, fully
paid and nonassessable shares of Common Stock (or Other Securities) to which
such Holder shall be entitled on such exercise, plus, in lieu of any fractional
share to which such holder would otherwise be entitled, cash equal to such
fraction multiplied by the then Fair Market Value of one full share, together
with any other stock or other securities and property (including cash, where
applicable) to which such Holder is entitled upon such exercise pursuant to
Section 1 or otherwise.


 


2.2                                 Exercise.  Payment may be made either (i) in cash or by
certified or official bank check payable to the order of the Company equal to
the applicable aggregate Exercise Price, (ii) by delivery of the Warrant, or
shares of Common Stock and/or Common Stock receivable upon exercise of the
Warrant in accordance with Section (b) below, or (iii) by a combination of any
of the foregoing methods, for the number of Common Shares specified in such
Exercise Notice (as such exercise number shall be adjusted to reflect any
adjustment in the total number of shares of Common Stock issuable to the Holder
per the terms of this Warrant) and the Holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully-paid and
non-assessable shares of Common Stock (or Other Securities) determined as
provided herein.  Notwithstanding any


 


3

















 


provisions herein to the
contrary, 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 this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof
being exercised) by surrender of this Warrant at the principal office of the
Company together with the properly endorsed Exercise Notice in which event the
Company shall issue to the Holder a number of shares of Common Stock computed
using the following formula:


 


	
   

  	
  X=Y

  	
  (A-B)

  	
   

  
	
   

  	
   

  	
  A

  	
   

  
	
   

  	
   

  	
   

  
	
  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 Warrant or, if only a portion
  of the Warrant is being exercised, the portion of the Warrant being exercised
  (at the date of such calculation)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A=

  	
  the Fair
  Market Value of one share of the Company’s Common Stock (at the date of such
  calculation)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B=

  	
  Exercise
  Price (as adjusted to the date of such calculation)

  



 


3.                                       Effect
of Reorganization, etc.; Adjustment of Exercise Price.


 


3.1                                 Reorganization,
Consolidation, Merger, etc.  In case at any time or from time to time, the Company shall (a)
effect a reorganization, (b) consolidate with or merge into any other person,
or (c) transfer all or substantially all of its properties or assets to any
other person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, as a condition to the consummation of such a
transaction, proper and adequate provision shall be made by the Company whereby
the Holder of this Warrant, on the exercise hereof as provided in Section 1 at
any time after the consummation of such reorganization, consolidation or merger
or the effective date of such dissolution, as the case may be, shall receive,
in lieu of the Common Stock (or Other Securities) issuable on such exercise
prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which such Holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if such Holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustment thereafter as provided in Section 4.


 


3.2                                 Dissolution.  In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, concurrently with any distributions made to holders of its
Common Stock, shall at its expense deliver or cause to be delivered to the
Holder the stock and other securities and property (including cash, where
applicable) receivable by the Holder of the Warrant pursuant to Section 3.1,
or, if the Holder shall so instruct the Company, to a bank or trust company
specified by the Holder and having its principal office in New York, NY as
trustee for the Holder of the Warrant.


 


 


4

















 


3.3           Continuation
of Terms.  Upon any reorganization,
consolidation, merger ortransfer (and any dissolution following any transfer)
referred to in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and
other securities and property receivable on the exercise of this Warrant after
the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may be,
and shall be binding upon the issuer of any such stock or other securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as provided
in Section 4.  In the event this Warrant
does not continue in full force and effect after the consummation of the
transactions described in this Section 3, then the Company’s securities and
property (including cash, where applicable) receivable by the Holders of the
Warrant will be delivered to Holder or the Trustee as contemplated by Section
3.2.


 


4.                                       Extraordinary
Events Regarding Common Stock.  In the event that the Company shall (a)
issue additional shares of the Common Stock as a dividend or other distribution
on outstanding Common Stock, (b) subdivide its outstanding shares of Common
Stock, or (c) combine its outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock, then, in each such event, the Exercise
Price shall, simultaneously with the happening of such event, be adjusted by
multiplying the then Exercise Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such event, and the product so obtained
shall thereafter be the Exercise Price then in effect. The Exercise Price, as
so adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 4.  The number of shares of Common Stock that
the holder of this Warrant shall thereafter, on the exercise hereof as provided
in Section 1, be entitled to receive shall be increased to a number determined
by multiplying the number of shares of Common Stock that would otherwise (but
for the provisions of this Section 4) be issuable on such exercise by a
fraction of which (a) the numerator is the Exercise Price that would otherwise
(but for the provisions of this Section 4) be in effect, and (b) the
denominator is the Exercise Price in effect on the date of such exercise.


 


5.                                       Certificate
as to Adjustments.  In each case of any adjustment or readjustment in the shares of
Common Stock (or Other Securities) issuable on the exercise of the Warrant, the
Company at its expense will promptly cause its Chief Financial Officer or other
appropriate designee to compute such adjustment or readjustment in accordance
with the terms of the Warrant and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares
of Common Stock (or Other Securities) issued or sold or deemed to have been
issued or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Exercise Price and the
number of shares of Common Stock to be received upon exercise of this Warrant,
in effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant. 
The Company will forthwith mail a copy of each such certificate to the
holder of the Warrant and any Warrant agent of the Company (appointed pursuant
to Section 11 hereof).


 


6.                                       Reservation
of Stock, etc. Issuable on Exercise of Warrant.  The Company will at all times reserve and
keep available, solely for issuance and delivery on the exercise of the
Warrant, shares of Common Stock (or Other Securities) from
time to time issuable on the exercise of the Warrant.


 


5

















 


7.                                       Assignment;
Exchange of Warrant.  Subject to compliance with applicable securities laws, this
Warrant, and the rights evidenced hereby, may be transferred by any registered
holder hereof (a “Transferor”) in
whole or in part.  On the surrender for
exchange of this Warrant, with the Transferor’s endorsement in the form of
Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with evidence reasonably satisfactory to the Company
demonstrating compliance with applicable securities laws, which shall include,
without limitation, a legal opinion from the Transferor’s counsel that such
transfer is exempt from the registration requirements of applicable securities
laws, the Company at its expense but with payment by the Transferor of any
applicable transfer taxes) will issue and deliver to or on the order of the
Transferor thereof a new Warrant of like tenor, in the name of the Transferor
and/or the transferee(s) specified in such Transferor Endorsement Form (each a
“Transferee”), calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for
on the face or faces of the Warrant so surrendered by the Transferor.


 


8.                                       Replacement of
Warrant.  On receipt
of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any such loss,
theft or destruction of this Warrant, on delivery of an indemnity agreement or
security reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, on surrender and cancellation of this Warrant, the
Company at its expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.


 


9.                                       Registration
Rights.  The Holder
of this Warrant has been granted certain registration rights by the
Company.  These registration rights are
set forth in a Registration Rights Agreement entered into by the Company and
Purchaser dated as of September 11, 2003.


 


10.                                 Maximum
Exercise.  The Holder
shall not be entitled to exercise this Warrant on an exercise date, in connection
with that number of shares of Common Stock which would be in excess of the sum
of (i) the number of shares of Common Stock beneficially owned by the Holder
and its affiliates on an exercise date, and (ii) the number of shares of Common
Stock issuable upon the exercise of this Warrant with respect to which the
determination of this proviso is being made on an exercise date, which would
result in beneficial ownership by the Holder and its affiliates of more than
4.99% of the outstanding shares of Common Stock of the Company on such
date.  For the purposes of the proviso
to the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder. 
Notwithstanding the foregoing, the restriction described in this
paragraph may be revoked upon 75 days prior notice from the Holder to the
Company and is automatically null and void upon an Event of Default under the
Note.


 


11.                                 Warrant Agent.  The Company may, by written
notice to the each Holder of the Warrant, appoint an agent for the purpose of
issuing Common Stock (or Other Securities) on the exercise of this Warrant
pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing
this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.


 


6

















 


12.                                 Transfer on the
Company’s Books.  Until this Warrant is transferred on the books of the Company,
the Company may treat the registered holder hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary.


 


13.                                 Notices, etc.  All notices and other
communications from the Company to the Holder of this Warrant shall be mailed
by first class registered or certified mail, postage prepaid, at such address
as may have been furnished to the Company in writing by such Holder or, until
any such Holder furnishes to the Company an address, then to, and at the
address of, the last Holder of this Warrant who has so furnished an address to
the Company.


 


14.                                 Voluntary
Adjustment by the Company.  The Company may at any time during the term
of this Warrant reduce the then current Exercise Price to any amount and for
any period of time deemed appropriate by the Board of Directors of the Company.


 


15.                                 No
Shorting.  The Purchaser or any of its affiliates and investment partners will
not and will not cause any person or entity, directly or indirectly, to engage
in “short sales” of the Company’s Common Stock or any other hedging strategies.


 


16.                                 Miscellaneous.  This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant shall be governed by and construed in accordance with the laws of State
of New York without regard to principles of conflicts of laws.  Any action brought concerning the
transactions contemplated by this Warrant shall be brought only in the state
courts of New York or in the federal courts located in the state of New York; provided,
however, that the Holder may choose to waive this provision and bring an action
outside the state of New York.  The
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury.  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
Warrant 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 Warrant.  The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof.  The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision. 
The Company acknowledges that legal counsel participated in the
preparation of this Warrant 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 Warrant to favor any party
against the other party.


 


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


 


7

















 


IN WITNESS WHEREOF, the Company
has executed this Warrant as of the date first written above.


 


	
   

  	
  ELECTRIC
  CITY CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Mitola

  	
   

  
	
   

  	
  Name:

  	
  John Mitola

  	
   

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  
	
  Witness:

  	
   

  
	
   

  	
   

  
	
  /s/ Jeffrey
  Mistarz

  	
   

  	
   

  
					



 


8

















 


Exhibit A


 


FORM OF SUBSCRIPTION


 


(To be signed only on exercise of Warrant)


 


	
  TO:

  	
  Electric
  City Corp.

  1280 Landmeier Road

  Elk Grove Village, Illinois  60007

  Attention:  Chief Financial Officer

  



 


The undersigned, pursuant to
the provisions set forth in the attached Warrant
(No.         ), hereby irrevocably
elects to purchase (check applicable box):


 


                                                   
shares of the Common Stock covered by such Warrant; or


 


                                  the
maximum number of shares of Common Stock covered by such Warrant pursuant to
the cashless exercise procedure set forth in Section 2.


 


The undersigned herewith makes
payment of the full Exercise Price for such shares at the price per share
provided for in such Warrant, which is
$                  .  Such payment takes the form of (check
applicable box or boxes):


 


                                    $                    
in lawful money of the United States; and/or


 


                                  the
cancellation of such portion of the attached Warrant as is exercisable for a
total of
              
shares of Common Stock (using a Fair Market Value of
$              
per share for purposes of this calculation); and/or


 


                              the
cancellation of such number of shares of Common Stock as is necessary, in
accordance with the formula set forth in Section 2.2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchaseable
pursuant to the cashless exercise procedure set forth in Section 2.


 


The undersigned requests that
the certificates for such shares be issued in the name of, and delivered
to 
                                     
whose address is
                                                    


 


 


The undersigned represents and
warrants that all offers and sales by the undersigned of the securities
issuable upon exercise of the within Warrant shall be made pursuant to
registration of the Common Stock under the Securities Act of 1933, as amended
(the “Securities Act”) or pursuant to an exemption from registration under the
Securities Act.


 


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature
  must conform to name of holder as

  specified on the face of the Warrant)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Address)

  



 

















 


Exhibit B


 


FORM OF TRANSFEROR ENDORSEMENT

(To be signed only on transfer of Warrant)


 


For value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading “Transferees” the right represented by
the within Warrant to purchase the percentage and number of shares of Common
Stock of Electric City Corp. into which the within Warrant relates specified
under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of Electric City
Corp. with full power of substitution in the premises.


 


	
  Transferees

  	
   

  	
  Address

  	
   

  	
  Percentage

  Transferred

  	
   

  	
  Number
  Transferrred

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


	
  Dated:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature
  must conform to name of holder as

  specified on the face of the Warrant)

  
	
   

  
	
  Signed in
  the presence of:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Name)

  	
   

  	
   

  	
  (address)

  
	
   

  	
   

  	
   

  	
   

  
	
  ACCEPTED AND
  AGREED:

  [TRANSFEREE]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (address)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Name)

  	
   

  	
   

  	
   

  



 


 


10