STOCK PURCHASE WARRANT
NEITHER
THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY OTHER
APPLICABLE STATE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT
OR
ANY APPLICABLE STATE LAWS. THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF
OF
A UNITED STATES PERSON UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
STOCK
PURCHASE WARRANT
Warrant
#
___
To
Purchase [_____]
Shares
of Common Stock of
POWER
EFFICIENCY CORPORATION
THIS
CERTIFIES that, for value received, [________________] (the “Holder”), is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date hereof (the
“Initial Exercise Date”) and on or prior to the close of business on
[ ],
2012
(the “Termination Date”) but not thereafter, to subscribe for and purchase from
POWER EFFICIENCY CORPORATION, a corporation incorporated in the State of
Delaware (the “Company”), up to [_________]
shares
(the “Warrant Shares”) of common stock, $0.001 par value, of the Company (the
“Common Stock”). The purchase price of one share of Common Stock (the “Exercise
Price”) under this Warrant shall be $0.60. The Exercise Price and the number of
shares for which the Warrant is exercisable shall be subject to adjustment
as
provided herein. In the event of any conflict between the terms of this Warrant
and the Securities Purchase Agreement dated as of October 25, 2007 pursuant
to
which this Warrant has been issued (the “Purchase Agreement”), the Purchase
Agreement shall control. Capitalized terms used and not otherwise defined herein
shall have the meanings set forth for such terms in the Purchase
Agreement.
1. Title
to Warrant.
Prior
to the Termination Date and subject to compliance with applicable laws and
the
terms hereof, this Warrant and all rights hereunder are transferable, in whole
or in part, at the office or agency of the Company by the holder hereof in
person or by duly authorized attorney, upon surrender of this Warrant together
with the Assignment Form annexed hereto properly endorsed.
2. Authorization
of Shares.
The
Company covenants that all shares of Common Stock which may be issued upon
the
exercise of the purchase rights represented by this Warrant will, upon exercise
of the purchase rights represented by this Warrant in accordance with the other
terms and conditions hereof, be duly authorized, validly issued, fully paid
and
nonassessable and free from all taxes, liens and charges in respect of the
issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue).
3. Exercise
of Warrant.
(a) Except
as
provided in Section 4 herein, exercise of the purchase rights represented by
this Warrant may be made at any time or times on or after the Initial Exercise
Date, and before the close of business on the Termination Date by the surrender
of this Warrant and the Notice of Exercise Form annexed hereto duly executed,
at
the office of the Company (or such other office or agency of the Company as
it
may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company) and upon payment
of the Exercise Price of the shares thereby purchased by wire transfer or
cashier’s check drawn on a United States bank, the holder of this Warrant shall
be entitled to receive a certificate for the number of shares of Common Stock
so
purchased. Certificates for shares purchased hereunder shall be delivered to
the
holder hereof within five
(5)
Trading
Days after the date on which this Warrant shall have been exercised as
aforesaid. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and Holder
or
any other person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
Warrant has been exercised by payment to the Company of the Exercise Price
and
all taxes required to be paid by Holder, if any, pursuant to Section 5 prior
to
the issuance of such shares, have been paid.
(b) If
this
Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant Shares, deliver
to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.
4. No
Fractional Shares or Scrip.
No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant. In lieu thereof, any fractional shares to which
Holder is entitled shall be rounded up or down to the nearest whole
share.
5. Charges,
Taxes and Expenses.
Issuance of certificates for shares of Common Stock upon the exercise of this
Warrant shall be made without charge to the holder hereof for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company,
and
such certificates shall be issued in the name of the holder of this Warrant
or
in such name or names as may be directed by the holder of this Warrant;
provided, however, in the event certificates for shares of Common Stock are
to
be issued in a name other than the name of the holder of this Warrant, this
Warrant when surrendered for exercise shall be accompanied by the Assignment
Form attached hereto duly executed by the holder hereof; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse
it
for any transfer tax incidental thereto.
6. Closing
of Books.
The
Company will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant.
2
7. Transfer,
Division and Combination.
(a) Subject
to compliance with any applicable securities laws, transfer of this Warrant
and
all rights hereunder, in whole or in part, shall be registered on the books
of
the Company to be maintained for such purpose, upon surrender of this Warrant
at
the principal office of the Company, together with a written assignment of
this
Warrant substantially in the form attached hereto duly executed by Holder or
its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and, if required, such payment,
the Company shall execute and deliver a new Warrant or Warrants in the name
of
the assignee or assignees and in the denomination or denominations specified
in
such instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be exercised by
a
new holder for the purchase of shares of Common Stock without having a new
Warrant issued.
(b) This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
7(a), as to any transfer which may be involved in such division or combination,
the Company shall execute and deliver a new Warrant or Warrants in exchange
for
the Warrant or Warrants to be divided or combined in accordance with such
notice.
(c) The
Company shall prepare, issue and deliver at its own expense (other than transfer
taxes) the new Warrant or Warrants under this Section 7.
(d) The
Company agrees to maintain, at its aforesaid office, books for the registration
and the registration of transfer of the Warrants.
8. No
Rights as Shareholder until Exercise.
This
Warrant does not entitle the holder hereof to any voting rights or other rights
as a shareholder of the Company prior to the exercise hereof. Upon the surrender
of this Warrant and the payment of the aggregate Exercise Price, the Warrant
Shares so purchased shall be and be deemed to be issued to such holder as the
record owner of such shares as of the close of business on the later of the
date
of such surrender or payment.
9. Loss,
Theft, Destruction or Mutilation of Warrant.
The
Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
certificate or any stock certificate relating to the Warrant Shares, and in
case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to it (which shall not include the posting of any bond), and upon surrender
and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and
dated
as of such cancellation, in lieu of such Warrant or stock
certificate.
10. Saturdays,
Sundays, Holidays, etc.
If the
last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday, Sunday or a legal holiday,
then such action may be taken or such right may be exercised on the next
succeeding day not a Saturday, Sunday or legal holiday.
3
11. Adjustments
of Exercise Price and Number of Warrant Shares; Stock Splits,
etc.
The
number and kind of securities purchasable upon the exercise of this Warrant
and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following. In case the Company shall (i) pay a dividend
in shares of Common Stock or make a distribution in shares of Common Stock
to
holders of its outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock into a greater number of shares of Common Stock, (iii) combine
its outstanding shares of Common Stock into a smaller number of shares of Common
Stock or (iv) issue any shares of its capital stock in a reclassification of
the
Common Stock, then the number of Warrant Shares purchasable upon exercise of
this Warrant immediately prior thereto shall be adjusted so that the holder
of
this Warrant shall be entitled to receive the kind and number of Warrant Shares
or other securities of the Company which he would have owned or have been
entitled to receive had such Warrant been exercised in advance thereof. Upon
each such adjustment of the kind and number of Warrant Shares or other
securities of the Company which are purchasable hereunder, the holder of this
Warrant shall thereafter be entitled to purchase the number of Warrant Shares
or
other securities resulting from such adjustment at an Exercise Price per Warrant
Share or other security obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares purchasable
pursuant hereto immediately prior to such adjustment and dividing by the number
of Warrant Shares or other securities of the Company resulting from such
adjustment. An adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
12. Reorganization
Reclassification Merger Consolidation or Disposition of Assets.
In case
the Company shall reorganize its capital, reclassify its capital stock,
consolidate or merge with or into another corporation (where the Company is
not
the surviving corporation or where there is a change in or distribution with
respect to the Common Stock of the Company), or sell, transfer or otherwise
dispose of all or substantially all its property, assets or business to another
corporation and, pursuant to the terms of such reorganization, reclassification,
merger, consolidation or disposition of assets, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock
of
the successor or acquiring corporation (“Other Property”), are to be received by
or distributed to the holders of Common Stock of the Company, then Holder shall
have the right thereafter to receive, upon exercise of this Warrant, the number
of shares of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property receivable
upon
or as a result of such reorganization, reclassification, merger, consolidation
or disposition of assets by a holder of the number of shares of Common Stock
for
which this Warrant is exercisable immediately prior to such event. In case
of
any such reorganization, reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed and observed
by
the Company and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of shares of Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 12. For purposes of this Section 12, “common stock of the
successor or acquiring corporation” shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 12 shall similarly
apply to successive reorganizations, reclassifications, mergers, consolidations
or disposition of assets.
4
13. Voluntary
Adjustment by the Company.
The
Company may at any time during the term of this Warrant reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate
by
the Board of Directors of the Company.
14. Notice
of Adjustment.
Whenever the number of Warrant Shares or number or kind of securities or other
property purchasable upon the exercise of this Warrant or the Exercise Price
is
adjusted, as herein provided, the Company shall promptly mail by registered
or
certified mail, return receipt requested, to the holder of this Warrant notice
of such adjustment or adjustments setting forth the number of Warrant Shares
(and other securities or property) purchasable upon the exercise of this Warrant
and the Exercise Price of such Warrant Shares (and other securities or property)
after such adjustment, setting forth a brief statement of the facts requiring
such adjustment and setting forth the computation by which such adjustment
was
made. Such notice, in the absence of manifest error, shall be conclusive
evidence of the correctness of such adjustment. Notwithstanding the foregoing,
if the Company fails to give notice to the Holder of any required adjustment
set
forth in this Warrant, then so long as the Company has made the adjustment(s)
required by this Warrant, the failure of the Company to give notice of such
adjustment to the Holder will not cause the Company to incur any liability.
15. Notice
of Corporate Action.
If at
any time:
(a) the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or other distribution, or any right
to
subscribe for or purchase any evidences of its indebtedness, any shares of
stock
of any class or any other securities or property, or to receive any other right,
or
(b) there
shall be any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation or
merger of the Company with, or any sale, transfer or other disposition of all
or
substantially all the property, assets or business of the Company to, another
corporation or,
(c) there
shall be a voluntary or involuntary dissolution, liquidation or winding up
of
the Company;
then,
in
any one or more of such cases, the Company shall give to Holder (i) at least
20
days’ (or as many days as is reasonably practicable) prior written notice of the
date on which a record date shall be selected for such dividend, distribution
or
right or for determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
liquidation or winding up, and (ii) in the case of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, at least 20 days’ prior written notice
of the date when the same shall take place. Such notice in accordance with
the
foregoing clause also shall specify (i) the date on which any such record is
to
be taken for the purpose of such dividend, distribution or right, the date
on
which the holders of Common Stock shall be entitled to any such dividend,
distribution or right, and the amount and character thereof, and (ii) the date
on which any such reorganization, reclassification, merger, consolidation,
sale,
transfer, disposition, dissolution, liquidation or winding up is to take place
and the time, if any such time is to be fixed, as of which the holders of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such disposition, dissolution, liquidation
or
winding up. Each such written notice shall be sufficiently given if addressed
to
Holder at the last address of Holder appearing on the books of the Company
and
delivered in accordance with Section 18(c).
5
16. Authorized
Shares.
The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise
of
any purchase rights under this Warrant. The Company further covenants that
its
issuance of this Warrant shall constitute full authority to its officers who
are
charged with the duty of executing stock certificates to execute and issue
the
necessary certificates for the Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable action
as
may be necessary to assure that such Warrant Shares may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of the principal market upon which the Common Stock may be
listed.
The
Company shall not by any action, including, without limitation, amending its
articles of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may
be
necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the foregoing, the Company will (a) not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such action as
may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the exercise
of
this Warrant, and (c) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.
Before
taking any action which would result in an adjustment in the number of shares
of
Common Stock for which this Warrant is exercisable or in the Exercise Price,
the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
6
17. Registration
Rights.
All
Common Stock issuable upon exercise of this Warrant shall be deemed to be
“Registrable Securities” or such other definition of securities entitled to
registration rights pursuant to Section 7 of the Purchase Agreement, and are
entitled, subject to the terms and conditions of the Purchase Agreement, to
all
rights granted to holders of Registrable Securities thereunder. In no event
will
any holder of this Warrant be entitled to receive a net-cash settlement in
lieu
of physical settlement in shares of Common Stock, regardless of whether any
of
such holder’s Warrant Shares are registered pursuant to an effective
registration statement
18. Miscellaneous.
(a) Jurisdiction.
This
Warrant shall constitute a contract under the laws of Delaware, without regard
to its conflict of law, principles or rules, and be subject to arbitration
pursuant to the terms set forth in this
Warrant.
(b) Restrictions.
The
holder hereof acknowledges that the Warrant Shares acquired upon the exercise
of
this Warrant, if not registered, will have restrictions upon resale imposed
by
state and federal securities laws.
(c) Notices.
Any
notice, request or other document required or permitted to be given or delivered
to the holder hereof by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
(d) Remedies.
Holder,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of
the
provisions of this Warrant and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate.
(e) Successors
and Assigns.
Subject
to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and shall be enforceable by any such Holder
or
holder of Warrant Shares.
(f) Amendment.
This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.
(g) Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
(h) Headings.
The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.
7
(i) Arbitration.
In the
event any controversy or dispute shall arise between the parties under, out
of,
in connection with, or relating to this Warrant or the breach thereof, the
party
initiating such controversy or making such claim shall provide to the other
party notice containing a brief and concise statement of the initiating party’s
claims, together with relevant facts supporting them. Following the date of
said
notice, the parties shall make good faith efforts to settle the dispute. In
the
event the parties have been unable to reach accord using the procedures set
forth in this Section 13, either party may seek binding arbitration before
three
(3) arbitrators in accordance with the rules of the American Arbitration
Association (“AAA”). Each party shall appoint one arbitrator and the appointed
arbitrators shall in turn appoint the third arbitrator. In the event the two
appointed arbitrators are unable to agree upon the third arbitrator, the AAA
shall designate the third arbitrator to arbitrate the controversy or dispute.
The arbitration shall be held in Las Vegas, Nevada. Within thirty (30) days
after initiation of arbitration, the parties shall reach agreement upon and
thereafter follow procedures assuring that the arbitration will be concluded
and
the award rendered within no more than six (6) months from selection of the
three arbitrators. Failing such agreement, AAA will design, and the parties
will
follow, such procedures. THE ARBITRATORS SHALL NOT AWARD ANY PARTY PUNITIVE
OR
EXEMPLARY DAMAGES, AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO SEEK
SUCH DAMAGES. Each party has the right before or during the arbitration to
seek
and obtain from the appropriate court provisional remedies such as attachment,
preliminary injunction, replevin, etc., to avoid irreparable harm, maintain
the
status quo or preserve the subject matter of the arbitration.
8
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated:
October [__],
2007
| POWER EFFICIENCY CORPORATION | ||
| |
|
|
| By: | ||
|
Name:
|
||
|
Title:
|
||
NOTICE
OF
EXERCISE
To:
Power
Efficiency Corporation.
(1) The
undersigned hereby elects to purchase shares
of
Common Stock (the “Common Stock”), of Power Efficiency Corporation, a Delaware
corporation pursuant to the terms of the attached Warrant, and tenders herewith
payment of the exercise price in full, together with all applicable transfer
taxes, if any.
(2) Please
issue a certificate or certificates representing said shares of Common Stock
in
the name of the undersigned or in such other name as is specified
below:
| |
|
|
| (Name) | ||
| (Address) | ||
|
Dated:
|
||
| Signature | ||
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this
form
and supply required information.
Do
not
use this form to exercise the warrant.)
FOR
VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to
_____________________________________________________
whose address is
_____________________________________________________________________________.
Dated:
______________________,_____
Holder’s
Signature: _________________________________
Holder’s
Address: __________________________________
Signature
Guaranteed: ____________________________________________________
NOTE:
The
signature to this Assignment Form must correspond with the name as it appears
on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in an fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing
Warrant.
