EXHIBIT 10.4
SETTLEMENT AGREEMENT
This Agreement (hereinafter the "Agreement") is entered into this 30th
day of September, 2003, by and between Xxxxxxxx Xxxxxxxx ("Xxxxxxxx") and Power
Efficiency Corporation ("PEC").
WHEREAS, PEC's former President, Xxxxxxx Xxxxxxx, filed a claim against
PEC claiming that a transaction PEC entered into with Summit Energy Ventures,
LLC triggered a change of control provision in Xx. Xxxxxxx'x employment
agreement;
WHEREAS, Xxxxxxxx has a change of control provision in his employment
agreement similar to the provision in Xx. Xxxxxxx'x employment agreement;
WHEREAS, Xxxxxxxx and PEC have reached an agreement regarding the
waiver by Xxxxxxxx of any claim Xxxxxxxx has to payment pursuant to the change
of control provision in his employment agreement; and
WHEREAS, Xxxxxxxx and PEC, voluntarily and with full knowledge of their
respective rights and the provisions herein, now agree to the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the promises
and covenants contained herein, it is hereby covenanted and agreed as follows:
1. Xxxxxxxx does hereby fully release, acquit, discharge and hold
harmless PEC of and from any and all actions, causes of
action, suits, covenants, contracts, agreements or other
liability or relief related to Article 5 (Severance and Change
in Control) of Xxxxxxxx'x employment agreement with PEC dated
April 1, 2001 that resulted from the transaction evidenced by
the Series A Convertible Stock Purchase Agreement by and
between PEC and Summit Energy Ventures, LLC dated June 14,
2002.
2. Xxxxxxxx'x employment agreement dated April 1, 2001 is hereby
amended to remove PEC's ability under section 3.1 to defer the
salary increases provided for in such section.
3. PEC shall provide to Xxxxxxxx life insurance as provided for
in Section 6.3 of Xxxxxxxx'x employment agreement with PEC
dated April 1, 2001.
4. Upon execution of this Agreement, PEC will issue to Xxxxxxxx
225,000 shares of unregistered Common Stock of PEC, to be
delivered within seven (7) days of the execution of this
Agreement.
1
5. Acknowledgments; Economic Risk; No Liquidity. Xxxxxxxx
understands and agrees that the purchase of the Shares is not
a liquid investment. In particular and in addition to the
representations in Section 3 hereof, Xxxxxxxx recognizes,
acknowledges and agrees that:
x. Xxxxxxxx must bear the economic risk of investment in
the Shares for an indefinite period of time since the
Shares have not been registered under the Securities
Act of 1933, as amended (the "Securities Act") or
applicable state securities laws ("State Acts"), and,
therefore, cannot be transferred or sold unless
either they are subsequently registered under the
Securities Act and applicable State Acts, or an
exemption from registration is available and a
favorable opinion of counsel to that effect is
obtained.
b. Although there is a limited public market for the
Company's Common Stock, which is thinly traded on the
National Association of Securities Dealers' Over the
Counter Bulletin Board ("OTCBB") under the symbol
"PREF", the Shares are being issued in a private
transaction exempt from the registration requirements
of the Securities Act and therefore cannot be freely
resold. The Shares are restricted securities. The
Shares may be resold in accordance with the
provisions of Securities Act Rule 144.
6. Representations. Xxxxxxxx represents to, and agrees with the
Company that:
x. Xxxxxxxx has carefully reviewed and understands the
risks of and other considerations relating to a
purchase of the Shares.
x. Xxxxxxxx is acquiring the Shares for which he hereby
subscribes as principal for his own investment
account, and not (1) with a view to the resale or
distribution of all or any part thereof, or (2) on
behalf of another person. No person other than the
undersigned will have a direct or indirect interest
in the Shares subscribed for hereby.
x. Xxxxxxxx consents to the placement of a legend on any
certificate(s) evidencing the Shares stating that
such securities have not been registered under the
Securities Act and setting forth or referring to the
restrictions on transferability and sale thereof. The
Xxxxxxxx is aware that the Company will make a
notation in its appropriate records with respect to
the restrictions on the transferability of such
securities.
7. The parties agree that the validity, interpretation and effect
of this Agreement be governed by the laws of the State of
Delaware, and that if any provision of this Agreement is held
to be invalid, such provision shall be deleted and the
remainder of this Agreement shall remain in full force and
effect.
2
8. The parties agree that this Agreement represents the entire
agreement of the parties and that no modification or amendment
of this Agreement shall be binding or effective, unless such
modification or amendment is in writing and executed by each
party hereto.
9. This Agreement may be executed in several counterparts, each
of which when so executed shall be deemed to be an original
and such counterparts together shall constitute one and the
same Agreement. Any counterpart of this Agreement shall be
validly and effectively delivered, if delivered by facsimile
transmission.
[Signature page to immediately follow.]
3
IN WITNESS WHEREOF, the parties hereto have executed this Settlement
Agreement dated September 30.
--------------------------------------------------------------------------------
POWER EFFICIENCY CORPORATION, Xxxxxxxx Xxxxxxxx, individually
a Delaware Corporation
-----------------------------------
By:
-----------------------------------
Name: Xxxxxxx Xxxx
Title: President & CEO
--------------------------------------------------------------------------------
