Document:

<PAGE>

                                                                    EXHIBIT 10.6

                                 PROMISSORY NOTE

$115,000                                                     September 15, 2003
                                                            Ann Arbor, Michigan

FOR VALUE RECEIVED, the undersigned ("Borrower") promises to pay to the order of
Stephen Shulman, of Ann Arbor, Michigan ("Creditor"), the principal amount of
One Hundred Fifteen Thousand Dollars ($115,000) and interest on the unpaid
principal balance from the date of this note at a rate per annum equal to the
Prime Rate (as defined below) from time to time in effect during the term of
this note. The interest rate on this note shall be adjusted on the first day of
each month to the Prime Rate in effect on the date of adjustment. As used in
this note, "Prime Rate" shall mean the rate of interest that the Bank of America
announces from time to time as its "prime" or "base" interest rate. The rate
announced by the Bank of America as its "prime" or "base" interest rate at any
given time may not necessarily be the lowest rate of interest available to
commercial customers of the Bank of America at that time.

The principal of this note shall be paid in installments of Five Thousand
Dollars ($5,000) each, beginning April 15, 2004 and on the 15th day of each
succeeding month until the principal balance is paid in full. Accrued interest
on the unpaid principal balance of this note shall be paid on November 15, 2003
and the 15th day of each succeeding month until the principal balance is paid in
full. Borrower may prepay all or part of the principal of this note at any time.
Interest shall be compounded monthly.

Each payment upon this note shall be made to Creditor at 5807 Fox Hollow Ct.,
Ann Arbor, Michigan 48105 or any other place that holder of this note directs in
writing.

If default occurs in the payment of any installment of principal or interest or
in the payment of any other indebtedness or obligation now or in the future
owing by Borrower to Creditor, and if the default continues for 10 days after
the holder of this note gives Borrower written notice, or if a voluntary or
involuntary case in bankruptcy, receivership, or insolvency is at any time begun
by or against Borrower, then the indebtedness evidenced by this note shall, at
the option of the holder, become immediately due and payable, without notice or
demand.

Borrower shall reimburse the holder for all expenses, including reasonable
attorney fees and legal expenses, that the holder pays or incurs in attempting
to collect this note.

Borrower waives demand for payment, presentment, notice of dishonor, and protest
of this note.

This note shall be governed by and interpreted according to the laws of the
state of Michigan.

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EACH OF CREDITOR AND BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES ITS, HIS,
OR HER RIGHT TO A TRIAL BY JURY IN ANY ACTION, INCLUDING ANY CLAIM,
COUNTERCLAIM, CROSS-CLAIM OR THIRD-PARTY CLAIM ("CLAIM"), THAT IS BASED UPON,
ARISES OUT OF, OR RELATES TO THIS NOTE OR THE INDEBTEDNESS EVIDENCED BY IT,
INCLUDING, WITHOUT LIMITATION, ANY CLAIM BASED UPON, ARISING OUT OF, OR RELATING
TO ANY ACTION OR INACTION OF CREDITOR IN CONNECTION WITH ANY ACCELERATION,
ENFORCEMENT, OR COLLECTION OF THIS NOTE OR SUCH INDEBTEDNESS.

                                             BORROWER:

                                             POWER EFFICIENCY
                                             CORPORATION

                                             By:
                                                --------------------------------
                                                Name:  Richard Koch
                                                Title: President<PAGE>

                                                                    EXHIBIT 10.7

                                AMENDMENT TO THE

                              AMENDED AND RESTATED

                            STOCKHOLDERS' AGREEMENT

         This Amendment dated September 22, 2003 (the "Amendment") amends the
Amended and Restated Stockholders' Agreement by and among Nicholas Anderson,
Anthony Caputo, Philip Elkus, Stephen Shulman, Performance Control, LLC, Summit
Energy Ventures, LLC and Power Efficiency Corporation dated June 14, 2002 (the
"Agreement").

         WHEREAS, the parties to this Amendment executed the Agreement on June
14, 2003;

         WHEREAS, the parties to this Amendment desire to remove Stephen Shulman
as a party to the Agreement;

         NOW, THEREFORE, in consideration of the terms and conditions herein
contained, the parties hereto mutually agree as follows:

         1)       Stephen Shulman is hereby removed as a party to the Agreement;

         2)       The terms of the Agreement shall continue in full force and
                  effect as if the Agreement was originally executed without
                  Stephen Shulman as a party;

                    [Signature page to immediately follow.]

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed on the date first written above.

PERFORMANCE CONTROL, LLC                     POWER EFFICIENCY CORPORATION

By:                                          By:
   --------------------------------             --------------------------------
   Phillip Elkus, Managing Member               Richard Koch, President

SUMMIT ENERGY VENTURES, LLC

By: Northwest Power Management, Manager

    By:
       ---------------------------
       Steven Strasser, President

-----------------------------------          -----------------------------------
Anthony Caputo, Individually                 Nicholas Anderson, Individually
1155 Colonial Way                            1536 208th Street
Bridgewater, NJ 08807                        Bayside, NY 08807

-----------------------------------          -----------------------------------
Philip Elkus, Individually                   Stephen Shulman, Individually
2488 Orchard Lake Road                       5807 Fox Hollow Court
Farmington Hill, MI 48334                    Ann Arbor, MI 48105

Signature page to the Amendment to the Amended and Restated Stockholders'
Agreement dated September 22, 2003.<PAGE>

                                                                    EXHIBIT 10.8

                          POWER EFFICIENCY CORPORATION

        Amended and Restated 2000 Stock Option and Restricted Stock Plan
                         (Adopted as of September, 2000
                                      and
                             amended in June, 2002
                                      and
                     further amended on September 8, 2003)

                                    RECITALS

         WHEREAS, Power Efficiency Corporation (the "Company") adopted the 2000
Stock Option and Restricted Stock Plan in September 2000 (the "2000 Plan");

         WHEREAS, this Amended and Restated 2000 Plan shall supercede the 2000
Plan; and

         WHEREAS, all grants under the 2000 Plan shall be covered and subject to
the provisions of the Amended and Restated 2000 Plan.

Section 1.        Purpose; Definitions.

         1.1      Purpose. The purpose of the Company's Amended and Restated
2000 Stock Option and Restricted Stock Plan (the "Plan") is to enable the
Company to offer to its key employees, officers, directors and consultants whose
past, present and/or potential contributions to the Company and its Subsidiaries
have been, are or will be important to the success of the Company, an
opportunity to acquire a proprietary interest in the Company. The various types
of long-term incentive awards which may be provided under the Plan will enable
the Company to respond to changes in compensation practices, tax laws,
accounting regulations and the size and diversity of its businesses.

         1.2      Definitions. For purposes of the Plan, the following terms
shall be defined as set forth below:

                  (a)      "Agreement" means the agreement between the Company
and the Holder setting forth the terms and conditions of an award under the
Plan.

                  (b)      "Board" means the Board of Directors of the Company.

                  (c)      "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto and the regulations
promulgated thereunder.

                  (d)      "Committee" means the Compensation Committee of the
Board or such persons as shall be designated by the President of the company, or
any other committee of the Board, which the Board may designate to administer
the Plan or any portion thereof. The Committee shall consist of disinterested
persons appointed by the Board who, during the one year period prior to
commencement of service on the Committee, shall not have participated in, and
while serving and for one year after serving on the Committee, shall not be
eligible for selection as persons to whom awards of Stock may be allocated, or
to whom Stock Options may be granted under the Plan or any other discretionary
plan of the Company, under which participants are entitled to acquire Stock or
Stock Options of the Company. If no Committee is so designated, then all
references in this Plan to "Committee" shall mean the Board.

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                          Power Efficiency Corporation
        AMENDED AND RESTATED 2000 STOCK OPTION AND RESTRICTED STOCK PLAN
================================================================================

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                  (e)      "Common Stock" means the Common Stock of the Company,
no par value per share.

                  (f)      "Company" means Power Efficiency Corporation, a
corporation organized under the laws of the State of Delaware.

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

                  (h)      "Employee" shall mean any person, including officers
and directors, employed by the Company or any Parent or Subsidiary of the
Company and for whom a withholding obligation exists under Section 3401 of the
Code by the employing corporation, as applicable. The payment of a director's
fee by the Company shall not be sufficient to constitute "employment" by the
Company.

                  (i)      "Disability" means disability as determined under
procedures established by the Committee for purposes of the Plan.

                  (j)      "Effective Date" means the date set forth in Section
15

                  (k)      "Fair Market Value", unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder, means, as
of any given date: (i) if the Common Stock is listed on a national securities
exchange or quoted on the NASDAQ National Market or NASDAQ SmallCap Market, the
last sale price of the Common Stock in the principal trading market for the
Common Stock on the last trading day preceding the date of grant of an award
hereunder, as reported by the exchange or NASDAQ, as the case may be; (ii) if
the Common Stock is not listed on a national securities exchange or quoted on
the NASDAQ National Market or NASDAQ SmallCap Market, but is traded in the
over-the-counter market, the closing bid price for the Common Stock on the last
trading day preceding the date of grant of an award hereunder for which such
quotations are reported by the National Quotation Bureau, Incorporated or
similar publisher of such quotations; and (iii) if the fair market value of the
Common Stock cannot be determined pursuant to clause (i) or (ii) above, such
price as the Committee shall determine, in good faith.

                  (l)      "Holder" means a person who has received an award
under the Plan.

                  (m)      "Incentive Stock Option" means any Stock Option
intended to be and designated as an "incentive stock option" within the meaning
of Section 422 of the Code.

                  (n)      "Non-Qualified Stock Option" means any Stock Option
that is not an Incentive Stock Option.

                  (o)      "Normal Retirement" means retirement from active
employment with the Company or any Subsidiary on or after age 65.

                  (p)      "Parent" means any present or future parent
corporation of the Company, as such term is defined in Section 424(e) of the
Code.

                  (q)      "Plan" means the Power Efficiency Corporation,
Amended and Restated 2000 Stock Option and Restricted Stock Plan, as hereinafter
amended from time to time.

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                          Power Efficiency Corporation
        AMENDED AND RESTATED 2000 STOCK OPTION AND RESTRICTED STOCK PLAN
================================================================================

                                       2
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                  (r)      "Restricted Stock" means Stock, received under an
award made pursuant to Section 7 below, that is subject to restrictions under
said Sections 8-11.

                  (s)      "Stock" means the Common Stock of the Company, no par
value per share.

                  (t)      "Stock Option" or "Option" means any option to
purchase shares of Stock which is granted pursuant to the Plan.

                  (u)      "Subsidiary" means any present or future subsidiary
corporation of the Company, as such term is defined in Section 424(f) of the
Code.

Section  2.       Administration.

         2.1      Committee Membership. The Plan shall be administered by the
Board or a Committee or such persons as shall be designated by the President of
the Company. Committee members shall serve for such term as the Board may in
each case determine, and shall be subject to removal at any time by the Board.

         2.2      Powers of Committee. The Committee shall have full authority,
subject to Section 2.3 hereof, to award, pursuant to the terms of the Plan: (i)
Stock Options and (ii) Restricted Stock grants. For purposes of illustration and
not of limitation, the Committee shall have the authority (subject to the
express provisions of this Plan):

                  (a)      to select the officers, key employees, directors and
consultants of the Company or any Subsidiary to whom Stock Options and/or
Restricted Stock, may from time to time be awarded hereunder.

                  (b)      to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, number of shares, share price, any restrictions
or limitations, and any vesting, exchange, surrender, cancellation,
acceleration, termination, exercise or forfeiture provisions, as the Committee
shall determine);

                  (c)      to determine any specified performance goals or such
other factors or criteria which need to be attained for the vesting of an award
granted hereunder;

                  (d)      to determine the terms and conditions under which
awards granted hereunder are to operate on a tandem basis and/or in conjunction
with or apart from other equity awarded under this Plan and cash awards made by
the Company or any Subsidiary outside of this Plan;

                  (e)      to determine the extent and circumstances under which
Stock and other amounts payable with respect to an award hereunder shall be
deferred which may be either automatic or at the election of the Holder; and

                  (f)      to substitute (i) new Stock Options for previously
granted Stock Options, which previously granted Stock Options have higher option
exercise prices and/or contain other less favorable terms, and (ii) new awards
of any other type for previously granted awards of the same type, which
previously granted awards are upon less favorable terms.

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                          Power Efficiency Corporation
        AMENDED AND RESTATED 2000 STOCK OPTION AND RESTRICTED STOCK PLAN
================================================================================

                                       3
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         2.3      Interpretation of Plan.

                  (a)      Committee Authority. Subject to Section 15 hereof,
the Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any award issued under the Plan (and to determine the form and
substance of all Agreements relating thereto), and to otherwise supervise the
administration of the Plan. Subject to Section 15 hereof, all decisions made by
the Committee pursuant to the provisions of the Plan shall be made in the
Committee's sole discretion and shall be final and binding upon all persons,
including the Company, its Subsidiaries and Holders.

                  (b)      Incentive Stock Options. Anything in the Plan to the
contrary notwithstanding, no term or provision of the Plan relating to Incentive
Stock Options or any Agreement providing for Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code, or, without the consent of the Holder(s) affected, to disqualify
any Incentive Stock Option under such Section 422.

Section 3.        Stock Subject to Plan.

         The total number of shares of Common Stock reserved and available for
distribution under the Plan shall be 5,000,000 shares. Shares of Stock under the
Plan may consist, in whole or in part, of authorized and unissued shares or
treasury shares. If any shares of Stock that have been optioned cease to be
subject to a Stock Option, or any shares of Stock that are subject to any
Restricted Stock granted hereunder are forfeited or any such award otherwise
terminates without a payment being made to the Holder in the form of Stock, such
shares shall again be available for distribution in connection with future
grants and awards under the Plan. Only net shares issued upon a stock-for-stock
exercise (including stock used for withholding taxes) shall be counted against
the number of shares available under the Plan.

Section 4.        Eligibility.

         4.1      General. Awards may be made or granted to key employees,
officers, directors and consultants who are deemed to have rendered or to be
able to render significant services to the Company or its Subsidiaries and who
are deemed to have contributed or to have the potential to contribute to the
success of the Company. No Incentive Stock Option shall be granted to any person
who is not an employee of the Company or a Subsidiary at the time of grant.

                                I. STOCK OPTIONS

Section 5.        Stock Options.

         5.1      Grant and Exercise. Stock Options granted under the Plan may
be of two types: (i) Incentive Stock Options and (ii) Non-Qualified Stock
Options. Any Stock Option granted under the Plan shall contain such terms, not
inconsistent with this Plan, or with respect to Incentive Stock Options, the
Code, as the Committee may from time to time approve. The Committee shall have
the authority to grant Incentive Stock Options, Non-Qualified Stock Options, or
both types of Stock Options and may be granted alone or in addition to other
awards granted under the Plan. To the extent that any Stock Option intended to
qualify as an Incentive Stock Option does not so qualify, it shall constitute a
separate Non-Qualified Stock Option. An Incentive Stock Option granted under
this Plan may only be exercised within ten years of the date of grant (or five
years in the case of an Incentive Stock Option granted to optionee ("10%
Stockholder") who, at the time of grant, owns Stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or a
Parent or Subsidiary.)

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                          Power Efficiency Corporation
        AMENDED AND RESTATED 2000 STOCK OPTION AND RESTRICTED STOCK PLAN
================================================================================

                                       4
<PAGE>

         5.2      Terms and Conditions. Stock Options granted under the Plan
shall be subject to the following terms and conditions:

                  (a)      Exercise Price. The exercise price per share of Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant and may be less than 100% of the Fair Market Value of the Stock as
defined above; provided, however, that (i) the exercise price of an Incentive
Stock Option shall not be less than 100% of the Fair Market Value of the Stock
(110%, in the case of 10% Stockholder); and (ii) the exercise price of a
Non-Qualified Stock Option shall not be less than 85% of the Fair Market Value
of the Stock as defined above.

                  (b)      Option Term. Subject to the limitations in Section
5.1, the term of each Stock Option shall be fixed by the Committee.

                  (c)      Exercisability. Stock Options shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Committee. If the Committee provides, in its discretion, that
any Stock Option is exercisable only in installments, i.e., that it vests over
time, the Committee may waive such installment exercise provisions at any time
at or after the time of grant in whole or in part, based upon such factors as
the Committee shall determine.

                  (d)      Method of Exercise. Subject to whatever installment,
exercise and waiting period provisions are applicable in a particular case,
Stock Options may be exercised in whole or in part at any time during the term
of the Option, by giving written notice of exercise to the Company specifying
the number of shares of Stock to be purchased. Such notice shall be accompanied
by payment in full of the purchase price, which shall be in cash or, unless
otherwise provided in the Agreement, in shares of Stock (including Restricted
Stock) or, partly in cash and partly in such Stock, or such other means which
the Committee determines are consistent with the Plan's purpose and applicable
law. Cash payments shall be made by wire transfer, certified or bank check or
personal check, in each case payable to the order of the Company; provided,
however, that the Company shall not be required to deliver certificates for
shares of Stock with respect to which an Option is exercised until the Company
has confirmed the receipt of good and available funds in payment of the purchase
price thereof. Payments in the form of Stock shall be valued at the Fair Market
Value of a share of Stock on the date prior to the date of exercise. Such
payments shall be made by delivery of stock certificates in negotiable form
which are effective to transfer good and valid title thereto to the Company,
free of any liens or encumbrances. A Holder shall have none of the rights of a
stockholder with respect to the shares subject to the Option until such shares
shall be transferred to the Holder upon the exercise of the Option.

                  (e)      Transferability. No Stock Option shall be
transferable by the Holder otherwise than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the Holder's
lifetime, only by the Holder.

                  (f)      Termination by Reason of Death. If a Holder's
employment by the Company or a Subsidiary terminates by reason of death, any
Stock Option held by such Holder that has not fully vested shall be forfeited,
unless otherwise determined by the Committee at the time of grant and set forth
in the Agreement. Any fully vested option may thereafter be exercised by the
legal representative of the estate or by the legatee of the Holder under the
will of the Holder, for a period of one year (or such other greater or lesser
period as the Committee may specify at grant) from the date of such death or
until the expiration of the stated term of such Stock Option, whichever period
is the shorter.

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                          Power Efficiency Corporation
        AMENDED AND RESTATED 2000 STOCK OPTION AND RESTRICTED STOCK PLAN
================================================================================

                                       5
<PAGE>

                  (g)      Termination by Reason of Disability. If a Holder's
employment by the Company or any Subsidiary terminates by reason of Disability,
any Stock Option held by such Holder that has not fully vested shall be
forfeited, unless otherwise determined by the Committee at the time of grant and
set forth in the Agreement. Any fully vested option may thereafter be exercised
by the Holder for a period of one year (or such other greater or lesser period
as the Committee may specify at the time of grant) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter.

                  (h)      Other Termination. Subject to the provisions of
Section 16.3 below and unless otherwise determined by the Committee at the time
of grant and set forth in the Agreement, if a Holder is an employee of the
Company or a Subsidiary at the time of grant and if such Holder's employment by
the Company or any Subsidiary terminates for any reason other than death or
Disability, the Stock Option shall thereupon automatically terminate, except
that if the Holder's employment is terminated by the Company or a Subsidiary
without cause or due to Normal Retirement, then the portion of such Stock Option
which has vested on the date of termination of employment may be exercised for
the lesser of three months after termination of employment or the balance of
such Stock Option's term.

                  (i)      Additional Incentive Stock Option Limitation. In the
case of an Incentive Stock Option, the amount of aggregate Fair Market Value of
Stock (determined at the time of grant of the Option) with respect to which
Incentive Stock Options are exercisable for the first time by a Holder during
any calendar year (under all such plans of the Company and its Parent and any
Subsidiary) shall not exceed $100,000.

                  (j)      Buyout and Settlement Provisions. The Committee may
at any time offer to buy out a Stock Option previously granted, based upon such
terms and conditions as the Committee shall establish and communicate to the
Holder at the time that such offer is made.

                  (k)      Stock Option Agreement. Each grant of a Stock Option
shall be confirmed by, and shall be subject to the terms of an agreement (a
"Stock Option Agreement"), or an amendment thereto, executed by the company and
the Holder. Each Stock Option Agreement shall set forth (1) the number of shares
underlying the Stock Options awarded to the Holder, (2) the vesting conditions
applicable to the award and (3) such other terms and conditions, not
inconsistent with the Plan, as determined in its discretion by the Committee.

Section 6.        [Intentionally omitted.]

                          II. RESTRICTED STOCK GRANTS

Section 7.        Grant of Restricted Stock Awards

         Subject to the provisions of the Plan, the Committee shall have full
and final authority, in its discretion, (1) to determine the eligibility of any
individual to receive an award of Restricted Stock under the Plan, (2) to select
from among the eligible individuals the persons who are to receive such awards
and (3) to determine the number of shares of Restricted Stock to be awarded to
any eligible person selected by the Committee and the terms and conditions of
the award. In determining the number of shares of Restricted Stock to be granted
to any Holder and the terms and conditions of such award, the Committee shall
consider the position and responsibilities of the individual being considered,
the nature and value to the Company of his or her services, his or her present
and/or potential contribution to the success of the Company, and such other
factors as the Committee may deem relevant.

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                          Power Efficiency Corporation
        AMENDED AND RESTATED 2000 STOCK OPTION AND RESTRICTED STOCK PLAN
================================================================================

                                       6
<PAGE>

Section 8.        Terms and Conditions of Restricted Stock Awards

         Awards of Restricted Stock granted under the Plan shall be subject to
the following terms and conditions:

         8.1      Date of Awards. Awards of Restricted Stock shall be made only
as of a Valuation Date, as defined in Section 8.9.

         8.2      Vesting Conditions. Awards under the Plan shall consist of a
specified number of shares of Stock ("Restricted Stock") awarded to a Holder
subject to the satisfaction of one or more vesting conditions determined and
specified by the Committee at the time of the award. Such vesting conditions may
include:

                  (i)      Service Conditions. A requirement that the Holder
         remain in the service of the Company as an employee, director, member
         of an Advisory Board, consultant, advisor and/or in such other capacity
         or capacities as the Committee may specify (hereinafter referred to as
         the Holder's "Service") from the date of the award through the
         Valuation Date or Valuation Dates specified by the Committee at the
         time of the award;

                  (ii)     Performance Conditions. Satisfaction of such
         requirements relating to the performance of the Company, any
         department, unit or other portion thereof or the Holder individually as
         the Committee may determine and specify at the time of the award;
         and/or

                  (iii)    Other Conditions. Such other conditions to the
         vesting of the shares of Restricted Stock as the Committee may, in its
         discretion, determine and specify at the time of the award.

         The vesting conditions to which an award of Restricted Stock is subject
may be stated in the alternative, such that satisfaction of one or more of such
conditions will be sufficient to cause the vesting of the shares of Restricted
Stock, or cumulatively such that vesting will not occur unless and until all of
such conditions is satisfied, or in any combination of the two. Vesting
conditions may also be stated in such a manner that vesting of a designated
portion of the shares awarded will occur on satisfaction of one or more
specified conditions, whereas satisfaction of additional or different conditions
is required for the vesting of another specified portion or portions of the
shares. For example, an award may provide for the vesting of an award in stages
upon satisfaction of conditions relating to specified numbers of years of
Service and/or levels of performance.

         Unless otherwise specifically determined by the Committee, the vesting
conditions applicable to an award of Restricted Stock shall be stated in such a
manner that vesting of any shares of Restricted Stock shall occur, if at all, as
of one or more Valuation Dates.

         8.3      Restricted Stock Agreements. All awards of Restricted Stock
shall be confirmed by and subject to the terms of an agreement (a "Restricted
Stock Agreement"), executed by the Company and the Holder. Each Restricted Stock
Agreement shall set forth (1) the number of shares of Restricted Stock awarded
to the Holder, (2) the vesting conditions applicable to the award and (3) such
other terms and conditions, not inconsistent with the Plan, as determined in its
discretion by the Committee.

         No Holder shall sell, exchange, assign, alienate, pledge, hypothecate,
encumber, charge, give, devise, or otherwise dispose of, either voluntarily or
by operation of law (hereinafter referred to as "transfer"), any shares of Stock
acquired pursuant to the Plan or any rights or interests appertaining thereto,
except as permitted by the Plan.

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                          Power Efficiency Corporation
        AMENDED AND RESTATED 2000 STOCK OPTION AND RESTRICTED STOCK PLAN
================================================================================

                                       7
<PAGE>

         8.4      Transfer Restrictions; Escrow of Restricted Stock. Unless and
until the vesting conditions prescribed by the Committee for such shares have
been satisfied, a Holder may not sell, exchange, assign, alienate, pledge,
hypothecate, encumber, charge, give, or otherwise dispose of, either voluntarily
or by operation of law (any such action being hereinafter referred to as a
"transfer") any shares of Restricted Stock, or any interest therein, other than
by Will or the laws of descent and distribution on death of the Holder, and any
attempt to make such a transfer shall be null and void. Pending satisfaction of
the vesting conditions with respect thereto, the certificates representing
shares of Restricted Stock awarded under the Plan shall be held in escrow by the
Company, and as a condition of any award of Restricted Stock, the Holder shall
deliver to the Company one or more undated stock powers with respect thereto to
be used by the Company in the event any such shares are forfeited to the Company
pursuant to the terms of the Plan or the Restricted Stock Agreement. As soon as
practicable following satisfaction of the vesting conditions with respect to any
shares of Restricted Stock and payment to the Company of any amount required for
withholding taxes as provided in Section 16.6, the Company will cause a
certificate or certificates for such shares to be delivered to the Holder or in
the event of death to the Holder's personal representative. Following
satisfaction of the vesting conditions and delivery of stock certificates to the
Holder, shares of Stock acquired pursuant to the Plan will remain subject to the
transfer restrictions provided in Section 10.

         8.5      Custody and Payment of Distributions on Restricted Stock.
Unless and until the vesting conditions with respect to such shares have been
satisfied, any dividends or other distributions paid with respect to shares of
Restricted Stock, whether in cash, securities or other property, and any cash,
securities or other property into which shares of Restricted Stock may be
converted or exchanged by reason of any reorganization, reclassification,
recapitalization, stock split or combination of shares, merger, consolidation or
other change affecting the Company or such shares (collectively
"Distributions"), shall be paid to and held in escrow by the Company subject to
the same vesting conditions as the shares of Restricted Stock to which they
relate. As soon as practicable following satisfaction of the vesting conditions
with respect to any shares of Restricted Stock and payment to the Company of any
amount required for withholding taxes as provided in Section 16.6, the Company
will cause any Distributions held by the Company with respect to such shares to
be paid or delivered to the Holder or in the event of death to the Holder's
personal representative. Notwithstanding the foregoing, if and to the extent
that the Committee shall so determine and specifically provide in the Restricted
Stock Agreement, cash dividends payable from the earnings of the Company may be
paid directly to the Holder, without restrictions, prior to the satisfaction of
the vesting conditions.

         8.6      Shareholder Status of Holders Of Restricted Stock. As of the
date of any award of Restricted Stock, and unless and until the shares of
Restricted Stock awarded are forfeited to the Company pursuant to the provisions
of the Plan or the Restricted Stock Agreement, the Holder shall be considered
for all purposes to be the beneficial and record owner of the shares of
Restricted Stock awarded to the Holder and to have all rights of a shareholder
with respect to such shares, subject only to the restrictions and other terms
and conditions of the award as specified in the Plan or in the Restricted Stock
Agreement.

         8.7      Termination of Service of Holders of Restricted Stock. Unless
the Committee, in its discretion, shall otherwise determine and the Restricted
Stock Agreement shall so provide:

                  (i)      If the Service of a Holder who is disabled within the
         meaning of Section 422(c)(6) of the Code (a "Disabled Holder") is
         voluntarily terminated with the consent of the Company, the vesting
         conditions applicable to any outstanding Restricted Stock award held by
         such Holder and not previously forfeited to the Company shall be deemed
         to have been satisfied as of the date of such termination of Service;

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                  (ii)     Upon death of a Holder during Service to the Company,
         the vesting conditions applicable to any outstanding Restricted Stock
         award held by such Holder and not previously forfeited to the Company
         shall be deemed to have been satisfied as of the date of death of the
         Holder; and

                  (iii)    If the Service of a Holder terminates for any reason
         other than voluntary termination of a Disabled Holder with the consent
         of the Company or death, all shares of Restricted Stock held by the
         Holder as to which the vesting conditions have not been satisfied as of
         the time of such termination of employment shall be automatically be
         deemed forfeited to the Company, without consideration or further
         action being required of the Company.

         Whether a Holder is a Disabled Holder shall be determined in each case,
in its discretion, by the Committee, and any such determination by the Committee
shall be final, binding and conclusive.

         8.8      Forfeiture of Restricted Stock; Determinations by the
Committee. Except as otherwise specifically provided in the Plan or the
Restricted Stock Agreement, in the event that any of the vesting conditions
applicable to shares of Restricted Stock shall not be satisfied, the shares of
Restricted Stock to which such conditions relates, and any Distributions held by
the Company with respect thereto, shall automatically be deemed to have been
forfeited to the Company, without consideration or further action being required
of the Company. In the event that the nature of a vesting condition is such that
the determination as to its satisfaction or nonsatisfaction cannot be made until
a later date, such as in the case of an earnings test for a specified accounting
period, the shares subject to such condition shall continue to be held in escrow
by the Company pending final determination as to the satisfaction of the
condition, but the earning or forfeiture of the shares and related Distributions
shall be deemed to have occurred as of the date of satisfaction or
nonsatisfaction of the final vesting condition related to such shares. Any
question or dispute which may arise as to the satisfaction or nonsatisfaction of
any vesting condition shall be determined, in its discretion, by the Committee,
and any such determination by the Committee shall be final, binding and
conclusive upon the Company, the Holder and all persons claiming through the
Holder.

         8.9      Valuation of the Restricted Stock

                  (a)      As used for this Section 8 of the Plan, the following
terms shall have the following definitions:

                  (i)      "Current Value" as of any date shall mean the Fair
         Market Value of a share of Stock as of the most recent Valuation Date
         for which a determination of Fair Market Value pursuant to 1.2(k) has
         been made by the Committee on or before such date, as adjusted for any
         stock splits, stock dividends, recapitalizations, reclassifications or
         other changes in the Stock occurring since such Valuation Date.

                  (ii)     "Valuation Date" shall mean (1) the date of the first
         award of Restricted Stock under the Plan, (2) thereafter, for so long
         as any shares of Stock shall remain subject to restrictions under
         Section 8 or Section 10 hereof, the last day of each fiscal year of the
         Company and (3) such other date or dates, if any, as the Committee may,
         in its discretion, determine.

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                  (b)      On or before the first Valuation Date, and for each
Valuation Date thereafter (1) if such Valuation Date is the last day of the
Company's fiscal year, not later than 30 days after the date the report of the
Company's independent accountants with respect to the Company's financial
statements for such fiscal year (the "Audit Report") is furnished to the Board,
or (2) in the case of any other Valuation Date, not later than 30 days such
Valuation Date, the Committee shall determine the Fair Market Value of the Stock
as of such Valuation Date. Within 10 days following its determination of Fair
Market Value as of any Valuation Date, the Committee call cause notice thereof
to be furnished to each Holder. In the absence of manifest error, any
determination of Fair Market Value made pursuant to this Section 8.9 shall, for
all purposes of the Plan, be final, binding and conclusive on the Company, on
each Holder, and on any heirs, legatees, personal representatives or any other
person claiming through any Holder.

Section 9         [Intentionally Omitted]

                            III. GENERAL RESTRICTIONS

Section 10.       General Restrictions Applicable to Grants Under The Plan

         10.1     Securities Law Restrictions. No shares of Stock shall be
issued under the Plan, and no certificates for such shares shall be delivered to
any Holder, unless the Company shall be satisfied (and if requested by the
Company, unless it has received an opinion of counsel selected by the Company to
such effect) that the issuance or delivery of the shares will not cause the
Company to violate the Securities Act, any applicable state or foreign
securities law or any applicable rules or regulations under the Securities Act
or under any such state or foreign securities law. The Company is under no
obligation to register any shares of Stock issuable under the Plan, or take any
other action, under the Securities Act or under any state or foreign securities
law in connection with any award of Stock Options or Restricted Stock or to
prepare any disclosure document for distribution to Holders under the Securities
Act or any state or foreign securities law in connection with any such award. As
a condition precedent to the issuance or delivery of shares upon an award of
Stock Options or Restricted Stock or upon satisfaction of the vesting conditions
with respect thereto, the person entitled to such shares may be required to
represent, warrant and agree (i) that the shares are being acquired for the
account of such person for investment and not with a view to the resale or other
distribution thereof and (ii) that such person will not, directly or indirectly,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of any such
shares unless the transfer, sale, assignment, pledge, hypothecation or other
disposition of the shares is pursuant to effective registrations under the
Securities Act and any applicable state or foreign securities laws or pursuant
to appropriate exemptions from any such registrations. The certificate or
certificates representing the shares to be issued or delivered upon an award of
Stock Options or Restricted Stock or the satisfaction of the vesting conditions
with respect thereto may bear a legend to this effect and other legends required
by any applicable securities laws, and if the Company should at some time engage
the services of a stock transfer agent, appropriate stop-transfer instructions
may be issued to the stock transfer agent with respect to such shares. In
addition, also as a condition precedent to the issuance or delivery of shares
upon an award of Stock Options or Restricted Stock or the satisfaction of the
vesting conditions with respect thereto, the person entitled to the shares may
be required to make certain other representations and warranties and to provide
certain other information to enable counsel for the Company to render an opinion
under the first sentence of this Section 10.1.

         Subject to the foregoing provisions of this Section 8 and the other
provisions of the Plan, any award of Stock Options or Restricted Stock granted
under the Plan may be made subject to such other restrictions and such other
terms and conditions, if any, as shall be determined, in its discretion, by the
Committee and set forth in the Stock Option or Restricted Stock Agreement or an
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         10.2     Continuing Transfer Restrictions After the satisfaction of the
vesting conditions with respect thereto, all shares of Stock acquired pursuant
to an award of Stock Options or Restricted Stock under the Plan shall remain
subject to the following continuing restrictions on transfer:

                  (a)      No Holder shall sell, exchange, assign, alienate,
pledge, hypothecate, encumber, charge, give, devise, or otherwise dispose of,
either voluntarily or by operation of law (hereinafter referred to as
"transfer"), any shares of Stock acquired pursuant to the Plan or any rights or
interests appertaining thereto, except as permitted by the Plan.

                  (b)      A Holder shall not transfer any shares of Stock
acquired pursuant to the Plan without first offering to sell such shares to the
Company at a price equal to the Current Value of the shares, determined as
provided in Section 8.9, as of the date of the offer under the following
procedure (and, in the case of a proposed transfer upon the death of the Holder,
the procedure specified in Section 10.2(c) hereof):

                  (i)      Each Holder who desires to transfer any shares of
         Stock acquired pursuant to the Plan shall make the offer required by
         this Section 10.2(b) by giving written notice by certified mail to the
         Company to the attention of its President at its principal executive
         offices. Such written notice shall specify the number of shares of
         Stock offered, the person or persons to whom the Holder will transfer
         the shares of Stock offered if the Company does not accept the Holder's
         offer and the price and form of consideration for which such shares
         will be transferred. For purposes of this Section 10.2(b) the date of
         an offer shall be the date on which the written notice pursuant to this
         paragraph (i) is postmarked;

                  (ii)     The offer of a Holder pursuant to paragraph (i) may
         be accepted by the Company as to all or any portion of the shares
         offered by written notice of acceptance given to the Holder by
         certified mail within 30 days after the date of the offer. The date
         such notice is postmarked shall be deemed the date of acceptance
         hereunder. All purchases of Stock pursuant to this Section 10.2(b)
         shall be consummated, and payment in full for the shares purchased
         shall be made, at the principal executive offices of the Company on
         such date and at such time as may be reasonably designated by the
         Company in such written notice delivered to the Holder, but not later
         than 30 days following the date of such written notice. At such date,
         time and place, and upon receipt of the purchase price, the Holder
         shall assign, transfer and deliver the certificates for the purchased
         Stock to the Company, duly endorsed, with all necessary stock transfer
         tax stamps duly affixed, together with any and all documents required
         to effectively transfer the Stock to the Company; and

                  (iii)    If the Company does not accept the Holder's offer as
         to any shares within the required period or if the Company accepts the
         offer and, through the fault of the Company alone, the Company fails to
         consummate the purchase of any shares as required by paragraph (ii),
         the Holder may thereafter transfer the shares not accepted or purchased
         by the Company to the person or persons specified in the written notice
         given to the Company pursuant to paragraph (i) at the price and on the
         terms specified in such notice, but only to such persons and only at
         such price and on such terms and only if the Holder transfers such
         shares within 90 days after (a) the expiration of the 30 day period
         during which the Company may accept the Holder's offer or (b) the
         expiration of the 30-day period during which the Company may consummate
         the purchase of the shares, as the case may be. The Holder may not
         thereafter transfer any shares of Stock acquired under the Plan without
         again complying with the provisions of this Section 10. The Holder may
         not transfer any shares of the Stock to any person or persons pursuant
         to this paragraph (iii) unless the Holder delivers to the Company a
         legal opinion in form and substance reasonably satisfactory to the
         Company that such transfer will not constitute a violation of any
         applicable Federal or state securities laws. The restrictions of this
         Section 10 also shall apply to any transferee of the Holder who
         acquires shares of Stock pursuant to this Section 10.2(b), and the
         transferee shall execute a written agreement with the Company agreeing
         to such restrictions.

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                  (c)      If the Service of a Holder with the Company
terminates for any reason other than death, retirement under any retirement plan
of the Company or because the Holder becomes a Disabled Holder (including
without limitation the resignation of the Holder or the termination of the
Holder's employment by the Company with or without cause) or if a Holder dies
subsequent to any such termination of Service, all shares of Stock held by the
Holder which were acquired pursuant to the Plan shall be deemed to have been
offered for sale to the Company as of the date of such termination of Service or
the date of death, as the case may be, at a price equal to the Current Value of
the shares, determined as provided in Section 8.9, as of such date. If the
Company elects to purchase any or all of the shares of Stock deemed offered, the
Company shall notify the Holder (or his or her personal representative) by
certified mail within 30 days of the date of termination of the Holder's Service
with the Company or the date the chief executive officer of the Company learns
of the Holder's death, as the case may be, that the Company accepts the deemed
offer and the number of such shares that the Company elects to purchase. If the
Company accepts the deemed offer in whole or in part, the purchase of the shares
of Stock pursuant to this Section 10.2(c) shall be consummated, and payment in
full for the shares purchased shall be made, at the principal executive offices
of the Company on such date and at such time as may be reasonably designated by
the Company in such written notice delivered to the Holder (or his or her
personal representative), but not later than 30 days following the date of such
written notice. Upon receipt of the purchase price of the Stock, the Holder (or
his or her personal representative) shall assign, transfer and deliver to the
Company the certificates for the shares purchased, duly endorsed, with all
necessary stock transfer tax stamps duly affixed, together with any and all
documents required to effectively transfer the shares to the Company. If the
Company decides not to accept the deemed offer in whole or in part, the Company
shall so notify the Holder (or the personal representative of the Holder).
Section 10.2(a), 10.2(b) and 10.2(c) shall continue to apply to the Holder (or
the Holder's personal representative, subject to Section 10.2(e)).

                  (d)      If the Service of a Holder with the Company
terminates by reason of retirement under any retirement plan of the Company or
because the Holder becomes a Disabled Holder, the Holder may, within 30 days
following such termination, by written notice to the Company by certified mail,
offer to sell to the Company all, but not less than all, of the shares of Stock
held by the Holder which were acquired pursuant to the Plan at a price equal to
the Current Value of such shares, determined as provided in Section 8.9, on the
date of such termination of employment. If the Service of a Holder with the
Company terminates by reason of death or the Holder dies following a termination
of Service described in the preceding sentence, the Holder's personal
representative may, within one year following the date of the Holder's death, by
written notice to the Company by certified mail, offer to sell to the Company
all, but not less than all, of the shares of Stock held by the Holder which were
acquired pursuant to the Plan at a price equal to the Current Value of such
shares, determined as provided in Section 8.9, on the date of death of the
Holder. The Company shall accept any offer made under this Section 10.2(d) to
the extent Company is legally permitted to acquire the shares of its Stock
offered for purchase, except that if offer is made by a Holder (or his or her
personal representative) who owns more than five percent (5%) of the total
number of shares of the Common Stock of the Company (a "Five Percent Holder"),
the Company shall have the right, but shall not be required, to accept the
offer. If the Company will acquire the shares of the Stock offered, the Company
shall notify the Holder (or his or her personal representative) by certified
mail within 30 days of the date of termination of the Holder's Service with the
Company or the date the chief executive officer of the Company learns of the
Holder's death, as the case may be, that the Company accepts the offer. If the
Company accepts the offer, the purchase of the shares of Stock pursuant to this
Section 10.2(d) shall be consummated, and payment in full for the shares
purchased shall be made, at the principal executive offices of the Company on
such date and at such time as may be reasonably designated by the Company in
such written notice delivered to the Holder (or his or her personal
representative), but not later than 30 days following the date of such written
notice. Upon receipt of the purchase price of the Stock, the Holder (or his or
her personal representative) shall assign, transfer and deliver to the Company
the certificates for the shares purchased, duly endorsed, with all necessary
stock transfer tax stamps duly affixed, together with any and all documents
required to effectively transfer the shares to the Company. If the Company is
not legally permitted to acquire all of the shares offered or the Company
decides not to accept the offer from a Five Percent Holder, the Company shall so
notify the Holder (or the personal representative of the Holder). Section
10.2(a), 10.2(b) and 10.2(d) shall continue to apply to the Holder (or the
Holder's personal representative, subject to Section 10.2(e)).

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                  (e)      In the event of (1) the death of any Holder and the
non-exercise by the Company of the purchase rights granted in Section 10.2(c) or
10.2(d), (2) the death of a Holder described in Section 10.2(d) and the failure
of the Holder's personal representative to offer the Holder's shares to the
Company or (c) the Company's failure following exercise of such purchase rights,
through the fault of the Company alone, to consummate the purchase of its Stock,
any devisee, legatee or heir of such Holder (including any trustee) shall be
entitled to receive the Stock of the Holder subject to the Plan, but any such
recipient shall be subject to the transfer restrictions of Sections 10.2(a) and
10.2(b) and, in the event of such recipient's death, Section 10.2(c) and this
Section 10.2(e), as if such recipient were the "Holder" (with any reference to
Service of the Holder meaning Service of the original Holder hereunder). The
devisee, legatee or heir of such Holder (including any trustee) who receives the
Stock shall execute a written agreement with the Company agreeing to such
restrictions.

                  (f)      Each certificate representing shares of Stock issued
pursuant to the Plan shall have noted on the face of such certificate legends in
substantially the following forms and such other legends as the Company may deem
necessary or appropriate to assure compliance with the requirements of
applicable federal or state securities laws:

                           Notice is hereby given that the shares of stock
                  represented by this certificate are held subject to, and may
                  not be sold, transferred, assigned, pledged, gifted or
                  otherwise disposed of except in accordance with, the terms,
                  conditions and restrictions set forth in the 2000 Stock Option
                  Plan of Power Efficiency Corporation (the "Plan"), a copy of
                  which is on file at the office of Power Efficiency Corporation
                  No such transaction shall be recognized as valid or effective
                  unless there shall have been compliance with the terms and
                  conditions of the Plan. By acceptance of this certificate, the
                  holder (i) represents and warrants that the shares of stock
                  represented hereby are being acquired for investment for the
                  account of the holder and not with a view to the resale or
                  other distribution thereof and (ii) acknowledges that
                  violation of the provisions of the Plan is not adequately
                  compensable by monetary damages and that, in addition to other
                  relief, the terms thereof may be specifically enforced in an
                  action for injunctive relief.

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                           In addition, the shares of stock represented by this
                  certificate have not been registered under the Securities Act
                  of 1933, as amended, or any state or foreign securities law
                  (the "Acts") and may not be transferred by the holder except
                  (1) pursuant to a Registration Statement or other appropriate
                  registration effective under the Acts, or (2) pursuant to an
                  exemption from the registration requirements of the Acts and
                  the delivery of a legal opinion satisfactory to counsel for
                  Power Efficiency Corporation that registration is not
                  required.

         The restrictions on transfer contained in this Section 10, and the
rights and obligations of the Company to purchase shares of Stock under this
Section 10, shall expire on such date, if any, as the Company shall become
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, provided, however, that such expiration shall
not affect the rights or obligations of the Company with respect to any offer to
purchase accepted by the Company prior to such date. The expiration of the
restrictions contained in this Section 10 shall not affect the restrictions to
which a holder of shares of Stock acquired under the Plan may be subject under
the Securities Act, any state or foreign securities law or other applicable law
or the right of the Company to require, as a condition to any transfer of its
Stock, an opinion of legal counsel satisfactory to the Company as to whether any
proposed transfer is in compliance with the registration or other requirements
of such laws.

IV.      MISCELLANEOUS

Section 11.       Adjustment and Substitution of Shares

         If a dividend or other distribution shall be declared upon the Stock,
payable in shares of the Stock, the number of shares of Stock remaining
available for the issuance of Stock Options or Restricted Stock awards under the
Plan shall be adjusted by adding thereto the number of shares of Stock which
would have been distributable thereon if such shares had been outstanding on the
date fixed for determining the shareholders entitled to receive such stock
dividend or distribution.

         If the outstanding shares of the Stock shall be converted into or
exchangeable for a different number or kind of shares of stock or other
securities of the Company or another corporation or entity, whether through
reorganization, reclassification, recapitalization, stock split, combination of
shares, merger or consolidation, then there shall be substituted for each share
of Stock remaining available for the issuance of Stock Options or Restricted
Stock awards under the Plan, the number and kind of shares of stock or other
securities into which each outstanding share of the Stock shall be so converted
or for which each such share shall be exchangeable.

In the event of any such stock dividend or distribution, conversion or exchange
affecting the Stock (1) shares of Stock previously issued under the Plan shall
be treated in the same manner as other outstanding shares of Stock and, in the
case of shares of Stock Options or Restricted Stock which remain subject to
vesting conditions, shall continue to be subject to the provisions of Section
8(i) of the Plan for Restricted Stock and the provisions of the vesting
schedules for Stock Options and (2) unless otherwise determined by the
Committee, any securities of the Company or of another corporation or entity
distributed with respect to shares of Stock acquired under the Plan, or into
which shares of Stock acquired under the Plan shall be converted or for which
such shares of Stock shall be exchanged shall be subject to the provisions of
Section 10 of the Plan in the same manner as the shares of Stock with respect to
which they were distributed or received.

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Section 12.       [Intentionally Omitted]

Section 13.       [Intentionally Omitted]

Section 14.       Amendment and Termination.

         The Board may at any time, and from time to time, amend, alter, suspend
or discontinue any of the provisions of the Plan, but no amendment, alteration,
suspension or discontinuance shall be made which would impair the rights of a
Holder under any Agreement theretofore entered into hereunder, without his
consent.

Section 15.       Term of Plan.

         15.1     Effective Date. The Plan shall be effective as of September
2000 ("Effective Date"). Any awards granted under the Plan prior to such
approval shall be effective when made (unless otherwise specified by the
Committee at the time of grant), but shall be conditioned upon, and subject to,
such approval of the Plan by the Company's stockholders and no awards shall vest
or otherwise become free of restrictions prior to such approval.

         15.2     Termination Date. Unless terminated by the Board, this Plan
shall continue to remain effective until such time no further awards may be
granted and all awards granted under the Plan are no longer outstanding.
Notwithstanding the foregoing, grants of Incentive Stock Options may only be
made during the ten year period following the Effective Date.

Section 16.       General Provisions.

         16.1     Written Agreements. Each award granted under the Plan shall be
confirmed by, and shall be subject to the terms of the Agreement executed by the
Company and the Holder. The Committee may terminate any award made under the
Plan if the Agreement relating thereto is not executed and returned to the
Company within sixty (60) days after the Agreement has been delivered to the
Holder for his or her execution.

         16.2     Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Holder by the Company, nothing contained herein shall
give any such Holder any rights that are greater than those of a general
creditor of the Company.

         16.3     Employees.

                  (a)      Engaging in Competition With the Company. In the
event an employee Holder violates a Policy or Agreement of the Company or a
subsidiary pertaining to non-competition, solicitation and/or confidentiality,
the Committee, in its sole discretion may require such Holder to return to the
Company the economic value of any award which was realized or obtained (measured
at the date of exercise, vesting or payment) by such Holder at any time during
the period beginning on that date which is six months prior to the date of such
Holder's violation of the Company's Policy or Agreements.

                  (b)      Termination for Cause. The Committee may, in the
event an employee is terminated for cause, annul any award granted under this
Plan to such employee and, in such event, the Committee, in its sole discretion,
may require such Holder to return to the Company the economic value of any award
which was realized or obtained (measured at the date of exercise, vesting or
payment) by such Holder at any time during the period beginning on that date
which is six months prior to the date of such Holder's termination of employment
with the Company.

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                  (c)      No Right of Employment. Nothing contained in the Plan
or in any award hereunder shall be deemed to confer upon any employee of the
Company or any Subsidiary any right to continued employment with the Company or
any Subsidiary, nor shall it interfere in any way with the right of the Company
or any Subsidiary to terminate the employment of any of its employees at any
time.

         16.4     Investment Representations. The Committee may require each
person acquiring shares of Stock pursuant to a Stock Option or other award under
the Plan to represent to and agree with the Company in writing that the Holder
is acquiring the shares for investment without a view to distribution thereof.

         16.5     Additional Incentive Arrangements. Nothing contained in the
Plan shall prevent the Board from adopting such other or additional incentive
arrangements as it may deem desirable, including, but not limited to, the
granting of stock options and the awarding of stock and cash otherwise than
under the Plan; and such arrangements may be either generally applicable or
applicable only in specific cases.

         16.6     Withholding Taxes. Not later than the date as of which an
amount first becomes includable in the gross income of the Holder for Federal
income tax purposes with respect to any Option or award of Restricted Stock
under the Plan, the Holder shall pay to the Company, or make arrangements
satisfactory to the Committee regarding the payment of, any Federal, state and
local taxes of any kind required by law to be withheld or paid with respect to
such amount. If permitted by the Committee, tax withholding or payment
obligations may be settled with Common Stock, including Common Stock that is
part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional upon such payment
or arrangements satisfactory to the Company and the Company or the Holder's
employer (if not the Company) shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
Holder from the Company or any Subsidiary.

         16.7     Governing Law. The Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws of the
State of New Jersey (without regard to choice of law provisions).

         16.8     Other Benefit Plans. Any award granted under the Plan shall
not be deemed compensation for purposes of computing benefits under any
retirement plan of the Company or any Subsidiary and shall not affect any
benefits under any other benefit plan no or subsequently in effect under which
the availability or amount of benefits is related to the level of compensation
(unless required by specific reference in any such other plan to awards under
this Plan).

         16.9     Non-Transferability. Except as otherwise expressly provided in
the Plan, no right or benefit under the Plan may be alienated, sold, assigned,
hypothecated, pledged, exchanged, transferred, encumbranced or charged, and any
attempt to alienate, sell, assign, hypothecate, pledge, exchange, transfer,
encumber or charge the same shall be void.

         16.10    Applicable Laws. The obligations of the Company with respect
to all Stock Options and awards under the Plan shall be subject to (i) all
applicable laws, rules and regulations and such approvals by any governmental
agencies as may be required, including, without limitation, the effectiveness of
a registration statement under the Securities Act of 1933, as amended, and (ii)
the rules and regulations of any securities exchange on which the Stock may be
listed.

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         16.11    Conflicts. If any of the terms or provisions of the Plan
conflict with the requirements of (with respect to Incentive Stock Options),
Section 422 of the Code, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with the requirements of said Section
422 of the Code. Additionally, if this Plan does not contain any provision
required to be included herein under Section 422 of the Code, such provision
shall be deemed to be incorporated herein with the same force and effect as if
such provision had been set out at length herein.

         16.12    Non-Registered Stock. The shares of Stock being distributed
under this Plan have not been registered under the Securities Act of 1933, as
amended, or any applicable state or foreign securities laws and the Company has
no obligation to any Holder to register the Stock or to assist Holder in
obtaining an exemption from the various registration requirements, or to list
the Stock on a national securities exchange or inter-dealer quotation system.

================================================================================
                          Power Efficiency Corporation
        AMENDED AND RESTATED 2000 STOCK OPTION AND RESTRICTED STOCK PLAN
================================================================================

                                       17

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