Document:

exv4w1

 

Exhibit 4.1

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 2,000,000 Shares of Common Stock of

Electric City Corporation (subject to adjustment as

provided herein)

FORM OF COMMON STOCK PURCHASE WARRANT

			
	No. ___
	 	Issue Date: November 22, 2005

          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) November 22, 2012 (the
"Expiration Date”), up to 2,000,000 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.	 	$1.16 per share for all shares of Common Stock 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 as determined 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 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,

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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. (a) 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. (b) Notwithstanding
any 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

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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.

          3.3      Continuation of Terms. Upon any reorganization, consolidation, merger or transfer
(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

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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 adjusted 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.

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     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 November 22, 2005.

     10.      Maximum Exercise. Notwithstanding anything contained herein to the contrary, the Holder
shall not be entitled to exercise this Warrant in connection with that number of shares of Common
Stock 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
the purposes of the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act, as amended, and Regulation 13d-3 thereunder.
The conversion limitation described in this Section 10 shall automatically become null and void
following notice to the Company upon the occurrence and during the continuance of an Event of
Default under and as defined in the Note made by the Company to the Holder dated the date hereof
(as amended, modified or supplemented from time to time, the “Note”), or upon 75 days prior notice
to the Company. 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 this Warrant, the Note, the Purchase Agreement or
any 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 Warrant, the Note, the Purchase Agreement, any Related Agreement or otherwise, would
exceed the Maximum Common Stock Issuance but for this Section 10, the Company shall promptly

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call a shareholders meeting to solicit shareholder approval for the issuance of the shares of
Common Stock hereunder.

     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.

     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.      No Shorting. The Holder 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.

     15.      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 Company agrees 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 attorneys 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.]

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

	 	 	 	 	 
	 	ELECTRIC CITY CORP.

 	 
	 	By:  	 	 
	 	 	Name:  	By: John Mitola 	 
	 	 	 	 
	 

Title: Chief Executive Officer Witness:

 

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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)

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Exhibit B

FORM OF TRANSFER OR 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 Transferred	 
	 	 

	 	 	 
	 	 	 
	 	 	 	 
	 	 

	 	 	 
	 	 	 
	 	 	 	 
	 	 

	 	 	 
	 	 	 
	 	 	 	 
	 	 

	 	 	 
	 	 	 
	 	 	 	 
	 

	 	 	 
	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)
	 	 

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Exhibit 4.2

REGISTRATION RIGHTS AGREEMENT

          This Registration Rights Agreement (this “Agreement”) is made and entered into as of November
22, 2005, by and between Electric City Corp., a Delaware corporation (the “Company”), and Laurus
Master Fund, Ltd. (the “Purchaser”).

          This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date
hereof, by and between the Purchaser and the Company (the “Securities Purchase Agreement”), and
pursuant to the Note and the Warrants referred to therein.

          The Company and the Purchaser hereby agree as follows:

     1.     Definitions. Capitalized terms used and not otherwise defined herein that are defined in
the Securities Purchase Agreement shall have the meanings given such terms in the Securities
Purchase Agreement. As used in this Agreement, the following terms shall have the following
meanings:

          “Commission” means the Securities and Exchange Commission.

          “Common Stock” means shares of the Company’s common stock, par value $0.0001 per share.

          “Effectiveness Date” means the 90th day following the Filing Date.

          “Effectiveness Period” shall have the meaning set forth in Section 2(a).

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor
statute.

          “Filing Date” means, with respect to the Registration Statement required to be filed
hereunder, a date no later than thirty (30)days following the date upon which the principal amount
of the Term Loan to the Company in original principal amount of $5,000,000 has been funded to the
Company.

          “Holder” or “Holders” means the Purchaser or any of its affiliates or transferees to the
extent any of them hold Registrable Securities.

          “Indemnified Party” shall have the meaning set forth in Section 5(c).

          “Indemnifying Party” shall have the meaning set forth in Section 5(c).

          “Note” has the meaning set forth in the Securities Purchase Agreement.

          “Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition), whether commenced or
threatened.

 

 

          “Prospectus” means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the Registration Statement,
and all other amendments and supplements to the Prospectus, including post-effective amendments,
and all material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.

          “Registrable Securities” means the shares of Common Stock issued upon the conversion of the
Note and issuable upon exercise of the Warrants.

          “Registration Statement” means each registration statement required to be filed hereunder,
including the Prospectus, amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration statement.

          “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

          “Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

          “Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

          “Securities Act” means the Securities Act of 1933, as amended, and any successor statute.

          “Trading Market” means any of the NASD OTC Bulletin Board, NASDAQ SmallCap Market, the Nasdaq
National Market, the American Stock Exchange or the New York Stock Exchange.

          “Warrants” means the Common Stock purchase warrants issued pursuant to the Securities Purchase
Agreement.

     2.     Registration.

          (a)     On or prior to the Filing Date the Company shall prepare and file with the Commission a
Registration Statement covering the Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if
the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in
which case such registration shall be on another appropriate form in accordance herewith). The
Company shall cause the Registration Statement to become effective and remain

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effective as provided herein. The Company shall use its reasonable commercial efforts to
cause the Registration Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event no later than the Effectiveness Date. The
Company shall use its reasonable commercial efforts to keep the Registration Statement continuously
effective under the Securities Act until the date which is the earlier date of when (i) all
Registrable Securities have been sold or (ii) all Registrable Securities may be sold immediately
without registration under the Securities Act and without volume restrictions pursuant to Rule
144(k), as determined by the counsel to the Company pursuant to a written opinion letter to such
effect, addressed and acceptable to the Company’s transfer agent and the affected Holders (the
“Effectiveness Period”).

          (b)     If: (i) the Registration Statement is not filed on or prior to the Filing Date; (ii) the
Registration Statement is not declared effective by the Commission by the Effectiveness Date; (iii)
after the Registration Statement is filed with and declared effective by the Commission, the
Registration Statement ceases to be effective (by suspension or otherwise) as to all Registrable
Securities to which it is required to relate at any time prior to the expiration of the
Effectiveness Period (without being succeeded immediately by an additional registration statement
filed and declared effective) for a period of time which shall exceed 30 days in the aggregate per
year (defined as a period of 365 days commencing on the date the Registration Statement is declared
effective) or more than 20 consecutive calendar days; or (iv) the Common Stock is not listed or
quoted, or is suspended from trading on any Trading Market for a period of three (3) consecutive
Trading Days (provided the Company shall not have been able to cure such trading suspension within
30 days of the notice thereof or list the Common Stock on another Trading Market); (any such
failure or breach being referred to as an “Event,” and for purposes of clause (i) or (ii) the date
on which such Event occurs, or for purposes of clause (iii) the date which such 30 day or 20
consecutive day period (as the case may be) is exceeded, or for purposes of clause (iv) the date on
which such three (3) Trading Day period is exceeded, being referred to as “Event Date”), then until
the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as
liquidated damages and not as a penalty, equal to 1.0% for each thirty (30) day period (prorated
for partial periods) on a daily basis of the original principal amount of the Note. While such
Event continues, such liquidated damages shall be paid not less often than each thirty (30) days.
Any unpaid liquidated damages as of the date when an Event has been cured by the Company shall be
paid within three (3) days following the date on which such Event has been cured by the Company.

     3.     Registration Procedures. If and whenever the Company is required by the provisions hereof
to effect the registration of any Registrable Securities under the Securities Act, the Company
will, as expeditiously as possible:

          (a)     prepare and file with the Commission the Registration Statement with respect to such
Registrable Securities, respond as promptly as possible to any comments received from the
Commission, and use its best efforts to cause the Registration Statement to become and remain
effective for the Effectiveness Period with respect thereto, and promptly provide to the Purchaser
copies of all filings and Commission letters of comment relating thereto;

          (b)     prepare and file with the Commission such amendments and supplements to the Registration
Statement and the Prospectus used in connection therewith as may be

3

 

necessary to comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by the Registration Statement and to keep such Registration
Statement effective until the expiration of the Effectiveness Period;

          (c)     furnish to the Purchaser such number of copies of the Registration Statement and the
Prospectus included therein (including each preliminary Prospectus) as the Purchaser reasonably may
request to facilitate the public sale or disposition of the Registrable Securities covered by the
Registration Statement;

          (d)     use its commercially reasonable efforts to register or qualify the Purchaser’s Registrable
Securities covered by the Registration Statement under the securities or “blue sky” laws of such
jurisdictions within the United States as the Purchaser may reasonably request, provided,
however, that the Company shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;

          (e)     list the Registrable Securities covered by the Registration Statement with any Trading
Market on which the Common Stock of the Company is then listed;

          (f)     immediately notify the Purchaser at any time when a Prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event of which the
Company has knowledge as a result of which the Prospectus contained in such Registration Statement,
as then in effect, includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; and

          (g)     make available for inspection by the Purchaser and any attorney, accountant or other agent
retained by the Purchaser, all publicly available, non-confidential financial and other records,
pertinent corporate documents and properties of the Company, and cause the Company’s officers,
directors and employees to supply all publicly available, non-confidential information reasonably
requested by the attorney, accountant or agent of the Purchaser.

     4.     Registration Expenses. All expenses relating to the Company’s compliance with Sections 2
and 3 hereof, including, without limitation, all registration and filing fees, printing expenses,
fees and disbursements of counsel and independent public accountants for the Company, fees and
expenses (including reasonable counsel fees) incurred in connection with complying with state
securities or “blue sky” laws, fees of the NASD, transfer taxes, fees of transfer agents and
registrars, fees of, and disbursements incurred by, one counsel for the Holders, are called
“Registration Expenses”. All selling commissions applicable to the sale of Registrable Securities,
including any fees and disbursements of any special counsel to the Holders beyond those included in
Registration Expenses, are called “Selling Expenses.” The Company shall only be responsible for
all Registration Expenses.

     5.     Indemnification.

          (a)     In the event of a registration of any Registrable Securities under the Securities Act
pursuant to this Agreement, the Company will indemnify and hold harmless the

4

 

Purchaser, and its officers, directors and each other person, if any, who controls the
Purchaser within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Purchaser, or such persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in any Registration Statement under which such Registrable Securities
were registered under the Securities Act pursuant to this Agreement, any preliminary Prospectus or
final Prospectus contained therein, or any amendment or supplement thereof, or arise out of or are
based upon the omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will reimburse the
Purchaser, and each such person for any reasonable legal or other expenses incurred by them in
connection with investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case if and to the
extent that any such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in conformity with
information furnished by or on behalf of the Purchaser or any such person in writing specifically
for use in any such document.

          (b)     In the event of a registration of the Registrable Securities under the Securities Act
pursuant to this Agreement, the Purchaser will indemnify and hold harmless the Company, and its
officers, directors and each other person, if any, who controls the Company within the meaning of
the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which
the Company or such persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact which was
furnished in writing by the Purchaser to the Company expressly for use in (and such information is
contained in) the Registration Statement under which such Registrable Securities were registered
under the Securities Act pursuant to this Agreement, any preliminary Prospectus or final Prospectus
contained therein, or any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the Company and each
such person for any reasonable legal or other expenses incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action, provided,
however, that the Purchaser will be liable in any such case if and only to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with information furnished
in writing to the Company by or on behalf of the Purchaser specifically for use in any such
document. Notwithstanding the provisions of this paragraph, the Purchaser shall not be required to
indemnify any person or entity in excess of the amount of the aggregate net proceeds received by
the Purchaser in respect of Registrable Securities in connection with any such registration under
the Securities Act.

          (c)     Promptly after receipt by a party entitled to claim indemnification hereunder (an
“Indemnified Party”) of notice of the commencement of any action, such Indemnified Party shall, if
a claim for indemnification in respect thereof is to be made against a party hereto obligated to
indemnify such Indemnified Party (an “Indemnifying Party”), notify the Indemnifying Party in
writing thereof, but the omission so to notify the Indemnifying Party shall

5

 

not relieve it from any liability which it may have to such Indemnified Party other than under
this Section 5(c) and shall only relieve it from any liability which it may have to such
Indemnified Party under this Section 5(c) if and to the extent the Indemnifying Party is prejudiced
by such omission. In case any such action shall be brought against any Indemnified Party and it
shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be
entitled to participate in and, to the extent it shall wish, to assume and undertake the defense
thereof with counsel satisfactory to such Indemnified Party, and, after notice from the
Indemnifying Party to such Indemnified Party of its election so to assume and undertake the defense
thereof, the Indemnifying Party shall not be liable to such Indemnified Party under this Section
5(c) for any legal expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof; if the Indemnified Party retains its own counsel, then the Indemnified Party shall
pay all fees, costs and expenses of such counsel, provided, however, that, if the
defendants in any such action include both the Indemnified Party and the Indemnifying Party and the
Indemnified Party shall have reasonably concluded that there may be reasonable defenses available
to it which are different from or additional to those available to the Indemnifying Party or if the
interests of the Indemnified Party reasonably may be deemed to conflict with the interests of the
Indemnifying Party, the Indemnified Party shall have the right to select one separate counsel and
to assume such legal defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the Indemnifying Party as incurred.

          (d)     In order to provide for just and equitable contribution in the event of joint liability
under the Securities Act in any case in which either (i) the Purchaser, or any officer, director or
controlling person of the Purchaser, makes a claim for indemnification pursuant to this Section 5
but it is judicially determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact that this Section 5
provides for indemnification in such case, or (ii) contribution under the Securities Act may be
required on the part of the Purchaser or such officer, director or controlling person of the
Purchaser in circumstances for which indemnification is provided under this Section 5; then, and in
each such case, the Company and the Purchaser will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from others) in such
proportion so that the Purchaser is responsible only for the portion represented by the percentage
that the public offering price of its securities offered by the Registration Statement bears to the
public offering price of all securities offered by such Registration Statement, provided,
however, that, in any such case, (A) the Purchaser will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it pursuant to such
Fegistration Statement; and (B) no person or entity guilty of fraudulent misrepresentation (within
the meaning of Section 10(f) of the Act) will be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.

     6.     Representations and Warranties.

          (a)     The Common Stock of the Company is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act and, except with respect to certain matters which the Company has disclosed to the
Purchaser on Schedule 4.21 to the Securities Purchase Agreement, the Company has timely filed all
proxy statements, reports, schedules, forms, statements and

6

 

other documents required to be filed by it under the Exchange Act. The Company has filed (i)
its Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and (ii) its Quarterly
Report on Form 10-Q for the fiscal quarters ended March 31, 2005, June 30, 2005 and September 30,
2005 (collectively, the “SEC Reports”). Each SEC Report was, at the time of its filing, in
substantial compliance with the requirements of its respective form and none of the SEC Reports,
nor the financial statements (and the notes thereto) included in the SEC Reports, as of their
respective filing dates, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. The financial statements of the
Company included in the SEC Reports comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a
consistent basis during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed) and fairly present in all material
respects the financial condition, the results of operations and the cash flows of the Company and
its subsidiaries, on a consolidated basis, as of, and for, the periods presented in each such SEC
Report.

          (b)     The Common Stock is listed for trading on the American Stock Exchange and satisfies all
requirements for the continuation of such listing. The Company has not received any notice that
its Common Stock will be delisted from the American Stock Exchange or that the Common Stock does
not meet all requirements for the continuation of such listing.

          (c)     Neither the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security or solicited any offers
to buy any security under circumstances that would cause the offering of the Securities pursuant to
the Securities Purchase Agreement to be integrated with prior offerings by the Company for purposes
of the Securities Act which would prevent the Company from selling the Common Stock pursuant to
Rule 506 under the Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries take any action or steps
that would cause the offering of the Securities to be integrated with other offerings.

          (d)     The Warrants, the Note and the shares of Common Stock which the Purchaser may acquire
pursuant to the Warrants and the Note are all restricted securities under the Securities Act as of
the date of this Agreement. The Company will not issue any stop transfer order or other order
impeding the sale and delivery of any of the Registrable Securities at such time as such
Registrable Securities are registered for public sale or an exemption from registration is
available, except as required by federal or state securities laws.

          (e)     The Company understands the nature of the Registrable Securities issuable upon the
conversion of the Note and the exercise of the Warrant and recognizes that the issuance of such
Registrable Securities may have a potential dilutive effect. The Company specifically acknowledges
that its obligation to issue the Registrable Securities is binding upon the Company

7

 

and enforceable regardless of the dilution such issuance may have on the ownership interests
of other shareholders of the Company.

          (f)     Except for agreements made in the ordinary course of business, there is no agreement that
has not been filed with the Commission as an exhibit to a registration statement or to a form
required to be filed by the Company under the Exchange Act, or described in the SEC Reports, the
breach of which could reasonably be expected to have a material and adverse effect on the Company
and its subsidiaries, or would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement in any material respect.

          (g)     The Company will at all times have authorized and reserved a sufficient number of shares
of Common Stock for the full conversion of the Note and exercise of the Warrants.

     7.     Miscellaneous.

          (a)     Remedies. In the event of a breach by the Company or by a Holder, of any of their
respective obligations under this Agreement, each Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under this Agreement,
including recovery of damages, will be entitled to specific performance of its rights under this
Agreement.

          (b)     No Piggyback on Registrations. Except as and to the extent specified in Schedule
7(b) hereto, neither the Company nor any of its security holders (other than the Holders in
such capacity pursuant hereto) may include securities of the Company in any Registration Statement
other than the Registrable Securities, and the Company shall not after the date hereof enter into
any agreement providing any such right for inclusion of shares in the Registration Statement to any
of its security holders. Except as and to the extent specified in Schedule 7(b) hereto, the
Company has not previously entered into any agreement granting any registration rights with respect
to any of its securities to any Person that have not been fully satisfied.

          (c)     Compliance. Each Holder covenants and agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement.

          (d)     Discontinued Disposition. Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of a Discontinuation
Event (as defined below), such Holder will forthwith discontinue disposition of such Registrable
Securities under the applicable Registration Statement until such Holder’s receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement or until it is advised in writing
(the “Advice”) by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus or Registration Statement. The Company
may provide appropriate stop orders to enforce the provisions of this paragraph. For purposes of
this Section 7(d), a “Discontinuation Event” shall mean (i) when the Commission notifies the
Company whether there will be a

8

 

“review” of such Registration Statement and whenever the Commission comments in writing on
such Registration Statement (the Company shall provide true and complete copies thereof and all
written responses thereto to each of the Holders); (ii) any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to such Registration
Statement or Prospectus or for additional information; (iii) the issuance by the Commission of any
stop order suspending the effectiveness of such Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that purpose; (iv) the receipt by
the Company of any notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; and/or (v) the occurrence of any
event or passage of time that makes the financial statements included in such Registration
Statement ineligible for inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in
any material respect or that requires any revisions to such Registration Statement, Prospectus or
other documents so that, in the case of such Registration Statement or Prospectus, as the case may
be, it will not contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

          (e)     Piggy-Back Registrations. If at any time during the Effectiveness Period there is not an
effective Registration Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or
their then equivalents relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any such Holder shall so
request in writing, the Company shall include in such registration statement all or any part of
such Registrable Securities such holder requests to be registered to the extent the Company may do
so without violating registration rights of others which exist as of the date of this Agreement,
subject to customary underwriter cutbacks applicable to all holders of registration rights and
subject to obtaining any required the consent of any selling stockholder(s) to such inclusion under
such registration statement.

          (f)     Amendments and Waivers. The provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the same shall be in writing and signed by the
Company and the Holders of the then outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of certain Holders and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.

9

 

          (g)     Notices. Any notice or request hereunder may be given to the Company or the Purchaser at
the respective addresses set forth below or as may hereafter be specified in a notice designated as
a change of address under this Section 7(g). Any notice or request hereunder shall be given by
registered or certified mail, return receipt requested, hand delivery, overnight mail or telecopy
(confirmed by mail). Notices and requests shall be, in the case of those by hand delivery, deemed
to have been given when delivered to any party to whom it is addressed, in the case of those by
mail or overnight mail, deemed to have been given three (3) business days after the date when
deposited in the mail or with the overnight mail carrier, and, in the case of a telecopy, when
confirmed. The address for such notices and communications shall be as follows:

				
	 	If to the Company:	 	Electric City Corporation

1280 Landmeier Road

Elk Grove Village, Illinois 60007

Attention: Chief financial officer

Facsimile: 847-437-4969
	 
	 	With a copy to:	 	Andrew H. Connor, Esq.

Schwartz, Cooper, Greenberger & Krauss, Chtd.

180 North LaSalle Street

Chicago, Illinois 60601

Facsimile: 312-782-8416
	 
	 	If to a Purchaser:	 	To the address set forth under

such Purchaser name on the

signature pages hereto.
	 
	 	If to any other Person who is then the registered Holder:
	 
	 	 	 	To the address of such Holder as it

appears in the stock transfer books

of the Company

or such other address as may be designated in writing hereafter in accordance with this Section
7(g) by such Person.

          (h)      Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of each of the parties and shall inure to the benefit of each
Holder. The Company may not assign its rights or obligations hereunder without the prior written
consent of each Holder. Each Holder may assign their respective rights hereunder in the manner and
to the Persons as permitted under the Notes and the Securities Purchase Agreement with the prior
written consent of the Company, which consent shall not be unreasonably withheld.

          (i)      Execution and Counterparts. This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any

10

 

signature is delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is executed) the same with the
same force and effect as if such facsimile signature were the original thereof.

          (j)      Governing Law. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced in accordance with
the internal laws of the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement shall be commenced exclusively in the
state and federal courts sitting in the City of New York, Borough of Manhattan. Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such Proceeding is improper. Each party hereto
hereby irrevocably waives personal service of process and consents to process being served in any
such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated hereby. If either
party shall commence a Proceeding to enforce any provisions of a Transaction Document, then the
prevailing party in such Proceeding shall be reimbursed by the other party for its reasonable
attorneys fees and other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.

          (k)      Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any
remedies provided by law.

          (l)      Severability. If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions set forth herein shall remain in full force
and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall
use their reasonable efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions without including
any of such that may be hereafter declared invalid, illegal, void or unenforceable.

          (m)      Headings. The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.

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

11

 

          IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.

	 	 	 	 	 
	 	ELECTRIC CITY CORP.

 	 
	 	By:  	/s/ John Mitola
 	 
	 	Name:  	John Mitola 	 
	 	Title:  	Chief Executive Officer 	 
	 
	 	LAURUS MASTER FUND, LTD.

 	 
	 	By:  	/s/ David Grin
 	 
	 	Name:  	David Grin 	 
	 	Title:  	Director 	 
	 
	 	Address for Notices:

825 Third Avenue , 14th Floor

New York, New York 10022

Attention: David Grin

Facsimile: 212-541-4434

 	 
	 	 	 
	 	 	 
	 	 	 
	 

12

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