UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                  SCHEDULE 14A
                                 (Rule 14a-101)
                     INFORMATION REQUIRED IN PROXY STATEMENT

                            SCHEDULE 14A INFORMATION

           Proxy Statement Pursuant to Section 14(a) of the Securities
                              Exchange Act of 1934

Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
X    Preliminary Proxy Statement
     Confidential, for Use of the Commission Only
       (as permitted by Rule 14a-6(e)(2))
     Definitive Proxy Statement
     Definitive Additional Materials
     Soliciting Material Pursuant to Section 240.14a-12

                               Electric City Corp.
                ------------------------------------------------
                (Name of Registrant as Specified In Its Charter)

    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
X    No fee required.
     Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
       and 0-11.
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          pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
          filing fee is calculated and state how it was determined):

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     Fee paid previously with preliminary materials. Check box if any part of
     the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify
     the filing for which the offsetting fee was paid previously. Identify the
     previous filing by registration statement number, or the Form or Schedule
     and the date of its filing.
     (1)  Amount Previously Paid:

     (2)  Form, Schedule or Registration Statement No.:

     (3)  Filing Party:

     (4)  Date Filed:
          August 3, 2001
          --------------



1280 Landmeier Road
Elk Grove Village, Illinois 60007

August 3, 2001

Dear Stockholder:

     On behalf of the Board of Directors, I cordially invite you to attend the
2001 Annual Meeting of Stockholders to be held at 10:00 a.m., local time, on
Thursday, August 30, 2001 at the Holiday Inn, 1008 Busse Road, Elk Grove
Village, Illinois 60007. The formal notice of the Annual Meeting appears on the
following page.

     The attached Notice of Annual Meeting and Proxy Statement contain detailed
information about the matters that we expect to act upon at the Annual Meeting.

     Please sign, date and specify your choices on the enclosed proxy card and
promptly return it in the enclosed business reply envelope. This will help
insure that your shares are represented at the Annual Meeting, whether or not
you plan to attend the Annual Meeting.

     We look forward to seeing you at the Annual Meeting and urge you to return
your proxy card as soon as possible.

Sincerely,

Electric City Corp.
John P. Mitola
Chief Executive Officer



                               ELECTRIC CITY CORP.
                               1280 Landmeier Road
                        Elk Grove Village, Illinois 60007

                                   ----------

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                           To be held August 30, 2001

                                   ----------

To the Stockholders of
ELECTRIC CITY CORP.:

     NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Electric
City Corp. will be held at the Holiday Inn, 1008 Busse Road, Elk Grove Village,
Illinois 60007 at 10:00 a.m. local time, on Thursday, August 30, 2001, for the
following purposes:

     1.   To elect 10 directors to our Board of Directors;

     2.   To ratify the appointment by our Board of Directors of BDO Seidman,
          LLP as the independent auditors of our financial statements for the
          year ending December 31, 2001;

     3.   To approve the adoption of the 2001 Stock Incentive Plan, which is set
          forth as Appendix B to the accompanying proxy statement;

     4.   To approve an amendment to our Certificate of Incorporation to
          increase our authorized shares of capital stock from 65,000,000 to
          90,000,000 and our authorized shares of Common Stock from 60,000,000
          to 85,000,000;

     5.   To approve our proposed issuance to certain potential investors of
          Series A Convertible Preferred Stock, Common Stock and warrants to
          purchase shares of Series A Convertible Preferred Stock and warrants
          to purchase Common Stock; and

     6.   To transact such other business as may properly come before the Annual
          Meeting or any adjournment thereof.

     The foregoing items of business are more fully described in the proxy
statement accompanying this notice. The Board of Directors has fixed the close
of business on July 27, 2001 as the record date for determining stockholders
entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof.

     The Board of Directors encourages you to complete, sign and date the
enclosed proxy card and promptly return it in the enclosed postage prepaid
envelope, regardless of whether you plan to attend the Annual Meeting.

                                   By Order of the Board of Directors,
                                   Greg M. Rice
                                   SECRETARY

Elk Grove Village, Illinois
August 3, 2001



                               ELECTRIC CITY CORP.
                               1280 Landmeier Road
                        Elk Grove Village, Illinois 60007

                                   ----------

                                 PROXY STATEMENT
                       FOR ANNUAL MEETING OF STOCKHOLDERS
                      To be held Thursday, August 30, 2001

                                   ----------

     This proxy statement and the enclosed proxy card are being furnished to our
stockholders in connection with the solicitation of proxies by the Board of
Directors of Electric City Corp., a Delaware corporation ("Electric City" or the
"Company"), for use at our Annual Meeting of Stockholders to be held at the
Holiday Inn, 1000 Busse Road, Elk Grove Village, Illinois 60007 at 10:00 a.m.
local time, on Thursday, August 30, 2001, and any adjournments thereof. This
proxy statement and the accompanying form of proxy are first being mailed to
stockholders on or about August 13, 2001.

SOLICITATION

     The cost of this proxy solicitation will be borne by Electric City. We may
request banks, brokers, fiduciaries, custodians, nominees and certain other
record holders to send proxies, proxy statements and other materials to their
principals at our expense. Those banks, brokers, fiduciaries, custodians,
nominees and other record holders will be reimbursed by us for their reasonable
out-of-pocket expenses of solicitation. We do not anticipate that costs and
expenses incurred in connection with this proxy solicitation will exceed an
amount normally expended for a proxy solicitation for an election of directors
in the absence of a contest. In addition to soliciting proxies by mail, Electric
City and its directors, officers and regular employees may also solicit proxies
personally, by telephone or by other appropriate means. No additional
compensation will be paid to directors, officers or other regular employees for
such services.

RECORD DATE AND OUTSTANDING SHARES

     Our Board of Directors fixed the close of business on July 27, 2001 as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Annual Meeting or any adjournments thereof. As of the close of
business on the record date, we had 30,722,168 shares of Common Stock
outstanding. Each outstanding share of Common Stock on such date will be
entitled to one vote on each matter to be voted on at the Annual Meeting.

REQUIRED VOTE

     The affirmative vote of a plurality of the shares of Common Stock voted in
person or by proxy at the Annual Meeting is required to elect the nominees to
the Board of Directors. Stockholders will not be allowed to cumulate their votes
in the election of directors. The affirmative vote of a majority of the shares
of Common Stock voted in person or by proxy at the Annual Meeting is required to
ratify the appointment of BDO Seidman, LLP as the independent auditors of our
financial statements for the year ending December 31, 2001, to approve the
adoption of the 2001 Stock Incentive Plan, and to approve our proposed issuance
of Series A Convertible Preferred Stock, Common Stock, and warrants to purchase
shares of Series A Convertible Preferred Stock and warrants to purchase shares
of our Common Stock. The affirmative vote of a majority of the outstanding
shares of our



Common Stock is required to approve the proposal to amend our Certificate of
Incorporation to increase our authorized shares of capital stock and our
authorized shares of Common Stock.

QUORUM; ABSTENTIONS AND BROKER NON-VOTES

     The required quorum for transaction of business at the Annual Meeting will
be a majority of the shares of Common Stock issued and outstanding as of the
record date. Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the election inspector appointed for the meeting and will be taken
into account in determining whether or not a quorum is present. Abstentions and
broker non-votes, which occur when a broker has not received customer
instructions and indicates that it does not have the discretionary authority to
vote on a particular matter on the proxy card, will be included in determining
the presence of a quorum at the Annual Meeting. Neither abstentions nor broker
non-votes will have any effect on the vote for the election of directors.
Because the affirmative vote of the holders of a majority of the outstanding
shares of our Common Stock will be required to approve the proposal to amend our
Certificate of Incorporation to increase our authorized shares of capital stock
and our authorized shares of Common Stock, abstentions and broker non-votes will
have the same effect as votes "against" that proposal.

     We will consider abstentions present and entitled to vote with respect to
the proposal to appoint our independent auditors, the proposal to approve the
adoption of the 2001 Stock Incentive Plan, and the proposal to approve the
issuance of Series A Convertible Preferred Stock, Common Stock and warrants to
purchase shares of Series A Convertible Preferred Stock and warrants to purchase
shares of our Common Stock, and, therefore, abstentions will have the same
effect as votes "against" those proposals. We will not consider broker non-votes
present and entitled to vote with respect to the proposal to appoint our
independent auditors, the proposal to approve the adoption of the 2001 Stock
Incentive Plan, or the proposal to approve the issuance of Series A Convertible
Preferred Stock, Common Stock and warrants to purchase shares of Series A
Convertible Preferred Stock and warrants to purchase shares of our Common Stock,
and, therefore, broker non-votes will have no effect on the voting on those
proposals.

VOTING OF PROXIES; REVOCABILITY OF PROXIES

     Our Board of Directors selected Jeffrey R. Mistarz and Greg M. Rice, the
persons named as proxies on the proxy card accompanying this proxy statement, to
serve as proxies. Mr. Mistarz is our chief financial officer and treasurer, and
Mr. Rice is our general counsel and secretary. The shares of Common Stock
represented by each executed and returned proxy will be voted in accordance with
the directions indicated thereon, or if no direction is indicated, the proxy
will be voted in accordance with the recommendations of the Board of Directors
contained in this proxy statement. Members of the Company's management intend to
vote their shares in favor of each of the proposals.

     You can revoke a proxy you have given at any time before the shares it
represents are voted by giving our secretary either (1) an instrument revoking
the proxy or (2) a duly executed proxy bearing a later date. Additionally, you
may change or revoke a previously executed proxy by voting in person at the
Annual Meeting. However, your attendance at the Annual Meeting will not, by
itself, revoke your proxy.

ANNUAL REPORT TO STOCKHOLDERS

     We are simultaneously furnishing to you with this proxy statement our
Annual Report to Stockholders for the fiscal year ended December 31, 2000, which
contains financial and other information pertaining to us.



                                   PROPOSAL 1

                              ELECTION OF DIRECTORS

     At the Annual Meeting, 10 nominees to the Board of Directors will be
elected to hold office for a one year term ending at our 2002 Annual Meeting of
stockholders or until their respective successors are duly elected and
qualified. All nominees listed below are currently members of our Board of
Directors and have consented to being named in this proxy statement and to serve
as directors, if elected. If at the time of the Annual Meeting any nominee
becomes unavailable or declines to serve as a director for any reason, the
persons named in the proxy will vote for the substitute nominee(s) as the Board
of Directors recommends, or vote to allow the vacancy created by the nominee who
is unable or declines to serve to remain open until filled by the Board of
Directors, as the Board of Directors recommends. The Board of Directors has no
reason to believe that any nominee will be unable or decline to serve if elected
to office.

     The number of directors has been set at 10 by resolution of the Board. As
more fully described in Proposal 5 below, we entered into a securities purchase
agreement on July 31, 2001, subject to shareholder approval, under which the
Board has agreed to increase the size of the Board by two members from 10 to 12
immediately prior to the closing thereunder, and, upon closing, the investors
will have the right to fill these vacancies with two members chosen by such
investors. In addition, we have agreed that two of the nominees presented below
who are not our employees, if elected to office, will resign upon the closing of
the securities purchase agreement, with the resulting vacancies being filled by
two additional members chosen by the investors.

     The table below presents the names of the nominees for the office of
director, as well as certain information about them.

                                    NOMINEES



NAME                                AGE  POSITION HELD WITH THE COMPANY                  SERVED AS DIRECTOR SINCE
----                                ---  ------------------------------                  ------------------------
                                                                                           
John P. Mitola....................  37   Chief Executive Officer and Director(1) (3)                1999
Brian J. Kawamura.................  43   President, Chief Operating Officer and                     1999
                                         Director(1)(2)
Michael S. Stelter................  44   Vice President, Sales and Director                         1998
Robert J. Manning.................  59   Chairman of the Board of Directors and                     2000
                                         Director(1)(3)
John J. Callahan..................  53   Director(2)                                                2001
Victor L. Conant..................  54   Director                                                   1998
Kevin P. McEneely.................  53   Director(1)                                                1998
Gerald A. Pientka.................  45   Director(2)(3)                                             2000
James Stumpe......................  43   Director                                                   1999
Roscoe C. Young II................  50   Director                                                   2000


----------

(1)  Member of our executive committee.

(2)  Member of our compensation committee.

(3)  Member of our audit committee.



     John P. Mitola has been one of our directors since November 1999 and has
been our chief executive officer since January 2000. From August 1993 until
joining us, Mr. Mitola was with Unicom Thermal Technologies (now Exelon Thermal
Technologies, Unicom (now Exelon) Corporation's largest unregulated subsidiary,
serving most recently as vice president and general manager. Mr. Mitola led the
growth of Unicom Thermal through the development of Unicom Thermal's
Northwind(TM) ice technology and through thermal energy joint ventures between
Unicom Thermal and several leading electric utility companies across North
America. Prior to his appointment at Unicom Thermal, Mr. Mitola was director of
business development for Commonwealth Edison Company, the local electric utility
serving Chicago, Illinois and the northern Illinois region.

     Brian J. Kawamura has been one of our directors since November 1999 and has
been our president and chief operating officer since January 2000. From
September 1997 until joining us, Mr. Kawamura served as executive vice
president--field sales and operations for the Southern Division of KMC Telecom,
a rapidly growing competitive local exchange carrier founded in 1995, where he
was responsible for sales growth in existing markets in Alabama, Florida,
Georgia, Louisiana and Texas as well as future markets in the South and
Southeast regions. From October 1986 until joining KMC Telecom, Mr. Kawamura was
vice president and general manager of the six state Central Region for MFS
Worldcom, a telecommunications company, where he was responsible for the
start-up of MFS.

     Michael S. Stelter is one of our co-founders and has been one of our
directors since our incorporation in June 1998. Since our organization as a
limited liability company in December 1997, Mr. Stelter has served as our vice
president of sales. Mr. Stelter was our secretary from June 1998 until October
2000. From Marino Electric's inception in 1986 until May 1999, Mr. Stelter
served as vice president of Marino Electric.

     Robert J. Manning has been one of our directors since May 2000 and Chairman
of our Board of Directors since January 2001. Mr. Manning is a co-founder and a
member of Groupe Manning LLC, an energy consulting company. From April 1997
until his retirement in January 2000, Mr. Manning served as executive vice
president of Exelon Corporation and its largest subsidiary, Commonwealth Edison
Company, where his responsibilities included managing the sale of Commonwealth
Edison's fossil generating fleet. During his thirty-five year career at Exelon,
Mr. Manning directed all aspects of electric generation, consumer service and
transmission and distribution operations.

     Victor L. Conant has been one of our directors since our incorporation in
June 1998. Since 1986, Mr. Conant has been president and chief executive officer
of Nightingale-Conant Corporation, a publisher and marketer of audio and video
self-improvement materials. Mr. Conant is also a member of NCVC.

     John J. Callahan has been one of our directors since April 2001. Mr.
Callahan served as senior vice president of sales and Marketing for Allegiance
Telecom from December 1997 until his retirement in December 1999. From November
1992 until December 1997, Mr. Callahan served as president of the Western
Division of MFS Worldcom. Prior to joining MFS Worldcom, he was a vice president
and general manager of the Southwestern Division of Sprint.

     Kevin P. McEneely has been one of our directors since our incorporation in
June 1998. Mr. McEneely was our senior executive vice president and chief
operating officer from our organization as a limited liability company in
December 1997 to December 1999. Since 1985, Mr. McEneely has been an executive
vice president of Nightingale-Conant Corporation. Mr. McEneely is also a member
of NCVC.

     Gerald A. Pientka has been one of our directors since May 2000. Mr. Pientka
is the co-founder of Higgins Development Partners, LLC, a national real estate
development company headquartered in Chicago, Illinois. Mr. Pientka has served
as President of the company since its inception in May 1999 when the Pritzker
family interest



purchased a controlling interest in Higgins Development Partners, LLC (formerly
Walsh, Higgins & Company). Mr. Pientka served as President of Walsh, Higgins &
Company from May 1992 until May 1999.

     James Stumpe has been one of our directors since October 1999. Mr. Stumpe
is a member of Electric City of Illinois, LLC, one of our distributors. Since
September 1996, Mr. Stumpe has been the owner of RCI, another of our
distributors, and a part owner of Diamac Electric, an electrical contracting
firm.

     Roscoe C. Young II has been one of our directors since April 2000. Mr.
Young has served as president and chief operating officer of KMC Telecom since
December 1999 and September 1996, respectively. Prior to joining KMC Telecom in
1996, Mr. Young was vice president of network services for Ameritech, where he
was in charge of customer service fulfillment of ISDN, digital Centrex, voice
services and network capital investment.

     THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF ALL OF THE NOMINEES FOR THE OFFICE OF DIRECTOR.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

     The Board of Directors has an Audit Committee, Compensation Committee and
Executive Committee. The Audit Committee, which is composed of Robert Manning,
Gerald Pientka and John Mitola, met two times in 2000. Messrs. Manning and
Pientka are independent as defined by Section 121(A) of The American Stock
Exchange listing standards. The Board of Directors adopted an Audit Committee
Charter effective April 19, 2000, and amended the Charter effective January 31,
2001 to combine the Conflicts Committee with the Audit Committee. The amended
Audit Committee Charter is attached hereto as Appendix A. The Audit Committee's
responsibilities are to: (1) review and recommend to the Board of Directors the
independent auditors to be selected to audit the financial statements of the
Company and to review the auditor's fees to determine whether they are
appropriate for the services rendered; (2) meet with the independent auditors
and management of the Company to review the scope of the proposed audit for the
current year and the audit procedures to be performed and, at the conclusion of
the audit, review the results of the audit, including any comments or
recommendations of the auditors; (3) confirm the independence of the auditors;
(4) review with the auditors, together with the Company's financial and
accounting personnel, the adequacy and effectiveness of the Company's internal
controls and recommendations for improving internal controls; (5) review legal
and regulatory matters that may have a material effect on the financial
statements; (6) inquire of the qualitative judgments of the auditors regarding
the appropriateness and acceptability of accounting principles used and the
clarity of financial disclosures made; (7) review with the auditors, together
with management of the Company, the financial statements contained in the annual
report to shareholders; (8) discuss with the Company's management and general
counsel any legal matters that may have a material impact on the Company's
financial statements, and any material reports or inquiries from regulatory or
governmental agencies; (9) review any management consulting services provided by
the auditors; and (10) review transactions involving the Company and its
officers, directors, affiliates and significant shareholders.

     The Executive Committee, which is composed of Robert Manning, Kevin
McEneely, John Mitola and Brian Kawamura, was formed on April 19, 2000 for the
purpose of reviewing the general operations of the Company. Because the
Company's operations were discussed extensively during the meetings of the Board
of Directors, the Executive Committee did not meet during 2000.

     The Company does not have a Nominating Committee; nominating functions are
performed by the Compensation Committee.

     The Compensation Committee, which is composed of John Callahan, Gerald
Pientka and Brian Kawamura, was formed on January 31, 2001 upon the Board of
Directors' adoption of a Compensation Committee Charter.



The Compensation Committee's responsibilities are to: (1) review and recommend
to the Board of Directors the annual salary, bonus, stock options and other
benefits of the senior executives; (2) review executive compensation programs
and the administration thereof; (3) plan for executive development and
succession; (4) review expense accounts and fringe benefits of executive
management; (5) administer the Company's stock option and stock incentive
programs; and (6) review and recommend to the Board of Directors, the nomination
of members to the Board of Directors and (7) review and recommend to the Board
of Directors, the compensation of members of the Board of Directors.

     During the fiscal year ended December 31, 2000, the Board of Directors held
six formal meetings and there were two meetings of the Audit Committee no
meetings of the Compensation Committee. During 2000, all members of the Board of
Directors, except Messrs. Conant, Manning and Young, attended at least 75% of
the total of all board meetings and applicable committee meetings.

DIRECTOR COMPENSATION

     Upon joining our Board of Directors in April and May 2000, we granted to
each of Messrs. Pientka, Manning and Young, three of our outside directors, an
option to purchase 50,000 shares of our Common Stock at an exercise price of
$7.00 per share (subject to vesting as described below). Of such options, 12,500
options vested on January 1, 2001, and 12,500 options will vest on the first day
of each year thereafter, all at an exercise price per share of $7.00,
conditioned upon being a director as of each vesting date. In addition, on
January 1, 2001 and on the first day of each year thereafter, we will grant
automatically to each of Messrs. Pientka, Manning and Young, if serving on our
Board of Directors as of such date, an option to purchase 25,000 shares of our
Common Stock at an exercise price of $1.00 more than the exercise price for the
preceding annual grant. The options granted, or to be granted, as the case may
be, to Messrs. Pientka, Manning and Young would vest equally over a four-year
period. On March 13, 2001, we granted to Mr. Stumpe, one of our outside
directors, retroactive to May 2000, stock options under the same conditions as
those granted to Messrs. Pientka, Manning and Young. On April 1, Mr. Callahan
was appointed to our Board of Directors. Mr. Callahan is also one of our outside
directors and was granted an option to purchase 75,000 shares of our Common
Stock at an exercise price of $2.00 per share, which was the closing price of
our stock on March 30, 2001. Of such options, 25,000 options vest each April 1,
beginning in 2001, if Mr. Callahan continues to serve as a director on each of
those vesting dates. In addition, on January 1, 2002, we will grant to Mr.
Callahan, if serving our Board of Directors at such time, an option to purchase
25,000 shares of our Common Stock at an exercise price equal to closing price of
our stock on the most recent prior trading day. This grant will vest in equal
increments on January 1, 2002, 2003 and 2004 if Mr. Callahan is a director on
each of those vesting dates. On March 21, 2001, our directors approved a change
in stock options granted to Messrs. Pientka, Manning, Young and Stumpe to
reflect the options granted to Mr. Callahan. We expect to grant similar option
packages to other outside directors that join our Board of Directors in the
future, including any directors elected by the holders of our Series A Preferred
Stock. No outside director was compensated with stock options during fiscal year
ended April 30, 1999, the eight-month period ended December 31, 1999 or the
fiscal year ended December 31, 2000.

     Directors who are also employees of the Company receive no additional
compensation for their services as directors. Directors who are not employees of
the Company (excluding founder-directors), in addition to stock options, are
reimbursed for travel expenses and other out-of-pocket costs incurred in
connection with their attendance at such meetings.


                                                         EXECUTIVE OFFICERS

     The table below identifies our executive officers who are not identified in
the table under "Nominees."

                               EXECUTIVE OFFICERS



NAME                                     AGE  POSITION
----                                     ---  --------
                                        
Michael R. Pokora......................  36   Executive Vice President, Business Operations
Jeffrey R. Mistarz.....................  43   Chief Financial Officer and Treasurer


     Michael R. Pokora has been our executive vice president, business
operations since November 1999. Mr. Pokora was a founding member of the
construction division of Arthur J. Gallagher & Company, one of the nation's
largest risk management companies where he served as executive vice president,
responsible for the Midwest Construction Wrap-up Practice.

     Jeffrey R. Mistarz has been our chief financial officer since January 2000
and our treasurer since October 2000. From January 1994 until joining us, Mr.
Mistarz served as chief financial officer for Nucon Corporation, a privately
held manufacturer of material handling products and systems, responsible for all
areas of finance and accounting, managing capital and shareholder relations.
Prior to joining Nucon, Mr. Mistarz was with First Chicago Corporation (now Bank
One Corporation) for 12 years where he held several positions in corporate
lending, investment banking and credit strategy.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16 of the Securities Exchange Act of 1934 requires our directors
and officers (as defined in Section 16) and persons who beneficially own greater
than 10% of a registered class of our equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
The required reports consist of initial statements on Form 3, statements of
changes on Form 4 and annual statements on Form 5. Based solely on our review of
the reports we have received and on written representations from our officers
who are reporting persons, we believe that during 2000 all Section 16 filing
requirements applicable to our directors, officers and 10% beneficial owners
were complied with by these persons.



                             AUDIT COMMITTEE REPORT

     The Audit Committee oversees our financial reporting process on behalf of
the Board of Directors. Management has the primary responsibility for the
financial statements and their reporting process, including the systems of
internal controls. In fulfilling their oversight responsibilities, the Committee
has reviewed and discussed the Company's audited consolidated financial
statements in the Annual Report with management, including a discussion of the
quality (not just the acceptability) of the accounting principles, the
reasonableness of significant judgment and the clarity of disclosures in the
financial statements.

     BDO Seidman, LLP is the Company's independent auditor. The independent
auditor is responsible for expressing an opinion on the conformity of the
audited financial statements with generally accepted accounting principles. The
Committee reviewed and discussed with BDO Seidman, LLP the following: (a) BDO
Seidman's judgments as to the quality (not just the acceptability) of our
auditing principles; (b) the auditor's independence from our management,
including the matters in the written disclosures required by the Independent
Standards Board in Standard No. 1, as may be modified or supplemented; (c) the
overall scope and plans for BDO Seidman's audits; (d) BDO Seidman's evaluation
of our internal controls; (e) the overall quality of our financial reporting;
and (f) other matters that are required to be discussed with the Committee under
generally accepted auditing standards, including the Statement on Auditing
Standards No. 61.

     The Committee met with BDO Seidman, with and without management present, to
discuss these matters and the results of BDO Seidman's examinations.

     BDO Seidman, LLP billed the Company $83,440 for audit services and reviews
of interim financial statements and $51,592 for other services performed for
fiscal year 2000. Included in other services are tax services and other
accounting consultations. The Board of Directors has determined that these
non-audit services have no effect on the ability of BDO Seidman, LLP to maintain
its independence.

     In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board approved) that the audited
financial statements be included in the Annual Report on Form 10-KSB for the
year ended December 31, 2000 for filing with the Securities and Exchange
Commission. The Committee and the Board recommended, subject to shareholder
ratification, the selection of BDO Seidman, LLP, as the Company's independent
auditor.

     DISCLAIMER: This report is being provided to the Company's stockholders
solely for informational purposes. You should not consider this report to be
"soliciting material" or to be "filed" with the SEC. It also is not subject to
the SEC's proxy rules or to the liabilities of Section 18 of the U.S. Securities
Exchange Act of 1934. In addition, this report shall not be deemed to be
incorporated by reference into any prior or subsequent filing by the Company
under the Federal securities laws.

                                   MEMBERS OF THE AUDIT COMMITTEE
                                   Robert J. Manning
                                   Gerald A. Pientka
                                   John P. Mitola



                             EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

     The following table summarizes the total compensation paid or awarded to
each of our executive officers whose total compensation exceeded $100,000 during
the fiscal year ended December 31, 2000 and to our former chairman of the board.
No bonuses were paid during the fiscal year ended December 31, 2000.




                                                                                                                 LONG TERM
                                                                     ANNUAL COMPENSATION                        COMPENSATION
                                                     -------------------------------------------------------  ----------------
                                                                                                                SECURITIES
                                                                                            OTHER ANNUAL        UNDERLYING
  NAME AND PRINCIPAL POSITION         PERIOD          SALARY ($)       BONUS ($)(7)       COMPENSATION ($)      OPTIONS (#)
--------------------------------   -------------     ---------------  --------------     -------------------  ----------------
                                                                                               
John P. Mitola(1)................  12/31/00(3)         $350,000         $140,000           $9,190(8)            1,000,000
  OUR CHIEF EXECUTIVE OFFICER
Brian J. Kawamura(1).............  12/31/00(3)         $350,000         $140,000           $6,600(9)            1,500,000
  OUR PRESIDENT AND CHIEF
  OPERATING OFFICER
Michael R. Pokora(1).............  12/31/00(3)         $250,000         $100,000           $8,695(10)            500,000
  OUR EXECUTIVE VICE
  PRESIDENT OF BUSINESS
  OPERATIONS AND SALES
Jeffrey R. Mistarz(2)............  12/31/00(3)         $175,000          $70,000           $2,320(11)            200,000
  OUR CHIEF FINANCIAL OFFICER
  AND TREASURER
Joseph C. Marino.................   4/30/99(5)          $60,000             --                 --             2,150,000(12)
  OUR FORMER CHAIRMAN OF THE       12/31/99(4)         $107,268                                                    -0-
  BOARD                            12/31/00(3)         $228,570(6)                                                 -0-


----------

(1)  Each of Messrs. Mitola, Kawamura and Pokora entered into employment
     agreements with us effective as of November 18, 1999 for a term of three
     years beginning on January 3, 2000 and ending on December 31, 2002.
     Effective as of January 1, 2000, options with an exercise price of $7.00
     per share that vest over the term of the agreements were granted to each of
     Messrs. Mitola, Kawamura and Pokora pursuant to their employment
     agreements.

(2)  Mr. Mistarz entered into an employment agreement with us effective January
     14, 2000 for a term of three years beginning as of January 1, 2000 and
     ending on December 31, 2002. As part of the employment agreement, Mr.
     Mistarz was granted options with an exercise price of $7.00 per share that
     vest over the term of the agreement.

(3)  This period represents the fiscal year ended December 31, 2000.

(4)  This period represents the eight-month period ended December 31, 1999

(5)  This period represents the fiscal year ended April 30, 1999.

(6)  Mr. Marino's employment agreement with us, which terminated on December 4,
     2000, provided for an annual base salary of $225,000. The 2000 salary of
     Mr. Marino includes a payment of $3,570 made in



     January 2000 for services performed in December 1999.

(7)  Any bonuses earned in 2000 will not be paid until the Company receives
     proceeds from the issuance of its Series A Convertible Preferred Stock.

(8)  This amount represents a monthly auto allowance of $550 and the cost of
     life and long-term disability insurance for Mr. Mitola.

(9)  This amount represents a monthly auto allowance of $550 for Mr. Kawamura.

(10) This amount represents a monthly auto allowance of $550 and the cost of
     life and long-term disability insurance for Mr. Pokora.

(11) This amount represents the cost of life and long-term disability insurance
     for Mr. Mistarz.

(12) Effective June 25, 1998, we granted to Pino, LLC, in which Mr. Marino owns
     a 100% membership interest, a ten-year option to acquire up to 2,000,000
     shares of Common Stock at an exercise price of $1.10 per share, which
     became exercisable on January 2, 2000. Effective December 4, 2000, we
     cancelled this option with respect to 300,000 shares. Effective January 1,
     1999, we granted to Mr. Marino an option to acquire up to 900,000 shares at
     an exercise price of $1.75 per share, one quarter of which became
     exercisable on January 1, 2000, one quarter of which became exercisable on
     January 1, 2001 and the remainder of which was terminated effective
     December 4, 2000.

                              OPTION GRANTS IN 2000

     The following table sets forth information regarding stock option grants
made to our executive officers during the fiscal year ended December 31, 2000.



                                               NUMBER OF SHARES
                                                  UNDERLYING             PERCENT OF TOTAL
                                                    OPTIONS             OPTIONS GRANTED TO           EXERCISE PRICE      EXPIRATION
       NAME                     PERIOD            GRANTED (#)           EMPLOYEES IN PERIOD              ($/SH)              DATE
       ----                     ------            -----------           -------------------          --------------      ----------
                                                                                                           
John P. Mitola                 12/31/00          1,000,000 (1)                  24%                      $7.00            12/31/09
Brian J. Kawamura              12/31/00          1,500,000 (1)                  37%                      $7.00            12/31/09
Michael R. Pokora              12/31/00            500,000 (1)                  12%                      $7.00            12/31/09
Jeffrey R. Mistarz             12/31/00            200,000 (2)                   5%                      $7.00            12/31/09
Joseph C. Marino               12/31/00               --                        --                        --                  --


----------

(1)  One third of each of these options became exercisable on December 31, 2000
     and one third of each of these options will become exercisable on each of
     December 31, 2001 and 2002.

(2)  One third of these options vested on December 31, 2000, and one third will
     vest on each of December 31, 2001 and December 31, 2002. Of the vested
     options, one third will become exercisable each year, with 22,223 which
     became exercisable on December 31, 2000, 22,222 becoming exercisable on
     December 31, 2001, 22,222 becoming exercisable on December 31, 2002, etc.



               AGGREGATED OPTION EXERCISES IN 2000 AND 2000 VALUES

     The following table contains information regarding our executive officers'
and our former chairman of the board's unexercised options at December 31, 2000.
Neither our executive officers, nor our former chairman of the board, hold any
stock appreciation rights and none of them exercised any options during the
fiscal year ended December 31, 2000.



                                      NUMBER OF SHARES UNDERLYING UNEXERCISED
                                                                   OPTIONS AT        VALUE OF UNEXERCISED IN-THE-
                                                     FISCAL YEAR-END 2000 (#)                   MONEY OPTIONS ($)
        NAME               PERIOD                   EXERCISABLE/UNEXERCISABLE           EXERCISABLE/UNEXERCISABLE
        ----               ------                   -------------------------           -------------------------
                                                                              
John P. Mitola            12/31/00                            333,334/666,666                           $0/$0 (1)
Brian J. Kawamura         12/31/00                          500,000/1,000,000                           $0/$0 (1)
Michael R. Pokora         12/31/00                            166,667/333,333                           $0/$0 (1)
Jeffrey R. Mistarz        12/31/00                             22,222/177,778                           $0/$0 (1)
Joseph C. Marino          12/31/00                          1,925,000/225,000          $3,511,250(2)/$281,250 (3)


----------

(1)  These figures reflect that the exercise price per option of $7.00 per share
     was greater than the closing market price of our Common Stock as reported
     on The American Stock Exchange on December 31, 2000, which was $3.00 per
     share.

(2)  This figure represents the difference between the exercise price per
     option, which is $1.10 per share for 1,700,000 of the shares and $1.75 for
     225,000 of the shares, and the closing price for our Common Stock as
     reported by The American Stock Exchange on December 31, 2000, which was
     $3.00 per share.

(3)  This figure represents the difference between the exercise price per
     option, which is $1.75 per share, and the closing price for our Common
     Stock as reported on The American Stock Exchange on December 31, 2000,
     which was $3.00 per share.

EMPLOYMENT AGREEMENTS

     Effective January 1, 1999, we entered into an employment agreement with Mr.
Marino pursuant to which he served as our president and chief executive officer.
From January 2000 until Mr. Marino's resignation from our Board of Directors and
termination of his employment with us, effective December 4, 2000, the
employment agreement governed our relationship with Mr. Marino as our chairman
of the board. The employment agreement provided for a base salary of $225,000
per year, the use of an automobile for company business and reimbursement for
Mr. Marino's business-related cellular phone calls.

     Under the employment agreement, we granted to Mr. Marino an option to
purchase 900,000 shares of our Common Stock at $1.75 per share which became
exercisable with respect to 225,000 shares on January 1, 2000, and with respect
to 225,000 shares on January 1, 2001 and which terminated with respect to
450,000 shares effective December 4, 2000. Mr. Marino has piggyback registration
rights with respect to 450,000 shares of our Common Stock that he may purchase
in the future upon exercise of the vested portions of these options.



         Mr. Marino remains subject to the confidentiality provisions of the
agreement and shall remain subject to the non-competition and non-solicitation
provisions for a period of two years following the effective date of termination
of the agreement.

     Effective November 18, 1999, we entered into an employment agreement with
John Mitola, our chief executive officer, for a three-year period beginning on
January 3, 2000 and ending on December 31, 2002. The agreement provides for a
base salary of $350,000 per year and a discretionary bonus of up to forty
percent (40%) of his annual salary payable if we meet or exceed the terms of our
annual business plan. The agreement also provides for a monthly automobile
allowance of $550.00 and the reimbursement of Mr. Mitola's business-related
cellular phone calls.

     Under the employment agreement, we granted to Mr. Mitola an option to
purchase 1,000,000 shares of our Common Stock at $7.00 per share which became
exercisable with respect to 333,334 shares on December 31, 2000, and which will
become exercisable with respect to 333,333 shares on each of December 31, 2001
and 2002. Mr. Mitola has piggyback registration rights with respect to all
shares of our stock obtained through the exercise of these options.

     The employment agreement imposes on Mr. Mitola non-competition,
non-solicitation and confidentiality obligations.

     Effective November 18, 1999, we entered into an employment agreement with
Brian Kawamura, our president and chief operating officer, for a three-year
period beginning on January 3, 2000 and ending on December 31, 2002. The
agreement provides for a base salary of $350,000 per year and a discretionary
bonus of up to forty percent (40%) of his annual salary payable if we meet or
exceed the terms of our annual business plan. The agreement also provides for a
monthly automobile allowance of $550.00 and the reimbursement of Mr. Kawamura's
business-related cellular phone calls.

     Under the employment agreement, we granted to Mr. Kawamura an option to
purchase 1,500,000 shares of our Common Stock at $7.00 per share which became
exercisable with respect to 500,000 shares on December 31, 2000, and which will
become exercisable with respect to 500,000 shares on each of December 31, 2001
and 2002. Mr. Kawamura has piggyback registration rights with respect to all
shares of our stock obtained through the exercise of these options.

     The employment agreement imposes on Mr. Kawamura non-competition,
non-solicitation and confidentiality obligations.

     Effective November 18, 1999, we entered into an employment agreement with
Michael Pokora, our executive vice president of operations and sales, for a
three-year period beginning on January 3, 2000 and ending on December 31, 2002.
The agreement provides for a base salary of $250,000 per year and a
discretionary bonus of up to forty percent (40%) of his annual salary payable if
we meet or exceed the terms of our annual business plan. The agreement also
provides for a monthly automobile allowance of $550.00 and the reimbursement of
Mr. Pokora's business-related cellular phone calls.

     Under the employment agreement, we granted to Mr. Pokora an option to
purchase 500,000 shares of our Common Stock at $7.00 per share which became
exercisable with respect to 166,667 shares on December 31, 2000, and which will
become exercisable with respect to 166,666 shares on each of December 31, 2001
and 2002. Mr. Pokora has piggyback registration rights with respect to all
shares of our stock obtained through the exercise of these options.

     The employment agreement imposes on Mr. Pokora non-competition,
non-solicitation and confidentiality



obligations.

     On January 14, 2000, we entered into an employment agreement with Jeffrey
Mistarz, our chief financial officer and treasurer, for a term of three years
commencing on January 1, 2000 and ending on December 31, 2002. The agreement
provides for a salary of $175,000 per year and a discretionary bonus payable if
Mr. Mistarz attains established performance goals to be agreed upon by Mr.
Mistarz and our chief executive officer. The agreement also provides for the
reimbursement of Mr. Mistarz's business expenses such as business-related
cellular phone calls.

     Under the employment agreement, we granted to Mr. Mistarz an option to
purchase 200,000 shares of our Common Stock at $7.00 per share which vests with
respect to 66,667 shares on December 31, 2000, and which will vest with respect
to 66,667 shares on December 31, 2001 and 66,666 shares on December 31, 2002. Of
the vested options, only one third will become exercisable each year, with
22,223 becoming exercisable on December 31, 2000, 22,222 becoming exercisable on
December 31, 2001, 22,222 becoming exercisable on December 31, 2002, etc. Mr.
Mistarz has piggyback registration rights with respect to all shares of our
stock obtained through the exercise of these options.

     The employment agreement imposes on Mr. Mistarz non-competition,
non-solicitation and confidentiality obligations.



           SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

     The following table contains information regarding the beneficial ownership
of our Common Stock as of June 30, 2001, by (1) each person known by us to own
more than 5% of the outstanding shares of our Common Stock, (2) each of our
directors, (3) Mr. Marino, our former chairman of the board, and (4) all
directors and executive officers as a group. The table lists the applicable
percentage of beneficial ownership based on 30,722,168 shares of Common Stock
outstanding as of July 27, 2001. Beneficial ownership is determined in
accordance with rules of the Securities and Exchange Commission, and, unless
otherwise indicated, the persons named in the table have sole voting and
investment power with respect to the shares beneficially owned by them. Except
as otherwise noted, the address of each person listed in the following table is
c/o Electric City Corp., 1280 Landmeier Road, Elk Grove Village, Illinois
60007-2410.



                                                                                                PERCENT OF SHARES
NAME                                                      SHARES BENEFICIALLY OWNED             BENEFICIALLY OWNED
----                                                      -------------------------             ------------------
                                                                                                
Joseph C. Marino........................................                  9,699,654(1)                29.51%
Pino, LLC...............................................                  8,850,502(1)                27.30%
NCVC, L.L.C (2).........................................                  5,488,999(3)                17.30%
Victor L. Conant........................................                  5,488,999(3)(4)             17.30%
Kevin P. McEneely.......................................                  5,488,999(3)(5)             17.30%
DYDX Consulting LLC (2).................................                  4,017,499(6)                12.66%
Nikolas Konstant (2)....................................                  4,017,499(6)                12.66%
Augustine Fund, L.P. (7)................................                  1,729,008(8)                 5.33%
John P. Mitola..........................................                    340,334(9)                  *
Brian J. Kawamura.......................................                    568,000(10)                 *
Jeffrey R. Mistarz......................................                     26,422(11)                 *
Michael R. Pokora.......................................                    176,667(12)                 *
Michael S. Stelter......................................                  1,244,192                    4.05%
John J. Callahan........................................                     35,000(13)                 *
Robert J. Manning.......................................                     52,000(14)                 *
Gerald A. Pientka.......................................                     68,500(15)                 *
James T. Stumpe.........................................                    555,556(16)                1.81%
Roscoe C. Young II......................................                     50,000(17)                 *
All directors and executive officers as a group
(12 persons)**..........................................                  8,605,670                   26.10%


----------

 *   Denotes beneficial ownership of less than 1%
**   Eliminates duplication

(1)  Includes (a) 450,000 shares issuable upon exercise of options that are
     currently exercisable, (b) 7,150,502 shares held of record by Pino, LLC and
     (c) 1,700,000 shares issuable upon exercise of an option held by Pino, LLC
     that is currently exercisable. Mr. Marino holds a 100% membership interest
     in Pino and, in such capacity, has sole voting and investment power with
     respect to the shares of Common Stock held by Pino. Therefore, Mr. Marino
     is deemed to be the beneficial owner of these shares.

(2)  The business address of each of NCVC, L.L.C. ("NCVC) and DYDX Consulting
     LLC ("DYDX) is 6245 West Howard Street, Niles, Illinois 60714.



(3)  Consists of 4,488,999 shares held of record by NCVC and 1,000,000 shares
     issuable upon exercise of an option held by NCVC that is currently
     exercisable. Messrs. Conant and McEneely are managers and members of NCVC,
     and, in such capacities, such persons share voting and investment power
     with respect to the shares of Common Stock held by NCVC. Therefore, such
     persons are each deemed to be the beneficial owner of these shares.

(4)  Excludes 448,415 shares held in trust for Carson Conant and Chappell
     Conant, Mr. Conant's adult children. Although Mr. Conant is trustee of each
     of the Carson Conant Trust and the Chappell Conant Trust and, in such
     capacity, has sole voting and investment power with respect to the shares
     of Common Stock held by each of the trusts, he disclaims beneficial
     ownership of these shares.

(5)  Excludes 427,568 shares held by Patrick McEneely and Ryan McEneely, Mr.
     McEneely's adult children.

(6)  Includes 1,000,000 shares issuable upon exercise of an option that is
     currently exercisable.

(7)  Effective June 15, 2001, Augustine Fund, L.P. elected to convert their
     2,000 shares of Series B Preferred Stock outstanding into 1,472,244 shares
     of our Common Stock at a conversion price of $1.36 per share. In addition,
     we elected to pay accrued dividends on the Series B Preferred Stock in
     56,764 shares of our Common Stock, which was calculated based upon a
     conversion price of $1.36 per share.

(8)  Includes 200,000 shares issuable upon exercise of a warrant that is
     currently exercisable.

(9)  Includes 333,334 shares issuable upon exercise of an option that became
     exercisable on December 31, 2000.

(10) Includes 500,000 shares issuable upon exercise of an option that became
     exercisable on December 31, 2000.

(11) Includes 22,223 shares issuable upon exercise of an option that became
     exercisable on December 31, 2000.

(12) Includes 166,667 shares issuable upon exercise of an option that became
     exercisable on December 31, 2000.

(13) Includes 25,000 shares issuable upon exercise of an option that became
     exercisable on April 1, 2001.

(14) Includes 50,000 shares issuable upon exercise of options that became
     exercisable on May 15, 2000 and January 1, 2001 for 25,000 shares each.

(15) Includes 50,000 shares issuable upon exercise of options that became
     exercisable on May 1, 2000 and January 1, 2001 for 25,000 shares each.

(16) Includes 50,000 shares issuable upon exercise of options that became
     exercisable on May 1, 2000 and January 1, 2001 for 25,000 shares each.
     Includes 434,444 shares of record held by Electric City of Illinois, LLC.
     Mr. Stumpe holds a 33% membership interest in Electric City of Illinois
     and, in such capacity, shares voting and investment power with respect to
     the shares of Common Stock held by Electric City of Illinois and,
     therefore, is deemed to be the beneficial owner of these shares.

(17) Includes 50,000 shares issuable upon exercise of options that became
     exercisable on April 19, 2000 and January 1, 2001 for 25,000 shares each.


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     From January 1999 until May 1999, we permitted Marino Electric to use,
without charge, a portion of the manufacturing area of our facility to build
EnergySaver unit components and cabinets. The members of our Board not
affiliated with Marino Electric approved this use and believed that it allowed
us to oversee the manufacture of the EnergySaver unit components and cabinets.
On May 24, 1999, we purchased from Mr. Marino most of the assets of Marino
Electric for a purchase price of $3,888,000, consisting of $1,792,000 in cash
and 1,600,000 shares of our Common Stock. The purchase price of $3,880,000
exceeded the fair value of the assets acquired by approximately $3,363,000.
Under the terms of the purchase agreement, we were obligated to pay the cash
portion of the purchase price upon the closing of our private issuances of
Common Stock that commenced in July 1999. In May 2000, Mr. Marino waived this
requirement and instead received a payment of $800,000 in cash and a
subordinated secured term note for the principal amount of $972,000 at an
interest rate of 10% per annum, payable in equal installments over 24 months and
requiring principal and interest payments of $44,928 per month. The note is
secured by an interest in all of our personal property, fixtures, inventory,
contract rights, accounts, general intangibles and equipment owned by us on May
30, 2000 or acquired by us thereafter and is subordinate to the security
interest in these items held by American National Bank & Trust of Chicago. Our
Board, including the members not affiliated with Marino Electric, negotiated and
approved the terms of this transaction on our behalf and believed that they were
as favorable to us as if negotiated with an unaffiliated third party. As of June
30, 2001, the principal and accrued interest owed and outstanding on the note to
Mr. Marino totaled $708,714.

     On December 16, 1999, we loaned $600,000 to Nikolas Konstant, then a member
of NCVC. The note was secured by 200,000 shares of our Common Stock held by Mr.
Konstant and provided for $120,000 in interest. On March 20, 2000, Mr. Konstant
repaid the note in full with interest.

     On April 1, 2000, we entered into a state representative agreement with
Electric City of Illinois, LLC and on June 1, 2000, we entered into a state
representative agreement with Electric City of Indiana, LLC. James Stumpe, one
of our directors, is a member of each of Electric City of Illinois and Electric
City of Indiana. The agreements grant to Electric City of Illinois and Electric
City of Indiana distribution territories within the States of Illinois and
Indiana, respectively. The members of our Board other than Mr. Stumpe approved
the terms of the transactions and believed the terms to be substantially similar
to those of our other distributor and state representative agreements and as
favorable to us as if negotiated with an unaffiliated third party. As of June
30, 2001, Electric City of Illinois had an open balance with us for the purchase
of goods and services in the amount of $202,948 and Electric City of Indiana had
an open balance with us for the purchase of goods and services in the amount of
$47,977.

     On January 5, 2000, we entered into a distributor agreement with Electric
City of Southern California L.L.C., of which Mr. Marino is a member, which
provides for an initial term of 10 years. The agreement grants to Electric City
of Southern California a distribution territory that extends from Monterrey to
Fresno to the northern edge of Death Valley, south to the southern border of
California. We believe that this agreement provides for terms that are
substantially similar to those of our other distributor agreements and as
favorable to us as if negotiated with an unaffiliated third party. As of June
30, 2001, Electric City of Southern California had an open balance with us for
the purchase of goods and services in the amount of $18,800.

     Augustine Fund, L.P., along with Messrs. Conant, Konstant, Marino, McEneely
and Stelter (collectively, the "Restricted Stockholders") have each entered into
trading agreements with us that are effective for a term of three years
beginning on October 17, 2000. The trading agreements restrict each Restricted
Stockholder's transfer of our Common Stock as follows:

     -    sales in any one trading day by such Restricted Stockholder shall not
          exceed the greater of



          10,000 shares or 10% of the average trading volume of our Common Stock
          during the 10 prior trading days;

     -    public trades in an opening transaction, during the last half hour of
          any trading day and at any time outside of regular trading hours shall
          be prohibited by such Restricted Stockholder; and

     -    up to four times within any 12-month period, we may prohibit any
          Restricted Stockholder from trading the Common Stock for an entire
          trading day.

     We have agreed to give each Restricted Stockholder a right of first refusal
to sell its Common Stock to any third party that contacts us with a desire to
purchase 100,000 or more shares of our Common Stock. This right will be
allocated equally among each of the Restricted Stockholders who elect to
participate in the sale. However, this right of first refusal will not preclude
us from raising additional capital should such need arise.

     During July 2001, Messrs. Conant, Konstant, Marino, McEneely and Stelter
agreed to amend the terms of their trading agreements to provide that sales in
any one trading day cannot exceed 5% of the average trading volume of our Common
Stock on such day and such sales will not exceed 15% of such individual's
holdings in any three-month period. In addition, if the Company and a managing
underwriter request a market stand-off pursuant to a qualified public offering,
each individual agrees not to sell, make any short sale of, grant any option for
the purchase of, or otherwise dispose of any of their holdings (other than those
included in the registration) without the consent of the underwriter. The market
stand-off period will not exceed 180 days.

     In October 2000, we entered into an agreement with KMC Telecom (of which
Roscoe Young, one of our directors, is President and Chief Operating Officer) to
sell and install our TP3 switchgear product at three KMC Telecom facilities. The
sale and installation amount for the three sites totaled $773,802 and was
reflective of prices that would be charged to an unrelated third party.
Installation of the TP3 switchgear began in November 2000 and was completed in
June 2001. As of June 30, 2001, our accounts receivable from KMC Telecom totaled
$293,074.

     Effective December 4, 2000, we entered into an agreement with Mr. Marino in
which we agreed to grant to Mr. Marino distributorship rights of our EnergySaver
product in Northern California, Nevada and Arizona and to enter into distributor
agreements with Mr. Marino with respect to each of those distribution
territories for an initial term of 10 years and on terms substantially similar
to those of our other distributor and state representative agreements. As
consideration for our grant of distributorship rights, effective December, 4,
2000, (1) we terminated the option to purchase 2,000,000 shares of our Common
Stock at $1.10 per share held by Pino, LLC with respect to 300,000 shares and
(2) Mr. Marino resigned from our Board of Directors and from his executive
position as our Chairman of the Board. The members of our Board other than Mr.
Marino approved the terms of the transactions and believed they were as
favorable to us as if negotiated with an unaffiliated third party.



                                   PROPOSAL 2

                      RATIFICATION OF INDEPENDENT AUDITORS

     The Board of Directors has appointed BDO Seidman, LLP, independent public
accountants, as auditors of our financial statements for the year ending
December 31, 2001, and to perform other audit and accounting activities as may
be requested from time to time by management or the Board of Directors. BDO
Seidman, LLP has acted as our auditors since August 1998.

     The Board of Directors has directed that the appointment of BDO Seidman,
LLP as our auditors be submitted to the stockholders for ratification. If a
majority of the shares of Common Stock voted at the Annual Meeting, in person or
by proxy, are not voted in favor of the ratification of the appointment of BDO
Seidman, LLP, the Board of Directors will interpret that as an instruction to
seek other auditors.

     It is expected that representatives of BDO Seidman, LLP, our independent
public accountants, will be present at the meeting and will be available to
respond to questions. Representatives of BDO Seidman, LLP will be given an
opportunity to make a statement if they desire to do so.

     THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN, LLP AS INDEPENDENT AUDITORS OF
OUR FINANCIAL STATEMENTS FOR THE YEAR ENDING DECEMBER 31, 2001.



                                   PROPOSAL 3

              APPROVAL OF ADOPTION OF THE 2001 STOCK INCENTIVE PLAN

     The Company's Board of Directors has adopted, subject to the approval of
the Company's stockholders, the Company's 2001 Stock Incentive Plan (the
"Plan"). The aggregate number of shares of Common Stock which may be delivered
under the Plan will initially be limited to 800,000. Such number will increase
on January 1st of each year, beginning January 1, 2002, by 500,000 shares
(unless the number of shares of our Common Stock outstanding declines to less
than 10,000,000, in which case the increase will be equal to 5% of the number of
shares of our Common Stock outstanding (assuming conversion of all outstanding
securities convertible into shares of Common Stock). The Board has reserved
800,000 shares of the Company's Common Stock for issuance pursuant to the
exercise of options issued under the Plan. A copy of the proposed Plan is
attached as Appendix B.

SUMMARY OF THE PLAN

     Under the terms of the Plan, the Board or a Committee designated by the
Board may issue options or shares of stock to certain employees of the Company
or any of its subsidiaries and who may include officers and directors of the
Company and to consultants and directors who are not employees of the Company.
However, no director may vote upon the grant to himself. The awards to be
granted under the Plan may be incentive stock options eligible for favored
treatment under Section 422 of the Internal Revenue Code of 1986, as amended
from time to time (the "Code"), or non-qualified options that are not eligible
for such treatment or stock of the Company which may be subject to contingencies
or restrictions. Approximately 40 employees, officers and directors of the
Company are currently eligible to participate in the Plan.

     The exercise price for any incentive stock option ("ISO") may not be less
than 100% of the fair market value of the stock on the date the option is
granted, except that with respect to a participant who owns more than 10% of the
Company's Common Stock the exercise price must be not less than 110% of fair
market value. The exercise price of any non-qualified option shall be in the
sole discretion of the Committee or Board. The aggregate fair market value of
the shares that may be subject to any ISO granted to any participant may not
exceed $100,000 on the date of grant. There is no comparable limitation with
respect to non-qualified stock options.

     The term of all options granted under the Plan will be determined by the
Committee or Board in their sole discretion, provided, however, that the term of
each ISO shall not exceed 10 years from the date of grant thereof and, further
provided, that if, at the time an ISO is granted, the optionee owns (or is
deemed to own under Section 424(d) of the Code) stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company, of
any of its Subsidiaries or of a Parent, the term of the ISO shall not exceed
five years from the date of grant. The right of exercise will be cumulative, so
that shares that are not purchased in one year may be purchased in a subsequent
year. The options may not be assigned. Upon exercise of any option, in whole or
in part, payment in full is required (unless the applicable award contract
permits installment payments or cashless exercise) for the number of shares
purchased. Payment may be made in cash, by delivery of shares of the Company's
Common Stock of equivalent fair market value or by any other form of legal
consideration that is acceptable to the Board.

     In addition to the ISOs and non-qualified options, the Plan permits the
Committee, consistent with the purposes of the Plan, to grant shares of Common
Stock to non-employee directors and such employees (including officers and
directors who are employees) of, or consultants to, the Company or any of its
Subsidiaries, as the Committee may determine, in its sole discretion. The grant
may require the holder to pay such price per share therefor, if any, as the
Committee may determine. Such shares may be subject to such contingencies and



restrictions as the Committee may determine.

     If an employee's employment is terminated by reason of death, disability or
retirement, either the employee or his or her beneficiary will have the right
for eighteen months to exercise the option to the extent the option was
exercisable on the date of death or disability, but in no event after the date
the award would otherwise have expired. If a Plan participant's relationship
with the Company is terminated for any reason other than death, disability or
retirement and other than for cause or without the Company's consent (in which
case the option shall terminate immediately), he or she may, for a period of one
year, exercise the option to the extent that it was exercisable on the date of
termination, but in no event after the date the award would otherwise have
expired.

     The Plan will be administered by the Board, which is authorized to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan and to determine the employees to whom, and the time, terms
and conditions under which, options are to be granted. The Board is also
authorized to adjust the number of shares available under the Plan, the number
of shares subject to outstanding options and the option prices to take into
account the Company's capitalization by reason of a stock dividend,
recapitalization, merger, consolidation, stock split, combination or exchange of
shares or otherwise.

     The Board may amend, suspend or terminate the Plan in any respect at any
time. However, no amendment may (i) increase the number of shares reserved for
option under the Plan, (ii) modify the requirements for participation in the
Plan, or (iii) modify the Plan in any way that would require stockholder
approval under the rules and regulations under the Exchange Act.

FEDERAL INCOME TAX CONSEQUENCES

     Under current Federal law, no taxable income will be recognized by the
recipient of an incentive stock option within the meaning of Section 422 of the
Code upon either the grant or exercise of the incentive stock option (provided
the exercise occurs while the participant is an employee of the Company or
within three months after termination of employment), nor will a deduction be
allowed the Company by reason of the grant or exercise, provided the employee
does not dispose of the shares issued upon exercise within two years from the
date the option was granted and within one year from the date the shares were
issued. If the recipient fails to satisfy these holding period requirements, the
difference between the amount realized upon disposition of the shares and the
adjusted basis of the shares is includible as compensation in the recipient's
gross income and the Company will be entitled to a deduction in that amount.

     Under current law, the holder of a non-qualified stock option is taxable at
the time of exercise on the difference between the exercise price and the fair
market value of the shares on the date of exercise. Upon disposition of the
stock, the stockholder is taxable upon the difference between the basis of the
stock (which is equal to the fair market value at the time the option was
exercised) and the amount realized upon the disposition.

     A grant of shares of Common Stock that is subject to no vesting
restrictions will result in taxable income for federal income tax purposes to
the recipient at the time of grant in an amount equal to the fair market value
of the shares awarded. The Company would be entitled to a corresponding
deduction at that time for the amount included in the recipient's income.

     Generally, a grant of shares of Common Stock under the Plan subject to
vesting and transfer restrictions will not result in taxable income to the
recipient for federal income tax purposes or a tax deduction to the Company in
the year of the grant. The value of the shares will generally be taxable to the
recipient as compensation income in the years in which the restriction on the
shares lapse. Such value will be the fair market value of the shares on the
dates the restrictions terminate. Any recipient, however, may elect pursuant to
Section 83(b) of the Code to treat the fair market value of the shares on the
date of such grant as compensation income in the year of the grant of



restricted shares, provided the recipient makes the election within 30 days
after the date of the grant. In any case, the Company will receive a deduction
for federal income tax purposes corresponding in amount to the amount of
compensation included in the recipient's income in the year in which that amount
is so included.

     The Board believes the Plan will further the growth and development of the
Company by issuing options or shares to its management employees as an incentive
for performance. It is contemplated that the Plan will provide such persons with
increased interest in the Company's success through their proprietary stake in
the Company.

     From January 1, 1999 through June 30, 2001, the Company has granted
non-qualified stock options for 5,889,300 shares of its Common Stock to
management employees of the Company. These options were not granted pursuant to
any stock incentive plan and, accordingly will not be included under this Plan.


     THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF ADOPTION OF THE 2001 STOCK INCENTIVE PLAN.



                                   PROPOSAL 4

       PROPOSAL TO AMEND OUR CERTIFICATE OF INCORPORATION TO INCREASE OUR
              AUTHORIZED CAPITAL STOCK AND AUTHORIZED COMMON STOCK

     The Board of Directors has unanimously approved, subject to stockholder
approval, an amendment to our Certificate of Incorporation to increase our
authorized number of shares of capital stock from 65,000,000 to 90,000,000 and
our authorized number of shares of Common Stock from 60,000,000 to 85,000,000.
No changes will be made to the number of authorized shares of our preferred
stock, which is 5,000,000. If approved, the first sentence of Article 4 of our
Certificate of Incorporation would be amended in its entirety to read as
follows:

          "4.  AUTHORIZED CAPITAL STOCK. The total number of shares of stock
     which the Corporation shall have authority to issue is 90,000,000,
     consisting of 85,000,000 shares of Common Stock, with a par value of $.0001
     per share, and 5,000,000 shares of Preferred Stock, with a par value of
     $.01 per share (hereinafter, the "Capital Stock")."

     As of July 31, 2001, we had (1) 30,722,167 shares of Common Stock issued
and outstanding, (2) 9,679,300 shares of Common Stock reserved for issuance upon
the exercise of outstanding options, and (3) 3,994,830 shares of Common Stock
reserved for issuance upon the exercise of outstanding warrants.

PURPOSE AND REASONS FOR THE AMENDMENT

     The purpose of the proposed amendment to our Certificate of Incorporation
is to increase the number of authorized shares of Common Stock to 85,000,000
shares, and thus to increase our authorized capital stock to 90,000,000 shares,
principally to provide sufficient authorized Common Stock to allow us to
complete the issuance of securities contemplated by the securities purchase
agreement that we entered into, subject to stockholder approval, with certain
strategic investors on July 31, 2001. The proposed amendment also will provide
us with additional authorized but unissued shares of Common Stock for general
corporate purposes, including issuances pursuant to stock incentive plans for
employees, officers and directors, possible future acquisitions and possible
future equity financings. The approval of the proposed amendment by the
Company's stockholders is required for the transaction described in Proposal 5
to proceed. The principal terms and conditions of the proposed issuance of
Series A Convertible Preferred Stock, Common Stock and warrants to purchase
shares of Series A Convertible Preferred Stock and Common Stock under the
securities purchase agreement and related agreements are more fully described in
Proposal 5 below. In considering this Proposal 4, stockholders should carefully
review and analyze the information set forth under Proposal 5 below. If the
requisite stockholders do not approve this Proposal 4, the transaction described
in Proposal 5 will not be completed, even if the stockholders have approved
Proposal 5. However, this Proposal 4 is not conditioned upon the approval of
Proposal 5.

     We seek this amendment primarily because it is a condition to closing under
the securities purchase agreement that we recently entered into with our
potential strategic investors. Under that agreement, we propose to issue, in
exchange for aggregate gross proceeds of $16,000,000, the following securities:

     -    1,600,000 shares of our Series A Convertible Preferred Stock, which
          are initially convertible into 16,000,000 shares of our Common Stock;

     -    320,868 additional shares of Common Stock;



     -    warrants to purchase 400,000 shares of Series A Convertible Preferred
          Stock, which following exercise will be initially convertible into
          4,000,000 shares of our Common Stock; and

     -    warrants to purchase 3,000,000 shares of additional Common Stock.

     In addition, we may enter into one additional securities purchase agreement
with a single financial investor (and/or that investor's affiliates) pursuant to
which we may issue, for aggregate gross proceeds of $4,000,000, an additional
400,000 shares of Series A Convertible Preferred Stock, which would be initially
convertible into 4,000,000 shares of our Common Stock, and an additional 100,000
warrants to purchase shares of Series A Convertible Preferred Stock, which
following exercise would be initially convertible into 1,000,000 shares of our
Common Stock.

     If the amendment to the Certificate of Incorporation described in this
Proposal 4 is approved by stockholders, and the proposed issuance of securities
described in Proposal 5 below is approved by stockholders, and assuming the
proposed issuances (including under the proposed agreement with the additional
financial investor) are consummated and all of the shares of Series A
Convertible Preferred Stock are converted and all related warrants are
exercised, the total number of shares of Common Stock outstanding would increase
by 28,320,868 shares. In addition, we are obligated to pay quarterly cumulative
dividends at a rate of 10% per annum on the Series A Convertible Preferred
Stock. If we elect to pay all of these dividends in additional shares of Series
A Convertible Preferred Stock during the first three years after issuance when
we are permitted to do so (and assuming the warrants to purchase additional
shares of Series A Convertible Preferred Stock were exercised immediately), we
would issue 701,274 additional shares of Series A Convertible Preferred Stock as
in-kind dividends, which would be initially convertible into an additional
7,012,740 shares of our Common Stock.

PRINCIPAL EFFECTS OF THE AMENDMENT

     The additional shares of Common Stock to be authorized by adoption of the
amendment would have rights identical to the currently outstanding Common Stock.
Adoption of the proposed amendment and issuance of the Common Stock would not
affect the rights of the holders of our currently outstanding Common Stock,
except for effects incidental to increasing the number of shares of the Common
Stock outstanding, such as dilution of the earnings per share and voting rights
of current holders of Common Stock. If the amendment is adopted, it will become
effective upon filing of a certificate of amendment to our Certificate of
Incorporation with the Secretary of State of the State of Delaware.

     Shares of our Common Stock, including the additional shares that will be
authorized if the proposed amendment is adopted, may be issued, subject to
certain exceptions, by the Board of Directors at such times, in such amounts and
upon such terms as the Board of Directors may determine without further approval
of the stockholders.

     The additional shares of Common Stock that would become available for
issuance if the proposed amendment is adopted could also be used by the Company
to oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. For example, without further stockholder approval,
the Board of Directors could adopt a "poison pill" that would, under some
circumstances related to an acquisition of shares not approved by the Board of
Directors, give some holders the right to acquire additional shares of Common
Stock at a low price, or the Board could strategically sell shares of Common
Stock in a private transaction to purchasers who would oppose a takeover or
favor the current Board of Directors. Although this proposal to increase the
authorized Common Stock has been prompted by our desire to consummate the
transactions described in Proposal 5 below and not by the threat of any hostile
takeover attempt (nor is the Board of Directors currently aware of any such
attempts directed at us), nevertheless, stockholders



should be aware that approval of this proposal could facilitate future efforts
by us to deter or prevent changes in control of the Company, including
transactions in which the stockholders might otherwise receive a premium for
their shares over then current market prices.

VOTE REQUIRED; VOTING AGREEMENT; RECOMMENDATION OF THE BOARD OF DIRECTORS

     The affirmative vote of the holders of a majority of the outstanding shares
of our Common Stock will be required to approve this proposal to amend our
Certificate of Incorporation. As a result, abstentions and broker non-votes will
have the same effect as votes "against" the proposal.

     Newcourt Capital USA Inc., a subsidiary of CIT and the bridge lender to the
Company and one of the strategic investors in the proposed private placement,
has informed the Company that it has sought and obtained the written agreement
of and a proxy from certain holders of the Company's Common Stock, each of whom
is a significant stockholder and an affiliate of a director or former director
of the Company, to vote in favor of Proposal 4. These stockholders own in the
aggregate approximately 52% of the outstanding shares of Common Stock of the
Company.

     THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENT TO THE
CERTIFICATE OF INCORPORATION IS IN THE BEST INTERESTS OF OUR STOCKHOLDERS, AND,
THEREFORE, RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO AMEND THE
CERTIFICATE OF INCORPORATION TO INCREASE OUR AUTHORIZED CAPITAL STOCK AND
AUTHORIZED COMMON STOCK.


                                   PROPOSAL 5

            PROPOSAL TO APPROVE THE ISSUANCE OF SERIES A CONVERTIBLE
             PREFERRED STOCK, COMMON STOCK, AND WARRANTS TO PURCHASE
              SERIES A CONVERTIBLE PREFERRED STOCK AND COMMON STOCK

     Our Board of Directors believes that our agreement to issue Series A
Convertible Preferred Stock for gross proceeds of $16,000,000 is one of the most
significant accomplishments for our Company to date, represents an equitable
approach to the recruitment of strategic investors and provides the capital and
significant strategic benefits that we expect will improve our long-term
performance. In addition, we believe the following benefits of this issuance
will be realized, as well:

     -    provides the capital necessary to fund our growth plans, including
          expansion of our sales team and acceleration of our research and
          development program;

     -    our Board of Directors will be complimented by the inclusion of
          members who represent leaders in the banking and energy industries;

     -    our business will realize enhanced brand recognition and the
          opportunity of joint sales initiatives;

     -    provide additional funding partners to our Shared Saving program;

     -    the scale of this investment presents significant liquidity
          constraints on our Series A Convertible Preferred Stock investors;

     -    the holders of our Series A Convertible Preferred Stock will be
          subject to a trading agreement which prevents or limits their sales
          of our Common Stock, as more fully explained in this Proposal.

     Our Board of Directors has unanimously approved, subject to stockholder
approval, entering into a securities purchase agreement to sell and issue to
certain strategic investors an aggregate of 1,600,000 shares of Series A
Convertible Preferred Stock, 320,868 shares of Common Stock, warrants to
purchase 400,000 shares of Series A Convertible Preferred Stock, and warrants to
purchase 3,000,000 shares of Common Stock, in exchange for aggregate gross
proceeds of $16,000,000. After the payment of placement agent fees and estimated
expenses for the private placement, the net proceeds of the private placement
are expected to be approximately $15,000,000. In addition, our Board of
Directors has unanimously authorized and approved, subject to stockholder
approval, our entering into one additional securities purchase agreement with a
single financial investor (and/or that investor's affiliates) pursuant to which
we may issue, for aggregate gross proceeds of $4,000,000, an additional 400,000
shares of Series A Convertible Preferred Stock, which would be initially
convertible into 4,000,000 shares of our Common Stock, and an additional 100,000
warrants to purchase shares of Series A Convertible Preferred Stock, which
following exercise would be initially convertible into 1,000,000 shares of our
Common Stock. By approving this Proposal 5, the Company's stockholders will be
approving the issuances of securities under the securities purchase agreement
entered into on July 31, 2001 and the additional securities purchase agreement
that may be entered into by the Company.

PURPOSE AND REASON FOR THE ISSUANCE OF THE SECURITIES

     In September 2000, we engaged Newcourt Capital Securities, Inc. as our
placement agent to find potential investors interested in investing in a private
placement of our capital stock. We were seeking additional capital for corporate
development, market expansion, the repurchase of certain distribution
territories and general working capital needs.

     A diligent search by our placement agent culminated in the placement agent
locating five investors desiring to invest in our capital stock, including
leaders in the banking and energy industries. These investors are: Newcourt
Capital USA Inc. ("CIT"), Duke Capital Partners, LLC, Morgan Stanley Dean Witter
Equity Funding, Inc., Originators Investment Plan, L.P. and EP Power Finance,
L.L.C. After extensive negotiations



and subject to stockholder approval, the investors and the Company entered into
a securities purchase agreement, as more fully described below, under which the
Company will receive $16,000,000 in aggregate gross proceeds. Negotiations with
one additional financial investor have been ongoing, and as described above, we
may enter into one additional securities purchase agreement with a single
financial investor (and/or that investor's affiliates) for the purchase of
additional shares of Series A Convertible Preferred Stock and warrants to
purchase Series A Convertible Preferred Stock.

     During the twelve-month period ended December 31, 2000, we incurred a net
loss of $10.2 million and used $7.1 million of cash for operating activities.
Primarily as a result of our continuing losses and lack of liquidity, our
independent certified public accountants, BDO Siedman, LLP, issued a "going
concern" opinion which expressed substantial doubt as to our ability to continue
as a going concern. We expect that the proceeds raised through the issuance of
these securities will provide the capital necessary for us to execute our
business plan and will enable us to continue as a going concern.


SUMMARY OF THE TRANSACTIONS CONTEMPLATED BY THE SECURITIES PURCHASE AGREEMENT

     On July 31, 2001, we entered into a securities purchase agreement with the
investors identified above, subject to stockholder approval and other customary
closing conditions. Under the securities purchase agreement, each of the
investors (with Morgan Stanley and its affiliate, Originators Investment Plan,
L.P., treated as one investor) will be issued the following securities at the
closing of the transactions contemplated thereby:

     -    400,000 shares of our Series A Convertible Preferred Stock;

     -    warrants to purchase 100,000 shares of Series A Convertible Preferred
          Stock, initially exercisable at a price of $10.00 per share;

     -    80,217 shares of our Common Stock; and

     -    warrants to purchase 750,000 shares of our Common Stock, initially
          exercisable at a price of $1.00 per share.

     In addition, our Board of Directors has unanimously authorized and
approved, subject to stockholder approval, our entering into one additional
securities purchase agreement with a single financial investor (and/or that
investor's affiliates) pursuant to which we may issue, for aggregate gross
proceeds of $4,000,000, an additional 400,000 shares of Series A Convertible
Preferred Stock and an additional 100,000 warrants to purchase shares of Series
A Convertible Preferred Stock, initially exercisable at a price of $10.00 per
share.

     We expect to use the proceeds raised from the sale and issuance of the
above capital stock and warrants for:

     -    general operating expenses until our sales increase to a point at
          which they can support our operations;

     -    expansion of our corporate sales and marketing teams in order to
          increase sales of our EnergySaver(TM) business;



     -    research and development of new products, including modifications to
          our EnergySaver(TM) product to improve our ability to target specific
          applications and a new line of EnergySaver(TM) reliability switchgear
          targeted at the telecommunications and internet industries;

     -    capital expenditures necessary to expand our manufacturing capacity,
          both for the production of both EnergySaver(TM) and switchgear
          products; and

     -    complete the repurchase of 10 distributor territories of amounts owing
          in respect of these repurchases and for the acquisition of companies
          with complementary technologies.

     The placement agent will receive a fee equal to 5% of the $16 million
aggregate gross proceeds under the July 31, 2001 securities purchase agreement
and 5% of the gross proceeds from the sale of Series A Preferred Stock to the
additional investor (or its affiliates) should such a sale be completed as
compensation for acting as placement agent. In addition, the placement agent
will receive 5% of the aggregate gross proceeds from exercise of any warrants to
purchase Series A Convertible Preferred Stock. The securities purchase agreement
is subject to stockholder approval (including approval of Proposal 4) and other
customary closing conditions.

     On July 31, 2001, we also obtained an additional bridge loan from CIT in
the principal amount of $1.2 million. We have previously borrowed $2 million
principal amount of bridge loans from CIT. On July 31, 2001, in connection with
the loans by CIT and services performed by the placement agent, an affiliate of
CIT, the placement agent received warrants to purchase 3,314,830 shares of
Common Stock initially exercisable at a price of $1.00 per share. The warrants
have an exercise period of seven years from the closing of the transactions
contemplated by the securities purchase agreement or, if no closing occurs,
seven years from the date of issuance. CIT will convert our outstanding
indebtedness, including accrued interest, under the various bridge loans against
payment of the purchase price of the capital stock and warrants purchased by CIT
under the securities purchase agreement. Accordingly, the Company expects to
receive, at the closing of the transactions contemplated by the securities
purchase agreement, approximately $12 million in cash (after paying the
placement agent fees and estimated expenses of the private placement).

SECURITIES AND WARRANTS TO BE ISSUED

     Each investor will be issued shares of Series A Convertible Preferred
Stock, shares of Common Stock, warrants to purchase shares of Series A
Convertible Preferred Stock and warrants to purchase shares of Common Stock. A
summary of the terms of each of these securities is set forth below.



     SERIES A CONVERTIBLE PREFERRED STOCK

     Following the approval by the requisite stockholders of Proposal 4 and this
Proposal 5, we will file a Certificate of Designations, Preferences and
Relative, Participating, Optional and Other Special Rights of Preferred Stock
and Qualifications, Limitations and Restrictions Thereof that sets forth the
rights of the holders of Series A Convertible Preferred Stock. Those rights are
summarized below:

          CONVERSION

     Each share of Series A Convertible Preferred Stock is convertible at the
option of the holder into the number of shares of our Common Stock as determined
by dividing $10.00 by the conversion price, which is initially $1.00.

     All outstanding shares of Series A Convertible Preferred Stock will be
automatically converted if either of the following occurs:

     -    at such time as the closing price of our Common Stock exceeds $12.00
          per share (as adjusted for stock splits, stock combinations and the
          like) as reported on the American Stock Exchange (or, if not traded on
          the American Stock Exchange, any national security exchange or
          automated quotation services on which our shares of Common Stock are
          listed for trading) for twenty consecutive trading days and the
          average trading volume for the same 20-day period exceeds 500,000
          shares; or

     -    we complete a firmly underwritten primary public offering of our
          Common Stock at a price of $5.00 per share or more (as adjusted for
          stock splits, stock combinations and the like) in which we raise
          aggregate gross proceeds of at least $35 million (a "Qualified Primary
          Offering").

     Shares of Series A Convertible Preferred Stock have, subject to certain
exceptions, anti-dilution protection that will automatically adjust the
conversion price of the Series A Convertible Preferred Stock to the price per
share of any Common Stock we issue, or are deemed to have issued, if that price
per share is less than the then existing conversion price for the Series A
Convertible Preferred Stock. For example, if following the closing of the
transactions contemplated by the securities purchase agreement we issue
1,000,000 shares of Common Stock at $0.50 per share, the conversion price of the
Series A Convertible Preferred Stock will automatically be adjusted from $1.00
to $0.50. The Series A Convertible Preferred Stock is also subject to other
customary anti-dilution provisions with respect to stock splits, stock
dividends, stock combinations, reorganizations, mergers, consolidations, special
distributions, sales of all or substantially all of the Company's assets and
similar events.

          DIVIDENDS

     Each outstanding share of Series A Convertible Preferred Stock is entitled
to cumulative quarterly dividends at a rate of 10% per annum of its stated
value, which is $10.00. Dividends on the Series A Convertible Preferred Stock
are payable and compounded quarterly. Until the first dividend payment date that
occurs after three years following the initial issuance of the Series A
Convertible Preferred Stock, dividends are payable, at our option, in cash or
additional shares of Series A Convertible Preferred Stock. After that date,
dividends on the Series A Convertible Preferred Stock must be paid in cash and
the dividend rate increases 0.5% every six months to a maximum rate of 15% per
year.



          LIQUIDATION

     Upon a liquidation, dissolution or winding up of the affairs of the
Company, each holder of Series A Convertible Preferred Stock will be entitled to
receive for each share of Series A Convertible Preferred Stock it holds, before
any other security holder of the Company, the higher of:

     -    $20 plus accrued and unpaid dividends; or

     -    an amount equal to the closing price of our Common Stock as reported
          on the American Stock Exchange (or, if not traded on the American
          Stock Exchange, any national security exchange or automated quotation
          services on which our shares of Common Stock are listed for trading)
          multiplied by the number of shares of Common Stock into which one
          share of Series A Convertible Preferred Stock is then convertible.

          REDEMPTION

     Outstanding shares of the Series A Convertible Preferred Stock are not
subject to mandatory redemption. At any time after the third anniversary of our
initial issuance of shares of Series A Convertible Preferred Stock, we have the
option to redeem all outstanding shares of Series A Convertible Preferred Stock
if the following two conditions are satisfied:

     -    the closing price of our Common Stock as reported on the American
          Stock Exchange (or, if not traded on the American Stock Exchange, any
          national security exchange or automated quotation services on which
          our shares of Common Stock are listed for trading) exceeds $7.50 per
          share (as adjusted for stock splits, stock combinations and the like)
          for at least 20 consecutive trading days immediately preceding the
          date we send a notice or redemption to all holders of Series A
          Convertible Preferred Stock; and

     -    the average daily trading volume for the same period exceeds 500,000
          shares.

The redemption price will be:

     -    cash in the amount of $10.00 per share plus accrued but unpaid
          dividends; and

     -    that number of shares of Common Stock having a value equal to 70% of
          the excess of (i) the closing price of our Common Stock as reported on
          the American Stock Exchange (or, if not traded on the American Stock
          Exchange, any national security exchange or automated quotation
          services on which our shares of Common Stock are listed for trading)
          on the day before the redemption date multiplied by the number of
          shares of Common Stock into which a share of Series A Convertible
          Preferred Stock is then convertible, and (ii) $10.00.

          VOTING RIGHTS

     The investors will have the right to elect up to four directors depending
on the number of shares of Series A Convertible Preferred Stock outstanding at
any time (as adjusted for stock splits, stock combinations and the like) as
follows:



     -    for so long as at least 800,000 shares of Series A Convertible
          Preferred Stock remain issued and outstanding, holders of Series A
          Convertible Preferred Stock, voting as a single class, will be
          entitled to elect four directors;

     -    for so long as at least 600,000 but less than 800,000 shares of Series
          A Convertible Preferred Stock remain issued and outstanding, holders
          of Series A Convertible Preferred Stock, voting as a single class,
          will be entitled to elect three directors;

     -    for so long as at least 400,000 but less than 600,000 shares of Series
          A Convertible Preferred Stock remain issued and outstanding, the
          holders of Series A Convertible Preferred Stock, voting as a single
          class, will be entitled to elect two directors; and

     -    for so long as at least 200,000 but less than 400,000 shares of Series
          A Convertible Preferred Stock remain issued and outstanding, the
          holders of Series A Convertible Preferred Stock, voting as a single
          class, shall be entitled to elect one director.

     Except for the election of directors or as otherwise provided by law, the
investors will be entitled to vote with the holders of our Common Stock on an
as-converted basis on all matters on which our holders of Common Stock are
entitled to vote. However, if less than 200,000 shares of Series A Convertible
Preferred Stock remain issued and outstanding, unless otherwise provided by law,
each holder of record of Series A Convertible Preferred Stock will have the
right to vote on an as-converted basis together with the holders of Common
Stock, on all matters on which holders of Common Stock are entitled to vote,
including the election of directors.

     Our board of directors intends to fix by resolution the number of directors
at 12. In order to maintain an appropriate number of directors, we also plan to
ask two of our current directors to resign and those two seats, along with two
currently vacant seats, will be filled by directors designated by each of the
investors.

          SPECIAL APPROVAL RIGHTS

     Holders of Series A Convertible Preferred Stock will also have the
following approval rights with respect to certain actions of the Company:

     -    For so long as any shares of Series A Convertible Preferred Stock
          remain issued and outstanding we cannot, without approval of at least
          75% of the shares of Series A Convertible Preferred Stock then
          outstanding:

               -    enter into any agreement that would restrict our ability to
                    perform under the securities purchase agreement;

               -    amend our Certificate of Incorporation or bylaws in any way
                    that could adversely affect, alter or change the rights,
                    powers or preferences of the Series A Convertible Preferred
                    Stock;

               -    engage in any transaction that would impair or reduce the
                    rights, powers or preferences of the Series A Convertible
                    Preferred Stock as a class;

               -    sell all or substantially all of the assets of the Company
                    or merge with or into another company, or liquidate the
                    Company (provided that if less than 400,000 shares of the



                    Series A Convertible Preferred Stock are then outstanding
                    and the then holders of Series A Convertible Preferred Stock
                    refused to consent to such a transaction, we may at our
                    option, redeem all, but not less than all, of such Series A
                    Convertible Preferred Stock at a redemption price per share
                    equal to the amount the Series A Convertible Preferred Stock
                    would receive upon a liquidation); or

               -    change the authorized number of directors of our Board of
                    Directors.

     -    For so long as at least 800,000 shares of Series A Convertible
          Preferred Stock remain issued and outstanding we cannot, without the
          approval of at least 66-2/3% of the shares of Series A Convertible
          Preferred Stock then outstanding:

               -    authorize or issue any capital stock with rights senior to
                    or equal to the Series A Convertible Preferred Stock or
                    securities convertible or exchangeable into such capital
                    stock;

               -    authorize or issue any options, rights or warrants to
                    purchase capital stock of the Company;

               -    amend or alter any outstanding options, rights or warrants
                    in a manner that reduces or that has the effect of reducing
                    the per share exercise price for any outstanding options,
                    rights or warrants;

               -    authorize or issue any debt securities of the Company or any
                    of its subsidiaries, other than debt under the existing
                    revolving lines of credit or the replacement thereof on
                    substantially similar terms, except that we may issue
                    additional debt up to $1,000,000 in the aggregate in the
                    ordinary course of business and may incur trade payables in
                    the ordinary course of business;

               -    purchase, redeem, or otherwise acquire any of the Company's
                    capital stock, other than the redemption of the Series A
                    Convertible Preferred Stock;

               -    enter into an acquisition, sale, merger, joint venture,
                    consolidation or reorganization involving the Company or any
                    of its subsidiaries;

               -    sell or lease assets of the Company or any of its
                    subsidiaries, except in the ordinary course of business;

               -    declare or pay any cash dividends or make any distributions
                    on any of our capital stock, other than on the Series A
                    Convertible Preferred Stock;

               -    authorize the payment of, or pay to any individual employee
                    of the Company, cash compensation in excess of $500,000 per
                    annum; or

               -    enter into any transaction (or series of transactions),
                    including loans, with any employee, officer or director of
                    the Company or to or with his, her or its affiliates or
                    family members (other than with respect to payment of
                    compensation to actual full-time employees in the ordinary
                    course of business) involving $50,000 or more per year



                    individually or $250,000 or more per year in the aggregate.

     -    For so long as at least 1,200,000 shares of Series A Convertible
          Preferred Stock remain issued and outstanding we cannot, without the
          approval of the holders representing 66-2/3% of the shares of Series A
          Convertible Preferred Stock then outstanding:

               -    terminate or newly appoint the chief executive officer or
                    president of the Company;

               -    approve any annual capital expense budget if such budget
                    provides for annual capital expenditures by the Company and
                    its subsidiaries in excess of $1,000,000 in the aggregate in
                    any year; or

               -    approve the incurrence of any single capital expenditure (or
                    series of related capital expenditures) in excess of
                    $500,000.

          VIOLATION OF SPECIAL APPROVAL RIGHTS

     In the event we violate any of these special approval rights and do not
cure the violation within the prescribed cure period, which is 30 days for the
first such violation and 10 days for any subsequent violation, following notice
of that violation from any holder of Series A Convertible Preferred Stock, the
holders of the Series A Convertible Preferred Stock will have the right to elect
that number of additional directors to our board of directors necessary for them
to elect a majority of the Board of Directors.

     WARRANTS TO PURCHASE ADDITIONAL SHARES OF COMMON STOCK

     The investors will be issued warrants to purchase 3,000,000 shares of our
Common Stock. The warrants to purchase shares of Common Stock will have an
exercise period of seven years from the date of issuance and an initial exercise
price of $1.00 per share. In addition, the holders of the Common Stock warrants
have the option to exercise the warrants on a cashless or net issuance basis.
The warrants will have anti-dilution protection that is substantially similar to
that of the Series A Convertible Preferred Stock.

     WARRANTS TO PURCHASE ADDITIONAL SHARES OF SERIES A CONVERTIBLE PREFERRED
     STOCK

     The investors will be issued warrants to purchase 400,000 shares of Series
A Convertible Preferred Stock. (500,000 shares if the Company enters into an
additional securities purchase agreement). The warrants will have an exercise
period of one year from the date of issuance and have a cash exercise price of
$10.00 per share.

ANCILLARY AGREEMENTS

     In addition to the securities purchase agreement, the investors, the
placement agent and/or the Company entered into three ancillary agreements, each
of which is described below.

     INVESTOR RIGHTS AGREEMENT

     The investors, the placement agent and the Company have entered into an
investor rights agreement that will become effective at the closing of the
transactions contemplated by the securities purchase agreement that provides
certain rights to the investors and the placement agent.



          REGISTRATION RIGHTS

     Under the investor rights agreement, investors and the placement agent may
require the Company to register "Eligible Securities." "Eligible Securities" are
(1) the shares of Common Stock (a) issued or issuable upon the conversion of the
Series A Convertible Preferred Stock issued pursuant to the securities purchase
agreements or (b) issued or issuable upon exercise of the warrants to purchase
Series A Convertible Preferred Stock and conversion into Common Stock of the
Series A Convertible Preferred Stock issued or issuable pursuant to such
exercise; (2) the shares of Common Stock issued or issuable upon exercise of the
warrants issued to the placement agent; (3) the shares of Common Stock issued
pursuant to the first securities purchase agreement; (4) the shares of Common
Stock issued or issuable upon exercise of the warrants to purchase Common Stock
issued under the first securities purchase agreement; and (5) any other shares
of Common Stock issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
shares described in clauses (1) - (4). The investors and the placement agent, as
a group, may require in each such registration an aggregate of four such
registrations of an amount of shares representing at least $5 million of market
value.

     The investors and the placement agent are also entitled to customary
"piggy-back" registration rights. In the event that underwriters institute
customary cut-back procedures, any shares registered pursuant to a registration
requested by the investors will have priority over the shares sought to be
included therein by any other selling stockholder.

          PARTICIPATION RIGHTS

     Under the investor rights agreement, each investor and the placement agent,
subject to certain exceptions, have a right of first offer with respect to
future sales by the Company of shares of its capital stock. Specifically each
investor and the placement agent have the right to acquire a portion of shares
of capital stock, in order to maintain their percentage ownership interests. The
investors also have the right to acquire any shares that the other investors
decline to purchase.

     STOCKHOLDERS AGREEMENT

     The investors and the Company have entered into a stockholders agreement
that will become effective at the closing of the transactions contemplated by
the securities purchase agreement. Under the stockholders agreement, each
investor will have the right to designate one member to the Board of Directors
and to have a representative attend all meetings of the Board of Directors as a
board observer so long as it holds at least 200,000 shares of Series A
Convertible Preferred Stock. Additionally, the investors and the Company have
agreed that for so long as an investor owns at least 2,000,000 shares of Common
Stock (assuming conversion of all Series A Convertible Preferred Stock and the
exercise of all Series A Convertible Preferred Stock warrants and Common Stock
warrants held by such investor), a representative of such investor is entitled
to attend all meetings of the Board of Directors as an observer if such investor
does not have a designated board member. For purposes of the stockholders
agreement, Morgan Stanley and Originators Investment Plan, L.P. are collectively
considered to be one investor.

     Each investor also agrees that if it converts more the 50% of the Series A
Convertible Preferred Stock it purchases under the securities purchase
agreement, it will, at the request of the Company, convert the remainder of its
Series A Convertible Preferred Stock.

     STOCK TRADING AGREEMENT

     Each of the investors, the placement agent and certain officers of the
Company have entered into a stock trading agreement that provides for
restrictions on their sale of Common Stock into the public market. Under the



stock trading agreement, the parties will not be able to sell their respective
shares of Common Stock into the public market before the successful completion
by us of a Qualified Primary Offering. If a Qualified Primary Offering is not
completed within 18 months after the closing of the transactions contemplated by
the securities purchase agreement, the parties may sell their respective shares
subject to the following restrictions:

          -    the closing price of our Common Stock as reported on the American
               Stock Exchange (or, if not traded on the American Stock Exchange,
               any national securities exchange or automated quotation services
               on which the Common Stock is then listed for trading) must exceed
               $4.00 per share (as adjusted for stock splits, stock combinations
               and the like) for each of the twenty (20) consecutive trading
               days immediately prior to the date of sale;

          -    the number of shares of Common Stock sold by a party on any
               trading day may not exceed five percent of the average daily
               trading volume of the Common Stock as reported on the American
               Stock Exchange (or, if not traded on the American Stock Exchange,
               any national securities exchange or automated quotation services
               on which the Common Stock is then listed for trading) for the
               twenty (20) consecutive trading days (as adjusted to exclude the
               highest and the lowest volume trading days for such twenty (20)
               consecutive trading day period) ending on the date immediately
               prior to such trading day;

          -    the average daily trading volume of the Common Stock as reported
               on the American Stock Exchange (or, if not traded on the American
               Stock Exchange, any national securities exchange or automated
               quotation services on which the Common Stock is then listed for
               trading) for the twenty (20) consecutive trading days (as
               adjusted to exclude the highest and the lowest volume trading
               days for such twenty (20) consecutive trading day period) ending
               on the date immediately prior to such trading day must exceed
               150,000 shares;

          -    the number of shares of Common Stock sold by a party into the
               public market in any three-month period may not exceed fifteen
               percent of that party's total holdings of Common Stock
               (calculated assuming the exercise of all rights, options and
               warrants to purchase Common Stock or securities convertible or
               exchangeable for shares of Common Stock, and the conversion or
               exchange of all securities convertible or exchangeable for Common
               Stock) on the date of the closing of the transactions
               contemplated by the securities purchase agreement (as adjusted
               for stock splits, stock combinations and the like); and

          -    sales of at least 10,000 shares or more of Common Stock must be
               executed at a minimum price of 90% of the ask price as reported
               on the American Stock Exchange (or, if not traded on the American
               Stock Exchange, any national security exchange or automated
               quotation services on which our shares of Common Stock are listed
               for trading).

     Subject to the expiration of any "lock-up" agreements entered into by the
parties to the stock trading agreement, each party may sell shares of Common
Stock into the public market following a Qualified Public Offering subject to
the following restrictions:



          -    the number of shares of Common Stock sold by a party on any
               trading day may not exceed five percent of the average daily
               trading volume of the Common Stock as reported on the American
               Stock Exchange (or, if not traded on the American Stock Exchange,
               any national securities exchange or automated quotation services
               on which the Common Stock is then listed for trading) for the
               twenty (20) consecutive trading days (as adjusted to exclude the
               highest and the lowest volume trading days for such twenty (20)
               consecutive trading day period) ending on the date immediately
               prior to such trading day,

          -    the number of shares of Common Stock sold by a party into the
               public market in any three-month period may not exceed twenty
               percent of that party's total holdings of Common Stock
               (calculated assuming the exercise of all rights, options and
               warrants to purchase Common Stock or securities convertible or
               exchangeable for shares of Common Stock, and the conversion or
               exchange of all securities convertible or exchangeable for Common
               Stock) on the date of the closing of the transactions
               contemplated by the securities purchase agreement (as adjusted
               for stock splits, stock combinations and the like), and

          -    sales of at least 10,000 shares or more of Common Stock must be
               executed at a minimum price of 90% of the ask price as reported
               on the American Stock Exchange (or, if not traded on the American
               Stock Exchange, any national security exchange or automated
               quotation services on which our shares of Common Stock are listed
               for trading).

     Each party to the stock trading agreement and the Company will have a right
of first offer if any other party to the stock trading agreement intends to sell
its shares in a private transaction. The stock trading agreement will terminate
three years after it becomes effective. However, if a Qualified Primary Offering
is completed within three years after it becomes effective, the stock trading
agreement will terminate 18 months after the completion of the Qualified Primary
Offering.

VOTE REQUIRED; VOTING AGREEMENT; RECOMMENDATION OF THE BOARD OF DIRECTORS

     The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the
Annual Meeting will be required to approve this Proposal 5. Abstentions will be
counted toward the tabulation of votes cast on this proposal and will have the
same effect as negative votes. Broker non-votes are counted towards a quorum,
but are not counted for any purpose in determining whether this Proposal 5 has
been approved.

     Newcourt Capital USA Inc., a subsidiary of CIT and the bridge lender to the
Company and one of the strategic investors in the proposed private placement,
has informed the Company that it has sought and obtained the written agreement
of and a proxy from certain holders of the Company's Common Stock, each of whom
is a significant stockholder and an affiliate of a director or former director
of the Company, to vote in favor of Proposal 5. These stockholders own in the
aggregate approximately 52% of the outstanding shares of Common Stock of the
Company.

     THE BOARD OF DIRECTORS BELIEVES THAT THE ISSUANCE OF THE SERIES A
CONVERTIBLE PREFERRED STOCK, THE COMMON STOCK, THE WARRANTS TO PURCHASE SERIES A
CONVERTIBLE PREFERRED STOCK, AND THE WARRANTS TO PURCHASE COMMON STOCK IS IN THE
BEST INTERESTS OF OUR STOCKHOLDERS AND, THEREFORE, RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THIS PROPOSAL 5.



                         MISCELLANEOUS AND OTHER MATTERS

STOCKHOLDER LIST

     For at least ten days prior to the meeting, a list of stockholders entitled
to vote at the Annual Meeting, arranged in alphabetical order, showing the
address of and number of shares registered in the name of each stockholder, will
be open for examination by any stockholder, for any purpose germane to the
Annual Meeting, during ordinary business hours beginning at Electric City's
principal executive offices by contacting the Corporate Secretary. The list will
also be available for examination at the meeting.

PROPOSALS OF STOCKHOLDERS FOR NEXT YEAR'S MEETING

     Stockholders may present proper proposals for inclusion in the proxy
statement for our next nnual meeting of stockholders by submitting their
proposals to us in a timely manner. In order to be included in the proxy
statement for our next annual meeting, stockholder proposals must be received by
us no later than January 1, 2002, and must otherwise comply with the
requirements of the applicable SEC rules. Notice of intention to present
proposals at next year's annual meeting must be addressed to Corporate
Secretary, Electric City Corp., 1280 Landmeier Road, Elk Grove Village, Illinois
60007. Any shareholder proposal to be considered at the our 2002 Annual Meeting
of Shareholders, but not included in the proxy materials, must be submitted to
the Company's Corporate Secretary by February 14, 2002, or the persons appointed
as proxies may exercise their discretionary voting authority with respect to
that proposal. The persons appointed as proxies may also exercise their
discretionary voting authority with respect to shareholder proposals submitted
prior to February 14, 2002, unless the proponent otherwise complies with the
requirements of the Commission's Rule 14a-4 or Rule 14a-8.

OTHER BUSINESS

     The Board of Directors is not aware of any other matters to be presented at
the Annual Meeting other than those mentioned in this proxy statement and our
enclosed Notice of Annual Meeting of Stockholders. If, however, any other
matters properly come before the Annual Meeting, the persons named in the
accompanying proxy will vote in accordance with their best judgment.

ADDITIONAL INFORMATION

     The quarterly financial data included in our report on Form 10-QSB for the
quarterly period ended on March 31, 2001 and filed with the Commission on May
15, 2001 is hereby incorporated by reference. The information set forth under
Management's Discussion and Analysis or Plan of Operation in our report on Form
10-KSB for the fiscal year ended December 31, 2000 and filed with the Commission
on April 20, 2001 (and a copy of which is included in the Annual Report to
Shareholders which has been sent to shareholders with this proxy statement) are
hereby incorporated by reference.

     We have enclosed a copy of our Annual Report to Stockholders for the fiscal
year ended December 31, 2000, which includes our Annual Report on Form 10-KSB
for such periods that we filed with the SEC. Upon the written request of any
person who is a stockholder as of the record date, we will provide copies of the
exhibits to



the Form 10-KSB upon payment of a reasonable fee which shall not exceed our
reasonable expenses in providing the exhibits. You should direct requests for
these materials to Electric City Corp., 1280 Landmeier Road, Elk Grove Village,
Illinois 60007, Attention: Corporate Secretary.

                                   BY ORDER OF THE BOARD OF DIRECTORS,
                                   Greg M. Rice
                                   SECRETARY

Elk Grove Village, Illinois
August 3, 2001

                         YOU ARE REQUESTED TO COMPLETE,
               DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.


                                                                      APPENDIX A

                               ELECTRIC CITY CORP.
                             AUDIT COMMITTEE CHARTER

ORGANIZATION

         The audit committee shall be composed of board members, the majority of
which are independent of the management of Electric City Corp. (the "Company")
and are free of any relationship that would interfere with their exercise of
independent judgment as a committee member. Such members of the audit committee
shall be able to read and understand fundamental financial statements or will
become able to do so in a reasonable period of time after the appointment to the
audit committee. At least one member of the audit committee shall have prior
experience in accounting or finance or other comparable experience or
background. The committee may be modified from time to time by a simple majority
vote of the board of directors. The chair of the committee will report on the
committee's activities and recommendations to the board at each full meeting of
the directors.


STATEMENT OF POLICY

         Senior operating management of the Company, as overseen by the board of
directors, is responsible for the Company's internal controls. The audit
committee shall assist the Company's board members in fulfilling their
responsibility to the shareholders, potential shareholders and investment
community relating to the reliability of financial reporting, the effectiveness
and efficiency of operations and compliance with applicable laws and
regulations. In addition, the audit committee shall review transactions
involving the Corporation and its officers, directors, affiliates and
significant shareholders. In so doing, the audit committee shall be responsible
for maintaining open communication among board members, the independent auditors
and the management of the Company.

RESPONSIBILITIES

         In carrying out its responsibility, the audit committee shall:

    o    Review and recommend to the board the independent auditors to be
         selected to audit the financial statements of the Company. In addition,
         the committee will review the auditors' fees to determine whether they
         are appropriate for the services they render;




    o    Meet with the independent auditors and management of the Company to
         review the scope of the proposed audit for the current year and the
         audit procedures to be performed;

    o    Meet with the independent auditors and management of the Company at the
         conclusion of the audit to review the results of the audit, including
         any comments or recommendations of the independent auditors, especially
         the contents of any auditors' letter to management;

    o    Confirm and assure the independence of the independent auditors and
         review any management consulting services provided by the independent
         auditors and the related fees;

    o    Review with the independent auditors and with the financial and
         accounting personnel the adequacy and effectiveness of the Company's
         internal controls and elicit any recommendations for improving the
         internal controls or particular areas where new or more detailed
         controls or procedures are desirable;

    o    Review any management consulting services provided by the auditors;

    o    Review legal and regulatory matters that may have a material effect on
         the financial statements;

    o    Inquire of management and the independent auditors regarding
         significant risks or exposures and assess the steps management has
         taken to minimize such risks and exposures to the Company;

    o    Review the financial statements contained in the annual report to
         shareholders with management and the independent auditors;

    o    Inquire of the independent auditors regarding their qualitative
         judgments about the appropriateness, not just the acceptability, of the
         accounting principles and the clarity of the financial disclosures.
         Also inquire of the auditors regarding their reasoning in accepting or
         questioning management's significant estimates, changes or proposed
         changes in accounting principles and disclosure practices management
         employs for new transactions or events;

    o    Provide sufficient opportunity at all meetings of the audit committee
         for the independent auditors to meet with the members of the audit
         committee without members of management present. Among the items to be
         discussed in these meetings are the independent auditors' evaluation of
         the Company's financial personnel and the cooperation received by the
         independent auditors during the course of the audit;




    o    Consider whether audit committee members are provided with appropriate
         background information and training and, when necessary, seek such
         information and training from management or the independent auditors;

    o    Submit the minutes of all meetings of the audit committee to the board;

    o    Investigate any matter brought to its attention within the scope of its
         duties, with the power to retain outside counsel for this purpose if,
         in its judgment, that is appropriate;

    o    Review the Company's proxy statement disclosure concerning the report
         of the audit committee and the independence of the members of the audit
         committee, include the audit committee charter as an exhibit to the
         Company's proxy statement at least once every three years, review and
         reassess the adequacy of the audit committee charter on an annual basis
         and recommend any changes to the audit committee charter to the board;

    o    Verify that the Company's auditors have reviewed the Company's
         financial information prior to filing the Company's Form 10-Q Reports;

    o    Review transactions involving the Corporation and its officers,
         directors, affiliates and significant shareholders.


                                                           APPENDIX B





                               [ELECTRIC CITY LOGO]








                               ELECTRIC CITY CORP.

                            2001 STOCK INCENTIVE PLAN








                                    Page 1 of 21





                               ELECTRIC CITY CORP.
                            2001 STOCK INCENTIVE PLAN


1.       ESTABLISHMENT AND PURPOSE.
         --------------------------

The Electric City Corp. 2001 Stock Incentive Plan (the "Plan") is established by
Electric City Corp. (the "Company") to attract and retain persons eligible to
participate in the Plan; motivate Participants to achieve long-term Company
goals; and further align Participants' interests with those of the Company's
other stockholders. The Plan is adopted as of May 30, 2001, subject to approval
by the Company's stockholders within 12 months after such adoption date. Unless
the Plan is discontinued earlier by the Board as provided herein, no Award shall
be granted hereunder on or after the date 10 years after the effective date.

Certain terms used herein are defined as set forth in Section 10.

2.       ADMINISTRATION; ELIGIBILITY.
         ---------------------------

The Plan shall be administered by a Committee, PROVIDED, HOWEVER, that, if at
any time no Committee shall be in office, the Plan shall be administered by the
Board. The Plan may be administered by different Committees with respect to
different groups of Eligible Individuals. As used herein, the term
"Administrator" means the Board or any of its Committees as shall be
administering the Plan.

The Administrator shall have plenary authority to grant Awards pursuant to the
terms of the Plan to Eligible Individuals. Participation shall be limited to
such persons as are selected by the Administrator. Awards may be granted as
alternatives to, in exchange or substitution for, or replacement of, awards
outstanding under the Plan or any other plan or arrangement of the Company or a
Subsidiary (including a plan or arrangement of a business or entity, all or a
portion of which is acquired by the Company or a Subsidiary). The provisions of
Awards need not be the same with respect to each Participant.

Among other things, the Administrator shall have the authority, subject to the
terms of this Plan:

     a) to select the Eligible Individuals to whom Awards may from time to time
        be granted;

     b) to determine whether and to what extent Stock Options, Stock
        Appreciation Rights, Stock Awards or any combination thereof are to be
        granted hereunder;

     c) to determine the number of shares of Stock to be covered by each Award
        granted hereunder;

                                  Page 2 of 21



     d) to approve forms of agreement for use under the Plan;

     e) to determine the terms and conditions, not inconsistent with the terms
        of this Plan, of any Award granted hereunder (including, but not limited
        to: (i) the option price, (ii) any vesting restriction or limitation,
        (iii) any vesting acceleration or forfeiture wavier, (iv) any right of
        repurchase, right of first refusal or other transfer or disposition
        restriction, (v) any grant of registration rights, (vi) any repurchase
        rights, (vii) any restrictions on voting, (viii) any commitments to pay
        cash bonuses, to make, arranges for or guaranty loans or to transfer
        other property to optionees upon exercise of Stock Options, and (ix) the
        issuance of Shares of Common Stock upon the exercise of Stock Options
        regarding any Award and the shares of Stock relating thereto, based on
        such factors or criteria as the Administrator shall determine);

     f) subject to Section 8(a), to modify, amend or adjust the terms and
        conditions of any Award, at any time or from time to time, including,
        but not limited to, with respect to (i) performance goals and targets
        applicable to performance-based Awards pursuant to the terms of the Plan
        and (ii) extension of the post-termination exercisability period of
        Stock Options;

     g) to determine to what extent and under what circumstances Stock and other
        amounts payable with respect to an Award shall be deferred;

     h) to determine the Fair Market Value; and

     i) to determine the type and amount of consideration to be received by the
        Company for any Stock Award issued under Section 6.

The Administrator shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.

Except to the extent prohibited by applicable law, the Administrator may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any portion of its responsibilities
and powers to any other person or persons selected by it. Any such allocation or
delegation may be revoked by the Administrator at any time. The Administrator
may authorize any one or more of their members or any officer of the Company to
execute and deliver documents on behalf of the Administrator.

Any determination made by the Administrator or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Award shall be made
in the sole discretion of the Administrator or such delegate at the time of the
grant of the Award or, unless in contravention of any express term of the Plan,
at any time thereafter. All

                                  Page 3 of 21


decisions made by the Administrator or any appropriately delegated officer
pursuant to the provisions of the Plan shall be final and binding on all
persons, including the Company and Participants.

No member of the Administrator, and no officer of the Company, shall be liable
for any action taken or omitted to be taken by such individual or by any other
member of the Administrator or officer of the Company in connection with the
performance of duties under this Plan, except for such individual's own willful
misconduct or as expressly provided by law.

3.       STOCK SUBJECT TO THE PLAN.
         -------------------------

Subject to adjustment as provided in this Section 3, the aggregate number of
shares of Stock which may be delivered under this Plan shall not exceed 800,000
shares; PROVIDED, HOWEVER, that, as of January 1 of each year, commencing with
the year 2002, the maximum number of shares of Stock which may be delivered
under the Plan shall automatically increase by a number equal to the lesser of
(i) 5% of the total number of shares of stock then outstanding, assuming for the
purpose of the conversion into Stock of all outstanding securities that are
convertible by their terms (directly or indirectly) into Stock, or (ii) 500,000
shares.

To the extent any shares of Stock covered by an Award are not delivered to a
Participant or beneficiary thereof because the Award expires, is forfeited,
canceled or otherwise terminated, or the shares of Stock are not delivered
because the Award is settled in cash or used to satisfy the applicable tax
withholding obligation, such shares shall not be deemed to have been delivered
for purposes of determining the maximum number of shares of Stock available for
delivery under the Plan.

Subject to adjustment as provided in this Section 3, the maximum number of
shares that may be covered by Stock Options, Stock Appreciation Rights and Stock
Awards, in the aggregate, granted to any one Participant during any calendar
year shall be 1,500,000 shares.

In the event of any Company stock dividend (except stock dividends paid in
Common Stock to the holders of the Company's preferred stock), stock split,
combination or exchange of shares, recapitalization or other change in the
capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale by
the Company of all or a substantial portion of its assets (measured on either a
stand-alone or consolidated basis), reorganization, rights offering, partial or
complete liquidation, or any other corporate transaction, Company share offering
or other event involving the Company and having an effect similar to any of the
foregoing, the Administrator may make such substitution or adjustments in the
(A) number and kinds of shares that may be delivered under the Plan, (B)
additional maximums imposed in the immediately preceding paragraph, (C) number
and kind of shares subject to outstanding awards, (D) exercise price of
outstanding Stock Options and Stock Appreciation Rights

                                  Page 4 of 21



and (E) other characteristics or terms of the Awards as it may determine
appropriate in its sole discretion to equitably reflect such corporate
transaction, share offering or other event, PROVIDED, HOWEVER, that the number
of shares subject to any Award shall always be a whole number.

4.       STOCK OPTIONS.
         -------------

Stock Options may be granted alone or in addition to other Awards granted under
the Plan and may be of two types: Incentive Stock Options and Non-Qualified
Stock Options. Any Stock Option granted under this Plan shall be in such form as
the Administrator may from time to time approve.

The Administrator shall have the authority to grant any Participant Incentive
Stock Options, Non-Qualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights). Incentive Stock Options
may be granted only to employees of the Company and its subsidiaries (within the
meaning of Section 424(f) of the Code). To the extent that any Stock Option is
not designated as an Incentive Stock Option or, even if so designated, does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock
Option. Incentive Stock Options may be granted only within 10 years from the
date the Plan is adopted, or the date the Plan is approved by the Company's
stockholders, whichever is earlier.

Stock Options shall be evidenced by options agreements, each in a form approved
by the Administrator. An option agreement shall indicate on its face whether it
is intended to be an agreement for an Incentive Stock Option or a Non-Qualified
Stock Option. The grant of a Stock Option shall occur as of the date the
Administrator determines.

Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be exercised, so as
to disqualify the Plan under Section 422 of the Code or, without the consent of
the Optionee affected, to disqualify any Incentive Stock Option under Section
422 of the Code.

Stock Options granted under this Section 4 shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Administrator shall deem desirable:

     a) EXERCISE PRICE. The exercise price per share of Stock purchasable under
        a Stock Option shall be determined by the Administrator. If the Stock
        Option is intended to qualify as an Incentive Stock Option, the exercise
        price per share shall be not less than the Fair Market Value per share
        on the date the Stock Option is granted, or if granted to an individual
        who is a Ten Percent Holder, not less than 110% of such Fair Market
        Value per share.

     b) OPTION TERM. The term of each Stock Option shall be fixed by the
        Administrator, but no Incentive Stock Option shall be exercisable more
        than 10 years (or five

                                  Page 5 of 21



        years in the case of an individual who is a Ten Percent Holder)
        after the date the Incentive Stock Option is granted.

     c) EXERCISABILITY. Except as otherwise provided herein, Stock Options shall
        be exercisable at such time or times, and subject to such terms and
        conditions, as shall be determined by the Administrator. If the
        Administrator provides that any Stock Option is exercisable only in
        installments, the Administrator may at any time waive such installment
        exercise provisions, in whole or in part, based on such factors as the
        Administrator may determine. In addition, the Administrator may at any
        time, in whole or in part, accelerate the exercisability of any Stock
        Option.

     d) METHOD OF EXERCISE. Subject to the provisions of this Section 4, Stock
        Options may be exercised, in whole or in part, at any time during the
        option term by giving written notice of exercise to the Company
        specifying the number of shares of Stock subject to the Stock Option to
        be purchased.

        The exercise price of any Stock Option shall be paid in full in cash (by
        certified or bank check or such other instrument as the Company may
        accept) or, unless otherwise provided in the applicable option
        agreement, by one or more of the following: (i) in the form of
        unrestricted Stock already owned by the Optionee (or, in the case of the
        exercise of a Non-Qualified Stock Option, Restricted Stock subject to a
        Stock Award hereunder) based in any such instance on the Fair Market
        Value of the Stock on the date the Stock Option is exercised; (ii) by
        certifying ownership of shares of Stock owned by the Optionee to the
        satisfaction of the Administrator for later delivery to the Company as
        specified by the Company; (iii) by irrevocably authorizing a third party
        to sell shares of Stock (or a sufficient portion of the shares) acquired
        upon exercise of the Stock Option and remit to the Company a sufficient
        portion of the sale proceeds to pay the entire exercise price and any
        tax withholding result from such exercise; or (iv) by any combination of
        cash and/or any one or more of the methods specified in clauses (i),
        (ii) and (iii). Notwithstanding the foregoing, a form of payment shall
        not be permitted to the extent it would cause the Company to recognize a
        compensation expense (or additional compensation expense) with respect
        to the Stock Option for financial reporting purposes, unless otherwise
        determined by the Administrator.

        No shares of Stock shall be issued upon exercise of a Stock Option until
        full payment therefore has been made. Upon exercise of a Stock Option
        (or portion thereof), the Company shall have a reasonable time to issue
        the Stock for which the Stock Option has been exercised, and the
        Optionee shall not be treated as a stockholder for any purposes
        whatsoever prior to such issuance. No adjustment shall be made for cash
        dividends or other rights for which the record date is prior to the date
        such Stock is recorded as issued and transferred in the Company's
        official stockholder records, except as otherwise provided herein or in
        the applicable option agreement.

                                  Page 6 of 21



     e) TRANSFERABILITY OF STOCK OPTIONS. Except as otherwise provided in the
        applicable option agreement, a Non-Qualified Stock Option (i) shall be
        transferable by the Optionee to a Family Member of the Optionee,
        provided that (A) any such transfer shall be by gift with no
        consideration and (B) non subsequent transfer of such Stock Option shall
        be permitted other than by will or the laws of descent and distribution,
        and (ii) shall not otherwise be transferable except by will or the laws
        of descent and distribution. An Incentive Stock Option shall not be
        transferable except by will or the laws of descent and distribution. A
        Stock Option shall be exercisable, during the Optionee's lifetime, only
        by the Optionee or by the guardian or legal representative of the
        Optionee, it being understood that the terms "holder" and "Optionee"
        include the guardian and legal representative of the Optionee named in
        the applicable option agreement and any person to whom the Stock Option
        is transferred (X) pursuant to the first sentence of this Section 4(e)
        or pursuant to the applicable option agreement or (Y) by will or the
        laws of descent and distribution. Notwithstanding the foregoing,
        references herein to the termination of an Optionee's employment or
        provision of services shall mean the termination of employment or
        provision of services of the person to whom the Stock Option was
        originally granted.

     f) TERMINATION BY DEATH. Unless otherwise provided in the applicable option
        agreement, if an Optionee's employment or provision of services
        terminates by reason of death, any Stock Option held by such Optionee
        may thereafter be exercised, to the extent then exercisable, or on such
        accelerated basis as the Administrator may determine, for a period of
        one year from the date of such death or until the expiration of the
        stated terms of such Stock Option, whichever period is shorter. In the
        event of termination of employment or provision of services due to
        death, if an Incentive Stock Option is exercised after the expiration of
        the exercise periods that apply for purposes of Section 422 of the Code,
        such Stock Option will thereafter be treated as a Non-Qualified Stock
        Option.

     g) TERMINATION BY REASON OF DISABILITY. Unless otherwise provided in the
        applicable option agreement, if an Optionee's employment or provision of
        services terminated by reason of Disability, any Stock Option held by
        such Optionee may thereafter be exercised by the Optionee, to the extent
        it was exercisable at the time of termination, or on such accelerated
        basis as the Administrator may determine, for a period of three years
        from the date of such termination of employment or provision of services
        or until the expiration of the stated terms of such Stock Option,
        whichever period is shorter, PROVIDED, HOWEVER, that if the Optionee
        dies within such period, an unexercised Stock Option held by such
        Optionee shall, notwithstanding the expiration of such period, continue
        to be exercisable to the extent to which it was exercisable at the time
        of death for a period of twelve months from the date of such death or
        until the expiration of the stated term of such Stock Option, whichever
        period is shorter. In the event of termination of employment or
        provision of services by reason of Disability, if an Incentive Stock
        Option is exercised after the expiration of the exercise periods that
        apply for

                                  Page 7 of 21



        purposes of Section 422 of the Code, such Stock Option will thereafter
        be treated as a Non-Qualified Stock Option.

     h) TERMINATION BY REASON OF RETIREMENT. Unless otherwise provided in the
        applicable option agreement, if an Optionee's employment or provision of
        services terminated by reason of Retirement, any Stock Option held by
        such Optionee may thereafter be exercised by the Optionee, to the extent
        it was exercisable at the time of such retirement, or on such
        accelerated basis as the Administrator may determine, for a period of
        three years from the date of such termination of employment or provision
        of services or until the expiration of the stated terms of such Stock
        Option, whichever period is shorter, PROVIDED, HOWEVER, that if the
        Optionee dies within such period, an unexercised Stock Option held by
        such Optionee shall, notwithstanding the expiration of such period,
        continue to be exercisable to the extent to which it was exercisable at
        the time of death for a period of twelve months from the date of such
        death or until the expiration of the stated term of such Stock Option,
        whichever period is shorter. In the event of termination of employment
        or provision of services by reason of Retirement, if an Incentive Stock
        Option is exercised after the expiration of the exercise periods that
        apply for purposes of Section 422 of the Code, such Stock Option will
        thereafter be treated as a Non-Qualified Stock Option.

     i) OTHER TERMINATION. Unless otherwise provided in the applicable option
        agreement, if an Optionee's employment or provision of services
        terminates for any reason other than death, Disability or Retirement,
        any Stock Option held by such Optionee shall thereupon terminate,
        PROVIDED, HOWEVER, that if such termination of employment or provision
        of services is involuntary on the part of the Optionee and without
        Cause, such Stock Option, to the extent then exercisable, or on such
        accelerated basis as the Administrator may determine, may be exercised
        for the lesser of three months from the date of such termination of
        employment or provision of services or the remainder of such Stock
        Option's term, as provided, further, that if the Optionee dies within
        such period, any unexercised Stock Option held by such Optionee shall,
        not withstanding the expiration of such period, continue to be
        exercisable to the extent to which it was exercisable at the time of
        death for a period of twelve months from the date of such death or until
        the expiration of the stated term of such Stock Option, whichever period
        is shorter. In the event of termination of employment or provision of
        services for any reason other than death, Disability or Retirement, if
        an Incentive Stock Option is exercised after the expiration of the
        exercise periods that apply for purposes of Section 422 of the Code,
        such Stock Option will thereafter be treated as a Non-Qualified Stock
        Option.

     j) EXCEPTION TO TERMINATION. Notwithstanding anything in this Plan to the
        contrary, if an Optionee's employment by, or provision of services to,
        the Company or an Affiliate ceases as a result of a transfer of such
        Optionee from the Company to an Affiliate, or from an Affiliate to the
        Company, such transfer will not be a

                                  Page 8 of 21



        termination of employment or provision of services to, the Company or an
        Affiliate, or from an Affiliate to the Company, such transfer will not
        be a termination of employment or provision of services for purposes of
        this Plan, unless expressly determined otherwise by the Administrator. A
        termination of employment or provision of services shall occur for an
        Optionee who is employed by, or provides services to, an Affiliate of
        the Company if the Affiliate shall cease to be an Affiliate and the
        Optionee shall not immediately thereafter be employed by, or provide
        services to, the Company or an affiliate.

5.       STOCK APPRECIATION RIGHTS.
         -------------------------

Stock Appreciation Rights may be granted either on a stand-alone basis or in
conjunction with all or part of any Stock Option granted under the Plan. Such
rights may be granted either at or after the time of grant of such Stock Option.
A Stock Appreciation Right shall terminate and no longer be exercisable as
determined by the Administrator, or, if granted in conjunction with all or part
of any Stock Option, upon the termination or exercise of the related Stock
Option.

A Stock Appreciation Right may be exercised by a Participant as determined by
the Administrator in accordance with this Section 5, and, if granted in
conjunction with all or part of any Stock Option, by surrendering the applicable
portion of the related Stock Option in accordance with procedures established by
the Administrator. Upon such exercise and surrender, the Participant shall be
entitled to receive an amount determined in the manner prescribed in this
Section 5. Stock Options which have been so surrendered, if any, shall no longer
be exercisable to the extent the related Stock Appreciation Rights have been
exercised.

Stock Appreciation Rights shall be subject to such terms and conditions as shall
be determined by the Administrator, including the following:

          (i) Stock Appreciation Rights granted on a stand-alone basis shall be
          exercisable only at such time or times and to such extent as
          determined by the Administrator. Stock Appreciation rights granted in
          conjunction with all or part of any Stock Option shall be exercisable
          only at the time or times and to the extent that the Stock Options to
          which they relate are exercisable in accordance with the provisions of
          Section 4 and this Section 5.

          (ii) Upon the exercise of a Stock Appreciation Right, an Optionee
          shall be entitled to receive an amount in cash, shares of Stock or
          both equal in value to the excess of the Fair Market Value of one
          share of Stock over (i) such value per share of Stock as shall be
          determined by the Administrator at the time of grant (if the Stock
          Appreciation Right is granted on a stand-alone basis), or (ii) the
          exercise price per share specified in the related Stock Option (if the
          Stock Appreciation Right is granted in conjunction with all or part of
          any Stock Option), multiplied by the number of shares

                                  Page 9 of 21



          in respect of which the Stock Appreciation Right shall have been
          exercised, with the Administrator having the right to determine the
          form of payment.

          (iii) A Stock Appreciation Right shall be transferable only to, and
          shall be exercisable only by, such persons permitted in accordance
          with Section 4(e).

6.       STOCK AWARDS OTHER THAN OPTIONS.
         -------------------------------

Stock Awards may be directly issued under the Plan (without any intervening
options), subject to such terms, conditions, performance requirements,
restrictions, forfeiture provisions, contingencies and limitations as the
Administrator shall determine. Stock Awards may be issued which are fully and
immediately vested upon issuance or which vest in one or more installments over
the Participant's period of employment or other service to the Company or upon
the attainment of specified performance objectives, or the Company may issue
Stock Awards which entitle the Participant to receive a specified number of
vested shares of Stock upon the attainment of one or more performance goals or
service requirements established by the Administrator.

Shares representing a Stock Award shall be evidenced in such manner as the
Administrator may deem appropriate, including book-entry registration or
issuance of one or more certificates (which may bear appropriate legends
referring to the terms, conditions and restrictions applicable to such Award).
The Administrator may require that any such certificates be held in custody by
the Company until any restrictions thereon shall have lapsed and that the
Participant deliver a stock power, endorsed in blank, relating to the Stock
covered by such Award.

A Stock Award may be issued in exchange for any consideration which the
Administrator may deem appropriate in each individual instance, including,
without limitation:

          (ii) cash or cash equivalents;

          (ii) past services rendered to the Company or any Affiliate; or

          (iii) future services to be rendered to the Company or any Affiliate
          (provided that, in such case, the par value of the stock subject to
          such Stock Award shall be paid in cash or cash equivalents, unless the
          Administrator provides otherwise).

A Stock Award that is subject to restrictions on transfer and/or forfeiture
provisions may be referred to as an award of "Restricted Stock" or "Restricted
Stock Units."

                                  Page 10 of 21


7.       CHANGE IN CONTROL PROVISIONS.
         ----------------------------

     a) IMPACT OF EVENT. Notwithstanding any other provision of the Plan to the
        contrary, in the event of a Change in Control:

          (i) Any Stock Options and Stock Appreciation Rights outstanding as of
          the date such Change in Control is determined to have occurred and not
          then exercisable and vested shall become fully exercisable and vested
          to the full extent of the original grant if such acceleration is
          provided for in the original grant;

          (ii) The restrictions applicable to any outstanding Stock Award shall
          lapse, and the Stock relating to such Award shall become free of all
          restrictions and become fully vested and transferable to the full
          extent of the original grant;

          (iii) All outstanding repurchase rights of the Company with respect to
          any outstanding Award shall terminate; and

          (iv) Outstanding Awards shall be subject to any agreement of merger or
          reorganization that effects such Change in Control, which agreement
          shall provide for:

               b) The continuation of the outstanding Awards by the Company, if
                  the Company is a surviving corporation;

               c) The assumption of the outstanding Awards by the surviving
                  corporation or its parent or subsidiary;

               d) The substitution by the surviving corporation or its parent or
                  subsidiary of equivalent awards for the outstanding Awards; or

               e) Settlement of each share of Stock subject to an outstanding
                  Award for the Change in Control Price (less, to the extent
                  applicable, the per share exercise price), or, if the per
                  share exercise price equals or exceeds the Change in Control
                  Price, the outstanding Award shall terminate and be canceled.

          (v) In the absence of any agreement with the Company effecting such
          Change in Control, each share of Stock subject to an outstanding Award
          shall be settled for the Change in Control Price (less, to the extent
          applicable, the per share exercise price), or, if the per share
          exercise price equals or exceeds the Change in Control Price, the
          outstanding Award shall terminate and be canceled.

        b)   DEFINITION OF CHANGE IN CONTROL. For purposes of the Plan, a
             "Change in Control" shall mean the happening of any of the
             following events:

                                  Page 11 of 21



          (i) An acquisition by any individual, entity or group (within the
          meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
          "Person") of beneficial ownership (within the meaning of Rule 13d-3
          promulgated under the Exchange Act) of 40% or more of either (1) the
          then outstanding shares of common stock of the Company (the
          "Outstanding Company Common Stock") or (2) the combined voting power
          of the then outstanding voting securities of the Company entitled to
          vote generally in the election of directors (the "Outstanding Company
          Voting Securities"); excluding, however, the following: (1) any
          acquisition directly from the Company, other than an acquisition by
          virtue of the exercise of a conversion privilege unless the security
          being so converted was itself acquired directly from the Company, (2)
          any acquisition by the Company; (3) any acquisition by any employee
          benefit plan (or related trust) sponsored or maintained by the Company
          or any corporation controlled by the Company; or (4) any acquisition
          by any Person pursuant to a transaction which complies with clauses
          (1), (2) and (3) of subsection (iii) of this Section 7(b); or

          (ii) Within any period of 24 consecutive months, a change in the
          composition of the Board such that the individuals who, immediately
          prior to such period, constituted the Board (such Board shall be
          hereinafter referred to as the "Incumbent Board") cease for any reason
          to constitute at least a majority of the Board, PROVIDED, HOWEVER, for
          purposes of this Section 7(b), that any individual who becomes a
          member of the Board during such period, whose election, or nomination
          for election by the Company's stockholders, was approved by a vote of
          at least a majority of those individuals who are members of the Board
          and who were also members of the Incumbent Board (or deemed to be such
          pursuant to this proviso) shall be considered as though such
          individual were a member of the Incumbent Board, but, provided
          further, that any such individual whose initial assumption of office
          occurs as a result of either an actual or threatened election contest
          (as such terms are used in Rule 14a-11 of Regulation 14A promulgated
          under the Exchange Act) or other actual or threatened solicitation of
          proxies or consents by or on behalf of a Person other than the Board
          shall not be so considered as a member of the Incumbent Board; or

          (iii) The approval by the stockholders of the Company of a
          reorganization, merger or consolidation or sale or other disposition
          of all or substantially all of the assets of the Company ("Corporate
          Transaction"); excluding, however, such a Corporate Transaction
          pursuant to which (1) all or substantially all of the individuals and
          entities who are the beneficial owners, respectively, of the
          outstanding Company Common Stock and Outstanding Company Voting
          Securities immediately prior to such Corporate Transaction will
          beneficially own, directly or indirectly, more than 40% of,
          respectively, the outstanding shares of common stock,

                                  Page 12 of 21


          and the combined voting power of the then outstanding voting
          securities entitled to vote generally in the election of directors, as
          the case may be, of the corporation resulting from such Corporate
          Transaction (including, without limitation, a corporation which has a
          result of such transaction owns the Company or substantially all of
          the Company's assets, either directly or through one or more
          subsidiaries) in substantially the same proportions as their
          ownership, immediately prior to such Corporate Transaction, of the
          outstanding Company Common Stock and Outstanding Company Voting
          Securities, as the case may be, (2) no Person (other than the Company;
          any employee benefit plan (or related trust) sponsored or maintained
          by the Company, by any corporation controlled by the Company, or by
          such corporation resulting from such Corporate Transaction) will
          beneficially own, directly or indirectly, more than 40% of,
          respectively, the outstanding shares of common stock of the
          corporation resulting from such Corporate Transaction or the combined
          voting power of the outstanding voting securities of such corporation
          entitled to vote generally in the election of directors, except to the
          extent that such ownership existed with respect to the Company prior
          to the Corporate Transaction; (3) individuals who were members of the
          Board immediately prior to the approval by the stockholders of the
          Corporation of such Corporate Transaction will constitute at lease a
          majority of the members of the board of directors of the corporation
          resulting from such Corporate transaction, and (4) a Corporate
          Transaction which results in the Company as the surviving entity; or

          (iv) The approval by the stockholders of the Company of a complete
          liquidation or dissolution of the Company, other than to a corporation
          pursuant to a transaction which would comply with clauses (1), (2),
          (3) and (4) of subsection (iii) of this Section 7(b), assuming for
          this purpose that such transaction were a Corporate Transaction.

     c) CHANGE IN CONTROL PRICE. For purposes of the Plan, "Change in Control
        Price" means the higher of (i) the highest reported sales price, regular
        way, of a share of Stock in any transaction reported on The American
        Stock Exchange or other national securities exchange on which such
        shares are listed or on NASDAQ, as applicable, during the 60-day period
        prior to and including the date of a Change in Control, (ii) if the
        Change in Control is the result of a tender or exchange offer or a
        Corporate Transaction, the highest price per share of Stock paid in such
        tender or exchange offer or Corporate Transaction, and (iii) the Fair
        Market Value of a share of Stock upon the Change in Control. To the
        extent that the consideration paid in any such transaction described
        above consists all or in part of securities or other non-cash
        consideration, the value of such securities or other non-cash
        consideration shall be determined in the sole discretion of the Board.

8.       MISCELLANEOUS.
         -------------
                                  Page 13 of 21



     a) AMENDMENT. The Board may amend, alter, or discontinue the Plan, but no
        amendment, alteration or discontinuation shall be made which would
        adversely affect the rights of a Participant under an Award theretofore
        granted without the Participant's consent, except such an amendment (i)
        made to avoid an expense charge to the Company or an Affiliate, or (ii)
        made to permit the Company or an Affiliate a deduction under the Code.
        No such amendment shall be made without the approval of the Company's
        stockholders to the extent such approval is required by law, agreement
        or the rules of any stock exchange or market on which the stock is
        listed.

        The Administrator may amend the terms of any Stock Option or other
        Award theretofore granted, prospectively or retroactively, but no such
        amendment shall adversely affect the rights of the holder thereof
        without the holder's consent.

        Notwithstanding anything in the Plan to the contrary, if any right
        under this Plan would cause a transaction to be ineligible for pooling
        of interests accounting that would, but for the right hereunder, be
        eligible for such accounting treatment, the Administrator may modify or
        adjust the right so that pooling of interests accounting shall be
        available, including the substitution of Common Stock having a Fair
        Market Value equal to the cash otherwise payable hereunder for the
        right which caused the transaction to be ineligible for pooling of
        interests accounting.

     b) UNFUNDED STATUS OF PLAN. It is intended that this Plan be an "unfunded"
        plan for incentive and deferred compensation. The Administrator may
        authorize the creation of trusts or other arrangements to meet the
        obligations created under this Plan to deliver Common Stock or make
        payments, provided that, unless the Administrator otherwise determines,
        the existence of such trusts or other arrangements is consistent with
        the "unfunded" status of this Plan.

     c) GENERAL PROVISIONS.

          (i) The Administrator may require each person purchasing or receiving
          shares pursuant to an Award to represent to and agree with the Company
          in writing that such person is acquiring the shares without a view to
          the distribution thereof. The certificates for such shares may include
          any legend which the Administrator deems appropriate to reflect any
          restrictions on transfer.

          All certificates for shares of Stock or other securities delivered
          under the Plan shall be subject to such stock transfer orders and
          other restrictions as the Administrator may deem advisable under the
          rules, regulations and other requirements of the Commission, any stock
          exchange or market on which the Stock is then listed and any
          applicable Federal or state securities law, and the Administrator may
          cause a legend or legends to be put on any such certificates to make
          appropriate reference to such restrictions.

                                  Page 14 of 21



          (ii) Nothing contained in the Plan shall prevent the Company or any
          Affiliate from adopting other or additional compensation arrangements
          for its employees.

          (iii) The adoption of the Plan shall not confer upon any employee,
          director, consultant or advisor any right to continued employment,
          directorship or service, nor shall it interfere in any way with the
          right of the Company or any Subsidiary or Affiliate to terminate the
          employment or service of any employee, consultant or advisor at any
          time.

          (iv) No later than the date as of which an amount first becomes
          includible in the gross income of the Participant for Federal income
          tax purposes with respect to any Award under the Plan, the Participant
          shall pay to the Company, or make arrangements satisfactory to the
          Company regarding the payment of, any Federal, state, local or foreign
          taxes of any kind required by law to be withheld with respect to such
          amount. Unless otherwise determined by the Administrator, withholding
          obligations may be settled with Stock, including Stock that is part of
          the Award that gives rise to the withholding requirement. The
          obligations of the Company under the Plan shall be conditional on such
          payment arrangements, and the Company, its Subsidiaries and its
          Affiliates shall, to the extent permitted by law, have the right to
          deduct any such taxes from any payment otherwise due to the
          Participant. The Administrator may establish such procedures as it
          deems appropriate for the settlement of withholding obligations with
          Stock.

          (v) The Administrator shall establish such procedures as it deems
          appropriate for a Participant to designate a beneficiary to whom any
          amounts payable in the event of the Participant's death are to be
          paid.

          (vi) Any amounts owed to the Company or an Affiliate by the
          Participant of whatever nature may be offset by the Company from the
          value of any shares of Common Stock, cash or other thing of value
          under this Plan or an agreement to be transferred to the Participant,
          and no shares of Common Stock, cash or other thing of value under this
          Plan or an agreement shall be transferred unless and until all
          disputes between the Company and the Participant have been fully and
          finally resolved and the Participant has waived all claims to such
          against the Company or an Affiliate.

          (vii) The grant of an Award shall in no way affect the right of the
          Company to adjust, reclassify, reorganize or otherwise change its
          capital or business structure or to merge, consolidate, dissolve,
          liquidate or sell or transfer all or any part of its business or
          assets.

                                  Page 15 of 21


          (viii) If any payment or right accruing to a Participant under this
          Plan (without the application of this Section 8(c)(viii), either alone
          or together with other payments or rights accruing to the Participant
          from the Company or an Affiliate ("Total Payments") would constitute a
          "parachute payment" (as defined in Section 280G of the Code and
          regulations thereunder), such payment or right shall be reduced to the
          largest amount or greatest right that will result in no portion of the
          amount payable or right accruing under this Plan being subject to an
          excise tax under Section 4999 of the Code or being disallowed as a
          deduction under Section 280G of the Code, PROVIDED, HOWEVER, that the
          foregoing shall not apply to the extent provided otherwise in an Award
          or in the event the Participant is party to an agreement with the
          Company or an Affiliate that explicitly provides for an alternate
          treatment of payments or rights that would constitute "parachute
          payments." The determination of whether any reduction in the rights or
          payments under this Plan is to apply shall be made by the
          Administrator in good faith after consultation with the Participant,
          and such determination shall be conclusive and binding on the
          Participant. The Participant shall cooperate in good faith with the
          Administrator in making such determination and providing the necessary
          information for this purpose. The foregoing provisions of this Section
          8(c)(viii) shall apply with respect to any person only if, after
          reduction for any applicable Federal excise tax imposed by Section
          4999 of the Code and Federal income tax imposed by the Code, the Total
          Payments accruing to such person would be less than the amount of the
          Total Payments as reduced, if applicable, under the foregoing
          provisions of this Plan and after reduction for only Federal income
          taxes.

          (ix) To the extent that the Administrator determines that the
          restrictions imposed by the Plan preclude the achievement of the
          material purposes of the Awards in jurisdictions outside the United
          States, the Administrator in its discretion may modify those
          restrictions as it determines to be necessary or appropriate to
          conform to applicable requirements or practices of jurisdictions
          outside of the United States.

          (x) The headings contained in this Plan are for reference purposes
          only and shall not affect the meaning or interpretation of this Plan.

          (xi) If any provision of this Plan shall for any reason be held to be
          invalid or unenforceable, such invalidity or unenforceability shall
          not affect any other provision hereby, and this Plan shall be
          construed as if such invalid or unenforceable provision were omitted.

          (xii) This Plan shall inure to the benefit of, and be binding upon,
          each successor and assign of the Company. All obligations imposed upon
          a Participant, and all rights granted to the Company hereunder, shall
          be binding upon the Participant's heirs, legal representatives and
          successors.

                                  Page 16 of 21



          (xiii) This Plan and each agreement granting an Award constitute the
          entire agreement with respect to the subject matter hereof and
          thereof.

          (xiv) In the event there is an effective registration statement under
          the Securities Act pursuant to which shares of Stock shall be offered
          for sale in an underwritten offering, a Participant shall not, during
          the period requested by the underwriters managing the registered
          public offering, effect any public sale or distribution of shares of
          Stock received, directly or indirectly, as an Award or pursuant to the
          exercise or settlement of an Award and shall become party to a lockup
          agreement if so required by the underwriters.

          (xv) None of the Company, an Affiliate or the Administrator shall have
          any duty or obligation to disclose affirmatively to a record or
          beneficial holder of Stock or an Award, and such holder shall have no
          right to be advised of, any material information regarding the Company
          or any Affiliate at any time prior to, upon or in connection with
          receipt or the exercise of an Award or the Company's purchase of Stock
          or an Award from such holder in accordance with the terms hereof.

          (xvi) This Plan, and all Awards, agreements and actions hereunder,
          shall be governed by, and construed in accordance with, the laws of
          the state of Delaware (other than its law respecting choice of law).

9.       DEFERRAL OF AWARDS.
         ------------------

The Administrator (in its sole discretion) may permit a Participant to:

     a) have cash that otherwise would be paid to such Participant as a result
        of the exercise of a Stock Appreciation Right or the settlement of a
        Stock Award credited to a deferred compensation account established for
        such Participant by the Administrator as an entry on the Company's
        books;

     b) have Stock that otherwise would be delivered to such Participant as a
        result of the exercise of a Stock Option or a Stock Appreciation Right
        converted into an equal number of Stock units; or

     c) have Stock that otherwise would be delivered to such Participant as a
        result of the exercise of a Stock Option or Stock Appreciation Right or
        the settlement of a Stock Award converted into amounts credited to a
        deferred compensation account established for such Participant by the
        Administrator as an entry on the Company's books. Such amounts shall be
        determined by reference to the Fair Market Value of the Stock as of the
        date on which they otherwise would have been delivered to such
        Participant.

                                  Page 17 of 21



A deferred compensation account established under this Section 9 may be credited
with interest or other forms of investment return, as determined by the
Administrator. A Participant for whom such an account is established shall have
no rights other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company. If the deferral or conversion of awards is
permitted or required, the Administrator (in its sole discretion) may establish
rules, procedures and forms pertaining to such awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Section 9.

10.      DEFINITIONS.
         -----------

For purposes of this Plan, the following terms are defined as set forth below:

     a) "AFFILIATE" means a corporation or other entity controlled by the
        Company and designated by the Administrator as such.

     b) "AWARD" means a Stock Appreciation Right, Stock Option or Stock Award.

     c) "BOARD" means the Board of Directors of the Company.

     d) "CAUSE" means (i) the conviction of the Participant for committing a
        felony under Federal law or the law of the state in which such action
        occurred, (ii) dishonesty in the course of fulfilling the Participant's
        duties as an employee or director of, or consultant or advisor to, the
        Company or (iii) willful and deliberate failure on the part of the
        Participant to perform such duties in any material respect.
        Notwithstanding the foregoing, if the Participant and the Company or the
        Affiliate have entered into an employment or services agreement which
        defines the term "Cause" (or a similar term), such definition shall
        govern for purposes of determining whether such Participant has been
        terminated for Cause for purposes of this Plan. The determination of
        Cause shall be made by the Administrator, in its sole discretion.

     e) "CODE" means the Internal Revenue Code of 1986, as amended from time to
        time, and any successor thereto.

     f) "COMMISSION" means the Securities and Exchange Commission or any
        successor agency.

     g) "COMMITTEE" means a committee of Directors appointed by the Board to
        administer this Plan. With respect to Options granted at the time the
        Company is publicly held, if any, insofar as the Committee is
        responsible for granting Options to Participants hereunder, it shall
        consist solely of two or more directors, each of whom is a "Non-Employee
        Director" within the meaning of Rule 16b-3 and each of whom is also an
        "outside director" under Section 162(m) of the Code.

                                  Page 18 of 21



     h) "COMPANY" means Electric City Corp., a Delaware corporation.

     i) "DIRECTOR" means a member of the Company's Board of Directors.

     j) "DISABILITY" means mental or physical illness that entitles the
        Participant to receive benefits under the long-term disability plan of
        the Company or an Affiliate, or if the Participant is not covered by
        such a plan or the Participant is not an employee of the Company or an
        Affiliate, a mental or physical illness that renders a Participant
        totally and permanently incapable of performing the Participant's duties
        for the Company or an Affiliate, PROVIDED, HOWEVER, that a Disability
        shall not qualify under this Plan if it is the result of (i) a willfully
        self-inflicted injury or willfully self-induced sickness; or (ii) an
        injury or disease contracted, suffered or incurred while participating
        in a criminal offense. Notwithstanding the foregoing, if the Participant
        and the Company or an Affiliate have entered into an employment or
        services agreement which defines the term "Disability" (or a similar
        term), such definition shall govern for purposes of determining whether
        such Participant suffers a Disability for purposes of this Plan. The
        determination of Disability shall be made by the Administrator, in its
        sole discretion. The determination of Disability for purposes of this
        Plan shall not be construed to be an admission of disability for any
        other purpose.

     k) "EFFECTIVE DATE" means May 30, 2001

     l) "ELIGIBLE INDIVIDUAL" means any officer, employee or director of the
        Company or a Subsidiary or Affiliate, or any consultant or advisor
        providing services to the Company or a Subsidiary or Affiliate.

     m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
        from time to time, and any successor thereto.

     n) "FAIR MARKET VALUE" means, as of any given date, the fair market value
        of the Stock as determined by the Administrator or under procedures
        established by the Administrator. Unless otherwise determined by the
        Administrator, the Fair Market Value per share shall be the closing
        sales price per share of the Stock on The American Stock Exchange (or
        the principal stock exchange or market on which the Stock is then
        traded) on the date as of which such value is being determined or the
        last previous day on which a sale was reported.

     o) "FAMILY MEMBER" means any child, stepchild, grandchild, parent,
        stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
        mother-in-law, father-in-law, son-in-law, daughter-in-law,
        brother-in-law or sister-in-law of a Participant (including adoptive
        relationships); any person sharing the Participant's household (other
        than a tenant or employee); any trust in which the Participant and any
        of these persons have all of the beneficial interest; any foundation in
        which the Participant and any of these persons control the management of
        the

                                  Page 19 of 21


        assets; any corporation, partnership, limited liability company or
        other entity in which the Participant and ay of these other persons are
        the direct and beneficial owners of all of the equity interest (provided
        the Participant and these other persons agree in writing to remain the
        direct and beneficial owners of all such equity interests); and any
        personal representative of the Participant upon the Participant's death
        for purposes of administration of the Participant's estate or upon the
        Participant's incompetency for purposes of the protection and management
        of the assets of the Participant.

     p) "INCENTIVE STOCK OPTION" means any Stock Option intended to be and
        designated as an "incentive stock option" within the meaning of Section
        422 of the Code.

     q) "NASDAQ" means The NASDAQ Stock Market, including the NASDAQ National
        Market and the NASDAQ SmallCap Market.

     r) "NON-EMPLOYEE DIRECTOR" means a Director who is not an officer or
        employee of the Company.

     s) "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
        Incentive Stock Option.

     t) "OPTIONEE" means a person who holds a Stock Option.

     u) "PARTICIPANT" means a person granted an Award.

     v) "REPRESENTATIVE" means (i) the person or entity acting as the executor
        or administrator of a Participant's estate pursuant to the last will and
        testament of a Participant or pursuant to the laws of the jurisdiction
        in which the Participant had his or her primary residence at the date of
        the Participant's death; (ii) the person or entity acting as the
        guardian or temporary guardian of a Participant; (iii) the person or
        entity which is the beneficiary of the Participant upon or following the
        Participant's death; or (iv) any person to whom an Option has been
        transferred with the permission of the Administrator or by operation of
        law; provided that only one of the foregoing shall be the Representative
        at any point in time as determined under applicable law and recognized
        by the Administrator.

     w) "RETIREMENT" means retirement from active employment under a pension
        plan of the Company or any subsidiary or Affiliate, or under an
        employment contract with any of them, or termination of employment or
        provision of services at or after age 55 under circumstances which the
        Administrator, in its sole discretion, deems equivalent to retirement.

     x) "STOCK" means common stock, par value $0.0001 per share, of the Company.

     y) "STOCK APPRECIATION RIGHT" means a right granted under Section 5.

                                 Page 20 of 21



     z) "STOCK AWARD" means an Award, other than a Stock Option or Stock
        Appreciation Right, made in Stock or denominated in shares of Stock.

    aa) "STOCK OPTION" means an option granted under Section 4.

    bb) "SUBSIDIARY" means any company during any period in which it is a
        "subsidiary corporation" (as such term is defined in Section 424(f) of
        the Code) with respect to the Company.

    cc) "TEN PERCENT HOLDER" means any individual who owns, or is deemed to
        own, stock possessing 10% or more of the total combined voting power of
        all classes of stock of the Company or of any parent or subsidiary
        corporation of the Company, determined pursuant to the rules applicable
        to Section 422(b)(6) of the Code.

In addition, certain other terms used herein have the definitions given to them
in the first places in which they are used.


                                  Page 21 of 21



                               ELECTRIC CITY CORP.
      PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL NOMINEES
LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2.



                                                        
----------------------------------------------------------------------------------------------------------------------------------

1.  Election of Directors.
         For all nominees listed below                     Withhold authority to vote
         (except as marked to the contrary below) / /      for all nominees listed below  / /

   (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME BELOW)

         John P. Mitola                                    Victor L. Conant
         Brian J. Kawamura                                 Kevin P. McEneely
         Michael S. Stelter                                Gerald A. Pientka
         Robert J. Manning                                 James Stumpe
         John J. Callahan                                  Roscoe C. Young II

2.  Proposal to ratify the appointment of BDO Seidman, LLP as the independent auditors of the        For    Against    Abstain
    Company's financial statements for the year ending December 31, 2000.                           /  /     /  /       /  /

3.  Proposal to approve the adoption of the 2001 Stock Incentive Plan.                              /  /     /  /       /  /

4.  Proposal to approve an amendment to the Company's Certificate of Incorporation to               /  /     /  /       /  /
    increase its authorized shares of capital stock from 65,000,000 to 90,000,000 and its
    authorized shares of Common Stock from 60,000,000 to 85,000,000.

5.  Proposal to approve the Company's issuance to certain investors of its Series A Convertible     /  /     /  /       /  /
    Preferred Stock, Common Stock and warrants to purchase shares of Series A Convertible
    Preferred Stock and warrants to purchase Common Stock.

6.  Each of the persons named as proxies herein are authorized, in such person's discretion,        /  /     /  /       /  /
    to vote upon such other matters as may properly come before the Annual Meeting, or any
    adjournments thereof


                                                                       Date______________________, 2001

                                                                       ________________________________________________________
                                                                       Signature

                                                                       ________________________________________________________
                                                                       Signature (if held jointly)


                                                                       Please date this Proxy and sign it exactly as your name(s)
                                                                       appears hereon. When shares are held by joint tenants,
                                                                       both should sign. When signing as an attorney, executor,
                                                                       administrator, trustee, guardian or other fiduciary, please
                                                                       indicate your capacity. If you sign for a corporation,
                                                                       please print full corporate name and indicate capacity
                                                                       of duly authorized officer executing on behalf of the
                                                                       corporation. If you sign for a partnership, please print
                                                                       full partnership name and indicate capacity of duly
                                                                       authorized person executing on behalf of the partnership.


                                                      FOLD AND DETACH HERE

----------------------------------------------------------------------------------------------------------------------------------

PLEASE VOTE, SIGN EXACTLY AS NAME APPEARS ABOVE, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE





                             ELECTRIC CITY CORP.
                             1280 Landmeier Road
                      Elk Grove Village, Illinois 60007

                 PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
                        TO BE HELD ON AUGUST 30, 2001

         THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS


         The undersigned stockholder(s) hereby appoints Jeffrey R. Mistarz and
Greg M. Rice and each of them, with full power of substitution, as attorneys and
proxies for, and in the name and place of, the undersigned, and hereby
authorizes each of them to represent and to vote all of the shares which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of
Electric City Corp. to be held at the Holiday Inn, 1008 Busse Road, Elk Grove
Village, Illinois 60007 on Thursday, August 30, 2001 at 10:00 a.m., local time,
and at any adjournments thereof, upon the matters as set forth in the Notice of
Annual Meeting of Stockholders and Proxy Statement, receipt of which is hereby
acknowledged.

         THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED IN A TIMELY MANNER,
WILL BE VOTED AT THE ANNUAL MEETING AND AT ANY ADJOURNMENTS THEREOF IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO CONTRARY
INDICATION IS MADE, THE PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL
1 AND FOR PROPOSAL 2 AND IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS NAMED AS
PROXIES HEREIN ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL
MEETING.

                       PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.

            (continued, and to be signed and dated, on reverse side)


                                                                 -----------
                                                                 SEE REVERSE
                                                                     SIDE
                                                                 -----------





                              FOLD AND DETACH HERE

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