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                                  EXHIBIT 10.4


                              EMPLOYMENT AGREEMENT


         This Employment Agreement (this "Agreement") is made on the 14th day of
January, 2000, by and between Electric City Corp., a Delaware corporation, with
its principal place of business at 1280 Landmeier Road, Elk Grove Village,
Illinois (the "Company"), and Jeffrey Mistarz, whose residence address is
("Mistarz").

                                   WITNESSETH

         WHEREAS, the Company desires to assure itself of the services of
Mistarz, and Mistarz desires to be employed by the Company; and

         WHEREAS, the Company and Mistarz desire to clearly define and clarify
all material terms and conditions of this employment relationship through a
written agreement.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:

1.       Term Of Employment.

         1.1 The Company agrees to employ Mistarz, and Mistarz agrees to serve
         in the employ of the Company, for the term set forth in paragraph 1.2,
         in the position and with the responsibilities, duties and authority set
         forth in paragraph 2, and on the other terms and conditions set forth
         in this Agreement.

         1.2 The term of Mistarz's employment under this Agreement shall be for
         a period commencing on January 1, 2000 and continuing through December
         31, 2002 unless sooner terminated in accordance with this Agreement.

         1.3 As used in this Agreement, the "Company" shall be defined as the
         Company, and any of its subsidiaries, affiliates, satellites, branches,
         or parent entities, and including, without limitation, the Company's
         successors, purchasers and assigns.

2.       Position And Duties.

         2.1 The Company agrees to employ Mistarz in the position of Chief
         Financial Officer, to render such services as would be customary for a
         Chief Financial Officer, including, but not limited to, management,
         oversight and supervision of the Company's financial affairs, budgets,
         financial planning, tax reporting and compliance activities, cash
         management, accounting functions, and such other responsibilities,
         consistent with Mistarz's position as Chief Financial Officer, as the
         Chief Executive Officer or Board of Directors, in their sole and
         exclusive discretion, shall assign. In the performance of his


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         duties, Mistarz shall report to the Chief Executive Officer, or such
         other official as the CEO or Board of Directors may designate.

         2.2 Performance. Mistarz agrees to devote his full time and best
         efforts to the diligent, loyal, faithful, timely, complete, and
         professional performance of all job duties as set forth in paragraph
         2.1 or assigned or reassigned from time to time by the Company. Without
         limiting the generality of the foregoing, Mistarz is expected to work
         full time (not less than five days per week, during normal business
         hours Monday through Friday), except for vacations and regular business
         holidays observed by the Company, plus any additional hours required by
         the Company or reasonably necessary to timely and expeditiously
         complete Mistarz's work assignments.

         2.3 No Prior Employment Restrictions. Mistarz warrants that he is not
         restricted by any restrictive covenant or confidentiality agreement
         from any prior employment from performing all of the duties required by
         this Agreement. Should a prior employer or such prior employer's
         assignee or successor in interest assert claims that Mistarz is so
         restricted, Mistarz shall indemnify, defend and hold harmless the
         Company from any reasonable attorneys' fees and costs incurred in
         defending such claims, and any damages resulting either from a final
         judgment or reasonable settlement of any such claims.

3.       Compensation.

         3.1 Salary. During the term of this Agreement, in consideration of the
         performance by Mistarz of the services set forth in paragraph 2 and his
         observance of the other covenants set forth herein, the Company shall
         pay Mistarz, and Mistarz shall accept a salary at the rate of One
         Hundred Seventy-Five Thousand Dollars ($175,000.00) per year, less any
         applicable withholdings or deductions, payable in accordance with the
         Company's standard payroll practices. Mistarz's salary may be subject
         to annual review by the CEO and the Board of Directors.

         3.2 Bonus. Mistarz shall be eligible for an annual bonus, if in the
         discretion of the Company's senior management, Mistarz's performance
         warrants payment of a bonus, as measured by Mistarz's attainment of
         performance goals to be mutually established and agreed upon by Mistarz
         and the Chief Executive Officer or his designee. The annual bonus for a
         calendar year shall be payable on February 15th of the following year,
         provided that Mistarz is actively employed by the Company on such date.
         If the Company establishes a formal annual bonus plan, Mistarz will be
         eligible consistent with the treatment of other senior executives of
         the Company.

         3.3 Benefits. Mistarz shall be eligible for the vacation and non-wage
         benefits the Company provides generally for its other senior
         executives, including four weeks paid vacation. Mistarz shall also be
         eligible to participate in the group insurance benefits provided by the
         Company for senior executives, including short-term and long-term
         disability insurance, life insurance, and medical and dental insurance,
         subject to the terms and conditions of the applicable insurance benefit
         plans. The Company will also provide


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         officer liability insurance coverage for Mistarz, in such amount as may
         be determined by the Board of Directors or as may be required by law.
         Mistarz shall submit to any medical or other examination and execute
         and deliver any application or other instrument in writing, reasonably
         necessary to effectuate any such insurance benefits.

         3.4 Business Expense. The Company shall reimburse Mistarz for the
         reasonable, ordinary and necessary expenses incurred by him in
         connection with the performance of his duties, including but not
         limited to all cellular telephone expense related to Company business,
         and ordinary and necessary travel expense and entertainment expenses
         approved by the President and Chief Executive Officer. Mistarz shall
         provide the Company with an accounting of his expenses, including an
         identification of those expenses for which reimbursement by the Company
         is sought, and such supporting documentation and receipts as the
         Company may require from time to time, in conformance with Internal
         Revenue Service or other requirements.

         3.5 Stock Options. The Company hereby grants to Mistarz an option to
         purchase shares of the common stock of the Company subject to and in
         accordance with the following (the "Option"):

                  (a) Options. During the term of employment with the Company,
                  the Company hereby grants options to Mistarz to purchase
                  200,000 shares of the Company's common stock, subject to the
                  vesting provisions described below:

                      (i)      On December 31, 2000, unless Mistarz has
                               been terminated for Cause prior thereto or
                               if Mistarz has resigned voluntarily, Mistarz
                               shall become immediately vested in options
                               to purchase 66,667 of the issued and
                               outstanding shares of the Company's Common
                               stock for Seven Dollars ($7.00) per share.
                               Mistarz will have the right to exercise the
                               options in accordance with the following
                               schedule:

                               December 31, 2000  -  One-third

                               December 31, 2001  -  An additional one-third

                               December 31, 2002  -  Remaining one-third

                      (ii)     On December 31, 2001, unless Mistarz has
                               been terminated for Cause prior thereto or
                               if Mistarz has resigned voluntarily, Mistarz
                               shall become immediately vested in options
                               to purchase 66,667 of the issued and
                               outstanding shares of the Company's Common
                               stock for Seven Dollars ($7.00) per share.
                               Mistarz will have the right to exercise the
                               options in accordance with the following
                               schedule:


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                               December 31, 2001  -  One-third

                               December 31, 2002  -  An additional one-third

                               December 31, 2003  -  Remaining one-third

                      (iii)    On December 31, 2002, unless Mistarz has
                               been terminated for Cause prior thereto or
                               if Mistarz has resigned voluntarily, Mistarz
                               shall become immediately vested in options
                               to purchase 66,666 of the issued and
                               outstanding shares of the Company's Common
                               stock for Seven Dollars ($7.00) per share.
                               Mistarz will have the right to exercise the
                               options in accordance with the following
                               schedule:

                               December 31, 2002  -  One-third

                               December 31, 2003  -  An additional one-third

                               December 31, 2004  -  Remaining one-third

                  (b) Registration Rights. Mistarz shall have piggy-back
                  registration rights for all shares of stock obtained through
                  the exercise of any options described in paragraph 3.5(a)
                  above for any registration statement the Company files with
                  the Securities and Exchange Commission registering shares of
                  the Company's common stock that are similar to the shares to
                  be issued hereunder. The Company will use its best efforts to
                  file an S-8 registration statement covering the shares
                  underlying the Options when Company becomes eligible to file
                  an S-8 Registration Statement. The Company will bear the cost
                  of registering the shares pursuant to this paragraph.

                  (c) Sale of Assets: Change in Control. Upon the sale of more
                  than forty percent (40%) of the net assets or shares of stock
                  of the Company to a person or entity not affiliated with the
                  Company or its parent company or subsidiaries, all of the
                  options described in Sections 3.5(a) (i) (ii) and (iii) above
                  shall be automatically granted to Mistarz and shall
                  immediately vest and be immediately exercisable by Mistarz
                  subject to the terms of this Agreement.

                  (d) Termination of Options. The term of the Options hereunder
                  shall be until December 31, 2009. Notwithstanding any other
                  provision of this Agreement, upon any of the Options described
                  above being granted, such granted but unexercised Options may
                  not be terminated prior to December 31, 2009. If Mistarz is
                  terminated without Cause or for death or disability, the
                  granted Options shall survive under the terms of this
                  Agreement.


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4.       Termination Of Employment.

         4.1      Termination for Cause, Death or Disability.

                  4.1.1 The Company may terminate Mistarz's employment at any
                  time for Cause, including without limitation: (a) breach by
                  Mistarz of his covenants under this Agreement if unremedied
                  within 21 days after written notice by the Company; (b)
                  commission by Mistarz of theft or embezzlement of property of
                  the Company or other acts of dishonesty; (c) commission by
                  Mistarz of a crime resulting in injury to the businesses,
                  properties or reputation of the Company, (d) commission of an
                  act by Mistarz in the performance of his duties hereunder
                  reasonably determined by a majority of the board of directors
                  of the Company to amount to gross, willful, or wanton
                  negligence, (e) willful refusal to perform or substantial
                  neglect of the duties assigned to Mistarz pursuant to
                  paragraph 1 hereof if unremedied within 21 days after written
                  notice by the Company; (f) any significant violation of any
                  statutory or common law duty of loyalty to the Company. All
                  compensation shall cease immediately upon termination for
                  Cause hereunder except for accrued and unpaid compensation.

                  4.1.2 Mistarz's employment will be terminated immediately upon
                  his death. All compensation shall cease immediately upon
                  termination for death hereunder except for accrued and unpaid
                  compensation.

                  4.1.3 Mistarz's employment hereunder will be terminated for
                  Permanent Total Disability, immediately upon written notice
                  from the Company, if an independent physician selected jointly
                  by the parties shall have determined that Mistarz has been
                  unable due to illness or a physical or mental disability, to
                  perform substantially all of the services required hereunder
                  for a continuous period of 180 days, or for a period
                  aggregating 180 days in any twelve month period. All
                  compensation shall cease immediately upon termination for
                  Permanent Total Disability hereunder except for accrued and
                  unpaid compensation.

         4.2 Surrender of Properties. Upon termination of Mistarz's employment
         with the Company, regardless of the cause therefor, or otherwise
         immediately upon request of the Company, Mistarz shall promptly
         surrender to the Company all property provided to him by the Company
         for use in relation to his employment and in addition, Mistarz shall
         surrender to the Company any and all financial and accounting
         materials, lists of customers and prospective customers, price lists,
         files, patent applications, records, models, or other materials and
         information of or pertaining to the Company or its customers or
         prospective customers or the products, businesses, finances, or
         operations of the Company.

         4.3 Survival of Covenants. The covenants of Mistarz set forth in
         paragraphs 4.2, 5, and 6 of this Agreement shall survive the
         termination of his employment hereunder.


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5. Recognition of Company's Rights and Non-Disclosure.

         5.1 Non-Disclosure. At all times during Mistarz's employment by the
         Company and thereafter, Mistarz will hold in strictest confidence and
         will not disclose, use, or otherwise publish in any manner, including
         by any electronic medium, any of the Company's "Confidential
         Information" (defined below), except as such disclosure, use or
         publication may be required in connection with Mistarz's services for
         the Company, or unless a senior officer of the Company expressly
         authorizes such disclosure, use or publication in writing in advance.

         5.2 Confidential Information. The term "Confidential Information" means
         trade secrets, confidential knowledge, data and all other proprietary
         information of the Company. By way of illustration but not limitation,
         "Confidential Information" includes (a) inventions, trade secrets,
         ideas, processes, formulas, source and object codes, data, programs,
         other works of authorship, know-how, improvements, discoveries,
         developments, materials, designs, and techniques regarding any of the
         foregoing; and (b) information regarding, or plans for, research,
         development, new products, marketing and selling, business plans,
         budgets and unpublished financial statements, licenses, prices and
         pricing structures, costs, customer lists, the identity of suppliers
         and customers, and information regarding the skills and compensation of
         employees of the Company.

         5.3 Inventions. Mistarz: (a) shall, from the time of entering the
         Company's employ until such employment is terminated and within the one
         (1) year period immediately following such termination, promptly
         disclose to the Company all inventions, ideas, devices, and processes,
         made or conceived by him alone or jointly with others, that are
         relevant or pertinent in any way, whether directly or indirectly, to
         the businesses or production operations of the Company or resulting
         from or suggested by any work which he may have done for or at the
         request of the Company; (b) shall, at all times during his employment
         with the Company, assist the Company in every reasonable way (entirely
         at the expense of the Company) to obtain and develop for the benefit of
         the Company patents on such inventions, ideas, devices, and processes,
         whether or not patented; and (c) shall do all such acts and execute,
         acknowledge and deliver all such instruments as may be necessary or
         desirable in the opinion of the Company to vest in the Company, the
         entire interest in such inventions, ideas, devices, and processes
         referred to in this paragraph 5.3.

6.       Non-Competition and Non-Solicitation. Mistarz acknowledges that but for
         his employment with the Company: (i) Mistarz would not have had contact
         with the Company's customers, with many of whom the Company enjoys a
         near permanent relationship; (ii) Mistarz would not have had access to
         the Company's Confidential Information; and (iii) the Company's
         business is national in scope and cannot be confined to any particular
         geographic area of the United States or the State of Illinois. In
         consideration of the receipt of the Company's Confidential Information
         under the terms and conditions of this Agreement, for a period of two
         (2) years after termination of employment for any reason, Mistarz shall
         not, without the prior written consent of the Company's Chief Executive
         Officer, in any manner, directly or indirectly, own, manage, operate,


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         control, be employed by, participate in, or be connected in any manner
         with the ownership, management, operation or control of, any other
         business (conducted for profit or not for profit) that is competitive
         with the business of the Company (business of the Company is defined by
         the business of the Company at the time of termination). The foregoing
         restrictions shall not preclude Mistarz from the ownership of not more
         than three percent (3%) of the voting securities of any corporation
         whose voting securities are registered under Section 12(g) of the
         Securities Exchange Act of 1934. Additionally, Mistarz agrees that,
         among other things, he shall not during the one (1) year period after
         termination of employment for any reason, directly or indirectly:

         A. Contact or solicit the trade or patronage of any customer of
            the Company for Mistarz or any other entity or person, with
            respect to the Company or the business engaged in by Company.
            The term "customers" shall for purposes of this Agreement be
            deemed to include, without limitation, the officers,
            directors, agents, employees, parents, subsidiaries and
            affiliates of any person or organization who is a customer at
            the time of Mistarz's termination of employment or was a
            customer within the twelve-month period immediately preceding
            such termination, and with whom Mistarz has been in contact on
            behalf of the Company, or with respect to whom Mistarz has
            used any Confidential Information.

         B. Solicit, induce or attempt to induce any employee of the
            Company to leave the Company's employ or engagement to become
            connected in any way with, or employ, engage or otherwise
            utilize any such employee in, any other business that is
            competitive with the Company or is engaged in the business of
            the Company.

7.       Injunction.

              7.1 In view of Mistarz's access to the Company's customer base and
              the Company's Confidential Information, and in consideration of
              the value of such property to the Company, Mistarz agrees that the
              covenants contained in paragraphs 4.2, 5 and 6 hereof are
              necessary to protect the interests of the Company in its
              Confidential Information, and to protect and maintain near
              permanent customer relationships and other legitimate, proprietary
              interests of the Company, both actual and potential, which Mistarz
              would not have had access to or any involvement in but for his
              employment relationship with the Company. Mistarz confirms and
              agrees that enforcement of the covenants in paragraphs 4.2, 5 and
              6 hereof would not prevent Mistarz from earning a livelihood.
              Mistarz further agrees that in the event of an actual or
              threatened breach by Mistarz of any of the covenants set forth
              herein, the Company would be irreparably harmed and the full
              extent of injury resulting therefrom would be impossible to
              calculate and the Company therefore will not have an adequate
              remedy at law. Accordingly, Mistarz agrees that temporary and
              permanent injunctive relief would be appropriate remedies against
              such breach, without bond or security; provided, however, that
              nothing herein shall be construed as limiting any other legal or
              equitable remedies available to the Company. The parties to this
              Agreement consent to the jurisdiction of the courts of general
              jurisdiction of


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              the State of Illinois, and to the federal courts situated in the
              State of Illinois, for any proceedings under paragraphs 6 or 7 of
              this Agreement.

              7.2 The Company shall have the right to disclose the contents of
              this Agreement or to deliver a copy of this Agreement bearing
              Mistarz's signature to any person to whom or for whose benefit the
              Company reasonably believes Mistarz has solicited, or has or may
              disclose or use any Confidential Information in violation of this
              Agreement.

              7.3 Mistarz and the Company agree that if, in any proceeding, the
              court or other authority shall refuse to enforce the covenants
              herein set forth because such covenants cover too extensive a
              geographic area or too long a period of time, any such covenant
              shall be deemed appropriately amended and modified in keeping with
              the intention of the parties to the maximum extent permitted by
              law.

8.   General Provisions.

         8.1  Notice. Any Notice required or permitted hereunder shall be made
              in writing (a) either by actual delivery of the notice into the
              hands of the party thereunder entitled, or (b) by the mailing of
              the notice in the United States mail, certified or registered
              mail, return receipt requested, all postage prepaid and addressed
              to the party to whom the notice is to be given at the party's
              respective address set forth below, or such other address as the
              parties may from time to time designate by written notice as
              herein provided.

              If to the Company:    Electric City Corp.
                                    1280 Landmeier Road
                                    Elk Grove Village, Illinois 60007

              With a copy (which shall not constitute notice) to:

                                    Wildman, Harrold, Allen & Dixon
                                    225 West Wacker Drive
                                    Chicago, IL  60606
                                    Attn: Neil G. Wolf

              If to CFO:            Jeffrey Mistarz

              This notice shall be deemed to be received in case (a) on the date
              of its actual receipt by the party entitled thereto and in case
              (b) on the date of its mailing.


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              8.2. Amendment and Waiver. No amendment or modification of this
              Agreement shall be valid or binding upon: a) the Company unless
              made in writing and signed by an officer of the Company, duly
              authorized by the board of directors of the Company or; b) Mistarz
              unless made in writing and signed by him. The waiver by the
              Company or Mistarz of the breach of any provision of this
              Agreement by the other party shall not operate or be construed as
              a waiver of any subsequent breach by such party.

              8.3. Governing Law. The validity and effect of this Agreement and
              the rights and obligations of the parties hereto shall be
              construed and determined in accordance with the internal law, and
              not the conflicts law, of the State of Illinois.

              8.4. Entire Agreement. This Agreement contains all of the terms
              agreed upon by the parties with respect to the subject matter
              hereof and supersedes all prior agreements, arrangements and
              communications between the parties dealing with such subject
              matter, whether oral or written.

              8.5. Binding Effect. This Agreement shall be binding upon and
              shall inure to the benefit of the transferees, successors and
              assigns of the Company, including, any company or corporation with
              which the Company may merge or consolidate.

              8.6. Costs of Enforcement. In the event of any suit or proceeding
              seeking to enforce the terms, covenants, or conditions of this
              Agreement, the prevailing party shall, in addition to all other
              remedies and relief that may be available under this Agreement or
              applicable law, recover his or its reasonable attorneys' fees and
              costs as shall be determined and awarded by the court.

              8.7. Headings. Numbers and titles to paragraphs hereof are for
              information purposes only and, where inconsistent with the text,
              are to be disregarded.

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

              8.9. Public Announcements. The parties hereto agree no
              announcement shall be made, unless required by law and with legal
              counsel's advice, as it relates to this Agreement or the
              employment of Mistarz with the Company without the joint written
              approval of Mistarz and the Company.


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         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.

                               ELECTRIC CITY CORP.


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


                             By:  /ss/ Brian Kawamura
                                 -------------------------------------------
                                  Brian Kawamura
                                  Its: President and Chief Operating Officer


                                  /ss/ Jeffrey Mistarz
                                 -------------------------------------------
                                  JEFFREY MISTARZ


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