**EXHIBIT 10.50**

 

**SETTLEMENT AGREEMENT**

 

ThisSettlement Agreement (the “Agreement”) is entered into this 21st day ofDecember, 2004 (the “Effective Date”), by and between Thomas Mills (“Mills”),located at 3115 34th Street NW, Washington, DC 20008, and Power EfficiencyCorporation (“PEC”), located at 3900 Paradise Road, Suite 282, Las Vegas, NV89109.

 

**WHEREAS**:          PEC and Mills previously signed asettlement agreement on or about September 30, 2004 (the “September Settlement”)that provides for:

1.               the payment of $18,750 in gross wages fromPEC to Mills, and

2.               the issuance of 36,500 qualified options toMills with a strike price of $0.65 per share,

 

inlieu of the payment of $37,500 in accrued wages owed to Mills.

 

**WHEREAS**:          On November 1, 2004, Mills resignedfrom PEC, thus terminating his employment with PEC.

 

**WHEREAS**:          Between the end of the period coveredby the September Settlement and Mills’ resignation on November 1, 2004, Millsclaims to have worked for and earned $5,000 in wages (the “Accrued Salary”).

 

**WHEREAS**:          Mills has submitted to PEC an expensereport with various travel and other expenses for the period of May 26 toOctober 1, 2004, which have remained unreimbursed to this time (the “UnreimbursedExpenses”), and which total $8,368.23; and

 

**WHEREAS**:          With PEC’s consent, Mills purchased acomputer (the “PC”) for Mills to use on PEC, academic, and personal mattersduring his employment with PEC, and for which he was partially reimbursed byPEC, and whereas further Mills wishes to have the PC for his own use in thefuture, recognizing that PEC paid $1,967.17 of the total amount of the cost ofthe PC.

 

**NOW, THEREFORE**, the parties hereby agree to settle thesematters as described in the following items:

 

1.             The parties agree they continue tobe bound by the September Settlement; PEC will make the payments of cash andoptions called for in the September Settlement, and Mills reaffirms his consentthat the September Settlement is just and complete consideration for all wages,back pay, and all other compensation PEC owed Mills through September 30, 2004.

 

2.             PEC agrees to pay Mills thecomplete $5,000 in gross wages for the Accrued Salary.

 

3.             PEC agrees to reimburse Mills forthe complete amount of the Unreimbursed Expenses, in accordance with PEC’sexpense reimbursement policies and the requirements of Mills employmentcontract with PEC, minus the $1,967.17 PEC already reimbursed Mills for the PC,for a net amount of ($8,368.23 - $1,967.17) = $6,401.06.

 

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4.             Mills accepts the considerationdescribed in items 1-3 above as complete and final compensation and payment ofall amounts currently owed to him by PEC, and further agrees that PEC does notand will not owe him any further payment of any kind for anything. PEC willmake all salary payments as soon after the Effective Date as ADP, PEC’s payrollprocessor, can make the payment. The parties understand that the UnreimbursedExpenses require significant time to enter into PEC’s accounting and thatpayment for the Unreimbursed Expenses will be sent as soon as reasonablypossible by PEC, but in no case later than January 5, 2005.

 

5.             Regarding withholding and all othertaxes, the parties agree: a) that PEC will withhold standard taxes from allcash payments made to Mills, except for cash payments for the UnreimbursedExpenses, and b) that Mills will pay any and all taxes associated with anycapital gains and income from the options related to the September Settlement.

 

6.             The parties agree that theemployment agreement entered into between PEC and Mills on October 16th,2003, is hereby terminated and the parties hereby release each other from anyand all obligations and claims under this employment agreement, with theexception of sections 10 and 11, which will survive and are hereby incorporatedin this Agreement.

 

7.             The parties agree that thevalidity, interpretation and effect of this Agreement be governed by the lawsof the State of Nevada, and that if any provision of this Agreement is held tobe invalid, such provision shall be deleted and the remainder of this Agreementshall remain in full force and effect.

 

8.             The parties agree that any legalsuit, action or proceeding arising out of or relating to this Agreement shallbe instituted exclusively in and subject to the jurisdiction of the courts ofthe State of Nevada, Clark County. The parties further waive any objection tothe venue of any such suit, action or proceeding and the right to assert thatsuch forum is not a convenient forum.

 

9.             The parties agree that thissettlement represents the entire agreement of the parties and that nomodification or amendment of this Agreement shall be binding or effective,unless such modification or amendment is in writing and executed by each partyhereto. This Agreement may be executed in several counterparts, each of whichwhen so executed shall be deemed to be an original and such counterpartstogether shall constitute one and the same Agreement.  Any counterpart of this Agreement shall bevalidly and effectively delivered, if delivered by facsimile transmission.

 

**IN WITNESSHEREOF**, the partieshereto have executed this Agreement as of the date and year first above written

 
| **POWER EFFICIENCY CORPORATION** |
|----------------------------------|
|                             |   |
| By:                              | /s/  John Lackland |   |
| Name:                            | BJ  Lackland |
| Title:                           | Interim  CFO |
|                             |   |
| **THOMAS MILLS**                 |
|                             |   |
|                             | /s/  Tom Mills |   |
| Thomas  Mills                    |
|                                  |  |  |  |  |

 

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