EXHIBIT 4.2


 


NEITHER THIS SECURITY NOR
THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.


 


COMMON
STOCK PURCHASE WARRANT




To Purchase  ______________  Shares of Common Stock of




AMERICAN
DEFENSE SYSTEMS, INC.


 


THIS COMMON STOCK PURCHASE
WARRANT (the “Warrant”) certifies that, for value
received, ______________ an individual (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 the five
year anniversary of the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from American Defense Systems, Inc.,
a Delaware corporation (the “Company”), up to ___________  shares
(the “Warrant Shares”) of Common Stock, par value $0.001 per share, of the Company (the “Common Stock”).
The purchase price of one share of Common Stock under this Warrant shall
be equal to the Exercise Price, as defined in Section 2(b).


 


Section 1.               Definitions.  Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in
that certain Engagement Letter (the “Agreement”), among the Company and
BFC.


 


Section 2.               Exercise.


 


 a) Exercise
of Warrant. 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 on or before the Termination Date by
delivery to the Company of a duly executed facsimile copy of the Notice of
Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered
Holder at the address of such Holder appearing on the books of the
Company); provided,  however,


 


 


1

















 


b)              within 5 Trading Days of the date
said Notice of Exercise is delivered to the
Company, the Holder shall have surrendered this Warrant to the Company and the Company shall have received payment of the aggregate Exercise Price of
the shares thereby purchased by wire transfer or cashier’s
check drawn on a United States bank, or purchased in accordance with
subsection 2(d) hereunder.


 


c)              Exercise Price. The
exercise price of the Common Stock under this Warrant
shall be $1.10, subject to adjustment hereunder or the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula
set forth in subsection 2(d), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(d) (collectively,
the “Exercise Price”).


 


d)              Mechanics of
Exercise.


 


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


 


ii.           Delivery
of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within 3
Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant and payment of the aggregate Exercise Price as set forth above
(“Warrant Share Delivery Date”). This Warrant shall be deemed to have been exercised on the date the Exercise
Price is received by the Company. The Warrant Shares shall be deemed to
have been issued,


 


 


2

















 


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 the Holder, if any, pursuant to Section 2(e)(vii) prior to
the issuance of such shares, have been paid.


 


iii.          Delivery
of New Warrants Upon Exercise. 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 called for by
this Warrant, which new Warrant shall in all other respects be identical with
this Warrant.


 


iv.          Rescission
Rights. If the Company fails to cause its transfer agent to transmit to the
Holder a certificate or certificates representing the Warrant Shares pursuant
to this Section 2(e)(iv) by the Warrant Share Delivery Date, then the
Holder will have the right to rescind such exercise.


 


v.           Compensation
for Buy-In on Failure to Timely Deliver 
Certificates Upon Exercise. In addition to any other rights available to
the Holder, if the Company fails to cause its transfer agent to transmit to the
Holder a certificate or certificates representing the Warrant Shares pursuant
to an exercise on or before the Warrant Share Delivery Date, and if after such
date the Holder is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of
a sale by the Holder of the Warrant Shares which the Holder anticipated
receiving upon such exercise (a “Buy-In”),           then
the Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company was required
to deliver to the Holder in connection with the exercise at issue times (B) the
price at which the sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for which such
exercise was not honored or deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company timely complied with
its exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (1) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in


 


 


3

















 


respect
of the Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Company. Nothing herein shall limit a Holder’s
right to pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant
as required pursuant to the terms hereof.


 


vi.          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 or $1.10.


 


vii.         Charges,
Taxes and Expenses. Issuance of certificates for Warrant Shares 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 or in such name or names as may be directed by
the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the
Company may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.


 


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


 


e)              Cashless Exercise. This
Warrant may also be exercised at such time 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 average Closing Price on the
previous five trading days immediately preceding the date of such election or,
if there is no Closing Price, the fair market
value of the common stock as determined in good faith by the Board of
Directors of the Company;


 


(B)                                     = the Exercise Price of this Warrant, as adjusted; and


 


 


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(X) =
the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a
cashless exercise.


 


Section 3.               Certain
Adjustments.


 


a)             Stock Dividends and Splits.
If the Company, at any time while this Warrant
is outstanding: (A) pays a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock or
any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company pursuant to this Warrant),  (B) subdivides outstanding shares of
Common Stock into a larger number of shares, (C)   combines (including by way of reverse stock
split) outstanding shares of Common Stock into
a smaller number of shares, or (D) issues by reclassification of shares of
the Common Stock any shares of capital
stock of the Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of Common Stock outstanding
after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted. Any adjustment made pursuant
to this Section 3(a) shall become effective immediately after the
record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.


 


b)              Subsequent Equity Sales. If
the Company or any Subsidiary thereof, as applicable,
at any time while this Warrant is outstanding, shall offer, sell, grant any option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or
announce any offer, sale, grant or any option to purchase or other disposition)
any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than
the then Exercise Price (such lower price, the “Base
Share Price” and such issuances collectively, a “Dilutive
Issuance”), as adjusted hereunder (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation
of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights per share which is issued in connection
with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Exercise Price, such
issuance shall be deemed to have occurred for
less than the Exercise Price), then, the Exercise Price shall be reduced to equal the Base Share Price and the number of
Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after
taking into account the decrease in
the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment and the number of Warrant
Shares issuable hereunder shall be increased
such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall
be equal to the aggregate Exercise Price prior to such adjustment. Such adjustment shall be made whenever such
Common Stock or Common Stock
Equivalents are issued. The Company shall notify the Holder in writing,
no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents


 


 


 


5

















 


subject to this section, indicating therein the
applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms
(such notice the “Dilutive Issuance Notice”). For purposes of
clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance,
after the date of such Dilutive Issuance
the Holder is entitled to receive a number of Warrant Shares based upon the
Base Share Price regardless of whether the Holder accurately refers to the Base
Share Price in the Notice of
Exercise. This provision shall not apply to stock options granted to employees
or securities issued pursuant to any stock option plan or securities issued to officers or directors of the Company or any
securities issued pursuant to a merger or acquisition of another entity
or convertible securities issued prior to the date herein (“Exempt Issuances”).


 


c)             Pro Rata Distributions. If the Company, at any
time prior to the Termination Date, shall
distribute to all holders of Common Stock (and not to Holders of the Warrants) evidences of its indebtedness or
assets or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be
subject to Section 3(b)), then in
each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive
such distribution by a fraction of which the denominator shall be the Closing Price determined as of the
record date mentioned above, and of which
the numerator shall be such Closing Price on such record date less the then per
share fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith.
In either case the adjustments shall be described in a statement provided to
the Holders of the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date mentioned above.


 


d)              Fundamental Transaction.
If, at any time while this Warrant is outstanding,
(A) the Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of
its assets in one or a series of related
transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, or (D) the Company effects any reclassification of the
Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted
into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any
subsequent conversion of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would
have been issuable upon such
exercise absent such Fundamental Transaction, at the option of the Holder, (a) 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 Alternate Consideration 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


 


 


6

















 


such event or (b) if the Company is acquired in
an all cash transaction, cash equal to the value of this Warrant as
determined in accordance with the Black-Scholes option pricing formula (the “Alternate
Consideration”). For purposes of any such exercise, the determination of
the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in
respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the Exercise Price
among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction. To the extent
necessary to effectuate the foregoing provisions, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a
new warrant consistent with the foregoing provisions and evidencing the Holder’s
right to exercise such warrant into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is affected shall include
teens requiring any such successor or surviving entity to comply with the
provisions of this Section 3(d) and insuring that this Warrant (or
any such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.


 


e)         Exempt Issuance. Notwithstanding
the foregoing, no adjustments, Alternate
Consideration nor notices shall be made, paid or issued under this Section 3
in respect of an Exempt Issuance.


 


f)             Calculations. All calculations under this Section 3
shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. The number of shares of Common Stock outstanding at any given time
shall not includes shares of Common Stock
owned or held by or for the account of the Company, and the description of any such
shares of Common Stock shall be considered on issue or sale of Common Stock.


 


g)            Voluntary
Adjustment By 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.


 


h)            Notice to Holders.


 


i.            Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to this Section 3,
the Company shall promptly mail to each Holder a notice setting forth the
Exercise Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment. If the Company issues a variable rate security
the Company shall be deemed to have issued Common Stock or Common Stock
Equivalents at the lowest possible conversion or exercise price at which such
securities may be converted or exercised in the case of a Variable Rate
Transaction, or the lowest possible adjustment price in the case of an MFN
Transaction.


 


 


7

















 


ii.           Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend
(or any other distribution) on the Common Stock; (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property; (E) the Company
shall authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company; then, in each case, the Company shall
cause to be mailed to the Holder at its last addresses as it shall appear upon
the Warrant Register of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice and the Holder retains all rights and preferences under this
Warrant. The Holder is entitled to exercise this Warrant during the 20-day
period commencing the date of such notice to the effective date of the event
triggering such notice.


 


    Section 4.                  Transfer of Warrant.


 


 a)               Transferability. Subject to
compliance with any applicable securities laws and the conditions set forth
in Sections 5(a) and 4(d) hereof, this Warrant and all rights hereunder are transferable, in whole or in part,
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 the 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


 


 


8

















 


assigned, and this Warrant shall promptly be cancelled.
A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a new
Warrant issued.


 


b)          New
Warrants. 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
the Holder or its agent or attorney. Subject to compliance with Section 4(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.


 


c)              Warrant
Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder
hereof from time to time. The Company may deem and treat the registered Holder
of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other
purposes, absent actual notice to the contrary.


 


d)              Transfer Restrictions. If,
at the time of the surrender of this Warrant in connection with any transfer of
this Warrant, the transfer of this Warrant shall not be registered pursuant to
an effective registration statement under the Securities Act and under
applicable state securities or blue sky laws, the Company may require, as a
condition of allowing such transfer (i) that the Holder or transferee of
this Warrant, as the case may be, furnish to the Company a written opinion of
counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that such
transfer may be made without registration under the Securities Act and under
applicable state securities or blue sky laws, (ii) that the holder or
transferee execute and deliver to the Company an investment letter in form and
substance acceptable to the Company, a form of which will be provided by the
Company when needed and (iii) that the transferee be an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated
under the Securities Act or a qualified institutional buyer as defined in Rule 144A(a) under
the Securities Act.


 


    Section 5.                 Miscellaneous.


 


 a)             Title to Warrant. Prior to
the Termination Date and subject to compliance with
applicable laws and Section 4 of this Warrant, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Company by the Holder in person or by duly authorized
attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. The transferee
shall sign an investment letter in form and
substance reasonably satisfactory to the Company. This investment letter and the investment letter represented in Section 4(d) is
a letter making the appropriate representations
(such as an exemption for the transfer under federal securities
laws) needed for such transfer under federal securities laws.


 


9

















 


b)              No Rights as Shareholder Until
Exercise. This Warrant does not entitle the
Holder 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.


 


c)              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 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, in the case of the Warrant, 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.


 


d)            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.


 


e)             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 trading market upon which the Common Stock may be listed.


 


Except and to the extent as
waived or consented to by the Holder, the Company shall not by any action,
including, without limitation, amending its certificate 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 as set forth in this Warrant against


 


 


10

















 


impairment. Without limiting the
generality of the foregoing, the Company will (a) not
increase the par value of any Warrant Shares 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 Warrant Shares 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 Warrant Shares 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.


 


f)               Jurisdiction. All questions concerning
the construction, validity, enforcement and interpretation of this Warrant
shall be determined in accordance with the laws of the State of Iowa.


 


g)              Restrictions. The Holder 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.


 


h)              Non waiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder’s rights, powers or
remedies, notwithstanding the fact that all
rights hereunder terminate on the Termination Date. If the Company willfully
and knowingly fails to comply with any provision of
this Warrant, which results in any material
damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited
to, reasonable attorneys’ fees, including
those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.


 


i)               Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the addresses provided by the Company and to the
Holder at: Berthel Fisher is 701 Tama Street, Building B, Marion, Iowa 52302. .


 


j)               Limitation
of Liability. No provision hereof, in the absence of any affirmative action
by Holder to exercise this Warrant or purchase Warrant Shares, and no
enumeration herein of the rights or privileges of Holder, shall give rise to
any liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.


 


 


11

















 


k)             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.


 


1)             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.


 


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


 


n)              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.


 


o)             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.


 


********************


 


 


12

















 


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


 


 


Dated:


 


	
   

  	
  American Defense
  Systems, Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Anthony
  J. Piscitelli

  
	
   

  	
   

  	
  Title:

  	
  CEO

  



 


 


 

















 


NOTICE OF EXERCISE


 


TO:  AMERICAN DEFENSE SYSTEMS, INC.


 


(1)     The undersigned hereby
elects to purchase_______________________Warrant
Shares of the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise price
in full, together with all applicable transfer taxes, if any.


 


(i)              Payment shall take the form of
lawful  money of the United States for a
total ____________________; or


 


(ii) the cancellation of
such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(d), to exercise this Warrant
with respect to the maximum number of Warrant
Shares purchasable pursuant to the cashless exercise procedure set
forth in subsection 2(d).


 


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


 


                                _____________________________


 


The Warrant Shares shall be delivered to the following:


 


                                ________________________________


 


                                ________________________________


 


                                ________________________________


 


(4) Accredited Investor.
The undersigned is an “accredited investor” as defined in Regulation D
promulgated under the Securities Act of 1933, as amended.


 


[SIGNATURE OF HOLDER]


 


Name of Investing Entity:
____________________________________________________________________


Signature of Authorized Signatory of Investing
Entity:______________________________________________


Name of Authorized Signatory:
________________________________________________________________


Title of Authorized Signatory:
_________________________________________________________________


Date:
_____________________________________________________________________________________


 


 


 

















 


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 Fowl 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 a fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.