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                                                                   EXHIBIT 10.42

                          POWER EFFICIENCY CORPORATION

                   Amended and Restated 1994 Stock Option Plan
                        (Adopted as of December 31, 1994
                                       and
                          amended on February 23, 2004)

1. Purposes. The purposes of this Stock Option Plan are to attract and retain
the best available personnel for positions of substantial responsibility, to
provide additional incentive to the Employees of the Company or its subsidiaries
(as defined in Section 2 below), and to promote the success of the Company's
business.

            Options granted hereunder may be either "Incentive Stock Options",
as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
"Nonqualified Stock Options", at the discretion of the Board and as reflected in
the terms of the written option agreement.

2. Definitions. As used herein, the following definitions shall apply:

         a.       "Board" shall mean the Board of Directors of the Company.

         b.       "Common Stock" shall mean the Common Stock of the Company (see
                  Section 3 below).

         c.       "Company" shall mean Power Efficiency Corporation, a Delaware
                  corporation.

         d.       "Committee" shall mean the Committee appointed by the Board of
                  Directors in accordance with paragraph (a) of Section 4 of the
                  Plan or the Board of Directors of the Company, if no Committee
                  is appointed.

         e.       "Continuous Status as an Employee" shall mean the absence of
                  any interruption or termination of service as an Employee.
                  Continuous Status as an Employee shall not be considered
                  interrupted in the case of sick leave, military leave, or any
                  other leave of absence approved by the Board.

         f.       "Employee" shall mean any person, including officers and
                  directors, employed by the Company or any Parent or Subsidiary
                  of the Company. The payment of a director's fee by the Company
                  shall not be sufficient to constitute "employment" by the
                  Company.

         g.       "Exchange Act" shall mean the Securities Exchange Act of 1934,
                  as amended.

         h.       "Incentive Stock Option" shall mean an Option intended to
                  qualify as an Incentive Stock Option within the meaning of
                  Section 422 of the Internal Revenue Code of 1986, as amended.

         i.       "Nonqualified Stock Option" shall mean a stock option not
                  intended to qualify as an Incentive Stock Option.
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         j.       "Option" shall mean a stock option granted pursuant to the
                  Plan.

         k.       "Optioned Stock" shall mean the Common Stock subject to an
                  Option.

         l.       "Optionee" shall mean an Employee or other person who receives
                  an Option.

         m.       "Parent" shall mean a "parent corporation", whether now or
                  hereafter existing, as defined in Section 425(e) of the
                  Internal Revenue Code of 1986, as amended.

         n.       "Share" shall mean a share of the Common Stock, as adjusted in
                  accordance with Section 12 of the Plan.

         o.       "Subsidiary" shall mean a "subsidiary corporation", whether
                  now or hereafter existing, as defined in Section 425(f) of the
                  Internal Revenue Code of 1986, as amended.

3. Stock.

            Subject to the provisions of Section 12 of the Plan, the maximum
aggregate number of shares which may be optioned and sold under the Plan is
Seventy One Thousand Four Hundred Twenty Nine (71,429) shares of authorized, but
unissued, or reacquired $.001 par value Common Stock.

            If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
further grant under the Plan.

4. Administration.

         a. Procedure. The Company's Board of Directors may appoint a Committee
to administer the Plan. The Committee appointed by the Board of Directors shall
consist of not less than three members of the Board of Directors, to administer
the Plan on behalf of the Board of Directors, subject to such terms and
conditions as the Board of Directors may prescribe. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board of
Directors. From time to time the Board of Directors may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause), and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan; provided, however, that at no time shall a Committee of
less than three (3) members administer the Plan.

         b. Powers of the Board. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options, in accordance with Section 422 of the Internal Revenue Code of 1986, as
amended or to grant Nonqualified Stock Options; (ii) to determine, upon review
of relevant information and in accordance with Section 8(b) of the Plan, the
fair market value of the Company's Common Stock; (iii) to determine the exercise
price per share of Options to be granted, which exercise price shall be
determined in accordance with Section 8 of the Plan; (iv) to determine the
Employees and other persons to whom, and the time or times at which, Options
shall be granted and the number of shares to be represented by each Option; (v)
to interpret the Plan; (vi) to prescribe, amend and rescind rules and
regulations relating to the Plan; (vii) to determine the terms and provisions of
each Option granted (which need not be identical) and, with the consent of the
holder thereof, modify or amend each Option; (viii) to accelerate or defer (with
the consent of the Optionee) the exercise date of any Option; (ix) to authorize
any person to execute on behalf of the Company any instrument required to
effectuate the grant of an Option previously granted by the Board; and (x) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
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         c. Effect of the Board's Decision. All decisions, determinations and
interpretations of the Board or any Committee shall be final and binding on all
Optionees and any other holders of any Options granted under the Plan.

5. Eligibility. Incentive Stock Options may be granted only to Employees.
Nonqualified Stock Options may be granted to employees as well as non-employee
directors and consultants to the Company (subject to the limitations set forth
in Section 4) as determined by the Board or any Committee. Any person who has
been granted an Option may, if he is otherwise eligible, be granted an
additional Option or Options.

         No such Incentive Stock Option may be granted to an Employee if, as the
result of such grant, the aggregate fair market value (determined at the time
each option was granted) of the Shares with respect to which such Incentive
Stock Options are exercisable for the first time by such Employee during any
calendar year (under all such plans of the Company and any Parent and
Subsidiary) shall exceed One Hundred Thousand Dollars ($100,000).

         The Plan shall not confer upon any Optionee any right with respect to
continuation of employment by the Company, nor shall it interfere in any way
with his right or the Company's right to terminate his employment at any time.

6. Term of Plan. The Plan shall become effective upon the earlier to occur of
(i) its adoption by the Board of Directors, or (ii) its approval by vote of the
holders of a majority of the outstanding shares of the Company entitled to vote
on the adoption of the Plan. It shall continue in effect for a term of ten (10)
years from its effective date unless sooner terminated under Section 14 of the
Plan.

7. Term of Option. The term of each Option shall be ten (10) years from the date
of grant thereof or such shorter term as may be provided in the Stock Option
Agreement. However, in the case of an Incentive Stock Option granted to an
Employee who, immediately before the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant thereof or
such shorter time as may be provided in the Stock Option Agreement.

8. Exercise Price and Consideration.

         a. The per Share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:

                  i. In the case of an Incentive Stock Option

                           1. granted to an Employee who, immediately before the
                  grant of such Incentive Stock Option, owns stock representing
                  more than ten percent (10%) of the voting power of all classes
                  of stock of the Company or any Parent or Subsidiary, the per
                  Share exercise price shall be no less than 110% of the fair
                  market value per Share on the date of grant.
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                           2. granted to any Employee, the per share exercise
                  price shall be no less than 100% of the fair market value per
                  Share on the date of grant.

                  ii. In the case of a Non-qualified Stock Option, the per-Share
         exercise price shall be determined by the Board of Directors or the
         Committee on the date of grant.

         b. In the case of Incentive Stock Options the fair market value shall
be determined by the Board in its discretion; provided, however, that where
there is a public market for the Common Stock, the fair market value per Share
shall be the closing bid price of the Common Stock on the date of grant, as
reported in the Wall Street Journal (or, if not so reported, as otherwise
reported by the National Association of Securities Dealers Automated Quotation
[NASDAQ] System) or, in the event the Common Stock is listed on a stock
exchange, the fair market value per Share shall be the closing price on such
exchange on the date of grant of the Option, as reported in the Wall Street
Journal.

         c. The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Board and may consist entirely of cash, check, promissory note, other Shares
of Common Stock having a fair market value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said option shall be
exercised, the surrender for cancellation of Options having an in the money
value on the date of surrender equal to the aggregate exercise price of other
Options being exercised, or any combination of such methods of payment, or such
other consideration and method of payment for the issuance of Shares to the
extent permitted under Delaware Law.

9. Exercise of Option.

         a. Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.

         An Option may not be exercised for a fraction of a Share.

         An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance, which in no event will be delayed more than thirty (30) days
from the date of the exercise of the Option, (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the stock certificate is issued, except as provided in the Plan.
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         Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

         b. Termination of Status as an Employee with Respect to Nonqualified
Stock Options. Nonqualified Stock Options granted pursuant to the Plan may be
exercised notwithstanding the termination of the Optionee's status as an
Employee, director or consultant, except as provided in the Plan or as provided
by the terms of the Stock Option Agreement.

         c. Termination of Status as an Employee with Respect to Incentive Stock
Options. In the case of an Incentive Stock Option, if an Employee ceases to
serve as an Employee, he may, but only within thirty (30) days (or such other
period of time not exceeding three (3) months as is determined by the Board)
after the date he ceases to be an Employee of the Company, exercise his Option
to the extent that he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the Option at
the date of such termination, or if he does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.

         d. Disability. Notwithstanding the provisions of Section 9(c) above, in
the event an Employee is unable to continue his employment with the Company as a
result of his total and permanent disability (as defined in Section 22(e)(3) of
the Internal Revenue Code of 1986), he may, but only within three (3) months (or
such other period of time not exceeding twelve (12) months as is determined by
the Board) from the date of disability, exercise his Incentive Stock Option to
the extent he was entitled to exercise it at the date of such disability. To the
extent that he was not entitled to exercise the Incentive Stock Option at the
date of disability, or if he does not exercise such Incentive Stock Option
(which he was entitled to exercise) within the time specified herein, the
Incentive Stock Option shall terminate.

         e. Death of Optionee. In the event of the death of an Optionee under an
Incentive Stock Option:

                  i. during the term of the Option who is at the time of his
         death an Employee of the Company and who shall have been in Continuous
         Status as an Employee since the date of grant of the Option, the Option
         may be exercised, at any time within twelve (12) months following the
         date of death, by the Optionee's estate or by a person who acquired the
         right to exercise the Option by bequest or inheritance, but only to the
         extent of the right to exercise that would have accrued had the
         Optionee continued living one (1) month after the date of death; or

                  ii. within thirty (30) days (or such other period of time not
         exceeding three (3) months as is determined by the Board) after the
         termination of Continuous Status as an Employee, the Option may be
         exercised, at any time within three (3) months following the date of
         death, by the Optionee's estate or by a person who acquired the right
         to exercise the Option by bequest or inheritance, but only to the
         extent of the right to exercise that had accrued at the date of
         termination.

10. Non-Transferability of Incentive Stock Options. An Incentive Stock Option
may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in
any manner other than by will or by the laws of descent or distribution and may
be exercised, during the lifetime of the Optionee, only by the Optionee.
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11. Transferability of Nonqualified Stock Options. All Nonqualified Options
granted pursuant to the Plan are transferable subject to compliance with the
Securities Act of 1933, as amended (the "Act"), and any applicable state
securities or Blue Sky laws. Upon surrender of a Nonqualified Option to the
Company or at the office of its stock transfer agent, if any, with the funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Nonqualified Option in the name of the assignee named in such
instrument of assignment and the Nonqualified Option shall promptly be
cancelled. The Nonqualified Option may be divided or combined with other
Nonqualified Options which carry the same rights upon presentation thereof at
the office of the Company or at the office of its stock transfer agent, if any,
together with a written notice specifying the names and denominations in which
new Nonqualified Options are to be issued and signed by the Optionee thereof.
The term "Option" as used herein includes any Nonqualified Options into which a
Nonqualified Option may be divided or exchanged.

12. Adjustments upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split or the payment of a stock dividend with
respect to the Common Stock or any other increase or decrease in the number of
issued shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Furthermore, any
distribution of assets by the Company except for cash dividends paid, shall be
considered the payment of a stock dividend for purposes of this Section 12.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

            In the event of the proposed dissolution or liquidation of the
Company, or in the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, the Option will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that any Option
shall terminate as of a date fixed by the Board and give each Optionee the right
to exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable.

13. Time for Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee to whom an
Option is so granted within a reasonable time after the date of such grant.

14. Amendment and Termination of the Plan. (a) The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval of
the holders of a majority of the outstanding shares of the Company entitled to
vote:
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                  i. any increase in the number of Shares subject to the Plan,
         other than in connection with an adjustment under Section 12 of the
         Plan;

                  ii. any change in the designation of the class of persons
         eligible to be granted Options; or

                  iii. any material increase in the benefits accruing to
         participants under the Plan.

         b. Shareholder Approval. If any amendment requiring shareholder
approval under Section 14(a) of the Plan is made such shareholder approval shall
be solicited as described in Section 18(a) of the Plan.

         c. Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

15. Conditions upon Issuance of Shares. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.

         As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

16. Reservation of Shares. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

         Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.

17. Option Agreement. Options shall be evidenced by written option agreements in
such form as the Board shall approve.
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18. Shareholder Approval. Continuance of the Plan shall be subject to approval
by the shareholders of the Company within twelve months before or after the date
the Plan is adopted. If such shareholder approval is obtained at a duly held
shareholders' meeting, it may be obtained by the affirmative vote of the holders
of a majority of the outstanding shares of the Company present or represented
and entitled to vote thereon. If at the time of such meeting the Company has a
class of securities registered pursuant to Section 12 of the Exchange Act, the
approval of such shareholders of the Company shall be; (1) solicited
substantially in accordance with Section 14(a) of the Exchange Act and the rules
and regulations promulgated thereunder, or (2) solicited after the Company has
furnished in writing to the holders entitled to vote substantially the same
information concerning the Plan as that which would be required by the rules and
regulations in effect under Section 14(a) of the Exchange Act at the time such
information is furnished.

         If such shareholder approval is obtained by written consent in the
absence of a Shareholders' Meeting, it must be obtained by the written consent
of all shareholders of the Company who would have been entitled to cast the
minimum number of votes which would be necessary to authorize such action at a
meeting at which all Shareholders entitled to vote thereon were present and
voting.

19. Miscellaneous Provisions. An Optionee shall have no rights as a shareholder
with respect to any Shares covered by his Option until the date of the issuance
of a stock certificate to him for such shares.

20. Other Provisions. The Stock Option Agreement authorized under the Plan shall
contain such other provisions, including, without limitation, restrictions upon
the exercise of the Option, as the Board of Directors of the Company shall deem
advisable. Any such Stock Option Agreement shall contain such limitations and
restrictions upon the exercise of the Option as shall be necessary in order that
such option will be an Incentive Stock Option as defined in Section 422 of the
Internal Revenue Code of 1986, as amended, if an Incentive Stock Option is
intended to be granted.

21. Indemnification of Committee. In addition to such other rights of
indemnification as they may have as Directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such Board
member is liable for negligence or misconduct in the performance of his duties;
provided that within 60 days after institution of any such action, suit or
proceeding a Board member shall in writing offer the Company the opportunity, at
its own expense, to handle and defend the same.

22. Application of Funds. The proceeds received by the Company from the sale of
Common Stock pursuant to Options will be used for general corporate purposes.

23. No Obligation to Exercise Option. The granting of an Option shall impose no
obligation upon the Optionee to exercise such Option.

24. Other Compensation Plans. The adoption of the Plan shall not affect any
other stock option or incentive or other compensation plans in effect for the
Company or any Subsidiary, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for employees
and directors of the Company or any Subsidiary.
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25. Singular, Plural; Gender. Whenever used herein, nouns in the singular shall
include the plural, and the masculine pronoun shall include the feminine gender.

26. Headings, etc., No Part of Plan. Headings of Articles and Sections hereof
are inserted for convenience and reference; they constitute no part of the Plan.