Document:

Exhibit 4.2

 

SEPTEMBER 2008 WARRANT

 

NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS.  THE SECURITIES
HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD
RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

OPEN ENERGY CORPORATION

 

SEPTEMBER 2008 WARRANT TO PURCHASE COMMON STOCK

 

Warrant No.: 
Quercus 2008-S

Number of Shares of Common Stock:  Seventy-Five Million (75,000,000)

Date of Issuance:  September 18, 2008 (“Issuance Date”)

 

Open Energy Corporation, a Nevada corporation (the “Company”), hereby certifies that, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, The Quercus Trust, 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 surrender of this
September 2008 Warrant to Purchase Common Stock (including any Warrants to
purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after
the date hereof, but not after 11:59 p.m., New York time, on the
Expiration Date (as defined below), Seventy-Five Million (75,000,000)
fully-paid 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 15.  This September 2008
Warrant is the Warrant to purchase Common Stock issued pursuant to Section 1
of that certain Securities Purchase Agreement, dated as of September 12,
2008, as amended,  (the “Subscription Date”), by and among the
Company and The Quercus Trust (the “Securities
Purchase Agreement”).

 

1.     EXERCISE OF WARRANT.

 

(a)  Mechanics of Exercise.  Subject to the terms and conditions hereof,
this Warrant may be exercised by the Holder on any day on or after the date
hereof, in whole or in part, by (i) delivery of a written notice, in the
form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this
Warrant and (ii) (A) payment to the Company 

 

 

of an amount equal to the
applicable Exercise Price multiplied by the number of Warrant Shares as to
which this Warrant is being exercised (the “Aggregate
Exercise Price”) in cash or by wire transfer of immediately available
funds or (B) by notifying the Company that this Warrant is being exercised
pursuant to a Cashless Exercise (as defined in Section 1(d)).  The Holder shall not be required to deliver
the original Warrant in order to effect an exercise hereunder.  Execution and delivery of the Exercise Notice
with respect to less than all of the Warrant Shares shall have the same effect
as cancellation of the original Warrant and issuance of a new Warrant
evidencing the right to purchase the remaining number of Warrant Shares.  On or before the second (2nd)
Business Day following the date on which the Company has received each of the
Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless
Exercise) (the “Exercise Delivery Documents”),
the Company shall transmit by facsimile an acknowledgment of confirmation of
receipt of the Exercise Delivery Documents to the Holder and the Company’s
transfer agent (the “Transfer Agent”).  On or before the third (3rd)
Business Day following the date on which the Company has received all of the
Exercise Delivery Documents (the “Share
Delivery Date”), 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 Agent Commission system, which balance account shall be specified in
the Exercise Notice, or (Y) if the Transfer Agent is not participating in
the DTC Fast Automated Securities Transfer Program, issue and dispatch by
overnight courier to the address as specified in the Exercise Notice, a certificate,
registered in the Company’s share register in the name of the Holder or its
designee, for the number of shares of Common Stock to which the Holder is
entitled pursuant to such exercise. Upon delivery of the Exercise Notice and
Aggregate Exercise Price referred to in clause (ii)(A) above or
notification to the Company of a Cashless Exercise referred to in Section 1(d),
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 of delivery of the certificates evidencing
such Warrant Shares.  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 the Company shall as soon as practicable and in no event later than five (5)
Business Days after any exercise and at its own expense, issue 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 pay any and all taxes which may be payable with respect to the issuance
and delivery of Warrant Shares upon exercise of this Warrant.

 

(b)  Exercise Price. 
For purposes of this Warrant, “Exercise
Price” means $0.067 per share, subject to adjustment as provided
herein.

 

(c)  Company’s Failure to Timely Deliver Securities.
Upon the Company’s receipt of an Exercise Notice or request for removal of
restrictive legends on the shares of Common Stock issuable in connection
therewith, the Company will deliver, or cause to be delivered, the certificates
evidencing such shares of Common Stock to the Holder within three (3) Trading
Days.  If such delivery is made more than
two (2) additional Trading Days
after 

 

2

 

exercise or request for removal
of legend, as the case may be, then the Company will compensate the Holder at a
rate of $100 per day for each of the first ten (10) Trading Days and $200
per day thereafter for each $10,000 of securities.  In such event, after the first such ten (10) Trading
Days noted above, the Holder will also have the right to rescind its Exercise
Notice for the Warrants.  If the
certificates have not been delivered by the fifth (5th) Trading Day
after conversion or request for removal of legend, as the case may be, and the
Holder has purchased (in an open market transaction or otherwise) Common Stock
to deliver in satisfaction of a sale by the Holder of Common Stock issuable
upon such conversion that the Holder anticipated receiving from the Company (a
“Buy-In”), then the Company shall,
within three (3) Trading 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
(the “Buy-In Price”), at which
point the Company’s obligation to deliver such certificate (and to issue such
Common Stock) shall terminate, or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates representing such Common
Stock 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, times (B) the Closing Bid Price on the Conversion Date.

 

(d)  Cashless Exercise.  Notwithstanding
anything contained herein to the contrary, if at any time after the twelve
(12)-month anniversary of the Issuance Date, a Registration Statement (as
defined in the Registration Rights Agreement) covering the Warrant Shares that
are the subject of an Exercise Notice (the “Unavailable
Warrant Shares”) is not available for the resale of such Unavailable
Warrant Shares, 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 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 arithmetic average of the Weighted Average Prices of the shares
of Common Stock (as reported by Bloomberg) for the five (5) consecutive
Trading Days ending on the date immediately preceding the date of the Exercise
Notice.

 

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

 

(e)  Cash Payment. 
In the event that there is an Authorized Share Failure, as defined in Section 1(g),
which prevents the issuance of Common Stock upon the exercise of all or any
portion of this Warrant, so that Company is unable to issue all or any portion
of the Common Stock for which the Warrant has been exercised, the Company shall
pay to Holder cash in an amount equal to the Black Scholes Value of that
portion of this Warrant which has been exercised but for which Common Stock
cannot be issued.

 

3

 

(f)  Disputes. 
In the case of a dispute as to the determination of the Exercise Price
or the arithmetic calculation of the Warrant Shares, 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 12.

 

(g)  Insufficient Authorized Shares.  If 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 (an “Authorized Share Failure”) to satisfy its obligation to
reserve for issuance upon exercise of the Warrants no less than 120% of 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 (in addition to all
other convertible securities) (the “Required Reserve Amount”), then the Company shall immediately take all action 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 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 its stockholders for the approval
of an increase in the number of authorized shares of Common Stock.  In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its 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.

 

2.     ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.  The Exercise Price and the number of Warrant
Shares shall be adjusted from time to time as follows:

 

(a)  Adjustment Upon Issuance of Shares of Common Stock.  If the Company issues or sells, or in
accordance with this Section 2 is deemed to have issued or sold, any
shares of Common Stock (including the issuance or sale of shares of Common
Stock owned or held by or for the account of the Company, but excluding shares
of Common Stock deemed to have been issued by the Company in connection with
any Excluded Securities (as defined in the Series B Convertible Note dated
September 19, 2007, issued to The Quercus Trust) for a consideration per
share (the “New Issuance Price”)
less than a price (the “Applicable Price”)
equal to the Exercise Price in effect immediately prior to such issue or sale
or deemed issuance or sale (the foregoing a “Dilutive
Issuance”), then immediately after such Dilutive Issuance, the
Exercise Price then in effect shall be reduced to an amount equal to the New
Issuance Price.  Upon each such
adjustment of the Exercise Price hereunder, the number of Warrant Shares shall be
adjusted to the number of shares of Common Stock determined by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares acquirable upon exercise of this Warrant immediately prior to
such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.  For
purposes of determining the adjusted Exercise Price under this Section 2(a),
the following shall be applicable:

 

4

 

(i)           Issuance
of Options.  If the Company grants
any Options (except in connection with the issuance of any Excluded Securities)
and the lowest price per share for which One (1) share of Common Stock is
issuable upon the exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such
Option is less than the Applicable Price, then such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the granting or sale of such Option for such price per share.  For purposes of this Section 2(a)(i),
the “lowest price per share for which One (1) share of Common Stock is
issuable upon exercise of such Options or upon conversion, exercise or exchange
of such Convertible Securities” shall be equal to the sum of the lowest amounts
of consideration (if any) received or receivable by the Company with respect to
any One (1) share of Common Stock upon the granting or sale of the Option,
upon exercise of the Option and upon conversion, exercise or exchange of any
Convertible Security issuable upon exercise of such Option.  No further adjustment of the Exercise Price
or number of Warrant Shares shall be made upon the actual issuance of such
shares of Common Stock or of such Convertible Securities upon the exercise of
such Options or upon the actual issuance of such shares of Common Stock upon
conversion, exercise or exchange of such Convertible Securities.

 

(ii)          Issuance of
Convertible Securities.  If the
Company in any manner issues or sells any Convertible Securities (except in
connection with the issuance of any Excluded Securities) and the lowest price
per share for which One (1) share of Common Stock is issuable upon the
conversion, exercise or exchange thereof is less than the Applicable Price,
then such share of Common Stock shall be deemed to be outstanding and to have
been issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share.  For the purposes of this Section 2(a)(ii),
the “lowest price per share for which One (1) share of Common Stock is
issuable upon the conversion, exercise or exchange” shall be equal to the sum
of the lowest amounts of consideration (if any) received or receivable by the
Company with respect to One (1) share of Common Stock upon the issuance or
sale of the Convertible Security and upon conversion, exercise or exchange of
such Convertible Security.  No further
adjustment of the Exercise Price or number of Warrant Shares shall be made upon
the actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustment of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(a), no further adjustment of the Exercise
Price or number of Warrant Shares shall be made by reason of such issue or
sale.

 

5

 

(iii)         Change in Option
Price or Rate of Conversion.  If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exercise or exchange of any
Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exercisable or exchangeable for shares of Common Stock
increases or decreases at any time (except in each case in connection with the
issuance of any Excluded Securities), the Exercise Price and the number of
Warrant Shares in effect at the time of such increase or decrease shall be
adjusted to the Exercise Price and the number of Warrant Shares which would
have been in effect at such time had such Options or Convertible Securities
provided for such increased or decreased purchase price, additional
consideration or increased or decreased conversion rate, as the case may be, at
the time initially granted, issued or sold. 
For purposes of this Section 2(a)(iii), if the terms of any Option
or Convertible Security that was outstanding as of the date of issuance of this
Warrant are increased or decreased in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the shares of
Common Stock deemed issuable upon exercise, conversion or exchange thereof
shall be deemed to have been issued as of the date of such increase or
decrease.  No adjustment pursuant to this
Section 2(a) shall be made if such adjustment would result in an
increase of the Exercise Price then in effect or a decrease in the number of
Warrant Shares.

 

(iv)        Calculation of
Consideration Received.  In case any
Option is issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction (except in
connection with the issuance of any Excluded Securities), the Options will be
deemed to have been issued for the difference of (x) the aggregate fair
market value of such Options and other securities issued or sold in such
integrated transaction, less (y) the fair market value of the securities
other than such Option, issued or sold in such transaction and the other
securities issued or sold in such integrated transaction will be deemed to have
been issued or sold for the balance of the consideration received by the
Company.  If any shares of Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the net amount received by the Company therefor.  If any shares of Common Stock, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of such consideration received by the Company will be the fair value
of such consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will be the
Weighted Average Price of such security on the date of receipt.  If any shares of Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving entity, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving entity as is
attributable to such shares of Common Stock, Options or Convertible Securities,
as the case may be.  The fair value of
any consideration other than cash or securities will be determined 

 

6

 

in good faith by the Board of Directors of the Company within five (5) days
after the occurrence of an event requiring valuation.  If the Required Holders disagree with the
determination of the Board of Directors and give written notice of such disagreement
to the Company within ten (10) days after the occurrence of an event
requiring valuation (the “Valuation Event”),
the fair value of such consideration will be determined within five (5) Business
Days after the tenth (10th) day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and the
Required Holders.  The determination of
such appraiser shall be final and binding upon all parties absent manifest
error and the fees and expenses of such appraiser shall be borne by the
Company.

 

(v)         Record Date.  If the Company takes a record of the holders
of shares of Common Stock for the purpose of entitling them (A) to receive
a dividend or other distribution payable in shares of Common Stock, Options or
in Convertible Securities or (B) to subscribe for or purchase shares of
Common Stock, Options or Convertible Securities, then such record date will be
deemed to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.

 

(b)  Adjustment upon Subdivision or Combination of Common
Stock.  If the Company at any time on
or after the Subscription Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced and the
number of Warrant Shares will be proportionately increased.  If the Company combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination will be proportionately increased and the
number of Warrant Shares will be proportionately decreased.  Any adjustment under this Section 2(b) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.

 

(c)  Minimum Adjustment.  No adjustment in the Exercise Price and the
number of Warrants shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Exercise Price as last adjusted; provided,
however, that any adjustments which would be required to be made but for
this Section 2(c) shall be carried forward and taken into account in
any subsequent adjustment.  All calculations
under this Section 2 shall be made to the nearest cent, with one half cent
being rounded upward.

 

(d)  Floor Price. 
If the Company’s Common Stock is listed on either the NYSE, AMEX or
NASDAQ Stock Market, and such market requires stockholder approval to adjust
the Exercise Price in accordance with this Section 2, then, until such
time as the Company receives any required stockholder approval, no adjustment
pursuant to Section 2(a) shall cause the Exercise Price to be less
than the closing bid price of the Common Stock on the date immediately prior to
the date of the Securities Purchase Agreement, as adjusted for any stock
dividend, stock split, stock combination, reclassification or similar
transaction.

 

7

 

3.     RIGHTS UPON DISTRIBUTION OF ASSETS.  If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of all or substantially all of its shares of Common Stock, by way of
return of capital or otherwise (including, without limitation, any distribution
of cash, stock or other securities not addressed by Section 2 above,
property or options not addressed by Section 2 above 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:

 

(a)   any Exercise Price in effect
immediately prior to the close of business on the record date fixed for the
determination of holders of shares of Common Stock entitled to receive the
Distribution shall be reduced, effective as of the close of business on such
record date, to a price determined by multiplying such Exercise Price by a
fraction of which (i) the numerator shall be the Weighted Average Price of
a share of Common Stock on the Trading Day immediately preceding such record
date minus the value of the Distribution (as determined in good faith by the
Company’s Board of Directors) applicable to One (1) share of shares of
Common Stock, and (ii) the denominator shall be the Weighted Average Price
of a share of Common Stock on the Trading Day immediately preceding such record
date; or

 

(b)   the number of Warrant Shares
shall be increased to a number of shares equal to the number of shares of
Common Stock obtainable immediately prior to the close of business on the
record date fixed for the determination of holders of shares of Common Stock
entitled to receive the Distribution multiplied by the reciprocal of the
fraction set forth in the immediately preceding paragraph (a); provided that in
the event that the Distribution is of shares of Common Stock (or common stock)
(“Other Shares of Common Stock”)
of a company whose common shares are traded on a national securities exchange
or a national automated quotation system, then the Holder may elect to receive
a warrant to purchase Other Shares of Common Stock in lieu of an increase in
the number of Warrant Shares, the terms of which shall be identical to those of
this Warrant, except that such warrant shall be exercisable into the number of
shares of Other Shares of Common Stock that would have been payable to the
Holder pursuant to the Distribution had the Holder exercised this Warrant
immediately prior to such record date and with an aggregate exercise price
equal to the product of the amount by which the exercise price of this Warrant
was decreased with respect to the Distribution pursuant to the terms of the
immediately preceding paragraph (a) and the number of Warrant Shares
calculated in accordance with the first part of this paragraph (b).

 

4.     PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS.

 

(a)   Purchase Rights.  In addition to any adjustments pursuant to Section 2
above, during the term hereof, if the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to all or substantially all of the record
holders of any class of shares of Common Stock or if the Company makes a Distribution
(as defined in Section 3) (the “Purchase
Rights”), then, upon exercise of this Warrant, the Holder will be
entitled to elect to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights, in lieu of any adjustments to which the
Holder 

 

8

 

is otherwise entitled under Section 2
or Section 3 above in respect of such Purchase Right, which the Holder
could have acquired if the Holder had held the proportionate number of shares of
Common Stock acquirable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) 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.  Notwithstanding any provision of
this Section 6(a) to the contrary, in the event that the Weighted Average
Price of the Common Stock equals or exceeds 150% of the applicable Exercise
Price for each of the twenty (20) consecutive Trading Days immediately
preceding a Purchase Right Date and the Company’s Common Stock has traded an
average of at least Six Hundred Thousand (600,000) shares per day during each
of such twenty (20) consecutive Trading Days, then this Section 6(a) shall
not apply to such Purchase Right.

 

(b)   Fundamental Transactions.  The Company shall not enter into or be party to a Fundamental Transaction
unless (i) the Successor Entity assumes in writing all of the obligations
of the Company under this Warrant and the other Transaction Documents in
accordance with the provisions of this Section 4(b) pursuant to
written agreements in form and substance reasonably satisfactory to the
Required Holders and approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Warrants in exchange for
such Warrants a
security of the Successor
Entity evidenced by a written instrument substantially similar in form
and substance to this Warrant,
including, without limitation, an adjusted exercise price equal to the value
for the shares of Common Stock reflected by the terms of such Fundamental
Transaction, and exercisable for a corresponding number of shares of capital
stock equivalent to the shares of Common Stock acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and reasonably
satisfactory to the Required Holders
and (ii) the Successor Entity (including its Parent Entity) is a publicly
traded corporation whose common stock is quoted on or listed for trading on an
Eligible Market and has “Substantially Similar Trading Characteristics” (as
defined below) as the Company.  For
purposes hereof, an entity shall have Substantially Similar Trading
Characteristics as the Company if the average daily dollar trading volume of
the common stock of such entity is equal to or in excess of $500,000 for the
sixtieth (60th) through the sixteenth (16th) day prior to
the public announcement of such transaction.  Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the effective date of such Fundamental Transaction, the
provisions of this Warrant referring to the “Company” shall refer instead to
the Successor Entity), and may exercise every right and power of the Company
and shall assume all of the obligations of the Company under this Warrant with
the same effect as if such Successor Entity had been named as the Company
herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity shall deliver
to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property) issuable
upon the exercise of the Warrant prior to such Fundamental Transaction, such
shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Holder
would have been entitled to receive upon the happening of such Fundamental
Transaction had this Warrant been converted immediately prior to such
Fundamental Transaction, as adjusted in accordance with the provisions of this Warrant.  In
addition to and not in substitution for any other rights hereunder, prior to
the consummation of any Fundamental Transaction pursuant to which holders 

 

9

 

of shares of Common Stock are
entitled to receive securities or other assets with respect to or in exchange
for shares of Common Stock (a “Corporate
Event”), the Company shall make appropriate provision to insure that
the Holder will thereafter have the right to receive upon an exercise of this
Warrant at any time after the consummation of
the Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or
other securities, cash, assets or other property) issuable upon the exercise of this Warrant prior to such Fundamental
Transaction, such shares of stock,
securities, cash, assets or any other property whatsoever (including warrants
or other purchase or subscription rights) which the Holder would have been
entitled to receive upon the happening of such Fundamental Transaction had this
Warrant been exercised immediately prior to such Fundamental Transaction.  Provision made pursuant to the
preceding sentence shall be in a form and substance reasonably satisfactory to
the Required Holders.  The provisions of
this Section shall apply similarly and equally to successive Fundamental
Transactions and Corporate Events and shall be applied without regard to any
limitations on the exercise of this Warrant.

 

(c)   Not later than ten (10) days
prior to the consummation of a Fundamental Transaction, but not prior to the
public announcement of such Fundamental Transaction, the Company shall deliver
written notice thereof via facsimile to the Holder (a “Fundamental
Transaction Notice”). 
Notwithstanding the foregoing, in the event of a Fundamental Transaction
in which a Successor Entity that is a publicly traded corporation whose stock
is quoted or listed for trading on an Eligible Market does not assume this
Warrant such that the Warrant shall be exercisable for the publicly traded
Common Stock of such Successor Entity, then, at the request of the Holder,
delivered anytime before the ninetieth (90th) day after such
Fundamental Transaction, the Company (or the Successor Entity) shall
purchase this Warrant from the Holder by paying to the Holder, within five (5) Business
Days after such request (or, if later, on the effective date of the Fundamental
Transaction), cash in an amount equal to the Black Scholes Value of the
remaining unexercised portion of this Warrant on the date of such Fundamental
Transaction.

 

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, solely with the intention of so doing, 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 nonassessable shares of Common Stock upon the exercise of this
Warrant, and (iii) shall, so long as any of the September 2008
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 September 2008 Warrants, 120%
of the number of shares of Common Stock as shall from time to time be necessary
to effect the exercise of the September 2008 Warrants then outstanding
(without regard to any limitations on exercise).

 

10

 

 

6.     WARRANT HOLDER NOT DEEMED A STOCKHOLDER.  Except as otherwise specifically provided
herein, the Holder, solely in such Person’s capacity as a holder of this
Warrant, shall not be entitled to vote or receive dividends or be deemed the
holder of share capital of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the Holder, solely in
such Person’s capacity as the Holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to
any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a stockholder
of the Company.  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 together with an opinion
from Holder’s counsel, satisfactory to the Company and its counsel, that such
transfer complies with the requirements of all applicable federal and state
securities laws, 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 then 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, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary 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, that
no Warrants for fractional shares of Common Stock shall be given.

 

11

 

(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.

 

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(f) of the Securities Purchase
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 therefore.  Without limiting the
generality of the foregoing, the Company will give written notice to the Holder
(i) promptly after any adjustment of the Exercise Price, setting forth in
reasonable detail and certifying the calculation of such adjustment and (ii) at
least ten (10) 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 shares of 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 all holders of shares 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.

 

9.     AMENDMENT AND WAIVER.  Except as otherwise provided herein, the
provisions of this Warrant 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 Required
Holders; provided that no such action may increase the exercise price of any September 2008
Warrant or decrease the number of shares or class of stock obtainable upon
exercise of any September 2008 Warrant without the written consent of the
Holder.  No such amendment shall be
effective to the extent that it applies to less than all of the holders of the September 2008
Warrants then outstanding.

 

10.   GOVERNING LAW.  This Warrant shall be governed by and
construed and enforced in accordance with, and all questions concerning the
construction, validity, interpretation and performance of this Warrant shall be
governed by, the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York.  The Company hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is improper.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.  In the event that any
provision of this Warrant is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified 

 

12

 

to conform with such statute or rule of law.  Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of this Warrant. 
Nothing contained herein shall be deemed or operate to preclude the
Holder from bringing suit or taking other legal action against the Company in any
other jurisdiction to collect on the Company’s obligations to the Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court ruling in favor of the Holder.  THE COMPANY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

11.   CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly
drafted by the Company and The Quercus Trust 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.

 

12.   DISPUTE RESOLUTION.  In the case of a dispute as to the
determination of the Exercise Price, the
determination of the occurrence of a Dilutive Issuance which would trigger a
reset of the Exercise Price, the arithmetic calculation of the Warrant
Shares, the Company
shall submit the disputed determinations or arithmetic calculations via
facsimile within two (2) Business Days of receipt of the Exercise Notice
giving rise to such dispute, as the case may be, to the Holder.  If the Holder and the Company are unable to
agree upon such determination or calculation of the Exercise Price or the
Warrant Shares within three (3) Business Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two (2) Business Days submit via facsimile (a) the
disputed determination of the Exercise Price to an independent, reputable
investment bank (which is
ranked in the top 10 investment banks nationally, by revenue) selected
by the Company and approved by the Holder, or (b) a copy of the disputed
agreement or other documentation pursuant to which Holder believes may be a
Dilutive Issuance which would trigger a reset of the Exercise Price, to an
independent law firm selected by the Company and approved by Holder, or (c) the disputed arithmetic
calculation of the Warrant Shares to the Company’s independent, outside
accountant  (which is ranked in the top 10
accounting firms nationally, by revenue).  The Company shall use its reasonable efforts
to cause at its expense the investment bank, law firm or the accountant, as the
case may be, to perform the determinations or calculations and notify the
Company and the Holder of the results no later than ten (10) Business Days
from the time it receives the disputed determinations or calculations.  Such investment bank’s, law firm’s or
accountant’s determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.  The procedures required by
this Section 12 are collectively referred to herein as the “Dispute
Resolution Procedures.”

 

13.   REMEDIES, 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 and the other Transaction Documents, 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
right to pursue actual damages for any failure by the Company to comply with
the terms of this Warrant.  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 

 

13

 

any such breach may be
inadequate.  The Company therefore agrees
that, in the event of any such breach or threatened breach, specifically including but not
limited to the Company’s failure to adjust the Exercise Price as required
hereunder following a Dilutive Issuance, 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.

 

14.   TRANSFER.  This Warrant may be offered for sale, sold,
transferred or assigned without the consent of the Company, except as may
otherwise be required by Section 2(f) of the Securities Purchase
Agreement.

 

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

 

(a)   “Black
Scholes Value” means the value of this Warrant based on the Black
and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg
determined as of the day immediately following the public announcement of the
applicable Fundamental Transaction and reflecting (i) a risk-free interest
rate corresponding to the U.S. Treasury rate for a period equal to the
remaining term of this Warrant as of such date of request and (ii) an
expected volatility equal to the greater of 80% and the one hundred (100)-day
volatility obtained from the HVT function on Bloomberg.

 

(b)   “Bloomberg” means Bloomberg Financial Markets.

 

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

 

(e)   “Common Stock Deemed Outstanding” means, at any given time,
the number of shares of Common Stock actually outstanding at such time, plus
the number of shares of Common Stock deemed to be outstanding pursuant to
Sections 2(a)(i) and 2(a)(ii) hereof regardless of whether the
Options or Convertible Securities are actually exercisable at such time, but
excluding any shares of Common Stock owned or held by or for the account of the
Company or issuable upon exercise of the September 2008 Warrants.

 

(f)    “Convertible Securities” means any stock or securities (other
than Options) directly or indirectly convertible into or exercisable or
exchangeable at the option of the holder thereof for shares of Common Stock.

 

(g)   “Eligible Market” means the Principal Market, The New York
Stock Exchange, Inc., the American Stock Exchange, The NASDAQ Global
Market, The NASDAQ Global Select Market, the NASDAQ Capital Market or the
NASD’s OTC Bulletin Board.

 

14

 

(h)   “Expiration Date” means the date eighty-four (84) months
immediately following 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.

 

(i)    “Fundamental Transaction” means that the Company shall, directly or indirectly, in one or
more related transactions, (i) consolidate or merge with or into (whether
or not the Company is the surviving corporation) another Person, or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of
the properties or assets of the Company to another Person, or (iii) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of the outstanding shares of Common Stock (not including any shares of Common
Stock 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 (iv) consummate a stock purchase agreement or
other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby such other
Person acquires more than the 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 purchase agreement or other business combination), (v) reorganize,
recapitalize or reclassify its Common Stock, or (vi) any
“person” or “group” (as these terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act) 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 Common Stock.

 

(j)    “Options” means any rights, warrants or options to subscribe
for or purchase shares of Common Stock or Convertible Securities, other than
those that may be issued as part of a compensation package of any employee of
the Company or it Subsidiaries and which are exercisable at a price not less
than the closing price of the Company’s Common Stock as reported on the
Principal Market on the Trading Day immediately preceding the date of grant.

 

(k)   “Parent Entity” of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common stock or
equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such
Person or Parent Entity, the Person or Parent Entity with the largest public
market capitalization as of the date of consummation of the Fundamental
Transaction.

 

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

 

(m)  “Principal Market” means the NASD OTC Bulletin Board.

 

(n)   “Registration Rights Agreement” means that certain registration
rights agreement by and among the Company and The Quercus Trust.

 

(o)   “Required Holders” means the holders of the September 2008
Warrants representing at least a majority of shares of Common Stock underlying
the September 2008 Warrants then outstanding, provided 15% or more of the September 2008
Warrants originally issued remain outstanding.

 

15

 

(p)   “Successor Entity” means the Person (or, if so elected by
the Required Holders, the Parent Entity) formed by, resulting from or surviving
any Fundamental Transaction or the Person (or, if so elected by the Required
Holders, the Parent Entity) with which such Fundamental Transaction shall have
been entered into.

 

(q)   “Trading Day”
means any day on which the Common Stock are 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 are 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 four and one-half (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).

 

(r)    “Weighted Average Price” means, for any security as of any
date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New York
City time, and ending at 4:00:00 p.m., New York City 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 City time, and
ending at 4:00:00 p.m., New York City 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 Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.).  If the
Weighted Average Price cannot be calculated for such security on such date on
any of the foregoing bases, the Weighted Average Price of such security on such
date shall be the fair market value as determined in good faith by the Board of
Directors of the Company.  If the
Required Holders disagree with the determination of the Board of Directors and
give written notice of such disagreement to the Company, then such dispute shall
be resolved pursuant to Section 12 with the term “Weighted Average Price”
being substituted for the term “Exercise Price.” All such determinations shall
be appropriately adjusted for any share dividend, share split or other similar
transaction during such period.

 

[Signature Page Follows]

 

16

 

IN WITNESS WHEREOF,
the Company has caused this September 2008 Warrant to Purchase Common
Stock to be duly executed as of the Issuance Date set out above.

 

 

	
   

  	
  OPEN
  ENERGY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: David Field

  
	
   

  	
   

  	
  Title:   President

  

 

17

 

EXHIBIT A

 

EXERCISE NOTICE

 

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE
THIS

SEPTEMBER 2008 WARRANT TO PURCHASE COMMON STOCK

 

 

OPEN ENERGY CORPORATION

 

c/o General Counsel

 

Fax: (858) 794-8811

 

The
undersigned holder hereby exercises the right to purchase
                                  
(              )of
the shares of Common Stock (“Warrant Shares”)
of Open Energy Corporation, a Nevada corporation (the “Company”), evidenced by the attached
Warrant to Purchase Common Stock (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.

 

2.  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.

 

3.  At the time such Holder was offered the
Warrant, it was, at the date hereof, and on each date on which it exercises any
Warrants, it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act of 1933, as
amended, or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act.  Such Buyer is not
required to be registered as a broker-dealer under Section 15 of the
Securities Exchange Act of 1934, as amended.

 

4.  Delivery of Warrant Shares.  The Company shall deliver to the holder
                    
Warrant Shares in accordance with the terms of the Warrant.

 

Date:
                              
    ,

 

	
   

  	
   

  
	
  Name of Registered Holder

  	
   

  

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Exercise Notice and hereby directs
Madison Stock Transfer, Inc. to issue the above-indicated number of shares
of Common Stock.

 

 

	
   

  	
  OPEN ENERGY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:UNITED STATES

EXHIBIT 10.1

REVISED AND AMENDED SIXTH WAIVER AND MODIFICATION AGREEMENT

This REVISED AND AMENDED SIXTH WAIVER AND MODIFICATION AGREEMENT (“Sixth Modification”) is made and entered into as of September 5, 2008, by and between BLASTGARD INTERNATIONAL, INC., a Colorado corporation (the “Company”), and the holders identified on the signature page hereto (each a “Holder” and collectively the “Holders”).  Capitalized terms used but not defined herein will have the meanings assigned to them in the Subscription Agreement (as defined below).

WHEREAS, the Company and the Holders entered into a Subscription Agreement dated as of December 2, 2004 (the “Subscription Agreement”); and

WHEREAS, Holders entered into a Modification and Waiver Agreement dated December 6, 2005 (Modification) as amended on June 7, 2006 (Second Modification), July 20, 2006 (Third Modification), March 20, 2007 (Fourth Modification) and on March 20, 2008 (Fifth Modification); and

WHEREAS, the Notes came due on the date hereof (i.e. August 29, 2008) and the Holders are willing and the Company agrees to the modification of certain rights under the Notes. 

NOW, THEREFORE, the Company and the Holders hereby agree as follows:

SECTION 1.

Extension of Maturity Date of the Note.  As consideration of the payment of default interest calculated at the rate of 21% per annum for the period April 1, 2008 through September 30, 2008, the Holders agree to extend the Maturity Date of the Notes to November 1, 2008 (the “Revised and Extended Maturity Date”). Commencing October 1, 2008 and thereafter, the interest rate shall revert to an amount equal to 8% per annum. All terms described in the Fifth Modification shall remain in full force and effect, except for those described in this Sixth Modification. 

SECTION 2.  Conversion.  Each Holder agrees to convert at a conversion price of $.10 per share, the amount of principal, accrued interest and penalty interest set forth beside each Holder’s name in accordance with Schedule A appended hereto.

SECTION 3.

Interest.  Commencing October 1, 2008 and on the first day of each month thereafter, interest shall be payable monthly in arrears at the rate of 8% per annum. 

SECTION 4.

Miscellaneous. 

(a)

Amendments. The Transaction Documents described in the Subscription Agreement of December 2, 2004, as amended by six Modification Agreements, represent the entire agreements among the parties. This Agreement and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

(b)

Counterparts.  This Sixth Modification may be executed in counterparts, each of which shall be deemed an original but all of which shall together constitute one and the same instrument.

(c)

Governing Law.  This Sixth Modification will be governed by and interpreted in accordance with the laws of the State of New York without giving effect to the rules governing the conflicts of law.

(d)

Headings.  The headings in this Sixth Modification are for purposes of reference only, and will not limit or otherwise affect any of the terms hereof.

(e)

Severability.  The invalidity or unenforceability of any provision hereof will in no way affect the validity or enforceability of any other provision.

IN WITNESS WHEREOF, the Company and the Holder have caused this Sixth Modification to be executed as of the date first written above.

					
	 
	 
	BLASTGARD INTERNATIONAL, INC.

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	By:

	/s/ Michael J. Gordon

	 
	 
	 
	Michael J. Gordon, Chief Financial Officer

	 
	 
	 
	 

	“HOLDERS”:

	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

	ALPHA CAPITAL ANSTALT

	 
	GENESIS MICROCAP INC.

	 
	 
	 
	 

	By: 

	 
	 
	By:

	/s/ Mat Drillman

	(authorized officer)

	 
	 
	(authorized officer)

	 
	 
	 
	 

	 
	 
	 
	 

	/s/ Steven Gold

	 
	/s/ Asher Brand

	STEVEN GOLD

	 
	ASHER BRAND

	 
	 
	 
	 

	 
	 
	 
	 

	TRW HOLDINGS PTY LIMITED

	 
	 
	 

	 
	 
	 
	 

	By: 

	/s/ Gerry McGowan

	 
	 
	 

	(authorized officer)

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