Exhibit 10.3


 





 


NEITHER THIS SECURITY
NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.


 


COMMON STOCK PURCHASE WARRANT


 


APPLIANCE RECYCLING CENTERS OF AMERICA,
INC.


 


	Warrant Shares: _______	Initial Exercise Date: ___________, 201_




 


THIS COMMON STOCK PURCHASE
WARRANT (the “Warrant”) certifies that, for value received, Energy Efficiency Investments, LLC, or its assigns
(the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time on or after ___________, 201_ (the “Initial Exercise Date”), and on or prior to the close
of business on the five-year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter,
to subscribe for and purchase from Appliance Recycling Centers of America, Inc., a Minnesota corporation (the “Company”),
up to _________ shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase
price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).


 


Section 1.Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement
(the “Purchase Agreement”), dated November 8, 2016, between the Company and the Holder.


 


Section 2.Exercise.


 


a)       Exercise
of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times
on or after the Initial Exercise Date and on or before the Termination Date (i) by delivery to the Company (or such other
office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise form annexed hereto and within
three (3) Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment
of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States
bank or, (ii) if available, pursuant to the cashless exercise procedure specified in Section 2(c) below. No ink-original Notice
of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of
Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender
this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been
exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading
Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases
of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number
of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and
the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall
deliver any objection to any Notice of Exercise Form within one (1) Trading Day of receipt of such notice. The Holder and any
assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the
purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given
time may be less than the amount stated on the face hereof.


 


 






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b)       Exercise
Price. The exercise price per share of the Common Stock under this Warrant shall be $0.__1, subject to adjustment
hereunder (the “Exercise Price”).


 


c)       Cashless
Exercise. If at any time there is no effective Registration Statement registering, or no current prospectus available for,
the resale of the Warrant Shares by the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means
of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) times (X)] by (A), where:


 


		(A) =	the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this
Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;



 


		(B) =	the Exercise Price of this Warrant, as adjusted hereunder; and



 


		(X) =	the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance
with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.



 


Notwithstanding anything
herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to
this Section 2(c).


 


d)       Mechanics
of Exercise.


 


i.       Delivery
of Warrant Shares Upon Exercise. Warrant Shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder
by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit and Withdrawal
at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is
an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder
or (B) the shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144, and
otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading
Days after the latest of (A) the delivery to the Company of the Notice of Exercise and (B) surrender of this Warrant (if required)
(such date, the “Warrant Share Delivery Date”). The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for
all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless
exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(v) prior to the issuance
of such shares, having been paid. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a
Notice of Exercise by the date that is two (2) Trading Days after the Warrant Share Delivery Date, the Company shall pay to the
Holder, in cash, as liquidated damages and not as a penalty, for each $1,000.00 of Warrant Shares subject to such exercise (based
on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10.00 per Trading Day (increasing to $20.00
per Trading Day on the seventh (7th) Trading Day after such Warrant Share Delivery Date) for each Trading Day after two (2) Trading
Days following after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise.


 


 


__________


1 One
hundred ten percent (110%) of the conversion price of the Note issued contemporaneously herewith.


 






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ii.       Delivery
of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder
and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.


 


iii.       Rescission
Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i)
by the Warrant Share Delivery Date, then the Holder will have the right, at any time prior to issuance of such Warrant Shares,
to rescind such exercise.


 


iv.       Compensation
for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder,
if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to an exercise on or before
two (2) Trading Days after the Warrant Share Delivery Date, and if after two (2) Trading Days following such Warrant Share Delivery
Date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage
firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares that
the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to
the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the
Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order
giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the
Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed
rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied
with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase
price of $11,000.00 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price
giving rise to such purchase obligation of $10,000.00, under clause (A) of the immediately preceding sentence the Company shall
be required to pay the Holder $1,000.00. The Holder shall provide the Company written notice indicating the amounts payable to
the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall
limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares
of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.


 


 






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


 


vi.       Charges,
Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of Warrant Shares, all of which taxes and expenses shall be paid by the Company,
and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided,
however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant
when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company
may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The
Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise.


 


vii.       Closing
of Books. The Company will not close its shareholder books or records in any manner that prevents the timely exercise of this
Warrant pursuant to the terms hereof.


 


 






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e)       Holder’s
Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise
any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that, after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other
Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock
that would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the
Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities
of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in
the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company
is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder
is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained
in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by
the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of
the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant
is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this
Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above
shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request
of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date
as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation”
shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares
of Common Stock issuable upon exercise of this Warrant. The Holder may decrease the Beneficial Ownership Limitation at any time
and the Holder, upon not less than 61 days’ prior notice to the Company, may increase the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares
of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this
Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any such increase will not be effective
until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented
in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall
apply to a successor holder of this Warrant.


 


 






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f)       Limitations
on the Number of Shares Issuable. Notwithstanding anything herein to the contrary, the Company shall not issue to the Holder
any Warrant Shares upon exercise of this Warrant to the extent such shares after giving effect to such issuance after exercise
and when added to the number of shares of Common Stock issued and issuable upon conversion of any Notes or exercise of any other
Warrants issued pursuant to the Purchase Agreement would exceed (i) 19.9% of the number of shares of Common Stock outstanding
immediately before the date of the Purchase Agreement (the “Maximum Share Amount”) or (ii) 19.9% of the
total voting power of the Company’s securities outstanding immediately before the date of the Purchase Agreement that are
entitled to vote on a matter being voted on by holders of the Common Stock (the “Maximum Voting Amount”), unless
and until the Company obtains shareholder approval permitting such issuances in accordance with applicable rules and regulations
of the NASDAQ Capital Market (“Stockholder Approval”). For purposes of this Section 2(f), beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder. For purposes of this Section 2(f), in determining the number of outstanding shares of Common Stock, a Holder
may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual
report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent
written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written
or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. If on any attempted exercise of this Warrant, the issuance of Warrant Shares would exceed
the Maximum Share Amount or the Maximum Voting Amount, and the Company shall not have previously obtained Stockholder Approval
at the time of exercise, then the Company shall issue to the Holder requesting exercise such number of Warrant Shares as may be
issued below the Maximum Share Amount or Maximum Voting Amount, as the case may be, and, with respect to the remainder of the aggregate
number of Warrant Shares, this Warrant shall not be exercisable until and unless Stockholder Approval has been obtained.


 


Section 3.Certain
Adjustments.


 


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


 


 






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b)       Subsequent
Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall
sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any
offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective
price per share less than the Exercise Price then in effect (such lower price, the “Base Share Price” and such
issuances collectively, a “Dilutive Issuance”) (it being understood and agreed that if the holder of the Common
Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices, or otherwise, or due to warrants, options or rights per share which are issued
in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than
the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive
Issuance at such effective price), then simultaneously with the consummation of each Dilutive Issuance the Exercise Price shall
be reduced and only reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased
such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be
equal to the aggregate Exercise Price prior to such adjustment. Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued. Notwithstanding the foregoing, no adjustments shall be made, paid, or issued under this Section 3(b)
in respect of an Exempt Issuance. The Company shall notify the Holder, in writing, no later than the Trading Day following the
issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the
applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the
“Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance
Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to acquire Warrant Shares
based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise.
If the Company enters into a Variable Rate Transaction, despite the prohibition thereon in the Purchase Agreement, the Company
shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at
which such securities may be converted or exercised.


 


c)       Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues,
or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities, or other property pro rata to the record
holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired
if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to
any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, or the issuance of such Purchase Rights would exceed the Maximum Share Amount or
the Maximum Voting Amount, the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent
shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding
the Beneficial Ownership Limitation or the issuance of such Purchase Rights exceeding the Maximum Share Amount or the Maximum Voting
Amount).


 


 






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d)       Pro
Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of cash, stock, or other securities, property or options by way of
a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”),
then, in each such case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant
Register of the Company, at least 10 calendar days prior to the date as of which a record is taken for such Distribution, or, if
no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation
in such Distribution, a notice stating the date as of which such record is to be taken or such determination made, and the date
as of which it is expected that holders of the Common Stock of record shall be entitled to receive such Distribution; provided
that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material,
non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with
the Commission pursuant to a Current Report on Form 8-K.


 


e)       Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more
related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any direct or indirect, purchase offer, tender offer, or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell,
tender, or exchange their shares for other securities, cash, or property and has been accepted by the holders of fifty percent
(50%) or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects
any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which
the Common Stock is effectively converted into or exchanged for other securities, cash, or property, or (v) the Company, directly
or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off, or scheme of arrangement) with another Person or
group of Persons whereby such other Person or group acquires more than fifty percent (50%) of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each,
a “Fundamental Transaction”), then, in each case, the Company shall cause to be mailed to the Holder at its
last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable effective
date of such Fundamental Transaction, a notice stating the date on which such Fundamental Transaction is expected to become effective
or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable upon such Fundamental Transaction; provided that
the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material,
non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with
the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period
commencing on the date of such notice to the effective date of the Fundamental Transaction triggering such notice except as may
otherwise be expressly set forth herein.


 


 






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


 


g)       Notice
to Holder.


 


i.       Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly
mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.


 


ii.       Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the
Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the
Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of any shareholders of the Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation,
or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last
address as it shall appear upon the Warrant Register of the Company, at least 10 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights, or warrants, or if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption, rights, or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale,
transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall
not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided
hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company
shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled
to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering
such notice except as may otherwise be expressly set forth herein.


 


 






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Section 4.Transfer
of Warrant.


 


a)       Transferability.
Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof and to the provisions
of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration
rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue
to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.
Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company
unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within
three (3) Trading Days of the date the Holder delivers an assignment form to the Company assigning this Warrant full. The Warrant,
if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having
a new Warrant issued.


 


 






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b)       New
Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by
the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer that may be involved in such division
or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial Exercise Date
and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.


 


c)       Warrant
Register. 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 hereof 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.


 


d)       Transfer
Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer
of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act
and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions
or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer,
that the Holder or transferee of this Warrant, as the case may be, comply with the provisions of Section 5.7 of the Purchase Agreement.


 


e)       Representation
by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any
exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for
distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities
law, except pursuant to sales registered or exempted under the Securities Act.


 


Section 5.Miscellaneous.


 


a)       No
Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends, or other rights
as a shareholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in
Section 3.


 


b)       Loss,
Theft, Destruction, or Mutilation of Warrant. The Company covenants that, upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction, or mutilation of this Warrant or any stock certificate relating to the Warrant
Shares, and, in case of loss, theft, or destruction, of indemnity or security reasonably satisfactory to it (which, in the case
of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate,
if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation,
in lieu of such Warrant or stock certificate.


 


c)       Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or
granted herein shall not be a Trading Day, then, such action may be taken or such right may be exercised on the next succeeding
Trading Day.


 


 






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d)       Authorized
Shares. 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 issuing the necessary 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 that may be issued upon the exercise of the purchase
rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such
Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable, and free from all taxes,
liens, and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).


 


Except and to the extent
as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will
at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary
or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality
of the foregoing, the Company will (i) not declare a par value of any Warrant Shares above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and
(iii) use commercially reasonable efforts to obtain all such authorizations, exemptions, or consents from any public regulatory
body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.


 


Before taking any action
that would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price,
the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.


 


e)       Jurisdiction.
All questions concerning the construction, validity, enforcement, and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.


 


f)       Restrictions.
The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered and if the Holder
does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.


 


 






    	 	12	 



     


    

 


g)       Nonwaiver
and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate
as a waiver of such right or otherwise prejudice the Holder’s rights, powers, or remedies, notwithstanding the fact that
all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision
of this Warrant that results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of
appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.


 


h)       Notices.
Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Purchase Agreement.


 


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


 


j)       Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled
to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert
the defense in any action for specific performance that a remedy at law would be adequate.


 


k)       Successors
and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and
shall be enforceable by the Holder or holder of Warrant Shares.


 


l)       Amendment.
This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.


 


m)       Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions
of this Warrant.


 


n)       Headings.
The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of
this Warrant.


 


********************


 


(Signature Page Follows)


 


 


 


 


 


 


 


 


 


 






    	 	13	 



     


    

 


IN WITNESS WHEREOF,
the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.


 


APPLIANCE RECYCLING CENTERS OF AMERICA, INC.


 


By:   __________


 


Name:   __________


 


Title:   __________


 


 


 


 


 


 


 


 


 


 






    	 	14	 



     


    

 


NOTICE OF EXERCISE


 


 


 


To: APPLIANCE RECYCLING CENTERS OF AMERICA,
INC.


 


 


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


 


(2)       Payment
shall take the form of (check applicable box):


 


[  ] in lawful
money of the United States; or


 


[  ] if permitted
the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c),
to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure
set forth in subsection 2(c).


 


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


 


______________________________


 


The Warrant Shares shall be delivered to
the following DWAC Account Number:


 


______________________________


______________________________


______________________________


 


(4)       Accredited
Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities
Act of 1933, as amended.


 


[SIGNATURE OF HOLDER]


 


Name of Investing Entity:


 





 



 


Signature of Authorized Signatory
of Investing Entity:


 





 



 


 


Name:  __________


 


Title:  __________


 


Date:  __________


 


 


 




    	 	15	 



     


    


ASSIGNMENT FORM


 


(To assign the
foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)


 


FOR VALUE RECEIVED,
the foregoing Warrant and all rights evidenced thereby are hereby assigned to:


 


	Name:	 
	 	(Please Print)
	Address:	
	 	 
	 	 
	 	
        

        (Please Print)

         

	Dated:  _______________ __, 20__	 
	Holder’s Signature:  __________	 
	
        Holder’s Address: __________

         

        _________________________

        _________________________

        

         
	 


 


 




 


 






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