Exhibit 10.3


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 FORCE PROTECTION, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED.


Right to Purchase up to 500,000 Shares of Common Stock of

FORCE PROTECTION, INC. 

(subject to adjustment as provided herein)


COMMON STOCK PURCHASE WARRANT


	
  No. 2006 - 2

  	
   

  	
  Issue Date: October 31,
  2006

  



 


FORCE PROTECTION, INC., a corporation organized under the laws of the
State of Nevada (the “Company”), hereby certifies that, for value received, GORDON
MCGILTON (the “Holder”), is entitled, subject to the terms set forth below, to
purchase from the Company from and after March 31, 2007 and at any time or from
time to time before 5:00 p.m., New York time, through the earlier of, the close
of business on October 31, 2011 or 120 calendar days after the date Mr.
McGilton terminates employment with the Company (the “Expiration Date”), up to 500,000
fully paid and nonassessable shares of Common Stock (as hereinafter defined),
$0.001 par value per share, at the applicable Exercise Price per share.  The Exercise Price under this Warrant shall
be $7.48.  The 500,000 warrants vest on a
pro-rata basis over the four fiscal quarters of 2007.  The warrants can not be exercised until they
vest. 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 Force Protection, Inc. and any person or entity which shall
succeed, or assume the obligations of, Force Protection, Inc. 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 the preceding clause (i) 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.


1.                    Exercise of
Warrant.


1.1     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 vesting and adjustments pursuant to Section 4.


1.2     Company Acknowledgment.  The Company will, at the time of the exercise
of this 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.


1.3     Trustee for Warrant Holder.  In the event that a bank or trust company
shall have been appointed as trustee for the holder of this 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.


2.                    Procedure
for Exercise.


2.1     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 pursuant to Section 1 or otherwise.


2.2     Exercise.


(a)                 Payment may be
made in cash or by certified or official bank check payable to the order of the
Company or other immediate funds equal to the applicable aggregate Exercise
Price, 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.


3.                    Effect of
Reorganization, Etc.; Adjustment of Exercise Price.


3.1     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, 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.


3.2     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 pursuant to Section 3.1, or, if the Holder
shall so instruct the Company, to a bank or trust company specified by the
Holder as trustee for the Holder.


3.3     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 Holder will be delivered to the Holder or
the Trustee as contemplated by Section 3.2.


4.                    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, (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 shall thereafter,
on the exercise hereof as provided in Section 1, be entitled to receive shall
be adjusted 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 (taking into account the provisions of this Section 4).


5.                    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 this 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 this 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 and any Warrant agent of the
Company (appointed pursuant to Section 10 hereof).


6.                    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 this Warrant,
shares of Common Stock (or Other Securities) from time to time issuable on the
exercise of this Warrant.


7.                    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 (at the Company’s expense) 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.


8.                    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.


9.                    Registration
Rights.  The Holder has been granted
certain registration rights by the Company. 
The shares of common stock issuable upon exercise of the warrants will
be registered on a Form S-8 registration statement at a time that the Board of
Directors believes is in the best interest of the Company prior to January 31,
2007.


10.                 Maximum
Exercise.  Notwithstanding anything
contained herein to the contrary, the Holder shall not be entitled to exercise
this Warrant in connection with that number of shares of Common Stock which
would exceed the difference between (i) 4.99% of the issued and outstanding
shares of Common Stock and (ii) the number of shares of Common Stock
beneficially owned by the Holder.  For
purposes of 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. 
The limitation described in the first sentence of this Section 10 shall
automatically become null and void following notice to the Company upon the
occurrence and during the continuance of an Event of Default (as defined in the
Security and Purchase Agreement dated as of the date hereof among the Holder,
the Company and various subsidiaries of the Company, as amended, modified,
restated and/or supplemented from time to time), or upon 75 days prior notice
to the Company.  The Holder shall be
solely responsible for determining its ownership pursuant to this Section
10.  If the Holder delivers a notice to
exercise its warrants, in whole or in part, to the Company, that notice shall
be deemed a waiver of this Section 10. The Holder shall be solely responsible
for determining its ownership pursuant to this Section 10.


11.                 Warrant Agent.  The Company may 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.


12.                 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.


13.                 Notices, Etc.  All notices and other communications from the
Company to the Holder 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 who has so
furnished an address to the Company.


14.                 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 THE STATE OF SOUTH CAROLINA WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.  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 attorneys’ 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 hereof. 
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.


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IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above. 


	
  

  	
   

  	
  FORCE PROTECTION, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Frank Kavanaugh

  
	
   

  	
   

  	
  Name:

  	
  Frank Kavanaugh

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chairman of the Board

  
						



 









 



EXHIBIT A


FORM OF SUBSCRIPTION

(To Be Signed Only On
Exercise Of Warrant)


TO:              Force Protection,
Inc.

9801 Highway 78, Building 1

Ladson, SC, 29456


Attention:                     Chief
Financial Officer


The undersigned, pursuant to the provisions set forth
in the attached Warrant (No.        ),
hereby irrevocably elects to purchase
             shares
of the common stock covered by such Warrant


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 $                     .


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 Force Protection, 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 Force
Protection, 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)