exv10w1



 






Exhibit 10.1




AMENDMENT TO SECURITY AGREEMENT AND REGISTRATION RIGHTS AGREEMENT




          This Amendment to Security Agreement and Registration Rights Agreement (this “Amendment”) is
made as of the 28th day of February, 2005 between Laurus Master Fund, Ltd., a Cayman
Islands company (“Laurus”) and Electric City Corp., a Delaware corporation (the “Company”).



W I T N E S S E T H:




          WHEREAS, the parties hereto are all of the parties to that certain Security Agreement dated as
of September 11, 2003 (as amended, modified or supplemented from time to time, the “Security
Agreement”);



          WHEREAS, the parties hereto are all of the parties to that certain Registration Rights
Agreement related to the Security Agreement (as amended, modified or supplemented from time to
time, the “Registration Rights Agreement”); and



          WHEREAS, Laurus and the Company have agreed to amend the Security Agreement and the
Registration Rights Agreement in certain respects as set forth herein;



          NOW, THEREFORE, the parties hereto hereby agrees as follows:



          1. Definitions. Capitalized terms used herein and not otherwise defined herein are
used with the meanings given such terms in the Security Agreement.



          2. Amendments and Agreements.



          (A) Section 2(a)(i) of the Security Agreement is hereby deleted in its entirety and
the following new Section 2(a)(i) is hereby inserted in lieu thereof:




     “Subject to the terms and conditions set forth herein and in the Ancillary Agreements,
Laurus may make loans (the “Loans”) to Company from time to time during the Term which, in the
aggregate at any time outstanding, will not exceed the lesser of (x) (I) the Capital
Availability Amount minus (II) such reserves as Laurus may reasonably in its good faith judgment
deem proper and necessary from time to time (the “Reserves”) and (y) an amount equal to (I) the
Accounts Availability minus (II) the Reserves. The amount derived at any time from Section
2(a)(i)(y)(I) minus 2(a)(i)(y)(II) shall be referred to as the “Formula Amount”. Company shall
execute and deliver to Laurus on the Closing Date a Minimum Borrowing Note and a Revolving Note
evidencing the Loans funded on the initial funding date. From time to time thereafter, Company
shall execute and deliver to Laurus immediately prior to the final funding of each additional
$1,000,000 tranche of Loans allocated to any Minimum Borrowing Note issued by Company to Laurus
after the date hereof (calculated on a cumulative basis for each such tranche) an additional
Minimum Borrowing Note evidencing such tranche, substantially in the form of the Minimum
Borrowing Note delivered by Company to Laurus on the Closing Date.



 









 






Notwithstanding anything
herein to the contrary, whenever during the Term the outstanding balance on the Revolving Note
should equal or exceed $1,000,000 to the extent that the outstanding balance on Minimum
Borrowing Note shall be less than or equal to $1,000,000 (the difference of $2,000,000 less the
actual balance of the Minimum Borrowing Note, the “Available Minimum Borrowing”), such portion
of the balance of the Revolving Note as shall equal the Available Minimum Borrowing shall be
deemed to be simultaneously extinguished on the Revolving Note and transferred to, and evidenced
by, the Minimum Borrowing Note.”



          (B) Section 2(c) of the Security Agreement is hereby deleted in its entirety and the following
new Section 2(c) is hereby inserted in lieu thereof:




     “(c) Minimum Borrowing Amount. After a registration statement registering the
Registrable Securities has been declared effective by the SEC, conversions of the Minimum
Borrowing Amount into the Common Stock of Company may be initiated as set forth in the
respective Minimum Borrowing Note. From and after the date upon which any outstanding principal
of the Minimum Borrowing Amount (as evidenced by the first Minimum Borrowing Note) is converted
into Common Stock (the “First Conversion Date”), (i) corresponding amounts of all outstanding
Loans (not attributable to the then outstanding Minimum Borrowing Amount) existing on or made
after the First Conversion Date will be aggregated until they reach the sum of $1,000,000 and
(ii) Company will issue a new (serialized) Minimum Borrowing Note to Laurus in respect of such
$1,000,000 aggregation, and (iii) Company shall prepare and file a subsequent registration
statement with the SEC to register shares of its common stock issuable upon conversion of such
subsequent Minimum Borrowing Note as set forth in the Registration Rights Agreement.”



          (C) The definition of “Minimum Borrowing Amount” set forth in Annex A to the Security
Agreement is hereby deleted in its entirety and the following new definition is hereby
inserted in lieu thereof:



                “Minimum Borrowing Amount” means (i) in the case of the initial Minimum
Borrowing Note issued by the Company in favor of Laurus, $2,000,000 and (ii) in the case
of each additional Minimum Borrowing Note issued by the Company in favor of Laurus,
$1,000,000.



          (D) The definition of “Secured Convertible Revolving Note” set forth in Annex A to the
Security Agreement is hereby deleted in its entirety and the following new definition is
hereby inserted in lieu thereof:




               “Secured Convertible Revolving Note” means that certain secured convertible
revolving note substantially in the form of Exhibit C, duly completed, issued by the
Company in favor of Laurus in the aggregate principal amount of Two Million Dollars
($2,000,000).



          (E) The definition of “Minimum Borrowing Notes” set forth in Annex A to the Security
Agreement is hereby deleted in its entirety and the following new definition is hereby
inserted in lieu thereof:



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               “Minimum Borrowing Note” shall mean each secured convertible minimum
borrowing note substantially in the form of Exhibit B, duly completed, issued by the
Company in favor of Laurus, each in a principal amount equal to the Minimum
Borrowing Amount.



          (F) Laurus hereby agrees to exercise the discretion granted to it pursuant to Section 2(a)(ii)
of the Security Agreement to make a Loan to the Company in excess of the Formula Amount in effect
on the date hereof (the “February 2005 Overadvance”). In connection with making such an
Overadvance, for the period beginning on the date hereof and ending on January 2, 2006 or, if
extended pursuant to the second proviso contained in this Section (F) below, the end of such
extension period (the “February 2005 Overadvance Period”), Laurus hereby agrees (i) to waive
compliance with Section 3 of the Security Agreement, but solely as such provision relates to the
immediate repayment requirement of the February 2005 Overadvance during the February 2005
Overadvance Period (but not thereafter), (ii) that, solely during the February 2005 Overadvance
Period, the February 2005 Overadvance shall not trigger an Event of Default under Section 19(a) of
the Security Agreement, and (iii) that the February 2005 Overadvance shall not be subject to the
increased rate set forth in Section 5(b)(iv) of the Security Agreement for the February 2005
Overadvance Period; provided that the February 2005 Overadvance shall become subject to the
increased rate set forth in Section 5(b)(iv) of the Security Agreement for the period from January
1, 2006 until such time as the aggregate outstanding amount of Loans are less than or equal the
Formula Amount; provided further that, the February 2005 Overadvance Period shall be extended on a
month to month basis if, on the first business day of each calendar month beginning on January 2,
2006 to and including the Maturity Date, (x) the February 2005 Overadvance continues to exist and
(y) the average closing price of the Common Stock is greater than or equal to one hundred ten
percent (110%) of the Fixed Conversion Price for the five most recently ended trading days
occurring prior to each such first business day of such calendar month.



          (G) For the avoidance of doubt, the Company and Laurus hereby acknowledge and agree that the
total amount of the Loans incurred by the Company from Laurus on or about the date hereof shall be
incurred under the Minimum Borrowing Note issued by the Company to Laurus on the date hereof.



          (H) Exhibit B to the Security Agreement is hereby deleted in its entirety and Exhibit I to
this Amendment is hereby inserted as the new Exhibit B to the Security Agreement. A new Exhibit C
to the Security Agreement is hereby added to the Security Agreement in the form of Exhibit II to
this Amendment.



          (I) The definition of “Filing Date” set forth in the Registration Rights Agreement is hereby
deleted in its entirety and the following new definition of “Filing Date” is hereby inserted in
lieu thereof:




               “Filing
Date” means, with respect to (1) the Registration Statement which is required
to be filed with respect to the shares of Common Stock issuable upon conversion of the
Loans evidenced by a Minimum Borrowing Note issued by the Company to the Purchaser on
February 28th, 2005, March 30th, 2005, (2) with respect to the shares of Common Stock
issuable upon conversion of each $1,000,000 tranche of Loans evidenced by a Minimum



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Borrowing Note funded after February 28th, 2005, the date which is thirty (30) days after
the issuance of such Minimum Borrowing Note and (3) with respect to any additional shares of
Common Stock issuable as a result of adjustments to the Fixed Conversion Price or Exercise
Price, as applicable, made pursuant to Section 2.5 of the Revolving Note, Section 3.5 of the
Minimum Borrowing Notes, or Section 4 of the Warrant or otherwise, thirty (30) days after
the occurrence such event or the date of the adjustment of the Fixed Conversion Price or
Exercise Price.



          3. Miscellaneous.



          (A) Captions. Section captions and headings used in this Amendment are for
convenience only and are not part of and shall not affect the construction of this Amendment.



          (B) Governing Law. This Amendment 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. In the
event that any provision of this Amendment 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 Amendment.



          (C) Counterparts; Facsimile Signature. This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which shall together
constitute but one and the same document. This Amendment may be executed by facsimile signature,
and any such facsimile signature by any party hereto shall be deemed to be an original signature
and shall be binding on such party to the same extent as if such facsimile signature were an
original signature.



          (D) Successors and Assigns. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.



          (E) References. From and after the date of execution of this Amendment, any reference
to the Security Agreement contained in any notice, request, certificate or other instrument,
document or agreement executed concurrently with or after the execution and delivery of this
Amendment shall be deemed to include this Amendment unless the context shall otherwise require.



          (F) Continued Effectiveness. Notwithstanding anything contained herein, the terms of
this Amendment are not intended to and do not serve to effect a novation as to either of the
Security Agreement or the Registration Rights Agreement. Each of the Security Agreement and the
Registration Rights Agreement, as modified hereby, remains in full force and effect and are hereby
reaffirmed in all respects.



          (G) Construction. Each party acknowledges that its legal counsel participated in the
preparation of this Amendment 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



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Amendment to favor any party against the other.



          (H) Effectiveness. This Amendment shall be effective as of the date hereof following (i) the
execution and delivery of same by each of the Company and Laurus and (ii) the issuance by the
Company to Laurus of the Minimum Borrowing Note and the Secured Convertible Revolving Note in the
form of Exhibits I and II, respectively, of this Amendment.


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




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     IN WITNESS WHEREOF, the parties have executed this Amendment to the Security Agreement and
Registration Rights Agreement as of the date first set forth above.


	 	 	 	 	 
	 	ELECTRIC CITY CORP.

 	 
	 	By:  	/s/ Jeffrey Mistarz
 	 
	 	 	Name:  	Jeffrey Mistarz 	 
	 	 	Title:  	Chief Financial Officer & Treasurer 	 
	 



	 	 	 	 	 
	 	LAURUS MASTER FUND, LTD.

 	 
	 	By:  	/s/ David Grin
 	 
	 	 	Name:  	David Grin 	 
	 	 	Title:  	Partner 	 




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EXHIBIT I TO AMENDMENT TO SECURITY AGREEMENT AND REGISTRATION RIGHTS AGREEMENT




[See attached]






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EXHIBIT II TO AMENDMENT TO SECURITY AGREEMENT AND REGISTRATION RIGHTS AGREEMENT




[See attached]





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