exv10w3



 






Exhibit 10.3




ELECTRIC CITY CORP. AND CERTAIN OF ITS SUBSIDIARIES

MASTER SECURITY AGREEMENT




	 	 	 
	To:

	 	Laurus Master Fund, Ltd.
	 

	 	c/o M&C Corporate Services Limited
	 

	 	P.O. Box 309 GT
	 

	 	Ugland House
	 

	 	South Church Street
	 

	 	George Town
	 

	 	Grand Cayman, Cayman Islands






Date: November 22, 2005




To Whom It May Concern:




     1.   To secure the payment of all Obligations (as hereafter defined), ELECTRIC CITY CORP., a
Delaware corporation (the “Company”), each of the other undersigned parties (other than Laurus
Master Fund, Ltd., (“Laurus”)) and each other entity that is required to enter into this Master
Security Agreement (each an “Assignor” and, collectively, the “Assignors”) hereby assigns and
grants to Laurus a continuing security interest in all of the following property now owned or at
any time hereafter acquired by such Assignor, or in which such Assignor now has or at any time in
the future may acquire any right, title or interest (the “Collateral”): all cash, cash equivalents,
accounts, accounts receivable, deposit accounts (including, without limitation, the Multi Party
Blocked Account Agreement (the “Blocked Account”) maintained at American Chartered Bank (Account
Name: ___, Account Number:___) referred to in the Multi Party Blocked Account
Agreement), inventory, equipment, goods, fixtures, documents, instruments (including, without
limitation, promissory notes), contract rights, commercial tort claims set forth on Exhibit B to
this Master Security Agreement, general intangibles (including, without limitation, payment
intangibles and an absolute right to license on terms no less favorable than those current in
effect among such Assignor’s affiliates), chattel paper, supporting obligations, investment
property (including, without limitation, all partnership interests, limited liability company
membership interests and all other equity interests owned by any Assignor), letter-of-credit
rights, trademarks, trademark applications, tradestyles, patents, patent applications, copyrights,
copyright applications and other intellectual property in which such Assignor now has or hereafter
may acquire any right, title or interest, all proceeds and products thereof (including, without
limitation, proceeds of insurance) and all additions, accessions and substitutions thereto or
therefor. In the event any Assignor wishes to finance the acquisition in the ordinary course of
business of any hereafter acquired equipment and has obtained a written commitment from an
unrelated third party financing source to finance such equipment, Laurus shall release its security
interest on such hereafter acquired equipment so financed by such third party financing source.
Except as otherwise defined herein, all capitalized terms used herein shall have the meanings
provided such terms in the Securities Purchase Agreement referred to



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below. All items of Collateral which are defined in the UCC shall have the meanings set forth
in the UCC. For purposes hereof, the term “UCC” means the Uniform Commercial Code as the same
may, from time to time, be in effect in the State of New York; provided, that in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or
remedies with respect to, Laurus’ security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New York, the term “UCC”
shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the
provisions of this Agreement relating to such attachment, perfection, priority or remedies and for
purposes of definitions related to such provisions; provided further, that to the extent that the
UCC is used to define any term herein and such term is defined differently in different Articles or
Divisions of the UCC, the definition of such term contained in Article or Division 9 shall govern.



     2.   The term “Obligations” as used herein shall mean and include all debts, liabilities and
obligations owing by each Assignor to Laurus arising under, out of, or in connection with: (i) that
certain Securities Purchase Agreement dated as of the date hereof by and between the Company and
Laurus (the “Securities Purchase Agreement”) and (ii) the Related Agreements referred to in the
Securities Purchase Agreement (the Securities Purchase Agreement and each Related Agreement, as
each may be amended, modified, restated or supplemented from time to time, collectively, the
“Documents”), and in connection with any documents, instruments or agreements relating to or
executed in connection with the Documents or any documents, instruments or agreements referred to
therein or otherwise, and in connection with any other indebtedness, obligations or liabilities of
each such Assignor to Laurus, whether now existing or hereafter arising, direct or indirect,
liquidated or unliquidated, absolute or contingent, due or not due and whether under, pursuant to
or evidenced by a note, agreement, guaranty, instrument or otherwise, including, without
limitation, obligations and liabilities of each Assignor for post-petition interest, fees, costs
and charges that accrue after the commencement of any case by or against such Assignor under any
bankruptcy, insolvency, reorganization or like proceeding (collectively, the “Debtor Relief Laws”)
in each case, irrespective of the genuineness, validity, regularity or enforceability of such
Obligations, or of any instrument evidencing any of the Obligations or of any collateral therefor
or of the existence or extent of such collateral, and irrespective of the allowability, allowance
or disallowance of any or all of the Obligations in any case commenced by or against any Assignor
under any Debtor Relief Law.



     3.   Each Assignor hereby jointly and severally represents, warrants and covenants to Laurus
that:




     (a)   it is a corporation, partnership or limited liability company, as the case may be,
validly existing, in good standing and formed under the respective laws of its jurisdiction
of formation set forth on Schedule A, and each Assignor will provide Laurus thirty
(30) days’ prior written notice of any change in any of its respective jurisdiction of
formation;




     (b)   its legal name is as set forth in its Certificate of Incorporation or other
organizational document (as applicable) as amended through the date hereof and as set forth
on Schedule A, and it will provide Laurus thirty (30) days’ prior written notice of
any change in its legal name;



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     (c)   its organizational identification number (if applicable) is as set forth on
Schedule A hereto, and it will provide Laurus thirty (30) days’ prior written notice
of any change in its organizational identification number;




     (d)   it is the lawful owner of its Collateral and it has the sole right to grant a
security interest therein and will defend the Collateral against all claims and demands of
all persons and entities;




     (e)   it will keep its Collateral free and clear of all attachments, levies, taxes,
liens, security interests and encumbrances of every kind and nature (“Encumbrances”), except
(i) Encumbrances securing the Obligations and (ii) Encumbrances securing indebtedness of
each such Assignor not to exceed $50,000 in the aggregate for all such Assignors;




     (f)   it will, at its and the other Assignors’ joint and several cost and expense keep
the Collateral in good state of repair (ordinary wear and tear excepted) and will not waste
or destroy the same or any part thereof other than ordinary course discarding of items no
longer used or useful in its or such other Assignors’ business;




     (g)   it will not, without Laurus’ prior written consent, sell, exchange, lease or
otherwise dispose of any Collateral, whether by sale, lease or otherwise, except for the
sale of inventory in the ordinary course of business and for the disposition or transfer in
the ordinary course of business during any fiscal year of obsolete and worn-out equipment or
equipment no longer necessary for its ongoing needs, having an aggregate fair market value
of not more than $25,000 and only to the extent that:




     (i)   the proceeds of each such disposition are used to acquire replacement
Collateral which is subject to Laurus’ first priority perfected security interest,
or are used to repay the Obligations or to pay general corporate expenses; or




     (ii)   following the occurrence of an Event of Default which continues to exist
the proceeds of which are remitted to Laurus to be applied to the Obligations;




     (h)   it will insure or cause the Collateral to be insured in Laurus’ name (as an
additional insured and loss payee) against loss or damage by fire, theft, burglary,
pilferage, loss in transit and such other hazards as Laurus shall specify in amounts and
under policies by insurers acceptable to Laurus and all premiums thereon shall be paid by
such Assignor and the policies delivered to Laurus. If any such Assignor fails to do so,
Laurus may procure such insurance and the cost thereof shall be promptly reimbursed by the
Assignors, jointly and severally, and shall constitute Obligations;




     (i)   it will at all reasonable times allow Laurus or Laurus’ representatives free access
to and the right of inspection of the Collateral; and



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     (j)   such Assignor (jointly and severally with each other Assignor) hereby indemnifies
and saves Laurus harmless from all loss, costs, damage, liability and/or expense, including
reasonable attorneys’ fees, that Laurus may sustain or incur to enforce payment, performance
or fulfillment of any of the Obligations and/or in the enforcement of this Master Security
Agreement or in the prosecution or defense of any action or proceeding either against Laurus
or any Assignor concerning any matter growing out of or in connection with this Master
Security Agreement, and/or any of the Obligations and/or any of the Collateral except to the
extent caused by Laurus’ own gross negligence or willful misconduct (as determined by a
court of competent jurisdiction in a final and nonappealable decision);




     (k)   all commercial tort claims (as defined in the Uniform Commercial Code as in effect
in the State of New York) held by any Assignor are set forth on Schedule B to this
Master Security Agreement; each Assignor hereby agrees that it shall promptly, and in any
event within five (5) Business Days after the same is acquired by it, notify Laurus of any
commercial tort claim acquired by it and unless otherwise consented to in writing by Laurus,
it shall enter into a supplement to this Master Security Agreement granting to Laurus a
security interest in such commercial tort claim, securing the Obligations.



     4.   The occurrence of any of the following events or conditions shall constitute an “Event of
Default” under this Master Security Agreement:




     (a)   any covenant or any other term or condition of this Master Security Agreement is
breached in any material respect and such breach, to the extent subject to cure, shall
continue without remedy for a period of fifteen (15) days after the occurrence thereof;




     (b)   any representation or warranty, or statement made or furnished to Laurus under this
Master Security Agreement by any Assignor or on any Assignor’s behalf should prove to any
time be false or misleading in any material respect on the date as of which made or deemed
made;




     (c)   the loss, theft, substantial damage, destruction, sale or encumbrance to or of any
of the Collateral or the making of any levy, seizure or attachment thereof or thereon except
to the extent:




     (i)   such loss is covered by insurance proceeds which are used to replace the
item or repay Laurus; or




     (ii)   said levy, seizure or attachment does not secure indebtedness in excess of
$100,000 in the aggregate for all Assignors and such levy, seizure or attachment has
been removed or otherwise released within ten (10) days of the creation or the
assertion thereof;




     (d) an Event of Default shall have occurred under and as defined in any Document.



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     5.   Upon the occurrence of any Event of Default and at any time thereafter, Laurus may declare
all Obligations immediately due and payable and Laurus shall have the remedies of a secured party
provided in the UCC as in effect in the State of New York, this Agreement and other applicable law.
Upon the occurrence of any Event of Default and at any time thereafter, Laurus will have the right
to take possession of the Collateral and to maintain such possession on any Assignor’s premises or
to remove the Collateral or any part thereof to such other premises as Laurus may desire. Upon
Laurus’ request, each Assignor shall assemble or cause the Collateral to be assembled and make it
available to Laurus at a place designated by Laurus. If any notification of intended disposition
of any Collateral is required by law, such notification, if mailed, shall be deemed properly and
reasonably given if mailed at least ten (10) days before such disposition, postage prepaid,
addressed to the applicable Assignor either at such Assignor’s address shown herein or at any
address appearing on Laurus’ records for such Assignor. Any proceeds of any disposition of any of
the Collateral shall be applied by Laurus to the payment of all expenses in connection with the
sale of the Collateral, including reasonable attorneys’ fees and other legal expenses and
disbursements and the reasonable expenses of retaking, holding, preparing for sale, selling, and
the like, and any balance of such proceeds may be applied by Laurus toward the payment of the
Obligations in such order of application as Laurus may elect, and each Assignor shall be liable for
any deficiency. For the avoidance of doubt, following the occurrence and during the continuance of
an Event of Default, Laurus shall have the immediate right to withdraw any and all monies contained
in any deposit account in the name of any Assignor and controlled by Laurus and apply same to the
repayment of the Obligations (in such order of application as Laurus may elect).



     6.   If any Assignor defaults in the performance or fulfillment of any of the terms, conditions,
promises, covenants, provisions or warranties on such Assignor’s part to be performed or fulfilled
under or pursuant to this Master Security Agreement, Laurus may, at its option without waiving its
right to enforce this Master Security Agreement according to its terms, immediately or at any time
thereafter and without notice to any Assignor, perform or fulfill the same or cause the performance
or fulfillment of the same for each Assignor’s joint and several account and at each Assignor’s
joint and several cost and expense, and the cost and expense thereof (including reasonable
attorneys’ fees) shall be added to the Obligations and shall be payable on demand with interest
thereon at the highest rate permitted by law, or, at Laurus’ option, debited by Laurus from any
other deposit accounts in the name of any Assignor and controlled by Laurus.



     7.   Each Assignor appoints Laurus, any of Laurus’ officers, employees or any other person or
entity whom Laurus may designate as such Assignor’s attorney, with power to execute such documents
in each such Assignor’s behalf and to supply any omitted information and correct patent errors in
any documents executed by any Assignor or on any Assignor’s behalf; to file financing statements
against such Assignor covering the Collateral (and, in connection with the filing of any such
financing statements, describe the Collateral as “all assets and all personal property, whether now
owned and/or hereafter acquired” (or any substantially similar variation thereof)); to sign such
Assignor’s name on public records; and to do all other things Laurus deem necessary to carry out
this Master Security Agreement. Each Assignor hereby ratifies and approves all acts of the
attorney and neither Laurus nor the attorney will be liable for any acts of commission or omission,
nor for any error of judgment or mistake of fact or law other than gross



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negligence or willful misconduct (as determined by a court of competent jurisdiction in a
final and non-appealable decision). This power being coupled with an interest, is irrevocable so
long as any Obligations remains unpaid.



     8.   No delay or failure on Laurus’ part in exercising any right, privilege or option hereunder
shall operate as a waiver of such or of any other right, privilege, remedy or option, and no waiver
whatever shall be valid unless in writing, signed by Laurus and then only to the extent therein set
forth, and no waiver by Laurus of any default shall operate as a waiver of any other default or of
the same default on a future occasion. Laurus’ books and records containing entries with respect
to the Obligations shall be admissible in evidence in any action or proceeding, shall be binding
upon each Assignor for the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof. Laurus shall have the right to enforce any one or more of the remedies
available to Laurus, successively, alternately or concurrently. Each Assignor agrees to join with
Laurus in executing such documents or other instruments to the extent required by the UCC in form
satisfactory to Laurus and in executing such other documents or instruments as may be required or
deemed necessary by Laurus for purposes of affecting or continuing Laurus’ security interest in the
Collateral.



     9.   THIS MASTER SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. All of the rights, remedies,
options, privileges and elections given to Laurus hereunder shall inure to the benefit of Laurus’
successors and assigns. The term “Laurus” as herein used shall include Laurus, any parent of
Laurus’, any of Laurus’ subsidiaries and any co-subsidiaries of Laurus’ parent, whether now
existing or hereafter created or acquired, and all of the terms, conditions, promises, covenants,
provisions and warranties of this Agreement shall inure to the benefit of each of the foregoing,
and shall bind the representatives, successors and assigns of each Assignor.



     10.   Each Assignor hereby consents and agrees that the state of federal courts located in the
County of New York, State of New York shall have exclusive jurisdiction to hear and determine any
claims or disputes between Assignor, on the one hand, and Laurus, on the other hand, pertaining to
this Master Security Agreement or to any matter arising out of or related to this Master Security
Agreement, provided, that Laurus and each Assignor acknowledges that any appeals from those courts
may have to be heard by a court located outside of the County of New York, State of New York, and
further provided, that nothing in this Master Security Agreement shall be deemed or operate to
preclude Laurus from bringing suit or taking other legal action in any other jurisdiction to
collect, the Obligations, to realize on the Collateral or any other security for the Obligations,
or to enforce a judgment or other court order in favor of Laurus. Each Assignor expressly submits
and consents in advance to such jurisdiction in any action or suit commenced in any such court, and
each Assignor hereby waives any objection which it may have based upon lack of personal
jurisdiction, improper venue or forum non conveniens. Each Assignor hereby
waives personal service of the summons, complaint and other process issues in any such action or
suit and agrees that service of such summons, complaint and other process may be made by registered
or certified mail addressed to such assignor at the address set forth on



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the signature lines hereto and that service so made shall be deemed completed upon the earlier
of such Assignor’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper
postage prepaid.



     The parties desire that their disputes be resolved by a judge applying such applicable laws.
Therefore, to achieve the best combination of the benefits of the judicial system and of
arbitration, the parties hereto waive all rights to trial by jury in any action, suit, or
proceeding brought to resolve any dispute, whether arising in contract, tort, or otherwise between
Laurus, and/or any Assignor arising out of, connected with, related or incidental to the
relationship established between them in connection with this Master Security Agreement or the
transactions related hereto.



     11.   It is understood and agreed that any person or entity that desires to become an Assignor
hereunder, or is required to execute a counterpart of this Master Security Agreement after the date
hereof pursuant to the requirements of any Document, shall become an Assignor hereunder by (x)
executing a Joinder Agreement in form and substance satisfactory to Laurus, (y) delivering
supplements to such exhibits and annexes to such Documents as Laurus shall reasonably request and
(z) taking all actions as specified in this Master Security Agreement as would have been taken by
such Assignor had it been an original party to this Master Security Agreement, in each case with
all documents required above to be delivered to Laurus and with all documents and actions required
above to be taken to the reasonable satisfaction of Laurus.



     12.   All notices from Laurus to any Assignor shall be sufficiently given if mailed or delivered
to such Assignor’s address set forth below.



	 	 	 	 	 
	 	Very truly yours,



ELECTRIC CITY CORP.

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



	 	 	 	 	 
	 	GREAT LAKES CONTROLLED ENERGY CORPORATION.

 	 
	 	By:  	/s/ Jeffrey Mistarz
 	 
	 	 	Name:  	Jeffrey Mistarz 	 
	 	 	Title:  	Treasurer 	 



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	 	MAXIMUM PERFORMANCE GROUP, INC.

 	 
	 	By:  	/s/ Jeffrey Mistarz
 	 
	 	 	Name:  	Jeffrey Mistarz 	 
	 	 	Title:  	Treasurer 	 
	 



	 	 	 	 	 
	 	ELC VNPP SUB I, LLC

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



	 	 	 	 	 
	 	ELC VNPP SUB II, LLC

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



	 	 	 	 	 
	 	ACKNOWLEDGED:



LAURUS MASTER FUND, LTD.

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




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SCHEDULE A




	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Jurisdiction of	 	 	Organization	 
	 	Entity	 	 	Formation	 	 	Identification Number	 
	 	Electric City Corp.

	 	 	Delaware	 	 	 	 
	 	Great Lakes Controlled
Energy Corp.

	 	 	Delaware	 	 	 	 
	 	Maximum Performance
Group, Inc.

	 	 	Delaware	 	 	 	 
	 	ELC VNPP SUB I, LLC

	 	 	Delaware	 	 	 	 
	 	ELC VNPP SUB II, LLC

	 	 	Delaware	 	 	 	 
	 	 
	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 
	 





 









 






SCHEDULE B

COMMERCIAL TORT CLAIMS