f8k0210ex10iv_envision.htm


    Exhibit
10.4

     

    CONFIDENTIAL

     

    THIS
WARRANT AND ALL SHARES OF WARRANT STOCK ISSUABLE HEREUNDER, HAVE BEEN AND WILL
BE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR
HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT UNLESS EITHER (i) THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED IN
CONNECTION WITH SUCH DISPOSITION OR (ii) THE SALE OF SUCH SECURITIES IS MADE
PURSUANT TO RULE 144 PROMULGATED UNDER THE ACT.

     

    WARRANT
TO PURCHASE COMMON STOCK

    OF

    ENVISION
SOLAR INTERNATIONAL, INC.

     

                           

    
      
        	Warrant
      No.___________________________  	 	La Jolla,
      California
	Date of Issuance: January
      11_,
      2008	 	 


      

       

    

     

    THIS
CERTIFIES THAT, for value received, Squire, Sanders & Dempsey L.L.P. or its
permitted registered assigns (the "Holder"), is
entitled, subject to the terms and conditions of this Warrant, at
any

    time or
from time to time after January___________ , 2008 (the "Effective Date"), to
purchase from Envision Solar International,
Inc., a California corporation (the "Company"), the Number
of Shares of Warrant Stock (as defined below) of the Company at an exercise
price equal to $0.01 (the "Exercise Price") per
share. Furthermore, both the Number of Shares of Warrant Stock purchasable upon
exercise of this Warrant and the Exercise Price are subject to adjustment as
provided herein. The Warrant Stock shall automatically expire unless previously
exercised on January 1, 2015 (the "Termination Date").
Except as otherwise provided herein, all defined terms shall have the meanings
ascribed to such terms as set forth in Section 1 hereinbelow.

     

    1.
CERTAIN DEFINITIONS. As used in this Warrant the following terms shall have the
following respective meanings:"Change of Control"
means (i) the sale, lease, exchange or other transfer, directly or indirectly,
of all or substantially all of the assets of Company or its subsidiaries (in one
transaction or in a series of related transactions); (ii) the approval by the
shareholders of the Company of any plan or proposal for the liquidation or
dissolution of the Company; (iii) a merger or consolidation to which the Company
is a party if the shareholders of Company immediately prior to the effective
date of such merger or consolidation have "beneficial ownership" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
immediately following the effective date of such merger or consolidation of
securities of the surviving entity representing 50% or less of the combined
voting power of the surviving entity's then outstanding securities (determined
on a fully diluted basis) ordinarily having the right to vote at elections of
directors; or (iv) the sale or transfer of outstanding securities by the
shareholders of Company to any person if after the sale or transfer such person
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of 50% or more of the combined voting power of
Company's outstanding securities ordinarily having the right to vote at
elections of directors.

    


    "Common Stock" shall
mean the Company's common stock.

    


    "Fair Market Value" of
a share of Warrant Stock as of a particular date shall mean:

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

       

      (a) If traded
on a national securities exchange or the Nasdaq National Market, the Fair Market
Value shall be deemed to be the average of the closing prices of the shares of
the Warrant Stock of the Company on such exchange or market over the five (5)
business days ending immediately prior to the applicable date of
valuation;

    

     

    (b) If
actively traded over-the-counter, the Fair Market Value shall be deemed to be
the average of the closing bid prices over the 30-day period ending immediately
prior to the applicable date of valuation; and

     

    (c) If there
is no active public market, the Fair Market Value shall be determined by the
Board of Directors of the Company in good faith using any reasonable method of
valuation, which determination shall be conclusive and binding on all interested
parties.

     

    "IPO"
shall mean the first firm commitment underwritten public offering of the
Company's Common Stock pursuant to an effective registration statement filed
with the SEC under the Securities Act.

     

    "Number of Shares of Warrant
Stock" and "Number of Shares"
shall mean, subject to the terms hereof, the number or quotient equal to
$8,006.20 divided by the lesser of (a) the price per share sold by the Company
in its next preferred stock, Common Stock or other equity financing of
securities after the Date of Issuance of this Warrant, or (b) SI 0.00 per share.
Notwithstanding the foregoing, the Number of Shares of Warrant Stock (i)
represents the number of shares or securities of Warrant Stock at any time
receivable or issuable upon exercise of this Warrant, and (ii) shall be subject
to adjustment as set forth in this Warrant.

     

    "Registered Holder"
shall mean any Holder in whose name this Warrant is registered upon the books
and records maintained by the Company.

     

    "SEC"
shall mean the U.S. Securities and Exchange Commission.

     

    "Securities Act" shall
mean the Securities Act of 1933, as amended.

     

    "Warrant" shall
include this Warrant and any warrant delivered in substitution or exchange for
this Warrant as provided herein.

     

    "Warrant Stock" shall
mean the Common Stock of the Company and any other securities, including any
securities into which such Warrant Stock has converted, at any time receivable
or issuable upon exercise of this Warrant.

     

    2. [RESERVED].

     

    3. EXERCISE
OF WARRANT

     

    3.1 Payment. Subject to
compliance with the terms and conditions of this Warrant and applicable
securities laws, this Warrant may be exercised, in whole or in part at any time
or from time to time after the Effective Date so long as Holder continues to
serve as legal counsel to the Company, by the delivery (including, without
limitation, delivery by facsimile) of the form of Notice of Exercise attached
hereto as Exhibit 1
(the "Notice of
Exercise"), duly executed by the Holder, at the principal office of the
Company, and as soon as practicable after such date, surrendering

     

    
      
        
        

      

      
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      (a) this
Warrant at the principal office of the Company (as listed in Section 14 below),
and

    

     

    (b) payment,
(i) in cash (by check) or by wire transfer, (ii) by cancellation by the Holder
of indebtedness of the Company to the Holder; or (lii) by a combination of (i)
and (ii), of an amount equal to the product obtained by multiplying the Number
of Shares of Warrant Stock being purchased upon such exercise by the then
effective Exercise Price (the "Exercise
Amount").

     

    3.2 Net Issue Exercise.
In lieu of the payment methods set forth in Section
3.1(b) above, if the Fair Market Value of one share of Warrant Stock is greater
than the Exercise
Price (at the date of calculation set forth below), the Holder may elect to
exchange all or some of
the Warrant for shares of Warrant Stock equal to the value of the Warrant being
exchanged
on the date of exchange. If Holder elects to exchange this Warrant as provided
in this Section
3.2, the Holder shall tender to the Company, at the principal office of the
Company, the Warrant
for the amount being exchanged, along with a properly endorsed Notice of
Exercise, and the
Company shall issue to the Holder the Number of Shares of the Warrant Stock
computed using the
following formula:

    


     

    X = Y (A-B)

     

    A

    


    Where X =
the Number of Shares of Warrant Stock to be issued to the Holder.

     

    Y = the
Number of Shares of Warrant Stock purchasable under the amount of the Warrant
being
exchanged (as adjusted to the date of such calculation). 

     

    A = the
Fair Market Value of one share of the Warrant Stock. 

     

    B =
  Exercise Price (as adjusted to the date of such
calculation).

     

    All
references herein to an "exercise" of the Wairant shall include an exchange
pursuant to this Section 3.2.

     

    3.3
IPO. Upon
receipt of a written notice of the Company's intention to raise capital by
selling shares of Common Stock in an IPO (the "IPO Notice"), which
notice shall be delivered to the Holder at least thirty (30) but not more than
sixty (60) days before the anticipated date of the filing with the SEC of the
registration statement for such IPO, the Holder shall promptly notify the
Company whether the Holder will exercise this Warrant. Notwithstanding whether
an IPO Notice has been delivered to the Holder or any other provision of this
Warrant to the contrary, this Warrant shall be deemed exercised on the
consummation of the IPO; the Fair Market Value will be the price at which one
share of Common Stock was sold to the public in the IPO. Ff the Holder has
elected to exercise this Warrant pursuant to this Section and the IPO is not
consummated, then the Holder's exercise of this Warrant shall not be effective
unless the Holder confirms in writing the Holder's intention to go forward with
the exercise of this Warrant.

     

    
      
        
        

      

      
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      3.4
"Easy Sale" Exercise.
In lieu of the payment methods set forth in Section 3.1(b) above, when permitted
by law and applicable regulations (including the rules of Nasdaq and the
National Association of Securities Dealers (the "NASD")), the Holder
may pay the Exercise Amount through a "same day sale" commitment from the Holder
(and if applicable a broker-dealer that is a member of the NASD (an "NASD Dealer")),
whereby the Holder will irrevocably elect to exercise this Warrant and to sell
at least that Number of Shares of Warrant Stock so purchased to pay the Exercise
Amount (and up to all of the shares of Warrant Stock so purchased) and the
Holder (or, if applicable, the NASD Dealer) commits upon sale (or, in the case
of the NASD Dealer, upon receipt) of such shares of Warrant Stock to forward the
Exercise Amount directly to the Company, with any sale proceeds in excess of the
Exercise Amount being for the benefit of the Holder.

    

     

    3.5 Stock Certificates;
Fractional Shares. As soon as practicable on or after the date of
exercise of this Warrant under Section 3.1, 3.2, 3.3 or 3.4 above, as
applicable, the Company
shall issue and deliver to the person or persons entitled to receive the same a
certificate or
certificates for the number of whole shares of Warrant Stock issuable upon such
exercise, together
with cash in lieu of any fraction of a share equal to such fraction of the
current Fair Market
Value of one whole share of Warrant Stock as of the date of exercise of this
Warrant. No fractional
shares or scrip representing fractional shares shall be issued upon an exercise
of this Warrant.

     

    3.6 Partial Exercise; Effective
Date of Exercise. In case of any partial exercise
of this Warrant, the Company shall cancel this Warrant upon surrender hereof and
shall execute
and deliver a new Warrant of like tenor and date for the balance of the shares
of Warrant Stock
purchasable hereunder. This Warrant shall be deemed to have been exercised
immediately prior to
the close of business on the date of its surrender for exercise as provided
above. The person
entitled to receive the shares of Warrant Stock issuable upon exercise of this
Warrant shall be
treated for all puiposes as the holder of record of such shares as of the close
of business on the date the
Holder is deemed to have exercised this Warrant.

     

    4. VALID
ISSUANCE; TAXES. All shares of Warrant Stock issued upon the exercise of this
Warrant shall be validly issued, fully paid and non-assessable, and the Company
shall pay all taxes and other governmental charges that may be imposed in
respect of the issue or delivery thereof.

     

    5. ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF SHARES. The Number of Shares of Warrant Stock
issuable upon exercise of this Warrant (or any shares of stock or other
securities or property receivable or issuable upon exercise of this Warrant) and
the Exercise Price are subject to adjustment upon occurrence of the following
events:

    


    5.1
Adjustment for Stock Splits.
Stock Subdivisions or Combinations of Shares. If the Company at any time
while this Warrant, or any portion hereof, remains outstanding shall split,
subdivide or combine the shares of Warrant Stock, as to which purchase rights
under this Warrant exist, into a different number of securities of the same
class, the Number of Shares of Warrant Stock issuable upon exercise of this
Warrant shall be proportionately increased and the Exercise Price for such
securities shall be proportionately decreased in the case of a split or
subdivision, and likewise, the Number of Shares of Warrant Stock issuable upon
exercise of this Warrant shall be proportionately decreased and the Exercise
Price proportionately increased in the case of a combination.

     

    5.2
Adjustment for Dividends or
Distributions of Stock or Other Securities or Property. In case the
Company shall make or issue, or shall fix a record date for the determination of
eligible holders entitled to receive, a dividend or other distribution with
respect to the Warrant Stock (or any shares of stock or other securities at the
time issuable upon exercise of the Warrant) payable in (a) securities of the
Company or (b) assets (excluding cash dividends paid or payable solely out of
retained earnings), then, in each such case, the Holder on exercise of this
Warrant at any time after the consummation, effective date or record date of
such dividend or other distribution, shall receive, in addition to the shares of
Warrant Stock (or such other stock or securities) issuable on such exercise
prior to such date, and without the payment of additional consideration
therefor, the securities or such other assets of the Company to which such
Holder would have been entitled upon such date if such Holder had exercised this
Warrant on the date hereof and had thereafter, during the period from the date
hereof to and including the date of such exercise, retained such shares and/or
all other additional stock available by it as aforesaid during such period
giving effect to all adjustments called for by this Section 5.

     

    
      
        
        

      

      
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      5.3 Reclassification. If
the Company, by reclassification of securities or otherwise, shall change any of
the securities as to which purchase rights under this Warrant exist into the
same or a different number of securities of any other class or classes, this
Warrant shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as a result of such change with respect
to the securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefore shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 5. No adjustment shall be made pursuant
to this Section 5.3 upon any conversion or redemption of the Warrant Stock which
is the subject of Section 5.5.

    

     

    5.4 Adjustment for Capita]
Reorganization, Merger or Consolidation. If at any time while this
Warrant, or any portion hereof, is outstanding and unexpired there shall be a
Change of Control, this Warrant shall cease to represent the right to receive
Warrant Stock and shall automatically represent the right to receive upon the
exercise of this Warrant, during the period specified herein and upon payment of
the Exercise Price then in effect, the Number of Shares of stock or other
securities or property offered to the Company's holders of Warrant Stock in
connection with such Change of Control that a holder of shares of Warrant Stock,
deliverable upon exercise of this Warrant would have been entitled to receive in
such Change of Control if this Warrant had been exercised immediately before
such Change of Control, subject to further adjustment as provided in this
Section 5. The foregoing provisions of this Section 5.4 shall similarly apply to
successive reorganizations, consolidations, mergers, sales, and transfers to the
extent that this Warrant is assigned to or assumed by any successor corporation
or entity, whether by operation of law or otherwise, and to the stock or
securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to the holder
hereof for shares of Warrant Stock in connection with any such transaction is in
a form other than cash or marketable securities, then the value of such
consideration shall be determined in good faith by the Company's Board of
Directors. In all events, appropriate adjustment (as determined in good faith by
the Company's Board of Directors) shall be made in the application of the
provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.

     

    5.5 Redemption or Termination of
Warrant Stock. In case all or any portion of the authorized and
outstanding shares of Warrant Stock of the Company are redeemed or converted or
reclassified into other securities or property pursuant to the Company's
Articles or Certificate of Incorporation or otherwise, or the Warrant Stock
otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon
exercise hereof at any time after the date on which the Warrant Stock is so
redeemed or ceases to exist (the "Warrant Stock Termination
Date"), shall receive, subject to the terms of this Warrant, in lieu of
the Number of Shares of Warrant Stock that would have been issuable upon such
exercise immediately prior to the Warrant Stock Termination Date, the securities
or property that would have been received if this Warrant had been exercised in
full and the Warrant Stock received thereupon had been simultaneously converted
immediately prior to the Warrant Stock Termination Date, all subject to further
adjustment as provided in this Warrant. Additionally, the Exercise Price shall
be immediately adjusted to equal the quotient obtained by dividing (x) the
aggregate Exercise Price of the maximum Number of Shares of Warrant Stock for
which this Warrant was exercisable immediately prior to the Warrant Stock
Termination Date by (y) the Number of Shares of Warrant Stock of the Company for
which this Warrant is exercisable immediately after the Warrant Stock
Termination Date, all subject to further adjustment as provided
herein.

     

    
      
        
        

      

      
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    6. CERTIFICATE
AS TO ADJUSTMENTS. In each case of any adjustment in the Exercise Price, or
number or type of shares issuable upon exercise of this Warrant, the Chief
Financial Officer or Controller of the Company shall compute such adjustment in
accordance with the tenns of this Warrant and prepare a certificate setting
forth such adjustment and showing in detail the facts upon which such adjustment
is based, including a statement of the adjusted Exercise Price. After each such
adjustment, the Company shall promptly send (by facsimile and by either first
class mail, postage prepaid or overnight delivery) a copy of each such
certificate to the Holder.

     

    7. LOSS OR
MUTILATION. Upon receipt of evidence reasonably satisfactory to the Company of
the ownership of and the loss, theft, destruction or mutilation of this Warrant,
and of indemnity reasonably satisfactory to it, and (in the case of mutilation)
upon surrender and cancellation of this Warrant, the Company will execute and
deliver in lieu thereof a new Warrant of like tenor as the lost, stolen,
destroyed or mutilated Warrant.

     

    8. RESERVATION
OF WARRANT STOCK. The Company hereby covenants that at all times there shall be
reserved for issuance and delivery upon exercise of this Warrant such Number of
Shares of Warrant Stock or other shares of capital stock of the Company as are
from time to time issuable upon exercise of this Warrant and, from time to time,
will take all steps necessary to amend its Articles or Certificate of
Incorporation to provide sufficient reserves of shares of Warrant Stock issuable
upon exercise of this Warrant. All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights, except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of Warrant Stock upon
the exercise of this Warrant.

     

    9. TRANSFER
AND EXCHANGE. Subject to the terms and conditions of this Warrant and compliance
with all applicable securities laws, this Warrant and all rights hereunder may
be transferred to any parent or subsidiary of the Registered Holder, in whole or
in part, on the books of the Company maintained for such purpose at the
principal office of the Company referred to above, by the Registered Holder
hereof in person, or by duly authorized attorney, upon surrender of this Warrant
properly endorsed and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. Upon any permitted partial
transfer, the Company will issue and deliver to the Registered Holder a new
Warrant or Warrants with respect to the shares of Warrant Stock not so
transferred. Each taker and holder of this Warrant, by taking or holding the
same, consents and agrees that when this Warrant shall have been so endorsed,
the person in possession of this Warrant may be treated by the Company, and all
other persons dealing with this Warrant, as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented hereby,
any notice to the contrary notwithstanding; provided, however that until a
transfer of this Warrant is duly registered on the books of the Company, the
Company may treat the Registered Holder hereof as the owner for all
purposes.

     

    
      
        
        

      

      
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    10. RESTRICTIONS
ON TRANSFER. The Holder, by acceptance hereof, agrees that, absent an effective
registration statement filed with the SEC under the Securities Act, covering the
disposition or sale of this Warrant or the Warrant Stock issued or issuable upon
exercise hereof, as the case may be, and registration or qualification under
applicable state securities laws, such Holder will not sell, transfer, pledge,
or hypothecate any or all such Warrants, Warrant Stock, or Common Stock, as the
case may be, unless either (i) the Company has received an opinion of counsel,
in form and substance reasonably satisfactory to the Company, to the effect that
such registration is not required in connection with such disposition or (ii)
the sale of such securities is made pursuant to Rule 144, promulgated pursuant
to the Securities Act.

     

    11. COMPLIANCE
WITH SECURITIES LAWS. By acceptance of this Warrant, the Holder hereby
represents, warrants and covenants that any shares of stock purchased upon
exercise of this Warrant or acquired upon conversion thereof shall be acquired
for investment only and not with a view to, or for sale in connection with, any
distribution thereof; that the Holder has had such opportunity as the Holder has
deemed adequate to obtain from representatives of the Company such information
as is necessary to permit the Holder to evaluate the merits and risks of its
investment in the Company; that the Holder is able to bear the economic risk of
holding such shares of Warrant Stock for an indefinite period; that the Holder
understands that shares of Warrant Stock will not be registered under the
Securities Act (unless otherwise required pursuant to exercise by the Holder of
the registration rights, if any, previously granted to the Holder) and will be
"restricted securities" within the meaning of Rule 144 promulgated under the
Securities Act and that the exemption from registration under Rule 144 will not
be available for at least one year from the date of exercise of this Warrant,
subject to any special treatment by the SEC for exercise of this Warrant
pursuant to Section 3.3, and even then will not be available unless a public
market then exists for the stock, adequate information concerning the Company is
then available to the public, and other terms and conditions of Rule 144 are
complied with; and that all stock certificates representing shares of Warrant
Stock may have affixed thereto a legend substantially in the following
form:

     

    THE
SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO RULE 144 PROMULGATED UNDER THE
ACT.

     

    12. NO RIGHTS
OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not entitle the Holder to any
voting rights or other rights as a stockholder of the Company.

     

    13. REGISTRATION
AND OTHER RIGHTS. With regard to all shares of Warrant Stock issuable upon
exercise of this Warrant, the Company shall give Holder the opportunity to
obtain the same contractual registration rights granted to other
investors.

     

    14. NOTICES.
Except as may be otherwise provided herein, all notices, requests, waivers and
other communications made pursuant to this Agreement shall be in writing and
shall be conclusively deemed to have been duly given (a) when hand delivered to
the other party; (b) when received if sent by facsimile at the address and
number set forth below; (c) five (5) business days after deposit in the U.S.
mail first class, postage prepaid, registered or certified mail with return
receipt requested and addressed to the other part}' as set forth below; or (d)
the next business day after deposit with a national overnight delivery service,
postage prepaid, addressed to the parties as given below, or designate
additional addresses, for purposes of this section by giving the other party
written notice of the new address in the manner set forth above.

     

     

    


    
      
        
        

      

      
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        	To Squire. Sanders
      & Dempsey L.L.P.:	 	 To the
      Company:
	
                Attn: Nicholas Unkovic 

                 600 Hansen Way

                Palo Alto,
      California 94303 

                  Fax
      Number: 650-843-8777

                

              	 	Envision
      Solar International, Inc. 

                4225
      Executive Square, Suite 480 

                La
      Jolla, California 92037 

                Fax
      Number: 858-799-459 

                Attn:
      President

              


      

       

    

     

     

    15. TITLES
AND HEADINGS. The titles, captions and headings of this Warrant are included for
ease of reference only and will be disregarded in interpreting or construing
this Warrant. Unless otherwise specifically stated, all references herein to
"sections" and "exhibits" will mean "sections" and "exhibits" to this
Warrant.

     

    16. LAW
GOVERNING. This Warrant shall be governed in all respects by the laws of the
State of California, without regard to principles of conflict of
laws.

     

    17. NO
MPAIRMENT. The Company will not, by amendment of its Articles or Certificate of
Incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets 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 action as may be necessary or
appropriate in order to protect the rights of the Registered Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of Warrant Stock
above the amount payable therefor upon such exercise, and (b) will 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 Warrant Stock upon
exercise of this Warrant.

     

    18. NOTICES
OF RECORD DATE. In case: (a) the Company shall take a record of the holders of
its Common Stock (or other stock or securities at the time receivable upon the
exercise of this Warrant), for the purpose of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities or to receive any other
right; (b) of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the capital stock of the Company, or any conveyance of all or substantially all
of the assets of the Company to another corporation in which holders of the
Company's stock are to receive stock, securities or property of another
corporation; (c) of any voluntary dissolution, liquidation or winding-up of the
Company; or (d) of any redemption or conversion of all outstanding Warrant
Stock; then, and in each such case, the Company will mail or cause to be mailed
to the Registered Holder of this Warrant a notice specifying, as the case may
be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, or (ii) the date on which such event or
transaction is to take place, and the time, if any is to be fixed, as of which
the holders of record of Warrant Stock shall be entitled to exchange their
shares of Warrant Stock for securities or other property deliverable upon such
event or transaction. Such notice shall be delivered at least thirty (30) days
prior to the date therein specified.

     

    19. SEVERABILITY.
If any paragraph, provision or clause of this Warrant shall be found or be held
to be illegal, invalid or unenforceable, the remainder of this Warrant shall be
valid and enforceable and the parties shall use good faith to negotiate a
substitute, valid and enforceable provision that most nearly effects the
parties' intent in entering into this Warrant.

     

    
      20. COUNTERPARTS.
This Warrant may be executed in any number of counterparts, each of which shall
be an original, but all of which together shall constitute one
instrument.

    

     

    21. NO
INCONSISTENT AGREEMENTS. The rights granted to the Holder hereunder do not in
any way conflict with and are not inconsistent with the rights granted to
holders of the Company's securities under any other agreements, except rights
that have been waived.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

      IN
WITNESS WHEREOF, the parties hereto have executed this Warrant as of the
Effective Date. 

    

     

     

    
      	SQUIRE, SANDERS & DEMPSEY L.L.P.	 	ENVISION SOLAR INTERNATIONAL,
INC.
	
            	 	
            
	By: /s/
      Nicholas
      Unkovic                            
      	 	By: /s/
      Karen
      Morgan                                        
      
	Name: Nicholas
      Unkovic                            
      	 	Name: Karen
      Morgan                                         
      
	Title:   Partner                                               
      	 	Title: President                                                    
      


    

     

     

    SIGNATURE
PAGE TO PREFERRED STOCK WARRANT 

    ISSUED BY
ENVISION SOLAR INTERNATIONAL, INC. 

    TO
SQUIRE, SANDERS & DEMPSEY L.L.P.

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

      EXHIBIT 1


      NOTICE OF
EXERCISE 

      (To be
executed upon exercise of Warrant)

    

    


     

    
      	 ENVISION SOLAR
      INTERNATIONAL, INC. 	 	WARRANT
      NO.________________________


    

     

    The
undersigned hereby irrevocably elects to exercise the right of purchase
represented by this Warrant Certificate for, and to purchase thereunder, the
securities of Envision Solar International, Inc., as provided for therein, and
(check the applicable box):

     

    o Tenders
herewith payment of the exercise price in full in the form of cash or a
certified or official bank check in same-day funds in the amount of
$[____________] for [__________] such securities.

     

    o Elects
the Net Issue Exercise option pursuant to Section 3.2 of the Warrant, and
accordingly requests delivery of a net of [______________] of such securities,
according to the following calculation:

     

    x=y(a-b)       ([_____________])
= [__________]) ([__________]) -
([___________])

           
A                                                                                            ([____________])                                                       


    Where
x
= the Number of Shares of Warrant Stock to be issued to the
Holder.

     

    y =
the Number of Shares of Warrant Stock purchasable under the amount of the
Warrant being
exchanged (as adjusted to the date of such calculation). 

     

    A = the
Fair Market Value of one share of the Warrant Stock. 

     

    b =
  Exercise Price (as adjusted to the date of such
calculation).

     

    o Elects the Easy Sale
Exercise option pursuant to Section 3.4 of the Warrant, and
accordingly

     

    requests
delivery of a net of [_____________] of such securities.

     

    Please
issue a certificate or certificates for such securities in the name of, and pay
any cash for any fractional share to:

    


    


     

    Signature: 
____________________________________ 

       

       

      Name:      
[____________________________________]

       

       

      Address:
[_____________________________________]

       

       

      Date:      
[______________________________________]

    

     

     

    Note: The
above signature should correspond exactly with the name on the first page of
this Warrant Certificate or with the name of the assignee appearing in the
assignment form below.

     

    If the
number of securities designated above shall not be all the shares purchasable
under this Warrant, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the shares purchasable thereunder
rounded up to the next higher whole number of shares.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

      EXHIBIT 2


      ASSIGNMENT

      (To be
executed only upon assignment ofWarrant)

    

    


    


    
    

     

    
      	ENVISION SOLAR
      INTERNATIONAL, INC.     	 	WARRANT
      NO.___________________________        


    

     

    For value
received, [_______________] hereby sells, assigns and transfers unto
[_____________________] the Warrant,
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint
[ ________________]attorney, to transfer said Warrant on the books of the
withm-named Company with
respect to the Number of Shares ofWarrant Stock set forth below, with full power
of substitution in the premises:

    


     

    
      	
              Name(s)
      of Assignee(s)

            	
              Address

            	
              Warrant
      Stock

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      


    

     

    And if
said Number of Shares of Warrant Stock shall not be all the Warrant Stock
represented by the Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the Warrant Stock registered by said
Warrant.

    


     

    Signature:    
____________________________                                                       

     

     

    Name:          
[____________________________]      

     

     

    Address:     
[____________________________]   

     

     

    Date:            [_____________________________]
               

     

    Notice:
The signature to the foregoing Assignment must correspond to the name as written
upon the face of this security in every particular, without alteration or any
change whatsoever; signature(s) must be guaranteed by an eligible guarantor
institution (banks, stock brokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program)
pursuant to Securities and Exchange Commission Rule 17Ad-15.

     

     

    11