<PAGE>

                                                                  EXHIBIT 10.18

                         AGREEMENT AND MUTUAL RELEASE


     This Agreement and Mutual Release ("Agreement") is entered into this
26th day of May, 2000, between and among Electric City Corporation, Joseph C.
Marino, Jeffrey A. Dome, Ronald Stone, and Curtis Vernon (collectively, the
"Parties").

     WHEREAS, Electric City Corp. ("Electric City") is an Illinois
corporation primarily engaged in the business of selling an energy efficiency
device referred to as an EnergySaver;

     WHEREAS, Joseph C. Marino ("Marino") is the founder and former
President, Chief Executive Officer, and Chairman of the Board of Electric
City and currently serves as Chairman of the Board;

     WHEREAS, Jeffrey A. Dome, Ronald Stone, and Curtis Vernon (collectively,
the "Distributors") are individuals who entered into Distributor Agreements
with Electric City whereby they received the exclusive right to distribute
Electric City's EnergySaver product in ten regions: Arizona, Colorado,
Florida, Georgia, Michigan, Nebraska, Northern California, North Carolina,
Ohio, and South Carolina;

     WHEREAS, the Distributors have asserted various claims against Electric
City and Marino, and Electric City has asserted various claims against the
Distributors, arising out of or in relation to the Distributor Agreements;

     WHEREAS, the Parties recognize that the continued pursuit of these
claims will be costly and time consuming and have determined that it is in
their respective best interests to resolve all of the issues arising or
resulting from these disputes without any admission of liability by any Party;

     WHEREAS, given the projected growth potential of Distributors' regions,
Electric City believes it is in its best interest to terminate the
Distributor Agreements to allow Electric City to realize its maximum growth
potential; and

     WHEREAS, the Parties to this Agreement do not intend that any person or
entity shall be a third party beneficiary of this Agreement, or intend to
release any claim, demand, or cause of action against any person or entity
other than as set forth herein;

     NOW THEREFORE, in consideration of the mutual promises and covenants
contained

<PAGE>

herein, it is hereby agreed as follows:

     1.   MUTUAL RELEASES. (A) Each Distributor, and the agents, employees,
assigns, and attorneys of each Distributor, releases and forever discharges
Electric City, together with its affiliates, shareholders, officers,
directors, employees, agents, assigns, and attorneys, and Marino, together
with his agents, attorneys, and assigns, from any and all claims, demands,
and causes of action arising from or relating to any matter occurring prior
to or as of the date of this Agreement, including but not limited to any
claim for actual or exemplary damages, interest, attorneys' fees, costs, and
any form of declaratory or injunctive relief.

     (B)  Electric City, and its affiliates, shareholders, officers,
directors, employees, agents, assigns, and attorneys, and Marino, and his
agents, attorneys, and assigns, release and forever discharge each
Distributor, and the agents, employees, assigns, and attorneys of each
Distributor, from any and all claims, demands, and causes of action arising
from or relating to any matter occurring prior to or as of the date of this
Agreement, including but not limited to any claim for actual or exemplary
damages, interest, attorneys' fees, costs, and any form of declaratory or
injunctive relief.

     (C)  The Parties agree that nothing contained in this Agreement or in
any other communication made for purposes of negotiating this Agreement shall
constitute an admission by any Party of any liability whatsoever to any other
Party.

     (D)  Each Party shall bear its own expenses in connection with the
negotiation and execution of this Agreement and the transactions contemplated
thereby.

     2.   TERMINATION OF DISTRIBUTOR AGREEMENTS. (A) The Distributors entered
into certain Distributor Agreements with Electric City, as set forth in
Addendum A, hereto, which is incorporated herein in its entirety.

     (B)  As reflected in Addendum A, certain parties in addition to the
Distributors were signatories to certain of the Distributor Agreement.
Specifically, Carlton Vernon co-signed the Northern California Distributor
Agreement with Curtis Vernon, and Electric City of Florida LLC, an entity
formed and controlled by Ronald Stone, is the party to the Distributor
Agreement for Florida and North Carolina. Electric City hereby covenants and
agrees that it will not assert


<PAGE>

herein, it is hereby agreed as follows:

     1.   MUTUAL RELEASES. (A) Each Distributor, and the agents, employees,
assigns, and attorneys of each Distributor, releases and forever discharges
Electric City, together with its affiliates, shareholders, officers,
directors, employees, agents, assigns, and attorneys, and Marino, together
with his agents, attorneys, and assigns, from any and all claims, demands,
and causes of action arising from or relating to any matter occurring prior
to or as of the date of this Agreement, including but not limited to any
claim for actual or exemplary damages, interest, attorneys' fees, costs, and
any form of declaratory or injunctive relief.

     (B)  Electric City, and its affiliates, shareholders, officers,
directors, employees, agents, assigns, and attorneys, and Marino, and his
agents, attorneys, and assigns, release and forever discharge each
Distributor, and the agents, employees, assigns, and attorneys of each
Distributor, from any and all claims, demands, and causes of action arising
from or relating to any matter occurring prior to or as of the date of this
Agreement, including but not limited to any claim for actual or exemplary
damages, interest, attorneys' fees, costs, and any form of declaratory or
injunctive relief.

     (C)  The Parties agree that nothing contained in this Agreement or in
any other communication made for purposes of negotiating this Agreement shall
constitute an admission by any Party of any liability whatsoever to any other
Party.

     (D)  Each Party shall bear its own expenses in connection with the
negotiation and execution of this Agreement and the transactions contemplated
thereby.

     2.   TERMINATION OF DISTRIBUTOR AGREEMENTS. (A) The Distributors entered
into certain Distributor Agreements with Electric City, as set forth in
Addendum A, hereto, which is incorporated herein in its entirety.

     (B)  As reflected in Addendum A, certain parties in addition to the
Distributors were signatories to certain of the Distributor Agreements.
Specifically, Carlton Vernon co-signed the Northern California Distributor
Agreement with Curtis Vernon, and Electric City of Florida LLC, an entity
formed and controlled by Ronald Stone, is the party to the Distributor
Agreement for Florida and North Carolina. Electric City hereby covenants and
agrees that it will not assert



<PAGE>

any claims against Carlton Vernon or Electric City of Florida LLC which it
has or could have asserted against any of the Distributors arising out of the
Distributor Agreements. Carlton Vernon and Electric City of Florida LLC, by
their authorized undersigned agents, hereby covenant and agree that they will
not assert any claims against Electric City which the Distributors have or
could have asserted against Electric City arising out of the Distributor
Agreements.

     (C)  This Agreement supercedes each of the Distributor Agreements, which
shall be null, void, and of no further force and effect as of the date of
this Agreement. As of the date of this Agreement, Electric City and Marino
shall have no duties or obligations to any of the Distributors, except those
set forth herein, and the Distributors shall have no duties or obligations to
Electric City or Marino, except those set forth herein.

     (D)  Within seven days of the date of this Agreement, the Distributors
shall provide Electric City with a list of all customers and potential
customers contacted by the Distributors on behalf of Electric City since
entering into the various Distributor Agreements and, for each such customer
or contact, the status of the relationship and any on-going sales
negotiations as of the date of this Agreement. The Distributors agree to make
themselves reasonably available by telephone to answer questions which may
arise after the date of this Agreement about transactions or contacts which
occurred prior to the date of this Agreement, and to provide Electric City
with any relevant existing documents requested by Electric City that relate
to those transactions or contacts.

     (E)  Electric City shall assume responsibility and liability for all
EnergySavers sold and/or installed by the Distributors or their agents and
honor any and all warranties or guarantees made by Electric City on those
products. As of the date of this Agreement, the Distributors shall have no
continuing obligation to any customer or to Electric City in connection with
any Electric City product, service, warranty, guarantee, or other obligation.
Electric City specifically agrees to honor the two-year warranties offered on
EnergySaver units sold by Distributor Dome to Giant Foods Inc., Amway Corp.,
and the State of Michigan.

     (F)  The Distributors represent and warrant that they have not entered
into any

<PAGE>

agreements, made any promises, guarantees, warranties, or representations, or
committed any acts or omissions which give rise to any liability on the part
of Electric City that have not been disclosed in writing to Electric City.

         (G) Electric City represents and warrants that it has paid the
Distributors all commissions due them on sales made in the Distributors'
territories up to and including the date of this Agreement.

         (H) Within three business days following the date of this Agreement,
Electric City shall return the original letters of credit posted pursuant to
the Distributor Agreements for Arizona and Northern California to the
Distributor's counsel at the address listed in Paragraph 6, below. In the
event Electric City cannot, despite all reasonable efforts, locate the
original letters of credit, it agrees to cooperate with the Distributors and
to provide any affidavits or other documents which may be required by the
involved banks or lending institutions as a substitute for the original
documents.

         3. PAYMENT BY ELECTRIC CITY. (A) Upon execution of this Agreement,
Electric City will pay to the Distributors the amount of $100,000.00 by wire
transfer pursuant to directions to be provided by the Distributors.

         (B) In addition, Electric City agrees to pay to the Distributors the
Final Repurchase Amount on or before July 31, 2000, subject to Paragraph
3(F), below. The Final Repurchase Amount shall be determined and agreed to by
the Parties after the execution of this Agreement but by no later than June
30, 2000. Notwithstanding any provision of this Agreement, however, the Final
Repurchase Amount shall not be less than $800,000.00 or greater than
$1,280,244.00.

         (C) The parties agree to cooperate in good faith following the
execution of this Agreement to determine the Final Repurchase Amount. To
facilitate that determination, the Distributors shall, within seven days of
the date of this Agreement, provide to Electric City a schedule of all
expenses accrued by each in the performance of his duties under the
Distributor Agreements. After reviewing that schedule, Electric City may,
through counsel, request a further explanation of, or documents related to,
particular scheduled expenses to verify that such expenses were reasonably
accrued in the performance of the Distributor's duties under the

<PAGE>

Distributor Agreements. It is the intent of the Parties that the Final
Repurchase Amount, plus the initial $100,000 payment, shall equal the total
amount of expenses reasonably accrued by the Distributors in performing
their duties under the Distributor Agreements. The Parties agree and intend
that any inquiry conducted by Electric City pursuant to this sub-paragraph
shall be intended, and reasonably tailored, solely to verify that a
particular expense was reasonably accrued by a Distributor in the performance
of his duties under the Distributor Agreement.

         (D) If the Parties fail to agree to a Final Repurchase Amount by
June 30, 2000, the Interim Final Repurchase Amount shall be $1,280,244.00
less the Disputed Amount (subject to the $800,000.00 limit provided for in
Paragraph (3)(B) of this Agreement. The Disputed Amount shall be the total of
the Distributor's expense entries of $500.00 or greater which Electric City
asserts were not reasonably accrued in the scope of the Distributors' duties
under the Distributor Agreements.

         (E) If there is a Disputed Amount, the Parties shall, by July 14,
2000, jointly retain a mutually agreed upon third party professional and
submit the Disputed Amount to that third party for a final and binding
determination of whether each expense entry which makes up the Disputed
Amount was reasonably accrued by a Distributor in the scope of his duties
under the Distributor Agreement. The Parties shall each submit their
positions and any documents in support thereof to the third party
professional in writing by July 21, 2000. As a condition precedent to his or
her retention, the third party shall commit to adjudicate the matter by July
31, 2000. For purposes of the third party's determination, the Distributors
shall bear the initial burden of demonstrating that the expenses at issue
were accrued in the scope of their duties under the Distributor Agreements.
If the Distributors make such a threshold showing, Electric City shall then
have the burden of demonstrating that the expenses at issue either: were not
reasonable or were not in fact accrued in the scope of the Distributors'
duties. Electric City and the Distributors shall each bear fifty percent of
the cost of the third party professional. The Interim Final Repurchase Amount
plus any portion of the Disputed Amount which is found by the third party to
have been reasonably accrued in the scope of the Distributors' duties shall
be the Final Repurchase Amount.

<PAGE>

     (F)  Electric City represents and warrants that it is currently
attempting to raise capital and reasonably believes it will have obtained a
commitment for additional financing on or before July 31, 2000, although the
Parties acknowledge that there is no guarantee that such financing will have
been obtained and/or funded by July 31, 2000. In the event that Electric City
has not obtained financing and cannot pay the Final Repurchase Amount on
July 31, 2000, that amount, plus interest compounded monthly at an annual
rate of 12%, shall be paid to the Distributors within seven days of the date
Electric City receives its additional funding or, if such funding is never
received, shall continue as an obligation of the company to the Distributors
until such time as it is paid in full.

     (G)  In addition to the payments set forth above, Electric City shall,
within seven business days of the date of this Agreement, grant to each
Distributor options to purchase shares of Electric City's common stock at a
strike price of $7.00 per share. The number of options each Distributor shall
receive is as follows:
                     Ronald Stone           35,000
                     Jeffrey Dome           20,000
                     Curtis Vernon          10,000

The stock options granted pursuant to this subparagraph shall vest on the
date of this Agreement and may be exercised at any time for a period of ten
(10) years from the date of vesting.

     (H)  Within fourteen days of the date of this Agreement, the
Distributors shall return to Electric City any unsold inventory and any
marketing or related materials owned by Electric City. The Distributors
represent and warrant that all EnergySaver units returned to Electric City
pursuant to this sub-paragraph have not been materially altered and remain in
substantially the same condition as they were when received from Electric
City.

     4.  DOCUMENTATION OF FINANCES.  Within seven days of the date of this
Agreement, Electric City agrees to provide the Distributor's attorney with
financial information, such as balance sheets, ledger balances, and cash flow
projections, sufficient to document Electric City's cash on hand and projected
cash flow through October, 2000. The Parties agree that such information
shall be provided to Distributor's attorney on an "attorney's eyes only"
basis, and the Distributors waive any right they may otherwise have had to
access such information provided to

<PAGE>

their attorney, provided, however, that Distributor's attorney may share with
Distributor Jeffrey Dome his general impressions about and conclusions drawn
from the documents provided by Electric City. The Distributors each agree
that any information provided by their attorney to Jeffrey Dome pursuant to
this subparagraph shall not be shared with Ronald Stone or Curtis Vernon so as
to avoid any inference that Stone or Vernon, who both own Electric City
common stock, received insider information in violation of applicable
securities laws.

     5.  CONFIDENTIALITY AND NON-DISPARAGEMENT. (A) All Parties agree that the
terms of this Agreement shall remain forever confidential and will not be
disclosed to anyone who is not an officer, director, agent, attorney, tax
advisor, or spouse of a Party, except as required by law or applicable
regulations. The Parties specifically agree not to disclose the terms of this
Agreement to any customer of Electric City, provided, however, that the
Parties may make truthful representations to customers and the general public
to the affect that the Distributor Agreements have been terminated, that the
Distributors no longer represent Electric City, and/or that Electric City
wished to terminate the Distributor Agreements to maximize its growth
potential.

     6.  NOTICE AND OPPORTUNITY TO CURE. Prior to declaring a breach of this
Agreement or initiating any action to enforce this Agreement, the Parties
agree to provide the Party alleged to be in breach with written notice of
the alleged breach and a seven day period in which to cure the alleged
breach. Any notice served under this Paragraph shall be directed as follows:
         If to Electric City or Joseph Marino, to:

                        Bonita L. Stone, Esq.
                        Katten, Muchin & Zavis
                        525 W. Monroe St., Suite 1600
                        Chicago, IL 60661-3693

         If to any Distributor, to:

                        Joseph J. Duffy, Esq.
                        Stetler & Duffy, Ltd.
                        140 South Dearborn, Suite 400
                        Chicago, IL 60603

     7.  PREVAILING PARTY ENTITLED TO ATTORNEYS' FEES. In the event any legal
action is initiated by any Party to enforce this Agreement or remedy a breach
of this Agreement, the




<PAGE>
prevailing party in that action shall be entitled to recover the costs and
attorneys' fees it reasonably incurred in connection with that action.

     8.     NO WAIVER OF TERMS. The failure of any Party, as the case may be, to
insist upon strict compliance with any of the terms, covenants, or conditions
of this Agreement shall not be deemed a waiver of such terms, covenants, or
conditions, nor shall the relinquishment of any right or power hereunder at
any one or more times be deemed a waiver or relinquishment of such right or
power at any other time or times.

     9.     WRITTEN AMENDMENTS. This Agreement may be changed, modified, or
amended only by a writing duly executed by both or all Parties affected by
such a change, modification, or amendment.

     10.    BINDS SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of the Parties and their respective successors-in-interest or
assigns.

     11.    SEVERABILITY. If applicable law prohibits or invalidates any
provision of this Agreement, such provision shall be rendered ineffective and
severable from the remainder of this Agreement without affecting or impairing
the enforceability or validity of the remainder of this Agreement.

     12.    APPLICABLE LAW. This Agreement shall be governed by and construed
and enforced in accordance with the law of the State of Illinois.

     13.    CAPACITY TO EXECUTE. Each Party represents and warrants to the
others that: (a) it has the capacity and authority to enter into and perform
this Agreement; and (b) the execution, delivery, and performance of this
Agreement has been duly authorized by all necessary corporate, partnership,
or other action and does not and will not conflict with, result in a breach
of, violate, or constitute a default under any of the governing documents or
instruments of such Party or any material agreement, instrument, judgment,
or decree to which such Party is bound. The Parties agree to execute such
further instruments as may be necessary to effectuate the intents and
purposes of this Agreement.

     14.    NO PRESUMPTION AGAINST DRAFTEE. The Parties, through their
attorneys, have each actively participated in and contributed to the
preparation of this Agreement. The Parties agree

<PAGE>

that there shall be no presumption favoring or burdening any Party based upon
the drafting of this Agreement.

     15.    COUNTERPARTS. This Agreement may by executed in counterparts, and
execution of separate copies of this Agreement by the Parties will not affect
its validity. Each counterpart or copy shall be deemed an original, all of
which shall constitute one and the same Agreement. A facsimile signature
shall be considered as binding as an original signature.
<PAGE>

     16.  HEADINGS. The headings used in this Agreement are for convenience
and reference only and shall not limit or otherwise affect the provisions of
this Agreement.


AGREED AND ACCEPTED:

                ELECTRIC CITY CORP.     JEFFREY A. DOME


By: _________________________           _________________________


Its: ________________________


JOSEPH MARINO                           RONALD STONE, individually and as an
                            authorized agent of Electric City of Florida LLC



_____________________________           _________________________


                                        CURTIS VERNON, individually and as an
                                        authorized agent of Carlton Vernon



                                        _________________________


<PAGE>


                                  ADDENDUM A


     Index of the Distributor Agreements referenced in Paragraph 2 of the
foregoing Agreement and Mutual Release between and among Electric City Corp.,
Joseph Marino, Jeffrey A. Dome, Curtis Vernon, and Ronald Stone:

<TABLE>
<CAPTION>

TERRITORY                          DISTRIBUTOR                DATE OF AGREEMENT
---------                          -----------                -----------------
<S>                     <C>                                   <C>
Arizona                           Curtis Vernon                   6/24/99(1)
Colorado                          Curtis Vernon                     4/8/99
Florida                 Electric City of Florida LLC(2)            10/28/98
Georgia                           Ronald Stone                      4/30/99
Michigan                          Jeffrey Dome                      5/19/99
Nebraska                          Curtis Vernon                     4/8/99
Northern California        Curtis & Carlton Vernon(3)               4/6/99
North Carolina          Electric City of Florida LLC(2)            10/28/98
Ohio                              Jeffrey Dome                      5/19/99
South Carolina                    Ronald Stone                      4/30/99
</TABLE>

-------------------------
     (1)  Distributor Curtis Vernon does not have a dated copy of the Arizona
Distributor Agreement in his possession but believes that it was dated on or
about June 24, 1999.
     (2)  As detailed in Paragraph 2(B) of this Agreement and Mutual Release,
the Distributor Agreement for Florida and North Carolina was executed by
Electric City of Florida LLC, an entity formed and controlled by Ronald Stone.
     (3)  As detailed in Paragraph 2(B) of this Agreement and Mutual Release,
the Distributor Agreement for Northern California was executed by both Curtis
Vernon and Carlton Vernon.

<PAGE>

     16.  HEADINGS.  The headings used in this Agreement are for convenience
and reference only and shall not limit or otherwise affect the provisions of
this Agreement.

AGREED AND ACCEPTED:

ELECTRIC CITY CORP.                    JEFFREY A. DOME

By:                                    /s/ Jeffrey A. Dome
    ------------------------------     ------------------------------------
Its:
    ------------------------------

JOSEPH MARINO                          RONALD STONE, individually and as an
                                       authorized agent of Electric City of
                                       Florida LLC


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

                                       CURTIS VERNON, individually and as an
                                       authorized agent of Carlton Vernon


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

                                       -11-
<PAGE>

     16.  HEADINGS.  The headings used in this Agreement are for convenience
and reference only and shall not limit or otherwise affect the provisions of
this Agreement.

AGREED AND ACCEPTED:

ELECTRIC CITY CORP.                    JEFFREY A. DOME

By:
    ------------------------------     ------------------------------------
Its:
    ------------------------------

JOSEPH MARINO                          RONALD STONE, individually and as an
                                       authorized agent of Electric City of
                                       Florida LLC

                                       /s/ Ronald Stone
----------------------------------     ------------------------------------

                                       CURTIS VERNON, individually and as an
                                       authorized agent of Carlton Vernon

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

                                       -11-
<PAGE>

     16.  HEADINGS.  The headings used in this Agreement are for convenience
and reference only and shall not limit or otherwise affect the provisions of
this Agreement.

AGREED AND ACCEPTED:

ELECTRIC CITY CORP.                    JEFFREY A. DOME

By:
    ------------------------------     ------------------------------------
Its:
    ------------------------------

JOSEPH MARINO                          RONALD STONE, individually and as an
                                       authorized agent of Electric City of
                                       Florida LLC


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

                                       CURTIS VERNON, individually and as an
                                       authorized agent of Carlton Vernon

                                       /s/ Curtis Vernon
                                       -------------------------------------

                                       -11-
<PAGE>

     16.  HEADINGS.  The headings used in this Agreement are for convenience
and reference only and shall not limit or otherwise affect the provisions of
this Agreement.

AGREED AND ACCEPTED:

ELECTRIC CITY CORP.                    JEFFREY A. DOME

By: /s/ John Mitola
    ------------------------------     ------------------------------------
Its: Chief Executive Officer
    ------------------------------

JOSEPH MARINO                          RONALD STONE, individually and as an
                                       authorized agent of Electric City of
                                       Florida LLC


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

                                       CURTIS VERNON, individually and as an
                                       authorized agent of Carlton Vernon


                                       -------------------------------------
<PAGE>

     16.  HEADINGS.  The headings used in this Agreement are for convenience
and reference only and shall not limit or otherwise affect the provisions of
this Agreement.

AGREED AND ACCEPTED:

ELECTRIC CITY CORP.                    JEFFREY A. DOME

By: /s/ John Mitola
    ------------------------------     ------------------------------------
Its: President
    ------------------------------

JOSEPH MARINO                          RONALD STONE, individually and as an
                                       authorized agent of Electric City of
                                       Florida LLC


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

                                       CURTIS VERNON, individually and as an
                                       authorized agent of Carlton Vernon


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

                                       -11-
<PAGE>

     16.  HEADINGS.  The headings used in this Agreement are for convenience
and reference only and shall not limit or otherwise affect the provisions of
this Agreement.

AGREED AND ACCEPTED:

ELECTRIC CITY CORP.                    JEFFREY A. DOME

By: /s/ John Mitola
    ------------------------------     ------------------------------------
Its: Chief Executive Officer
    ------------------------------

JOSEPH MARINO                          RONALD STONE, individually and as an
                                       authorized agent of Electric City of
                                       Florida LLC

/s/ Joseph Marino
----------------------------------     ------------------------------------

                                       CURTIS VERNON, individually and as an
                                       authorized agent of Carlton Vernon


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