Document:

Exhibit
10.1

       AGREEMENT AND GENERAL
RELEASE    This Agreement and General Release
(‘‘Agreement’’), is hereby executed by and
between Matthew Suffoletto (‘‘Employee’’ or
‘‘you’’), and AXS-One Inc. (the
‘‘Company’’) on behalf of its past, present
and future parent entities, subsidiaries, divisions, affiliates and
related business entities, successors and assigns, assets, employee
benefit plans or funds, and any of its or their respective past,
present and/or future directors, officers, fiduciaries, agents,
trustees, administrators, employees and assigns, whether acting as
agents for the Company or in their individual capacities (collectively
the ‘‘Company Entities’’), and sets forth
the parties’ agreement regarding Employee’s termination
of employment.

1. The Company and Employee agree
that Employee’s last day of employment with the company will be
January  31,  2006 (the termination date).
Employee’s coverage under the various employee benefit plans
maintained by the Company shall terminate effective as of the
termination date.. The Restricted Stock Certificate (25,000 shares)
issued in your name has not vested as of your termination date. That
Certificate Number AXS0493 will be
cancelled.

2. Following the Effective Date of this
Agreement (as defined in paragraph 17 below), and in exchange for your
waiver of claims against the Company Entities and compliance with other
terms and conditions of this Agreement, the Company agrees to pay you
severance of $62,500. This payment will be made to you as a salary
continuation, paid on the Company’s normal pay dates, beginning
on the pay date which is no sooner than fourteen days after the
Effective Date of this agreement. Employee may purchase, if eligible,
continuation health benefits coverage to the extent and for the period
provided by federal law (COBRA), however, provided Employee executes,
timely returns, and does not revoke this Agreement, the Company will
pay for Employee’s COBRA benefits through April
30,  2006.

3. You agree and acknowledge that
the payments and benefits provided for by the above paragraphs equals
or exceeds any payment, benefit or other thing of value to which you
might otherwise be entitled under any policy, plan or procedure of The
Company or pursuant to any prior agreement or contract with the
Company, including but not limited to, your offer
letter.

4. You agree and acknowledge that the
payment(s) and other benefits provided pursuant to this Agreement are
in full discharge of any and all liabilities and obligations of the
Company to you, monetarily or with respect to employee benefits or
otherwise, including but not limited to any and all obligations arising
under any alleged written or oral employment agreement (including, but
not limited to, your offer letter), policy, plan or procedure of the
Company and/or any alleged understanding or arrangement between you and
the Company.

5.    (a) In consideration for the payment
and benefits to be provided you pursuant to paragraph
‘‘2’’ above, you, for yourself and for your
heirs, executors, administrators, trustees, legal representatives and
assigns (hereinafter referred to collectively as
‘‘Releasors’’), forever release and
discharge the Company Entities from any and all claims, demands, causes
of action, fees and liabilities of any kind whatsoever, whether known
or unknown, which you ever had, now have, or may have against any of
the Company Entities by reason of any act, omission, transaction,
practice, plan, policy, procedure, conduct, occurrence, or other matter
up to and including the date on which you sign this
Agreement.

       (b) Without limiting the
generality of the foregoing, this Agreement is intended to and shall
release the Company Entities from any and all claims, whether known or
unknown, which Releasors ever had, now have, or may have against the
Company Entities arising out of your employment, and/or the termination
of that employment, including, but not limited to: (i) any claim under
the Age Discrimination in Employment Act, Title VII of the Civil Rights
Act of 1964, the Americans with Disabilities Act, the Employee
Retirement Income Security Act of 1974 (excluding claims for accrued,
vested benefits under any employee benefit or pension plan of the
Company Entities in accordance with the terms and conditions of such
plan and applicable law), and the Family and Medical Leave Act; (ii)
any claim under the New Jersey Law Against Discrimination, the New
Jersey Equal Pay Act, the New Jersey Family Leave Act, and the New
Jersey Conscientious Eligible Employee Protection Act; (iii) any other
claim (whether based on federal, state, or local law, statutory or
decisional) relating to or arising out of your employment, the terms
and conditions of such employment, the termination of such employment,
and/or any of the events relating directly or indirectly to or
surrounding the termination of that employment, including but not
limited to breach of contract (express or implied), wrongful discharge,
detrimental 

reliance, defamation, emotional distress,
retaliation, discrimination or harassment under any applicable law, or
compensatory or punitive damages; and (iv) any claim for
attorneys’ fees, costs, disbursements and/or the like. Nothing
in this Agreement shall be a waiver of claims that may arise after the
date on which you sign this
Agreement.

       (c) You acknowledge and
agree that by virtue of the foregoing, you have waived any relief
available to you (including without limitation, monetary damages,
equitable relief and reinstatement) under any of the claims and/or
causes of action waived in this paragraph
‘‘4’’.

6. The terms
and conditions of this Agreement are and shall be deemed to be
confidential, and shall not be disclosed by you to any person or entity
without the prior written consent of the Company, except if required by
law, and to your accountants, attorneys and/or immediate family
members, provided that, to the maximum extent permitted by applicable
law, rule, code or regulation, they agree to maintain the
confidentiality of the Agreement. You further represent that you have
not disclosed the terms and conditions of the Agreement to anyone other
than your attorneys, accountants and/or immediate family members.

7. You acknowledge that during the course of your
employment with the Company and/or any of the Company Entities, you
have had access to information relating to the Company and/or the
Company Entities and their respective business that is not generally
known by persons not employed by the Company and/or the Company
Entities and that could not easily be determined or learned by someone
outside of the Company and/or the Company Entities
(‘‘Confidential Information’’). You agree
not to disclose or use such Confidential Information at any time in the
future. You also hereby acknowledge and reaffirm your continuing
obligations under any agreements you previously made with the Company
and/or the Company Entities regarding confidential information of the
Company Entities, including but not limited to the Non-Disclosure
Agreement you signed upon the commencement of your employment by the
Company..

8. You represent that you have returned
(or will return) to the Company all property belonging to the Company
and/or the Company Entities, including but not limited to laptop, cell
phone, keys, card access to the building and office floors, Employee
Handbook, phone card, rolodex (if provided by the Company and/or the
Company Entities), computer user name and password, disks and/or
voicemail code. You further acknowledge and agree that the Company
shall have no obligation to make the payment(s) and provide the
benefits referred to in paragraph ‘‘2’’
above unless and until you have satisfied all your obligations pursuant
to this paragraph.

9. If any provision of this
Agreement is held to be illegal, void or unenforceable, such provision
shall have no effect; however, the remaining provisions shall be
enforced to the maximum extent possible. If a court should determine
that any portion of this Agreement is overbroad or unreasonable, such
provision shall be given effect to the maximum extent possible by
narrowing or enforcing in part that aspect of the provision found
overbroad or unreasonable. Additionally, you agree that if you breach
the terms of paragraphs 4, 5, 6, and/or 7, it shall constitute a
material breach of this Agreement as to which the Company Entities may
seek all relief available under the law.

10.    This
Agreement is not intended, and shall not be construed, as an admission
that any of the Company Entities has or have violated any federal,
state or local law (statutory or decisional), ordinance or regulation,
breached any contract or committed any wrong whatsoever against
you.

11.    This Agreement is binding upon, and shall
inure to the benefit of, the parties and their respective heirs,
executors, administrators, successors and
assigns.

12.    This Agreement shall be construed and
enforced in accordance with the laws of the State of New Jersey without
regard to the principles of conflicts of law.

13.    You understand that this Agreement constitutes the
complete understanding between the Company and you, and, with the
exception of the agreements referred to in paragraph
‘‘7’’ above which are incorporated by
reference into this Agreement, supersedes any and all agreements,
understandings, and discussions, whether written or oral between you
and any of the Company Entities. No other promises or agreements shall
be binding unless in writing and signed by both the Company and you
after the Release Effective Date.

14.    Obligation to
Comply.    Employee acknowledges that the Company’s
obligations to provide the payments and benefits and to comply with any
other obligations set forth herein ceases immediately upon
Employee’s breach of any of his or her obligations
hereunder.

15.    Exception For Challenge Under the
Older Workers Benefit Protection Act: The provisions of
paragraph 5 are not intended to, and shall not affect Employee’s
right to file a lawsuit, complaint or charge that challenges the
validity of this Agreement under the Older Workers Benefit Protection
Act, 29 U.S.C. § 626(f), with respect to claims under the Age
Discrimination in Employment Act
(‘‘ADEA’’). Furthermore, in the event of
such a proceeding, the provisions of paragraph 14 pertaining to
Company’s right to cease making payments pursuant to this
Agreement, Employee’s obligation to repay monies paid pursuant
to this Agreement, and the recovery of attorneys’ fees, shall
not apply. This paragraph is not intended to and shall not limit the
right of a court to determine, in its discretion, that Company is
entitled to restitution, recoupment or setoff of any monies paid should
the release of ADEA claims in this Agreement be found to be invalid.
Neither does this paragraph affect Company’s right to recover
attorneys’ fees or costs to the extent authorized under federal
law. The provisions of paragraph 5 shall apply with full force and
effect with respect to any other legal
proceeding.

16.    Nondisparagement.    Employee
represents that he has not and agrees that he will not in any way
disparage the Company and its employees, or make or solicit any
comments, statements, or the like to the media or to others that may be
considered to be derogatory or detrimental to the good name or business
reputation of the Company and its employees.

17.    You
acknowledge that you: (a) have carefully read this Agreement in its
entirety; (b) have had an opportunity to consider the terms and
conditions of this Agreement fully for at least forty-five (45) days;
(c) have been, and are hereby, advised by the Company in writing to
consult with an attorney of your choosing in connection with this
Agreement; (d) fully understand the significance of all of the terms
and conditions of this Agreement and have discussed them with your
independent legal counsel, or have had a reasonable opportunity to do
so; (e) have had answered to your satisfaction any questions you have
asked with regard to the meaning and significance of any of the
provisions of this Agreement; and (f) are signing this Agreement
voluntarily and of your own free will and agree to all the terms and
conditions contained herein.

18.    You understand
that you will have at least forty-five (45) days (the
‘‘Consideration Period’’) from the date of
receipt of this Agreement to consider the terms and conditions of this
Agreement. You may accept this Agreement by signing it and returning it
to Elizabeth Mack, Human Resources, AXS-One Inc., 301 Route 17 North,
Rutherford, NJ 07070. After executing this Agreement, you shall have
seven (7) days (the ‘‘Revocation Period’’)
to revoke this Agreement by indicating your desire to do so in writing
delivered to Elizabeth Mack at the address above (or by fax at
201-935-5431) by no later than 5:00 p.m. on the seventh (7th) day after
the date you sign this Agreement. The effective date of this Agreement
shall be the eighth (8th) day after you sign the Agreement (the
‘‘Effective Date’’). If the last day of the
Consideration or Revocation Period falls on a Saturday, Sunday or
holiday, the last day of the Consideration or Revocation Period, as
applicable, will be deemed to be the next business day. In the event
you do not accept this Agreement as set forth above, or in the event
you revoke this Agreement during the Revocation Period, this Agreement,
including but not limited to the obligation of the Company to provide
the payment(s) and other benefits referred to in paragraph
‘‘2’’ above, shall be deemed automatically
null and
void.

		Date:   2/9/06            

Signature:  /s/ Matthew Suffoletto    

  Matthew Suffoletto

Sworn to before me
this

             day of
                    ,
2006

__________________________
                Notary
Public

For THE
COMPANY

By:  /s/   Bill
Lyonsexv4w1

 

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)

COMMON STOCK PURCHASE WARRANT

			
	No. 100
	 	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, 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

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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 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

3

 

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 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

4

 

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.

     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,

5

 

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

6

 

     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.]

7

 

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

	 	 	 	 	 	 	 
	 	 	 	 	ELECTRIC CITY CORP.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	     /s/ John Mitola
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	John Mitola
	 

	 	 	 	Title:
	 	Chief Executive Officer
	Witness:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	   /s/ Jeffrey Mistarz
	 	 	 	 	 	 
	 	 	 	 	 	 	 

8

 

Exhibit A

FORM OF SUBSCRIPTION

(To be signed only on exercise of Warrant)

			
	TO:	 	Electric City Corp.

1280 Landmeier Road

Elk Grove Village, Illinois 60007

Attention: Chief Financial Officer

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

                                                              shares of the Common Stock covered by such Warrant; or

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

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

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

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

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

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

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

	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 

	 	 	 	 	 	(Signature must conform to name of holder as
	 

	 	 	 	 	 	specified on the face of the Warrant)

 

	 	 	 
	 

	 	 
	 

	 	(Address)

Exhibit B

FORM OF TRANSFEROR ENDORSEMENT

(To be signed only on transfer of Warrant)

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

	 	 	 	 	 	 	 
	Transferees

	 	Address
	 	Percentage Transferred
	 	Number 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)	 	 	 	 

10

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