Exhibit 4.1


Form of Warrant


 







[FORM
OF WARRANT]


 


AMERICAN
DG ENERGY INC.


 


Common
Stock Purchase Warrant


 


Warrant
No.:________


Date of
Issuance: August __, 2014 (“Issuance Date”)


 


American
DG Energy Inc., a corporation incorporated under the laws of the State of Delaware (the “Company”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [              
], the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the
terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of
this Warrant (including any Warrants issued in exchange, transfer or replacement hereof, the “Warrant”), at
any time or times on or after the Issuance Date, but not after 11:59 p.m., New York time, on the Expiration Date (as defined below),
[______________](subject to adjustment as provided herein) fully paid and nonassessable shares of Common Stock (as defined below)
(the “Warrant Shares”). Except as otherwise defined herein, capitalized terms in this Warrant shall have
the meanings set forth in Section 16. This Warrant is one of the Warrants (the “Warrants”) issued pursuant to
(i) Section 1 of that certain Underwriting Agreement, dated as of July 31, 2014, by and among the Company and the underwriters
referred to therein, as amended from time to time (the “Underwriting Agreement”) and (ii) the Company’s
Registration Statement, General Disclosure Package and the Prospectus. All capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Underwriting Agreement.


 


1.EXERCISE
OF WARRANT.


 


(a)Mechanics
of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)),
this Warrant may be exercised by the Holder on any day on or after the Issuance Date (each, an “Exercise Date”),
in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit
A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading
Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the
Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so
exercised (the “Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds if the
Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (as defined
in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise
hereunder. No ink-original Exercise Notice of exercise shall be required, nor shall any medallion guarantee (or other type of guarantee
or notarization) of any Exercise Notice form be required. Execution and delivery of an Exercise Notice with respect to less than
all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a new Warrant
evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of
the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant after delivery of
the Warrant Shares in accordance with the terms hereof. On or before the first (1st) Trading Day following the date
on which the Company has received an Exercise Notice, the Company shall transmit by facsimile an acknowledgment of confirmation
of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s
transfer agent (the “Transfer Agent”). On or before the third (3rd) Trading Day following the date
on which the Company has received such Exercise Notice, the Company shall (X) provided that the Transfer Agent is participating
in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, upon the request of the
Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the
Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the Holder or,
at the Holder’s instruction pursuant to the Exercise Notice, the Holder’s agent or designee, in each case, sent by
reputable overnight courier to the address as specified in the applicable Exercise Notice, a certificate, registered in the Company’s
share register in the name of the Holder or its designee (as indicated in the applicable Exercise Notice), for the number of shares
of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise Notice, the Holder shall
be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant
has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of
delivery of the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with
any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise
is greater than the number of Warrant Shares being acquired upon an exercise, then, at the request of the Holder, the Company shall
as soon as practicable and in no event later than three (3) Business Days after any exercise and at its own expense, issue and
deliver to the Holder (or its designee) a new Warrant (in accordance with Section 7(d)) representing the right to purchase
the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares
with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company
shall not be required to pay any stamp or other tax or governmental charge required to be paid in connection with any transfer
involved in the issue of the Warrant Shares upon the exercise of Warrants; and in the event that any such transfer is involved,
the Company shall not be required to issue or deliver any Warrant Shares until such tax or other charge shall have been paid or
it has been established to the Company’s satisfaction that no such tax or other charge is due. Notwithstanding the foregoing,
except in the case where an exercise of this Warrant is validly made pursuant to a Cashless Exercise (as defined in Section 1(d)),
the Company’s failure to deliver Warrant Shares to the Holder on or prior to the second (2nd) Trading Day after the Company’s
receipt of the Aggregate Exercise Price shall not be deemed to be a breach of this Warrant.


 






    	 



    	 



    

 


(b)Exercise
Price. For purposes of this Warrant, “Exercise Price” means $1.8875, subject to adjustment as provided
herein.


 


(c)Company’s
Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, to issue to the Holder within
the later of (i) three (3) Trading Days after receipt of the applicable Exercise Notice and (ii) two (2) Trading Days after the
Company’s receipt of the Aggregate Exercise Price (or valid notice of a Cashless Exercise) (such later date, the “Share
Delivery Deadline”), a certificate for the number of shares of Common Stock to which the Holder is entitled and register
such shares of Common Stock on the Company’s share register or to credit the Holder’s balance account with DTC for
such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the
case may be) (a “Delivery Failure”), and if on or after such Share Delivery Deadline the Holder purchases (in
an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of all or any
portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of
the number of shares of Common Stock, issuable upon such exercise that the Holder so anticipated receiving from the Company, then,
in addition to all other remedies available to the Holder, the Company shall, within three (3) Business Days after the Holder’s
request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total
purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased
(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “Buy-In Price”),
at which point the Company’s obligation to so issue and deliver such certificate or credit the Holder’s balance account
with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as
the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to so issue
and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder
(as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product
of (A) such number of shares of Common Stock multiplied by (B) the lowest Closing Sale Price of the shares of Common Stock on any
Trading Day during the period commencing on the date of the applicable Exercise Notice and ending on the date immediately preceding
the date of such issuance and payment under this clause (ii). In addition to the foregoing, in the event the Company fails for
any reason to deliver to the Holder the number of Warrant Shares subject to an Exercise Notice by the Share Delivery Deadline,
the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject
to such exercise (based on the VWAP of the shares of Common Stock on the date of the applicable Exercise Notice), $10 per Trading
Day (increasing to $20 per Trading Day on the second Trading Day after such liquidated damages begin to accrue) for each Trading
Day after such Share Delivery Deadline until such certificates are delivered or Holder rescinds such exercise at any time prior
to the issuance of the Warrant Shares.


 






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(d)Cashless
Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if the shares issuable
upon the exercise of the Warrants are no longer registered under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead
to receive upon such exercise the “Net Number” of shares of Common Stock (the “Net Number”) determined
according to the following formula (a “Cashless Exercise”):


 










Net Number
= (A x B) - (A x C)


B


 


For purposes
of the foregoing formula:


 


A
= the total number of shares with respect to which this Warrant is then being exercised.


 


B
=the quotient of (x) the sum of the VWAP of the shares of Common Stock of each of the ten (10) Trading Days ending at the close
of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice, divided
by (y) ten (10).


 


C
= the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.


 


(e)Disputes.
In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares
to be issued pursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section 13.


 


(f)Limitations
on Exercises. Notwithstanding anything to the contrary contained in this Warrant, this Warrant shall not be exercisable by
the Holder hereof to the extent (but only to the extent) that after giving effect to such exercise the Holder (together with any
of its affiliates) would beneficially own in excess of  4.99% (the “Maximum Percentage”) of the Common
Stock. To the extent the above limitation applies, the determination of whether this Warrant shall be exercisable (vis-à-vis
other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities
shall be convertible, exercisable or exchangeable (as the case may be, as among all such securities owned by the Holder) shall,
subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion,
exercise or exchange (as the case may be). No prior inability to exercise this Warrant pursuant to this paragraph shall have any
effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability.
For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation,
with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise
than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective
or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph
shall apply to a successor Holder of this Warrant. For any reason at any time, upon the written or oral request of the Holder,
the Company shall within two (2) Business Days confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into shares
of Common Stock, including, without limitation, pursuant to this Warrant or securities issued pursuant to the Underwriting Agreement.
By written notice to the Company, any Holder may increase or decrease the Maximum Percentage to any other percentage not in excess
of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the 61st day after such notice
is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder sending such notice and not to
any other holder of Warrants.


 






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(g)Insufficient
Authorized Shares. From and after the Issuance Date, the Company shall at all times keep reserved for issuance under this Warrant
a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary
to satisfy the Company’s obligation to issue shares of Common Stock hereunder (without regard to any limitation otherwise
contained herein with respect to the number of shares of Common Stock that may be acquirable upon exercise of this Warrant). From
and after the Issuance Date, if, notwithstanding the foregoing, and not in limitation thereof, at any time while any of the Warrants
remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy
its obligation to reserve for issuance upon exercise of the Warrants at least a number of shares of Common Stock (the “Required
Reserve Amount”) equal to the number of shares of Common Stock as shall from time to time be necessary to effect the
exercise of all of the Warrants then outstanding (an “Authorized Share Failure”), then the Company shall immediately
take all action reasonably necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient
to allow the Company to reserve the Required Reserve Amount for all the Warrants then outstanding. Without limiting the generality
of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event
later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of, or seek
the written consent of, its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In
connection with any such meeting, the Company shall provide each stockholder with a proxy statement and shall use its reasonable
best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its
board of directors to recommend to the stockholders that they approve such proposal. In the event that the Company is prohibited
from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficient shares
of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common
Stock, the “Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder,
the Company shall pay cash in exchange for the cancellation of such portion of this Warrant exercisable into such Authorized Failure
Shares at a price equal to the sum of (i) the product of (x) such number of Authorization Failure Shares and (y) the greatest Closing
Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder delivers the applicable Exercise
Notice with respect to such Authorization Failure Shares to the Company and ending on the date immediately preceding the date of
such issuance and payment under this Section 1(g) and (ii) to the extent the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any brokerage
commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith.


 






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2. ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 2. 







 


(a)Stock
Dividends and Splits. Without limiting any provision of Section 2(b), if the Company, at any time on or after the Issuance
Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution
on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines
(by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of
shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall
become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution,
and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date
of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an
Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflect
such event.


 


(b)Calculations.
All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a
share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held
by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of shares of
Common Stock.








 





3.RIGHTS UPON DISTRIBUTION OF ASSETS.
In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution
of its assets (or rights to acquire its assets) to holders 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”), at any time
after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution
to the same extent that the Holder would have participated therein 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 Maximum Percentage) immediately before the date on 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
(provided, however, to the extent that the Holder’s right to participate in any such Distributions would result in the Holder
exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (or
the beneficial ownership of any such shares of Common Stock as a result of such Distribution to such extent) and such Distribution
to such extent shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not
result in the Holder exceeding the Maximum Percentage).







 


 


 






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4.PURCHASE
RIGHTS; FUNDAMENTAL tRANSACTIONS; Market Stand-off


 


(a)Purchase
Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells
pro rata to all of the record holders of any class of Common Stock any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property, (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 Maximum Percentage) 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 Maximum
Percentage, then 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
Maximum Percentage).


 


(b)Fundamental
Transactions. Upon the consummation of a Fundamental Transaction, the registered holder shall have the right thereafter to
receive, upon exercise of the Warrant, the same amount and kind of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of the number of Warrant Shares then issuable upon exercise in full of the Warrant without regard to any limitations
on exercise contained in the Warrant. The Company shall not effect any such Fundamental Transaction unless prior to or simultaneously
with the consummation thereof, any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring
such assets or other appropriate corporation or person shall assume the Warrant and the obligation to deliver to the registered
holder may be entitled to receive, and the other obligations under the Warrant.


 





5. NONCIRCUMVENTION. The Company
hereby covenants and agrees that the Company will not, by amendment of its certificate of incorporation, bylaws or through any
reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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, and will
at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any
shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all
such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable
shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the Warrants are outstanding, take
all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose
of effecting the exercise of the Warrants, the maximum number of shares of Common Stock as shall from time to time be necessary
to effect the exercise of the Warrants then outstanding (without regard to any limitations on exercise).







 





 






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6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.
Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be
entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of
the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which
it is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be
construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or
as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding
this Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders
of the Company generally, contemporaneously with the giving thereof to the stockholders.







 





7.REISSUANCE
OF WARRANTS.


 


(a)Transfer
of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered
as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and,
if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.


 


(b)Lost,
Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall
suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to
the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to
purchase the Warrant Shares then underlying this Warrant.


 


(c)Exchangeable
for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the
Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase
the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such
portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for
fractional shares of Common Stock shall be given.


 


(d)Issuance
of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant
(i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to
purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a)
or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying
the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date,
and (iv) shall have the same rights and conditions as this Warrant.


 






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8. NOTICES Whenever notice is required
to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9.1 of
the Underwriting Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this
Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality
of the foregoing, the Company will give written notice to the Holder (i) promptly upon each adjustment of the Exercise Price and
the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii)
at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend
or distribution upon the Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities
or rights to purchase stock, warrants, securities or other property to holders of Common Stock or (C) for determining rights to
vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall
be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) at least ten (10)
Trading Days prior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes,
or contains, material, non-public information regarding the Company or any of its Subsidiaries, the Company shall simultaneously
file such notice with the SEC pursuant to a Current Report on Form 8-K. It is expressly understood and agreed that the time of
execution specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.


 


9. AMENDMENT AND WAIVER. Except
as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained
the written consent of the Holder. No waiver shall be effective unless it is in writing and signed by an authorized representative
of the waiving party.


 


10. SEVERABILITY. If any provision
of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction,
the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent
that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity
of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change,
the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability
of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties
or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in
good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect
of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).













 






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11.GOVERNING
LAW; AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITIES. 


 


(a)This
Warrant shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect
to conflict of laws principles thereof,


 


(b)The
Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Warrant shall
be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern
District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives
any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be
served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested,
postage prepaid, addressed to it at the address set forth in Section 8 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the Company in any action, proceeding or claim. The Company and the Holder agree that the prevailing
party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees
and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on
its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and the Holder hereby
irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated hereby. 


 





12. CONSTRUCTION; HEADINGS. This
Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the
drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation
of, this Warrant.


 


13. DISPUTE RESOLUTION. In the
case of a dispute as to the determination of the Exercise Price, the Closing Bid Price, the Closing Sale Price or fair market
value or the arithmetic calculation of the number of Warrant Shares (as the case may be), the Company or the Holder (as the case
may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile (i) within two
(2) Business Days after receipt of the applicable notice giving rise to such dispute to the Company or the Holder (as the case
may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise
to such dispute. If the Holder and the Company are unable to agree upon such determination or calculation (as the case may be)
of the Exercise Price, the Closing Sale Price or fair market value or the number of Warrant Shares (as the case may be) within
three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Company or the Holder
(as the case may be), then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination
of the Exercise Price, the Closing Bid Price, the Closing Sale Price or fair market value (as the case may be) to an independent,
reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the
number of Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment
bank or the accountant (as the case may be) to perform the determinations or calculations (as the case may be) and notify the
Company and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations
or calculations (as the case may be). Such investment bank’s or accountant’s determination or calculation (as the
case may be) shall be binding upon all parties absent demonstrable error.










 






    	9



    	 



    

  





14. REMEDIES, CHARACTERIZATION, OTHER
OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Warrant shall be cumulative and in addition to
all other remedies available under this Warrant, at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual and consequential damages for any
failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be no characterization
concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments,
exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as
expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any
such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder
of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without
the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information
and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance
with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). The issuance
of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to
the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name
other than the Holder or its agent on its behalf.


 


15. TRANSFER. This Warrant may
be offered for sale, sold, transferred or assigned without the consent of the Company.


 


16. CERTAIN DEFINITIONS. For purposes
of this Warrant, the following terms shall have the following meanings:












 









    	10



    	 



    

 





(a)“Bid
Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal
Market as reported by Bloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the bid price of such security on the principal securities exchange or trading market where
such security is listed or traded as reported by Bloomberg as of such time of determination, or if the foregoing does not apply,
the bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by
Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination,
the average of the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets
Group Inc. (formerly Pink Sheets LLC) as of such time of determination. If the Bid Price cannot be calculated for a security as
of the particular time of determination on any of the foregoing bases, the Bid Price of such security as of such time of determination
shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to
agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13.
All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar
transaction during such period.


 


(b)
“Bloomberg” means Bloomberg, L.P.


 


(c)“Business
Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.


 


(d)“Closing
Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price
and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal
Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as
the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York City
time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such
security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing
bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security
by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported
in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing
Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by
the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.


 






    	11



    	 



    

 


(e)“Common
Stock” means  the Company’s Common Stock, $0.001 par value per share, and (ii) any capital stock into which
such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.


 


(f)“Convertible
Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly
or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any
shares of Common Stock.


 


(g)“Expiration
Date” means the date that is the third anniversary of the Issuance Date or, if such date falls on a day other than a
Business Day or on which trading does not take place on the Principal Market (a “Holiday”), the next date that
is not a Holiday.


 


(h)“Fundamental
Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related
transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation)
any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its
respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer
that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares
of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other
Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including
any shares of Voting Stock of the Company 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), or (5) (I) reorganize,
recapitalize or reclassify the Shares of Common Stock, (II) effect or consummate a stock combination, reverse stock split or other
similar transaction involving the Shares of Common Stock or (III) make any public announcement or disclosure with respect to any
stock combination, reverse stock split or other similar transaction involving the Shares of Common Stock (including, without limitation,
any public announcement or disclosure of (x) any potential, possible or actual stock combination, reverse stock split or other
similar transaction involving the Shares of Common Stock or (y) board or stockholder approval thereof, or the intention of the
Company to seek board or stockholder approval of any stock combination, reverse stock split or other similar transaction involving
the Common Stock) (for the avoidance of doubt, this subsection (5) shall not include any forward splits or dividends on the Common
Stock), or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented
by issued and outstanding Voting Stock of the Company.


 






    	12



    	 



    




 


(i)
“Initial Per Share Offering Price” means $1.51.


 


(j)
“Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible
Securities.


 


(k)“Person”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
any other entity or a government or any department or agency thereof.


 


(l)“Principal
Market” means the NYSE MKT.


 


(m)“Subsidiary”
means any Person in which the Company, directly or indirectly, (i) owns 50% or more of the outstanding capital stock or holds any
equity or similar interest of such Person or (ii) controls or operates all or any part of the business, operations or administration
of such Person, and all of the foregoing.


 


(n)
“Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market
on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common
Stock are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock are suspended
from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such
day is otherwise designated as a Trading Day in writing by the Holder.


 


(o)“Voting
Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have
the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or
trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might
have voting power by reason of the happening of any contingency).


 


(p)“VWAP”
means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or,
if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities
market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00
p.m., New York time, as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported
by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average
of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in
the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If VWAP cannot be calculated for such security
on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined
by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.


 


[signature
page follows]


 




    	13



    	 



    

 


IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date set out above.


 





	 	AMERICAN DG ENERGY INC.
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	By: 	_________________________________	 
	 	 	Name:	 
	 	 	Title:	 


  







    	14



    	 



    

 


EXHIBIT
A


 





EXERCISE
NOTICE


 


TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT


 


AMERICAN
DG ENERGY INC.


 


The
undersigned holder hereby exercises the right to purchase _________________ shares of Common Stock (“Warrant Shares”)
of American DG Energy Inc., a corporation formed under the laws of the State of Delaware (the “Company”), evidenced
by Warrant No. _______ (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the Warrant.


 


1.Form
of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as:


 





	____________	a “Cash Exercise” with respect to _________________ Warrant Shares; and/or


 





	____________	a “Cashless Exercise” with respect
    to _______________ Warrant Shares, resulting in a delivery obligation by the Company to the Holder of __________ shares of
    Common Stock representing the applicable Net Number, subject to adjustment.









 


2.Cashless
Exercise Adjustment. Check if applicable: __________


 


The Holder
hereby notifies the Company that the Holder has previously delivered the Exercise Notice(s) attached hereto as Schedule I
for Cashless Exercise.


 


As the applicable
Net Number has changed since the time of delivery of such Exercise Notice(s):


 


Check if
applicable:


 


 







	_________	The Company’s delivery obligation to the Holder with respect to such Exercise Notice(s), in the aggregate, should be adjusted to __________ shares of Common Stock.







 





	_________  	Due to the application of Section 1(f) of the Warrant, the number of Warrant Shares of this Warrant to be exercised, with respect to such Exercise Notice(s), in the aggregate, was automatically reduced to ________, Warrant Shares, resulting in a delivery obligation by the Company to the Holder of __________ shares of Common Stock representing the applicable Net Number.


 






    	 



    	 



    




 


3.Payment
of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares
to be issued pursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum
of $___________________ to the Company in accordance with the terms of the Warrant.


 


4.Delivery
of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ Warrant
Shares in accordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, to the following address:




 





	 	 	 
	 	 	 
	 	 	 







 





	Date:__________ __, ______	
	 	 
	 	 
	Name of Registered Holder	 
	 	 
	By	 	 
	 	Name	 
	 	Title	 



















    	 



    	 



    

 


EXHIBIT
B


 


ACKNOWLEDGMENT


 


The
Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated
number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _________, 20__, from the Company and
acknowledged and agreed to by _______________.


 








	 	AMERICAN DG ENERGY INC.
	 	 	 
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title: