telkonet_10q-093ex0417.htm


    Exhibit
      4.17

     

     

    THE
      SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND
      MAY
      NOT BE SOLD, TRANSFERED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
      REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS
      THE
      CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY
      SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS
      NOT
      REQUIRED.

     

    
      	
              Dated:
                July __, 2007

            	
              Void
                after the date

              specified
                below in Section 1

            


    

    


    TELKONET,
      INC.

     

    WARRANT
      TO PURCHASE COMMON STOCK

     

    THIS
      CERTIFIES THAT, for value received, GRQ Consultants, Inc. and its permitted
      assigns (hereinafter called the “Holder”) is entitled to purchase from
      Telkonet, Inc., a Utah corporation (the “Company”), in whole or in part
      and at the times set forth below in Section 1, up to 359,712 shares of common
      stock, par value $.001 per share, of the Company (the “Warrant Shares”)
      at an exercise price per share of $4.17 per share (the “Exercise Price”),
      as may be adjusted in accordance with this Warrant.

     

    1.           Term.  This
      Warrant shall be exercisable on and after the date hereof until 5:00 pm, New
      York City time, on July 31, 2012; and

     

    2.           Method
      of Exercise; Payment; Issuance Of New Warrant.

     

    2.1           Deliverables.  Subject
      to the provisions herein, the purchase right represented by this Warrant may
      be
      exercised by the Holder, in whole or in part, by the surrender of this Warrant,
      together with a completed notice of exercise in the form attached hereto as
      Attachment A, an executed investment representation statement in the form
      attached hereto as Attachment B and, if applicable, a check, payable to
      the Company, in an amount equal to the Exercise Price per share multiplied
      by
      the number of Warrant Shares then being purchased (such aggregate amount of
      money being herein referred to as, the “Purchase Price”) at the principal
      office of the Company.

     

    2.2           Status;
      Taxes.  Upon receipt of this Warrant, such notice of exercise and
      such investment representation together with the Purchase Price (if applicable)
      by the Company at its principal office (or, if the Company shall then have
      a
      stock transfer agent or warrant agent, then by such agent at its office), the
      Holder shall be deemed to be the holder of record of the applicable Warrant
      Shares, notwithstanding that the stock transfer books of the Company shall
      then
      be closed or that certificates representing such Warrant Shares shall not then
      be actually delivered to the Holder. The Company shall collect from the Holder
      and pay any and all documentary, stamp or similar issue or transfer taxes
      payable in respect of the issue or delivery of the Warrant Shares.

     

    2.3           Net
      Exercise.  In addition to and without limiting the rights of the
      Holder under the terms of this Warrant, the Holder may elect to convert this
      Warrant or any portion thereof (the “Conversion Right”) into Warrant
      Shares, the aggregate value of which Warrant Shares shall be equal to the value
      of this Warrant or the portion thereof being converted.  The
      Conversion Right may be exercised by the Holder by surrender of this Warrant
      at
      the principal office of the Company (or, if applicable, at the offices of the
      Company’s stock transfer agent or warrant agent) together with notice of the
      Holder’s intention to exercise the Conversion Right, in which event the Company
      shall issue to the Holder a number of Warrant Shares computed using the
      following formula:

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    X
      =
Y(A - B)

    A

     

    
      	
              Where:

            	
              X
                =

            	
              The
                number of Warrant Shares to be issued to the Holder upon exercise
                of its
                Conversion Right.

            
	 	
              Y
                =

            	
              The
                number of Warrant Shares issuable under this Warrant at the date
                of
                calculation.

            
	 	
              A
                =

            	
              The
                fair market value of one Warrant Share, which shall equal the average
                closing price per share of the Common Stock on the NASDAQ Stock Market
                (including the OTC Bulletin Board, if applicable) for the five consecutive
                trading days immediately preceding the date of exercise, or if the
                Common
                Stock is not then listed on NASDAQ, as determined in good faith by
                the
                board of directors of the Company as at the time the Conversion Right
                is
                exercised pursuant to this Section 2.

            
	 	
              B
                =

            	
              Exercise
                Price (as adjusted to the date of such
                calculations).

            


    

    


    2.4           Partial
      Exercise.  In the event that this Warrant is being exercised for
      less than all of the then current number of Warrant Shares, the Company shall,
      concurrently with the issuance by the Company of the number of Warrant Shares
      for which this Warrant is then being exercised, issue a new Warrant exercisable
      for the remaining number of Warrant Shares.

     

    3.           Stock
      Fully Paid; Reservation of Warrant Shares.

     

    All
      shares of stock which may be issued upon the exercise of the rights represented
      by this Warrant will, upon such exercise and issuance in accordance with the
      terms and conditions herein contained, be validly issued, fully paid and
      non-assessable.  The Company shall, at all times during which this
      Warrant is exercisable, have authorized and reserved for issuance a number
      of
      shares of Common Stock sufficient to permit the full exercise of this
      Warrant.

     

    4.           Adjustment
      of Exercise Price and Number of Warrant Shares.

     

    The
      number of and kind of securities purchasable upon exercise of this Warrant
      and
      the Exercise Price shall be subject to adjustment from time to time as
      follows:

     

    4.1           Subdivisions,
      Combinations and Other Issuances.  If the Company shall at any
      time after the date hereof and prior to the expiration of this Warrant subdivide
      its Common Stock, by split-up or otherwise, or combine its Common Stock, or
      issue additional shares of its Common Stock as a dividend with respect to any
      shares of its Common Stock, the number of Warrant Shares issuable upon the
      exercise of this Warrant shall forthwith be proportionately increased in the
      case of a subdivision or stock dividend, or proportionately decreased in the
      case of a combination. Appropriate adjustments shall also be made to the
      Exercise Price payable per share, but the aggregate Purchase Price payable
      for
      the total number of Warrant Shares purchasable under this Warrant (as adjusted)
      shall remain the same.  Any adjustment under this Section 4.1 shall
      become effective at the close of business on the date the subdivision or
      combination becomes effective, or as of the record date of such dividend, or
      in
      the event that no record date is fixed, upon the making of such
      dividend.

     


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    4.2           Reclassification,
      Reorganization and Consolidation.  In case of any
      reclassification, capital reorganization, or change in the Common Stock of
      the
      Company (other than as a result of a subdivision, combination, or stock dividend
      provided for in Section 4.1 or as a result of a Change of Control), then, as
      a
      condition to such reclassification, reorganization, or change, lawful provision
      shall be made, and duly executed documents evidencing the same from the Company
      or its successor shall be delivered to the Holder, so that the Holder shall
      have
      the right at any time prior to the expiration of this Warrant to purchase,
      at a
      purchase price equal to the Purchase Price payable upon the exercise of this
      Warrant, the kind and amount of shares of stock and other securities and
      property receivable in connection with such reclassification, reorganization,
      or
      change by a holder of the same number of shares of Common Stock as were
      purchasable by the Holder immediately prior to such reclassification,
      reorganization, or change. In any such case, appropriate provisions shall be
      made with respect to the rights and interest of the Holder so that the
      provisions hereof shall thereafter be applicable with respect to any shares
      of
      stock or other securities and property deliverable upon the exercise hereof,
      and
      appropriate adjustments shall be made to the Exercise Price, provided,
      that the Purchase Price shall remain the same.

     

    4.3           Public
      Transaction.  If the Company shall at anytime prior to the
      expiration hereof, merge with a publicly-traded company (“Pubco”) that
      will acquire all of the capital stock and business of the Company, then the
      Holder shall have the option to exchange this Warrant for a number of shares
      of
      capital stock of Pubco equal to the number of shares of capital stock of Pubco
      that would be received in such merger for the number of shares of Common Stock
      then issuable upon the exercise of this Warrant pursuant to Section 2
      hereof.

     

    4.4           Certain
      Events.  If any change in the outstanding Common Stock of the
      Company or any other event occurs as to which the other provisions of this
      Section 4 are not strictly applicable or if strictly applicable would not fairly
      protect the purchase rights of the Holder in accordance with such provisions,
      then the Board of Directors of the Company shall make an adjustment in the
      number and class of shares available under this Warrant, the Purchase Price
      or
      the application of such provisions, so as to protect such purchase rights as
      aforesaid. The adjustment shall be such as will give the Holder upon exercise
      for the same aggregate Purchase Price the total number, class and kind of shares
      as he or she would have owned had this Warrant been exercised prior to the
      event
      and had he or she continued to hold such shares until after the event requiring
      such adjustment.

     

    4.5           Notice
      of Adjustment.  When any adjustment is required to be made in the
      number or kind of shares purchasable upon exercise of this Warrant, or in the
      Exercise Price, the Company shall promptly notify the Holder of such
      event.

     

    5.           Fractional
      Warrant Shares.

     

    No
      fractional Warrant Shares will be issued in connection with any exercise
      hereunder, but in lieu of such fractional shares the Company shall make a cash
      payment therefor upon the basis of the Exercise Price then in
      effect.

     

    6.           Compliance
      with Securities Act.

     

    The
      Holder, by acceptance hereof, represents and agrees that this Warrant and the
      Warrant Shares are being acquired for investment and that he or she will not
      offer, sell or otherwise dispose of this Warrant or any Warrant Shares except
      as
      permitted under this Warrant and under circumstances which will not result
      in a
      violation of the Securities Act of 1933, as amended (the
“Act”).  Upon exercise of this Warrant, the Holder shall
      confirm in writing, in the form of Attachment B hereto, that the Warrant
      Shares so purchased are being acquired for investment and not with a view toward
      distribution or resale in violation of law.  This Warrant and all
      Warrant Shares (unless registered under the Act) shall be stamped or imprinted
      with legends in substantially the following form:

     


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    


     

    “THESE
      SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “ACT”) OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, PLEDGED OR
      OTHERWISE TRANSFERRED OR HYPOTHECATED WITHOUT (1) THE PRIOR WRITTEN CONSENT
      OF
      THE COMPANY AND (2) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
      APPLICABLE STATE SECURITIES LAWS RELATING TO THESE SECURITIES OR AN AVAILABLE
      EXEMPTION FROM SUCH REGISTRATION SUPPORTED BY AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
      REQUIRED.”

    


    7.           Transferability
      of Warrant.

     

    This
      Warrant may be transferred or assigned in whole or in part in Holder’s sole and
      absolute discretion except as prohibited by applicable federal and state
      securities laws.

     

    8.           Disposition
      of Warrant Shares.

     

    With
      respect to any offer, sale or other disposition of any Warrant Shares prior
      to
      registration of such shares, the Holder and each subsequent Holder of this
      Warrant agrees to give written notice to the Company prior thereto, describing
      briefly the manner thereof, together with a written opinion of such Holder’s
      counsel, if reasonably requested by the Company, to the effect that such offer,
      sale or other disposition may be effected without registration or qualification
      of such Warrant Shares under the Act (as then in effect) or any other Federal
      or
      state laws then in effect; provided, however, that no such opinion of
      counsel shall be necessary for a transfer by bona fide gift, will or intestate
      succession by the Holder to his or her spouse or lineal descendants or ancestors
      or any trust for the benefit of any of the foregoing if the transferee agrees
      in
      writing to be subject to the terms hereof to the same extent as if he/she were
      an original Holder hereunder. Notwithstanding the foregoing, such Warrant Shares
      may be offered, sold or otherwise disposed of in accordance with Rule
      144.

     

    9.           No
      Rights as Stockholder.

     

    No
      Holder
      of this Warrant shall be entitled to vote or be deemed the holder of stock
      or
      any other securities of the Company which may at any time be issuable on the
      exercise hereof for any purpose, nor shall anything contained herein be
      construed to confer upon the Holder of this Warrant, as such, any of the rights
      of a stockholder of the Company or any right to vote for the election of
      directors or upon any matter submitted to stockholders at any meeting thereof,
      or to give or withhold consent to any corporate action (whether upon any
      recapitalization, issuance of stock, reclassification of stock, change of par
      value or change of stock to no par value, consolidation, merger, conveyance,
      or
      otherwise) or to receive notice of meetings, or to receive dividends or
      subscription rights or otherwise until this Warrant has been exercised and
      the
      Warrant Shares shall have become deliverable, as provided herein.

     

    10.           Governing
      Law; Jurisdiction.

     

    The
      terms
      and conditions of this Warrant shall be governed by and construed in accordance
      with the laws of the State of New York, without regard to any provisions thereof
      relating to conflicts of laws among different jurisdictions.  The
      parties consents to the exclusive jurisdiction of the federal or state court
      located in New York, New York, with respect to any claim or controversy related
      to the enforcement or interpretation of this note.

     


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    


    11.           Notices.

     

    All
      notices, requests, demands and other communications that are required or may
      be
      given under this Agreement shall be in writing and shall be deemed to have
      been
      duly given (i) when received if personally delivered, (ii) upon electronic
      confirmation of receipt, if transmitted by telecopy, (iii) the business day
      after it is sent, if sent for next day delivery to a domestic address by a
      nationally recognized overnight delivery service (i.e., Federal Express) or
      (iv)
      three days from the date of deposit in the U.S. mails, if sent by certified
      or
      registered U.S. mail, return receipt requested. In each case such notice shall
      be addressed as follows:

     

    To
      the
      Company:

    Telkonet,
      Inc.

    20374
      Seneca Meadows Parkway

    Germantown,
      MD 20876

    Att:
      Ronald W. Pickett To Holder:

    Fax:
      ________________

     

    12.           Miscellaneous.

     

    The
      headings in this Warrant are for purposes of convenience and reference only,
      and
      shall not be deemed to constitute a part hereof.  Neither this Warrant
      nor any term hereof may be changed, waived, discharged or terminated orally,
      but
      only by an instrument in writing signed by the Company and the registered
      Holder.

     

     

     

    
      	 	
              TELKONET,
                INC.

               

            	 
	 	 	 	 
	
              November
                9, 2007

            	
              By:
                

            	/s/ 
              Ronald W. Pickett	 
	 	 	Ronald
              W. Pickett	 
	 	 	Chief
              Executive Officer	 
	 	 	 	 


      	 	
               

              HOLDER:

               

              
                GRQ
                  CONSULTANTS, INC.

              

            	 
	 	 	 	 
	 	 	 	 
	
              November
                9, 2007

            	
              By:
                

            	/s/ 
              Barry Honig	 
	 	 	Barry
              Honig	 
	 	 	President	 
	 	 	 	 


       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      ATTACHMENT
        A TO WARRANT

      NOTICE
        OF EXERCISE

       

    

     

    TO:  Telkonet,
      Inc. (the “Company”):

     

    1.           The
      undersigned hereby elects to purchase _________ shares of common stock, no
      par
      value per share (“Common Stock”), of Telkonet, Inc., pursuant to the
      terms of the attached warrant (the “Warrant”) and tenders herewith
      payment of the aggregate purchase price of such shares in full, together with
      all applicable transfer taxes, if any.

     

    2.           The
      undersigned hereby elects to convert the attached Warrant into shares of Common
      Stock in the manner specified in Section 2.3 of the Warrant.  This
      conversion is exercised with respect to ________ of the shares covered by the
      Warrant.

     

    3.           Please
      issue a certificate(s) representing said shares of Common Stock in the name
      of
      the undersigned or in such other name as is specified below:

     

    
      	 
	
              (Name)

            
	 
	 
	
               (Address)

            
	 


    

    


    4.           The
      undersigned represents that the aforesaid shares of Common Stock are being
      acquired for the account of the undersigned for investment and not with a view
      to, or for resale in connection with, the distribution thereof and that the
      undersigned has no present intention of distributing or reselling such
      shares.  In support thereof, the undersigned has executed and
      delivered to the Company an Investment Representation Statement in the form
      of
Attachment B to the attached Warrant.

     

     

        

    
      	
               INDIVIDUAL
                HOLDER
                SIGNATURE:

               

            	 	 	 CORPORATE
              HOLDER
              SIGNATURE:	 
	
               

            	 	 	
               

            	 
	
               Name:

            	 	 	
               Name:

            	 
	
               

            	 	 	
               By:

            	 	 
	 	 	 	 Name:	 
	 	 	 	 Title:	 


    

     

     

     

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    ATTACHMENT
      B TO WARRANT

    


    INVESTMENT
      REPRESENTATION STATEMENT

     

    
      	
              PURCHASER:

            	 
	
              COMPANY:

            	
              Telkonet,
                Inc. (the “Company”)

            
	
              SECURITY:

            	
              Warrants
                to purchase common stock, $.001 par value per share, of the
                Company.

            
	
              AMOUNT:

            	 
	
              DATE:

            	 


    

    


    In
      connection with my purchase of the above-listed warrants and shares issuable
      upon the exercise of such warrants (collectively, the “Securities”), I,
      _________________, hereby represent to the Company as follows:

     

    (a)           I
      am aware of the Company’s business affairs and financial condition, and have
      acquired sufficient information about the Company to reach an informed and
      knowledgeable decision to acquire the Securities.  I am purchasing the
      Securities for my own account for investment purposes only and not with a view
      to, or for the resale in connection with, any “distribution” thereof for
      purposes of the Securities Act of 1933, as amended (the “Securities
      Act”).

     

    (b)           I
      understand that the Securities have not been registered under the Securities
      Act
      or the securities laws of any state and have been issued in reliance upon a
      specific exemption therefrom, which exemption depends upon, among other things,
      the bonafide nature of my investment intent as expressed
      herein.  In this connection, I understand that, in the view of the
      Securities and Exchange Commission, the statutory basis for such exemption
      may
      be unavailable if my representation was predicated solely upon a present
      intention to hold these Securities for the minimum capital gains period
      specified under tax statutes, for a deferred sale, for or until an increase
      or
      decrease in the market price of the Securities, or for a period of one year
      or
      any other fixed period in the future.

     

    (c)           I
      understand that I must hold the Securities indefinitely unless they are
      subsequently registered under the Securities Act or an exemption from such
      registration is available.  In addition, I understand that all
      certificates evidencing the Securities will be imprinted with a legend that
      prohibits the transfer of the Securities without (1) the prior consent of the
      Company, and (2) an effective registration statement under the Securities Act
      covering the Securities or an available exemption from such
      registration.  I further understand that in the event that I propose
      to transfer any of the Securities in reliance upon an exemption from
      registration under the Securities Act I may be required to submit to the Company
      an opinion of counsel reasonable satisfactory to the Company regarding such
      proposed transfer and exemption.

     

     

    
       

          

      
        	
                 INDIVIDUAL
                  PURCHASER SIGNATURE:

                 

              	 	 	 CORPORATE
                PURCHASER
                SIGNATURE:	 
	
                 

              	 	 	
                 

              	 
	
                 Name:

              	 	 	
                 Name:

              	 
	
                 

              	 	 	
                 By:

              	 	 
	 	 	 	 Name:	 
	 	 	 	 Title:	 


      

       

       

    

    6