telkonet_8k-ex1003.htm


    
      
        

      

    

    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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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.

     

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
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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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