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                                                                    EXHIBIT 10.4

                              SETTLEMENT AGREEMENT

         This Agreement (hereinafter the "Agreement") is entered into this 30th
day of September, 2003, by and between Nicholas Anderson ("Anderson") and Power
Efficiency Corporation ("PEC").

         WHEREAS, PEC's former President, Stephen Shulman, filed a claim against
PEC claiming that a transaction PEC entered into with Summit Energy Ventures,
LLC triggered a change of control provision in Mr. Shulman's employment
agreement;

         WHEREAS, Anderson has a change of control provision in his employment
agreement similar to the provision in Mr. Shulman's employment agreement;

         WHEREAS, Anderson and PEC have reached an agreement regarding the
waiver by Anderson of any claim Anderson has to payment pursuant to the change
of control provision in his employment agreement; and

         WHEREAS, Anderson 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.       Anderson 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 Anderson's 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.       Anderson's 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 Anderson life insurance as provided for
                  in Section 6.3 of Anderson's employment agreement with PEC
                  dated April 1, 2001.

         4.       Upon execution of this Agreement, PEC will issue to Anderson
                  225,000 shares of unregistered Common Stock of PEC, to be
                  delivered within seven (7) days of the execution of this
                  Agreement.

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         5.       Acknowledgments; Economic Risk; No Liquidity. Anderson
                  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, Anderson recognizes,
                  acknowledges and agrees that:

                  a.       Anderson 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. Anderson represents to, and agrees with the
                  Company that:

                  a.       Anderson has carefully reviewed and understands the
                           risks of and other considerations relating to a
                           purchase of the Shares.

                  b.       Anderson 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.

                  c.       Anderson 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
                           Anderson 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.

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         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.]

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         IN WITNESS WHEREOF, the parties hereto have executed this Settlement
Agreement dated September 30.

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POWER EFFICIENCY CORPORATION,                Nicholas Anderson, individually
a Delaware Corporation

                                             -----------------------------------
By:
   -----------------------------------
Name:  Richard Koch
Title: President & CEO

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                                                                    EXHIBIT 10.5

                SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE

         This Settlement Agreement and Mutual General Release (hereinafter the
"Settlement Agreement") is entered into this 3rd day of October 2003, by and
between and among Stephen L. Shulman ("Shulman"), Power Efficiency Corporation
("PEC"), and Summit Energy Ventures, L.L.C. ("Summit");

         WHEREAS, Shulman filed a Demand for Arbitration on or about October 10,
2002 with the American Arbitration Association, Case No. 54 160 01565 02
(hereinafter the "Arbitration") and

         WHEREAS, Summit Energy Ventures, L.L.C. filed an action in the Federal
District Court for the Western District of Washington on August 18, 2003
entitled "Summit Energy Ventures, L.L.C., Plaintiff, vs. Stephen P. Shulman,
Defendant," Case No. C03-2577 (hereinafter the "Lawsuit"); and

         WHEREAS, Shulman, PEC, and Summit deny and continue to deny that they
have breached any duty or violated any law whatsoever or that they have any
liability to one another on any of the claims set forth in the Arbitration or
the Lawsuit;

         WHEREAS, Shulman and PEC voluntarily and with full knowledge of their
respective rights, and the provisions herein, and having the benefit of advice
of their separate counsel, now desire to settle, compromise and dispose of the
Arbitration and the Lawsuit, and any other claims that they have or might have
against each other, upon the terms and conditions set forth herein; and

         WHEREAS, Shulman and Summit voluntarily and with full knowledge of
their respective rights, and the provisions herein, and having the benefit of
advice of their separate counsel, now desire to settle, compromise and dispose
of the Arbitration and the Lawsuit, and any other claims that they have or might
have against each other, upon 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.       In consideration of the foregoing and the agreements set forth
herein, PEC shall pay or deliver to Shulman the following:

                  (a)      Upon execution of this Settlement Agreement, PEC
                           shall pay the sum of $25,000 in cash to Shulman.

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                  (b)      Further upon execution of this Settlement Agreement,
                           PEC will issue its Promissory Note to Shulman in the
                           amount of $115,000, a draft copy of which is attached
                           hereto as Exhibit A.

                  (c)      Upon execution of this Settlement Agreement, any
                           other promissory notes or indebtedness claimed by
                           Shulman will be deemed cancelled, including but not
                           limited to the $28,500 Promissory Note dated June 11,
                           2002 previously issued by PEC and the $103,313
                           Promissory Note dated May 31, 2002 previously issued
                           by PEC.

                  (d)      Upon execution of this Settlement Agreement, PEC will
                           issue to Shulman 225,000 shares of non-registered
                           stock of PEC, to be delivered within seven (7) days
                           of the execution of this Settlement Agreement.

         2.       As to the releases in Paragraphs 4 and 5, the parties agree
that Shulman is providing the releases and receiving releases individually; that
Shulman is providing releases and receiving releases binding upon his spouse (if
applicable), and upon his heirs, successors and assigns; and that Shulman is
providing releases and receiving releases in his capacity of present and/or
former employee, agent, servant, officer, director, and shareholder of PEC.
Hereinafter, all such persons, parties and capacities shall be referred to as
"the Shulman parties." Shulman warrants and represents that he has the authority
to provide these releases.

         3.       As to the releases in Paragraphs 4 and 5, the parties agree
that PEC and Summit are each separately providing releases and receiving
releases on behalf of itself, each of their respective officers, directors,
agents, representatives, employees, attorneys, sureties, insurers, heirs,
successors and assigns, investors, shareholders, affiliates, subsidiaries,
parent corporations, lenders, partners, joint venturers, or any other person or
company in privity with PEC and Summit. Hereinafter, all such persons, parties
and capacities shall be referred to, respectively, as "the Summit parties" and
"the PEC parties." PEC and Summit each warrant and represent that it has the
authority to provide these releases.

         4.       Shulman, for himself and the Shulman parties, does hereby
fully release, acquit, discharge and hold harmless the Summit parties and the
PEC parties of and from any and all actions, causes of action, suits, covenants,
contracts, agreements, arrangements, promises, obligations, warranties,
trespasses, torts, injuries, losses, damages, claims, demands or other liability
or relief of any nature whatsoever, whether known or unknown, foreseen or
unforeseen, resulting or to result, whether in law or in equity that Shulman
Releasors ever had, now have or hereinafter can have, including but not limited
to, claims arising in any way or relating in any way to: (i) Any claim by
Shulman or the Shulman parties against PEC or against the PEC parties; (ii) Any
claim by Shulman or the Shulman parties against Summit or against the Summit
parties; (iii) Any claims or matters arising out of stock ownership by Shulman
or the Shulman parties in PEC before the date of this Agreement; (iv) the
subject matter of the Arbitration or any matter which could have been raised in
the Arbitration; and (v) the Lawsuit, or any matter which could have been raised
in the Lawsuit. Provided, however, any claims for breach of this Settlement
Agreement are not released.

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         5.       PEC and Summit, for themselves and, respectively, for the PEC
parties and the Summit parties, do hereby fully release, acquit and discharge
the Shulman parties and Medical Devices of and from any and all actions, causes
of action, suits, covenants, contracts, agreements, arrangements, promises,
obligations, warranties, trespasses, torts, injuries, losses, damages, claims,
demands or other liability or relief of any nature whatsoever, whether known or
unknown, foreseen or unforeseen, resulting to or to result, whether in law or in
equity that the PEC parties and Summit parties ever had, now have, or
hereinafter can have, including, but not limited to, claims arising in any way
out of or related in any way to (i) Any claim by PEC or the PEC parties against
Shulman or the Shulman parties; (ii) Any claim by Summit or the Summit parties
against Shulman or the Shulman parties; (iii) Any claims or matters arising out
of stock ownership by Shulman or the Shulman parties in PEC before the date of
this Agreement; (iv) the subject matter of the Arbitration or any matter which
could have been raised in the Arbitration; and (v) the Lawsuit, or any matter
which could have been raised in the Lawsuit. Provided, however, any claims for
breach of this Settlement Agreement are not released.

         6.       Contemporaneously with the execution of this Settlement
Agreement, counsel for Summit shall execute and present for entry with the
Federal District Court for the Western District of Washington the Notice of
Dismissal with Prejudice and without costs attached hereto as Exhibit B and
counsel for Shulman shall execute and present for entry with the American
Arbitration Association the Notice of Dismissal with Prejudice and Without Costs
attached hereto as Exhibit C. Each party will bear their own costs, expenses and
attorneys fees incurred in connection with those matters. The parties agree that
contemporaneously with the execution of this Settlement Agreement, the parties
shall execute an Amendment to the Amended and Restated Stockholders' Agreement,
in the form attached hereto as Exhibit D.

         7.       The parties agree that the validity, interpretation and effect
of this Settlement Agreement be governed by the laws of the State of Michigan,
and that if any provision of this Settlement Agreement is held to be invalid,
such provision shall be deleted and the remainder of this Settlement Agreement
shall remain in full force and effect.

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         8.       The parties agree that this settlement represents the entire
agreement of the parties and that no modification or amendment of this
Settlement Agreement shall be binding or effective, unless such modification or
amendment is in writing and executed by each party hereto.

         9.       The parties warrant and represent that they have not relied
upon any statements of one of the other parties or their counsel concerning
their respective rights or the facts regarding the Arbitration or the Lawsuit.

         10.      This Settlement 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 Settlement
Agreement. Any counterpart of this Settlement Agreement shall be validly and
effectively delivered, if delivered by facsimile transmission.

         IN WITNESS WHEREOF, the parties hereto have executed this Settlement
Agreement as of the date and year first above written.

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POWER EFFICIENCY CORPORATION, a              SUMMIT ENERGY VENTURES, LLC, a
Delaware Corporation                         Delaware limited liability company

By:                                          By: Northwest Power Management, its
   --------------------------------          manager
Name:  Richard Koch
Title: President & CEO
                                             By:
                                                --------------------------------
                                                Name:  Steven Strasser
                                                Title: President

--------------------------------------------------------------------------------
Stephen L. Shulman, individually

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

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