Document:

telkonet_8k-ex0401.htm

    EXHIBIT
4.1

    
No.  001

     

    THE
SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY
NOT BE SOLD, TRANSFERED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE
CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.

     

    TELKONET,
INC.

     

    PROMISSORY
NOTE

     

    (non-negotiable)

    
    

     

    
      	$400,000.00 	
              Germantown,
      Maryland

            
	 	
              May 6,
      2008

            

    

     

     

    FOR VALUE
RECEIVED Telkonet, Inc., a Utah corporation (the “Company”), promises
to pay to RALPH W. HOOPER (the “Holder”), the
principal amount of FOUR HUNDRED THOUSAND DOLLARS ($400,000.00), or such lesser
amount as shall equal the outstanding principal amount.  All unpaid
principal, together and any other amounts payable hereunder, shall be due and
payable on the earlier of (i) the Next Financing (as hereinafter defined) or
(ii) November 6, 2008 (the “Maturity
Date”).

     

    The
following is a statement of the rights of the Holder of this Note and the
conditions to which this Note is subject, and to which the Holder, by the
acceptance of this Note, agrees:

     

    1.    Certain
Definitions.

     

    (a)    “Default”
means:

     

    (i)    the
Company shall default in the payment of interest and/or principal on this Note
and such default shall continue for ten (10) business days after the due date
thereof; or

     

    (ii)   any of
the representations or warranties made by the Company herein or in any
certificate or financial or other statements heretofore or hereafter furnished
by or on behalf of the Company to Holder in connection with the execution and
delivery of this Note shall be false or misleading in any material respect at
the time made; or

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (iii)   the
Company shall fail to materially perform any covenant, term, provision,
condition, agreement or obligation of the Company under this Note or the SPA
(other than for non-payment) and such failure shall continue uncured for a
period of ten (10) business days after notice from the Holder of such failure;
or

     

    (iv)   a
trustee, liquidator or receiver shall be appointed for the Company or for a
substantial part of its property or business without its consent and shall not
be discharged within thirty (30) days after such appointment; or

     

    (v)    any
governmental agency or any court of competent jurisdiction at the insistence of
any governmental agency shall assume custody or control of the whole or any
substantial portion of the properties or assets of the Company and shall not be
dismissed within thirty (30) days thereafter; or

     

    (vi)    bankruptcy,
reorganization, insolvency or liquidation proceedings or other proceedings, or
relief under any bankruptcy law or any law for the relief of debt shall be
instituted by or against the Company and, if instituted against the Company
shall not be dismissed within thirty (30) days after such institution, or the
Company shall by any action or answer approve of, consent to, or acquiesce in
any such proceedings or admit to any material allegations of, or default in
answering a petition filed in any such proceeding; or

     

    (b)   “Next Financing” means
the next transaction (or series of related transactions) after the date of this
Note in which the Company issues and sells shares of its capital stock or
securities convertible into shares of capital stock in exchange for aggregate
gross proceeds of not less than $3 million (including any amounts received upon
conversion or cancellation of indebtedness).

     

    2.    Prepayment.  The
Company may prepay this Note at any time, in whole or in part, provided any such
prepayment will be applied first to the payment of expenses due under this Note,
second to interest accrued on this Note and third, if the amount of prepayment
exceeds the amount of all such expenses and accrued interest, to the payment of
principal of this Note.

     

    3.    Security.  To
secure the payment of this Note and all other Liabilities, the Maker hereby
grants to and creates in favor of the Company a lien upon and security interest
in the Collateral. Maker hereby agrees to execute all documents and take any
other actions reasonably requested by the Company in order to perfect the
security interest contemplated hereby. The term "Collateral", as used herein,
shall mean: (i) certificates representing Two Million Four Hundred and Fifty
Four Thousand (2,454,000 shares of Common Stock, par value $.01 per share, of
Geeks on Call Holdings, Inc. (the "Shares") held by the Maker, together with a
stock power executed in blank, and (ii) any and all dividends, distributions and
other rights on or with respect to, and substitutions for and proceeds of, any
of the foregoing. The term "Liabilities", as used herein, shall mean all
obligations of the Maker under this Note.  Holder agrees that this
Note does not constitute or create, and that it shall not take, any lien or
security or other charge or encumbrance of any kind on any of the Company’s
inventory or accounts receivable.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    4.    Remedies

     

    (a)    If the
Maker shall Default, the Holder may, to the fullest extent permitted by
applicable law and, without notice, advertisement, hearing or process of law of
any kind, sell any or all of the Collateral, free of all rights and claims of
Maker therein and thereto. Any proceeds of any of the Collateral may be applied
by the Holder to the payment of expenses in connection with the Collateral, free
of all rights and claims of the Maker therein and thereto. Any proceeds of any
of the Collateral may be applied by the Company to the payment of expenses in
connection with the Collateral, including reasonable attorneys' fees and legal
expenses, and any balance of such proceeds may be applied by the Company toward
the payment of such of the Liabilities. No delay on the part of the Holder in
the exercise of any right or remedy shall operate as a waiver therefore, and no
single or partial exercise by the Holder of any right or remedy shall preclude
other or further exercise thereof or the exercise of any other right or
remedy.

     

    (b)    Notwithstanding
anything to the contrary herein, recourse of the Holder of this Note shall be
limited to the Collateral, twenty percent (20%) of the outstanding principal
amount of this Note and all accrued interest hereunder. The Maker (its officers,
directors and employees) shall have no personal liability to the Holder of this
Note except as provided in the preceding sentence.

     

    5.    Miscellaneous.

     

    (a)    Priority.
This Note will be senior in right of payment to all other indebtedness of the
Company.

     

    (b)    Loss, Theft, Destruction or
Mutilation of Note.  Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note and, in the case of loss, theft or destruction, delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Note, the
Company shall execute and deliver, in lieu of this Note, a new note executed in
the same manner as this Note, in the same principal amount as the unpaid
principal amount of this Note and dated the date to which interest shall have
been paid on this Note or, if no interest shall have yet been so paid, dated the
date of this Note.

     

    (c)    Payment.  All
payments under this Note shall be made in lawful tender of the United
States.

     

    (d)    Waivers.  The
Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.

     

    (e)    Usury.  In
the event that any interest paid on this Note is deemed to be in excess of the
then legal maximum rate, then that portion of the interest payment representing
an amount in excess of the then legal maximum rate shall be deemed a payment of
principal and applied against the principal of this Note.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

    (f)    Waiver and
Amendment.  Any provision of this Note may be amended, waived
or modified only by an instrument in writing signed by the party against which
enforcement of the same is sought.

     

    (g)    Notices.  Any
notice, request or other communication required or permitted hereunder shall be
given in accordance with the SPA.

     

    (h)    Expenses; Attorneys’
Fees.  If action is instituted to enforce or collect this Note,
the Company promises to pay all reasonable costs and expenses, including,
without limitation, reasonable attorneys’ fees and costs, incurred in connection
with such action.

     

    (i)    Successors and
Assigns.  This Note may be assigned or transferred by the
Holder upon prior written notice to the Company.  Subject to the
preceding sentence, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.

     

    (j)    Governing Law;
Jurisdiction.  THIS NOTE SHALL BE GOVERNED IN ALL RESPECTS BY
THE INTERNAL LAWS OF THE STATE OF MARYLAND WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICTS OF LAWS. COMPANY CONSENTS TO THE EXCLUSIVE JURSDICTION OF THE FEDERAL
OR STATE COURTS LOCATED IN NEW YORK, NEW YORK, WITH RESPECT TO ANY CLAIM OR
CONTROVERSY RELATED TO THE ENFORCEMENT OR INTERPRETATION OF THIS
NOTE.

     

    IN
WITNESS WHEREOF, the Company has caused this Note to be executed as of the date
first above written by its duly authorized officer.

    
    

     

     

    
      	 	TELKONET,
      INC. 
	 	 
	 	By: /s/ Richard J.
      Leimbach                                
      
	 	Name:  Richard
      J. Leimbach
	 	Title:    Chief
      Financial Officer

    

     

     

     

    4telkonet_8k-ex0402.htm

    EXHIBIT
4.2

    
THE
SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY
NOT BE SOLD, TRANSFERED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE
CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.

     

    
      	
              Dated:
      May 6, 2008

            	
              Void
      after the date

              specified
      below in Section 1

            

    

    

    TELKONET,
INC.

     

    WARRANT TO PURCHASE COMMON
STOCK

     

    THIS
CERTIFIES THAT, for value received, RALPH W. HOOPER and its permitted assigns
(hereinafter called the “Holder”) is entitled
to purchase from Telkonet, Inc., a Utah corporation (the “Company”), in whole
or in part and at the times set forth below in Section 1, up to 800,000 shares
of common stock, par value $.001 per share, of the Company (the “Warrant Shares”) at
an exercise price per share of $0.60 per share (the “Exercise Price”), as
may be adjusted in accordance with this Warrant.

     

    1.    Term.  This
Warrant shall be exercisable on and after the date hereof until 5:00 pm, New
York City time, on May 6, 2013; and

     

    2.    Method of Exercise; Payment;
Issuance Of New Warrant.

     

    2.1    Deliverables.  Subject
to the provisions herein, the purchase right represented by this Warrant may be
exercised by the Holder, in whole or in part, by the surrender of this Warrant,
together with a completed notice of exercise in the form attached hereto as
Attachment A,
an executed investment representation statement in the form attached hereto as
Attachment B
and, if applicable, a check, payable to the Company, in an amount equal to the
Exercise Price per share multiplied by the number of Warrant Shares then being
purchased (such aggregate amount of money being herein referred to as, the
“Purchase
Price”) at the principal office of the Company.

     

    2.2    Status;
Taxes.  Upon receipt of this Warrant, such notice of exercise
and such investment representation together with the Purchase Price (if
applicable) by the Company at its principal office (or, if the Company shall
then have a stock transfer agent or warrant agent, then by such agent at its
office), the Holder shall be deemed to be the holder of record of the applicable
Warrant Shares, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Warrant Shares shall
not then be actually delivered to the Holder. The Company shall collect from the
Holder and pay any and all documentary, stamp or similar issue or transfer taxes
payable in respect of the issue or delivery of the Warrant Shares.

     

    2.3    Net
Exercise.  In addition to and without limiting the rights of
the Holder under the terms of this Warrant, the Holder may elect to convert this
Warrant or any portion thereof (the “Conversion Right”)
into Warrant Shares, the aggregate value of which Warrant Shares shall be equal
to the value of this Warrant or the portion thereof being
converted.  The Conversion Right may be exercised by the Holder by
surrender of this Warrant at the principal office of the Company (or, if
applicable, at the offices of the Company’s stock transfer agent or warrant
agent) together with notice of the Holder’s intention to exercise the Conversion
Right, in which event the Company shall issue to the Holder a number of Warrant
Shares computed using the following formula:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    X = Y(A - B) 

            A

     

    
      	
              Where:

            	
              X
      =

            	
              The
      number of Warrant Shares to be issued to the Holder upon exercise of its
      Conversion Right.

            
	 
      	
              Y
      =

            	
              The
      number of Warrant Shares issuable under this Warrant at the date of
      calculation.

            
	 
      	
              A
      =

            	
              The
      fair market value of one Warrant Share, which shall equal the average
      closing price per share of the Common Stock on the NASDAQ Stock Market
      (including the OTC Bulletin Board, if applicable) for the five consecutive
      trading days immediately preceding the date of exercise, or if the Common
      Stock is not then listed on NASDAQ, as determined in good faith by the
      board of directors of the Company as at the time the Conversion Right is
      exercised pursuant to this Section 2.

            
	 
      	
              B
      =

            	
              Exercise
      Price (as adjusted to the date of such
  calculations).

            

    

    

    2.4    Partial
Exercise.  In the event that this Warrant is being exercised
for less than all of the then current number of Warrant Shares, the Company
shall, concurrently with the issuance by the Company of the number of Warrant
Shares for which this Warrant is then being exercised, issue a new Warrant
exercisable for the remaining number of Warrant Shares.

     

    3.    Stock Fully Paid;
Reservation of Warrant Shares.

     

    All
shares of stock which may be issued upon the exercise of the rights represented
by this Warrant will, upon such exercise and issuance in accordance with the
terms and conditions herein contained, be validly issued, fully paid and
non-assessable.  The Company shall, at all times during which this
Warrant is exercisable, have authorized and reserved for issuance a number of
shares of Common Stock sufficient to permit the full exercise of this
Warrant.

     

    4.    Adjustment of Exercise Price
and Number of Warrant Shares.

     

    The
number of and kind of securities purchasable upon exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time as
follows:

     

    4.1    Subdivisions, Combinations
and Other Issuances.  If the Company shall at any time after
the date hereof and prior to the expiration of this Warrant subdivide its Common
Stock, by split-up or otherwise, or combine its Common Stock, or issue
additional shares of its Common Stock as a dividend with respect to any shares
of its Common Stock, the number of Warrant Shares issuable upon the exercise of
this Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend, or proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the Exercise Price
payable per share, but the aggregate Purchase Price payable for the total number
of Warrant Shares purchasable under this Warrant (as adjusted) shall remain the
same.  Any adjustment under this Section 4.1 shall become effective at
the close of business on the date the subdivision or combination becomes
effective, or as of the record date of such dividend, or in the event that no
record date is fixed, upon the making of such dividend.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    4.2    Reclassification,
Reorganization and Consolidation.  In case of any
reclassification, capital reorganization, or change in the Common Stock of the
Company (other than as a result of a subdivision, combination, or stock dividend
provided for in Section 4.1 or as a result of a Change of Control), then, as a
condition to such reclassification, reorganization, or change, lawful provision
shall be made, and duly executed documents evidencing the same from the Company
or its successor shall be delivered to the Holder, so that the Holder shall have
the right at any time prior to the expiration of this Warrant to purchase, at a
purchase price equal to the Purchase Price payable upon the exercise of this
Warrant, the kind and amount of shares of stock and other securities and
property receivable in connection with such reclassification, reorganization, or
change by a holder of the same number of shares of Common Stock as were
purchasable by the Holder immediately prior to such reclassification,
reorganization, or change. In any such case, appropriate provisions shall be
made with respect to the rights and interest of the Holder so that the
provisions hereof shall thereafter be applicable with respect to any shares of
stock or other securities and property deliverable upon the exercise hereof, and
appropriate adjustments shall be made to the Exercise Price, provided, that the Purchase
Price shall remain the same.

     

    4.3    Public
Transaction.  If the Company shall at anytime prior to the
expiration hereof, merge with a publicly-traded company (“Pubco”) that will
acquire all of the capital stock and business of the Company, then the Holder
shall have the option to exchange this Warrant for a number of shares of capital
stock of Pubco equal to the number of shares of capital stock of Pubco that
would be received in such merger for the number of shares of Common Stock then
issuable upon the exercise of this Warrant pursuant to Section 2
hereof.

     

    4.4    Certain
Events.  If any change in the outstanding Common Stock of the
Company or any other event occurs as to which the other provisions of this
Section 4 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder in accordance with such provisions,
then the Board of Directors of the Company shall make an adjustment in the
number and class of shares available under this Warrant, the Purchase Price or
the application of such provisions, so as to protect such purchase rights as
aforesaid. The adjustment shall be such as will give the Holder upon exercise
for the same aggregate Purchase Price the total number, class and kind of shares
as he or she would have owned had this Warrant been exercised prior to the event
and had he or she continued to hold such shares until after the event requiring
such adjustment.

     

    4.5    Notice of
Adjustment.  When any adjustment is required to be made in the
number or kind of shares purchasable upon exercise of this Warrant, or in the
Exercise Price, the Company shall promptly notify the Holder of such
event.

     

    5.    Fractional Warrant
Shares.

     

    No
fractional Warrant Shares will be issued in connection with any exercise
hereunder, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in
effect.

     

    6.    Compliance with Securities
Act.

     

    The
Holder, by acceptance hereof, represents and agrees that this Warrant and the
Warrant Shares are being acquired for investment and that he or she will not
offer, sell or otherwise dispose of this Warrant or any Warrant Shares except as
permitted under this Warrant and under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the “Act”).  Upon
exercise of this Warrant, the Holder shall confirm in writing, in the form of
Attachment B
hereto, that the Warrant Shares so purchased are being acquired for investment
and not with a view toward distribution or resale in violation of
law.  This Warrant and all Warrant Shares (unless registered under the
Act) shall be stamped or imprinted with legends in substantially the following
form:

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”) OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED OR HYPOTHECATED WITHOUT (1) THE PRIOR WRITTEN CONSENT OF
THE COMPANY AND (2) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS RELATING TO THESE SECURITIES OR AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION SUPPORTED BY AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.”

    

    7.    Transferability of
Warrant.

     

    The
Holder may not assign this Warrant or the rights hereunder without the prior
written consent of the Company, such consent not to be unreasonably
withheld.  Any transfer or assignment of this Warrant or the rights
hereunder without such consent shall be null and void.

     

    8.    Disposition of Warrant
Shares.

     

    With
respect to any offer, sale or other disposition of any Warrant Shares prior to
registration of such shares, the Holder and each subsequent Holder of this
Warrant agrees to give written notice to the Company prior thereto, describing
briefly the manner thereof, together with a written opinion of such Holder’s
counsel, if reasonably requested by the Company, to the effect that such offer,
sale or other disposition may be effected without registration or qualification
of such Warrant Shares under the Act (as then in effect) or any other Federal or
state laws then in effect; provided, however, that no
such opinion of counsel shall be necessary for a transfer by bona fide gift,
will or intestate succession by the Holder to his or her spouse or lineal
descendants or ancestors or any trust for the benefit of any of the foregoing if
the transferee agrees in writing to be subject to the terms hereof to the same
extent as if he/she were an original Holder hereunder. Notwithstanding the
foregoing, such Warrant Shares may be offered, sold or otherwise disposed of in
accordance with Rule 144.

     

    9.    No Rights as
Stockholder.

     

    No Holder
of this Warrant shall be entitled to vote or be deemed the holder of stock or
any other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the Holder of this Warrant, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance, or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant has been exercised and the
Warrant Shares shall have become deliverable, as provided herein.

     

    10.   Governing Law;
Jurisdiction.

     

    The terms
and conditions of this Warrant shall be governed by and construed in accordance
with the laws of the State of New York, without regard to any provisions thereof
relating to conflicts of laws among different jurisdictions.  The
parties consents to the exclusive jurisdiction of the federal or state court
located in New York, New York, with respect to any claim or controversy related
to the enforcement or interpretation of this note.

     

    11.   Notices.

     

    All
notices, requests, demands and other communications that are required or may be
given under this Agreement shall be in writing and shall be deemed to have been
duly given (i) when received if personally delivered, (ii) upon electronic
confirmation of receipt, if transmitted by telecopy, (iii) the business day
after it is sent, if sent for next day delivery to a domestic address by a
nationally recognized overnight delivery service (i.e., Federal Express) or (iv)
three days from the date of deposit in the U.S. mails, if sent by certified or
registered U.S. mail, return receipt requested. In each case such notice shall
be addressed as follows:

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

    To the
Company:

     

    Telkonet,
Inc.

    20374
Seneca Meadows Parkway

    Germantown,
MD 20876

    Att:
Richard J. Leimbach

     

    To
Holder:

     

    Ralph W.
Hooper

     

     

    Fax:
________________

     

    12.   Miscellaneous.

     

    The
headings in this Warrant are for purposes of convenience and reference only, and
shall not be deemed to constitute a part hereof.  Neither this Warrant
nor any term hereof may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the Company and the registered
Holder.

     

    
    

     

    
      	 	TELKONET,
      INC. 
	 	 
	 	By: /s/ Richard J.
      Leimbach                                          
        
	 	Name: Richard J.
      Leimbach 
	 	Title:  Chief
      Financial Officer 
	 	 
	 	 
	 	HOLDER: 
	 	 
	 	 
	 	 
	 	                                                        
                                           
	 	Name: Ralph W.
      Hooper 

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    ATTACHMENT A TO
WARRANT

     

    NOTICE OF
EXERCISE

     

     

    TO:  Telkonet,
Inc. (the “Company”):

     

    1.           The
undersigned hereby elects to purchase _________ shares of common stock, no par
value per share (“Common Stock”), of
Telkonet, Inc., pursuant to the terms of the attached warrant (the “Warrant”) and tenders
herewith payment of the aggregate purchase price of such shares in full,
together with all applicable transfer taxes, if any.

     

    2.           The
undersigned hereby elects to convert the attached Warrant into shares of Common
Stock in the manner specified in Section 2.3 of the Warrant.  This
conversion is exercised with respect to ________ of the shares covered by the
Warrant.

     

    3.           Please
issue a certificate(s) representing said shares of Common Stock in the name of
the undersigned or in such other name as is specified below:

     

    
      	 
      
	
              (Name)

            
	 
      
	 
      
	
              (Address)

            
	 
      

    

    

    3.           The
undersigned represents that the aforesaid shares of Common Stock are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such
shares.  In support thereof, the undersigned has executed and
delivered to the Company an Investment Representation Statement in the form of
Attachment B to
the attached Warrant.

     

    
      	INDIVIDUAL HOLDER
      SIGNATURE:  	CORPORATE HOLDER
      SIGNATURE: 
	 	 
	 	Name:
      _________________________________
	________________________________ 	 
	Name:    	By:
      ______________________________ 
	 	      
      Name:
	 	      
      Title:

    

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    ATTACHMENT B TO
WARRANT

    

    INVESTMENT
REPRESENTATION STATEMENT

     

    
      	
              PURCHASER:

            	 
      
	
              COMPANY:

            	
              Telkonet,
      Inc. (the “Company”)

            
	
              SECURITY:

            	
              Warrants
      to purchase common stock, $.001 par value per share, of the
      Company.

            
	
              AMOUNT:

            	 
      
	
              DATE:

            	 
      

    

    

    In
connection with my purchase of the above-listed warrants and shares issuable
upon the exercise of such warrants (collectively, the “Securities”), I,
_________________, hereby represent to the Company as follows:

     

    (a)           I
am aware of the Company’s business affairs and financial condition, and have
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities.  I am purchasing the
Securities for my own account for investment purposes only and not with a view
to, or for the resale in connection with, any “distribution” thereof for
purposes of the Securities Act of 1933, as amended (the “Securities
Act”).

     

    (b)           I
understand that the Securities have not been registered under the Securities Act
or the securities laws of any state and have been issued in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of my
investment intent as expressed herein.  In this connection, I
understand that, in the view of the Securities and Exchange Commission, the
statutory basis for such exemption may be unavailable if my representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future.

     

    (c)           I
understand that I must hold the Securities indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available.  In addition, I understand that all
certificates evidencing the Securities will be imprinted with a legend that
prohibits the transfer of the Securities without (1) the prior consent of the
Company, and (2) an effective registration statement under the Securities Act
covering the Securities or an available exemption from such
registration.  I further understand that in the event that I propose
to transfer any of the Securities in reliance upon an exemption from
registration under the Securities Act I may be required to submit to the Company
an opinion of counsel reasonable satisfactory to the Company regarding such
proposed transfer and exemption.

     

    
      
        	INDIVIDUAL PURCHASER
      SIGNATURE:     	CORPORATE PURCHASER
      SIGNATURE:
	 	 
	 	Name:
      _________________________________
	________________________________ 	 
	Name:    	By:
      ______________________________ 
	 	      
      Name:
	 	      
      Title:

      

       

       

      7

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