Document:

Interim Financing Agreement

 EXHIBIT 10.1 
 EMTUCK, LLC 
 As of April 18, 2006 
 Power Efficiency Corporation 
 3960 Howard Hughes Parkway 
 Suite 460 
 Las Vegas, NV 89109 
  

	 	Re:	Interim Debt Financing 

 Ladies and Gentlemen: 
 In accordance with our discussions with Power Efficiency Corporation (the “Company”),
EMTUCK, LLC, a Nevada limited liability company (the “Lender”), hereby agrees to make term loans (the “Loans”) to the Company in the aggregate principal amount of $1,000,000 (the “Base
Commitment”), subject to increase up to $1,500,000 if the Lender makes available such increased amount of up to $500,000 (the “Additional Commitment,” and the Base Commitment and the Additional Commitment being herein
collectively called the “Total Commitment”) available to the Company on or before May 31, 2006, on the following terms and conditions and any additional conditions set forth in the Notes (as hereinafter defined): 
 1. Terms of Loans. The Company shall borrow the aggregate principal amount of the Base Commitment in multiple borrowings, in each case not to
exceed $200,000 (each such borrowing herein called a “Base Loan”), and, if made available, may borrow the amount of the Additional Commitment, up to the amount of the Total Commitment, each such borrowing being herein called an
“Additional Loan,” and the Base Loans and the Additional Loans being herein sometimes collectively called the “Loans”), in the case of the first Base Loan, on a closing date on or as soon as practicable after
execution of this Agreement, and in the case of subsequent Loans, on five (5) days prior written notice to the Lender; each Loan shall be due and payable on the date which is nine (9) months from the date the first Base Loan is advanced,
shall bear interest on the unpaid principal amount thereof, payable quarterly as set forth in the Note, at a fixed rate equal to the prime rate of Bank of America as published in The Wall Street Journal as in effect on the date of the first Base
Loan plus three percent (3%), shall be convertible into equity securities of the Company as provided in paragraph 2 of this Agreement, and shall have such other terms as are set forth herein or in the Notes. The Base Loans and the Additional
Loans shall each be evidenced by a single promissory note of the Company dated the date of the first Base Loan or Additional Loan, as applicable, in the form of Exhibit A attached (a “Note,” and collectively, the
“Notes”) and shall be secured as provided in the Notes. 
 2. Conversion Right. In the event the Company, while any
amount of the Loans are outstanding, offers any equity securities to third parties (excluding issuances to officers, directors, employees, consultants or advisors pursuant to stock option or restricted stock purchase plans approved by the Board of
Directors of the Company which are issued at fair market value at the time of issuance, and also excluding issuances of Common Stock on the exercise of currently outstanding warrants), the Company will use its best efforts to afford Lender the
right, at the Lender’s sole option, to participate in such equity financing by converting the aggregate principal amount of the Loans outstanding into equity issuable in such financing on the same terms as such equity is offered to such third
parties. 
 3. Warrants. On the applicable Closing Dates of the first Base Loan and the first Additional Loan, the Company will issue
to the Lender (or at the Lender’s designation in its discretion to the individual members of the Lender or their affiliates) Warrants allowing the Lender to purchase, subject to vesting of the exercisability of the Warrants in accordance with
Schedule X attached to this Agreement, at any time prior to the fifth anniversary following such Closing Date, and at the Lender’s sole and absolute discretion, a number of shares of Common Stock of the Company equal to a sum obtained by
dividing 50% of the aggregate principal amount of the applicable Loans by the Warrant Exercise Price (as defined below), at a price (the “Warrant Exercise Price”) equal to the 5-day average of the closing bid price of shares
of Common Stock of the Company on the OTC Bulletin Board prior to the applicable Closing Date; provided that the Warrant Exercise Price shall not be less than twenty cents ($0.20) per share. The 

 
Warrants shall provide for “cashless exercise” by the Lender by use of shares issuable on exercise. If after the date of the issuance of the
Warrants the Company files a registration statement under the Securities Act of 1933, or amends an existing registration statement, in either case the Company will use its best efforts to include the shares issuable on exercise of the Warrants in
such registration statement or amended registration statement. 
 4. Consent of Pali Capital Noteholders. As a condition precedent to
the Loans, the Company shall have received the requisite consent of the holders of those certain promissory notes bearing interest at 15% per annum of the Company in the aggregate principal amount of $1,464,806 due October 26, 2006, and
$125,000 due February 24, 2007 (the “Pali Notes”) to the provision of security for the Loans in the form of a second lien subordinate to the lien securing the Pali Notes as provided in the Notes. 
 5. Securities Law Compliance. The Lender confirms that it is an “accredited investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended (the “1933 Act”), and that in order to comply with the requirements of Section 4(2) of the 1933 Act and any applicable state securities or blue sky laws the Lender represents and warrants that
it is acquiring the Notes and the Warrants for investment purposes only and not with a view to the resale or distribution thereof. 
 6.
Company Action. This transaction shall have been approved by the requisite vote of members of the Board of Directors of the Company who are independent of any affiliate of the Lender. 
 [Signature page follows] 

 If the foregoing sets forth our understanding, please indicate your agreement by signing and returning
the enclosed copy of this letter. 
  

					
	 Very truly yours,

	
	 EMTUCK, LLC

			
	By:	 	  	 	  
		 	 Name:
	 	  
		 	 Title:
	 	  

  

					
	 Agreed to and accepted as of the
          day of April, 2006:

	
	 POWER EFFICIENCY CORPORATION

			
	By:	 	  	 	  
		 	 Name:
	 	  
		 	 Title:
	 	  

 SCHEDULE X 
 EXERCISABILITY OF THE WARRANTS 
  

			
	 IMMEDIATELY VESTED
	  	 SUBSEQUENT VESTING

	70% of the Warrants issued at the applicable Closing Date.	  	The remaining 30% of the Warrants shall vest in equal monthly increments in each month during which the Base Loans or the Additional Loans, as applicable, are outstanding.Promissory Note granted to EMTUCK, LLC

 EXHIBIT 10.2 
 NOTE 
  

			
	 Principal Amount: $1,000,000
	  	Las Vegas, Nevada
		  	April 19, 2006

 FOR VALUE RECEIVED, Power Efficiency Corporation, a Delaware corporation (the
“Borrower”) hereby promises to pay to EMTUCK, LLC, a Nevada limited liability company (the “Lender”), by wire transfer of immediately available United States federal funds to the Lender’s designated account or,
if the Lender so agrees, by the Borrower’s check, the aggregate principal sum of $1,000,000, or such lesser amount as is advanced and outstanding (each such advance, a “Loan”) pursuant to the provisions of this Note (this
“Note”), together with interest in like money on the unpaid principal balance of each Loan for the period from and including the date of such Loan to but excluding the date such Loan is paid in full (whether as stated, by
acceleration or otherwise) at the rate of 10.75% per annum. Interest shall be simple interest and calculated on the basis of a 360-day year consisting of twelve 30-day months. Accrued interest on each Loan shall be payable (a) upon the
payment or prepayment of the Loan (but only on the principal amount so paid or prepaid) and (b) quarterly on each three-month anniversary of the date of this Note, commencing July 19, 2006, and at maturity on the Maturity Date (as defined
below). All principal then outstanding, and all interest, fees, charges, and other amounts owing under this Note and then unpaid shall be due and payable on January 19, 2007 (the “Maturity Date”). All payments on or in respect
of this Note shall be made to the Lender without set-off or counterclaim and free and clear of and without deductions of any kind. 
 The
Borrower hereby authorizes the Lender to endorse on the Schedule annexed to this Note the principal amount of each Loan made to the Borrower and all payments of principal and interest in respect of each such Loan, which endorsements shall, in the
absence of manifest error, be conclusive; provided, however, that the failure to make such notation with respect to any Loan or payment shall not limit or otherwise affect the obligations of the Borrower hereunder. 
 This Note is the Note referred to in that certain agreement dated April 18, 2006, between the Borrower and the Lender (the
“Agreement”), and is subject to the terms and conditions and entitled to the benefits thereby, is secured by, and entitled to the benefits of, the Security Agreement dated of even date with this Note between the Borrower and the
Lender (the “Security Agreement”). 
 In this Note, the following terms shall have the following respective meanings:

 “Business Day” shall mean a day other than a Saturday, Sunday or other day on which commercial banks are authorized to
close under the laws of the State of Nevada. 
 “Default” shall mean an event that with notice or lapse of time or both
would become an Event of Default (as defined below). 
 “Material Adverse Condition” shall mean a material adverse effect
on the business, property, operations, prospects or condition (financial or otherwise) of the Borrower and its subsidiaries, taken as a whole. 
 1. Optional Prepayment; Premium. The Borrower may prepay the principal and interest due on this Loan, at any time, in whole or in part, without penalty or premium. 
 2. Conversion. The Borrower may convert this Note into Common Stock of the Company in accordance with the terms of paragraph 2 of the
Agreement. Any such conversion shall constitute payment in full of the aggregate principal amount of this Note so converted. 
 3.
Expenses. Each party shall bear its own expenses incurred in connection with all transactions in respect of the Loans, except that Borrower shall reimburse the Lender for its reasonable legal expenses incurred in connection with such
transactions, including the costs of formation of the Borrower. 

 4. Notices. Unless otherwise indicated differently, all notices, requests, reports, information or
demands which either party may desire or may be required to give to the other party shall be in writing and shall be personally delivered, sent by facsimile, by a reliable overnight mail delivery service providing a receipt or by first-class
certified or registered United States mail, postage prepaid return receipt requested, and sent to the receiving party at its address appearing below or at such other address as that party shall designate to the other party by written notice;
(provided, however, notices to the Lender requesting disbursements need not be sent by certified United States mail): 
  

	 	If to the Borrower:	John (BJ) Lackland 

 Power Efficiency
Corporation 
 3960 Howard Hughes Parkway 
 Suite 460 
 Las Vegas, NV 89109 
  

	 	If to the Lender:	EMTUCK, LLC 

 c/o Northwest Power
Management, Inc. 
 One Hughes Center Drive 
 Suite 1004 
 Las Vegas, NV 89109 
 All notices, requests, reports, information or demands so given shall be deemed effective upon receipt or, if
mailed, upon receipt or the expiration of the third day following the date of mailing, which ever occurs first, except that any notice of change in address shall be effective only upon receipt by the party to whom said notice is addressed.

 5. Maximum Interest Rate. Notwithstanding the provisions of this Note, if the rate of interest payable under this Note is limited
by law, the interest payable under this Note shall be the lesser of (a) the amount calculated at the rate set forth in this Note and (b) the maximum interest permitted by law. If, however, interest is paid under this Note in excess of the
maximum rate of interest permitted by law, any interest so paid which exceeds that maximum rate shall automatically be considered a payment of principal and shall automatically be applied in reduction of principal due on this Note to the extent of
the excess. The provisions of this Section 5 shall survive the termination of this Note. 
 6. Covenants. The Borrower covenants
and agrees with the Lender that, so long as the Commitment is outstanding and until payment in full of all obligations of the Borrower under this Note: 
 (a) Pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income and profits, or upon any properties belonging to it before the same shall be in default; provided,
however, that the Borrower shall not be required to pay any such tax, assessment, charge or levy which is being contested in good faith by proper proceedings and adequate reserves for the accrual of same are maintained if required by generally
accepted accounting principles; 
 (b) Preserve its corporate existence and continue to engage in business of the same general type as
conducted as of the date hereof; 
 (c) Comply in all respects with all statutes, laws, ordinances, orders, judgments, decrees, injunctions,
rules, regulations, permits, licenses, authorizations and requirements (the “Requirements”) of all governmental bodies, departments, commissions, boards, companies or associates insuring the premises, courts, authorities, officials,
or officers, which are applicable to the Borrower or its property; except wherein the failure to comply would not have a material adverse effect on the Borrower or its property; provided that nothing contained herein shall prevent the
Borrower from contesting the validity or the application of any Requirements; 
 (d) Preserve the value of the Collateral (as defined in the
Security Agreement) by using all possible efforts to challenge any claim that the Borrower’s patents infringe upon any patents held by a third party, promptly challenging any third party who files a patent which the Borrower believes infringe
upon the Borrower’s patents and 

 
to make any necessary filings to prosecute the pending patent applications. In the event that such steps are not taken to the satisfaction of the Lender, the
Lender shall have the right (at the Borrower’s expense) to take all necessary steps to preserve the value of the Collateral; and 
 (e)
Shall not grant any party other than the Lender a security interest in any of the Collateral, except for the currently existing security interest securing the Pali Notes (as defined in the Agreement). 
 7. Representations and Warranties. The Borrower represents and warrants to the Lender that: 
 (a) Organization; Powers. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of Delaware, has all
requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Condition, is qualified to do business
in, and is in good standing in, every jurisdiction where that qualification is required. 
 (b) Authorization; Enforceability. The
transactions contemplated under this Note and the other Basic Documents are within the Borrower’s corporate powers and have been duly authorized by all necessary corporate (including, if required, stockholder) action. This Note has been, and
the other Basic Documents will be, duly executed and delivered by the Borrower, and each Basic Document constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. 
 (c) Governmental Approvals; No Conflicts. The transactions contemplated under this Note and the other Basic Documents (i) will not violate or
result in a default under any agreement or other instrument binding upon the Borrower or its property and assets or give rise to a right under any such agreement or other instrument to require any payment to be made by the Borrower and
(ii) will not result in the creation or imposition of any lien on any property or asset of the Borrower other than the liens created under the Security Agreement. 
 (d) Properties and Assets. 
 (i) The Borrower has good title to all its property and
assets, free and clear of all liens (other than the liens of the Security Agreement and securing the Pali Notes) except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize
its properties and assets for their intended purposes. 
 (ii) The Borrower owns, or is licensed to use, all trademarks, trade
names, copyrights, patents and other intellectual property material to its business, and the use of any such property by the Borrower does not infringe upon the rights of any other person or entity. 
 8. Events of Default. (a) Upon the occurrence of any of the following events (herein called “Events of Default”):

 (i) the Borrower shall fail to pay the principal of or interest on this Note when due and payable and on the Maturity Date;

 (ii) the Borrower makes a general assignment for the benefit of creditors or commences (as the debtor) a case in
bankruptcy, or commences (as the debtor) any proceeding under any other insolvency law; 
 (iii) except as provided in
Section 6(e) above, the Borrower shall encumber or hypothecate the Collateral subject to the security interest created under the Security Agreement; or 
 (iv) a case in bankruptcy or any proceeding under any other insolvency law is commenced by or against the Borrower (as the debtor) and:

 (A) a court having jurisdiction enters a decree or order for relief against the Borrower as the debtor in such case or
proceeding; 

 (B) such case or proceedings is consented to by the Borrower or remains undismissed for
60 days; 
 (C) the Borrower consents or admits the material allegations against it in any such case or proceeding; or

 (D) a trustee, receiver or agent (however named) is appointed or authorized to take charge of substantially all of the
property of the Borrower for the purpose of general administration of such property for the benefit of creditors and the order making such appointment or granting such authorization is not vacated within 60 days, during which period such trustee,
receiver or agent shall not have taken any action with respect to the property of the Borrower which might prejudice the interest of the Holder, 
 then, the
Lender may upon written notice to the Borrower elect to declare the entire principal amount of the Note then outstanding together with accrued unpaid interest thereon due and payable. Upon receipt of such notice, the Company shall have seven
(7) Business Days to cure the Event of Default and if uncured on the eighth (8th) Business Day, all
principal and accrued interest shall become immediately due and payable. 
 9. Conditions Precedent to Initial Loan. The obligation of
the Lender to make the initial Loan under the Agreement is subject to the satisfaction of the following conditions: 
 (a) no Default or
Event of Default has occurred and is continuing as of the date of such initial Loan; 
 (b) no Material Adverse Condition has occurred and is
continuing as of the date of such initial Loan; 
 (c) the representations and warranties made by the Borrower in this Note and the other
Basic Documents are true and complete on and as of the date of that Loan with the same force and effect as if made on and as of that date (or, if applicable, as of any specific date as of which that representation or warranty is expressly stated to
have been made); 
 (d) the Lender shall have received a certificate of the Secretary or an Assistant Secretary of the Borrower, dated as of
the date of the initial Loan and certifying: 
 (i) that attached to such certificate is a true and complete copy of the
charter, as amended and in effect, of the Borrower, and that such charter has not been amended since the date of the last amendment set forth in such certificate; 
 (ii) that attached to such certificate is a true and complete copy of the bylaws of the Borrower as amended and in effect at all times
from the date on which the resolutions referred to in clause (iii) were adopted to and including the date of such certificate, 
 (iii) that attached to such certificate is a true and complete copy of resolutions duly adopted by the board of directors of the Borrower authorizing the execution, delivery and performance of this Note and the Agreement, the Loans, the
Security Agreement and all documents related to the transactions contemplated under this Note (the “Basic Documents”), and that such resolutions have not been modified, rescinded or amended and are in full force and effect;

 (iv) that attached to such certificate is a certificate of good standing for the Borrower from the Secretary of State of
the State of Delaware; 
 (v) as to the incumbency and specimen signature of each officer of the Borrower executing the Basic
Documents (and the Lender may conclusively rely on such certificate); 

 (e) the Lender shall have received an opinion of legal counsel to the Borrower, dated the date of the
initial Loan, in form and substance reasonably satisfactory to the Lender; 
 (f) the Lender shall have received duly executed and delivered
copies of (i) the Security Agreement and (ii) the Warrants (in accordance with paragraph 3 of the Agreement); 
 (g) the
conditions set forth in paragraph 4 of the Agreement shall have been satisfied; and 
 (h) the Lender shall have received such other
documents as the Lender may reasonably request. 
 10. Conditions to All Loans. The obligation of the Lender to make any Loan under
the Agreement is subject to the further conditions precedent that, both immediately prior to the making of that Loan and also after giving effect to, and to the intended use of, that Loan: 
 (a) no Default or Event of Default has occurred and is continuing; 
 (b) no Material Adverse Condition has occurred and is continuing; and 
 (c) the representations and
warranties made by the Borrower in this Note and the other Basic Documents are true and complete on and as of the date of that Loan with the same force and effect as if made on and as of that date (or, if applicable, as of any specific date as of
which that representation or warranty is expressly stated to have been made). 
 Each such extension of credit to the Company shall
constitute a certification by the Company to the effect set forth in the preceding sentence. 
 11. Governing Law. THIS
NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEVADA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEVADA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. 
 12. No Waiver. No failure on the part of the Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right,
remedy, power or privilege under this Note shall operate as a waiver of that right, remedy, power or privilege, nor shall any single or partial exercise of any right, power or privilege under this Note preclude any other or further exercise of any
such right, remedy, power or privilege or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in this Note are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law. 
 13. Restrictions on Transfer. The Borrower may not assign any of its rights or obligations under this Note without
the prior written consent of the Lender. 
 14. Integration. This Note and the other Basic Documents constitute the entire agreement
and understanding between the Borrower and the Lender with respect to the matters covered by this Note and the other Basic Documents and supersede all prior agreements and understandings, written or oral, between the Borrower and the Lender with
respect to the subject matter of this Note and the other Basic Documents. 
 15. Severability. Any provision of this Note that is
prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of that prohibition or unenforceability without invalidating the remaining provisions of this Note, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable that provision in any other jurisdiction. 
 16.
Captions. The table captions and section headings appearing in this Note are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Note. 

 17. Amendments. No provision of this Note may be waived, modified or supplemented except by a written
instrument signed by the Borrower and the Lender. 
 18. Successors and Assigns. This Note shall be binding upon and inure to the
benefit of its parties and their respective successors and permitted assigns. 
 19. Further Assurances. The Borrower shall provide to
the Lender, from time to time, such documents, agreements, certificates and other information requested by the Lender as shall be necessary or advisable to effect the purposes of this Note and the other Basic Documents. 
 [Signature pages follows] 

 IN WITNESS WHEREOF, Power Efficiency Corporation has caused this Note to be duly executed and
delivered on its behalf and in its name by the signature of its duly authorized officer, as of the date first above written. 
  

			
	POWER EFFICIENCY CORPORATION
  (a Delaware corporation)
		
	By:	 	  

			
	 Name:
	 	  
	 Title:
	 	  

 SCHEDULE OF LOANS AND 
 PAYMENTS OF PRINCIPAL 
 UNDER REVOLVING CREDIT NOTE 
  

											
	 Date
	  	 Amount of
 Loan
	  	 Amount of
Principal Paid
	  	 Amount of Interest
Paid
	  	 Balance of Unpaid
Principal
	  	 Person Making
Notation

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