Document:

exv10w5

 

Exhibit 10.5

LIMITED LIABILITY COMPANY AGREEMENT

OF

ELC VNPP SUB I, LLC

     This Limited Liability Company Agreement (together with the exhibit attached hereto, this
“Agreement”) of ELC VNPP SUB I, LLC (the “Company”) is entered into on November 18,
2005 to be effective as of November 18, 2005 (the “Effective Date”), by Electric City Corp.
a Delaware corporation (“Electric City”), as the sole equity member of the Company and
Michelle A. Dreyer (“Independent Manager 1”) and Cheryl A. Tussie (“Independent Manager
2”) as the Independent Managers.

     WHEREAS, on November 14, 2005, the Company was formed pursuant to the filing of the
Certificate of Formation of the Company (such certificate, the “Original Certificate”) with
the Secretary of State of the State of Delaware in accordance with the Delaware Limited Liability
Company Act, 6 Del. C. §18-101 et seq. (as amended form time to time, the “Act”); and

     WHEREAS, the Company shall acquire the Property (as defined below) and shall guaranty the Debt
(as defined below) pursuant to the Loan Documents; and

     WHEREAS, Electric City desires to set forth the Company’s limited liability company agreement
as set forth herein;

     NOW, THEREFORE, Electric City, in its capacity as Member (as defined below) of the Company,
and the Independent Managers, intending to be legally bound, hereby agree as follows:

     1.   Definitions. The following capitalized words and phrases used in this Agreement
have the respective meanings indicated in this Section 1:

     “Act” is defined in the first WHEREAS clause.

     “Affiliate” (including the term “Affiliated”) means, with respect to a
particular Person, any other Person who is Controlled by, under common Control with, or in Control
of, such particular Person or any person who has a direct familial relationship by blood or
marriage or otherwise with such Person.

     “Bankruptcy” means with respect to any Person, if such Person: (i) makes an assignment
for the benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii) is adjudged a
bankrupt or insolvent, or has entered against him, her or it an order for relief, in any bankruptcy
or insolvency proceedings; (iv) files a petition or answer seeking for himself, herself or itself
any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any
statute, law or regulation; (v) files an answer or other pleading admitting or failing to contest
the material allegations of a petition filed against him, her or it in any proceeding of this
nature; (vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of the Person or of all or any substantial part of his, her or its properties; or (vii)
if 120 days after the commencement of any proceeding against the Person seeking reorganization,
arrangement, composition, readjustment, liquidation or similar relief under any statute, law or
regulation, if the proceeding has not been dismissed, or if within 90 days after the appointment
without such Person’s consent or acquiescence

 

 

of a trustee, receiver or liquidator of such Person or of all or any substantial part of his,
her or its properties, the appointment is not vacated or stayed, or within 90 days after the
expiration of any such stay, the appointment is not vacated. The foregoing definition of
“Bankruptcy” is intended to replace and shall supersede and replace the definition of “Bankruptcy”
set forth in Sections 18-101(1) and 18-304 of the Act.

     “Certificate of Formation” means the Certificate of Formation of the Company filed
with the Secretary of State of the State of Delaware, as it may be amended or amended and restated
from time to time.

     “Control” means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through the ownership of
voting securities or other beneficial interests, by contract or otherwise. “Controlling”
and “Controlled” shall have correlative meanings.

     “Covered Persons” has the meaning set forth in Section 15.

     “Debt” means the outstanding principal amount of the VNPP Loan, together with all
interest accrued and unpaid thereon and all other sums due to Lender in respect of the VNPP Loan
under the Loan Documents.

     “Debt Guaranty Agreement” means that certain Bill of Sale and Debt Guaranty Agreement
dated as of November 22, 2005, between Electric City and the Company, pursuant to which the Company
will acquire certain assets and certain payment rights under the VNPP Contract and agree to
guaranty all obligations of Electric City pursuant to the Loan Documents, as the same may be
amended, restated, modified or supplemented and in effect from time to time.

     “Electric City” means Electric City Corp., a Delaware corporation.

     “Independent Manager” means a Person who is not, shall not be while serving and for
the prior five years has not been: (a) a stockholder, director, manager, officer, employee,
trustee, attorney or counsel of the Company, or any subsidiaries or Affiliates thereof (other than
an independent director or manager of the Company and other than a stockholder in any
publicly-traded Affiliate); or (b) a creditor, customer, supplier or other Person who derives any
of his, her or its purchases or revenues from his, her or its activities with the Company or any
Affiliate thereof; or (c) a Person Controlling or under common Control with any such stockholder,
partner, customer, supplier or other person; or (d) a member of the immediate family of any such
stockholder, director, manager, officer, employee, partner, customer, supplier or other person. A
natural person who satisfies the foregoing definition other than subparagraph (b) shall not be
disqualified from serving as an Independent Manager of the Company if such individual is an
Independent Manager provided by a nationally-recognized company that provides professional
independent managers (a “Professional Independent Manager”) and other corporate services in
the ordinary course of its business. A natural person who otherwise satisfies the foregoing
definition other than subparagraph (a) by reason of being the independent manager of a “special
purpose entity” affiliated with the Company shall not be disqualified from serving as an
Independent Manager of the Company if (i) such individual is a Professional Independent Manager, or
(ii) the fees that such individual earns from serving as independent Manager of any Affiliates of
the Company in any given year constitute

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in the aggregate less than five percent (5%) of such individual’s annual income for that year.
Notwithstanding the immediately preceding sentence, an Independent Manager may not simultaneously
serve as Independent Manager of the Company and independent manager of a special purpose entity
that owns a direct or indirect equity interest in the Company or a direct or indirect interest in
any co-borrower with the Company.

     “Lender” means Laurus Master Fund, Ltd., a Cayman Islands company, its successors and
assigns as lender under the Loan Agreement.

     “Loan Agreement” means that certain Securities Purchase Agreement dated as of
November 22, 2005, between Electric City and Lender, as the same may be amended, restated, modified
or supplemented and in effect from time to time.

     “Loan Documents” means collectively, each of the Loan Agreement, the Debt Guaranty
Agreement, and any and all other instruments, documents, agreements and certificates executed
and/or delivered in connection with the Loan Agreement or the Debt Guaranty Agreement, as the same
may be amended, restated, modified or supplemented and in effect from time to time.

     “Managing Member” means Electric City as the member of the Company.

     “Material Action” means any of the following: (i) to admit in writing the Company’s
inability to pay its debts when due; (ii) commencement of any case, proceeding or other action on
behalf of the Company under any existing or future law of any jurisdiction relating to bankruptcy,
insolvency, reorganization or relief of debtors; (iii) institution of proceedings to have the
Company adjudicated as bankrupt or insolvent; (iv) consenting to the institution of bankruptcy or
insolvency proceedings against the Company; (v) filing a petition or consenting to a petition
seeking reorganization, arrangement, adjustment, winding-up, composition, liquidation or other
relief on behalf of the debts of the Company under any federal or state law related to bankruptcy;
(vi) seeking or consenting to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian or any similar official for the Company or a substantial portion of any of
its properties; (vii) making any assignment for the benefit of the Company’s creditors; or (viii)
taking any action or causing the Company to take any action in furtherance of (i) through (vii).

     “Member” means Electric City as the initial member of the Company, and includes any
Person admitted as an additional member of the Company or a substitute member of the Company
pursuant to the provisions of this Agreement, each in its capacity as a member of the Company;
provided, however, the term “Member” shall not include any Special Member.

     “Percentage Interest” shall have the meaning given to such term in Section 8 of this
Agreement.

     “Person” means any individual, corporation, partnership, joint venture, limited
liability company, limited liability partnership, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization, or other organization, whether or
not a legal entity, and any governmental authority.

     “Pledge Agreement” shall have the meaning given to such term in Section 16(b) of this
Agreement.

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     “Property” means the equipment and other personal property which comprises the VNPP,
together with the rights of Electric City to receive payments and proceeds under the VNPP Contract.

     “Special Member” means, upon such Person’s admission to the Company as a member of the
Company pursuant to Section 10, a Person acting as Independent Manager, in such Person’s capacity
as a member of the Company. A Special Member shall only have the rights and duties expressly set
forth in this Agreement.

     “VNPP” means the “Virtual Negawatt Power Plan” automatic power curtailment system
which is the subject of the VNPP Contract.

     “VNPP Contract” means that certain Agreement dated as of September 9, 2003 between
Commonwealth Edison Company, an Illinois public utility company, and Electric City, as in effect
from time to time.

     “VNPP Loan” means the loan from the Lender which is guaranteed by the Company pursuant
to the Debt Guaranty Agreement, together with all interest and fees accruing thereon.

     “UCC” has the meaning set forth in Section 25(a).

     2.   Formation. The Certificate of Formation, the formation of the Company as a limited
liability company under the Act, and all actions taken in connection therewith are hereby adopted
and ratified. Janice Cohen is hereby designated an “authorized person” within the meaning of the
Act, and has executed, delivered and filed the Certificate of Formation of the Company with the
Secretary of State of the State of Delaware. Upon the filing of the Certificate of Formation of
the Company with the Secretary of State of the State of Delaware, her powers as an “authorized
person” ceased, and the Member thereupon became the designated “authorized person” and shall
continue as the designated “authorized person” within the meaning of the Act. The Member shall
execute, deliver and file any other certificates (and any amendment and/or restatements thereof)
necessary for the Company to qualify to do business in Illinois and in any other jurisdiction in
which the Company may wish to conduct business. The affairs of the Company and the conduct of its
business shall be governed by the terms and subject to the conditions set forth in this Agreement,
as amended from time to time.

     3.   Name; Registered Office, Registered Agent. The name of the limited liability
company is ELC VNPP SUB I, LLC. The address of the registered office of the Company in the State
of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19808. The name and address of the registered agent of the Company for service of
process on the Company in the State of Delaware are The Corporation Trust Company, 1209 Orange
Street, Wilmington, New Castle County, Delaware 19808.

     4.   Term. The term of the Company commenced upon the filing of the Certificate of
Formation, and the Company shall continue in existence until it is terminated pursuant to this
Agreement or the Act. The existence of the Company as a separate legal entity shall continue until
cancellation of the Certificate of Formation as provided in the Act.

     5.   Purpose. The sole purposes of the Company are to (i) own and dispose of and
operate the Property, to (ii) enter into and perform under the Debt Guaranty Agreement and, to the
extent

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provided therein, the VNPP Loan and the Loan Documents, and to (iii) engage in any lawful act
or activity that is related or incidental to the above-stated purposes. Notwithstanding anything
contained herein to the contrary, the Company shall not engage in any business, and it shall have
no purpose unrelated to the Property and shall not acquire any real property or own assets other
than those related to the Property or otherwise in furtherance of the purposes of the Company. The
Company, and the Managing Member and any other Member or manager on behalf of the Company, may
enter into and perform their obligations under the Loan Documents, this Agreement, and all
documents, agreements, certificates, or financing statements contemplated thereby or related
thereto, all without any further act, vote or approval of any Member, manager, or other Person
notwithstanding any other provision of this Agreement. The foregoing authorization shall not be
deemed a restriction on the powers of the Managing Member to enter into other agreements on behalf
of the Company.

     6.   Member Admission and Capital Contributions. Simultaneously with the execution and
delivery of this Agreement, the Member is being admitted as the sole Member of the Company, with a
100% limited liability company interest in the Company. The Member has made certain capital
contributions to the Company, which shall be reflected on the books and records of the Company. In
accordance with Section 10, the Special Members shall not be required to make any capital
contributions to the Company.

     7.   Additional Contributions. The Member is not required to make any additional
capital contribution to the Company. However, the Member may make additional capital contributions
to the Company at any time upon the written consent of the Members. The provisions of this
Agreement, including this Section 7, are intended to benefit the Member and the Special Members
and, to the fullest extent permitted by law, shall not be construed as conferring any benefit upon
any creditor of the Company (other than Covered Persons) (and except as set forth in Section 23, no
such creditor of the Company shall be a third-party beneficiary of this Agreement) and the Member
and the Special Members shall not have any duty or obligation to any creditor of the Company to
make any contribution to the Company or to issue any call for capital pursuant to this Agreement.

     8.   Percentage Interest and Allocations of Profits and Losses. Each Member’s interest
in the Company shall be expressed as a percentage equal to the ratio on any date of such Member’s
capital account on such date to the aggregate capital accounts of all Members on such date, such
capital accounts to be determined after giving effect to all contributions of property or money,
distributions and allocations for all periods ending on or prior to such date (as to any Member,
his, her or its “Percentage Interest”). The Company’s profits and losses shall be
allocated in accordance with the Percentage Interests of the Members.

     9.   Member Manager. The Member shall be the Managing Member of the Company and shall
have the right and authority, subject to Section 11, to take all actions specifically enumerated in
this Agreement or which the Member otherwise deems necessary, useful, appropriate or desirable to
the day-to-day management and conduct of the Company’s business. Subject to Sections 5 and 11, the
Member has the authority to bind the Company.

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     10.   Special Member.

     (a)   Admission. Upon the occurrence of any event that causes the Member to cease to be
a member of the Company (other than upon continuation of the Company without dissolution upon an
assignment by the Member of all of its limited liability company interest in the Company and the
admission of the transferee pursuant to Sections 16 and 17) the Person executing this Agreement as
Independent Manager 1 shall, without any action of any other Person and simultaneously with the
Member ceasing to be a member of the Company, automatically be admitted to the Company as a Special
Member, and shall continue the Company without dissolution. If, however, at the time the last
remaining Member ceases to be a member, Independent Manager 1 has died or is otherwise no longer
able to step into the role of Special Member, then in such event, the person executing this
Agreement as Independent Manager 2 shall, concurrently with the last remaining Member ceasing to be
a member, and without any action of any Person, automatically be admitted to the Company as Special
Member and shall continue the Company without dissolution. It is the intent of these provisions
that the Company never have more than one Special Member at any particular point in time. Prior to
his, her or its admission to the Company as a Special Member in accordance with this Section 10, a
Person acting as an Independent Manager shall not be a member of the Company. In order to
implement the admission to the Company of the Special Member, each of Independent Manager 1 and
Independent Manager 2 shall execute a counterpart to this Agreement.

     (b)   Resignation; Termination of Status. A Special Member may not resign from the
Company or transfer his, her or its rights as a Special Member unless (i) a successor Special
Member has been admitted to the Company as Special Member by executing a counterpart to this
Agreement, and (ii) such successor has also accepted his, her or its appointment as Independent
Manager pursuant to Section 11(a); provided, however, that any Person acting as a
Special Member shall automatically cease to be a Special Member of the Company upon the admission
to the Company of a substitute Member.

     (c)   Rights; Obligations. Each Special Member shall be a member of the Company having
no interest in the profits, losses and capital of the Company and having no right to receive any
distributions of the Company’s assets. Pursuant to Section 18-301 of the Act, a Special Member
shall not be required to make any capital contributions to the Company and shall not receive a
limited liability company interest in the Company. No Special Member, in such Person’s capacity as
a Special Member, may bind the Company. Except as required by any mandatory provision of the Act,
no Special Member, in such Person’s capacity as a Special Member, shall have a right to vote on,
approve or otherwise consent to any action by, or matter relating to, the Company, including,
without limitation, the merger, consolidation or conversion of the Company; provided,
however, such prohibition shall not limit the obligations of a Special Member, in such
Person’s capacity as an Independent Manager, to vote on any Material Action.

     11.   Separateness Provisions.

     (a)   Independent Managers. The Member shall cause the Company, at all times until such
time as the Debt is paid in full, to have at least two Independent Managers, each of which shall be
appointed by the Member and be reasonably satisfactory to Lender. To the fullest extent permitted
by law, including Section 18-1101(c) of the Act, the Independent Managers shall consider only the
interests of the Company, including those of its respective creditors, in acting or otherwise
voting on

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the matters referred to in Section 11(b). No resignation or removal of an Independent
Manager, and no appointment of a successor Independent Manager, shall be effective until such
successor (i) shall have accepted his, her or its appointment as an Independent Manager by a
written instrument, and (ii) shall have executed a counterpart to this Agreement as required by
Section 10. In the event of a vacancy in the position of Independent Manager, the Member shall, as
soon as practicable, appoint a successor Independent Manager. All right, power and authority of
the Independent Managers shall be limited to the extent necessary to exercise those rights and
perform those duties specifically set forth in this Agreement. Except with respect to those
actions expressly requiring the vote of the Independent Managers pursuant to Section 12(b), no
Independent Manager, in his, her or its capacity as Independent Manager, shall have any right to
vote on, approve or otherwise consent to any action by, or matter relating to, the Company, and
such Independent Manager’s attendance at any meeting shall not be required as a condition to the
taking of any such action. Anything in the laws of the State of Delaware of this Agreement to the
contrary notwithstanding, except pursuant to Section 11(b), an Independent Manager, in his, her or
its capacity as Independent Manager, may not bind the Company.

     12.   Prohibition on Material Actions. Notwithstanding any other provision of this
Agreement and any provision of law that otherwise so empowers the Company, the Member or any other
Person, until such time as the Debt is paid in full, neither the Member nor any other Person shall
be authorized or empowered, nor shall they permit the Company, to take any Material Action without
the prior unanimous written consent of the Managing Member and both Independent Managers;
provided, further, that, until such time as the Debt is paid in full, the Member
may not authorize the taking of any Material Action unless, at the time such Material Action is
approved, at least two Independent Managers are serving in such capacity.

     (a)   Separateness Covenants. Until such time as the Debt is paid in full, the Company
will:

     (i)   Maintain books and records separate from any other Person;

     (ii)   Maintain its bank accounts separate from any other Person;

     (iii)   Not commingle assets with those of any other Person and hold all of its assets in
its own name;

     (iv)   Conduct its own business in its own name;

     (v)   Maintain separate financial statements (except that the Company may be included in
consolidated financial statements of another Person where required by GAAP but (A) its
separate assets shall be clearly indicated as such on such statement and such statements
will indicate that the Company’s assets and credit are not available to satisfy the debts
and other obligations of such Affiliate or any other Person, and (B) such assets shall also
be listed on the Company’s own separate balance sheet;

     (vi)   Pay its own liabilities out of its own funds, provided, however, the
foregoing shall not require the Member to make any additional capital contributions to the
Company;

     (vii)   Observe all limited liability company formalities;

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     (viii)   Pay the salaries of its own employees and maintain a sufficient number of
employees in light of its contemplated business operations, provided, however, the
foregoing shall not require the Member to make any additional capital contributions to the
Company;

     (ix)   Not guarantee or become obligated for the debts of any other Person or hold out
its credit as being available to satisfy the obligations of others;

     (x)   Not acquire obligations or securities of its partners, members or shareholders or
any Affiliate, as applicable;

     (xi)   Allocate fairly and reasonably any overhead for shared office space or other
expenses shared with Affiliates;

     (xii)   Use separate stationery, invoices and checks;

     (xiii)   Not pledge its assets to secure the obligations of any other Person or make any
loans or advances to any Person;

     (xiv)   Hold itself out as a separate entity;

     (xv)   Correct any known misunderstanding regarding its separate identity;

     (xvi)   Maintain adequate capital in light of its contemplated business operations,
provided, however, the foregoing shall not require the Member to make any additional
capital contributions to the Company;

     (xvii)   To the fullest extent permitted by law, not dissolve, wind up or liquidate, in
whole or in part, consolidate or merge with or into any other Person, or convey or sell its
properties and assets substantially as an entirety to any Person, except for sales expressly
permitted by the Loan Documents;

     (xviii)   Not incur, assume or guarantee any indebtedness other than the Debt evidenced
and secured by the Loan Documents and the Debt permitted by the Loan Documents;

     (xix)   Not identify itself as a division of any other Person;

     (xx)   Not form, hold or acquire any subsidiaries;

     (xxi)   Not make any loans to any other Person or buy or hold evidence of indebtedness
issued by others (other than investment grade securities);

     (xxii)   Enter into transactions with Affiliates only on a commercially reasonable basis
and on terms similar to those available in an arms-length transaction with a third party;

     (xxiii)   Pay any taxes required to be paid under applicable law, and file its own tax
returns separate from those of any other Person, except to the extent that the Company is

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treated as a “disregarded entity” for tax purposes and is not required to file tax
returns under applicable law;

     (xxiv)   Not engage, directly or indirectly, in any business other than ownership,
maintenance and operation of the VNPP; and

     (xxv)   Not own any asset or property other than the Property and incidental personal
property necessary for the ownership or operation of the Property.

Failure of the Company, or the Member on behalf of the Company, to comply with any of the foregoing
covenants or any other covenants contained in this Agreement shall not affect the status of the
Company as a separate legal entity or the limited liability of the Member.

     (b)   Amendment. Until such time as the Debt has been paid in full, the provisions of
Section 4, Section 5, Section 10, this Section 12(b), Section 13, Section 15(g), Section 16,
Section 17, Section 18, Section 19, Section 23, Section 24, Section 25, Exhibit A, or any defined
terms therein (together the “SPPs”) may not be amended or modified in any manner without
the prior written consent of Lender. In the event of any conflict between any of the SPPs and any
other provision of this or any other document governing the formation, management or operation of
the Company, the SPPs shall control.

     12.   Limited Liability. Except as otherwise expressly provided by the Act, the debts,
obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall
be the debts, obligations and liabilities solely of the Company, and neither the Member nor the
Special Members nor any Independent Manager shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Member, Special Member or
Independent Manager of the Company.

     13.   Distributions.

     (a)   At the time determined by the Member, but at least once during each fiscal year, the
Member shall cause the Company to distribute any cash held by it which is not reasonably necessary
for the operation of the Company. Cash available for distribution shall be distributed to the
Member in accordance with the Percentage Interests, provided that notwithstanding anything
else in this Agreement, no such distribution shall be made to the extent they would violate the Act
or would constitute a default under the Loan Documents.

     (b)   Any payments made pursuant to the Loan Documents shall constitute distributions to or at
the direction of the Member.

     14.   Other Business. The Member, Special Members, any Independent Manager and any
Affiliate of the Member, Independent Managers or the Special Members may engage in or possess an
interest in other business ventures (unconnected with the Company) of every kind and description,
independently or with others, notwithstanding any duty otherwise existing at law or in equity;
provided however that the activities of any Independent Manager is subject to the restrictions set
forth in its definition. The Company shall not have any rights in or to such independent ventures
or the income or profits therefrom by virtue of this Agreement.

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     15.   Exculpation and Indemnification.

     (a)   Neither the Member nor the Special Members nor any Independent Manager, employee or agent
of the Company nor any employee, representative, agent or Affiliate of the foregoing (collectively,
the “Covered Persons”) shall be liable to the Company or any other Person who is bound by
this Agreement for any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of the authority conferred on such Covered Person by this
Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred
by reason of such Covered Person’s gross negligence or willful misconduct.

     (b)   To the fullest extent permitted by applicable law, a Covered Person shall be entitled to
indemnification from the Company for any loss, damage or claim incurred by such Covered Person by
reason of any act or omission performed or omitted by such Covered Person in good faith on behalf
of the Company and in a manner reasonably believed to be within the scope of the authority
conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled
to be indemnified in respect of any loss, damage or claim incurred by such Covered Person by reason
of such Covered Person’s gross negligence or willful misconduct with respect to such acts or
omissions; provided, however, (i) that any indemnity under this Section 15(b) by
the Company shall be provided out of and to the extent of Company assets only, and the Member and
the Special Members shall not have personal liability on account thereof and (ii) that so long as
any portion of the Debt remains unpaid, no indemnity payment from funds of the Company (as distinct
from funds from other sources, such as insurance) of any indemnity under this Section 15(b) shall
be payable from amounts allocable to any other Person pursuant to the Loan Documents, however, the
provisions of this subsection (ii) shall not apply to indemnities for any Independent Managers.

     (c)   To the fullest extent permitted by applicable law, expenses (including legal fees)
incurred by a Covered Person defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by the Company prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the
Covered Person to repay such amount if it shall be determined that the Covered Person is not
entitled to be indemnified as authorized in this Section 15(c).

     (d)   A Covered Person shall be fully protected in relying in good faith upon the records of the
Company and upon such information, opinions, reports or statements presented to the Company by any
Person as to matters the Covered Person reasonably believes are within such other Person’s
professional or expert competence and who has been selected with reasonable care by or on behalf of
the Company, including information, opinions, reports or statements as to the value and amount of
the assets, liabilities, or any other facts pertinent to the existence and amount of assets from
which distributions to the Member might properly be paid.

     (e)   The provisions of this Agreement, to the extent that they restrict or eliminate the duties
and liabilities of a Covered Person to the Company or its Members otherwise existing at law or in
equity, are agreed by the parties hereto to replace such other duties and liabilities of such
Covered Person.

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     (f)   The foregoing provisions of this Section 15(f) shall survive any termination of this
Agreement.

     (g)   Notwithstanding any provision hereof to the contrary, any indemnification of a Covered
Person shall be fully subordinated to any obligations respecting the Property (including, without
limitation, the Loan Agreement) and such indemnification shall not constitute a claim against the
Company in the event that cash flow is insufficient to pay such obligations.

     16.   Admission of Additional Members.

     (a)   One or more additional Members may be admitted to the Company with the written consent of
the Member; provided, however, that, notwithstanding the foregoing, so long as any
portion of the Debt remains unpaid, no additional Member may be admitted to the Company and no
transfer of any direct or indirect interest in the Company may be made unless expressly permitted
under the Loan Documents.

     (b)   Upon a foreclosure, sale or other transfer of the limited liability company interests in
the Company pursuant to the Pledge Agreement, the holder of such limited liability company
interests shall, upon the execution of a counterpart to this Agreement, automatically be admitted
as member of the Company upon such foreclosure, sale or other transfer, with all of the rights and
obligations of the Member hereunder, subject to the limitations on transferability of such
interests as described in this Section 16. The Company acknowledges that the pledge of the limited
liability company interest in the Company made by the Member under the Pledge Agreement shall be a
pledge not only of profits and losses of the Company, but also a pledge of all rights and
obligations of the Member. Upon a foreclosure, sale or other transfer of the limited liability
company interests of the Company pursuant to the Pledge Agreement, the successor Member may
transfer its interests in the Company, subject to this Section 16. Notwithstanding any provision
in the Act or any other provision contained herein to the contrary, the Member shall be permitted
to pledge and, upon any foreclosure of such pledge in connection with the admission of the Lender
as a member, to transfer to the Lender its rights and powers to manage and control the affairs of
the Company pursuant to the terms of the Pledge Agreement. Upon the exercise of its rights under
the Pledge Agreement and admission of the Company as a Member, the Lender shall have, among its
other powers, the right to appoint and remove Independent Managers pursuant to the terms of Section
11 herein.

     (c)   Notwithstanding anything to the contrary contained herein, for so long as any amounts
remain outstanding under the Loan, the Company shall not, without the prior written consent of the
Lender, issue any additional limited liability company interests of the Company other than its
initial issuance of interests issued on or prior to the date of this Agreement.

     17.   Assignments. A Member may assign all or any part of its limited liability company
interest only with the consent of all other Members and subject to Section 16. Subject to Section
16, the transferee shall be admitted to the Company as a member of the Company upon its execution
of an instrument signifying its agreement to be bound by the terms and conditions of this
Agreement, which instrument may be a counterpart signature page to this Agreement. If the Member
transfers all of its limited liability company interest in the Company pursuant to this Section 17,
such admission shall be deemed effective immediately prior to the transfer and, immediately
following such admission, the transferor Member shall cease to be a member of the Company.

11

 

Notwithstanding anything in this Agreement to the contrary, any successor to the Member by
merger or consolidation in compliance with the Loan Documents shall, without further act, be the
Member hereunder, and such merger or consolidation shall not constitute an assignment for purposes
of this Agreement and the Company shall continue without dissolution. A transferee of a limited
liability company interest in the Company can only become a substituted member with the consent of
all other Members; provided, however, that, notwithstanding the foregoing, so long
as any portion of the Debt remains unpaid, no Member may assign all or any part of its limited
liability company interest unless expressly permitted under the Loan Documents.

     18.   Dissolution.

     (a)   Subject to Section 12, the Company shall be dissolved, and its affairs shall be wound up
upon the first to occur of the following: (i) the termination of the legal existence of the last
remaining member of the Company or the occurrence of any other event which terminates the continued
membership of the last remaining member of the Company in the Company unless the business of the
Company is continued in a manner permitted by this Agreement or the Act; (ii) the entry of a decree
of judicial dissolution under Section 18-802 of the Act; (iii) the unanimous decision of the
Members; (iv) the sale by the Company of all or substantially all of its assets; or (v) December
31, 2049. Upon the occurrence of any event that causes the last remaining member of the Company to
cease to be a member of the Company or that causes the Member to cease to be a member of the
Company (other than upon continuation of the Company without dissolution upon an assignment by the
Member of all of its limited liability company interest in the Company and the admission of the
transferee pursuant to Sections 16 and 17), to the fullest extent permitted by law, the personal
representative of such transferee member is hereby authorized to, and shall, within 90 days after
the occurrence of the event that terminated the continued membership of the Member, agree in
writing (i) to continue the Company and (ii) to the admission of the personal representative or its
nominee or designee, as the case may be, as a substitute member of the Company, effective as of the
occurrence of the event that terminated the continued membership of the last remaining member of
the Company in the Company.

     (b)   Notwithstanding any other provision of this Agreement, the Bankruptcy of the Member or a
Special Member shall not cause the Member or Special Member, respectively, to cease to be a member
of the Company and upon the occurrence of such an event, the business of the Company shall continue
without dissolution.

     (c)   Notwithstanding any other provision of this Agreement, the Member and each of the Special
Members waives any right it might have to agree in writing to dissolve the Company upon the
Bankruptcy of the Member or a Special Member, or the occurrence of an event that causes the Member
or any Special Member to cease to be a member of the Company.

     (d)   In the event of dissolution, the Company shall conduct only such activities as are
necessary to wind up its affairs (including the sale of the assets of the Company in an orderly
manner), and the assets of the Company shall be applied in the manner, and in the order of
priority, set forth in Section 18-804 of the Act.

     (e)   The Company shall terminate when (i) all of the assets of the Company, after payment of or
due provision for all debts, liabilities and obligations of the Company shall have been

12

 

distributed to the Member in the manner provided for in this Agreement, and (ii) the
Certificate of Formation shall have been canceled in the manner required by the Act.

     19.   Nature of Interest. The Member shall not have any interest in any specific assets
of the Company, and the Member shall not have the status of a creditor with respect to any
distribution pursuant to Section 13 hereof. The interest of the Member in the Company is personal
property.

     20.   Governing Law. This Agreement shall be governed by and construed under the laws
of the State of Delaware (without regard to conflict of laws principles), all rights and remedies
being governed by said laws.

     21.   Amendments. Subject to Section 12, this Agreement may be modified, altered,
supplemented or amended pursuant to a written agreement executed and delivered by the Member.

     22.   Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original of this Agreement and all of which together shall constitute
one and the same instrument.

     23.   Third Party Beneficiaries. Except for the Lender with respect to the SPPs, (i)
none of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor
of the Company or by any creditor of the Member or a Special Member, and (ii) nothing in this
Agreement shall be deemed to create any right in any Person (other than Covered Persons) not a
party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or
in part for the benefit of any third Person. The Lender, its successors or assigns are intended
third-party beneficiaries of this Agreement and may enforce the SPPs.

     24.   Waiver of Partition. Except as otherwise expressly provided in Section 11(b) of
this Agreement, to the fullest extent permitted by law, each of the Member, the Special Member, and
any additional member admitted to the Company hereby irrevocably waives any right or power that
such Person might have to cause the Company or any of its assets to be partitioned, to cause the
appointment of a receiver for all or any portion of the assets of the Company, to compel any sale
of all or any portion of the assets of the Company pursuant to any applicable law or to file a
complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation,
winding up or termination of the Company.

     25.   Interests and Certificates.

     (a)   Interests. Each limited liability company interest in the Company shall
constitute and shall remain a “security” within the meaning of, and governed by, (i) Article 8 of
the Uniform Commercial Code (including Section 8-102(a)(15) thereof) as in effect from time to time
in the States of Delaware and New York, and (ii) Article 8 of the Uniform Commercial Code of any
other applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to
Article 8 thereof as adopted by the American Law Institute and the National Conference of
Commissioners on Uniform State Laws and approved by the American Bar Association on February 14,
1995. Notwithstanding any provision of this Agreement to the contrary, to the extent that any
provision of this Agreement is inconsistent with any non-waivable provision of Article 8 of the
Uniform Commercial Code as in effect in the State of Delaware (6 Del C. § 8-101, et. seq.) (the
“UCC”), such provision of Article 8 of the UCC shall be controlling.

13

 

     (b)   Certificates.

     (i)   Upon the issuance of limited liability company interests in the Company to any
Person in accordance with the provisions of this Agreement, without any further act, vote or
approval of any Member, manager, officer or any Person, the Company shall issue one or more
non-negotiable certificates in the name of such Person substantially in the form of
Exhibit A hereto (a “Certificate”), which evidences the ownership of the
limited liability company interests in the Company of such Person. Each such Certificate
shall be denominated in terms of the percentage of the limited liability company interests
in the Company evidenced by such Certificate and shall be signed by manual or facsimile
signature of the Managing Member on behalf of the Company.

     (ii)   Without any further act, vote or approval of any Member, officer or any Person,
the Company shall issue a new Certificate in place of any Certificate previously issued if
the holder of the limited liability company interests in the Company represented by such
Certificate, as reflected on the books and records of the Company:

     (A)   makes proof by affidavit, in form and substance satisfactory to the
Company, that such previously issued Certificate has been lost, stolen or destroyed;

     (B)   requests the issuance of a new Certificate before the Company has notice
that such previously issued Certificate has been acquired by a purchaser for value
in good faith and without notice of an adverse claim;

     (C)   if requested by the Company, delivers to the Company a bond, in form and
substance satisfactory to the Company, with such surety or sureties as the Company
may direct, to indemnify the Company against any claim that may be made on account
of the alleged loss, destruction or theft of the previously issued Certificate; and

     (D)   satisfies any other reasonable requirements imposed by the Company.

     (iii)   Upon a Member’s transfer in accordance with the provisions of this Agreement of
any or all limited liability company interests in the Company represented by a Certificate,
the transferee of such limited liability company interests in the Company shall deliver such
Certificate to the Company for cancellation (executed by such transferee on the reverse side
thereof), and the Company shall thereupon issue a new Certificate to such transferee for the
percentage of limited liability company interests in the Company being transferred and, if
applicable, cause to be issued to such Member a new Certificate for that percentage of
limited liability company interests in the Company that were represented by the canceled
Certificate and that are not being transferred.

     (c)   Registration of Limited Liability Company Interests. The Company shall maintain
books for the purpose of registering the transfer of limited liability company interests.
Notwithstanding any provision of this Agreement to the contrary, a transfer of limited liability
company interests requires delivery of an endorsed Certificate and shall be effective upon
registration of such transfer in the books of the Company.

14

 

     26.   Severability of Provisions. Each provision of this Agreement shall be considered
severable and if for any reason any provision or provisions herein are determined to be invalid,
unenforceable or illegal under any existing or future law, such invalidity, unenforceability or
illegality shall not impair the operation of or affect those portions of this Agreement which are
valid, enforceable and legal.

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

15

 

     IN WITNESS WHEREOF, the undersigned have executed this Limited Liability Company Agreement of
ELC VNPP SUB I, LLC to be effective as of the Effective Date.

	 	 	 	 	 
	 	MEMBER:

Electric City Corp., a Delaware corporation

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

	 	 	 	 	 
	 	Independent Manager 1

 	 
	 	/s/  Michele A. Dreyer
 	 
	 	Name:  	Michelle A. Dreyer 	 
	 	 	 
	 

	 	 	 	 	 
	 	Independent Manager 2

 	 
	 	/s/  Cheryl A. Tussie
 	 
	 	Name:  	Cheryl A. Tussie 	 
	 	 	 

 

 

	 	 	 	 	 

Exhibit A

CERTIFICATE FOR LIMITED LIABILITY COMPANY INTERESTS IN

ELC VNPP SUB I, LLC

THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER
THE SECURITIES OR BLUE SKY LAWS OF ANY STATE. THE HOLDER OF THIS CERTIFICATE, BY ITS ACCEPTANCE
HEREOF, REPRESENTS THAT IT IS ACQUIRING THIS SECURITY FOR INVESTMENT AND NOT WITH A VIEW TO ANY
SALE OR DISTRIBUTION HEREOF. ANY TRANSFER OF THIS CERTIFICATE OR ANY LIMITED LIABILITY COMPANY
INTEREST REPRESENTED HEREBY IS SUBJECT TO THE TERMS AND CONDITIONS OF THE LIMITED LIABILITY COMPANY
AGREEMENT (AS DEFINED BELOW).

			
	Certificate Number 001
	 	100% Percentage Interest

     ELC VNPP SUB I, LLC, a Delaware limited liability company (the “Company”), hereby
certifies that ELECTRIC CITY CORP. (together with any assignee of this Certificate, the
“Holder”) is the registered owner of 100 percent of the limited liability company interests
in the Company. The rights, powers, preferences, restrictions and limitations of the limited
liability company interests in the Company are set forth in, and this Certificate and the limited
liability company interests in the Company represented hereby are issued and shall in all respects
be subject to the terms and provisions of, the Limited Liability Company Agreement of the Company
entered into on November 17, 2005 to be effective as of November 17, 2005, as the same may be
further amended or restated from time to time (the “Limited Liability Company Agreement”).
By acceptance of this Certificate, and as a condition to being entitled to any rights and/or
benefits with respect to the limited liability company interests evidenced hereby, the Holder is
deemed to have agreed to comply with and be bound by all the terms and conditions of the Limited
Liability Company Agreement. The Company will furnish a copy of the Limited Liability Company
Agreement to the Holder without charge upon written request to the Company at its principal place
of business. Transfer of any or all of the limited liability company interests in the Company
evidenced by this Certificate is subject to certain restrictions in the Limited Liability Company
Agreement and can be effected only after compliance with all of those restrictions and the
presentation to the Company of the Certificate, accompanied by an assignment in the form appearing
on the reverse side of this Certificate, duly completed and executed by and on behalf of the
transferor in such Transfer, and an application for transfer in the form appearing on the reverse
side of this Certificate, duly completed and executed by and on behalf of the transferee in such
transfer. The Company maintains books for the purpose of registering the transfer of limited
liability company interests in the Company.

     Each limited liability company interest in the Company shall constitute a “security” within
the meaning of, and governed by, (i) Article 8 of the Uniform Commercial Code (including Section
8-102(a)(15) thereof) as in effect from time to time in the States of Delaware and New York and
(ii) Article 8 of the Uniform Commercial Code of any other applicable jurisdiction that now or
hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the American
Law Institute and the National Conference of Commissioners on Uniform State Laws and approved by
the American Bar Association on February 14, 1995 (and each limited liability company interest in
the Company shall be treated as such a “security” for all purposes, including, without limitation
perfection of the security interest therein under Article 8 of each applicable Uniform Commercial
Code).

     This Certificate and the limited liability company interests evidenced hereby shall be
governed by and construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws.

     IN WITNESS WHEREOF, the Company has caused this Certificate to be executed as of the date set
forth below.

	 	 	 	 	 
	 	ELC VNPP SUB I, LLC, by Electric City Corp., its
Managing
Member

 	 
	Dated: __________________________ 	By:  	 	 
	 	 	Name:  	Jeffrey Mistarz 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

 

 

(REVERSE SIDE OF CERTIFICATE)

ASSIGNMENT OF INTEREST

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _________
_________(print or typewrite name of transferee), ____________(insert Social
Security or other taxpayer identification number of transferee), the following specified percentage
of limited liability company interests in the Company: ______(identify the percentage
interest being transferred) effective as of the date specified in the Application for Transfer of
Interests below, and irrevocably constitutes and appoints _______________ and its
authorized officers, as attorney-in-fact, to transfer the same on the books and records of the
Company, with full power of substitution in the premises.

	 	 	 	 
	Dated:
	   Signature:	 	ELECTRIC CITY CORP.

	 	 	 
	 
	 	 
	 
	 	By:
	 
	 	 
	 
	 	Name: Jeffrey Mistarz

Title:Chief Financial Officer
	 
	 	 
	Address:	 	1280 Landmeier Road, Elk Grove Village, IL 60007

APPLICATION FOR TRANSFER OF INTERESTS

     The undersigned applicant (the “Applicant”) hereby (a) applies for a transfer of the
percentage of limited liability company interests in the Company described above (the
“Transfer”) and applies to be admitted to the Company as a substitute member of the
Company, (b) agrees to comply with and be bound by all of the terms and provisions of the Limited
Liability Company Agreement, (c) represents that the Transfer complies with the terms and
conditions of the Limited Liability Company Agreement, (d) represents that the Transfer does not
violate any applicable laws and regulations, and (e) agrees to execute and acknowledge such
instruments (including, without limitation, a counterpart of the Limited Liability Company
Agreement), in form and substance satisfactory to the Company, as the Company reasonably deems
necessary or desirable to effect the Applicant’s admission to the Company as a substitute member of
the Company and to confirm the agreement of the Applicant to be bound by all the terms and
provisions of the Limited Liability Company Agreement with respect to the limited liability company
interests in the Company described above. Initially capitalized terms used herein and not
otherwise defined herein are used as defined in the Limited Liability Company Agreement.

     The Applicant directs that the foregoing Transfer and the Applicant’s admission to the Company
as a Substitute Member shall be effective as of __________________.

	 	 	 	 
	Name of Transferee (Print):
	 	 	 
	 
	 	 	 
	 
	 	 	 
	Dated: 
	   Signature:	 	 
	 
	 	 	(Transferee)
	 
	 	 	 
	 
	   Address:
	 	 
	 
	 	 	 
	 
	 	 	 

The Company has determined (a) that the Transfer described above is permitted by the Limited
Liability Company Agreement, (b) hereby agrees to effect such Transfer and the admission of the
Applicant as a substitute member of the Company effective as of the date and time directed above,
and (c) agrees to record, as promptly as possible, in the books and records of the Company the
admission of the Applicant as a substitute member.

	 	 	 
	 	 	ELC VNPP SUB I, LLC, by Electric City Corp., its
Managing
Member

 	 
	Dated: _____________________ 	 	By: 
	 	 	Name:  
	 	 	Title:exv10w6

 

Exhibit 10.6

LIMITED LIABILITY COMPANY AGREEMENT

OF

ELC VNPP SUB II, LLC

     This Limited Liability Company Agreement (together with the exhibit attached hereto, this
“Agreement”) of ELC VNPP SUB II, LLC (the “Company”) is entered into on November
18, 2005 to be effective as of November 18, 2005 (the “Effective Date”), by Electric City
Corp. a Delaware corporation (“Electric City”), as the sole equity member of the Company
and Michelle A. Dreyer (“Independent Manager 1”) and Cheryl A. Tussie (“Independent
Manager 2”) as the Independent Managers.

     WHEREAS, on November 14, 2005, the Company was formed pursuant to the filing of the
Certificate of Formation of the Company (such certificate, the “Original Certificate”) with
the Secretary of State of the State of Delaware in accordance with the Delaware Limited Liability
Company Act, 6 Del. C. §18-101 et seq. (as amended form time to time, the “Act”); and

     WHEREAS, the Company shall acquire the Property (as defined below) and shall guaranty the Debt
(as defined below) pursuant to the Loan Documents; and

     WHEREAS, Electric City desires to set forth the Company’s limited liability company agreement
as set forth herein;

     NOW, THEREFORE, Electric City, in its capacity as Member (as defined below) of the Company,
and the Independent Managers, intending to be legally bound, hereby agree as follows:

     1. Definitions. The following capitalized words and phrases used in this Agreement
have the respective meanings indicated in this Section 1:

     “Act” is defined in the first WHEREAS clause.

     “Affiliate” (including the term “Affiliated”) means, with respect to a
particular Person, any other Person who is Controlled by, under common Control with, or in Control
of, such particular Person or any person who has a direct familial relationship by blood or
marriage or otherwise with such Person.

     “Bankruptcy” means with respect to any Person, if such Person: (i) makes an assignment
for the benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii) is adjudged a
bankrupt or insolvent, or has entered against him, her or it an order for relief, in any bankruptcy
or insolvency proceedings; (iv) files a petition or answer seeking for himself, herself or itself
any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any
statute, law or regulation; (v) files an answer or other pleading admitting or failing to contest
the material allegations of a petition filed against him, her or it in any proceeding of this
nature; (vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of the Person or of all or any substantial part of his, her or its properties; or (vii)
if 120 days after the commencement of any proceeding against the Person seeking reorganization,
arrangement, composition, readjustment, liquidation or similar relief under any statute, law or
regulation, if the proceeding has not been dismissed, or if within 90 days after the appointment
without such Person’s consent or acquiescence

 

 

of a trustee, receiver or liquidator of such Person or of all or any substantial part of his,
her or its properties, the appointment is not vacated or stayed, or within 90 days after the
expiration of any such stay, the appointment is not vacated. The foregoing definition of
“Bankruptcy” is intended to replace and shall supersede and replace the definition of “Bankruptcy”
set forth in Sections 18-101(1) and 18-304 of the Act.

     “Certificate of Formation” means the Certificate of Formation of the Company filed
with the Secretary of State of the State of Delaware, as it may be amended or amended and restated
from time to time.

     “Control” means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through the ownership of
voting securities or other beneficial interests, by contract or otherwise. “Controlling”
and “Controlled” shall have correlative meanings.

     “Covered Persons” has the meaning set forth in Section 15.

     “Debt” means the outstanding principal amount of the VNPP Loan, together with all
interest accrued and unpaid thereon and all other sums due to Lender in respect of the VNPP Loan
under the Loan Documents.

     “Debt Guaranty Agreement” means that certain Bill of Sale and Debt Guaranty Agreement
dated as of November 22, 2005, between Electric City and the Company, pursuant to which the Company
will acquire certain assets and certain payment rights under the VNPP Contract and agree to
guaranty all obligations of Electric City pursuant to the Loan Documents, as the same may be
amended, restated, modified or supplemented and in effect from time to time.

     “Electric City” means Electric City Corp., a Delaware corporation.

     “Independent Manager” means a Person who is not, shall not be while serving and for
the prior five years has not been: (a) a stockholder, director, manager, officer, employee,
trustee, attorney or counsel of the Company, or any subsidiaries or Affiliates thereof (other than
an independent director or manager of the Company and other than a stockholder in any
publicly-traded Affiliate); or (b) a creditor, customer, supplier or other Person who derives any
of his, her or its purchases or revenues from his, her or its activities with the Company or any
Affiliate thereof; or (c) a Person Controlling or under common Control with any such stockholder,
partner, customer, supplier or other person; or (d) a member of the immediate family of any such
stockholder, director, manager, officer, employee, partner, customer, supplier or other person. A
natural person who satisfies the foregoing definition other than subparagraph (b) shall not be
disqualified from serving as an Independent Manager of the Company if such individual is an
Independent Manager provided by a nationally-recognized company that provides professional
independent managers (a “Professional Independent Manager”) and other corporate services in
the ordinary course of its business. A natural person who otherwise satisfies the foregoing
definition other than subparagraph (a) by reason of being the independent manager of a “special
purpose entity” affiliated with the Company shall not be disqualified from serving as an
Independent Manager of the Company if (i) such individual is a Professional Independent Manager, or
(ii) the fees that such individual earns from serving as independent Manager of any Affiliates of
the Company in any given year constitute

2

 

in the aggregate less than five percent (5%) of such individual’s annual income for that year.
Notwithstanding the immediately preceding sentence, an Independent Manager may not simultaneously
serve as Independent Manager of the Company and independent manager of a special purpose entity
that owns a direct or indirect equity interest in the Company or a direct or indirect interest in
any co-borrower with the Company.

     “Lender” means Laurus Master Fund, Ltd., a Cayman Islands company, its successors and
assigns as lender under the Loan Agreement.

     “Loan Agreement” means that certain Securities Purchase Agreement dated as of
November 22, 2005, between Electric City and Lender, as the same may be amended, restated, modified
or supplemented and in effect from time to time.

     “Loan Documents” means collectively, each of the Loan Agreement, the Debt Guaranty
Agreement, and any and all other instruments, documents, agreements and certificates executed
and/or delivered in connection with the Loan Agreement or the Debt Guaranty Agreement, as the same
may be amended, restated, modified or supplemented and in effect from time to time.

     “Managing Member” means Electric City as the member of the Company.

     “Material Action” means any of the following: (i) to admit in writing the Company’s
inability to pay its debts when due; (ii) commencement of any case, proceeding or other action on
behalf of the Company under any existing or future law of any jurisdiction relating to bankruptcy,
insolvency, reorganization or relief of debtors; (iii) institution of proceedings to have the
Company adjudicated as bankrupt or insolvent; (iv) consenting to the institution of bankruptcy or
insolvency proceedings against the Company; (v) filing a petition or consenting to a petition
seeking reorganization, arrangement, adjustment, winding-up, composition, liquidation or other
relief on behalf of the debts of the Company under any federal or state law related to bankruptcy;
(vi) seeking or consenting to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian or any similar official for the Company or a substantial portion of any of
its properties; (vii) making any assignment for the benefit of the Company’s creditors; or (viii)
taking any action or causing the Company to take any action in furtherance of (i) through (vii).

     “Member” means Electric City as the initial member of the Company, and includes any
Person admitted as an additional member of the Company or a substitute member of the Company
pursuant to the provisions of this Agreement, each in its capacity as a member of the Company;
provided, however, the term “Member” shall not include any Special Member.

     “Percentage Interest” shall have the meaning given to such term in Section 8 of this
Agreement.

     “Person” means any individual, corporation, partnership, joint venture, limited
liability company, limited liability partnership, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization, or other organization, whether or
not a legal entity, and any governmental authority.

     “Pledge Agreement” shall have the meaning given to such term in Section 16(b) of this
Agreement.

3

 

     “Property” means the equipment and other personal property which comprises the VNPP,
together with the rights of Electric City to receive payments and proceeds under the VNPP Contract.

     “Special Member” means, upon such Person’s admission to the Company as a member of the
Company pursuant to Section 10, a Person acting as Independent Manager, in such Person’s capacity
as a member of the Company. A Special Member shall only have the rights and duties expressly set
forth in this Agreement.

     “VNPP” means the “Virtual Negawatt Power Plan” automatic power curtailment system
which is the subject of the VNPP Contract.

     “VNPP Contract” means that certain Agreement dated as of November 23, 2004 between
PacifiCorp, an Oregon public utility company, and Electric City, as in effect from time to time.

     “VNPP Loan” means the loan from the Lender which is guaranteed by the Company pursuant
to the Debt Guaranty Agreement, together with all interest and fees accruing thereon.

     “UCC” has the meaning set forth in Section 25(a).

     2. Formation. The Certificate of Formation, the formation of the Company as a limited
liability company under the Act, and all actions taken in connection therewith are hereby adopted
and ratified. Janice Cohen is hereby designated an “authorized person” within the meaning of the
Act, and has executed, delivered and filed the Certificate of Formation of the Company with the
Secretary of State of the State of Delaware. Upon the filing of the Certificate of Formation of
the Company with the Secretary of State of the State of Delaware, her powers as an “authorized
person” ceased, and the Member thereupon became the designated “authorized person” and shall
continue as the designated “authorized person” within the meaning of the Act. The Member shall
execute, deliver and file any other certificates (and any amendment and/or restatements thereof)
necessary for the Company to qualify to do business in Illinois and in any other jurisdiction in
which the Company may wish to conduct business. The affairs of the Company and the conduct of its
business shall be governed by the terms and subject to the conditions set forth in this Agreement,
as amended from time to time.

     3. Name; Registered Office, Registered Agent. The name of the limited liability
company is ELC VNPP SUB II, LLC. The address of the registered office of the Company in the State
of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19808. The name and address of the registered agent of the Company for service of
process on the Company in the State of Delaware are The Corporation Trust Company, 1209 Orange
Street, Wilmington, New Castle County, Delaware 19808.

     4. Term. The term of the Company commenced upon the filing of the Certificate of
Formation, and the Company shall continue in existence until it is terminated pursuant to this
Agreement or the Act. The existence of the Company as a separate legal entity shall continue until
cancellation of the Certificate of Formation as provided in the Act.

     5. Purpose. The sole purposes of the Company are to (i) own and dispose of and
operate the Property, to (ii) enter into and perform under the Debt Guaranty Agreement and, to the
extent provided therein, the VNPP Loan and the Loan Documents, and to (iii) engage in any lawful
act or

4

 

activity that is related or incidental to the above-stated purposes. Notwithstanding anything
contained herein to the contrary, the Company shall not engage in any business, and it shall have
no purpose unrelated to the Property and shall not acquire any real property or own assets other
than those related to the Property or otherwise in furtherance of the purposes of the Company. The
Company, and the Managing Member and any other Member or manager on behalf of the Company, may
enter into and perform their obligations under the Loan Documents, this Agreement, and all
documents, agreements, certificates, or financing statements contemplated thereby or related
thereto, all without any further act, vote or approval of any Member, manager, or other Person
notwithstanding any other provision of this Agreement. The foregoing authorization shall not be
deemed a restriction on the powers of the Managing Member to enter into other agreements on behalf
of the Company.

     6. Member Admission and Capital Contributions. Simultaneously with the execution and
delivery of this Agreement, the Member is being admitted as the sole Member of the Company, with a
100% limited liability company interest in the Company. The Member has made certain capital
contributions to the Company, which shall be reflected on the books and records of the Company. In
accordance with Section 10, the Special Members shall not be required to make any capital
contributions to the Company.

     7. Additional Contributions. The Member is not required to make any additional
capital contribution to the Company. However, the Member may make additional capital contributions
to the Company at any time upon the written consent of the Members. The provisions of this
Agreement, including this Section 7, are intended to benefit the Member and the Special Members
and, to the fullest extent permitted by law, shall not be construed as conferring any benefit upon
any creditor of the Company (other than Covered Persons) (and except as set forth in Section 23, no
such creditor of the Company shall be a third-party beneficiary of this Agreement) and the Member
and the Special Members shall not have any duty or obligation to any creditor of the Company to
make any contribution to the Company or to issue any call for capital pursuant to this Agreement.

     8. Percentage Interest and Allocations of Profits and Losses. Each Member’s interest
in the Company shall be expressed as a percentage equal to the ratio on any date of such Member’s
capital account on such date to the aggregate capital accounts of all Members on such date, such
capital accounts to be determined after giving effect to all contributions of property or money,
distributions and allocations for all periods ending on or prior to such date (as to any Member,
his, her or its “Percentage Interest”). The Company’s profits and losses shall be
allocated in accordance with the Percentage Interests of the Members.

     9. Member Manager. The Member shall be the Managing Member of the Company and shall
have the right and authority, subject to Section 11, to take all actions specifically enumerated in
this Agreement or which the Member otherwise deems necessary, useful, appropriate or desirable to
the day-to-day management and conduct of the Company’s business. Subject to Sections 5 and 11, the
Member has the authority to bind the Company.

5

 

     10. Special Member.

     (a) Admission. Upon the occurrence of any event that causes the Member to cease to be
a member of the Company (other than upon continuation of the Company without dissolution upon an
assignment by the Member of all of its limited liability company interest in the Company and the
admission of the transferee pursuant to Sections 16 and 17) the Person executing this Agreement as
Independent Manager 1 shall, without any action of any other Person and simultaneously with the
Member ceasing to be a member of the Company, automatically be admitted to the Company as a Special
Member, and shall continue the Company without dissolution. If, however, at the time the last
remaining Member ceases to be a member, Independent Manager 1 has died or is otherwise no longer
able to step into the role of Special Member, then in such event, the person executing this
Agreement as Independent Manager 2 shall, concurrently with the last remaining Member ceasing to be
a member, and without any action of any Person, automatically be admitted to the Company as Special
Member and shall continue the Company without dissolution. It is the intent of these provisions
that the Company never have more than one Special Member at any particular point in time. Prior to
his, her or its admission to the Company as a Special Member in accordance with this Section 10, a
Person acting as an Independent Manager shall not be a member of the Company. In order to
implement the admission to the Company of the Special Member, each of Independent Manager 1 and
Independent Manager 2 shall execute a counterpart to this Agreement.

     (b) Resignation; Termination of Status. A Special Member may not resign from the
Company or transfer his, her or its rights as a Special Member unless (i) a successor Special
Member has been admitted to the Company as Special Member by executing a counterpart to this
Agreement, and (ii) such successor has also accepted his, her or its appointment as Independent
Manager pursuant to Section 11(a); provided, however, that any Person acting as a
Special Member shall automatically cease to be a Special Member of the Company upon the admission
to the Company of a substitute Member.

     (c) Rights; Obligations. Each Special Member shall be a member of the Company having
no interest in the profits, losses and capital of the Company and having no right to receive any
distributions of the Company’s assets. Pursuant to Section 18-301 of the Act, a Special Member
shall not be required to make any capital contributions to the Company and shall not receive a
limited liability company interest in the Company. No Special Member, in such Person’s capacity as
a Special Member, may bind the Company. Except as required by any mandatory provision of the Act,
no Special Member, in such Person’s capacity as a Special Member, shall have a right to vote on,
approve or otherwise consent to any action by, or matter relating to, the Company, including,
without limitation, the merger, consolidation or conversion of the Company; provided,
however, such prohibition shall not limit the obligations of a Special Member, in such
Person’s capacity as an Independent Manager, to vote on any Material Action.

     11. Separateness Provisions.

     (a) Independent Managers. The Member shall cause the Company, at all times until such
time as the Debt is paid in full, to have at least two Independent Managers, each of which shall be
appointed by the Member and be reasonably satisfactory to Lender. To the fullest extent permitted
by law, including Section 18-1101(c) of the Act, the Independent Managers shall consider only the
interests of the Company, including those of its respective creditors, in acting or otherwise
voting on

6

 

the matters referred to in Section 11(b). No resignation or removal of an Independent
Manager, and no appointment of a successor Independent Manager, shall be effective until such
successor (i) shall have accepted his, her or its appointment as an Independent Manager by a
written instrument, and (ii) shall have executed a counterpart to this Agreement as required by
Section 10. In the event of a vacancy in the position of Independent Manager, the Member shall, as
soon as practicable, appoint a successor Independent Manager. All right, power and authority of
the Independent Managers shall be limited to the extent necessary to exercise those rights and
perform those duties specifically set forth in this Agreement. Except with respect to those
actions expressly requiring the vote of the Independent Managers pursuant to Section 12(b), no
Independent Manager, in his, her or its capacity as Independent Manager, shall have any right to
vote on, approve or otherwise consent to any action by, or matter relating to, the Company, and
such Independent Manager’s attendance at any meeting shall not be required as a condition to the
taking of any such action. Anything in the laws of the State of Delaware of this Agreement to the
contrary notwithstanding, except pursuant to Section 11(b), an Independent Manager, in his, her or
its capacity as Independent Manager, may not bind the Company.

     12. Prohibition on Material Actions. Notwithstanding any other provision of this
Agreement and any provision of law that otherwise so empowers the Company, the Member or any other
Person, until such time as the Debt is paid in full, neither the Member nor any other Person shall
be authorized or empowered, nor shall they permit the Company, to take any Material Action without
the prior unanimous written consent of the Managing Member and both Independent Managers;
provided, further, that, until such time as the Debt is paid in full, the Member
may not authorize the taking of any Material Action unless, at the time such Material Action is
approved, at least two Independent Managers are serving in such capacity.

     (a) Separateness Covenants. Until such time as the Debt is paid in full, the Company
will:

     (i) Maintain books and records separate from any other Person;

     (ii) Maintain its bank accounts separate from any other Person;

     (iii) Not commingle assets with those of any other Person and hold all of its assets in
its own name;

     (iv) Conduct its own business in its own name;

     (v) Maintain separate financial statements (except that the Company may be included in
consolidated financial statements of another Person where required by GAAP but (A) its
separate assets shall be clearly indicated as such on such statement and such statements
will indicate that the Company’s assets and credit are not available to satisfy the debts
and other obligations of such Affiliate or any other Person, and (B) such assets shall also
be listed on the Company’s own separate balance sheet;

     (vi) Pay its own liabilities out of its own funds, provided, however, the
foregoing shall not require the Member to make any additional capital contributions to the
Company;

     (vii) Observe all limited liability company formalities;

7

 

(viii) Pay the salaries of its own employees and maintain a sufficient number of
employees in light of its contemplated business operations, provided, however, the
foregoing shall not require the Member to make any additional capital contributions to the
Company;

     (ix) Not guarantee or become obligated for the debts of any other Person or hold out
its credit as being available to satisfy the obligations of others;

     (x) Not acquire obligations or securities of its partners, members or shareholders or
any Affiliate, as applicable;

     (xi) Allocate fairly and reasonably any overhead for shared office space or other
expenses shared with Affiliates;

     (xii) Use separate stationery, invoices and checks;

     (xiii) Not pledge its assets to secure the obligations of any other Person or make any
loans or advances to any Person;

     (xiv) Hold itself out as a separate entity;

     (xv) Correct any known misunderstanding regarding its separate identity;

     (xvi) Maintain adequate capital in light of its contemplated business operations,
provided, however, the foregoing shall not require the Member to make any additional
capital contributions to the Company;

     (xvii) To the fullest extent permitted by law, not dissolve, wind up or liquidate, in
whole or in part, consolidate or merge with or into any other Person, or convey or sell its
properties and assets substantially as an entirety to any Person, except for sales expressly
permitted by the Loan Documents;

     (xviii) Not incur, assume or guarantee any indebtedness other than the Debt evidenced
and secured by the Loan Documents and the Debt permitted by the Loan Documents;

     (xix) Not identify itself as a division of any other Person;

     (xx) Not form, hold or acquire any subsidiaries;

     (xxi) Not make any loans to any other Person or buy or hold evidence of indebtedness
issued by others (other than investment grade securities);

     (xxii) Enter into transactions with Affiliates only on a commercially reasonable basis
and on terms similar to those available in an arms-length transaction with a third party;

     (xxiii) Pay any taxes required to be paid under applicable law, and file its own tax
returns separate from those of any other Person, except to the extent that the Company is

8

 

treated as a “disregarded entity” for tax purposes and is not required to file tax
returns under applicable law;

     (xxiv) Not engage, directly or indirectly, in any business other than ownership,
maintenance and operation of the VNPP; and

     (xxv) Not own any asset or property other than the Property and incidental personal
property necessary for the ownership or operation of the Property.

Failure of the Company, or the Member on behalf of the Company, to comply with any of the foregoing
covenants or any other covenants contained in this Agreement shall not affect the status of the
Company as a separate legal entity or the limited liability of the Member.

     (b) Amendment. Until such time as the Debt has been paid in full, the provisions of
Section 4, Section 5, Section 10, this Section 12(b), Section 13, Section 15(g), Section 16,
Section 17, Section 18, Section 19, Section 23, Section 24, Section 25, Exhibit A, or any defined
terms therein (together the “SPPs”) may not be amended or modified in any manner without
the prior written consent of Lender. In the event of any conflict between any of the SPPs and any
other provision of this or any other document governing the formation, management or operation of
the Company, the SPPs shall control.

     12. Limited Liability. Except as otherwise expressly provided by the Act, the debts,
obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall
be the debts, obligations and liabilities solely of the Company, and neither the Member nor the
Special Members nor any Independent Manager shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Member, Special Member or
Independent Manager of the Company.

     13. Distributions.

     (a) At the time determined by the Member, but at least once during each fiscal year, the
Member shall cause the Company to distribute any cash held by it which is not reasonably necessary
for the operation of the Company. Cash available for distribution shall be distributed to the
Member in accordance with the Percentage Interests, provided that notwithstanding anything
else in this Agreement, no such distribution shall be made to the extent they would violate the Act
or would constitute a default under the Loan Documents.

     (b) Any payments made pursuant to the Loan Documents shall constitute distributions to or at
the direction of the Member.

     14. Other Business. The Member, Special Members, any Independent Manager and any
Affiliate of the Member, Independent Managers or the Special Members may engage in or possess an
interest in other business ventures (unconnected with the Company) of every kind and description,
independently or with others, notwithstanding any duty otherwise existing at law or in equity;
provided however that the activities of any Independent Manager is subject to the restrictions set
forth in its definition. The Company shall not have any rights in or to such independent ventures
or the income or profits therefrom by virtue of this Agreement.

9

 

     15. Exculpation and Indemnification.

     (a) Neither the Member nor the Special Members nor any Independent Manager, employee or agent
of the Company nor any employee, representative, agent or Affiliate of the foregoing (collectively,
the “Covered Persons”) shall be liable to the Company or any other Person who is bound by
this Agreement for any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of the authority conferred on such Covered Person by this
Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred
by reason of such Covered Person’s gross negligence or willful misconduct.

     (b) To the fullest extent permitted by applicable law, a Covered Person shall be entitled to
indemnification from the Company for any loss, damage or claim incurred by such Covered Person by
reason of any act or omission performed or omitted by such Covered Person in good faith on behalf
of the Company and in a manner reasonably believed to be within the scope of the authority
conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled
to be indemnified in respect of any loss, damage or claim incurred by such Covered Person by reason
of such Covered Person’s gross negligence or willful misconduct with respect to such acts or
omissions; provided, however, (i) that any indemnity under this Section 15(b) by
the Company shall be provided out of and to the extent of Company assets only, and the Member and
the Special Members shall not have personal liability on account thereof and (ii) that so long as
any portion of the Debt remains unpaid, no indemnity payment from funds of the Company (as distinct
from funds from other sources, such as insurance) of any indemnity under this Section 15(b) shall
be payable from amounts allocable to any other Person pursuant to the Loan Documents, however, the
provisions of this subsection (ii) shall not apply to indemnities for any Independent Managers.

     (c) To the fullest extent permitted by applicable law, expenses (including legal fees)
incurred by a Covered Person defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by the Company prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the
Covered Person to repay such amount if it shall be determined that the Covered Person is not
entitled to be indemnified as authorized in this Section 15(c).

     (d) A Covered Person shall be fully protected in relying in good faith upon the records of the
Company and upon such information, opinions, reports or statements presented to the Company by any
Person as to matters the Covered Person reasonably believes are within such other Person’s
professional or expert competence and who has been selected with reasonable care by or on behalf of
the Company, including information, opinions, reports or statements as to the value and amount of
the assets, liabilities, or any other facts pertinent to the existence and amount of assets from
which distributions to the Member might properly be paid.

     (e) The provisions of this Agreement, to the extent that they restrict or eliminate the duties
and liabilities of a Covered Person to the Company or its Members otherwise existing at law or in
equity, are agreed by the parties hereto to replace such other duties and liabilities of such
Covered Person.

10

 

     (f) The foregoing provisions of this Section 15(f) shall survive any termination of this
Agreement.

     (g) Notwithstanding any provision hereof to the contrary, any indemnification of a Covered
Person shall be fully subordinated to any obligations respecting the Property (including, without
limitation, the Loan Agreement) and such indemnification shall not constitute a claim against the
Company in the event that cash flow is insufficient to pay such obligations.

     16. Admission of Additional Members.

     (a) One or more additional Members may be admitted to the Company with the written consent of
the Member; provided, however, that, notwithstanding the foregoing, so long as any
portion of the Debt remains unpaid, no additional Member may be admitted to the Company and no
transfer of any direct or indirect interest in the Company may be made unless expressly permitted
under the Loan Documents.

     (b) Upon a foreclosure, sale or other transfer of the limited liability company interests in
the Company pursuant to the Pledge Agreement, the holder of such limited liability company
interests shall, upon the execution of a counterpart to this Agreement, automatically be admitted
as member of the Company upon such foreclosure, sale or other transfer, with all of the rights and
obligations of the Member hereunder, subject to the limitations on transferability of such
interests as described in this Section 16. The Company acknowledges that the pledge of the limited
liability company interest in the Company made by the Member under the Pledge Agreement shall be a
pledge not only of profits and losses of the Company, but also a pledge of all rights and
obligations of the Member. Upon a foreclosure, sale or other transfer of the limited liability
company interests of the Company pursuant to the Pledge Agreement, the successor Member may
transfer its interests in the Company, subject to this Section 16. Notwithstanding any provision
in the Act or any other provision contained herein to the contrary, the Member shall be permitted
to pledge and, upon any foreclosure of such pledge in connection with the admission of the Lender
as a member, to transfer to the Lender its rights and powers to manage and control the affairs of
the Company pursuant to the terms of the Pledge Agreement. Upon the exercise of its rights under
the Pledge Agreement and admission of the Company as a Member, the Lender shall have, among its
other powers, the right to appoint and remove Independent Managers pursuant to the terms of Section
11 herein.

     (c) Notwithstanding anything to the contrary contained herein, for so long as any amounts
remain outstanding under the Loan, the Company shall not, without the prior written consent of the
Lender, issue any additional limited liability company interests of the Company other than its
initial issuance of interests issued on or prior to the date of this Agreement.

     17. Assignments. A Member may assign all or any part of its limited liability company
interest only with the consent of all other Members and subject to Section 16. Subject to Section
16, the transferee shall be admitted to the Company as a member of the Company upon its execution
of an instrument signifying its agreement to be bound by the terms and conditions of this
Agreement, which instrument may be a counterpart signature page to this Agreement. If the Member
transfers all of its limited liability company interest in the Company pursuant to this Section 17,
such admission shall be deemed effective immediately prior to the transfer and, immediately
following such admission, the transferor Member shall cease to be a member of the Company.

11

 

Notwithstanding anything in this Agreement to the contrary, any successor to the Member by
merger or consolidation in compliance with the Loan Documents shall, without further act, be the
Member hereunder, and such merger or consolidation shall not constitute an assignment for purposes
of this Agreement and the Company shall continue without dissolution. A transferee of a limited
liability company interest in the Company can only become a substituted member with the consent of
all other Members; provided, however, that, notwithstanding the foregoing, so long
as any portion of the Debt remains unpaid, no Member may assign all or any part of its limited
liability company interest unless expressly permitted under the Loan Documents.

     18. Dissolution.

     (a) Subject to Section 12, the Company shall be dissolved, and its affairs shall be wound up
upon the first to occur of the following: (i) the termination of the legal existence of the last
remaining member of the Company or the occurrence of any other event which terminates the continued
membership of the last remaining member of the Company in the Company unless the business of the
Company is continued in a manner permitted by this Agreement or the Act; (ii) the entry of a decree
of judicial dissolution under Section 18-802 of the Act; (iii) the unanimous decision of the
Members; (iv) the sale by the Company of all or substantially all of its assets; or (v) December
31, 2049. Upon the occurrence of any event that causes the last remaining member of the Company to
cease to be a member of the Company or that causes the Member to cease to be a member of the
Company (other than upon continuation of the Company without dissolution upon an assignment by the
Member of all of its limited liability company interest in the Company and the admission of the
transferee pursuant to Sections 16 and 17), to the fullest extent permitted by law, the personal
representative of such transferee member is hereby authorized to, and shall, within 90 days after
the occurrence of the event that terminated the continued membership of the Member, agree in
writing (i) to continue the Company and (ii) to the admission of the personal representative or its
nominee or designee, as the case may be, as a substitute member of the Company, effective as of the
occurrence of the event that terminated the continued membership of the last remaining member of
the Company in the Company.

     (b) Notwithstanding any other provision of this Agreement, the Bankruptcy of the Member or a
Special Member shall not cause the Member or Special Member, respectively, to cease to be a member
of the Company and upon the occurrence of such an event, the business of the Company shall continue
without dissolution.

     (c) Notwithstanding any other provision of this Agreement, the Member and each of the Special
Members waives any right it might have to agree in writing to dissolve the Company upon the
Bankruptcy of the Member or a Special Member, or the occurrence of an event that causes the Member
or any Special Member to cease to be a member of the Company.

     (d) In the event of dissolution, the Company shall conduct only such activities as are
necessary to wind up its affairs (including the sale of the assets of the Company in an orderly
manner), and the assets of the Company shall be applied in the manner, and in the order of
priority, set forth in Section 18-804 of the Act.

     (e) The Company shall terminate when (i) all of the assets of the Company, after payment of or
due provision for all debts, liabilities and obligations of the Company shall have been

12

 

distributed to the Member in the manner provided for in this Agreement, and (ii) the
Certificate of Formation shall have been canceled in the manner required by the Act.

     19. Nature of Interest. The Member shall not have any interest in any specific assets
of the Company, and the Member shall not have the status of a creditor with respect to any
distribution pursuant to Section 13 hereof. The interest of the Member in the Company is personal
property.

     20. Governing Law. This Agreement shall be governed by and construed under the laws
of the State of Delaware (without regard to conflict of laws principles), all rights and remedies
being governed by said laws.

     21. Amendments. Subject to Section 12, this Agreement may be modified, altered,
supplemented or amended pursuant to a written agreement executed and delivered by the Member.

     22. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original of this Agreement and all of which together shall constitute
one and the same instrument.

     23. Third Party Beneficiaries. Except for the Lender with respect to the SPPs, (i)
none of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor
of the Company or by any creditor of the Member or a Special Member, and (ii) nothing in this
Agreement shall be deemed to create any right in any Person (other than Covered Persons) not a
party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or
in part for the benefit of any third Person. The Lender, its successors or assigns are intended
third-party beneficiaries of this Agreement and may enforce the SPPs.

     24. Waiver of Partition. Except as otherwise expressly provided in Section 11(b) of
this Agreement, to the fullest extent permitted by law, each of the Member, the Special Member, and
any additional member admitted to the Company hereby irrevocably waives any right or power that
such Person might have to cause the Company or any of its assets to be partitioned, to cause the
appointment of a receiver for all or any portion of the assets of the Company, to compel any sale
of all or any portion of the assets of the Company pursuant to any applicable law or to file a
complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation,
winding up or termination of the Company.

     25. Interests and Certificates.

     (a) Interests. Each limited liability company interest in the Company shall
constitute and shall remain a “security” within the meaning of, and governed by, (i) Article 8 of
the Uniform Commercial Code (including Section 8-102(a)(15) thereof) as in effect from time to time
in the States of Delaware and New York, and (ii) Article 8 of the Uniform Commercial Code of any
other applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to
Article 8 thereof as adopted by the American Law Institute and the National Conference of
Commissioners on Uniform State Laws and approved by the American Bar Association on February 14,
1995. Notwithstanding any provision of this Agreement to the contrary, to the extent that any
provision of this Agreement is inconsistent with any non-waivable provision of Article 8 of the
Uniform Commercial Code as in effect in the State of Delaware (6 Del C. § 8-101, et. seq.) (the
“UCC”), such provision of Article 8 of the UCC shall be controlling.

13

 

     (b) Certificates.

     (i) Upon the issuance of limited liability company interests in the Company to any
Person in accordance with the provisions of this Agreement, without any further act, vote or
approval of any Member, manager, officer or any Person, the Company shall issue one or more
non-negotiable certificates in the name of such Person substantially in the form of
Exhibit A hereto (a “Certificate”), which evidences the ownership of the
limited liability company interests in the Company of such Person. Each such Certificate
shall be denominated in terms of the percentage of the limited liability company interests
in the Company evidenced by such Certificate and shall be signed by manual or facsimile
signature of the Managing Member on behalf of the Company.

     (ii) Without any further act, vote or approval of any Member, officer or any Person,
the Company shall issue a new Certificate in place of any Certificate previously issued if
the holder of the limited liability company interests in the Company represented by such
Certificate, as reflected on the books and records of the Company:

     (A) makes proof by affidavit, in form and substance satisfactory to the
Company, that such previously issued Certificate has been lost, stolen or destroyed;

     (B) requests the issuance of a new Certificate before the Company has notice
that such previously issued Certificate has been acquired by a purchaser for value
in good faith and without notice of an adverse claim;

     (C) if requested by the Company, delivers to the Company a bond, in form and
substance satisfactory to the Company, with such surety or sureties as the Company
may direct, to indemnify the Company against any claim that may be made on account
of the alleged loss, destruction or theft of the previously issued Certificate; and

     (D) satisfies any other reasonable requirements imposed by the Company.

     (iii) Upon a Member’s transfer in accordance with the provisions of this Agreement of
any or all limited liability company interests in the Company represented by a Certificate,
the transferee of such limited liability company interests in the Company shall deliver such
Certificate to the Company for cancellation (executed by such transferee on the reverse side
thereof), and the Company shall thereupon issue a new Certificate to such transferee for the
percentage of limited liability company interests in the Company being transferred and, if
applicable, cause to be issued to such Member a new Certificate for that percentage of
limited liability company interests in the Company that were represented by the canceled
Certificate and that are not being transferred.

     (c) Registration of Limited Liability Company Interests. The Company shall maintain
books for the purpose of registering the transfer of limited liability company interests.
Notwithstanding any provision of this Agreement to the contrary, a transfer of limited liability
company interests requires delivery of an endorsed Certificate and shall be effective upon
registration of such transfer in the books of the Company.

14

 

     26. Severability of Provisions. Each provision of this Agreement shall be considered
severable and if for any reason any provision or provisions herein are determined to be invalid,
unenforceable or illegal under any existing or future law, such invalidity, unenforceability or
illegality shall not impair the operation of or affect those portions of this Agreement which are
valid, enforceable and legal.

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

15

 

     IN WITNESS WHEREOF, the undersigned have executed this Limited Liability Company Agreement of
ELC VNPP SUB II, LLC to be effective as of the Effective Date.

	 	 	 	 	 
	 	MEMBER:

Electric City Corp., a Delaware corporation

 	 
	 	By:  	/s/ Jeffrey Mistarz
 	 
	 	 	Name:  	Jeffrey Mistarz 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	Independent Manager 1

 	 
	 	/s/ Michele A. Dreyer
 	 
	 	Name:  	Michelle A. Dreyer 	 
	 	 	 
	 
	 	Independent Manager 2

 	 
	 	/s/ Cheryl A. Tussie
 	 
	 	Name:  	Cheryl A. Tussie 	 
	 	 	 

 

 

	 	 	 	 	 

Exhibit A

CERTIFICATE FOR LIMITED LIABILITY COMPANY INTERESTS IN

ELC VNPP SUB II, LLC

THIS
CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE. THE HOLDER OF THIS
CERTIFICATE, BY ITS ACCEPTANCE
HEREOF, REPRESENTS THAT IT IS ACQUIRING THIS SECURITY FOR INVESTMENT
AND NOT WITH A VIEW TO ANY
SALE OR DISTRIBUTION HEREOF. ANY TRANSFER OF THIS CERTIFICATE OR ANY LIMITED LIABILITY COMPANY
INTEREST REPRESENTED HEREBY IS SUBJECT TO THE TERMS AND CONDITIONS OF THE LIMITED LIABILITY COMPANY
AGREEMENT (AS DEFINED BELOW).

			
	Certificate Number 001
	 	100% Percentage Interest

     ELC VNPP SUB II, LLC, a Delaware limited liability company (the “Company”), hereby
certifies that ELECTRIC CITY CORP. (together with any assignee of this Certificate, the
“Holder”) is the registered owner of 100 percent of the limited liability company interests
in the Company. The rights, powers, preferences, restrictions and limitations of the limited
liability company interests in the Company are set forth in, and this Certificate and the limited
liability company interests in the Company represented hereby are issued and shall in all respects
be subject to the terms and provisions of, the Limited Liability Company Agreement of the Company
entered into on November 18, 2005 to be effective as of November 18, 2005, as the same may be
further amended or restated from time to time (the “Limited Liability Company Agreement”).
By acceptance of this Certificate, and as a condition to being entitled to any rights and/or
benefits with respect to the limited liability company interests evidenced hereby, the Holder is
deemed to have agreed to comply with and be bound by all the terms and conditions of the Limited
Liability Company Agreement. The Company will furnish a copy of the Limited Liability Company
Agreement to the Holder without charge upon written request to the Company at its principal place
of business. Transfer of any or all of the limited liability company interests in the Company
evidenced by this Certificate is subject to certain restrictions in the Limited Liability Company
Agreement and can be effected only after compliance with all of those restrictions and the
presentation to the Company of the Certificate, accompanied by an assignment in the form appearing
on the reverse side of this Certificate, duly completed and executed by and on behalf of the
transferor in such Transfer, and an application for transfer in the form appearing on the reverse
side of this Certificate, duly completed and executed by and on behalf of the transferee in such
transfer. The Company maintains books for the purpose of registering the transfer of limited
liability company interests in the Company.

     Each limited liability company interest in the Company shall constitute a “security” within
the meaning of, and governed by, (i) Article 8 of the Uniform Commercial Code (including Section
8-102(a)(15) thereof) as in effect from time to time in the States of Delaware and New York and
(ii) Article 8 of the Uniform Commercial Code of any other applicable jurisdiction that now or
hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the American
Law Institute and the National Conference of Commissioners on Uniform State Laws and approved by
the American Bar Association on February 14, 1995 (and each limited liability company interest in
the Company shall be treated as such a “security” for all purposes, including, without limitation
perfection of the security interest therein under Article 8 of each applicable Uniform Commercial
Code).

     This Certificate and the limited liability company interests evidenced hereby shall be
governed by and construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws.

     IN WITNESS WHEREOF, the Company has caused this Certificate to be executed as of the date set
forth below.

	 	 	 	 	 
	 	ELC VNPP SUB II, LLC, by Electric City Corp., its

Managing Member

 	 
	Dated: ____________________ 	By:  	 	 
	 	 	Name:  	Jeffrey Mistarz 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

 

 

(REVERSE SIDE OF CERTIFICATE)

ASSIGNMENT OF INTEREST

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                     
                     (print or typewrite name of transferee),                     (insert Social
Security or other taxpayer identification number of transferee), the following specified percentage
of limited liability company interests in the Company:                     (identify the percentage
interest being transferred) effective as of the date specified in the Application for Transfer of
Interests below, and irrevocably constitutes and appoints                      and its
authorized officers, as attorney-in-fact, to transfer the same on the books and records of the
Company, with full power of substitution in the premises.

	 	 	 	 	 
	Dated: __________________________ 	Signature:	ELECTRIC CITY CORP.

 	 
	 	By:  	 	 
	 	 	Name:  	Jeffrey Mistarz 	 
	 	

Address:	Title:  	Chief Financial Officer

1280 Landmeier Road, Elk Grove Village, IL  60007 	 
	 

APPLICATION FOR TRANSFER OF INTERESTS

     The undersigned applicant (the “Applicant”) hereby (a) applies for a transfer of the
percentage of limited liability company interests in the Company described above (the
“Transfer”) and applies to be admitted to the Company as a substitute member of the
Company, (b) agrees to comply with and be bound by all of the terms and provisions of the Limited
Liability Company Agreement, (c) represents that the Transfer complies with the terms and
conditions of the Limited Liability Company Agreement, (d) represents that the Transfer does not
violate any applicable laws and regulations, and (e) agrees to execute and acknowledge such
instruments (including, without limitation, a counterpart of the Limited Liability Company
Agreement), in form and substance satisfactory to the Company, as the Company reasonably deems
necessary or desirable to effect the Applicant’s admission to the Company as a substitute member of
the Company and to confirm the agreement of the Applicant to be bound by all the terms and
provisions of the Limited Liability Company Agreement with respect to the limited liability company
interests in the Company described above. Initially capitalized terms used herein and not
otherwise defined herein are used as defined in the Limited Liability Company Agreement.

     The Applicant directs that the foregoing Transfer and the Applicant’s admission to the Company
as a Substitute Member shall be effective as of           .

	 	 	 	 	 
	Name of Transferee (Print): 

 	___________________________________________________
	 	  	 	 
	 	 	 	 
	Dated:
__________________________            
          Signature:	 	________________________________________

                        (Transferee)

Address:____________________________________________ 

___________________________________________________	 
	 

     The Company has determined (a) that the Transfer described above is permitted by the Limited
Liability Company Agreement, (b) hereby agrees to effect such Transfer and the admission of the
Applicant as a substitute member of the Company effective as of the date and time directed above,
and (c) agrees to record, as promptly as possible, in the books and records of the Company the
admission of the Applicant as a substitute member.

	 	 	 	 	 
	 	ELC VNPP SUB II, LLC, by Electric City Corp., its

Managing Member

 	 
	Dated: _____________________ 	By:  	 	 
	 	Name:  	 	 
	 	Title:

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