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Exhibit 10.3
 
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT
OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
 
TELKONET, INC.
 
WARRANT TO PURCHASE COMMON STOCK
 

     
Warrant No. ____
  
Original Issue Date: ___________

 
Telkonet, Inc., a Utah corporation (the “Company”), hereby certifies that, for
value received, ___________ or its permitted registered assigns (the “Holder”),
is entitled to purchase from the Company up to a total of ___________ shares of
common stock, $0.001 par value per share (the “Common Stock”), of the Company
(each such share, a “Warrant Share” and all such shares, the “Warrant Shares”)
at an exercise price per share equal to the greater of (i) the closing bid price
of a share of Common Stock on November 12, 2009 or (ii) the volume-weighted
average price of a share of Common Stock measured over the 30-day period
immediately preceding November 12, 2009, per share (as adjusted from time to
time as provided in Section 9 herein, the “Exercise Price”), at any time and
from time to time on or after the date hereof (the “Original Issue Date”) and
through and including 5:30 P.M., New York City time, on ______________, 2014
(the “Expiration Date”), and subject to the following terms and conditions:

This Warrant (this “Warrant”) is one of a series of similar warrants issued
pursuant to that certain Securities Purchase Agreement, dated November 16, 2009,
by and among the Company and the Purchasers identified therein (the “Purchase
Agreement”).  All such Warrants are referred to herein, collectively, as the
“Warrants.”
 
1.           Definitions. In addition to the terms defined elsewhere in this
Warrant, capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Purchase Agreement.
  
2.           Registration of Warrants. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder (which shall include the initial
Holder or, as the case may be, any registered assignee to which this Warrant is
permissibly assigned hereunder) from time to time.  The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.
 

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3.           Registration of Transfers. Subject to the restrictions on transfer
set forth in Section 4.1 of the Purchase Agreement and compliance with all
applicable securities laws, the Company shall register the transfer of all or
any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached as Schedule 2 hereto duly
completed and signed, to the Company’s transfer agent or to the Company at its
address specified in the Purchase Agreement and (x) delivery, at the request of
the Company, of an opinion of counsel reasonably satisfactory to the Company to
the effect that the transfer of such portion of this Warrant may be made
pursuant to an available exemption from the registration requirements of the
Securities Act and all applicable state securities or blue sky laws and (y)
delivery by the transferee of a written statement to the Company certifying that
the transferee is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and making the representations and certifications set forth in
Sections 3.2(b), (c) and (d) of the Purchase Agreement, to the Company at its
address specified in the Purchase Agreement.  Upon any such registration or
transfer, a new warrant to purchase Common Stock in substantially the form of
this Warrant (any such new warrant, a “New Warrant”) evidencing the portion of
this Warrant so transferred shall be issued to the transferee, and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations in respect of the New Warrant that the Holder has
in respect of this Warrant. The Company shall prepare, issue and deliver at its
own expense any New Warrant under this Section 3.
 
4.           Exercise and Duration of Warrants.
 
(a)           All or any part of this Warrant shall be exercisable by the
registered Holder in the manner permitted by Section 10 of this Warrant at any
time and from time to time on or after the Original Issue Date and through and
including 5:30 P.M. New York City time, on the Expiration Date.  Upon the
earlier of (i) 5:30 P.M., New York City time, on the Expiration Date, (ii) full
exercise of this Warrant, or (iii) subject to Section 4(b), consummation of a
Change of Control (as defined below), the portion of this Warrant not exercised
prior thereto shall be and become void and of no value and this Warrant shall be
terminated and no longer outstanding.

For the purposes hereof each of the following events shall constitute a “Change
of Control”:

(i)           a merger, consolidation or share exchange in which
 
(x)           the Company is a constituent party or
 
 
(y)
a subsidiary of the Company is a constituent party and the Company issues shares
of its capital stock pursuant to such merger or consolidation,

 
except any such merger or consolidation involving the Company or a subsidiary in
which the shares of capital stock of the Company outstanding immediately prior
to such merger or consolidation continue to represent, or are converted into or
exchanged for shares of capital stock that represent, immediately following such
merger or consolidation, at least a majority, by voting power, of the capital
stock of (1) the surviving or resulting corporation or (2) if the surviving or
resulting corporation is a wholly owned subsidiary of another corporation
immediately following such merger or consolidation, the parent corporation of
such surviving or resulting corporation (provided that, for the purpose of this
Section 4(a), all shares of Common Stock issuable upon exercise of options
outstanding immediately prior to such merger or consolidation or upon conversion
of convertible securities outstanding immediately prior to such merger or
consolidation shall be deemed to be outstanding immediately prior to such merger
or consolidation and, if applicable, converted or exchanged in such merger or
consolidation on the same terms as the actual outstanding shares of Common Stock
are converted or exchanged); or
 
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(ii)           the sale, lease, transfer, exclusive license or other
disposition, in a single transaction or series of related transactions, by the
Company or any subsidiary of the Company of all or substantially all the assets
of the Company and its subsidiaries taken as a whole, or the sale or disposition
(whether by merger or otherwise) of one or more subsidiaries of the Company if
substantially all of the assets of the Company and its subsidiaries taken as a
whole are held by such subsidiary or subsidiaries, except where such sale,
lease, transfer, exclusive license or other disposition is to a wholly owned
subsidiary of the Company.
 
Notwithstanding the foregoing, a financing shall not constitute a Change of
Control.

(b)           Immediately prior to the consummation of a Change of Control, the
Warrant Shares shall automatically be deemed exercised for Common Stock if the
price per share of the Common Stock is above the Exercise Price.

(c)           The Holder may exercise this Warrant by delivering to the Company
(i) an exercise notice, in the form attached as Schedule 1 hereto (the “Exercise
Notice”), completed and duly signed,  and (ii) payment of the Exercise Price for
the number of Warrant Shares as to which this Warrant is being exercised, and
the date on which the last of such items is delivered to the Company (as
determined in accordance with the notice provisions hereof) is an “Exercise
Date.” The delivery by (or on behalf of) the Holder of the Exercise Notice and
the applicable Exercise Price as provided above shall constitute the Holder’s
certification to the Company that its representations contained in Sections
3.2(b), (c) and (d) of the Purchase Agreement are true and correct as of the
Exercise Date as if remade in their entirety (or, in the case of any transferee
Holder that is not a party to the Purchase Agreement, such transferee Holder’s
certification to the Company that such representations are true and correct as
to such assignee Holder as of the Exercise Date).  The Holder shall not be
required to deliver the original Warrant in order to effect an exercise
hereunder.  Execution and delivery of the Exercise Notice shall have the same
effect as cancellation of the original Warrant and issuance of a New Warrant
evidencing the right to purchase the remaining number of Warrant Shares.

5.           Delivery of Warrant Shares. Upon exercise of this Warrant, the
Company shall promptly (but in no event later than three (3) Trading Days after
the Exercise Date) issue or cause to be issued and cause to be delivered to or
upon the written order of the Holder and in such name or names as the Holder may
designate (provided that, if the Registration Statement is not effective and the
Holder directs the Company to deliver a certificate for the Warrant Shares in a
name other than that of the Holder or an Affiliate of the Holder, it shall
deliver to the Company on the Exercise Date an opinion of counsel reasonably
satisfactory to the Company to the effect that the issuance of such Warrant
Shares in such other name may be made pursuant to an available exemption from
the registration requirements of the Securities Act and all applicable state
securities or blue sky laws), (i) a certificate for the Warrant Shares issuable
upon such exercise, free of restrictive legends, or (ii) an electronic delivery
of the Warrant Shares to the Holder’s account at the Depository Trust Company
(“DTC”) or a similar organization, unless in the case of clause (i) and (ii) a
registration statement covering the resale of the Warrant Shares and naming the
Holder as a selling stockholder thereunder is not then effective or the Warrant
Shares are not freely transferable without volume and manner of sale
restrictions pursuant to Rule 144 under the Securities Act, in which case such
Holder shall receive a certificate for the Warrant Shares issuable upon such
exercise with appropriate restrictive legends.  The Holder, or any Person
permissibly so designated by the Holder to receive Warrant Shares, shall be
deemed to have become the holder of record of such Warrant Shares as of the
Exercise Date.  If the Warrant Shares are to be issued free of all restrictive
legends, the Company shall, upon the written request of the Holder, use its
reasonable best efforts to deliver, or cause to be delivered, Warrant Shares
hereunder electronically through DTC or another established clearing corporation
performing similar functions, if available; provided, that, the Company may, but
will not be required to, change its transfer agent if its current transfer agent
cannot deliver Warrant Shares electronically through such a clearing
corporation.
 
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6.           Charges, Taxes and Expenses. Issuance and delivery of certificates
for shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, transfer agent fee or other
incidental tax or expense in respect of the issuance of such certificates, all
of which taxes and expenses shall be paid by the Company; provided, however,
that the Company shall not be required to pay any tax that may be payable in
respect of any transfer involved in the registration of any certificates for
Warrant Shares or the Warrants in a name other than that of the Holder or an
Affiliate thereof. The Holder shall be responsible for all other tax liability
that may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof.
 
7.           Replacement of Warrant. If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction (in such case)
and, in each case, a customary and reasonable indemnity and surety bond, if
requested by the Company. Applicants for a New Warrant under such circumstances
shall also comply with such other reasonable regulations and procedures and pay
such other reasonable third-party costs as the Company may prescribe. If a New
Warrant is requested as a result of a mutilation of this Warrant, then the
Holder shall deliver such mutilated Warrant to the Company as a condition
precedent to the Company’s obligation to issue the New Warrant.
 
8.           Reservation of Warrant Shares. The Company covenants that it will
at all times reserve and keep available out of the aggregate of its authorized
but unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares that are initially issuable and
deliverable upon the exercise of this entire Warrant, free from preemptive
rights or any other contingent purchase rights of persons other than the Holder
(taking into account the adjustments and restrictions of Section 9). The Company
covenants that all Warrant Shares so issuable and deliverable shall, upon
issuance and the payment of the applicable Exercise Price in accordance with the
terms hereof, be duly and validly authorized, issued and fully paid and
nonassessable. The Company will take all such action as may be reasonably
necessary to assure that such shares of Common Stock may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of any securities exchange or automated quotation system upon which
the Common Stock may be listed.
 
9.           Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 9.
 
(a)           Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock
into a larger number of shares, (iii) combines its outstanding shares of Common
Stock into a smaller number of shares or (iv) issues by reclassification of
shares of Common Stock any shares of capital of the Company, then in each such
case the Exercise Price shall be multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
before such event and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such event. Any adjustment made
pursuant to clause (i) of this paragraph shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution, and any adjustment pursuant to clause (ii) or
(iii) of this paragraph shall become effective immediately after the effective
date of such subdivision or combination.
 
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(b)           Pro Rata Distributions. If the Company, at any time while this
Warrant is outstanding, distributes to all holders of Common Stock for no
consideration (i) evidences of its indebtedness, (ii) any security (other than a
distribution of Common Stock covered by the preceding paragraph) or (iii) rights
or warrants to subscribe for or purchase any security, or (iv) any other asset
(in each case, “Distributed Property”), then, upon any exercise of this Warrant
that occurs after the record date fixed for determination of stockholders
entitled to receive such distribution, the Holder shall be entitled to receive,
in addition to the Warrant Shares otherwise issuable upon such exercise (if
applicable), the Distributed Property that such Holder would have been entitled
to receive in respect of such number of Warrant Shares had the Holder been the
record holder of such Warrant Shares immediately prior to such record date
without regard to any limitation on exercise contained therein.
 
(c)           Number of Warrant Shares. Simultaneously with any adjustment to
the Exercise Price pursuant to paragraph (a) of this Section 9, the number of
Warrant Shares that may be purchased upon exercise of this Warrant shall be
increased or decreased proportionately, so that after such adjustment the
aggregate Exercise Price payable hereunder for the increased or decreased number
of Warrant Shares shall be the same as the aggregate Exercise Price in effect
immediately prior to such adjustment.
 
10.           Payment of Exercise Price. The Holder shall pay the Exercise Price
in immediately available funds.
 
11.           Reserved.

12.           No Fractional Shares. No fractional Warrant Shares will be issued
in connection with any exercise of this Warrant.  In lieu of any fractional
shares that would otherwise be issuable, the number of Warrant Shares to be
issued shall be rounded down to the next whole number and the Company shall pay
the Holder in cash the fair market value (based on the closing sale price) for
any such fractional shares.
 
13.           Notices. Any and all notices or other communications or deliveries
hereunder (including, without limitation, any Exercise Notice) shall be in
writing and shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified in the Purchase Agreement prior to 5:30 P.M., New
York City time, on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in the Purchase Agreement on a day that is not a
Trading Day or later than 5:30 P.M., New York City time, on any Trading Day,
(iii) the Trading Day following the date of mailing, if sent by nationally
recognized overnight courier service specifying next business day delivery, or
(iv) upon actual receipt by the Person to whom such notice is required to be
given, if by hand delivery. The address and facsimile number of a Person for
such notices or communications shall be as set forth in the Purchase Agreement
unless changed by such Person by two (2) Trading Days’ prior notice to the other
Persons in accordance with this Section 13.
 
14.           Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days’ notice to the Holder, the Company may appoint a
new warrant agent. Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act.  Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last
address as shown on the Warrant Register.
 
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15.           Miscellaneous.
 
(a)   No Rights as a Stockholder.  The Holder, solely in such Person's capacity
as a holder of this Warrant, shall not be entitled to vote or receive dividends
or be deemed the holder of share capital of the Company for any purpose, nor
shall anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, amalgamation, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
which such Person is then entitled to receive upon the due exercise of this
Warrant. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on the Holder to purchase any securities (upon exercise
of this Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
 
(b)   Authorized Shares. (i) 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 Trading Market upon
which the Common Stock may be listed.  The Company covenants that all Warrant
Shares 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, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
 
(c)   Successors and Assigns. Subject to the restrictions on transfer set forth
in this Warrant and in Section 4.1 of the Purchase Agreement, and compliance
with applicable securities laws, this Warrant may be assigned by the Holder.
This Warrant shall be binding on and inure to the benefit of the Company and the
Holder and their respective successors and assigns. Subject to the preceding
sentence, nothing in this Warrant shall be construed to give to any Person other
than the Company and the Holder any legal or equitable right, remedy or cause of
action under this Warrant. This Warrant may be amended only in writing signed by
the Company and the Holder, or their successors and assigns.
 
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(d)   Amendment and Waiver.  Except as otherwise provided herein, the provisions
of the Warrants may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Holders of Warrants
representing no less than a majority of the Warrant Shares obtainable upon
exercise of the Warrants then outstanding.
 
(e)   Acceptance. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.
 
(f)   Governing Law; Jurisdiction. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH OF THE
COMPANY AND THE HOLDER HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION
OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF
MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN
(INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS),
AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR
PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
ANY SUCH COURT. EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH
SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED
MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PERSON AT THE
ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THE PURCHASE AGREEMENT AND AGREES THAT
SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. EACH OF THE COMPANY AND THE
HOLDER HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY. 
 
(g)           Headings.   The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
 
(h)           Severability.  In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby, and the Company and the Holder will
attempt in good faith to agree upon a valid and enforceable provision which
shall be a commercially reasonable substitute therefor, and upon so agreeing,
shall incorporate such substitute provision in this Warrant.
 
 
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its authorized officer as of the date first indicated above.
 

 

 
TELKONET, INC.
         
By:  /s/ Jason Tienor                                       
 
Name:   Jason Tienor
 
Title:     Chief Executive Officer

 
 
 
 
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SCHEDULE 1

FORM OF EXERCISE NOTICE

[To be executed by the Holder to purchase shares of Common Stock under the
Warrant]
 
Ladies and Gentlemen:

(1)           The undersigned is the Holder of Warrant No. __________ (the
“Warrant”) issued by Telkonet, Inc., a Utah corporation (the
“Company”). Capitalized terms used herein and not otherwise defined herein have
the respective meanings set forth in the Warrant.

(2)           The undersigned hereby exercises its right to purchase __________
Warrant Shares pursuant to the Warrant.

(3)           The Holder shall pay the sum of $___________ in immediately
available funds to the Company in accordance with the terms of the Warrant.

(4)           Pursuant to this Exercise Notice, the Company shall deliver to the
Holder Warrant Shares determined in accordance with the terms of the Warrant.

 
 
Dated:____________________
 
Name of Holder:  ____________________________
 
By:_________________________________     
Name: _______________________________
Title:  _______________________________
(Signature must conform in all respects to name of Holder as specified on the
face of the Warrant)
 
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SCHEDULE 2

FORM OF ASSIGNMENT
 
[To be completed and executed by the Holder only upon transfer of the Warrant]
 
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
                             (the “Transferee”) the right represented by the
within Warrant to purchase                  shares of Common Stock of Telkonet,
Inc., a Utah company, (the “Company”) to which the within Warrant relates and
appoints                              attorney to transfer said right on the
books of the Company with full power of substitution in the premises. In
connection therewith, the undersigned represents, warrants, covenants and agrees
to and with the Company that:

(a)
the offer and sale of the Warrant contemplated hereby is being made in
compliance with Section 4(1) of the United States Securities Act of 1933, as
amended (the “Securities Act”) or another valid exemption from the registration
requirements of Section 5 of the Securities Act and in compliance with all
applicable securities laws of the states of the United States;

 
(b)
the undersigned has not offered to sell the Warrant by any form of general
solicitation or general advertising, including, but not limited to, any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, and
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising;

 
(c)
the undersigned has read the Transferee’s investment letter included herewith,
and to its actual knowledge, the statements made therein are true and correct;
and

 
(d)
the undersigned understands that the Company may condition the transfer of the
Warrant contemplated hereby upon the delivery to the Company by the undersigned
or the Transferee, as the case may be, of a written opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that such transfer may be made without
registration under the Securities Act and under applicable securities laws of
the states of the United States.

 
Dated:   __________________________
  __________________________________________     
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
          __________________________________________     
Address of Transferee
          __________________________________________
In the presence of:
        __________________________________________ 
________________________________     

 
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