Exhibit 10.88

 

NEITHER THIS WARRANT NOR ANY SECURITIES THAT MAY BE ISSUED UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS.
THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO ITS
DISTRIBUTION OR RESALE, AND THIS WARRANT AND ANY SUCH SECURITIES MAY NOT BE
SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR THIS WARRANT OR SUCH SECURITIES UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.

 

American Power Group Corporation

 

Common Stock Purchase Warrant

 

Warrant – ______  January 8, 2016

 

American Power Group Corporation, a Delaware corporation with a principal place
of business of 7 Kimball Lane Building A, Lynnfield, Massachusetts 01940 (the
“Company”), hereby certifies that, subject to the terms and conditions set forth
herein, ____________ or its permitted assigns (the “Holder”), is entitled to
purchase up to that number of shares (the “Warrant Shares”) of the Company’s
Common Stock, $.01 par value per share (“Common Stock”), as is determined
pursuant to Section 1(b) below, at the Exercise Price (as defined below) at any
time or from time to time after the date hereof and prior to 5:00 p.m. (Boston,
Massachusetts time), on the Expiration Date (as defined below). This Warrant is
one of a series of warrants (together, the “Warrants”) issued pursuant to that
certain Securities Purchase Agreement dated as of January 8, 2016 among the
Company and the original holders of the Warrants (the “Purchase Agreement”).

 

1. Exercise of Warrant.

 

(a) Exercise Price. The price per share of Common Stock for which this Warrant
is exercisable (as adjusted pursuant to the terms of this Warrant, the “Exercise
Price”) is $0.10 per share.

 

(b) Right to Exercise.

 

(i) Subject to clause (iii) of this Section 1(b), this Warrant shall be
exercisable at any time, in the aggregate, for not more than __________ Warrant
Shares; provided, however, that, prior to the satisfaction of the Exercise
Condition, this Warrant shall not be exercisable, in the aggregate for more than
__________ Warrant Shares (the Warrant Shares referred to in this proviso, the
“Contingent Warrant Shares”). Subject to the foregoing, this Warrant may be
exercised in whole or in part by the Holder at any time thereafter until the
Expiration Date. Any exercise or attempted exercise of this Warrant in excess of
the limits set forth in this Section shall be null and void.

 

 

 

 

(ii) For purposes of this Section 1(b), “Exercise Condition” shall mean the
filing under the Delaware General Corporation Law of a certificate of amendment
to the Company’s Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware increasing the number of authorized shares of
Common Stock from 200,000,000 to 350,000,000 shares.

 

(iii) [For inclusion in warrants issued other than to Arrow, LLC and its
affiliates:] Notwithstanding the provisions of clause (i) of this Section 1(b),
in the event that the holders of a majority of the Warrants (measured with
reference to the number of Warrant Shares issuable from time to time upon the
exercise of all Warrants) (the “Majority Holders”) exercise their Warrants in
whole or in part, then the Holder of this Warrant shall exercise a pro rata
portion of this Warrant. In the event that the Holder does not exercise this
Warrant as required by the preceding sentence within 10 days after written
notice of such exercise by the Majority Holders, this Warrant shall immediately
terminate and shall thereafter be null and void.

 

[For inclusion in warrants issued to Arrow, LLC and its affiliates]:
Notwithstanding the provisions of clause (i) of this Section 1(b), in the event
that the holders of a majority of the Warrants (measured with reference to the
number of Warrant Shares issuable from time to time upon the exercise of all
Warrants) (the “Majority Holders”) exercise their Warrants in whole or in part,
and any holder or holders of any other Warrant or Warrants breaches the
obligations, as set forth in such other Warrants, to exercise a pro rata portion
of such Warrant or Warrants within 10 days after written notice of such exercise
by the Majority Holders (“Failed Warrants”), then the number of Warrant Shares
for which this Warrant shall be exercisable in the aggregate shall be increased
by the number of shares of Common Stock which equals (A) the total number of
shares of Common Stock for which the Failed Warrants had been exercisable
immediately prior to such breach, multiplied by (B) a fraction of which the
numerator shall be the number of Warrant Shares for which this Warrant was
exercisable immediately prior to such breach and of which the denominator shall
be the number of Warrant Shares for which all Warrants held by the Majority
Holders were exercisable immediately prior to such breach.

 

(c) Mechanics of Exercise. This Warrant may be exercised by the Holder by
surrender to the Company of this Warrant, with the attached form of notice of
exercise (a “Notice of Exercise”) duly executed by such Holder, accompanied by
payment, by certified or bank check payable to the order of the Company or by
wire transfer to the Company’s account, in an amount equal to the aggregate
Exercise Price payable hereunder for the number of Warrant Shares for which this
Warrant is being exercised.

 

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2. Delivery of Certificates; Fractional Shares.

 

(a) Delivery of Certificates Upon Exercise. Certificates for shares purchased
hereunder shall be transmitted by the Transfer Agent to the Holder by crediting
the account of the Holder’s prime broker with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is
then a participant in such system and either (A) there is an effective
registration statement permitting the issuance of the Warrant Shares to or
resale of the Warrant Shares by the Holder or (B) the shares are eligible for
resale by the Holder pursuant to Rule 144, and otherwise by physical delivery to
the address specified by the Holder in the Notice of Exercise by the date that
is three (3) Trading Days after the latest of (A) the delivery to the Company of
the Notice of Exercise, (B) surrender of this Warrant (if required) and (C)
payment of the aggregate Exercise Price as set forth above (such date, the
“Warrant Share Delivery Date”). The Warrant Shares 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, with payment to the Company of the
Exercise Price and all taxes required to be paid by the Holder, if any, pursuant
to Section 2(f) prior to the issuance of such shares, having been paid.

 

(b) Delivery of New Warrants Upon Exercise. If this Warrant shall have been
exercised in part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, 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 Warrant
Shares called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant.

 

(c) Rescission Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder a certificate or the certificates representing the
Warrant Shares pursuant to Section 2(a) by the Warrant Share Delivery Date,
then, the Holder will have the right to rescind such exercise.

 

(d) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise. In addition to any other rights available to the Holder, if the
Company fails to cause the Transfer Agent to transmit to the Holder a
certificate or the certificates representing the Warrant Shares pursuant to an
exercise on or before the Warrant Share Delivery Date, and if after such date
the Holder is required by its broker to purchase (in an open market transaction
or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”),
then the Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (y) the amount obtained
by multiplying (1) the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue times (2) the
price at which the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent number of Warrant Shares for which such exercise was
not honored (in which case such exercise shall be deemed rescinded) or deliver
to the Holder the number of shares of Common Stock that would have been issued
had the Company timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

 

3

 

 

(e) No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up to the next whole share.

 

(f) Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares
shall be made without charge to the Holder 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 or in such name or names as may be
directed by the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

 

(g) Closing of Books. The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.

 

3. Certain Adjustments.

 

(a) Stock Dividends and Splits. If the Company, at any time while this Warrant
is outstanding: (i) pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company upon
exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, (iii) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event, and the number of shares
issuable upon exercise of this Warrant shall be proportionately adjusted such
that the aggregate Exercise Price of this Warrant shall remain unchanged. Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.

 

4

 

 

(b) Pro Rata Distributions. If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to the
Holder) evidences of its indebtedness or assets (including cash and cash
dividends) or rights or warrants to subscribe for or purchase any security other
than the Common Stock, then in each such case the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the VWAP determined
as of the record date mentioned above, and of which the numerator shall be such
VWAP on such record date less the then per share fair market value at such
record date of the portion of such assets or evidence of indebtedness or rights
or warrants so distributed applicable to one outstanding share of the Common
Stock as determined by the Company’s Board of Directors in good faith. In either
case the adjustments shall be described in a statement provided to the Holder of
the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.

 

(c) Fundamental Transaction. If, at any time while this Warrant is outstanding,
(i) the Company, directly or indirectly, in one or more related transactions
effects any merger or consolidation of the Company with or into another Person,
(ii) the Company, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct
or indirect, purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for other
securities, cash or property and has been accepted by the holders of 50% or more
of the outstanding Common Stock, (iv) the Company, directly or indirectly, in
one or more related transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property, (v) the Company, directly or indirectly, in one or
more related transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock or share purchase agreement or other
business combination) (each a “Fundamental Transaction”), then, upon any
subsequent exercise of this Warrant, the Holder shall have the right to receive,
for each Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental Transaction, at the
option of the Holder, the number of shares of Common Stock of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and
any additional consideration (the “Alternate Consideration”) receivable as a
result of such Fundamental Transaction by a holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
Fundamental Transaction. For purposes of any such exercise, the determination of
the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. Notwithstanding anything to the contrary in this Warrant from the
date hereof until the Expiration Date, in the event of a Fundamental Transaction
that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined
in Rule 13e-3 under the Securities Exchange Act of 1934, as amended, or (3) a
Fundamental Transaction involving a Person not traded on a national securities
exchange, including, but not limited to, the Nasdaq Global Select Market, the
Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any Successor
Entity (as defined below) shall, at the Holder’s request, delivered at any time
concurrently with, or within 30 days after, the consummation of the Fundamental
Transaction, purchase this Warrant from the Holder by paying to the Holder an
amount of cash equal to the Black Scholes Value.

 

5

 

 

(d) The Company shall cause any successor entity in a Fundamental Transaction in
which the Company is not the survivor (the “Successor Entity”) to assume in
writing all of the obligations of the Company under this Warrant in accordance
with the provisions of this Section 3(d) pursuant to a written agreement in form
and substance reasonably satisfactory to the Holder and approved by the Holder
(without unreasonable delay) prior to such Fundamental Transaction and shall, at
the option of the holder of this Warrant, deliver to the Holder in exchange for
this Warrant a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Warrant which is
exercisable for a corresponding number of shares of capital stock of such
Successor Entity (or its parent entity) equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and with an exercise price which applies the exercise price
hereunder to such shares of capital stock (but taking into account the relative
value of the shares of Common Stock pursuant to such Fundamental Transaction and
the value of such shares of capital stock, such number of shares of capital
stock and such exercise price being for the purpose of protecting the economic
value of this Warrant immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and substance to the
Holder. Upon the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the date
of such Fundamental Transaction, the provisions of this Warrant referring to the
“Company” shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under this Warrant with the same effect as if such Successor Entity had
been named as the Company herein.

 

(e) Calculations. All calculations under this Section 3 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and outstanding.

 

(f) Notices to Holder.

 

(i) Adjustment to Exercise Price. Whenever the [number of Warrant Shares for
which this Warrant may be exercised is adjusted pursuant to Section 1(b)
and/or]1 the Exercise Price is adjusted pursuant to any provision of this
Section 3, the Company shall promptly mail to the Holder a notice setting forth
the [number of Warrant Shares for which this Warrant may be exercised and/or
the] Exercise Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. For purposes of clarification, the Holder
shall be entitled to the benefit of any adjustment to the Exercise Price
hereunder regardless of whether the Holder accurately refers to the adjusted
Exercise Price in the Notice of Exercise.

 

(ii) Notice to Allow Exercise by Holder. If (A) the Company shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to
all holders of the Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of
any stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property, or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
mailed to the Holder at its last address as it shall appear upon the Warrant
Register of the Company, at least 10 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such notice. The Holder shall
remain entitled to exercise this Warrant during the period commencing on the
date of such notice to the effective date of the event triggering such notice
except as may otherwise be expressly set forth herein.

 

 

1 For inclusion in warrants issued to Arrow, LLC and its affiliates.

 

6

 

 

4. No Impairment. The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant.
Without limiting the generality of the foregoing, the Company (i) will not
increase the par value of any shares of stock receivable on the exercise of this
Warrant above the amount payable therefor on such exercise, (ii) will take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable shares of stock upon
exercise of this Warrant from time to time, and (iii) will not transfer all or
substantially all of its properties and assets to any other Person or
consolidate into or merge with or into any other Person (if the Company is not
the surviving entity), unless such other Person expressly agrees in writing
(naming the registered Holder hereof, as such, as an intended third-party
beneficiary) to assume and satisfy all of the Company’s obligations under this
Warrant.

 

5. Transfers.

 

(a) Unregistered Security. The Holder acknowledges that this Warrant and the
Warrant Shares have not been registered under the Securities Act of 1933, as
amended (the “Securities Act”), and agrees not to sell, pledge, distribute,
offer for sale, transfer or otherwise dispose of this Warrant or any Warrant
Shares issued upon its exercise in the absence of (i) an effective registration
statement under the Act as to this Warrant or such Warrant Shares, as the case
may be, and registration or qualification of this Warrant or such Warrant
Shares, as the case may be, under any applicable U.S. federal or state
securities law then in effect, or (ii) an opinion of counsel, satisfactory to
the Company, that such registration and qualification are not required. Each
certificate or other instrument for Warrant Shares issued upon the exercise of
this Warrant shall bear a legend substantially to the foregoing effect.

 

(b) Transfer of Warrant. Neither this Warrant, nor any rights of the Holder
hereunder, may be transferred or assigned, whether by operation of law or
otherwise, without prior notice in writing to the Company. The Company may
condition any such transfer or assignment on the prior receipt from the proposed
transferee or assignee of a written representation that such transferee or
assignee is an “accredited investor,” as such term is defined in Regulation D as
promulgated under the Securities Act and the written agreement that such
transferee or assignee will bound by all of the terms of this Warrant. Any such
transfer or assignment, or attempted transfer or assignment, in violation of
this Warrant shall be null and void.

 

(c) Warrant Register. The Company will maintain a register containing the names
and address of the Holder of the Warrant. Any Holder may change such Holder’s
address as shown on the warrant register by written notice to the Company
requesting such change.

 

7

 

 

6. Authorized Shares.

 

(a) Reservation of Shares. The Company covenants that, subject to the
satisfaction of the Exercise Condition, 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 and
payment for such Warrant Shares in accordance herewith, 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).

 

(b) No Impairment. Except and to the extent as waived or consented to by the
Holder, the Company shall not by any action, including, without limitation,
amending its certificate 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
as set forth in this Warrant against impairment. Without limiting the generality
of the foregoing, the Company will (i) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) 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.

 

(c) Authorizations or Exemptions. Before taking any action which would result in
an adjustment in the number of Warrant Shares 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.

 

8

 

 

7. Certain Definitions. As used in this Warrant, the following terms shall have
the following meanings:

 

“Black Scholes Value” means the value of the unexercised portion of this Warrant
remaining on the date of the Holder’s request pursuant to Section 3(c), which
value is calculated using the Black Scholes Option Pricing Model obtained from
the “OV” function on Bloomberg utilizing (i) an underlying price per share equal
to the greater of (1) the highest Closing Sale Price of the Common Stock during
the period beginning on the Trading Day immediately preceding the earliest to
occur of (x) the public disclosure of the applicable Fundamental Transaction (as
defined below), (y) the consummation of the applicable Fundamental Transaction
and (z) the date on which the Holder first became aware of the applicable
Fundamental Transaction and ending on the Trading Day of the Holder’s request
pursuant to Section 3(c) and (2) the sum of the price per share being offered in
cash in the applicable Fundamental Transaction (if any) plus the value of the
non-cash consideration being offered in the applicable Fundamental Transaction
(if any), (ii) a strike price equal to the Exercise Price in effect on the date
of the Holder’s request pursuant to Section 3(c), (iii) a risk-free interest
rate corresponding to the U.S. Treasury rate for a period equal to the greater
of (1) the remaining term of this Warrant as of the date of the Holder’s request
pursuant to Section 3(c) and (2) the remaining term of this Warrant as of the
date of consummation of the applicable Fundamental Transaction or as of the date
of the Holder’s request pursuant to Section 3(c) if such request is prior to the
date of the consummation of the applicable Fundamental Transaction, (iv) a zero
cost of borrow and (v) an expected volatility equal to the greater of 100% and
the 100 day volatility obtained from the HVT function on Bloomberg (determined
utilizing a 365 day annualization factor) as of the Trading Day immediately
following the earliest to occur of (x) the public disclosure of the applicable
Fundamental Transaction, (y) the consummation of the applicable Fundamental
Transaction and (z) the date on which the Holder first became aware of the
applicable Fundamental Transaction.

 

“Bloomberg” means Bloomberg, L.P.

 

“Closing Sale Price” means, for any security as of any date, the last closing
trade price for such security on the Trading Market, as reported by Bloomberg,
or, if the Trading Market begins to operate on an extended hours basis and does
not designate the closing trade price, then the last trade price of such
security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if
the Trading Market is not the principal securities exchange or trading market
for such security, the last trade price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing does not apply, the last trade price
of such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no last trade price is
reported for such security by Bloomberg, the average of the ask prices of any
market makers for such security as reported in the “pink sheets” by OTC Markets
Group Inc. (formerly Pink Sheets LLC). If the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases,
the Closing Sale Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. If the Company and
the Holder are unable to agree upon the fair market value of such security, then
the fair value of such security will be determined by an independent, reputable
appraiser selected in good faith by the Company and reasonably acceptable to the
Majority Holders. The fees and expenses of such appraiser shall be borne by the
Company. All such determinations shall be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during
such period.

 

9

 

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Rule 144” means Rule 144 promulgated by the Securities and Exchange Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by such Commission having
substantially the same effect as such Rule.

 

“Trading Day” means a day on which the principal Trading Market is open for
trading.

 

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
Alternext, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or
any successors to any of the foregoing).

 

“Transfer Agent” means American Stock Transfer & Trust Company, LLC, the current
transfer agent of the Company, with a mailing address of 6201 15th Avenue
Brooklyn, New York 11219, and a facsimile number of (718) 765-8712, and any
successor transfer agent of the Company.

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)), (b) if the OTC Bulletin Board is not a Trading Market, the volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then
listed or quoted for trading on the OTC Bulletin Board and if prices for the
Common Stock are then reported in the “Pink Sheets” published by Pink OTC
Markets, Inc. (or a similar organization or agency succeeding to its functions
of reporting prices), the most recent bid price per share of the Common Stock so
reported, or (d) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the
Company and reasonably acceptable to the Majority Holders, the fees and expenses
of which shall be paid by the Company.

 

8. Termination; Expiration Date. This Warrant shall terminate on [the earlier
of] January 8, 2021 [the breach of Section 1.2(b)(iii) hereof]2 (the “Expiration
Date”); provided, however, that (a) if the Closing Condition has not been
satisfied prior January 8, 2017, then the Expiration Date shall be extended,
with respect to the Contingent Warrant Shares only, until January 8, 2022; and
(b) if the Closing Condition has not been satisfied prior January 8, 2018, then
the Expiration Date shall be extended, with respect to all of the Warrant
Shares, until January 8, 2026.

 

 

2 For inclusion in warrants issued other than to Arrow, LLC and its affiliates.

 

10

 

 

9. Exchange of Warrants. Upon the surrender by the Holder of this Warrant,
properly endorsed, to the Company at the principal office of the Company, the
Company will, subject to the provisions of Section 5 hereof, issue and deliver
to or upon the order of such Holder, at the Company’s expense, a new Warrant or
Warrants of like tenor, in the name of such Holder or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

10. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.

 

11. No Rights as Stockholder. Until the exercise of this Warrant, the Holder of
this Warrant shall not have or exercise any rights by virtue hereof as a
stockholder of the Company.

 

12. Captions. The captions of sections or subsections of this Warrant are for
reference only and will not affect the interpretation or construction of this
Warrant.

 

13. Equitable Relief. The Company hereby acknowledges that any breach by it of
its obligations under this Warrant would cause substantial and irreparable
damage to the registered Holder hereof, and that money damages would be an
inadequate remedy therefor, and accordingly, acknowledges and agrees that, in
addition to any other rights and remedies to which the registered Holder hereof
may be entitled in respect of any breach of such obligations, such Holder will
be entitled to an injunction, specific performance, and/or other equitable
relief to prevent the breach of such obligations.

 

14. Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers or remedies. Without
limiting any other provision of this Warrant, if the Company willfully and
knowingly fails to comply with any provision of this Warrant, which results in
any material damages to the Holder, the Company shall pay to Holder such amounts
as shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys’ fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto or
in otherwise enforcing any of its rights, powers or remedies hereunder.

 

15. Limitation of Liability. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

 

11

 

 

16. Amendments; Waivers. Any of the terms and conditions of this Warrant may be
changed or amended, and any right of the Holder of this Warrant may be waived,
with the written consent of the Company and the Majority Holders (with or
without the specific consent of the Holder); provided, however, that (a) any
such change, amendment or waiver shall apply equitably to all of the Warrants
and (b) the Exercise Price of this Warrant shall not be changed or amended
(expect as otherwise provided in Section 3) without the written consent of
either (i) the Holder or (ii) the holders of 75% of the Warrants (measured with
reference to the number of Warrant Shares issuable from time to time upon the
exercise of all Warrants) (with or without the specific consent of the Holder).

 

17. Reservation of Rights. No failure or other delay by the registered Holder
hereof exercising any right, power, or privilege hereunder will be or operate as
a waiver thereof, nor will any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power, or
privilege.

 

18. Governing Law; Venue; Waiver of Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
determined in accordance with the provisions of the Purchase Agreement. IN ANY
ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY HOLDER OR THE
COMPANY AGAINST THE OTHER, SUCH HOLDER AND THE COMPANY EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY
ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.

 

[Remainder of page intentionally left blank.]

 

12

 

 

IN WITNESS WHEREOF, the Company has executed and delivered this Warrant, under
seal, on the day and year first above written.

 

  AMERICAN POWER GROUP CORPORATION         By:       Charles E. Coppa     Chief
Financial Officer

 

13

 

 

American Power Group Corporation

 

Common Stock Purchase Warrant

(Warrant _______)

Notice of Exercise

 

o: american power group corporation

 

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the
Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.

 

(2) The undersigned hereby represents and warrants to the Company that the
undersigned is an “Accredited Investor,” as that term is defined in the
Securities Purchase Agreement, on the date hereof.

 

(3) Please issue a certificate or certificates representing said Warrant Shares
in the name of the undersigned or in such other name as is specified below:

 

     

 

The Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

 

                 

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity:
______________________________________________________________

Signature of Authorized Signatory of Investing
Entity:________________________________________

Name of Authorized Signatory:
__________________________________________________________

Title of Authorized Signatory:
___________________________________________________________

Date:
_______________________________________________________________________________

 

14

 

 

American Power Group Corporation

 

Common Stock Purchase Warrant

(Warrant _______)

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, [____] all of or [_______] shares of 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 a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

 

15