Document:

ex1012.htm

Date: ________________, 2010

 

CALIBRUS, INC.

SPECIMEN

SERIES 2010-B COMMON STOCK PURCHASE WARRANT

EXERCISABLE FOR THREE YEARS

FROM DATE OF ISSUE

____________________________________________________________

THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.  THIS COMMON STOCK PURCHASE WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT OR THE LAWS OF THE APPLICABLE STATE OR A “NO-ACTION” OR INTERPRETIVE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER AND ITS COUNSEL TO THE EFFECT THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE STATUTES.

____________________________________________________________

This warrant is being issued as part of a Unit by the Company.  Each unit consists of a Debenture with a face value of five thousand dollars and twenty five hundred common stock purchase warrants (the “Units”).  Each debenture, which is convertible into shares of common stock of the Company, bears interest at the rate of 12% per annum (the “Debentures”).  This warrant for the purchase of shares of common stock, $0.001 par value, (this “Warrant”), of Calibrus, Inc., a Nevada corporation (the “Company”), certifies that for value received,       Specimen      , or registered assigns (the “Holder” or “Holders”), is entitled, at any time or from time to time on or after the date the Debenture issued by the Company and which this Warrant formed a Unit at the time of issuance is converted into shares of the Common stock, and on or before 11:59 p.m. Mountain time three (3) years from the date hereof, (the “Exercise Period”), to subscribe for, purchase, and receive ________ shares of the Company’s common stock, $0.001 par value (the “Shares” or “Common Stock”), at a per share price of the lower of (i) one dollar and ninety-five cents ($1.95), or (ii) one hundred thirty percent (130%) of the per share price paid by any investor in a private placement by the Company of shares of its common stock at any time in the next twelve months from the date of this Warrant, (the “Exercise Price”), by paying in full and in lawful money of the United States of America cash or cashier’s check for the Exercise Price for the Shares, based on, and complying with, all the terms and conditions hereinafter set forth.  The number of Shares to be received on exercise of this Warrant and the Exercise Price may be adjusted on the occurrence of such events as described herein.  If the subscription rights represented hereby are not exercised by 11:59 p.m. Mountain Time three (3) years from the date hereof, (the “Expiration Date”), this Warrant shall automatically become void and of no further force or effect, and all rights represented hereby shall cease and expire.

This Warrant is subject to the following further terms and material provisions:

 

 

  

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1.           Term of Warrant; Exercise of Warrant.  The Holder of this Warrant shall have the right, which may be exercised for a period from the date such Debenture issued by the Company and which this Warrant formed a Unit at the time of issuance is converted into shares of the Common stock, through 11:59 p.m. Mountain time three (3) years from the date of issuance of this Warrant, from the Company to purchase ______________ (_________) fully paid and nonassessable shares of the Company’s common stock, $0.001 par value, (the “Shares” or “Common Stock”), upon presentation and surrender of this Warrant with the subscription form attached hereto as Exhibit “A,” accompanied by payment in lawful money of the United States of America in cash or by official bank or certified check payable to the Company of the lower of (i) one dollar and ninety-five cents ($1.95), or (ii) one hundred thirty percent (130%) of the per share price paid by any investor in a private placement by the Company of shares of its common stock at any time in the next twelve months from the date of this Warrant per share purchased on the exercise of the Warrant.  On the exercise of all or any portion of this Warrant in the manner provided above, the Holder exercising the same shall be deemed to have become a holder of record of the Shares for all purposes, and certificates for the securities so purchased shall be delivered to the Holder within a reasonable time, but in no event longer than ten days after this Warrant shall have been exercised as set forth above.  If this Warrant shall be exercised in respect to only a part of the Shares covered hereby, the Holder shall be entitled to receive a similar Warrant of like tenor and date covering the number of Shares with respect to which this Warrant shall not have been exercised.

2.           Warrant Price.  The price at which the Shares shall be purchasable on exercise of the Warrant (the “Exercise Price”) shall be one dollar and ninety five cents ($1.95) per share of Common Stock. The Exercise Price and number of Warrants shall be subject to adjustment pursuant to Section 5 hereof.

3.           Reservation of Warrant Shares.  The Company has reserved out of the authorized and unissued shares of Common Stock a number of shares sufficient to provide for the exercise of the rights of purchase represented by this Warrant.  All Warrants surrendered in exercise of the rights hereby evidenced shall be canceled by the Company.  Promptly after the date of expiration of the Warrants no shares of Common Stock shall be subject to reservation in respect to the Warrants.  This Warrant shall obligate the Company and any successor corporation who merges with the Company or purchases substantially all of the assets of the Company to issue the Shares upon the exercise of the Warrant.

4.           Fully Paid Shares.  The Company covenants and agrees that the Shares which may be issued on the exercise of the rights represented by this Warrant will, on issuance, be fully paid and nonassessable, and free from all taxes, liens, and charges with respect to the issue thereof.

5.           Adjustments.  The number of Shares issuable upon exercise of this Warrant may be subject to adjustment from time to time as follows:

(a)           In case the Company shall (i) pay a dividend or make a distribution in shares of Common Stock, (ii) subdivide its outstanding Common Stock, (iii) combine its outstanding Common Stock into a smaller number of shares, (iv) issue by reclassification of its Common Stock other securities of the Company, or (v) enter into any plan of capital reorganization or of reclassification of the Common Stock; the number of Shares purchasable on exercise of each Warrant immediately prior thereto shall be adjusted so that the Holder of each Warrant shall be entitled to receive, the kind and number of Shares or other securities of the Company which he or she would have owned or have been entitled to receive after the happening of any of the events described above, had such Warrant(s) been exercised immediately prior to the happening of such event or any record date with respect thereto.  An adjustment made pursuant to this paragraph (a) shall become effective immediately after the effective date of such event retroactive to the record date for such event.

 

 

  

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(b)           No adjustment in the number of Shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least 1% in the number of Shares purchasable on the exercise of each Warrant; provided, however, that any adjustments which by reason of this paragraph (b)  are not required to be made shall be carried forward and taken into account in any subsequent adjustment.  Neither the purchase nor other acquisition by the Company of any Shares nor the sale or other disposition by the Company of any Shares shall affect any adjustment of the Exercise Price or be taken into account in computing any subsequent adjustment of the Exercise Price.

(c)           Whenever the number of Shares purchasable on the exercise of each Warrant is adjusted, as herein provided, the Exercise Price payable on exercise of each Warrant shall be adjusted by multiplying such Exercise Prices immediately prior to such adjustment by a fraction, of which the numerator shall be the number of Shares purchasable on the exercise of each Warrant immediately prior to such adjustment and of which the denominator shall be the number of Shares so purchasable immediately thereafter.

(d)           Whenever the number of Shares purchasable on the exercise of each Warrant or the Exercise Prices of such Shares are adjusted, as herein provided, the Company shall promptly mail by first class mail, postage prepaid, to each Holder of a Warrant or Warrants notice of such adjustment or adjustments setting forth the number of Shares purchasable on the exercise of each Warrant and the Exercise Price of such Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

(e)           For the purpose of this subsection, the term “common stock” shall mean (i) the class of stock designated as the common stock of the Company at the date of this Agreement, (ii) any other class of stock resulting form successive changes or reclassifications of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value; or (iii) as a result of a merger, consolidation or reorganization of the Company into another company shall be those shares of securities designated as “common stock” by the successor corporation, and if such corporation’s stock is traded, those series of stock which are traded.  In the event that at any time, as a result of an adjustment made pursuant to paragraph (a), above, the holders of a Warrant or Warrants shall  become entitled to purchase any securities of the Company other than Shares, thereafter the number of such other securities so purchasable on exercise of each Warrant and the Exercise Prices of such securities shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to each share of Common Stock contained in paragraphs (a) through (d), inclusive, above.

6.           Fractional Interest.  The Company shall not be required to issue fractional shares on the exercise of Warrants.  If more than one Warrant shall be presented for exercise in full at the same time by the same Holder, the number of full shares which shall be issuable on the exercise thereof shall be computed on the basis of the aggregate number of shares represented by the Warrants so presented.  The Company shall pay an amount in cash equal to the current value of such fraction computed on the basis of the Exercise Price per-share of the Warrants being exercised.

 

 

  

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7.           No Right as Shareholder; Notices to Warrant Holders. Nothing contained in this Warrant shall be construed as conferring on the Holder or its transferee the right to vote or to receive dividends or to consent or to receive notice as shareholders in respect of the meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as shareholder of the Company.

8.           Restrictions.  The holder of this Warrant, by acceptance hereof, both with respect to the Warrant and the Shares to be issuable upon exercise of the Warrant (unless issued pursuant to an effective registration statement under the Securities Act), represents and warrants as follows:

(a)           The Warrant and the Shares are being acquired for the holder's own account to be held for investment purposes only and not with a view to, or for, resale in connection with any distribution of such Warrant or Shares or any interest therein without registration or other compliance under the Securities Act, and the holder hereof has no direct or indirect participation in any such undertaking or in underwriting such an undertaking.

(b)           The holder hereof has been advised and understands that the Warrant and the Shares have not been registered under the Securities Act and the Warrant and/or the Shares must be held and may not be sold, transferred, or otherwise disposed of for value unless they are subsequently registered under the Securities Act or an exemption from such registration is available; except as set forth herein, the Company is under no obligation, except as set forth in section 9 hereof, to register the Warrant and/or the Shares under the Securities Act; in the absence of such registration, sale of the Warrant or Shares may be impracticable; the Company's registrar and transfer agent will maintain stop-transfer orders against registration of transfer of the Warrant and the Shares; and the certificates to be issued for any Shares will bear on their face a legend in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ( THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.  THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT OR THE LAWS OF THE APPLICABLE STATE OR A "NO-ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER AND ITS COUNSEL TO THE EFFECT THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE STATUTES.

(c)           The Company may refuse to transfer the Warrant and/or the Shares unless the holder thereof provides an opinion of legal counsel reasonably satisfactory to the Company or a "no-action" or interpretive response from the Securities and Exchange Commission to the effect that the transfer is proper; further, unless such letter or opinion states that the Warrant and/or Shares are free from any restrictions under the Securities Act, the Company may refuse to transfer the Warrant and/or the Shares to any transferee who does not furnish in writing to the Company the same representations and agree to the same conditions with respect to such Warrant or Shares if any set forth herein.  The Company may also refuse to transfer the Warrant or Shares if any circumstance is present reasonably indicating that the transferee's representations are not accurate.

 

 

  

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9.           Redemption of Warrants by the Company.   The Warrants are subject to redemption by the Company during the Exercise Period at a redemption price of $0.10 per Warrant, on 30 days written notice to the Holders if the Company has a registration statement filed with the Securities and Exchange Commission registering the shares of Common Stock issueable on exercise of the Warrants and the underling price for shares of the Company’s common stock is trading at $2.50 per share.  To redeem the Warrants, the Company must provide notice to the Warrant holder stating that the Warrants will be automatically redeemed 30 days from the date of such notice unless earlier exercised in accordance with the terms of the Warrants.  Each Holder of the Warrants remaining unexercised after the expiration of the 30 day period shall be required to tender their Warrant or Warrants, duly endorsed, to the Company at its address.  On surrender of the Warrants, the Company will deliver the redemption amounts to the Warrant Holder.  Warrant Holders have the right to exercise their Warrants in accordance with, and complying with, the terms of the Warrant during the 30 days prior to redemption.  Once the 30 day redemption period has expired, no Warrant may be exercised.

10.           Adjustment to Warrant.   Due to the uncertainties regarding the future exercise of the Warrants, and the nature of the Company’s proposed activities, the board of directors has the authority, in its sole discretion, to reduce the exercise price of the Warrants, extend the exercise period, or otherwise modify the terms of such Warrants in a manner not prejudicial to the Warrant holders.  Any such modification shall be effective on notice in writing to the holders of record of the Warrants.

11.           Cancellation of Warrant.  This warrant shall be cancelled and of not exercisable if the holder does not convert his, her or its Debenture, of which this Warrant formed a Unit at the time of issuance, into shares of Common Stock.  Additionally, this Warrant may not be exercised until such Debenture is converted into shares of Common Stock.

12.           Severability.  In case any provision in this Warrant shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

13.           Governing Law.  This Warrant shall be governed by and construed and interpreted in accordance with the laws of the State of Nevada.

14.           Legal Holidays.  In any case where any date provided herein shall not be a business day, then (notwithstanding any other provision of this Warrant) the event required or permitted on such date shall be required or permitted, as the case may be, on the next succeeding business day with the same force and effect as if made on the date upon which such event was required or permitted pursuant hereto.

15.           Mutilated or Missing Warrant.  Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen, or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, and upon reimbursement of the Company’s reasonable incidental expenses, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor, and denomination.

 

 

  

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16.           Attorneys Fees.  In any action at law or in equity to enforce any of the provisions or rights under this Agreement, the unsuccessful party to such litigation, as determined by a court in a final judgment or decree, shall pay the successful party or parties all costs, expenses, and reasonable attorneys’ fees incurred therein by such party or parties (including without limitation such costs, expenses, and fees on any appeal), and if such successful party shall recover judgment in any such action or proceeding, such costs, expenses, and attorney’s fees shall be included as part of such judgment.

17.           Headings.  The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction thereof.

DATED effective as of the   day of   2010.

ATTEST:                                                                CALIBRUS, INC.

By                             SPECIMEN                        By                             SPECIMEN

      Its Secretary                                                       Its President

 

 

  

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FORM OF EXERCISE

(To be executed by the Holder at the time of exercise)

 Date:                                      

CALIBRUS, INC.

1225 West Washington

Phoenix, Arizona 85281

Re:           Exercise of Warrant

Gentlemen:

The undersigned, the Holder of this Warrant hereby irrevocably exercises its right to purchase this Warrant or the portion hereof designated, into shares of Common Stock, no par value per share, of Calibrus, Inc., in accordance with the terms of this Warrant, and directs that the shares issuable and deliverable upon the exercise, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned unless a different name has been indicated below.  If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay any transfer taxes payable with respect thereto.

Number of Warrants Exercised:  _______

Exercised Price Attached:  $________                                                                           

(Signature, must conform in all respects to the name of Holder as specified on the face of the Warrant)

FILL IN FOR REGISTRATION OF SHARES

___________________________________

(Printed Name)                                                                                           (Social Security or Tax I.D. Number)

                                                                                 

(Street Address)

                                                                                                                                                                      

(City, State, and Zip Code)                                                                      Portion to be exercised (if less than all)

 

 

  

-7-EXHIBIT 4.1

Exhibit 4.1

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

TELKONET, INC.

 

WARRANT TO PURCHASE COMMON STOCK

 

			
	  

	  

	  

	Warrant No. ____

	  

	Original Issue Date: April _____, 2011

 

Telkonet, Inc., a Utah corporation (the “Company”), hereby certifies that, for value received, ___________ or his/her/its permitted registered assigns (the “Holder”), is entitled to purchase from the Company up to a total of ___________ shares of common stock, $0.001 par value per share (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at an exercise price per share equal to thirteen cents ($.13) (the “Exercise Price”), at any time and from time to time on or after the date hereof (the “Original Issue Date”) and through and including 5:30 P.M., New York City time, on April ____ 2016 (the “Expiration Date”), and subject to the following terms and conditions:

This Warrant (this “Warrant”) is one of a series of similar warrants issued pursuant to that certain Securities Purchase Agreement, dated April ____, 2011, by and among the Company and the Purchasers identified therein (the “Purchase Agreement”).  All such Warrants are referred to herein, collectively, as the “Warrants.”

 

1.           Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Purchase Agreement.

  

2.           Registration of Warrants. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder (which shall include the initial Holder or, as the case may be, any registered assignee to which this Warrant is permissibly assigned hereunder) from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

3.           Registration of Transfers. Subject to the restrictions on transfer set forth in Section 4.1 of the Purchase Agreement and compliance with all applicable securities laws, the Company shall 

register the transfer of all or any portion of this Warrant in the Warrant Register, upon (x) surrender of this Warrant, with the Form of Assignment attached as Schedule 2 hereto duly completed and signed, to the Company’s transfer agent or to the Company at its address specified in the Purchase Agreement, (y) delivery, at the request of the Company, of an opinion of counsel reasonably satisfactory to the Company to the effect that the transfer of such portion of this Warrant may be made pursuant to an available exemption from the registration requirements of the Securities Act and all applicable state securities or blue sky laws and (z) delivery by the transferee of a written statement to the Company certifying that the transferee is an “accredited investor” as defined in Rule 501(a) under the Securities Act and making the representations and certifications set forth in Sections 3.2(b), (c) and (d) of the Purchase Agreement, to the Company at its address specified in the Purchase Agreement.  Upon any such registration or transfer, a new warrant to purchase Common Stock in substantially the form of this Warrant (any such new warrant, a “New Warrant”) evidencing the portion of this Warrant so transferred shall be issued to the transferee, and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the New Warrant that the Holder has in respect of this Warrant. The Company shall prepare, issue and deliver at its own expense any New Warrant under this Section 3.

 

4.           Exercise and Duration of Warrants.

 

(a)           All or any part of this Warrant shall be exercisable by the registered Holder  in the manner permitted by Section 10 of this Warrant at any time and from time to time on or after the Original Issue Date and through and including 5:30 P.M. New York City time, on the Expiration Date.  Upon the earlier of (i) 5:30 P.M., New York City time, on the Expiration Date, (ii) full exercise of this Warrant, or (iii) subject to Section 4(b), consummation of a Change of Control (as defined below), the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and no longer outstanding.

For the purposes hereof each of the following events shall constitute a “Change of Control”:

(i)           a merger, consolidation or share exchange in which

 

 

			
	  

	(x)

	the Company is a constituent party or 

	 
	(y)

	a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation,

 

except any such merger or consolidation involving the Company or a subsidiary in which the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation (provided that, for the purpose of this Section 4(a), all shares of Common Stock issuable upon exercise of options outstanding immediately prior to such merger or consolidation or upon conversion of convertible securities outstanding immediately prior to such merger or 

consolidation shall be deemed to be outstanding immediately prior to such merger or consolidation and, if applicable, converted or exchanged in such merger or consolidation on the same terms as the actual outstanding shares of Common Stock are converted or exchanged); or

 

(ii)           the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company.

 

Notwithstanding the foregoing, a financing shall not constitute a Change of Control.

(b)           Immediately prior to the consummation of a Change of Control, the Warrant Shares shall automatically be deemed exercised for Common Stock if the price per share of the Common Stock is above the Exercise Price.

(c)           The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached as Schedule 1 hereto (the “Exercise Notice”), completed and duly signed,  and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised, and the date on which the last of such items is delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.” The delivery by (or on behalf of) the Holder of the Exercise Notice and the applicable Exercise Price as provided above shall constitute the Holder’s certification to the Company that its representations contained in Sections 3.2(b), (c) and (d) of the Purchase Agreement are true and correct as of the Exercise Date as if remade in their entirety (or, in the case of any transferee Holder that is not a party to the Purchase Agreement, such transferee Holder’s certification to the Company that such representations are true and correct as to such assignee Holder as of the Exercise Date).  The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder.  Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.

5.           Delivery of Warrant Shares. Upon exercise of this Warrant, the Company shall promptly (but in no event later than three (3) Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate (provided that, if the Registration Statement is not effective and the Holder directs the Company to deliver a certificate for the Warrant Shares in a name other than that of the Holder or an Affiliate of the Holder, it shall deliver to the Company on the Exercise Date an opinion of counsel reasonably satisfactory to the Company to the effect that the issuance of such Warrant Shares in such other name may be made pursuant to an available exemption from the registration requirements of the Securities Act and all applicable state securities or blue sky laws), (i) a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends, or (ii) an electronic delivery of the Warrant Shares to the Holder’s account at the Depository Trust Company (“DTC”) or a similar organization, unless in the case of clause (i) and (ii) a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective or the Warrant Shares are not freely transferable without volume and manner of sale restrictions pursuant to Rule 144 under the Securities Act, in which case such Holder shall receive a certificate for the Warrant Shares issuable upon such exercise with appropriate restrictive legends.  The Holder, or any Person 

permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date.  If the Warrant Shares are to be issued free of all restrictive legends, the Company shall, upon the written request of the Holder, use its reasonable best efforts to deliver, or cause to be delivered, Warrant Shares hereunder electronically through DTC or another established clearing corporation performing similar functions, if available; provided, that, the Company may, but will not be required to, change its transfer agent if its current transfer agent cannot deliver Warrant Shares electronically through such a clearing corporation.

 

6.           Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or the Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

 

7.           Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction (in such case) and, in each case, a customary and reasonable indemnity and surety bond, if requested by the Company. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.

 

8.           Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares that are initially issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will take all such action as may be reasonably necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed.

 

9.           Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9.

 

(a)           Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock into a larger number of shares, (iii) combines its 

outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of Common Stock any shares of capital of the Company, then in each such case the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately before such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

 

(b)           Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock for no consideration (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph) or (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, “Distributed Property”), then, upon any exercise of this Warrant that occurs after the record date fixed for determination of stockholders entitled to receive such distribution, the Holder shall be entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), the Distributed Property that such Holder would have been entitled to receive in respect of such number of Warrant Shares had the Holder been the record holder of such Warrant Shares immediately prior to such record date without regard to any limitation on exercise contained therein.

 

(c)           Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section 9, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

 

10.           Payment of Exercise Price. The Holder shall pay the Exercise Price in immediately available funds.

 

11.           No Fractional Shares. No fractional Warrant Shares will be issued in connection with any exercise of this Warrant.  In lieu of any fractional shares that would otherwise be issuable, the number of Warrant Shares to be issued shall be rounded down to the next whole number and the Company shall pay the Holder in cash the fair market value (based on the closing sale price) for any such fractional shares.

 

12.           Notices. Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Purchase Agreement prior to 5:30 P.M., New York City time, on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Purchase Agreement on a day that is not a Trading Day or later than 5:30 P.M., New York City time, on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service specifying next business day delivery, or (iv) upon actual receipt by the Person to whom such notice is required to be given, if by hand delivery. The address and facsimile number of a Person for such notices or communications shall 

be as set forth in the Purchase Agreement unless changed by such Person by two (2) Trading Days’ prior notice to the other Persons in accordance with this Section 12.

 

13.           Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act.  Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.

 

14.           Miscellaneous.

 

(a)   No Rights as a Stockholder.  The Holder, solely in such Person's capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person's capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, amalgamation, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

 

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

 

(c)   Successors and Assigns. Subject to the restrictions on transfer set forth in this Warrant and in Section 4.1 of the Purchase Agreement, and compliance with applicable securities laws, this Warrant may be assigned by the Holder. This Warrant shall be binding on and inure to the benefit of the Company and the Holder and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under 

this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder, or their successors and assigns.

 

(d)   Amendment and Waiver.  Except as otherwise provided herein, the provisions of the Warrants may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holders of Warrants representing no less than a majority of the Warrant Shares obtainable upon exercise of the Warrants then outstanding.

 

(e)   Acceptance. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

 

(f)   Governing Law; Jurisdiction. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT. EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PERSON AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THE PURCHASE AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. EACH OF THE COMPANY AND THE HOLDER HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY. 

 

(g)           Headings.   The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

 

(h)           Severability.  In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby, and the Company and the Holder will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

  

[Next Page is the Signature Page]

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

 

 

		
	 

	TELKONET, INC.

	 

	 

	 

	 

	 

	By:  _______________________ 

	 

	Name:   Jason Tienor

	 

	Title:     Chief Executive Officer

 

 

 

SCHEDULE 1

FORM OF EXERCISE NOTICE

[To be executed by the Holder to purchase shares of Common Stock under the Warrant]

 

Ladies and Gentlemen:

(1)           The undersigned is the Holder of Warrant No. __________ (the “Warrant”) issued by Telkonet, Inc., a Utah corporation (the “Company”). Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.

(2)           The undersigned hereby exercises its right to purchase __________ Warrant Shares pursuant to the Warrant.

(3)           The Holder shall pay the sum of $___________ in immediately available funds to the Company in accordance with the terms of the Warrant.

(4)           Pursuant to this Exercise Notice, the Company shall deliver to the Holder Warrant Shares determined in accordance with the terms of the Warrant.

 

 

Dated:____________________

 

Name of Holder:  ____________________________

 

By:_________________________________      

Name: _______________________________

Title:  _______________________________

(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

 

SCHEDULE 2

FORM OF ASSIGNMENT

 

[To be completed and executed by the Holder only upon transfer of the Warrant]

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                              (the “Transferee”) the right represented by the within Warrant to purchase                  shares of Common Stock of Telkonet, Inc., a Utah company, (the “Company”) to which the within Warrant relates and appoints                              attorney to transfer said right on the books of the Company with full power of substitution in the premises. In connection therewith, the undersigned represents, warrants, covenants and agrees to and with the Company that:

		
	(a)

	the offer and sale of the Warrant contemplated hereby is being made in compliance with Section 4(1) of the United States Securities Act of 1933, as amended (the “Securities Act”) or another valid exemption from the registration requirements of Section 5 of the Securities Act and in compliance with all applicable securities laws of the states of the United States;

 

		
	(b)

	the undersigned has not offered to sell the Warrant by any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and any seminar or meeting whose attendees have been invited by any general solicitation or general advertising;

 

		
	(c)

	the undersigned has read the Transferee’s investment letter included herewith, and to its actual knowledge, the statements made therein are true and correct; and

 

		
	(d)

	the undersigned understands that the Company may condition the transfer of the Warrant contemplated hereby upon the delivery to the Company by the undersigned or the Transferee, as the case may be, of a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable securities laws of the states of the United States.

 

			
	Dated:   __________________________

	  

	__________________________________________  

	  

	  

	(Signature must conform in all respects to name of 

holder as specified on the face of the Warrant)

	 

	 

	 

	  

	  

	__________________________________________  

	  

	  

	Address of Transferee

	  

	  

	  

	  

	  

	__________________________________________ 

	In the presence of:

	  

	  

	 

	 

	__________________________________________ 

	________________________________

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