Document:

EX-10.3

THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,

AS AMENDED, AND MAY NOT BE TRANSFERRED IN VIOLATION OF THE ACT, THE RULES AND REGULATIONS UNDER THE

ACT, OR THE PROVISIONS OF THIS COMMON STOCK PURCHASE WARRANT OR THE PURCHASE AGREEMENT UNDER WHICH

THIS WARRANT HAS BEEN ISSUED.

COMMON STOCK PURCHASE WARRANT

 ENERGY FOCUS, INC.

 

	 	 	 	 	 
	Warrant Shares: 350,000

	 	 
	 	Issuance Date:      , 2010            

Warrant No. 2010LPCW-01 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received,
Lincoln Park Capital Fund, LLC (the “Holder”) is entitled, upon the terms and subject to
the limitations on exercise and the conditions hereinafter set forth, at any time on or after
     , 2010 [6 months from the Issuance Date] (the “Initial Exercise Date”) and on or
prior to the close of business on the fifth anniversary of the Initial Exercise Date (the
“Termination Date”) but not thereafter, to subscribe for and purchase from ENERGY FOCUS,
INC., a Delaware corporation (the “Company”), up to 350,000 shares (the “Warrant
Shares”) of Common Stock.  The purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.             Definitions.  Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Purchase Agreement (the
“Purchase Agreement”), dated March 17, 2010, among the Company and the Holder.

 

Section 2.             Exercise.

 

a)           Exercise of Warrant.  Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise
Date and on or before the Termination Date by delivery to the Company (or such other office or
agency of the Company as it may designate by notice in writing to the registered Holder at the
address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of
the Notice of Exercise Form annexed hereto; and, within three (3) Business Days of the date said
Notice of Exercise is delivered to the Company, the Company shall have received payment of the
aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn
on a United States bank or, if available, pursuant to the cashless exercise procedure specified in
Section 2(c) below.  Notwithstanding anything herein to the contrary, the Holder shall not be
required to physically surrender this Warrant to the Company until the Holder has purchased all of
the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case,
the Holder shall surrender this Warrant to the Company for cancellation within three (3) Business
Days of the date the final Notice of Exercise is delivered to the Company.  Partial exercises of
this Warrant resulting in purchases of a portion of the total number of Warrant Shares available
hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable
hereunder in an amount equal to the applicable number of Warrant Shares purchased. Any and each
partial exercise of this Warrant shall be in the minimum amount of 35,000 Warrant Shares.  The
Holder and the Company shall maintain records showing the number of Warrant Shares purchased and
the date of such purchases.  The Company shall deliver any objection to any Notice of Exercise Form
within 1 Business Day of receipt of such notice.  In the event of any dispute or discrepancy, the
records of the Holder shall be controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of
the provisions of this paragraph, following the purchase of a portion of the Warrant Shares
hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be
less than the amount stated on the face hereof.

  

b)           Exercise Price.  The exercise price per share of the Common Stock under
this Warrant shall be $1.20, subject to adjustment hereunder (the “Exercise Price”).

 

c)           Cashless Exercise.  If at any time on or after 6 months from the Initial
Exercise Date there is not an effective registration statement registering all of the Warrant
Shares or such registration statement is not current (or the prospectus contained therein is not
available for use) for a continuous period of 10 days, then this Warrant may also be exercised, in
whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be
entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained
by dividing [(A-B) (X)] by (A), where:

 

	 	 	 
	(A) =
	 	the VWAP on the Business Day immediately preceding the date on which

Holder elects to exercise this Warrant by means of a “cashless

exercise,” as set forth in the applicable Notice of Exercise;

	 	 	 
	(B) =

	 	the Exercise Price of this Warrant, as adjusted hereunder; and

	 	 	 
	(X) =
	 	the number of Warrant Shares that would be issuable upon exercise of

this Warrant in accordance with the terms of this Warrant if such

exercise were by means of a cash exercise rather than a cashless

exercise.

“VWAP” means, for any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on the Principal Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest preceding date) on
the Principal Market as reported by Bloomberg L.P. (based on a Business Day from 8:30 a.m. (Central
Standard Time to 3:02 p.m. (Central Standard Time), (b)  if the OTC Bulletin Board is not a
Principal Market, the volume weighted average price of the Common Stock for such date (or the
nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or
quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported
in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the Common
Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by the Holder and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

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

d)           Mechanics of Exercise.

 

i.      Delivery of Certificates Upon Exercise.  Certificates for shares purchased
hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the
Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent
Commission (“DWAC”) system if the Company is then a participant in such system and either
(A) there is an effective Registration Statement permitting the issuance of the Warrant Shares to
or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless
exercise, and otherwise by physical delivery to the address specified by the Holder in the Notice
of Exercise by the date that is five (5) Business Days after the latest of (A) the delivery to the
Company of the Notice of Exercise Form, (B) surrender of this Warrant (if required) and (C) payment
of the aggregate Exercise Price as set forth above (including by cashless exercise, if permitted)
(such date, the “Warrant Share Delivery Date”).  This Warrant shall be deemed to have been
exercised on the first date on which all of the foregoing have been delivered to the Company.  The
Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to
be named therein shall be deemed to have become a holder of record of such shares for all purposes,
as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price
(or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any,
pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid. If the
Company fails for any reason to deliver to the Holder certificates evidencing the Warrant Shares
subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the
Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares
subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable
Notice of Exercise), $10 per Business Day (increasing to $20 per Business Day on the fifth Business
Day after such liquidated damages begin to accrue) for each Business Day after such Warrant Share
Delivery Date until such certificates are delivered or Holder rescinds such exercise

 

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

 

iii.          Rescission Rights.  If the Company fails to cause the Transfer Agent to
transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant
to Section 2(d)(i) by the Warrant Share Delivery Date, then, the Holder will have the right to
rescind such exercise.

 iv.           Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.  In addition to any other rights available to the Holder, if the Company fails to
cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing
the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if
after such date the Holder is required by its broker to purchase (in an open market transaction or
otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the
amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1)
the number of Warrant Shares that the Company was required to deliver to the Holder in connection
with the exercise at issue times (2) the price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the
Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which
case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such
loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company’s failure to timely deliver certificates
representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms
hereof.

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

 

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

 

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

 

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

Notwithstanding anything to the contrary contained herein, unless any shareholder approval of
the this Warrant includes approval under Nasdaq Rule 5635(b), the number of Warrant Shares that may
be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall
be limited to the extent necessary to insure that, following such exercise (or other issuance), the
total number of shares of Common Stock then beneficially owned by such Holder and its affiliates
and any other Persons whose beneficial ownership of Common Stock would be aggregated with the
Holder’s for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), does not exceed 19.9% of the total number of issued and outstanding shares of
Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise) as
of the date of the transaction. For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. This provision shall not restrict the number of shares of Common Stock which a Holder
may receive or beneficially own in order to determine the amount of securities or other
consideration that such Holder may receive in the event of a Fundamental Transaction.

  

Section 3.             Certain Adjustments.

 

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

 

b)           Subsequent Rights Offerings.  If the Company, at any time while the
Warrant is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and
not to the Holders) entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the VWAP on the record date mentioned below, then, the Exercise Price shall be
multiplied by a fraction, of which the denominator shall be the number of shares of the Common
Stock outstanding on the date of issuance of such rights, options or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase, and of which the numerator
shall be the number of shares of the Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered (assuming receipt by the Company in full of all consideration
payable upon exercise of such rights, options or warrants) would purchase at such VWAP.  Such
adjustment shall be made whenever such rights, options or warrants are issued, and shall become
effective immediately after the record date for the determination of stockholders entitled to
receive such rights, options or warrants.

 

c)           Pro Rata Distributions.  If the Company, at any time while this Warrant
is outstanding, shall distribute to all holders of Common Stock (and not to the Holders) evidences
of its indebtedness or assets (including cash and cash dividends) or rights or warrants to
subscribe for or purchase any security other than the Common Stock, then in each such case the
Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to
the record date fixed for determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record date mentioned
above, and of which the numerator shall be such VWAP on such record date less the then per share
fair market value at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as determined by the Board of
Directors in good faith.  In either case the adjustments shall be described in a statement provided
to the Holder of the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock.  Such adjustment shall be made
whenever any such distribution is made and shall become effective immediately after the record date
mentioned above.

 

d)           Fundamental Transaction. If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a series of related transactions,
(iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common Stock are permitted to
sell, tender or exchange their shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or
indirectly, in one or more related transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or property, (v) the
Company, directly or indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share purchase agreement or
other business combination) (each a “Fundamental Transaction”), then, upon any subsequent
exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that
would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the
exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and any additional consideration
(the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a
holder of the number of shares of Common Stock for which this Warrant is exercisable immediately
prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the
exercise of this Warrant).  For purposes of any such exercise, the determination of the Exercise
Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount
of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components of the Alternate
Consideration.  If holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any exercise of this Warrant following
such Fundamental Transaction.  Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as
defined in Rule 13e-3 under the Exchange Act, or (3) a Fundamental Transaction involving a person
or entity not traded on a national securities exchange, including, but not limited to, the Nasdaq
Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any
Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time
concurrently with, or within 30 days after, the consummation of the Fundamental Transaction,
purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black
Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation
of such Fundamental Transaction.  “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,
L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental
Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the
U.S. Treasury rate for a period equal to the time between the date of the public announcement of
the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal
to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of
the Business Day immediately following the public announcement of the applicable Fundamental
Transaction, (C) the underlying price per share used in such calculation shall be the sum of the
price per share being offered in cash, if any, plus the value of any non-cash consideration, if
any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the
time between the date of the public announcement of the applicable Fundamental Transaction and the
Termination Date.  The Company shall cause any successor entity in a Fundamental Transaction in
which the Company is not the survivor (the “Successor Entity”) to assume 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 3(d) pursuant to written agreements in form and substance
reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior
to such Fundamental Transaction and shall, at the option of the holder of this Warrant, deliver to
the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Warrant which is exercisable for a
corresponding number of shares of capital stock of such Successor Entity (or its parent entity)
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 with an exercise price which applies the exercise price hereunder to such shares
of capital stock (but taking into account the relative value of the shares of Common Stock pursuant
to such Fundamental Transaction and the value of such shares of capital stock, such number of
shares of capital stock and such exercise price being for the purpose of protecting the economic
value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and
which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any
such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of this Warrant and
the other Transaction Documents 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 and the other Transaction Documents with the same
effect as if such Successor Entity had been named as the Company herein.

 

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

f)           Voluntary Adjustment By Company; Nasdaq Limitations. The Company may at
any time during the term of this Warrant reduce the then current Exercise Price to any amount and
for any period of time deemed appropriate by the Board of Directors of the Company.
Notwithstanding anything herein to the contrary, the Company agrees not to adjust the Exercise
Price, or the number of shares of Common Stock that may be issued to the Holder of this Warrant, in
any way that would violate Nasdaq Rules.

 

g)           Notice to Holder.

 

i.      Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant
to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting
forth the Exercise Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company enters into a Variable Rate Transaction despite the
prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common
Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such
securities may be converted or exercised.

 

ii.           Notice to Allow Exercise by Holder. If (A) the Company shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the
Company shall authorize the granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the Company is a party,
any sale or transfer of all or substantially all of the assets of the Company, or any compulsory
share exchange whereby the Common Stock is converted into other securities, cash or property, or
(E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up
of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the
Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20
calendar days prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of
which the holders of the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become effective or close,
and the date as of which it is expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange;
provided that the failure to mail such notice or any defect therein or in the mailing thereof shall
not affect the validity of the corporate action required to be specified in such notice.  To the
extent that any notice provided hereunder constitutes, or contains, material, non-public
information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file
such notice with the Commission pursuant to a Current Report on Form 8-K.  The Holder shall remain
entitled to exercise this Warrant during the period commencing on the date of such notice to the
effective date of the event triggering such notice except as may otherwise be expressly set forth
herein.

 

Section 4.             Transfer of Warrant.

 

a)           Transferability.  This Warrant and all rights hereunder (including,
without limitation, any registration rights) are transferable, in whole but not in part, upon
surrender of this Warrant at the principal office of the Company or its designated agent, together
with a written assignment of this Warrant substantially in the form attached hereto duly executed
by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall
execute and deliver a new Warrant in the name of the assignee or assignees, as applicable, and in
the denomination specified in such instrument of assignment, and this Warrant shall promptly be
cancelled.  The Warrant, if properly assigned in accordance herewith, may be exercised by a new
holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b)           New Warrants. All Warrants issued on transfers or exchanges shall be
dated the initial issuance date set forth on the first page of this Warrant and shall be identical
with this Warrant, except as to the number of Warrant Shares issuable pursuant thereto if this
Warrant partially has been exercised.

 

c)           Warrant Register. The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the “Warrant Register”), in the name of
the record Holder hereof from time to time.  The Company may deem and treat the registered Holder
of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

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

 

Section 5.             Miscellaneous.

 

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

 

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

 

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

 

d)           Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from
its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance
of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company
further covenants that its issuance of this Warrant shall constitute full authority to its officers
who are charged with the duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights under this
Warrant.  The Company will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which the Common Stock may be
listed.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of the purchase rights represented
by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by
the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

 

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

 

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

 

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

 

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

 

g)           Nonwaiver and Expenses.  No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder’s rights, powers or remedies.  Without limiting any other provision of
this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with
any provision of this Warrant, which results in any material damages to the Holder, the Company
shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including,
but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred
by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.

 

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

 

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

 

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

 

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

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

 

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

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

(Signature Pages Follow)

 

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

ENERGY FOCUS, INC.

By:      

Name: Joseph G. Kaveski

Title: Chief Executive Officer

1

NOTICE OF EXERCISE

TO:           ENERGY FOCUS, INC.

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

 

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

 

o in lawful money of the United States; or

 

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

 

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

 

      

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery
of a certificate to:

 

      

      

      

[SIGNATURE OF HOLDER]

Name of Investing Entity:      

Signature of Authorized Signatory of Investing Entity:
     

Name of Authorized Signatory:      

Title of Authorized Signatory:      

Date:       

 
 

 

 

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [      ] all of or [      ] shares of the foregoing Warrant and all rights
evidenced thereby are hereby assigned to

       whose address is

      .

      

Dated:        ,       

 

Holder’s Signature:                   

Holder’s Address:                     

     

     

 

Signature Guaranteed:        

 

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign the foregoing
Warrant.

2EX-10.1

EXHIBIT 10.1

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement is made and entered into as of March 16, 2010 (this
“Agreement”) by and between Hawk Corporation, a Delaware corporation (“Hawk”), and
Norman C. Harbert, an individual (“Seller”).

RECITALS

A. Seller (i) has exercised an option to purchase 107,192 shares of Hawk’s Class A Common
Stock, par value $0.01 per share (the “Common Stock”), and (ii) owns 25,000 shares of
Common Stock (together, the “Shares”);

B. Seller exercised the option expiring on October 5, 2011 and Seller desires to sell the
Shares for estate planning purposes and in consideration of the ordinary income tax triggered by
the exercise of the option.

C. On February 19, 2010, Hawk’s Board of Directors approved a stock repurchase program
pursuant to which Hawk is authorized to purchase up to $25.0 million of its outstanding Common
Stock as allowed under its current senior note indenture and credit facility.

D. Under the terms of Hawk’s stock repurchase program, Hawk desires to purchase from Seller,
and Seller desires to sell to Hawk the Shares, upon the terms and subject to the conditions set
forth herein.

NOW, THEREFORE, in consideration of the premises, and the mutual covenants and agreements
herein set forth, the parties hereto hereby agree as follows:

ARTICLE I

PURCHASE AND SALE OF SHARES

SECTION 1.1 Purchase and Sale of Shares. At the Closing, upon the terms and subject to
the conditions of this Agreement, Seller shall sell, transfer and deliver to Hawk, and Hawk shall
purchase from Seller, all of the Shares. The aggregate purchase price to be paid by Hawk for all
of the Shares shall be $20.08 per Share, or a total of $2,654,415.36 (the “Purchase
Price”). Seller and Hawk confirm that the Purchase Price of $20.08 per Share represented a
discount to the market price of the Common Stock at the time the Purchase Price was negotiated
between Seller and the agent representing Hawk with respect to this Agreement. Seller hereby
agrees that the Purchase Price shall be paid in cash exclusive of the required taxes that Hawk will
withhold from the Purchase Price on behalf of Seller for the exercise of the option referenced
above and pursuant to Hawk’s 1997 Stock Option Plan. Subject to the preceding sentence, the
Purchase Price shall be paid in the amounts as set forth in Exhibit A. Separately, Seller
shall designate in writing to Hawk the accounts to which the Purchase Price shall be paid.

SECTION 1.2 Closing Date. The closing of the purchase and sale of the Shares
(hereinafter called the “Closing”) shall take place on March 19, 2010.

SECTION 1.3 Transactions to be Effected at the Closing. At the Closing, Hawk shall
deliver the Purchase Price to Seller against delivery of the Shares to Hawk. To the extent
applicable and to effect the transfer of the Shares at the Closing, the Shares shall be transferred
by the stock broker representing Seller through the electronic book entry system maintained by the
Depository Trust Company (“DTC”). To the extent applicable, Seller will electronically
transmit the Shares to Hawk.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER

SECTION 2. Representations and Warranties of Seller. Seller hereby warrants and
represents:

	 	(a)	 	Seller is the owner of the Shares, has good and marketable
title to the Shares and such Shares are not subject to any mortgage, pledge,
encumbrance, security interest or other lien.

	 	(b)	 	There are no existing warrants, options, stock purchase
agreements, redemption agreements, restrictions of any nature, calls or rights
to subscribe of any character relating to the Shares.

	 	(c)	 	Upon Seller’s receipt of the Purchase Price described in
Section 1, Seller will transfer good and marketable title and all other rights
and interests in the Shares by effecting delivery of the Shares to Purchaser
free and clear of any liens or encumbrances.

	 	(e)	 	This Agreement is a legal, valid and binding obligation of
Seller. Seller has the authority to enter into this Agreement and to perform
his obligations under this Agreement. Seller’s sale of the Shares will not
violate any agreement that is binding on Seller.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF HAWK

SECTION 3. Representations and Warranties of Hawk. Hawk hereby warrants and
represents that this Agreement is a legal, valid and binding obligation of Hawk. Hawk has the
authority to enter into this Agreement and to perform its obligations under this Agreement. Hawk’s
purchase of the Shares will not violate any agreement that is binding on Hawk.

ARTICLE IV

MISCELLANEOUS

SECTION 4.1 Further Acts. Following the Closing of this Agreement, each party hereto
shall, upon the reasonable request of the other party, execute and deliver in proper form any
instruments or documents and perform any acts necessary or desirable to satisfy or perform his or
its respective obligations hereunder or perfect in the other party title to all items intended to
be transferred under the terms of this Agreement.

SECTION 4.2 Entire Agreement. This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, oral and written, between the parties hereto
with respect to the subject matter hereof.

SECTION 4.3 Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of this Agreement.

SECTION 4.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which together shall be
deemed to be one and the same instrument.

SECTION 4.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio without regard to conflicts of laws principles
thereof.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.

HAWK CORPORATION

/s/ Ronald E. Weinberg

By: Ronald E. Weinberg

Its: Chief Executive Officer

and Chairman of the Board

/s/ Norman C. Harbert

	 	 	Norman C. Harbert

1

Exhibit A

Seller’s Payment Instructions:

Proceeds to Seller from Sale of Shares Issued Pursuant to Exercise of the

Option for 107,192 Share (net of exercise price and withholding taxes): $1,093,028.54

Proceeds to Seller from Sale of 25,000 Shares: $ 502,000.00

2

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