8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 5, 2006 (November 30, 2006)

POWER EFFICIENCY CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	0-31805	22-3337365
(State or other jurisdiction of incorporation)	Commission File Number	(IRS Employer Identification No.)

3960 Howard Hughes Pkwy, Suite 460, Las Vegas, NV	89169
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (702) 697-0377

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR 240.13e-4(c))

INFORMATION TO BE INCLUDED IN THE REPORT

Item 1.01 Entry into a Material Definitive Agreement.

On November 30, 2006, Power Efficiency Corporation (the “Company”) issued and sold units, each unit consisting of two shares of Company common stock and a warrant to purchase one share of common stock, resulting in the sale and issuance of an aggregate of 10,700,008 shares of its common stock and 5,350,004 warrants to purchase its common stock (the “Equity Warrants”), in a private offering (the “Offering”) for $3,210,000 in cash, cancellation of indebtedness and in lieu of compensation owed to certain employees, officers and directors of the Company, all as described in Item 3.02 below. The effective per share purchase price of the common stock was $0.30. In connection with the Offering, the Company must use best efforts to file a registration statement (the “Registration Statement”) to register the common stock issued, as well as those issuable upon exercise of the Equity Warrants, not later than 60 days from the termination of the Offering, and must use its best efforts to have the Registration Statement declared effective not later than 120 days from the termination of the Offering. The Offering will terminate at the earlier of January 31, 2007 or when the Company raises gross proceeds of $4,500,000 under the Offering. The registration obligations of the Company are as set forth in Section 7 of the Securities Purchase Agreement filed as an exhibit hereto. Failure to comply with these registration obligations shall result in the imposition of liquidated damages, requiring the Company to issue to each investor additional shares of Company common stock such that the number of shares of Common Stock included within each unit shall be increased by two percent (2%), up to a maximum additional aggregate percentage amount of twelve percent (12%).

Item 2.03 Creation of a Direct Financial Obligation.

On November 30, 2006, the Company entered into a financing transaction in which the Company issued $2,000,000 of its two year, senior, secured promissory notes (collectively the “Notes”, individually a “Note”). The Notes bear interest of 15% per annum. Interest due under the Notes is payable quarterly, with the principal and final quarterly interest payment becoming due November 30, 2008. The Notes have a first priority security interest in all of the assets of the Company. Upon the occurrence of an “Event of Default” (as defined in the Note, included herein as an exhibit) the holder may, upon written notice to the Company, 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 business days to cure the Event of Default, and if uncured on the eighth business day, all principal and interest shall become immediately due and payable. The Company also issued common stock purchase warrants to purchasers of the Notes as part of such transaction.

The $2,000,000 loan consisted of $550,000 from Steven Strasser, the Company’s Chairman, Chief Executive Officer and the Company’s largest beneficial shareholder, $200,000 from Commerce Energy Group, Inc, the Company’s second largest shareholder prior to the Offering, and $1,250,000 from individual investors. $1,450,000 of these Notes came from the exchange of existing promissory notes of the Company.

The Company’s previously issued notes, including $1,464,306 issued on October 27, 2004, $125,000 issued on February 24, 2005 (collectively the “Pali Notes”) and $1,500,000 issued to EMTUCK, LLC, were paid off and such paid off note holders no longer hold a security interest in the Company’s assets.

Item 3.02 Unregistered Sale of Securities.

On November 30, 2006, the Company issued the Notes in the transaction described above, together with 2,500,000 warrants (the “Debt Warrants”) to purchase common stock of the Company to the holders of the Notes. The Debt Warrants have a per share exercise price of $0.40 and expire November 29, 2011. 1,250,000 of the Debt Warrants are exercisable immediately, with the remaining 1,250,000 Debt Warrants becoming exercisable in equal amounts over 24 months beginning December 29, 2006. The common stock issuable upon exercise of the Debt Warrants have piggyback registration rights, and can be included in the Company’s next registration statement. The Debt Warrants have a cashless exercise provision, but only if the registration statement on which the common stock issuable upon exercise of the Debt Warrants is not then effective.

On November 30, 2006, the Company issued and sold 10,700,008 shares of its common stock and 5,350,004 warrants to purchase its common stock (the “Equity Warrants”), in a private offering (the “Offering”) for $3,210,000 in cash, cancellation of indebtedness and in lieu of compensation owed to certain employees, officers and directors of the Company. The per share purchase price of the common stock was $0.30. The Equity Warrants have a per share exercise price of $0.40, are exercisable immediately and expire November 29, 2011. The Company must use best efforts to file a Registration Statement to register the common stock issued, together with those issuable upon exercise of the Equity Warrants, not later than 60 days from the termination of the Offering, and must use its best efforts to have the Registration Statement declared effective not later than 120 days from the termination of the Offering. The Offering will terminate at the earlier of January 31, 2007, or when the Company raises gross proceeds of $4,500,000 under the Offering. The Equity Warrants have a cashless exercise provision, but only if the Registration Statement is not then effective.

The $3,210,000 investment consisted of $400,000 from the cancellation of indebtedness owed by the Company, approximately $50,000 in lieu of compensation owed to certain employees, officers and directors of the Company, and approximately $2,760,000 in new cash.

Both of the Offering and the sale of the Notes were conducted pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Regulation D, Section 4(2) and Rule 506 thereunder. No placement agent or underwriter is entitled to compensation in connection with either the Offering or the sale of the Notes and there is no commission, finder’s fee or other compensation due or owing to any party as a result of the transactions described herein.

Item 9.01. Exhibits

Description of Document
4.1	Form of Note
4.2	Form of Debt Warrant
4.3	Form of Equity Warrant
10.1	Form of Securities Purchase Agreement

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

POWER EFFICIENCY CORPORATION (Registrant)
By:	/s/ Steven Strasser
	Steven Strasser, CEO

Date: December 5, 2006

EX-4.1

EXHIBIT 4.1

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON, INCLUDING A PLEDGEE, UNLESS (1) EITHER (A) A REGISTRATION STATEMENT WITH RESPECT THERETO SHALL BE EFFECTIVE UNDER THE SECURITIES ACT, OR (B) THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE, AND (2) THERE SHALL HAVE BEEN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS.

15% SENIOR SECURED PROMISSORY NOTE

No. [_]

US$             November 30, 2006

THIS NOTE is one of a duly authorized issue of senior secured promissory notes (each, a “Note” and collectively, the “Notes”) of Power Efficiency Corporation, a corporation duly organized and validly existing under the laws of the State of Delaware (“Power Efficiency”, “Borrower” or “Company”). The Notes are designated as the 15% Senior Secured Promissory Notes, in an aggregate maximum principal face value for all Notes of this series (the “Series”) of Two Million and no/100 United States Dollars (US $2,000,000.00).

FOR VALUE RECEIVED, the Company promises to pay to the registered holder hereof,             , or its successors or assigns (the “Holder”), the principal sum of              ($            ), or such other amount as shall then equal the outstanding principal amount hereof, in accordance with the terms hereof, and to pay interest on the principal sum outstanding at the rate of fifteen percent (15%) per annum. Accrual of interest on the outstanding principal amount shall commence on the date hereof and shall continue until payment in full of the outstanding principal amount has been made or duly provided for.

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

1. Principal Repayment. The outstanding principal amount of this Note, and all accrued but unpaid interest, shall be paid on or before November 29, 2008 (the “Maturity Date”).

2. Interest. (a) The holders of the Notes are entitled to receive interest (“Interest”) at an annual rate of fifteen percent (15%) of the principal dollar value of the Notes held. Accrued interest on each Note shall be payable (a) upon the payment in full or prepayment of any portion of the Note (but only on the principal amount so paid) and (b) quarterly, in arrears, on each three-month anniversary of the date of this Note, commencing February 28, 2007.

(b) 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 2(b) shall survive the satisfaction or termination of this Note.

3. Prepayment. The Company may prepay the principal and interest due on this Note, at any time, in whole or in part, without penalty or premium. In the event this Note is repaid in full any and all unvested warrants held by Holder to purchase shares of the Company’s common stock shall be cancelled as of the date of the tendering of such payment.

4. Collateral. This Note is secured by a Security Agreement, dated as of the date hereof (as amended, modified or supplemented from time to time, the “Security Agreement”), executed by the Company in favor of all Holders of Notes, covering the specified assets of the Company therein described (collectively, the “Collateral”), which Security Agreement secures the payment and performance of all obligations under the Notes. The Security Agreement and the Uniform Commercial Code financing statements in connection with the Security Agreement, and any and all other documents executed and delivered by the Company to the Holder under which the Holder is granted liens on assets of the Company, are collectively referred to as the “Security Documents.”

5. Rights upon Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of the Notes shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of any debt or equity security of the Company, an amount equal to the unpaid principal face amount of their respective Notes and any accrued and unpaid interest thereon.

6. Merger, Consolidation or Other Corporate Reorganization. A merger, consolidation or other corporate reorganization in which the Company’s stockholders shall receive cash or securities of another entity, or any transaction in which all or substantially all of the assets of the Company are sold shall be treated as a liquidation for purposes of the liquidation preference set forth in Section 5 hereof.

7. Affirmative Covenants of the Company. The Company and each of its subsidiaries (the “Subsidiaries”) hereby agree that, so long as the Note remains outstanding and unpaid, the Company and the Subsidiaries will and with respect to the agreements set forth in this Section 7 hereof:

(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 and to make any necessary filings to prosecute the pending patent applications. In the event such steps are not taken to the reasonable satisfaction of the Holder, Holder shall have the right (at the Borrower’s expense) to take all necessary steps to preserve the value of the Collateral; and

(e) Not grant any party other than the Holders of the Notes a security interest in any of the Collateral senior to the Holders.

8. Representations and Warranties. Borrower represents and warrants to the Holder that:

(a) Organization; Powers. 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 effect on the business, property, operations, prospects or condition (financial or otherwise) of the Borrower and its subsidiaries, taken as a whole, 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 are within Borrower’s corporate powers and have been duly authorized by all necessary corporate (including, if required, stockholder) action. This Note has been duly executed and delivered by the Borrower and 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 will not: (i) 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 or (ii) result in the creation or imposition of any lien on any property or asset of Borrower other than the liens created under the Security Agreement.

(d) Properties and Assets.

(i) Borrower has good title to all its property and assets, free and clear of all liens (other than the liens of the Security Agreement), 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) 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 Borrower does not infringe upon the rights of any other person or entity.

9. Events of Default. Upon any one or more of the following events or occurrences (“Events of Default”):

(a) if any portion of the Note is not paid when due;

(b) if any final judgment for the payment of money in excess of $100,000 is rendered against the Company and the Company does not discharge the same or cause it to be discharged or vacated within one hundred twenty (120) days from the entry thereof, or does not appeal therefrom or from the order, decree or process upon which or pursuant to which said judgment was granted, based or entered, and does not secure a stay of execution pending such appeal within one hundred twenty (120) days after the entry thereof;

(c) if the Company makes an assignment for the benefit of creditors or if the Company generally does not pay its debts as they become due; or

(d) if a receiver, liquidator or trustee of the Company is appointed or if the Company is adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, is filed by or against, consented to, or acquiesced in, by the Company or if any proceeding for the dissolution or liquidation of the Company is instituted; however, if such appointment, adjudication, petition or proceeding is involuntary and is not consented to by the Company, it shall constitute an Event of Default only upon the same not being discharged, stayed or dismissed within 90 days,

then, Holder 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 (8^th) business day, all principal and accrued interest shall become immediately due and payable.

10. Note Holder Not Deemed a Stockholder. No Holder of this Note shall be entitled to vote or receive dividends or be deemed the holder of shares of the Company’s common stock for any purpose, nor shall anything contained in this Note be construed to confer upon the Holder hereof, as such, any of the rights at law of a stockholder of the Company.

11. Mutilated, Destroyed, Lost or Stolen Notes. In case this Note shall become mutilated or defaced, or be destroyed, lost or stolen, the Company shall execute and deliver a new note of like principal amount in exchange and substitution for the mutilated or defaced Note, or in lieu of and in substitution for the destroyed, lost or stolen Note. In the case of a mutilated or defaced Note, the Holder shall surrender such Note to the Company. In the case of any destroyed, lost or stolen Note, the Holder shall furnish to the Company (a) evidence to its satisfaction of the destruction, loss or theft of such Note and (b) such security or indemnity as may be reasonably required by the Company to hold the Company harmless.

12. Payment. Except as otherwise provided for herein, all payments with respect to this Note shall be made in lawful currency of the United States of America, at the option of the Holder, (i) at the principal office of the Holder, or such other place or places as may be reasonably specified by the Holder of this Note in a written notice to the Company at least five (5) business days before a given payment date, or (ii) by mailing a good check in the proper amount to the Holder at least two days prior to the due date of each payment or otherwise transferring funds so as to be received by the Holder on the due date of each such payment; provided, however, that the Company shall make payment by wire transfer to an account such Holder may specify in writing to the Company at least two days prior to the due date of each payment. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal. The Holder shall keep a record of each payment of principal and interest with respect thereto.

13. Assignment. The rights and obligations of the Company and the Holder of this Note shall be binding upon, and inure to the benefit of, the permitted successors, assigns, heirs, administrators and transferees of the parties hereto. Notwithstanding the foregoing, the Holder may not assign, pledge or otherwise transfer this Note without the prior written consent of the Company. Interest and principal are payable only to the registered Holder of this Note.

14. Waiver and Amendment. Any provision of this Note, including, without limitation, the due date hereof, and the observance of any term hereof, may be amended, waived or modified (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the holders of greater than 50% of the face amount of all then outstanding Notes issued in the Series.

15. Amendment Provision. The term “Note” and all references thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented, and any successor instrument as such successor instrument may be amended or supplemented.

16. Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

17. Notices. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail, postage prepaid, or delivered by facsimile transmission, to the Company or the Holder at the address or facsimile number set forth herein. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given when personally delivered or when deposited in the mail in the manner set forth above and shall be deemed to have been received when delivered or, if notice is given by facsimile transmission, when delivered with confirmation of receipt.

18. Governing Law, Jurisdiction and Waiver of Jury Trial.

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

THE COMPANY HEREBY CONSENTS AND AGREES THAT THE APPLICABLE STATE OR FEDERAL COURTS LOCATED IN THE STATE OF NEVADA SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE OTHER RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE OR ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEVADA; AND FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

THE COMPANY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER AND THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

19. Arbitration. In the event any controversy or dispute shall arise between the parties under, out of, in connection with, or relating to this Note or the breach thereof, the party initiating such controversy or making such claim shall provide to the other party notice containing a brief and concise statement of the initiating party’s claims, together with relevant facts supporting them. Following the date of said notice, the parties shall make good faith efforts to settle the dispute. In the event the parties have been unable to reach accord using the procedures set forth in this section, either party may seek binding arbitration before three (3) arbitrators in accordance with the rules of the American Arbitration Association (“AAA”). Each party shall appoint one arbitrator and the appointed arbitrators shall appoint the third arbitrator. In the event the two appointed arbitrators are unable to agree upon the third arbitrator, the AAA shall designate the third arbitrator to arbitrate the controversy or dispute. The arbitration shall be held in Las Vegas, Nevada. Within thirty (30) days after initiation of arbitration, the parties shall reach agreement upon and thereafter follow procedures assuring that the arbitration will be concluded and the award rendered within no more than six (6) months from selection of the three arbitrators. Failing such agreement, AAA will design, and the parties will follow, such procedures. THE ARBITRATORS SHALL NOT AWARD ANY PARTY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES, AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO SEEK SUCH DAMAGES. Each party has the right before or during the arbitration to seek and obtain from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc., to avoid irreparable harm, maintain the status quo or preserve the subject matter of the arbitration.

20. Severability. In the event any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.

21. Expenses. Each party shall bear its own expenses incurred in connection with all transactions in respect of the Notes, except that Borrower shall reimburse the Holder for its reasonable legal expenses incurred in connection with such transactions.

22. Construction. Each party acknowledges that its legal counsel participated in the preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Note to favor any party against the other.

23. Headings. Section headings in this Note are for convenience only, and shall not be used in the construction of this Note.

[Signature Page Follows]

IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first above written.

POWER EFFICIENCY CORPORATION
By:
Name:	Steven Z. Strasser
Title:	Chief Executive Officer

EX-4.2

EXHIBIT 4.2

NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY OTHER APPLICABLE STATE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS. THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF A UNITED STATES PERSON UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

STOCK PURCHASE WARRANT

Warrant #             

To Purchase              Shares of Common Stock of

POWER EFFICIENCY CORPORATION

THIS CERTIFIES that, for value received,                                               (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, to subscribe for and purchase from POWER EFFICIENCY CORPORATION, a corporation incorporated in the State of Delaware (the “Company”), up to              shares (the “Warrant Shares”) of common stock, $0.001 par value, of the Company (the “Common Stock”) commencing at the times listed below (as applicable, the “Initial Exercise Date”) and ending on or prior to the close of business on November 29, 2011 (the “Termination Date”) but not thereafter. The Initial Exercise Date and vesting shall be as follows:

(i)              Warrants shall vest and be exercisable from the date hereof through the Termination Date; and

(ii) the remaining              Warrants shall vest and be exercisable in 24 (twenty-four) monthly installments (             (            ) installments of              Warrants beginning              until              and              (            ) installments of              beginning             , all of which shall be exercisable until the Termination Date; provided, however, in the event that certain 15% Senior Secured Promissory Note by and between the Company and Holder, dated November 30, 2006, is prepaid pursuant to its terms, any Warrants which have not yet vested shall immediately be cancelled and of no force and effect.

The exercise price of one Warrant Share under this Warrant shall be $0.40 (the “Exercise Price”). The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. Capitalized terms used and not

otherwise defined herein shall have the meanings set forth for such terms in the Subscription Agreement dated as of November 30, 2006 (the “Subscription Agreement”) pursuant to which this Warrant has been issued.

Title to Warrant. Prior to the Termination Date and subject to compliance with applicable laws and the terms hereof, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this Warrant, together with the Assignment Form annexed hereto, properly endorsed.

Authorization of Shares. The Company covenants that all Warrant Shares will, upon exercise of the purchase rights represented by this Warrant, upon payment of the Exercise Price and upon compliance by Holder with all other terms and conditions hereof, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

Exercise of Warrant.

Except as provided in Section 4 herein, exercise of the purchase rights represented by this Warrant, to the extent vested, may be made at any time or times on or after the Initial Exercise Date, and before the close of business on the Termination Date, by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof) and upon payment of the Exercise Price for the Warrant Shares thereby purchased, by wire transfer or cashier’s check drawn on a United States bank, the holder of this Warrant shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for Warrant Shares purchased hereunder shall be delivered to the holder hereof within five (5) trading days after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by Holder, if any, pursuant to Section 5 prior to the issuance of such Warrant Shares, have been paid.

If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares, which new Warrant shall in all other respects be identical with this Warrant.

If the Holder exercised its piggyback registration rights hereunder, but either (i) the registration statement has not become effective with respect to the Warrant Shares or (ii) if the Registration Statement with respect to the Warrant Shares has been declared effective, but there is a suspension or the registration statement ceases for any reason to remain continuously effective as to all Registrable Securities for which it is required to be effective or the Holders are

not permitted to utilize the prospectus therein to resell the Registrable Securities, such Warrant Shares shall be exercisable by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = the volume weighted average price per share of Common Stock on the trading day preceding the date of such election on The Over-the-Counter Bulletin Board, or if the Common Stock is not traded on The-Over-the-Counter Bulletin Board, then on the principal market or exchange on which the Common Stock is traded;

(B) = the Exercise Price of the Warrants; and

(X) = the number of Warrant Shares vested in accordance with the terms of this Warrant.

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

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

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

Transfer, Division and Combination.

Subject to compliance with any applicable securities laws, transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of shares of Common Stock without having a new Warrant issued.

This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7.

The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.

No Rights as Shareholder until Exercise. This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant certificate or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

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

Adjustments of Exercise Price and Number of Warrant Shares; Stock Splits, etc. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall: (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the holder of this Warrant shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which he would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the holder of this Warrant shall

thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

Reorganization Reclassification Merger Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be received by or distributed to the holders of Common Stock, then Holder shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of shares of Common Stock for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets.

Voluntary Adjustment by the Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is

adjusted, as herein provided, the Company shall promptly mail by registered or certified mail, return receipt requested, to the holder of this Warrant notice of such adjustment or adjustments setting forth the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) 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. Such notice, in the absence of manifest error, shall be conclusive evidence of the correctness of such adjustment. Notwithstanding the foregoing, if the Company fails to give notice to the Holder of any required adjustment set forth in this Warrant, then so long as the Company has made the adjustment(s) required by this Warrant, the failure of the Company to give notice of such adjustment to the Holder will not cause the Company to incur any liability.

Notice of Corporate Action. If at any time:

the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or

there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or,

there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

then, in any one or more of such cases, the Company shall give to Holder (i) at least 20 days’ (or as many days as is reasonably practicable) prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 20 days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 18(c).

Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number

of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the principal market upon which the Common Stock may be listed.

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

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

Piggyback Registration Rights. All Common Stock issuable upon exercise of this Warrant shall be deemed to be “Registrable Securities” or such other definition of securities entitled to registration rights pursuant to this Section 17. At any time commencing after the original issue date of this Warrant, if the Company shall determine to proceed with the preparation and filing of a new registration statement under the Act in connection with the sale of any of its securities by it or any of its security holders (other than a registration statement on Form S-4. S-8 or any successor forms), the Company will give written notice of its determination to the Holder of the Warrant and the Warrant Shares. Upon the written request from the Holders (the “Requesting Holders”), within fifteen (15) days after receipt of any such notice from the Company, the Company will, except as herein provided, cause all of the Warrant Shares covered by such request (the “Requested Stock”) held by the Requesting Holder to be included in such registration statement, all to the extent requisite to permit the sale or other disposition by the prospective seller or sellers of the Requested Stock; provided, however, that nothing herein shall prevent the Company from, at any time, abandoning or delaying any registration. If any registration pursuant to this Section 17 shall be underwritten in whole or in part, the Company may require that the Requested Stock be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters. In such event, the Requesting Holder shall, if requested by the underwriters, execute an underwriting agreement containing customary representations and warranties by selling stockholders. If in the good faith

judgment of the managing underwriter of such public offering the inclusion of all of the Requested Stock would reduce the number of shares to be offered by the Company or interfere with the successful marketing of the shares of stock offered by the Company, the number of shares of Requested Stock otherwise to be included in the underwritten public offering may be reduced pro rata among the Requesting Holder and all other holders of registration rights who have requested inclusion of their securities, or excluded in their entirety if so required by the underwriter; provided, however, no securities of other selling securities holders may be included in any registration statement unless the Warrant Shares have been included on a pro rata basis unless the Company, by contract with such other holder of registration rights was allowed to exclude others. The obligation of the Company under this Section 17 shall not apply after the earlier of (a) the date that all of the Warrant Shares have been sold pursuant to Rule 144 under the Act (b) a registration statement has been filed registering the Warrant Shares, or (c) such time as the Warrant Shares held by any Holder (i) are eligible for immediate resale pursuant to Rule 144(k) under the Act or (ii) are otherwise eligible for resale pursuant to Rule 144(k) within a period of three months.

The Company understands the Requesting Holders disclaim being underwriters, but a Requesting Holder being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has hereunder. In the event the SEC determines any registration statement filed by the Company constitutes a primary offering of securities by the Company and/or requires any Requesting Holder to be named as an underwriter, Requesting Holders understand and agree the Company may reduce, on a pro rata basis, the total number of Requested Stock to be registered on behalf of each such Requesting Holder. In the event of such reduction, the affected Requesting Holders shall continue to have the registration rights set forth herein until such time as: (i) all Registrable Securities have been registered pursuant to an effective registration statement, (ii) the Registrable Securities may be resold without restriction pursuant to Rule 144 of the Act or (iii) the Requesting Holders agree to be named as an underwriter in any such registration statement. Holders acknowledge and agree the provisions of this paragraph may apply to more than one registration statement and that the SEC may limit or condition any subsequent registration statement. If the Company receives notice from the SEC that it deems any Requesting Holder an “underwriter”, the Company shall notify all Requesting Holders of same within five (5) business days of the date of receipt of such notice.

In no event will any holder of this Warrant be entitled to receive a net-cash settlement in lieu of physical settlement in shares of Common Stock, regardless of whether any of such holder’s Warrant Shares are registered pursuant to an effective registration statement

Miscellaneous.

Jurisdiction. This Warrant shall constitute a contract under the laws of Nevada, without regard to its conflict of law, principles or rules, and be subject to arbitration pursuant to the terms set forth below.

Restrictions. The holder hereof acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

Notices. Any notice, request or other document required or permitted to be given or delivered to the holder hereof by the Company shall be delivered in accordance with the notice provisions of the Subscription Agreement.

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

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

Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

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

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

Arbitration. In the event any controversy or dispute shall arise between the parties under, out of, in connection with, or relating to this Warrant or the breach thereof, the party initiating such controversy or making such claim shall provide to the other party notice containing a brief and concise statement of the initiating party’s claims, together with relevant facts supporting them. Following the date of said notice, the parties shall make good faith efforts to settle the dispute. In the event the parties have been unable to reach accord using the procedures set forth in this Section 18, either party may seek binding arbitration before three (3) arbitrators in accordance with the rules of the American Arbitration Association (“AAA”). Each party shall appoint one arbitrator and the appointed arbitrators shall in turn appoint the third arbitrator. In the event the two appointed arbitrators are unable to agree upon the third arbitrator, the AAA shall designate the third arbitrator to arbitrate the controversy or dispute. The arbitration shall be held in Las Vegas, Nevada. Within thirty (30) days after initiation of arbitration, the parties shall reach agreement upon and thereafter follow procedures assuring that the arbitration will be concluded and the award rendered within no more than six (6) months from selection of the three arbitrators. Failing such agreement, AAA will design, and the parties will follow, such procedures. THE ARBITRATORS SHALL NOT AWARD ANY PARTY PUNITIVE OR EXEMPLARY DAMAGES, AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO SEEK SUCH DAMAGES. Each party has the right before or during the arbitration to seek and obtain from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc., to avoid irreparable harm, maintain the status quo or preserve the subject matter of the arbitration.

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated: November 30, 2006

POWER EFFICIENCY CORPORATION

By:

Name:

Title:

NOTICE OF EXERCISE

To: Power Efficiency Corporation

(1) The undersigned hereby elects to purchase shares of Common Stock (the “Common Stock”) of Power Efficiency Corporation, a Delaware corporation pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

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

(Name)

(Address)

Dated:

Signature

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

                                                                                                                                                                         whose address is                                                                                                                                                                                 .

Dated:                                                  ,         

Holder’s Signature:

Holder’s Address:

Signature Guaranteed:

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

EX-4.3

EXHIBIT 4.3

NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY OTHER APPLICABLE STATE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS. THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF A UNITED STATES PERSON UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

STOCK PURCHASE WARRANT

Warrant #             

To Purchase [            ] Shares of Common Stock of

POWER EFFICIENCY CORPORATION

THIS CERTIFIES that, for value received, [                                ] (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on November 29, 2011 (the “Termination Date”) but not thereafter, to subscribe for and purchase from POWER EFFICIENCY CORPORATION, a corporation incorporated in the State of Delaware (the “Company”), up to [                ] shares (the “Warrant Shares”) of Common Stock, $0.001 par value, of the Company (the “Common Stock”). The purchase price of one share of Common Stock (the “Exercise Price”) under this Warrant shall be $0.40. The Exercise Price and the number of shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. In the event of any conflict between the terms of this Warrant and the Securities Purchase Agreement dated as of November 30, 2006 pursuant to which this Warrant has been issued (the “Purchase Agreement”), the Purchase Agreement shall control. Capitalized terms used and not otherwise defined herein shall have the meanings set forth for such terms in the Purchase Agreement.

Title to Warrant. Prior to the Termination Date and subject to compliance with applicable laws and the terms hereof, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed.

Authorization of Shares. The Company covenants that all shares of Common Stock 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 in accordance with the other terms and conditions hereof, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

Exercise of Warrant.

Except as provided in Section 4 herein, exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date, and before the close of business on the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company) and upon payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank, the holder of this Warrant shall be entitled to receive a certificate for the number of shares of Common Stock so purchased. Certificates for shares purchased hereunder shall be delivered to the holder hereof within five (5) Trading Days after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid.

If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased shares of Common Stock called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

If as set forth in Article 7 of the Purchase Agreement, either (i) the Registration Statement has not become effective with respect to the Common Stock issued upon exercise of this Warrant or (ii) if the Registration Statement with respect to the Common Stock issued upon exercise of the Warrant has been declared effective, but there is a Suspension or the Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities for which it is required to be effective or the Investors are not permitted to utilize the prospectus therein to resell the Registrable Securities, then this Warrant shall be exercisable by means of a “cashless exercise” in which the holder shall be entitled to receive a certificate for the number of shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = the volume weighted average price per share of Common Stock on the trading day preceding the date of such election on The Over-the-Counter Bulletin Board, or if the Common Stock is not traded on The-Over-the-Counter Bulletin Board, then on the principal market or exchange that the Common Stock is traded on in terms of volume, and converted into US Dollars;

(B) = the Exercise Price of the Warrants; and

(X) = the number of shares issuable upon exercise of the Warrants in accordance with the terms of this Warrant.

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

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

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

Transfer, Division and Combination.

Subject to compliance with any applicable securities laws, transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of shares of Common Stock without having a new Warrant issued.

This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7.

The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.

No Rights as Shareholder until Exercise. This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

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

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

Adjustments of Exercise Price and Number of Warrant Shares; Stock Splits, etc. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the holder of this Warrant shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which he would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the holder of this Warrant shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

Reorganization Reclassification Merger Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be received by or distributed to the holders of Common Stock of the Company, then Holder shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of shares of Common Stock for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets.

Voluntary Adjustment by the Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall promptly mail by registered or certified mail, return receipt requested, to the holder of this Warrant notice of such adjustment or adjustments setting forth the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) 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. Such notice, in the absence of manifest error, shall be conclusive evidence of the correctness of such adjustment. Notwithstanding the foregoing, if the Company fails to give notice to the Holder of any required adjustment set forth in this Warrant, then so long as the Company has made the adjustment(s) required by this Warrant, the failure of the Company to give notice of such adjustment to the Holder will not cause the Company to incur any liability.

Notice of Corporate Action. If at any time:

the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or

there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or,

there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

then, in any one or more of such cases, the Company shall give to Holder (i) at least 20 days’ (or as many days as is reasonably practicable) prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 20 days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 18(c).

Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the principal market upon which the Common Stock may be listed.

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

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

Registration Rights. All Common Stock issuable upon exercise of this Warrant shall be deemed to be “Registrable Securities” or such other definition of securities entitled to registration rights pursuant to Section 7 of the Purchase Agreement, and are entitled, subject to the terms and conditions of the Purchase Agreement, to all rights granted to holders of Registrable Securities thereunder. In no event will any holder of this Warrant be entitled to receive a net-cash settlement in lieu of physical settlement in shares of Common Stock, regardless of whether any of such holder’s Warrant Shares are registered pursuant to an effective registration statement

Miscellaneous.

Jurisdiction. This Warrant shall constitute a contract under the laws of California, without regard to its conflict of law, principles or rules, and be subject to arbitration pursuant to the terms set forth in this Warrant.

Restrictions. The holder hereof acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

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

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

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

Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

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

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

Arbitration. In the event any controversy or dispute shall arise between the parties under, out of, in connection with, or relating to this Warrant or the breach thereof, the party initiating such controversy or making such claim shall provide to the other party notice containing a brief and concise statement of the initiating party’s claims, together with relevant facts supporting them. Following the date of said notice, the parties shall make good faith efforts to settle the dispute. In the event the parties have been unable to reach accord using the procedures set forth in this Section 13, either party may seek binding arbitration before three (3) arbitrators in accordance with the rules of the American Arbitration Association (“AAA”). Each party shall appoint one arbitrator and the appointed arbitrators shall in turn appoint the third arbitrator. In the event the two appointed arbitrators are unable to agree upon the third arbitrator, the AAA shall designate the third arbitrator to arbitrate the controversy or dispute. The arbitration shall be held in San Francisco, California. Within thirty (30) days after initiation of arbitration, the parties shall reach agreement upon and thereafter follow procedures assuring that the arbitration will be concluded and the award rendered within no more than six (6) months from selection of the three arbitrators. Failing such agreement, AAA will design, and the parties will follow, such procedures. THE ARBITRATORS SHALL NOT AWARD ANY PARTY PUNITIVE OR EXEMPLARY DAMAGES, AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO SEEK SUCH DAMAGES. Each party has the right before or during the arbitration to seek and obtain from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc., to avoid irreparable harm, maintain the status quo or preserve the subject matter of the arbitration.

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated: November 30, 2006

POWER EFFICIENCY CORPORATION

By:

Name:

Title:

NOTICE OF EXERCISE

To: Power Efficiency Corporation.

(1) The undersigned hereby elects to purchase shares of Common Stock (the “Common Stock”), of Power Efficiency Corporation, a Delaware corporation pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

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

(Name)

(Address)

Dated:

Signature

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

                                                                                                                                                                     whose address is                                                                                                                                                                             .

Dated:                                                  ,         

Holder’s Signature:

Holder’s Address:

Signature Guaranteed:

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

EX-10.1

EXHIBIT 10.1

SECURITIES PURCHASE AGREEMENT

Power Efficiency Corporation

3960 Howard Hughes Parkway

Suite 460 Las Vegas, NV 89169

Ladies & Gentlemen:

Each undersigned investor set forth on the Schedule of Investors attached as Annex I hereto (each, an “Investor” and, collectively, the “Investors”), hereby confirms its agreement with you as follows:

1. This Securities Purchase Agreement (the “Agreement”) is made as of November 30, 2006 between Power Efficiency Corporation, a Delaware corporation (the “Company”), and each of the Investors.

2. The Company has authorized the sale and issuance of up to 7,500,000 units (the “Units”) to the Investors in a private placement offering (the “Offering”) commencing as of the date hereof and continuing through January 31, 2007 (the “Termination Date”). Each Unit consists of two shares of common stock of the Company, par value $0.001 per share (the “Common Stock”) and a warrant in substantially the form attached hereto as Annex III to purchase a number of shares of Common Stock equal to 100% of the total Units purchased by such Investor pursuant to this Agreement (each a “Warrant” and collectively for all Investors, the “Warrants”).

3. The Company and the Investors agree that each Investor will, severally and not jointly, purchase from the Company and the Company will issue and sell to the Investors that number of Units as set forth opposite each Investor’s name on Annex I attached hereto, for a purchase price of $0.60 per Unit, pursuant to the Terms and Conditions for Purchase of Units attached hereto as Annex II and incorporated herein by reference as if fully set forth herein (the “Terms and Conditions”). Notwithstanding the foregoing, certain officers and directors of the Company may purchase Units in the Offering, with the purchase price therefore being paid through the cancellation of deferred compensation owed to such officers or directors. Unless otherwise requested by the Investor, certificates representing the Common Stock underlying the Units and the Warrants purchased by the Investor will be registered in the Investor’s name and address as set forth on Annex I.

4. Each Investor represents that, except as set forth below, (a) it has had no position, office or other material relationship within the past three years with the Company or persons known to it to be affiliates of the Company, (b) neither it, nor any group of which it is a member or to which it is related, beneficially owns (including the right to acquire or vote) any securities of the Company and (c) it has no direct or indirect affiliation or association with any National Association of Securities Dealers, Inc. (“NASD”) member as of the date hereof. Exceptions:

(If no exceptions, write “none.” If left blank, response will be deemed to be “none.”)

Please confirm that the foregoing correctly sets forth the agreement between us by signing in the space provided below for that purpose. By executing this Agreement, you acknowledge that the Company may use (i) the information in paragraph 4 above, (ii) the representations and warranties in Section 5 of the Terms and Conditions, solely with respect to the Investors and (iii) the name and address information below in preparation of the Registration Statement (as defined in Annex II).

AGREED AND ACCEPTED:
POWER EFFICIENCY CORPORATION		INVESTORS:
		Marathon Resource Partners I, L.P.
By:		By:
Name:	Steven Z. Strasser	Name:	Robert Mullin
Title:	Chairman & CEO
		Title:
		Address:	One Ferry Building Suite 255 San Francisco, CA 94111
		Name in which securities should be registered (if different):
		Marathon International Master Fund II L.P.
		By:
		Name:	Robert Mullin
		Title:
		Address:	One Ferry Building Suite 255 San Francisco, CA 94111
		Name in which securities should be registered (if different):

By:
Print Name:	Steven Z. Strasser
Address:	One Hughes Center Drive, #1004 N Las Vegas, NV 89169
Name in which securities should be registered (if different):
By:
Print Name:	Ron Boyer
Address:	1132 SW 19th Avenue, #612 Portland, OR 97205
Name in which securities should be registered (if different):
By:
Print Name:	George Boyadjieff
Address:	18772 Colony Circle Villa Park, CA 92861
Name in which securities should be registered (if different):

Sarkowsky Family L.P.
By: SPF Holding Company Its General Partner
By:
Print Name:	Herman Sarkowsky, President
Address:	700 5th Avenue, Suite 1600 Seattle, WA 98104
Name in which securities should be registered (if different):
By:
Print Name:	Robert Murray
Address:	3960 Howard Hughes Pkwy, Ste 460 Las Vegas, NV 89169
Name in which securities should be registered (if different):
By:
Print Name:	John (“BJ”) Lackland
Address:	3960 Howard Hughes Pkwy, Ste 460 Las Vegas, NV 89169
Name in which securities should be registered (if different):

By:
Print Name:	Irwin Helford
Address:	One Hughes Center Drive, #1804 Las Vegas, NV 89169
Name in which securities should be registered (if different):
By:
Print Name:	David Heerensperger
Address:	96 Cascade Key Bellevue, WA 98006
Name in which securities should be registered (if different):
By:
Print Name:	Mike Saltman
Address:	One Hughes Center Drive, #1830 Las Vegas, NV 89169
Name in which securities should be registered (if different):

By:
Print Name:	Sharon Strasser
Address:	One Hughes Center Drive, #1004N Las Vegas, NV 89169
Name in which securities should be registered (if different):

ANNEX I

SCHEDULE OF INVESTORS

NAME AND ADDRESS OF PURCHASER	NUMBER OF UNITS	AGGREGATE PURCHASE PRICE
Marathon Resource Partners I, L.P. One Ferry Building Suite 255 San Francisco, CA 94111	800,000	$	480,000
Marathon International Master Fund II L.P. One Ferry Building Suite 255 San Francisco, CA 94111	33,334	$	20,000
Steven Z. Strasser One Hughes Center Drive #1004 Las Vegas, NV 89169	583,334	$	350,000
Ron Boyer 1132 SW 19th Avenue, #612 Portland, OR 97205	583,334	$	350,000
George Boyadjieff 18772 Colony Circle Villa Park, CA 92861	500,000	$	300,000
Sarkowsky Family L.P. 700 5th Avenue, Suite 1600 Seattle, WA 98104	1,666,667	$	1,000,000
Robert Murray 3960 Howard Hughes Pkwy, Ste 460 Las Vegas, NV 89169	50,000	$	30,000
John (“BJ”) Lackland 3960 Howard Hughes Pkwy, Ste 460 Las Vegas, NV 89169	50,000	$	30,000

Irwin Helford One Hughes Center Drive #1804 Las Vegas, NV 89169	500,000	$	300,000
David Heerensperger 96 Cascade Key Bellevue, WA 98006	333,334	$	200,000
Mike Saltman One Hughes Center Drive #1803 Las Vegas, NV 89169	166,667	$	100,000
Sharon Strasser One Hughes Center Drive #1004N Las Vegas, NV 89169	83,334	$	50,000
TOTAL	5,350,004	$	3,210,000

THE UNITS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE UNITS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS CONFIDENTIAL SUMMARY OF TERMS AND CONDITIONS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE UNITS ARE BEING OFFERED PURSUANT TO EXEMPTIONS FROM REGISTRATION REQUIREMENTS PROVIDED BY SECTION 4(2) OF THE SECURITIES ACT, REGULATION D AND RULE 506 THEREUNDER, CERTAIN STATE SECURITIES LAWS AND CERTAIN RULES AND REGULATIONS PROMULGATED PURSUANT THERETO. THE UNITS MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

ANNEX II

TERMS AND CONDITIONS FOR PURCHASE OF UNITS

1. Authorization and Sale of the Units. Subject to these Terms and Conditions, the Company has authorized the sale and issuance of up to 7,500,000 Units.

2. Agreement to Sell and Purchase the Units. At each Closing (as defined in Section 3), the Company will sell to each Investor, and such Investor will severally purchase from the Company, upon the terms and conditions hereinafter set forth, the number of Units set forth opposite such Investor’s name in Annex I to the Securities Purchase Agreement (the “Agreement”) to which these Terms and Conditions are attached as Annex II, at the purchase price set forth thereon.

3. Delivery of the Common Stock and Warrants at Closing. A closing on the purchase and sale of the Units (each, a “Closing”) shall occur at such time or times as the Company determines at the offices of the Company’s counsel. At each Closing, the Company shall deliver to each Investor, versus payment therefor, (i) one or more stock certificates representing the number of shares of Common Stock and (ii) one or more Warrants underlying the number of Units set forth opposite such Investor’s name in Annex I of the Agreement, each such certificate or Warrant to be registered in the name of such Investor or, if so indicated on the signature page of the Agreement, in the name of a nominee designated by the Investor. The Common Stock certificates and the Warrants shall bear an appropriate restrictive legend as required by applicable securities laws.

The Company’s obligation to issue the Units to the Investors shall be subject to the following conditions, any one or more of which may be waived by the Company: (a) receipt by the Company of a certified or official bank check or wire transfer of funds in the full amount of the purchase price for the Units being purchased hereunder, (b) the accuracy of the representations and warranties made by the Investors and the fulfillment of those undertakings of the Investors and (c) not less than $1,500,000 in secured debt has been advanced to the Company for a two year term on terms satisfactory to the Company prior to the Closing.

Each Investor’s obligation to purchase the Units shall be subject to the following conditions, any one or more of which may be waived by such Investor: (a) the representations and warranties of the Company set forth herein shall be true and correct as of the date of each Closing in all material respects and (b) the Investor shall have received such documents as such Investor shall reasonably have requested, including compliance and Secretary’s certificates and a standard opinion of Company counsel as to the matters set forth in the first clause of Section 4.1, in Sections 4.2, 4.3, 4.4, 4.6, 4.15 and 4.22 hereof and, subject to the accuracy of the information and the representations and warranties required to be provided by each Investor, as to exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), of the sale of the Units. It shall also be a condition to Closing that not less than $1,500,000 in secured debt has been advanced to the Company for a two year term on terms satisfactory to the Investors.

4. Representations, Warranties and Covenants of the Company. Except as otherwise described in the Disclosure Schedule delivered to the Investors prior to the execution of this Agreement, the Company hereby represents and warrants to, and covenants with, the Investors, as follows:

4.1 Organization. The Company is duly organized and validly existing under the laws of the jurisdiction of its organization. Each of the Company and its Subsidiaries (as defined in Rule 405 under the Securities Act) has full power and authority to own, operate and occupy its properties and to conduct its business as presently conducted and as described in the documents filed by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), since the end of its most recently completed fiscal year through the date hereof, including, without limitation, its most recent reports on Form 10-KSB and Form 10-QSB (collectively, the “Exchange Act Documents”) and is registered or qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the location of the properties owned or leased by it requires such qualification and where the failure to be so qualified would have a material adverse effect upon the condition (financial or otherwise), earnings, business or business prospects, properties or operations of the Company and its Subsidiaries, considered as one enterprise (a “Material Adverse Effect”), and no proceeding has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification.

4.2 Due Authorization and Valid Issuance. The Company has all requisite power and authority to execute, deliver and perform its obligations under the Agreement, and the

Agreement has been duly authorized and validly executed and delivered by the Company and constitutes the legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Furthermore, the Company has complied with Delaware Corporations Code Section 144(a).

4.3 Non-Contravention. The execution and delivery of the Agreement, the issuance and sale of the Units under the Agreement, the fulfillment of the terms of the Agreement and the consummation of the transactions contemplated hereby will not (A) conflict with or constitute a violation of, or default (with the passage of time or otherwise) under, (i) any material bond, debenture, note or other evidence of indebtedness, lease, contract, indenture, mortgage, deed of trust, loan agreement, joint venture or other agreement or instrument to which the Company or any Subsidiary is a party or by which it or any of its Subsidiaries or their respective properties are bound, (ii) the charter, bylaws or other organizational documents of the Company or any Subsidiary, or (iii) any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any Subsidiary or their respective properties other than in relation to any offering of securities under Section 5 of the Securities Act or (iv) any offering of securities under Section 5 of the Securities Act, assuming compliance by the Investors with the terms and conditions hereof and the truthfulness and accuracy of the Investors’ representations and warranties set forth in Section 5 hereof, except in the case of clauses (i), (iii) and (iv) for any such conflicts, violations or defaults which are not reasonably likely to have a Material Adverse Effect, individually or in the aggregate, or (B) result in the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of the Company or any Subsidiary or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any material bond, debenture, note or any other evidence of indebtedness or any material indenture, mortgage, deed of trust or any other agreement or instrument to which the Company or any Subsidiary is a party or by which any of them is bound or to which any of the material property or assets of the Company or any Subsidiary is subject. No consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory body, administrative agency, or other governmental body in the United States or any other person is required for the execution and delivery of the Agreement and the valid issuance and sale of the Units to be sold and issued pursuant to the Agreement, other than such as have been made or obtained, and except for any post-closing securities filings or notifications required to be made under federal or state securities laws.

4.4 Capitalization. As of the date hereof and prior to giving effect to the issuance of the Units, and immediately following issuance of the warrants associated with the issuance of not less than $1,500,000 in new secured debt, Disclosure Schedule 4.4 sets forth the capitalization of the Company on an outstanding basis and on a fully-diluted basis. Disclosure Schedule 4.4 also sets forth (i) any capital stock granted pursuant to an employee benefit plan and (ii) any outstanding warrants, options or other securities. The Units to be sold and issued pursuant to the Agreement have been duly authorized, and when issued and paid for in

accordance with the terms of the Agreement, will be duly and validly issued, fully paid and nonassessable (other than as to a lawful offering of securities under Section 5 of the Securities Act) and as to a lawful offering of securities under Section 5 of the Securities Act, assuming the correctness of the representations and warranties of the Investors set forth in Section 5 hereof. The outstanding shares of capital stock of the Company have been duly and validly issued and are fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and were not issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Except as set forth in or contemplated by the Agreement or as described in the Disclosure Schedule, there are no outstanding rights (including, without limitation, preemptive rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any unissued shares of capital stock or other equity interest in the Company or any Subsidiary, or any contract, commitment, agreement, understanding or arrangement of any kind to which the Company is a party or of which the Company has knowledge and relating to the issuance or sale of any capital stock of the Company or any Subsidiary, any such convertible or exchangeable securities or any such rights, warrants or options. Without limiting the foregoing, except as set forth in or contemplated by the Agreement or as described in the Disclosure Schedule, no preemptive right, co-sale right, right of first refusal, registration right, or other similar right exists with respect to the Units or the issuance and sale thereof. No further approval or authorization of any stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the Units. Except as set forth on the Disclosure Schedule, the Company owns the entire equity interest in each of its Subsidiaries, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest. Except as described in the Disclosure Schedule, there are no stockholders agreements, voting agreements, rights plans or other similar agreements with respect to the Common Stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

4.5 Legal Proceedings. Except as set forth on the Disclosure Schedule, there is no material legal or governmental proceeding pending or, to the knowledge of the Company, threatened (i) to which the Company or any Subsidiary is or may be a party or of which the business or property of the Company or any Subsidiary is subject or (ii) which adversely affects or challenges the legality, validity or enforceability of the Agreement.

4.6 No Violations. Neither the Company nor any Subsidiary is, and no facts have come to the Company’s attention that would be reasonably likely (with the passage of time or otherwise) to result, in violation of its charter, bylaws, or other organizational document, or in violation of any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any Subsidiary, which violation, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect, or is in default (and there exists no condition which, with the passage of time or otherwise, would constitute a default) in any material respect in the performance of any bond, debenture, note or any other evidence of indebtedness in any indenture, mortgage, deed of trust or any other material agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound or by which the properties of the Company or any Subsidiary are bound, which would be reasonably likely to have a Material Adverse Effect.

4.7 Governmental Permits, Etc. With the exception of the matters which are dealt with separately in Section 4.1, 4.12 and 4.13, each of the Company and its Subsidiaries has all necessary franchises, licenses, certificates and other authorizations from any foreign, federal, state or local government or governmental agency, department, or body that are currently necessary for the operation of the business of the Company and its Subsidiaries as currently conducted and as described in the Exchange Act Documents except where the failure to currently possess could not reasonably be expected to have a Material Adverse Effect.

4.8 Intellectual Property. Except as specifically disclosed in the Disclosure Schedule, (i) each of the Company and its Subsidiaries owns or possesses sufficient rights to use all material patents, patent rights, trademarks, copyrights, licenses, inventions, trade secrets, trade names, designs, manufacturing or other processes, systems, data compilation, research results, know-how or other proprietary rights (collectively, “Intellectual Property”) that are necessary for the conduct of its business as now conducted or as proposed to be conducted as described in the Exchange Act Documents except where the failure to currently own or possess would not have a Material Adverse Effect, (ii) neither the Company nor any of its Subsidiaries has received any notice of, or has any knowledge of, any asserted infringement by the Company or any of its Subsidiaries of, any rights of a third party with respect to any Intellectual Property that, individually or in the aggregate, would have a Material Adverse Effect and (iii) neither the Company nor any of its Subsidiaries, to the knowledge of the Company, is infringing, or has received any notice of, or has any knowledge of, infringement by a third party with respect to any Intellectual Property rights of the Company or of any Subsidiary that, individually or in the aggregate, would have a Material Adverse Effect.

All material licenses or other material agreements under which (i) the Company is granted rights in Intellectual Property, other than Intellectual Property generally available on commercial terms from other sources, and (ii) the Company has granted rights to others in Intellectual Property owned or licensed by the Company, are in full force and effect and, to the knowledge of the Company, there is no material default by the Company thereunder.

The Company believes it has taken all steps reasonably required in accordance with sound business practice and business judgment to establish and preserve its ownership of all material copyright, trade secret and other proprietary rights with respect to its products and technology. To the knowledge of the Company, the Company is not making unauthorized use of any confidential information or trade secrets of any person. Neither the Company nor, to the knowledge of the Company, any of its employees have any agreements or arrangements with any persons other than the Company related to confidential information or trade secrets of such persons or restricting any such employee’s engagement in business activities of the kind engaged in by the Company or would reasonably be expected to have a Material Adverse Effect on the Company.

4.9 Financial Statements. The financial statements of the Company and the related notes contained in the Exchange Act Documents present fairly, in accordance with generally accepted accounting principles, the financial position of the Company and its Subsidiaries on a consolidated basis, as of the dates indicated, and the results of its operations and cash flows for the periods therein specified consistent with the books and records of the Company and its Subsidiaries on a consolidated basis, except that the unaudited interim financial

statements were or are subject to normal and recurring year-end adjustments which are not expected to be material in amount. Such financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods therein specified, except in the case of unaudited statements, as may be permitted by the Securities and Exchange Commission (the “SEC”) on Form 10-QSB under the Exchange Act. Except to the extent reflected or reserved against in the Company’s balance sheet as of September 30, 2006, or as disclosed on Disclosure Schedule 4.9, the Company did not have as of September 30, 2006, nor will the Company have as of the date hereof, any material liabilities of any nature, whether accrued, absolute, contingent or otherwise, including, without limitation, tax liabilities due or to become due.

4.10 No Material Adverse Change. Since December 31, 2005, there has not been (i) any Material Adverse Effect affecting the Company and its Subsidiaries considered as one enterprise, (ii) except as described in the Disclosure Schedule, any obligation, direct or contingent, that is material to the Company and its Subsidiaries considered as one enterprise, incurred by the Company, (iii) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company or any of its Subsidiaries, or (iv) any loss or damage (whether or not insured) to the physical property of the Company or any of its Subsidiaries which has been sustained which has a Material Adverse Effect.

4.11 Disclosure. The representations and warranties of the Company contained in this Section 4 as of the date hereof, do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

4.12 Common Stock Listing. The Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is quoted on The Over-the-Counter Bulletin Board (the “OTCBB”), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or removal of the Common Stock from the OTCBB, nor has the Company received any notification that the SEC is contemplating terminating such registration.

4.13 Reporting Status. The Company has filed in a timely manner all documents that the Company was required to file under the Exchange Act during the 12 months preceding the date of this Agreement. The following documents complied in all material respects with the SEC’s requirements as of their respective filing dates, and the information contained therein as of the date thereof did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading:

(a) Annual Report on Form 10-KSB for the years ended December 31, 2004 and December 31, 2005;

(b) Definitive Proxy Statement for the Annual Meeting held on February 16, 2006;

(c) Quarterly Reports on Form 10-QSB for the quarters ended September 30, 2005, March 31, 2006, June 30, 2006 and September 30, 2006;

(d) Current Reports on Form 8-K, filed on September 8, 2005, October 11, 2005, November 3, 2005, December 5, 2005, January 19, 2006, April 24, 2006, May 26, 2006 and October 27, 2006; and

(e) All other documents, if any, filed by the Company with the SEC during the 12 months preceding the date of this Agreement pursuant to the reporting requirements of the Exchange Act.

4.14 No Manipulation of Stock. Neither the Company, nor any of its directors, officers or controlling persons, has taken or will, in violation of applicable law, take, any action designed to or that might reasonably be expected to cause or result in, or which has constituted, stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Units.

4.15 Company not an “Investment Company”. The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Company is not, and immediately after receipt of payment for the Units will not be, an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act and shall conduct its business in a manner so that it will not become subject to the Investment Company Act.

4.16 Foreign Corrupt Practices; Sarbanes-Oxley Act.

(a) Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any corrupt funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

(b) The Company is in compliance in all material respects with all provisions of the Sarbanes-Oxley Act of 2002 that are applicable to it as of the date of each Closing.

(c) The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

4.17 Environmental. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (i) the Company and its Subsidiaries are in compliance with and not subject to any known liability under applicable Environmental Laws (as defined below), (ii) the Company has made all filings and provided all notices required under any applicable Environmental Law, and has, and is in compliance with, all permits required under any applicable Environmental Laws and each of them is in full force and effect, (iii) (a) there is no pending civil, criminal or administrative action, or pending hearing or suit, (b) the Company has not received any demand, claim or notice of violation and (c) to the knowledge of the Company, there is no investigation, proceeding, notice or demand letter or request for information threatened against the Company, in the case of each of (a), (b) and (c), under any Environmental Law, (iv) no lien, charge, encumbrance or restriction has been recorded under any Environmental Law with respect to any assets, facility or property owned, operated, leased or controlled by the Company, (v) the Company has not received notice that it has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), or any comparable state law and (vi) no property or facility of the Company is (a) listed or, to the knowledge of the Company, proposed for listing on the National Priorities List under CERCLA or is (b) listed in the Comprehensive Environmental Response, Compensation, Liability Information System List promulgated pursuant to CERCLA, or on any comparable list maintained by any state or local governmental authority.

For purposes of this Agreement, “Environmental Laws” means all applicable federal, state and local laws or regulations, codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder, relating to pollution or protection of public or employee health and safety or the environment, including, without limitation, laws relating to (i) emissions, discharges, releases or threatened releases of Hazardous Materials (as defined below) into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), (ii) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of Hazardous Materials and (iii) underground and above ground storage tanks and related piping, and emissions, discharges, releases or threatened releases therefrom. The term “Hazardous Material” means (a) any “hazardous substance,” as defined in the Comprehensive Environmental Response, the Resource Conservation and Recovery Act, as amended, (b) any “hazardous waste,” as defined by the Resource Conservation and Recovery Act, as amended, (c) any petroleum or petroleum product, (d) any polychlorinated biphenyl and any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, waste or substance.

4.18 Accountants. Sobel & Co., LLC, who have certified certain financial statements filed with the SEC as part of, or incorporated by reference in, the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, are independent public accountants as required by the Exchange Act and the rules and regulations thereunder.

4.19 Contracts. The contracts that are currently material to the Company are in full force and effect on the date hereof, and neither the Company nor, to the Company’s knowledge, any other party to such contracts is in breach of or default under any of such contracts which would have a Material Adverse Effect.

4.20 Taxes. Except as set forth on the Disclosure Schedule, the Company has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been or might be asserted or threatened against it which would have a Material Adverse Effect.

4.21 Transfer Taxes. On the date of each Closing, all securities transfer or other taxes (other than income taxes) which are required to be paid in connection with the sale and transfer of the Units to be sold to the Investors hereunder will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with.

4.22 Private Offering. Assuming the correctness of the representations and warranties of the Investors set forth in Section 5 hereof, the offer and sale of Units hereunder is exempt from registration under the Securities Act. The Company has not distributed, and will not distribute prior to the final Closing, any offering materials in connection with this Offering and sale of the Units other than the documents of which this Agreement is a part, including the Disclosure Schedule, or the Exchange Act Documents. The Company has not in the past nor will it hereafter take any action to sell, offer for sale or solicit offers to buy any securities of the Company which would bring the offer, issuance or sale of the Units as contemplated by this Agreement, within the provisions of Section 5 of the Securities Act, unless such offer, issuance or sale was or shall be within the exemptions of Section 4 of the Securities Act.

4.23 Use of Proceeds. The Company shall use the proceeds from the Offering for repayment of debt, working capital, strategic acquisitions, if any, and general corporate purposes.

4.24 Issuances Below Purchase Price. From and after the date hereof and for a period of time ending not earlier than forty-five days after the effectiveness of the Registration Statement (as defined below), the Company shall not, without the prior written consent of a majority in interest of the Investors, issue or sell any shares of the Company’s capital stock or other securities exercisable for, convertible into or otherwise giving the holder thereof the right to acquire the Company’s capital stock at a price per share, including the exercise or conversion price per share, which is below $0.30 per share; provided, however, that this restriction shall not apply to any capital stock issued pursuant to: (i) employee benefit plans disclosed in the Disclosure Schedule or (ii) outstanding warrants, options or other securities disclosed in the Disclosure Schedule or in the Exchange Act Documents.

4.25 Transactions with Affiliates. Other than as set forth on the Disclosure Schedule, as of the date hereof, the Company has no current plans to enter into any, agreement, contract or arrangement with any of its officers, directors or other affiliates.

4.26 Brokers or Finders. Except as disclosed in the Disclosure Schedule, the Company has not dealt with any broker or finder in connection with the transactions contemplated by the Agreement, and Company has not incurred, and shall not incur, directly or indirectly, any liability for any brokerage or finders’ fees or agents commissions or any similar charges in connection with the transactions contemplated by the Agreement.

4.27 Employee Relations. Neither the Company nor any of its Subsidiaries is involved in any union or labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened. None of the Company’s or its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relations with their employees are good. No executive officer (as defined in Rule 501(f) of the Securities Act) has notified the Company that such officer intends to leave the Company or otherwise terminate such officer’s employment with the Company. No executive officer, to the best knowledge of the Company and its Subsidiaries, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, nondisclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.

4.28 Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the business in which the Company and its Subsidiaries are engaged, and all of such insurance is in full force and effect. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business on terms that could not reasonably be expect to, individually or in the aggregate, have a Material Adverse Effect.

4.29 No Misleading Statements. The representations and warranties of the Company contained in this Agreement, the Annexes, Exhibits and Disclosure Schedules hereto and all other documents and information furnished to the Investors and their representatives pursuant hereto are complete and accurate in all material respects and do not include any untrue statement of a material fact or omit to state any material fact necessary to make any statements made not misleading. There is no material fact relating to the Company or the Units that has not been set forth or described in this Agreement or in the Disclosure Schedules hereto or in the Exchange Act Documents.

5. Representations Warranties and Covenants of the Investors.

5.1 Each Investor, severally and not jointly, represents and warrants to, and covenants with, the Company that: (i) the Investor is an “accredited investor” as defined in Rule 501(a) of Regulation D under the Securities Act and the Investor is also knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in shares presenting an investment decision like that involved in the purchase of the Units, including investments in securities issued by the Company and investments in comparable companies, and has requested, received, reviewed and considered all information it deemed relevant in making an informed decision to purchase the Units; (ii) the Investor is acquiring the Units set forth in Annex I to the Agreement in the ordinary course of its business and for its own account for investment only and with no present intention of distributing any of such Units or any arrangement or understanding with any other persons regarding the distribution of such

Units, except in accordance with applicable securities law; (iii) the Investor will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Units except in compliance with the Securities Act, applicable state securities laws and the respective rules and regulations promulgated thereunder; (iv) the Investor has answered all questions in the Agreement for use in preparation of the Registration Statement and the answers thereto are true, correct and complete in all material respects as of the date hereof and will be true, correct and complete in all material respects as of the date of each Closing; and (v) the Investor has, in connection with its decision to purchase the Units set forth in Annex I to the Agreement, relied only upon the Exchange Act Documents, the representations and warranties of the Company contained herein and the Disclosure Schedules. Each Investor understands that its acquisition of the Units has not been registered under the Securities Act or registered or qualified under any state securities law in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of the Investor’s investment intent as expressed herein. Investor understands that the Units purchased hereunder have to be held indefinitely unless there is an effective Registration Statement under the Securities Act with respect to the Units or an exemption from registration available under the Securities Act and applicable state securities laws, and the Investor is able to bear the economic risk of an investment in the Units.

5.2 Each Investor, severally and not jointly, acknowledges, represents and agrees that no action has been or will be taken in any jurisdiction outside the United States by the Company that would permit an offering of the Units, or possession or distribution of offering materials in connection with the issue of the Units, in any jurisdiction outside the United States where legal action by the Company for that purpose is required. Each Investor outside the United States will comply with all applicable laws and regulations in each foreign jurisdiction in which it purchases, offers, sells or delivers Units or has in its possession or distributes any offering material, in all cases at its own expense.

5.3 Each Investor, severally and not jointly, hereby covenants with the Company not to make any sale of the Units or the underlying Common Stock or Warrants without complying with the provisions of this Agreement, including Section 7.2 hereof and all securities laws, and the Investor acknowledges that the certificates evidencing the Common Stock and the Warrants will be imprinted with a legend that prohibits their transfer except in accordance therewith. Upon the earlier of (i) the Registration Statement becoming effective and (ii) Rule 144(k) becoming available, the Investors shall be entitled to exchange their certificates representing the Common Stock and Warrants for certificates that do not contain any restrictive legend. Each Investor acknowledges that there may occasionally be times when the Company determines that it must suspend the use of the prospectus forming a part of the Registration Statement, as set forth in Section 7.2(c).

5.4 Each Investor, severally and not jointly, further represents and warrants to, and covenants with, the Company that (i) the Investor has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, (ii) the execution and delivery of this Agreement, the purchase of the Units under the Agreement, the fulfillment of the terms of the Agreement and the consummation of the transactions contemplated hereby will not conflict with or constitute a violation of, or default

(with the passage of time or otherwise) under the charter, bylaws or other organizational documents of the Investor, and (iii) this Agreement constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements of the Investors herein may be legally unenforceable.

5.5 Investor will not use any of the restricted Units acquired pursuant to this Agreement to cover any short position in the Common Stock of the Company if doing so would be in violation of applicable securities laws.

5.6 Each Investor understands that nothing in the Exchange Act Documents, this Agreement or any other materials presented to the Investors in connection with the purchase and sale of the Units constitutes legal, tax or investment advice. The Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of Units.

5.7 Except as disclosed in the Disclosure Schedule, the Investors have not dealt with any broker or finder in connection with the transactions contemplated by the Agreement, and the Investors have not incurred, and shall not incur, directly or indirectly, any liability for any brokerage or finders’ fees or agents commissions or any similar charges in connection with the transactions contemplated by the Agreement.

5.8 Investor is not purchasing the Units as a result of any advertisement, article, notice or other communication regarding the Units published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

5.9 Each Investor has independently evaluated the merits of its decision to purchase Units, such decision has been independently made by such Investor and such Investor confirms that it has only relied on the advice of its own business and/or legal counsel and not on the advice of the Company’s or any other Investor’s business and/or legal counsel in making such decision.

5.10 Each Investor acknowledges that certain officers and directors of the Company may purchase Units in the Offering, with the purchase price therefore being paid through the cancellation of deferred compensation owed to such officers or directors.

6. Survival of Representations, Warranties and Agreements. Notwithstanding any investigation made by any party to this Agreement, all covenants, agreements, representations and warranties made by the Company and the Investors herein shall survive the execution of this Agreement, the delivery to the Investors of the Units being purchased and the payment therefor.

7. Registration of the Units; Compliance with the Securities Act.

7.1 Registration Procedures and Other Matters. The Company shall:

(a) subject to receipt of necessary information from the Investors after prompt request from the Company to the Investors to provide such information, prepare and file with the SEC, not later than 60 days from the Termination Date (the “Filing Date”), a registration statement on Form SB-2 or such other successor form (except that if the Company is not then eligible to register for resale the Registrable Securities (as defined below) on Form SB-2, in which case such registration shall be on any form available for registration) (the “Registration Statement”) to enable the resale of the shares of Common Stock underlying the Units and the shares of Common Stock underlying the Warrants and any Additional Shares, as defined below (the “Registrable Securities”) by the Investors from time to time through the OTCBB quotation system or in other privately-negotiated transactions;

(b) use its reasonable best efforts, subject to receipt of necessary information from the Investors after prompt request from the Company to the Investors to provide such information, to cause the Registration Statement to become effective, not later than 120 days from the Termination Date (the “Effectiveness Date”), such efforts to include, without limiting the generality of the foregoing, preparing and filing with the SEC in such 120-day period any financial statements required to be filed prior to the effectiveness of such Registration Statement;

(c) use its reasonable best efforts to prepare and file with the SEC such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement current, effective and free from any material misstatement or omission to state a material fact for a period not exceeding, with respect to each Investor’s Registrable Securities purchased hereunder, the earlier of (i) the second anniversary of the final Closing date, (ii) the date on which the Investors may sell all Registrable Securities then held by the Investors without restriction by the volume limitations of Rule 144(e) of the Securities Act, or (iii) such time as all Registrable Securities purchased by the Investors in this Offering have been sold pursuant to a registration statement;

(d) furnish to the Investors with respect to the Registrable Securities registered under the Registration Statement such number of copies of the Registration Statement, prospectuses and preliminary prospectuses in conformity with the requirements of the Securities Act and such other documents as the Investors may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Registrable Securities by the Investors; provided, however, that the obligation of the Company to deliver copies of prospectuses or preliminary prospectuses to the Investors shall be subject to the receipt by the Company of reasonable assurances from the Investors that the Investors will comply with the applicable provisions of the Securities Act and of such other securities or blue sky laws as may be applicable in connection with any use of such prospectuses or preliminary prospectuses.

(e) file documents required of the Company for normal blue sky clearance in states specified in writing by the Investors and use its reasonable best efforts to maintain such blue sky qualifications during the period the Company is required to maintain the effectiveness of the Registration Statement pursuant to Section 7.1(c); provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented;

(f) otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC under the Securities Act and the Exchange Act, and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder;

(g) bear all expenses in connection with the procedures in paragraph (a) through (e) of this Section 7.1 and the registration of the Registrable Securities pursuant to the Registration Statement;

(h) advise the Investors, promptly after it shall receive notice or obtain knowledge of the issuance of any stop order by the SEC delaying or suspending the effectiveness of the Registration Statement or of the initiation or threat of any proceeding for that purpose; and it will promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued; and

if: (i) the Registration Statement is not filed on or prior to the Filing Date in violation of this Agreement or (ii) the Registration Statement filed hereunder is not declared effective by the SEC on or before the Effectiveness Date or (iii) any one Earnings Suspension, as defined below, resulting in the suspension of a Registration Statement for longer than 15 days, or (iv) during any twelve-month period, any number of Earnings Suspensions, taken together, resulting in the suspension of the Registration Statement for longer than an aggregate of 30 days or (v) after the Registration Statement is first declared effective by the SEC, it ceases for any reason to remain continuously effective as to all Registrable Securities for which it is required to be effective or the Investors are not permitted to utilize the prospectus therein to resell such Registrable Securities, other than, in each case, within the time limits permitted by Sections 7.2(d) (any such failure or breach being referred to as an “Event”), then in addition to any other rights the Investors may have hereunder or under applicable law, on each such Event date and on each thirty (30) day period following such Event (if the applicable Event shall not have been cured by such date) until the applicable Event is cured (each an “Additional Amount Date”), the Company shall, as liquidated damages and not as a penalty, issue to each Investor additional shares of Common Stock such that the number of shares of Common Stock included within each Unit shall be increased on each Additional Amount Date by two percent (2%) up to a maximum additional aggregate percentage amount of twelve percent (12%) (each such additional issuance of additional shares, the “Additional Shares”). If the Company fails to pay any liquidated damages pursuant to this Section in full within seven business days after the date demanded, the Company will pay, in additional shares of Common Stock, interest thereon at a rate of 10% of the purchase price as set forth on Annex I, per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Investors, accruing daily from the date such liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. Nothing contained in this Agreement shall be deemed to require the payment of interest or other charges in excess of the amount that the Investors may lawfully charge under the applicable usury laws. “Earnings Suspension” shall mean a Suspension (as defined in Section 7.2) relating to announcement of earnings by the Company at any time from the end of a fiscal period and prior to such announcement and for such period and through the date on which a post-effective amendment to the SB-2 Registration Statement has been declared effective by the SEC in connection with the financial results for such period.

With a view to making available to the Investors the benefits of Rule 144 (or its successor rule) and any other rule or regulation of the SEC that may at any time permit the Investors to sell Registrable Securities to the public without registration, the Company covenants and agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) such date as all of the Investors’ Registrable Securities may be resold pursuant to Rule 144(k) or any other rule of similar effect or (B) such date as all of the Investors’ Registrable Securities shall have been resold; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and under the Exchange Act; and (iii) furnish to the Investors upon request, as long as the Investors owns any Registrable Securities, (A) a written statement by the Company that it has complied with the reporting requirements of the Securities Act and the Exchange Act; (B) a copy of the Company’s most recent Annual Report on Form 10-KSB or Quarterly Report on Form 10-Q-SB and (C) such other information as may be reasonably requested in order to avail the Investors of any rule or regulation of the SEC that permits the selling of such Registrable Securities without registration.

In no event at any time before the Registration Statement becomes effective with respect to the Units shall the Company publicly announce or file any other registration statement, other than (i) registrations on Form S-8 and (ii) maintaining the effectiveness of the current SB-2 of the Company, declared effective by the SEC on December 20, 2005, without the prior written consent of a majority in interest of the Investors.

The Company understands that the Investors disclaim being underwriters, but an Investor being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has hereunder. In the event the SEC determines any Registration Statement filed pursuant hereto constitutes a primary offering of securities by the Company and/or requires any Investor to be named as an underwriter, Investors understand and agree the Company may reduce, on a pro rata basis, the total number of Registrable Securities to be registered on behalf of each such Investor, and the failure to include such Registrable Securities in any Registration Statement shall not constitute an Event, the Company shall not be required to pay any penalty, financial or otherwise, and the Company shall not be obligated to issue any Additional Shares to any Investor. In the event of such reduction, the affected Investors shall have demand registration rights until such time as: (i) all Registrable Securities have been registered pursuant to an effective Registration Statement, (ii) the Registrable Securities may be resold without restriction pursuant to Rule 144 of the Act or (iii) the Investor agrees to be named as an underwriter in any such registration statement. Investors acknowledge and agree the provisions of this paragraph may apply to more than one Registration Statement and that the SEC may limit or condition any subsequent Registration Statement. If the Company receives notice from the SEC that it deems any Investor an “underwriter”, the Company shall notify all Investors of same within five (5) business days of the date of receipt of such notice.

Notwithstanding anything to the contrary contained herein, it shall not be deemed an Event, and in no event shall the Company be required to pay any penalties, financial or otherwise, or issue any Additional Shares to any Investor as a result of the failure to include Registrable Securities owned by Steven Strasser or Herman Sarkowsky, or any entity owned or controlled by either of them, in any Registration Statement.

In no event will any registered holder of Registrable Securities be entitled to receive a net-cash settlement in lieu of physical settlement in shares of Common Stock, regardless of whether any of such holder’s Registrable Securities are registered pursuant to an effective registration statement.

7.2 Transfer of Units After Registration; Suspension.

(a) Each Investor agrees that it will not effect any disposition of the Registrable Securities or its right to purchase the Registrable Securities that would constitute a sale within the meaning of the Securities Act except as contemplated in the Registration Statement referred to in Section 7.1 and as described below or as otherwise permitted by law, and that it will promptly notify the Company of any changes in the information set forth in any Registration Statement regarding the Investor or its plan of distribution.

(b) Except in the event that paragraph (c) below applies, the Company shall (i) if deemed necessary by the Company, prepare and file from time to time with the SEC a post-effective amendment to any Registration Statement or a supplement to the related prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that such Registration Statement will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and so that, as thereafter delivered to purchasers of the Registrable Securities being sold thereunder, such prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) provide the Investors copies of any documents filed pursuant to Section 7.2(b)(i); and (iii) inform each Investor that the Company has complied with its obligations in Section 7.2(b)(i) (or that, if the Company has filed a post-effective amendment to the Registration Statement which has not yet been declared effective, the Company will notify the Investors to that effect, will use its best efforts to secure the effectiveness of such post-effective amendment as promptly as possible and will promptly notify the Investors when the amendment has become effective).

(c) Subject to paragraph (d) below, in the event (i) of any request by the SEC or any other federal or state governmental authority during the period of effectiveness of any Registration Statement for amendments or supplements to a Registration Statement or related prospectus or for additional information; (ii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Units for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; or (iv) of any event or circumstance which, upon the advice of its counsel, necessitates the making of any changes in any Registration Statement or related prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to

be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; then the Company shall deliver a certificate in writing to the Investors (the “Suspension Notice”) to the effect of the foregoing and, upon receipt of such Suspension Notice, the Investors will refrain from selling any Registrable Securities pursuant to the Registration Statement (a “Suspension”) until the Investors’ receipt of copies of a supplemented or amended prospectus prepared and filed by the Company, or until it is advised in writing by the Company that the current prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in any such prospectus. In the event of any Suspension, the Company will use its reasonable best efforts to cause the use of the prospectus so suspended to be resumed as soon as reasonably practicable within 20 business days after the delivery of a Suspension Notice to the Investors. In addition to and without limiting any other remedies (including, without limitation, at law or at equity) available to the Investors, the Investors shall be entitled to specific performance in the event that the Company fails to comply with the provisions of this Section 7.2(c).

(d) Notwithstanding the foregoing paragraphs of this Section 7.2, the Investors shall not be prohibited from selling Registrable Securities under any Registration Statement as a result of Suspensions on more than two occasions of not more than 30 days each in any twelve month period, unless, in the good faith judgment of the Company’s Board of Directors, upon the written advice of counsel, continuing a Suspension is necessary to prevent the disclosure of material nonpublic information where such disclosure would be materially injurious to the Company, in which event the Company shall use reasonable best efforts to terminate such Suspension at the earliest date practicable.

(e) Provided that a Suspension is not then in effect, the Investors may sell Registrable Securities under a Registration Statement in the manner set forth under the caption “Plan of Distribution” in the prospectus, provided that they arrange for delivery of a current prospectus to the transferee of such Registrable Securities and provided that they comply with all applicable laws. Upon receipt of a request therefor, the Company has agreed to provide an adequate number of current prospectuses to the Investors and to supply copies to any other parties requiring such prospectuses.

(f) In the event of a sale of Registrable Securities by the Investors pursuant to a Registration Statement, the Investors must also deliver to the Company’s transfer agent, with a copy to the Company, a Certificate of Subsequent Sale substantially in the form attached hereto as Exhibit A, so that the Registrable Securities may be properly transferred.

7.3 Indemnification. For the purpose of this Section 7.3:

(a) the term “Selling Stockholder” shall include the Investors and any affiliate of such Investors;

(b) the term “Registration Statement” shall include the prospectus in the form first filed with the SEC pursuant to Rule 424(b) of the Securities Act or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing is required, exhibit, supplement or amendment included in or relating to the Registration Statement referred to in Section 7.1; and

(c) the term “untrue statement” shall include any untrue statement or alleged untrue statement of a material fact, or any omission or alleged omission to state (1) if in the Registration Statement (and excluding the prospectus from such defined term solely for the purposes of describing the applicable standard), a material fact required to be stated therein or necessary to make the statements therein not misleading, and (2) if in the prospectus, a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(i) The Company agrees to indemnify and hold harmless each Selling Stockholder from and against any losses, claims, damages or liabilities to which such Selling Stockholder may become subject (under the Securities Act or otherwise) insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon (i) any untrue statement contained in a Registration Statement as amended at the time of effectiveness, or (ii) any failure by the Company to fulfill any undertaking included in a Registration Statement as amended at the time of effectiveness, and the Company will reimburse such Selling Stockholder for any reasonable legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim, provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of, or is based upon, an untrue statement made in such Registration Statement in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Selling Stockholder specifically for use in preparation of the Registration Statement or for any transaction effected by any Selling Stockholder following receipt of a Suspension Notice, which notice is given in compliance with the terms hereof and of a duration in compliance with the terms hereof, which transaction is effected by such Selling Stockholder in violation of Section 7.2(c) above and is not subsequently remedied. The Company shall reimburse each Selling Stockholder for the amounts provided for herein on demand as such expenses are incurred.

(ii) Each Investor agrees to indemnify and hold harmless the Company (and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, each officer of the Company who signs a Registration Statement and each director of the Company) from and against any losses, claims, damages or liabilities to which the Company (or any such officer, director or controlling person) may become subject (under the Securities Act or otherwise), insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon: any untrue statement contained in any Registration Statement if such untrue statement was made in reliance upon and in conformity with written information furnished by or on behalf of the Investor specifically for use in preparation of the Registration Statement or for any transaction effected by any Selling Stockholder following receipt of a Suspension Notice, which notice is given in compliance with the terms hereof and of a duration in compliance with the terms hereof, which is not subsequently remedied, or for any transaction effected by any Selling Stockholder following receipt of a Suspension Notice, which notice is given in compliance with the terms hereof and of a duration in compliance with the terms hereof, which transaction is effected by such Selling Stockholder in violation of Section 7.2(c) above and is not subsequently remedied, and the Investor will reimburse the Company (or such officer, director or controlling person), as the case may be, for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided that the Investor’s obligation

to indemnify the Company shall be limited to the net amount received by such Investor from the sale of the Registrable Securities giving rise to such liability. The Investor shall reimburse the Company for the amounts provided for herein on demand as such expenses are incurred.

(iii) Promptly after receipt by any indemnified person of a notice of a claim or the beginning of any action in respect of which indemnity is to be sought against an indemnifying person pursuant to this Section 7.3, such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, but the omission to so notify the indemnifying person will not relieve it from any liability which it may have to any indemnified person under this Section 7.3 (except to the extent that such omission materially and adversely affects the indemnifying person’s ability to defend such action) or from any liability otherwise than under this Section 7.3. Subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person, the indemnifying person shall be entitled to participate therein, and, to the extent that it shall elect by written notice delivered to the indemnified person promptly after receiving the aforesaid notice from such indemnified person, shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to such indemnified person. After notice from the indemnifying person to such indemnified person of its election to assume the defense thereof, such indemnifying person shall not be liable to such indemnified person for any reasonable legal expenses subsequently incurred by such indemnified person in connection with the defense thereof, provided, however, that if there exists or shall exist a conflict of interest that would make it inappropriate, in the opinion of counsel to the indemnified person, for the same counsel to represent both the indemnified person and such indemnifying person or any affiliate or associate thereof, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person; provided, however, that no indemnifying person shall be responsible for the fees and expenses of more than one separate counsel (together with appropriate local counsel) for all indemnified parties. In no event shall any indemnifying person be liable in respect of any amounts paid in settlement of any action unless the indemnifying person shall have approved the terms of such settlement; provided that such consent shall not be unreasonably withheld. No indemnifying person shall, without the prior written consent of the indemnified person, effect any settlement of any pending or threatened proceeding in respect of which any indemnified person is or could have been a party and indemnification could have been sought hereunder by such indemnified person, unless such settlement includes an unconditional release of such indemnified person from all liability on claims that are the subject matter of such proceeding.

(iv) If the indemnification provided for in this Section 7.3 is unavailable to or insufficient to hold harmless an indemnified person under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying person shall contribute to the amount paid or payable by such indemnified person as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Investors on the other in connection with the statements or omissions or other matters which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, in the case of an untrue statement, whether the untrue statement relates to information supplied by the Company on the one hand or the Investors on the other and the parties’ relative intent, knowledge, access to information and

opportunity to correct or prevent such untrue statement. The Company and the Investors agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by any method of allocation which does not take into account the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified person as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), the Investors shall not be required to contribute any amount in excess of the amount by which the net amount received by the Investors from the sale of the Registrable Securities to which such loss relates exceeds the amount of any damages which such Investors have otherwise been required to pay by reason of such untrue statement. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 (t) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Each Investor’s obligations in this subsection to contribute shall be in proportion to its sale of Registrable Securities to which such loss relates and shall not be joint with any other Selling Stockholders.

(v) The parties to this Agreement hereby acknowledge that they are sophisticated business persons who were represented by counsel during the negotiations regarding the provisions hereof including, without limitation, the provisions of this Section 7.3, and are fully informed regarding said provisions. They further acknowledge that the provisions of this Section 7.3 fairly allocate the risks in light of the ability of the parties to investigate the Company and its business in order to assure that adequate disclosure is made in a Registration Statement as required by the Securities Act and the Exchange Act. The parties are advised that federal or state public policy as interpreted by the courts in certain jurisdictions may be contrary to certain of the provisions of this Section 7.3, and the parties hereto hereby expressly waive and relinquish any right or ability to assert such public policy as a defense to a claim under this Section 7.3 and further agree not to attempt to assert any such defense.

7.4 Termination of Conditions and Obligations. The conditions precedent imposed by Section 5 or this Section 7 upon the transferability of the Units or the Registrable Securities, as applicable, shall cease and terminate as to any particular Units or the Registrable Securities, as applicable, when such Units or the Registrable Securities, as applicable, shall have been effectively registered under the Securities Act and sold or otherwise disposed of in accordance with the intended method of disposition set forth in a Registration Statement covering the Registrable Securities or at such time as an opinion of counsel reasonably satisfactory to the Company shall have been rendered to the effect that such conditions are not necessary in order to comply with the Securities Act.

7.5 Information Available. So long as the Registration Statement is effective covering the resale of Registrable Securities owned by the Investors, the Company will furnish to the Investors:

(a) Unless otherwise electronically available on EDGAR, as soon as practicable after it is available, one copy of (i) its Annual Report to Stockholders (which Annual Report shall contain financial statements audited in accordance with generally accepted accounting principles by a national firm of certified public accountants), (ii) if not included in

substance in the Annual Report to Stockholders, its Annual Report on Form 10-KSB and (iii) its Quarterly Reports on Form 10-QSB (the foregoing, in each case, excluding exhibits);

(b) upon the request of the Investors, all exhibits excluded by the parenthetical to subparagraph (a) of this Section 7.5 as filed with the SEC and all other information that is made available to shareholders; and

(c) upon the reasonable request of the Investors, an adequate number of copies of the prospectuses to supply to any other party requiring such prospectuses. Further, and upon the reasonable request of the Investors, the President or the Chief Financial Officer of the Company (or an appropriate designee thereof) will meet with the Investors or their representative at the Company’s headquarters to discuss all information relevant for disclosure in the Registration Statement covering the Registrable Securities and will otherwise cooperate with any Investor conducting an investigation for the purpose of reducing or eliminating such Investor’s exposure to liability under the Securities Act, including the reasonable production of information at the Company’s headquarters; provided, that the Company shall not be required to disclose any confidential information to or meet at its headquarters with any Investor until and unless the Investor shall have entered into a confidentiality agreement in form and substance reasonably satisfactory to the Company with the Company with respect thereto.

8. Representation. Each party hereto acknowledges that Marathon Resource Investments LLC retained Shartsis Friese LLP (“Shartsis Friese”) to represent it in connection with this Agreement and any Annexes or Exhibits thereto, such that its interests may not necessarily coincide with the interests of any other investors (the “Other Investors”). The Other Investors have consulted with, or have had the opportunity to consult with, their own legal counsel and the Other Investors have not relied on Shartsis Friese for legal counsel in connection with this transaction. For the avoidance of doubt, it shall be expressly agreed and understood that as among the Investors, each Investor intends to and is acting individually on its own behalf only, making its own investment decisions, not in concert with or as a group with any other Investor, and no beneficial or pecuniary interest of any one Investor shall be attributed or attributable to any other Investor.

9. Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed (A) if within the United States by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile, or (B) if delivered from outside the United States, by International Federal Express or facsimile, and shall be deemed given (i) if delivered by first-class registered or certified mail, three business days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day after so mailed, (iii) if delivered by International Federal Express, two business days after so mailed, (iv) if delivered by facsimile, upon electronic confirmation of receipt and shall be delivered as addressed as follows:

(a) if to the Company, to:

Power Efficiency Corporation

3960 Howard Hughes Parkway Suite 460

Las Vegas, NV 89169

Tel: (702) 697-0377

Fax: (702) 697-0379

Attn: BJ Lackland

(b) with a copy to:

Ellenoff Grossman & Schole LLP

370 Lexington Avenue

New York, New York 10017

Tel: (212) 370-1300

Fax: (212) 370-7889

Attn: Barry Grossman, Esq.

(c) if to the Investors, at their respective addresses on the signature pages hereto, or at such other address or addresses as may have been furnished to the Company in writing, with a copy to Louis Treiger, 6411 57^th Avenue S., Seattle, WA 98118.

10. Changes. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and the majority in interest of the Investors.

11. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement.

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

13. Governing Law; Arbitration.

13.1 This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of California, without giving effect to the principles of conflicts of law.

13.2 In the event any controversy or dispute shall arise between the parties under, out of, in connection with, or relating to this Agreement or the breach thereof, the party initiating such controversy or making such claim shall provide to the other party notice containing a brief and concise statement of the initiating party’s claims, together with relevant facts supporting them. Following the date of said notice, the parties shall make good faith efforts to settle the dispute. In the event the parties have been unable to reach accord using the procedures set forth in this Section 13, either party may seek binding arbitration before three (3) arbitrators in accordance with the rules of the American Arbitration Association (“AAA”). Each party shall appoint one arbitrator and the appointed arbitrators shall in turn appoint the third arbitrator. In the event the two appointed arbitrators are unable to agree upon the third arbitrator, the AAA shall designate the third arbitrator to arbitrate the controversy or dispute. The

arbitration shall be held in San Francisco, California. Within thirty (30) days after initiation of arbitration, the parties shall reach agreement upon and thereafter follow procedures assuring that the arbitration will be concluded and the award rendered within no more than six (6) months from selection of the three arbitrators. Failing such agreement, AAA will design, and the parties will follow, such procedures. THE ARBITRATORS SHALL NOT AWARD ANY PARTY PUNITIVE OR EXEMPLARY DAMAGES, AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO SEEK SUCH DAMAGES. Each party has the right before or during the arbitration to seek and obtain from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc., to avoid irreparable harm, maintain the status quo or preserve the subject matter of the arbitration.

14. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties.

15. Expenses. Each of the Company and the Investors shall bear its own expenses, including fees and costs of attorneys, accountants and financial advisors, incurred in connection with the transactions contemplated hereunder; provided, however, that the Company shall be responsible for the payment of legal fees that are related to the registration of the issued securities.

16. Confidential Information. Each Investor represents to the Company that, at all times during the Offering, the Investor has maintained in confidence the existence of this Offering.

17. Publicity. The Company and the Investors shall consult with each other in issuing any press releases with respect to the transactions contemplated hereby, and neither the Company nor any Investor shall issue any such press release or otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Investor, and without the prior consent of a majority in interest of the Investors, with respect to any press release of the Company, which consent shall not unreasonably be withheld, except if such disclosure is required by law, in which case the disclosing party shall, to the extent not inconsistent with the disclosing party’s legal obligations, promptly provide the other party with prior notice of such public statement or communication.

Power Efficiency Corporation

                        , 200

Re: Power Efficiency Corporation; Registration Statement

Dear Selling Stockholder:

Enclosed please find five (5) copies of a prospectus dated                     ,              (the “Prospectus”) for your use in reselling your shares of common stock, par value $0.001 per share (the “Shares”), of Power Efficiency Corporation (the “Company”), under the Company’s Registration Statement on Form S— (Registration No. 333- ) (the “Registration Statement”), which has been declared effective by the Securities and Exchange Commission. As a selling stockholder under the Registration Statement, you may have an obligation to comply with the Prospectus delivery requirements under the Securities Act of 1933, as amended for each purchaser of your shares of Common Stock, either directly or through the broker-dealer who executes the sale of your shares of Common Stock.

The Company is obligated to notify you in the event that it suspends trading under the Registration Statement in accordance with the terms of the Securities Purchase Agreement between the Company and you. During the period that the Registration Statement remains effective and trading thereunder has not been suspended, you will be permitted to sell your shares of Common Stock which are included in the Prospectus under the Registration Statement. Upon a sale of any shares of Common Stock under the Registration Statement, you or your broker will be required to deliver to the Company’s Transfer Agent, Continental Stock Transfer & Trust Company, (1) your restricted stock certificate(s) representing the shares of Common Stock, (2) instructions for transfer of the shares of Common Stock sold, and (3) a representation letter from your broker, or from you if you are selling in a privately negotiated transaction, or from such other appropriate party, in the form of Exhibit A attached hereto (the “Certificate of Subsequent Sale”). The Representation Letter confirms that the shares of Common Stock have been sold pursuant to the Registration Statement and in a manner described under the caption “Plan of Distribution” in the Prospectus and that such sale was made in accordance with all applicable securities laws, including the prospectus delivery requirements, if and to the extent applicable.

Please note that you are under no obligation to sell your shares of Common Stock during the registration period. However, if you do decide to sell, you must comply with the requirements described in this letter or otherwise applicable to such sale. Your failure to do so may result in liability under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Please remember that all sales of your shares of Common Stock must be carried out in the manner set forth under the caption “Plan of Distribution” in the Prospectus if you sell under the Registration Statement. The Company may require an opinion of counsel reasonably satisfactory to the Company if you choose another method of sale. You should consult with your own legal advisor(s) on an ongoing basis to ensure your compliance with the relevant securities laws and regulations.

In order to maintain the accuracy of the Prospectus, you must notify the undersigned upon the sale, gift, or other transfer of any shares of Common Stock by you, including the number of shares of Common Stock being transferred, and in the event of any other change in the information regarding you which is contained in the Prospectus. For example, you must notify the undersigned if you enter into any arrangement with a broker-dealer for the sale of shares of Common Stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker-dealer. Depending on the circumstances, such transactions may require the filing of a supplement to the prospectus in order to update the information set forth under the caption “Plan of Distribution” in the Prospectus.

Should you need any additional copies of the Prospectus, or if you have any questions concerning the foregoing, please write to me at Power Efficiency Corporation, 3960 Howard Hughes Parkway, Suite 460, Las Vegas, NV 89169. Thank you.

Sincerely,

Chief Executive Officer

Exhibit A

CERTIFICATE OF SUBSEQUENT SALE

Continental Stock Transfer and Trust Company

17 Battery Place

New York, NY 10004

RE: Sale of Shares Common Stock and/or Warrants of Power Efficiency Corporation (the “Company”) pursuant to the Company’s Prospectus dated                  , 2006 (the “Prospectus”)

Dear Sir/Madam:

The undersigned hereby certifies, in connection with the sale of shares of Common Stock or Warrants of the Company included in the table of Selling Stockholders in the Prospectus, that the undersigned has sold the shares and/or warrants pursuant to the Prospectus and in a manner described under the caption “Plan of Distribution” in the Prospectus and that such sale complies with all securities laws applicable to the undersigned, including, without limitation, if and to the extent applicable, the Prospectus delivery requirements of the Securities Act of 1933, as amended.

Selling Stockholder (the beneficial owner): _________________________________________________________________

Record Holder (e.g., if held in name of nominee): ____________________________________________________________

Restricted Stock Certificate No.(s): ________________________________________________________________________

Number of Shares of Common Stock Sold: __________________________________________________________________

Restricted Warrant No.(s): _______________________________________________________________________________

Number of Warrants Sold: _______________________________________________________________________________

Date of Sale: __________________________________________________________________________________________

In the event that you receive a stock certificate(s) representing more shares of Common Stock than have been sold by the undersigned, then you should return to the undersigned a newly issued certificate for such excess shares in the name of the Record Holder [and BEARING A RESTRICTIVE LEGEND]. Further, you should place a stop transfer on your records with regard to such certificate.

Dated: _____________________________________	Very truly yours,
	By:
	Print Name:
	Title:

cc: Power Efficiency Corporation

3960 Howard Hughes Parkway

Suite 460

Las Vegas, NV 89169