THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON
STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO GLOBAL DIGITAL SOLUTIONS, INC. THAT SUCH REGISTRATION
IS NOT REQUIRED.
Right to Purchase 1,111,111 Shares of Common Stock of
Global Digital Solutions, Inc.
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. _________________ Issue Date: July 28, 2004
GLOBAL DIGITAL SOLUTIONS, INC., a corporation organized under the laws
of the State of New Jersey ("GDSI"), hereby certifies that, for value
received, LAURUS MASTER FUND, LTD., or assigns (the "Holder"), is
entitled, subject to the terms set forth below, to purchase from the
Company (as defined herein) from and after the Issue Date of this
Warrant and at any time or from time to time before 5:00 p.m., New York
time, through the close of business July 28, 2011 (the "Expiration
Date"), up to 1,111,111 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), $0.001 par value per share, at the
applicable Exercise Price per share (as defined below). The number and
character of such shares of Common Stock and the applicable Exercise
Price per share are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include GDSI and any corporation which
shall succeed, or assume the obligations of, GDSI hereunder.
(b) The term "Common Stock" includes (i) the Company's Common Stock,
par value $0.001 per share; and (ii) any other securities into which or
for which any of the securities described in (a) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of the Warrant at any time
shall be entitled to receive, or shall have received, on the exercise
of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or
in replacement of Common Stock or Other Securities pursuant to Section
4 or otherwise.
(d) The "Exercise Price" applicable under this Warrant shall be equal
to a price of $1.07.
Exercise of Warrant.
Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be
entitled to receive, upon exercise of this Warrant in whole or in part,
by delivery of an original or fax copy of an exercise notice in the
form attached hereto as Exhibit A (the "Exercise Notice"), shares of
Common Stock of the Company, subject to adjustment pursuant to Section
4.
Fair Market Value. For purposes hereof, the "Fair Market Value" of a
share of Common Stock as of a particular date (the "Determination
Date") shall mean:
If the Company's Common Stock is traded on the American Stock Exchange
or another national exchange or is quoted on the National or SmallCap
Market of The Nasdaq Stock Market, Inc. ("Nasdaq"), then the closing or
last sale price, respectively, reported for the last business day
immediately preceding the Determination Date.
If the Company's Common Stock is not traded on the American Stock
Exchange or another national exchange or on the Nasdaq but is traded on
the NASD OTC Bulletin Board, then the mean of the average of the
closing bid and asked prices reported for the last business day
immediately preceding the Determination Date.
Except as provided in clause (d) below, if the Company's Common Stock
is not publicly traded, then as the Holder and the Company agree or in
the absence of agreement by arbitration in accordance with the rules
then in effect of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education
and training to pass on the matter to be decided.
If the Determination Date is the date of a liquidation, dissolution or
winding up, or any event deemed to be a liquidation, dissolution or
winding up pursuant to the Company's charter, then all amounts to be
payable per share to holders of the Common Stock pursuant to the
charter in the event of such liquidation, dissolution or winding up,
plus all other amounts to be payable per share in respect of the Common
Stock in liquidation under the charter, assuming for the purposes of
this clause (d) that all of the shares of Common Stock then issuable
upon exercise of the Warrant are outstanding at the Determination Date.
Company Acknowledgment. The Company will, at the time of the exercise
of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights
to which such holder shall continue to be entitled after such exercise
in accordance with the provisions of this Warrant. If the holder shall
fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such holder any such
rights.
Trustee for Warrant Holders. In the event that a bank or trust company
shall have been appointed as trustee for the holders of the Warrant
pursuant to Subsection 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent (as hereinafter described) and
shall accept, in its own name for the account of the Company or such
successor person as may be entitled thereto, all amounts otherwise
payable to the Company or such successor, as the case may be, on
exercise of this Warrant pursuant to this Section 1.
Procedure for Exercise.
Delivery of Stock Certificates, Etc., on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such
shares as of the close of business on the date on which this Warrant
shall have been surrendered and payment made for such shares in
accordance herewith. As soon as practicable after the exercise of this
Warrant in full or in part, and in any event within three (3) business
days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the
number of duly and validly issued, fully paid and nonassessable shares
of Common Stock (or Other Securities) to which such Holder shall be
entitled on such exercise, plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash equal to such
fraction multiplied by the then Fair Market Value of one full share,
together with any other stock or other securities and property
(including cash, where applicable) to which such Holder is entitled
upon such exercise pursuant to Section 1 or otherwise.
Exercise. Payment may be made either (i) in cash or by certified or
official bank check payable to the order of the Company equal to the
applicable aggregate Exercise Price, (ii) by delivery of the Warrant,
or shares of Common Stock and/or Common Stock receivable upon exercise
of the Warrant in accordance with Section (b) below, or (iii) by a
combination of any of the foregoing methods, for the number of Common
Shares specified in such Exercise Notice (as such exercise number shall
be adjusted to reflect any adjustment in the total number of shares of
Common Stock issuable to the Holder per the terms of this Warrant) and
the Holder shall thereupon be entitled to receive the number of duly
authorized, validly issued, fully-paid and non-assessable shares of
Common Stock (or Other Securities) determined as provided herein.
Notwithstanding any provisions herein to the contrary, if the Fair
Market Value of one share of Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, the Holder may elect to receive
shares equal to the value (as determined below) of this Warrant (or the
portion thereof being exercised) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed
Exercise Notice in which event the Company shall issue to the Holder a
number of shares of Common Stock computed using the following formula:
X=Y (A-B)
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised, the
portion of the Warrant being exercised (at the date of such
calculation)
A = the Fair Market Value of one share of the Company's Common Stock
(at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
Effect of Reorganization, Etc.; Adjustment of Exercise Price.
Reorganization, Consolidation, Merger, Etc. In case at any time or
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under
any plan or arrangement contemplating the dissolution of the Company,
then, in each such case, as a condition to the consummation of such a
transaction, proper and adequate provision shall be made by the Company
whereby the Holder of this Warrant, on the exercise hereof as provided
in Section 1 at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as
the case may be, shall receive, in lieu of the Common Stock (or Other
Securities) issuable on such exercise prior to such consummation or
such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon
such consummation or in connection with such dissolution, as the case
may be, if such Holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustment thereafter as provided in
Section 4.
Dissolution. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its
Common Stock, shall at its expense deliver or cause to be delivered to
the Holder the stock and other securities and property (including cash,
where applicable) receivable by the Holder of the Warrant pursuant to
Section 3.1, or, if the Holder shall so instruct the Company, to a bank
or trust company specified by the Holder and having its principal
office in New York, NY as trustee for the Holder of the Warrant.
Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect
and the terms hereof shall be applicable to the shares of stock and
other securities and property receivable on the exercise of this
Warrant after the consummation of such reorganization, consolidation or
merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of
any such stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall
have expressly assumed the terms of this Warrant as provided in Section
4. In the event this Warrant does not continue in full force and
effect after the consummation of the transactions described in this
Section 3, then the Company's securities and property (including cash,
where applicable) receivable by the Holders of the Warrant will be
delivered to Holder or the Trustee as contemplated by Section 3.2.
Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a
dividend or other distribution on outstanding Common Stock, (b)
subdivide its outstanding shares of Common Stock, or (c) combine its
outstanding shares of the Common Stock into a smaller number of shares
of the Common Stock, then, in each such event, the Exercise Price
shall, simultaneously with the happening of such event, be adjusted by
multiplying the then Exercise Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be
the number of shares of Common Stock outstanding immediately after such
event, and the product so obtained shall thereafter be the Exercise
Price then in effect. The Exercise Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive
event or events described herein in this Section 4. The number of
shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be
entitled to receive shall be increased to a number determined by
multiplying the number of shares of Common Stock that would otherwise
(but for the provisions of this Section 4) be issuable on such exercise
by a fraction of which (a) the numerator is the Exercise Price that
would otherwise (but for the provisions of this Section 4) be in
effect, and (b) the denominator is the Exercise Price in effect on the
date of such exercise.
Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities)
issuable on the exercise of the Warrant, the Company at its expense
will promptly cause its Chief Financial Officer or other appropriate
designee to compute such adjustment or readjustment in accordance with
the terms of the Warrant and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (a)
the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold
or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be
outstanding, and (c) the Exercise Price and the number of shares of
Common Stock to be received upon exercise of this Warrant, in effect
immediately prior to such adjustment or readjustment and as adjusted or
readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and
any Warrant agent of the Company (appointed pursuant to Section 11
hereof).
Reservation of Stock, Etc., Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of the Warrant, shares of Common
Stock (or Other Securities) from time to time issuable on the exercise
of the Warrant.
Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole
or in part. On the surrender for exchange of this Warrant, with the
Transferor's endorsement in the form of Exhibit B attached hereto (the
"Transferor Endorsement Form") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable
securities laws, which shall include, without limitation, a legal
opinion from the Transferor's counsel that such transfer is exempt from
the registration requirements of applicable securities laws, the
Company at its expense but with payment by the Transferor of any
applicable transfer taxes) will issue and deliver to or on the order of
the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor
Endorsement Form (each a "Transferee"), calling in the aggregate on the
face or faces thereof for the number of shares of Common Stock called
for on the face or faces of the Warrant so surrendered by the
Transferor.
Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this
Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any
such mutilation, on surrender and cancellation of this Warrant, the
Company at its expense will execute and deliver, in lieu thereof, a new
Warrant of like tenor.
Registration Rights. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights
are set forth in a Registration Rights Agreement entered into by the
Company and Purchaser dated as of even date of this Warrant.
Maximum Exercise. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares
of Common Stock which would be in excess of the sum of (i) the number
of shares of Common Stock beneficially owned by the Holder and its
affiliates on an exercise date, and (ii) the number of shares of Common
Stock issuable upon the exercise of this Warrant with respect to which
the determination of this proviso is being made on an exercise date,
which would result in beneficial ownership by the Holder and its
affiliates of more than four and ninety nine percent (4.99%) of the
outstanding shares of Common Stock of the Company on such date. For
the purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and
Regulation 13d-3 thereunder. Notwithstanding the foregoing, the
restriction described in this paragraph may be revoked upon seventy
five (75) days prior notice from the Holder to the Company and is null
and void upon the occurrence and the continuance of an Event of Default
under any Note made by the Company to the Holder on the date hereof in
connection with the issuance of this Warrant.
Warrant Agent. The Company may, by written notice to the each Holder
of the Warrant, appoint an agent for the purpose of issuing Common
Stock (or Other Securities) on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 7, and replacing
this Warrant pursuant to Section 8, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may
be, shall be made at such office by such agent.
Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder
hereof as the absolute owner hereof for all purposes, notwithstanding
any notice to the contrary.
Notices, Etc. All notices and other communications from the Company to
the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been
furnished to the Company in writing by such Holder or, until any such
Holder furnishes to the Company an address, then to, and at the address
of, the last Holder of this Warrant who has so furnished an address to
the Company.
Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Warrant shall be governed by
and construed in accordance with the laws of State of New York without
regard to principles of conflicts of laws. Any action brought
concerning the transactions contemplated by this Warrant shall be
brought only in the state courts of New York or in the federal courts
located in the state of New York; provided, however, that the Holder
may choose to waive this provision and bring an action outside the
state of New York. The individuals executing this Warrant on behalf of
the Company agree to submit to the jurisdiction of such courts and
waive trial by jury. The prevailing party shall be entitled to recover
from the other party its reasonable attorney's fees and costs. In the
event that any provision of this Warrant 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 Warrant. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any
of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability
of any other provision. The Company acknowledges that legal counsel
participated in the preparation of this Warrant 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 Warrant to favor any party against the other
party.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.
GLOBAL DIGITAL SOLUTIONS, INC.
WITNESS:
By:
Name:
Title:
Exhibit A
FORM OF SUBSCRIPTION
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO: Global Digital Solutions, Inc.
Attention: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.____), hereby irrevocably elects to purchase (check
applicable box):
_______ shares of the Common Stock covered by such Warrant; or
the maximum number of shares of Common Stock covered by such
Warrant pursuant to the cashless exercise procedure set forth in
Section 2.
The undersigned herewith makes payment of the full Exercise Price for
such shares at the price per share provided for in such Warrant, which
is $___________. Such payment takes the form of (check applicable box
or boxes):
_______ $__________ in lawful money of the United States; and/or
_______ the cancellation of such portion of the attached Warrant as
is exercisable for a total of _______ shares of Common Stock (using a
Fair Market Value of $_______ per share for purposes of this
calculation); and/or
_______ the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section 2.2, to
exercise this Warrant with respect to the maximum number of shares of
Common Stock purchasable pursuant to the cashless exercise procedure
set forth in Section 2.
The undersigned requests that the certificates for such shares be
issued in the name of, and delivered to
______________________________________________ whose address is
_______________________________________________________________________
____.
The undersigned represents and warrants that all offers and sales by
the undersigned of the securities issuable upon exercise of the within
Warrant shall be made pursuant to registration of the Common Stock
under the Securities Act of 1933, as amended (the "Securities Act") or
pursuant to an exemption from registration under the Securities Act.
Dated:
(Signature must conform to name of holder as specified on the face of
the Warrant)
Address:
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading
"Transferees" the right represented by the within Warrant to purchase
the percentage and number of shares of Common Stock of Global Digital
Solutions, Inc. into which the within Warrant relates specified under
the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each
such person Attorney to transfer its respective right on the books of
Global Digital Solutions, Inc. with full power of substitution in the
premises.
Transferees Address Percentage
Transferred Number Transferred
Dated:
(Signature must conform to name of holder as specified on the face of
the Warrant)
Address:
SIGNED IN THE PRESENCE OF:
(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
(Name)
B-1
