Document:

f1012ba1ex10vii_globaldigit.htm

Exhibit 10.7

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

1.           Identification.

 

This Intellectual Property Security Agreement (the “Agreement”), dated as of August 5, 2013 is entered into by and between Merriellyn Kett, an individual (“Grantor”) and Global Digital Solutions, Inc., a New Jersey corporation (“GDSI” or the “Lender”).

 

2.           Recitals.

 

2.1         On or about March 15, 2013, the Lender made or committed to make a loan to Airtronic USA, Inc. (“Debtor”), as evidenced by: (a) the Bridge Loan Modification and Ratification Agreement dated March 15, 2013 (“First Modification”); (b) the Debtor in Possession Note Purchase Agreement dated October 22, 2012 (“Purchase Agreement”); (c) the Security Agreement dated October 22, 2012 (“Security Agreement”); and (d) the 8 14 % Secured Promissory Note dated October 22, 2012 (“Original Note”) (collectively, the “Original Loan Documents”).

 

2.2        As provided in the Original Note, the maturity date of the Original Note is “the date the Bankruptcy Court has discharged the Bankruptcy Case.” The Debtor filed its plan of reorganization (the “Plan”) in the Bankruptcy Case, as that term is defined in the Purchase Agreement. GDSI consented to the filing of the plan, and approved of all of the terms and conditions contained therein. Pursuant to the Plan, as may be amended with GDSI’s consent, on the GDSI Transaction Closing Date (as defined in the Plan), the GDSI Transaction (as defined in the Plan) shall be consummated, at which time, among other things, GDSI will acquire 70% of the issued and outstanding capital stock of the Debtor, as reorganized, and all amounts due and owing under the Original Note shall be credited to the GDSI Note Receivable (as defined in the Plan) in the original principal amount of $2 million.

 

2.2        Thereafter, Lender made or committed to make further loans to Debtor pursuant to the 814% Secured Promissory Note dated as of August 5, 2013 (“New Note”) and the Second Bridge Loan Modification and Ratification Agreement between Lender and Debtor dated as of August 5, 2013 (“Second Modification”) (collectively with the Original Loan Documents, the “Loan Documents”).

 

2.3         Grantor is Chief Executive Officer of the Debtor and signatory to the Loan Documents on behalf of the Debtor.

 

2.4         In consideration of the loans made by Lender to Debtor pursuant to the Loan Documents or otherwise (the “Loan”) and for other good and valuable consideration, and as security for the performance by Debtor of its obligations under the Loan Documents, and as security for the repayment of the Loan and all other sums due from Debtor to the Lender arising under the Loan Documents and any other agreement between or among them, Grantor, for good and valuable consideration, receipt of which is acknowledged, desires to grant to the Lender a first priority security interest senior to all other security interests in the Intellectual Property Collateral (as such term is defined herein), on the terms and conditions hereinafter set forth. Obligations (as defined in the Purchase Agreement) include all future advances and loans by the Lender to Debtor that may be made pursuant to the Purchase Agreement, Loan Documents or any other agreements.

 

  

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2.5         Capitalized terms not defined but employed herein shall have the meanings attributed to them in the Loan Documents and the Plan. In the event of a conflict between defined terms in the Loan Documents and defined terms in the Plan, defined terms in the Loan Documents shall prevail.

 

3.           Creation of Security.

 

3.1         Grant of Security Interest.

 

As collateral security for the prompt and complete payment and performance of all of Debtor’s present or future Obligations under the Loan Documents and repayment of the Loan, Grantor hereby grants a first priority security interest, senior to all other security interests, in all of Grantor’s right, title and interest in, to, and under her registered intellectual property collateral (all of which shall collectively be referred to as the “Intellectual Property Collateral”), including, without limitation, the following:

 

(a)         Any and all patents, patent applications, and like protections, including without limitation improvements, divisions, continuations, renewals, reissues, extensions, and/or continuations-in-part of the same, set forth on Exhibit A hereto (collectively, the “Patents”);

 

(b)         Any and all trademark and/or service mark rights, slogans, trade dress, trade names, and trade styles, whether registered or not, applications to register, and registrations of same and like protections, and the entire goodwill of the business of Debtor connected with and symbolized by such trademarks, set forth on Exhibit B hereto (collectively, the “Trademarks”);

 

(c)         Any and all claims for damages by way of past, present, and/or future infringements of any of the Copyrights, Patents and Trademarks described above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the rights described above;

 

(d)         Any and all amendments, extensions, or renewals of any of the Copyrights, Patents and Trademarks; and

 

(e)         Any and all proceeds and products of the foregoing rights, including without limitation all payments under any insurance policy or policies or any indemnity or warranty payable in respect of any of the foregoing.

 

  

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Provided, however, that notwithstanding any of the other provisions herein (and notwithstanding any recording of the Lender’s Lien made in the United States Patent and Trademark Office, United States Copyright Office, or other registry office in any other jurisdiction), this Agreement shall not constitute a grant of security interest in any property to the extent that such grant of a security interest is prohibited by any rule of law, statute or regulation or is prohibited by, or constitutes a breach or default under or results in the termination of or gives rise to any right of acceleration, modification or cancellation under any contract, license, agreement, instrument or other document evidencing or giving rise to Grantor’s right to use such property, or would result in the forfeiture of Grantor’s rights in the property including, without limitation, any Trademark applications filed in the United States Patent and Trademark Office on the basis of Grantor’s “intent to use” such Trademark, unless and until acceptable evidence of use of the Trademark has been filed with and accepted by the United States Patent and Trademark Office pursuant to Section 1(c) or Section 1(d) of the Lanham Act, 15 U.S.C. 1051, et seq., to the extent that granting a lien in such Trademark application prior to such filing would adversely affect the enforceability or validity of such Trademark application.

 

Furthermore, notwithstanding any other provisions herein, this Agreement shall not grant a security interest in any property unless and until Lender has advanced $550,000 to Debtor pursuant to the New Note.

 

3.2        Additional Security Interests. This security interest in the Intellectual Property Collateral is granted in conjunction with the security interest granted to Lender under the Security Agreement and/or other Loan Documents. The rights and remedies of Lender with respect to the security interest in the Intellectual Property Collateral are in addition to those set forth in the Loan Documents, and those which are now or hereafter available to Lender as a matter of law or equity. Each right, power, and remedy of Lender provided for herein or in the Loan Documents, or now or hereafter existing at law or in equity, shall be cumulative and concurrent and shall be in addition to every right, power, or remedy provided for herein and the exercise by Lender of any one or more of the rights, powers, or remedies provided for in this Intellectual Property Security Agreement, or any of the other Loan Documents, or now or hereafter existing at law or in equity, shall not preclude the concurrent or later exercise by any person or entity, including Lender, of any or all other rights, powers, or remedies.

 

3.3        Authorizations. Grantor irrevocably authorizes Lender to file at any time in any relevant jurisdiction any initial financing statements with respect to the Intellectual Property Collateral or any part thereof and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code, or the analogous legislation of each applicable jurisdiction for the filing of any financing statement or amendment. Lender is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country or jurisdiction) such documents as may be necessary or advisable for the purposes of perfecting, confirming, continuing, enforcing, or protecting its security interest in the Intellectual Property Collateral, without the signature of Grantor, and naming Grantor as debtor and Lender as secured party.

 

4.           Covenants and Warranties. Grantor represents, warrants, covenants, and agrees as follows:

 

(a)         This Agreement creates, and in the case of any After-Acquired Intellectual Property (as defined in Section 4(f), below), will create, at the time Grantor first has rights in such After-Acquired Intellectual Property, in favor of Lender, in each case, a valid and perfected first priority security interest and collateral assignment in the Intellectual Property Collateral in the United States securing the payment and performance of the Obligations evidenced in the Loan Documents.

 

  

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(b)         Grantor is now an owner of the Intellectual Property Collateral, free and clear of any and all liens, assignments, prior security interests, or otherwise, except for non-exclusive licenses granted by Grantor to Debtor’s customers in the ordinary course of business, and has full power and authority to grant a first-priority security interest in the Intellectual Property Collateral to Lender hereunder, without the consent of any other person or entity.

 

(c)         Performance of this Agreement does not conflict with or result in a breach of any material agreement to which Grantor is a party or otherwise bound. Grantor shall remain liable to perform all obligations under the terms of any contract, agreement, or instrument relating to the Intellectual Property Collateral (in whole or in part), and Grantor agrees to indemnify and hold harmless Lender from and against any and all liability for such performance or failure to perform.

 

(d)         During the term of this Agreement, Grantor will not: (1) transfer or otherwise encumber any interest in the Intellectual Property Collateral, except for non-exclusive licenses granted by Grantor in the ordinary course of Debtor’s business or as otherwise permitted by this Agreement; (2) divest herself of any right under, in, or to the Intellectual Property Collateral except as permitted herein, absent prior written approval of the Lender; or (3) enter into any agreement that would materially impair or conflict with Grantor’s obligations under this Agreement without Lender’s express written consent, which consent will not be unreasonably withheld. Notwithstanding anything to the contrary herein, nothing in this Agreement prevents Grantor from disposing of, discontinuing the use or maintenance of, failing to pursue, or otherwise allowing to lapse, terminate, or be put into the public domain, any Intellectual Property Collateral if Grantor determines in her reasonable business judgment that such discontinuance is desirable in the conduct of her or Debtor’s business.

 

(e)         To the best of Grantor’s knowledge, each of the Trademarks, Patents, and Copyrights is valid and enforceable, and no part of the Intellectual Property Collateral has been judged invalid or unenforceable, in whole or in part, and no claim has been made in writing that any part of the Intellectual Property Collateral violates the rights of any third party.

 

(f)          Grantor shall advise Lender of any ownership right of Grantor in or to any Trademark, Patent, or Copyright arising after the date of this Agreement (“After-Acquired Intellectual Property”). Grantor agrees that, should she obtain an ownership or other interest in After-Acquired Intellectual Property: (1) the provisions of this Agreement shall automatically apply thereto; and (2) any such After-Acquired Intellectual Property shall automatically become part of the Intellectual Property Collateral subject to the terms and conditions of this Agreement.

 

  

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(g)         Grantor shall, at her own expense: (1) protect, defend, and maintain the validity and enforceability of the Trademarks, Patents, and Copyrights, including, but not limited to, timely filing and paying all maintenance fees for Patents and all renewal fees for Trademarks and/or Copyrights; (2) use reasonable commercial efforts to detect infringements of the Trademarks, Patents, or Copyrights and promptly advise Lender in writing of material infringements detected; and (3) not allow any Trademarks, Patents, or Copyrights to be abandoned, forfeited, dedicated to the public or placed into the public domain, or otherwise become invalid or unenforceable, without the written consent of Lender, which shall not be unreasonably withheld.

 

(h)         Grantor shall take such further actions as Lender may reasonably request from time to time to perfect or continue the perfection of Lender’s security interest in the Intellectual Property Collateral, including, but not limited to, the payment of any fees and/or taxes required in connection with the granting of the security interest in the Intellectual Property Collateral to Lender, and the filing of any financing statements or other documents in connection herewith or therewith.

 

(i)          To Grantor’s knowledge, no authorization, approval, or other action by, and no notice to or filing with, any United States governmental authority or United States regulatory body is required either: (1) for the grant by Grantor of the security interest granted under this Agreement, or for the execution, delivery, or performance of this Agreement by Grantor in the United States; or (2) for the perfection in the United States or the exercise by Lender of its rights and remedies under this Agreement.

 

(j)           All information heretofore, herein, or hereafter supplied to Lender by or on behalf of Grantor with respect to the Intellectual Property Collateral is true and correct in all material respects.

 

(k)         Grantor will promptly notify Lender in writing of: (1) any event that materially adversely affects the value of the Intellectual Property Collateral; (2) any event that adversely affects the ability of Grantor to dispose of any material Intellectual Property Collateral; (3) any event that materially adversely affects the rights and remedies of Lender in relation to the Intellectual Property Collateral; and (4) any threatened or filed legal, equitable, or administrative claims or proceedings that are reasonably likely to affect or impair any of the rights of the Lender under this Agreement or in the Intellectual Property Collateral in any material respect.

 

(l)          Grantor, at her sole cost and expense, will protect and defend this Agreement, all of the rights of the Lender hereunder, and the Intellectual Property Collateral against the claims and demands of all other persons or entities.

 

5.           Performance By Lender. If Grantor fails to perform any material covenant, agreement, duty or obligation of Grantor under this Agreement, Lender may, at any time or times in its discretion, take action to effect performance of such obligation. All amounts expended by the Lender in so doing shall become part of the Debtor’s obligations secured hereby, and shall be immediately due and payable by Grantor to the Lender upon demand and shall bear interest at the highest legal amount allowed by law from the dates of such expenditures until paid. No discretionary right, remedy or power granted to the Lender under any part of this Agreement shall be deemed to impose any obligation whatsoever on the Lender with respect thereto, such rights, remedies and powers being solely for the protection of the Lender.

 

  

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6.           Further Assurances; Attorney in Fact.

 

(a)         On a continuing basis, Grantor will, at any time upon request by Lender, make, execute, acknowledge, and deliver, and file and record in the proper filing and recording places in the United States, all such instruments, including appropriate financing and continuation statements and collateral agreements and filings with the United States Patent and Trademark Office and the Register of Copyrights, and take all such action as may reasonably be requested by Lender, to perfect Lender’s security interest in all Licenses, Copyrights, Patents, and Trademarks and otherwise to carry out the intent and purposes of this Agreement, or for assuring and confirming to Lender the grant or perfection of a security interest in all Intellectual Property Collateral, provided that Grantor shall not be required to register any Intellectual Property Collateral that Grantor determines, consistent with reasonable business practices, need not be registered.

 

(b)         In addition to Section 6(a) above, Grantor shall not register any Copyrights in the United States Copyright Office unless Grantor: (1) has given at least fifteen (15) days’ prior written notice to Lender of Grantor’s intent to register such Copyrights and has provided Lender with a copy of the application Grantor intends to file with the United States Copyright Office; (2) executes a security agreement or such other documents as Lender may reasonably request in order to maintain the perfection and priority of Lender’s security interest in the Copyrights Grantor proposes to register with the United States Copyright Office; and (3) records such security agreement or other such documents with the United States Copyright Office contemporaneously with filing the Copyright application(s) with the United States Copyright Office. Grantor shall promptly provide to Lender evidence of the recording of the security agreement or other such documents necessary for Lender to maintain the perfection and priority of its security interest in such Copyrights.

 

(c)         Grantor shall provide written notice to Lender of any application filed by Grantor in the United States Patent and Trademark Office for a patent or to register a trademark or service mark within thirty (30) days of any such filing.

 

(d)         Grantor hereby irrevocably makes, constitutes, and appoints Lender (and any of Lender’s officers, employees, or agents designated by Lender) as Grantor’s attorney-in-fact, with full authority in the place and stead of Grantor and in the name of Grantor, Lender, or otherwise, from time to time in Lender’s discretion, upon Grantor’s failure or inability to do so, to take any action and to execute any instrument which Lender may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including: (1) to modify, in Lender’s sole discretion, this Agreement without first obtaining Grantor’s approval of or signature to such modification, by amending Exhibit A, Exhibit B, or Exhibit C hereto, as appropriate, to include reference to any right, title, or interest in any Copyrights, Patents, Licenses or Trademarks acquired by Grantor after the execution of this Agreement, or to delete any reference to any right, title, or interest in any Copyrights, Patents, or Trademarks in which Grantor no longer has or claims any right, title, or interest; and (2) to file, in Lender’s sole discretion, one or more financing or continuation statements and/or amendments thereto, or other notice filings or notations in appropriate filing offices, relative to any of the Intellectual Property Collateral, without notice to Grantor, within all appropriate jurisdictions, as Lender deems appropriate, in order to perfect or protect Lender’s interest in the Intellectual Property Collateral.

 

  

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In addition, on such periodic basis as Lender shall require, Grantor shall: (x) provide Lender with a report of all new patentable, copyrightable, or trademarkable materials acquired or generated by Grantor during the prior period; (y) cause all Patents, Copyrights, and/or Trademarks acquired or generated by Grantor that are not already the subject of a registration with the appropriate filing office (or an application therefor diligently prosecuted) to be registered with such appropriate filing office in a manner sufficient to impart constructive notice of Grantor’s ownership thereof; and (z) cause to be prepared, executed, and delivered to Lender supplemental schedules to the Exhibits to this Agreement to identify such Patents, Copyrights, Licenses and/or Trademarks as being subject to the security interests created hereunder.

 

7.           Event of Default.

 

An event of default (“Event of Default”) shall be deemed to have occurred hereunder upon the occurrence of any event of default as defined in the Loan Documents, except an Event of Default under this Agreement shall not be triggered solely because Lender deems itself insecure. Upon and after any Event of Default, after the applicable cure period, if any, any or all of the Obligations shall become immediately due and payable at the option of the Lender, and the Lender may dispose of the Intellectual Property Collateral as provided below. A default by Debtor of any of its material obligations pursuant to any of the Loan Documents, or a default of Grantor of any of her material obligations pursuant to this Agreement, shall also constitute an Event of Default hereunder and an “Event of Default” as defined in the Loan Documents.

 

8.          Remedies Upon Default.

 

8.1         Upon and after any Event of Default which is then continuing, and if such Event of Default is not cured by Grantor within seven (7) days after receipt of written notice thereof from Lender, then the Lender may exercise its rights with respect to each and every component of the Intellectual Property Collateral, without regard to the existence of any other security or source of payment, in order to satisfy the Obligations. In addition to other rights and remedies provided for herein or otherwise available to it, the Lender shall have all of the rights and remedies of a lender on default under the Uniform Commercial Code then in effect in the State of Illinois.

 

  

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8.2         If an Event of Default occurs and is continuing, and if such Event of Default is not cured by Grantor within seven (7) days after receipt of written notice thereof from Lender, Grantor agrees to deliver each item of Intellectual Property Collateral to Lender on demand, and Lender shall have the right, at the same or different times, with respect to any Intellectual Property Collateral, on demand, to cause its security interest in any Intellectual Property Collateral to become an assignment, transfer, and conveyance of any or all such Intellectual Property Collateral by Grantor to Lender, or to license or sublicense, whether special, general or otherwise, and whether on an exclusive or non-exclusive basis, any such Intellectual Property Collateral throughout the world on such terms and conditions and in such manner as Lender shall determine, and, generally, to exercise any and all rights afforded to a secured party with respect to the Obligations under the Uniform Commercial Code in any applicable jurisdiction or other applicable law. The use of any such license or sublicense by Lender may be exercised, at Lender’s option, during the continuation of an Event of Default; provided, that any permitted license, sublicense, or other transaction entered into by Lender in accordance herewith shall be binding upon Grantor notwithstanding any subsequent cure of an Event of Default. Notwithstanding the foregoing, nothing in this Section shall require Grantor to grant any license that is prohibited by any rule of law, statute or regulation or is prohibited by, or constitutes a breach or default under or results in the termination of or gives rise to any right of acceleration, modification, or cancellation under any contract, license, agreement, instrument or other document evidencing, giving rise to a right to use or theretofore granted, to the extent permitted by the Loan Documents, with respect to such property.

 

Without limiting the generality of the foregoing, if an Event of Default occurs and is continuing, and if such Event of Default is not cured by Grantor within seven (7) days after receipt of written notice thereof from Lender, Grantor agrees that the Lender shall have the right, subject to applicable law and the notice requirements described in Section 8.3 below, to sell or otherwise dispose of all or any part of the Intellectual Property Collateral securing the Obligations at a public or private sale, for cash, upon credit, or for future delivery as Lender shall deem appropriate. Each such purchaser at any sale of Intellectual Property Collateral shall hold the property sold absolutely, free from any claim or right on the part of the Grantor, and Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

 

8.3         Lender shall give Grantor five (5) days’ written notice (which Grantor agrees is reasonable notice within the meaning of the Uniform Commercial Code or other applicable law) of the Lender’s intention to make any sale of Intellectual Property Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale. Any such public sale shall be held at such time or times as within ordinary business hours and at such place or places as Lender may fix and state in the notice (if any) of such sale. At any such sale, the Intellectual Property Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Lender may determine in its sole discretion. The Lender shall not be obligated to make any sale of any Intellectual Property Collateral if Lender shall determine not to do so, regardless of the fact that notice of sale of such Intellectual Property Collateral shall have been given. The Lender may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Intellectual Property Collateral is made on credit or for future delivery, the Intellectual Property Collateral so sold may be retained by the Lender until the sale price is paid by the purchaser or purchasers thereof, but the Lender shall not incur any liability in case any purchaser or purchasers shall fail to take up and pay for the Intellectual Property Collateral so sold and, in case of any such failure, such Intellectual Property Collateral may be sold again upon like notice. As an alternative to exercising the power of sale herein conferred upon it, Lender may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Intellectual Property Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the Illinois Uniform Commercial Code or its equivalent in other jurisdictions. The rights granted in this Section are in addition to any and all rights available to the Lender under the Uniform Commercial Code.

 

  

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8.4        All proceeds received by the Lender in respect of any sale, collection or other enforcement or disposition of Intellectual Property Collateral shall be applied (after deduction of any amounts payable to the Lender pursuant to the terms of this Agreement) against the Obligations. Upon payment in full of all Obligations, Grantor shall be entitled to the return of all Intellectual Property Collateral which has not been used or applied toward the payment of Obligations or used or applied to any and all costs or expenses of the Lender incurred in connection with the liquidation of the Intellectual Property Collateral (unless another person is legally entitled thereto).

 

9.          Miscellaneous.

 

9.1         Expenses. Grantor shall pay to the Lender, on demand, the amount of any and all reasonable expenses, including, without limitation, attorneys’ fees, legal expenses and brokers’ fees, which the Lender incurs in connection with: (a) the sale, collection or other enforcement or disposition of the Intellectual Property Collateral; (b) the exercise or enforcement of any the rights, remedies or powers of the Lender hereunder or with respect to any or all of the Obligations upon breach or threatened breach; and (c) failure by Grantor to perform and/or observe any agreements of Grantor contained herein which are performed by the Lender. Notwithstanding the foregoing, nothing in this Section 9.1 is intended to or shall alter the terms of Section 5 above.

 

9.2        Waivers, Amendment, and Remedies. No course of dealing by the Lender and no failure by the Lender to exercise, or delay by the Lender in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any other right, remedy or power of the Lender. No amendment, modification or waiver of any provision of this Agreement and no consent to any departure by Grantor therefrom shall, in any event, be effective unless contained in a writing signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. The rights, remedies and powers of the Lender, not only hereunder, but also under any instruments and agreements evidencing or securing the Obligations and under applicable law are cumulative, and may be exercised by the Lender from time to time in such order as the Lender may elect.

 

  

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9.3        Notices. All notices or other communications given or made hereunder shall be in writing and shall be personally delivered or deemed delivered the first business day after being faxed (provided that a copy is delivered by first class mail), or two business days after being sent via FedEx or other nationally recognized overnight delivery service for overnight delivery to the party to receive the same at the address set forth below or to such other address as either party shall hereafter give to the other by notice duly made under this Section:

 

To Grantor:

 

Merriellyn Kett

c/o Airtronic USA, Inc.

1860 Jarvis Avenue

Elk Grove Village, IL 60007

 

With a copy (which shall not constitute notice) to:

 

Swanson, Martin & Bell, LLP 

2525 Cabot Drive, Suite 204 

Lisle, IL 60532

Attn: Charles S. Stahl, Jr.

 

and to:

 

Kamensky Rubinstein Hochman & Delott LLP 

7250 North Cicero Avenue, Suite 200

Lincolnwood, IL 60712

Attn: Lee J. Levin

 

To Lender:

 

Global Digital Solutions, Inc.

777 South Flagler Drive, Suite 800W 

West Palm Beach, FL 33401

Attn: Richard J. Sullivan

 

With a copy (which shall not constitute notice) to:

 

Global Digital Solutions, Inc. 

14 Saint George Pl.

Palm Beach Gardens, FL 33418 

Attn: David A. Loppert

 

and to:

 

Greiman, Rome & Griesmeyer, LLC

24115 West 103rd Street, Suite B 

Naperville, IL 60564

Attn: Beau T. Greiman, Esq.

 

  

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Any party may change its address by written notice in accordance with this Section.

 

9.4        Term; Binding Effect. This Agreement shall: (a) remain in full force and effect until payment and satisfaction in full of all of the Obligations; (b) be binding upon Grantor, and her heirs, successors, and permitted assigns; and (c) inure to the benefit of the Lender and its successors and assigns.

 

9.5         Captions. The captions of Paragraphs, Articles and Sections in this Agreement have been included for convenience of reference only, and shall not define or limit the provisions of this Agreement and have no legal or other significance whatsoever.

 

9.6         Governing Law; Venue; Severability.

 

(a)         All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Illinois, without regard to the principles of conflicts of law thereof. The Grantor and the Lender each agree that all legal proceedings concerning the interpretation, enforcement and defense of this Agreement shall be commenced in the state and/or federal courts sitting in the County of Cook, State of Illinois (the “Illinois Courts”). Grantor and Lender waive, to the extent permitted under applicable law, any right each may have to assert the doctrine of forum non conveniens or to object to venue to the extent any proceeding is brought in accordance with this Section.

 

(b)         Except as set forth above, each of the Grantor and the Lender hereby irrevocably submit to the exclusive jurisdiction of the Illinois Courts for the adjudication of any dispute hereunder (including with respect to the enforcement of this Agreement), and hereby irrevocably waive, and agree not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or that such suit, action or proceeding is improper. The Grantor and the Lender each hereby irrevocably waive personal service of process and consent to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to the other at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each of the Grantor and the Lender hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

 

9.7         Integration. This Agreement, together with the Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter of this Agreement and supersedes all prior agreements, written or oral, on the subject matter of this Agreement. This Agreement was drafted with the joint participation of Grantor and Lender and shall be construed neither for nor against either party.

 

  

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9.8         Counterparts/Execution. This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. This Agreement may be executed by facsimile signature and delivered by electronic transmission.

 

10.         Termination; Release. When the Obligations have been indefeasibly paid and performed in full pursuant to the terms of the Loan Documents, this Agreement shall be terminated, and the Lender, at the request and sole expense of the Grantor, will execute and deliver to the Grantor the proper instruments (including UCC termination statements) acknowledging the termination of the Agreement, and duly assign, transfer and deliver to the Grantor, without recourse, representation or warranty of any kind whatsoever, such of the Intellectual Property Collateral, as may be in the possession of the Lender.

 

11.           Lender Powers. The powers conferred on the Lender hereunder are solely to protect the Lender’s interest in the Intellectual Property Collateral and shall not impose any duty on it to exercise any such powers. Lender hereby agrees to comply with the International Trafficking in Arms Regulations, ATF regulations, DDTC regulations and any related regulations (collectively, the “Applicable Regulations”), and to the extent any terms and provisions in this Agreement, including the granting of any powers or authority, contravene any Applicable Regulations, such terms and provisions are hereby limited to conform with such Applicable Regulations. To the extent the terms and provisions in this Section conflict with any other provisions in this Agreement, the terms in this Section will prevail.

 

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IN WITNESS WHEREOF, the undersigned have executed and delivered this Intellectual Property Security Agreement, as of the date first written above.

 

	 	
“GRANTOR” 

 

MERRIELLYN KETT

	 
	 	 	 
	 	Merriellyn Kett	 
	 	 	 
	 	
LENDER”

	 
	 	 	 
	 	
GLOBAL DIGITAL SOLUTIONS, INC.

	 
	 	 	 
	 	
By: 

	/s/ William J. Delgado	 
	 	Printed Name:  	William J. Delgado	 
	 	Printed Title:	CEO	 

 

  

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EXHIBIT A

 

PATENTS

 

	
Patent Name

	
Application No.

	
Filing Date

	
Applicant Name

	 	 	 	 
	
1. Improved Rocket-Propelled Grenade Launcher with Picatinny Rail Mount System

	
61607751

	
March 7, 2012

	
Merriellyn Kett

	
2. Improved Grenade Launcher with Extended Receiver and Picatinny Rail Mount System

	
61601840

	
Feb. 22, 2012

	
Merriellyn Kett

 

  

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EXHIBIT B

 

TRADEMARKS

 

	
Word Mark

	
Serial No.

	
Filing Date

	
Status

	 	 	 	 
	
1.     MK 777 Airtronic USA

	
85415967

	
Sept. 6, 2011

	
Live

	 	  	  	  
	
2.     Airtronic USA

	
85385141

	
Feb. 21, 2012

	
Live

	 	 	 	 
	
3.     MK 777

	
85385153

	
July 29, 2011

	
Live

	 	 	 	 
	
4.     RPG-7(USA)

	
85385162

	
July 29, 2011

	
Live

 

 

15fs12013a7ex4iv_intercloud.htm

Exhibit 4.4

INTERCLOUD SYSTEMS, INC. WARRANT AGENCY AGREEMENT

 

WARRANT AGENCY AGREEMENT made as of September ___, 2013 (the “Issuance Date”), between InterCloud Systems, Inc., a Delaware corporation, with offices at 331 Newman Springs Road, Building 1, Suite 104, Red Bank, New Jersey 07701 (“Company”), and Corporate Stock Transfer, with offices at 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209 (“Warrant Agent”).

 

WHEREAS, the Company is engaged in a public offering (the “Offering”) of Common Stock and Warrants and, in connection therewith, has determined to issue and deliver up to _______ Warrants (the “Warrants”) to the public investors, with each such Warrant evidencing the right of the holder thereof to purchase one share of common stock, par value $.0001 per share, of the Company's Common Stock (the “Common Stock”) for $_____, subject to adjustment as described herein; and

 

WHEREAS, the Company has filed with the Securities and Exchange Commission a Registration Statement, No. 333-185293 on Form S-1 (as the same may be amended from time to time, the “Registration Statement”) for the registration, under the Securities Act of 1933, as amended (the “Act”) of, among other securities, the Warrants and the Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”), and such Registration Statement was declared effective on September ___, 2013; and

 

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange and exercise of the Warrants; and

 

WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

 

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Warrant Agreement.

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:

 

1.          Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Warrant Agreement.

 

2.           Warrants.

 

2.1          Form of Warrant. Each Warrant shall be issued in registered form only, shall be in substantially the form of Exhibit A hereto, the provisions of which are incorporated herein, and shall be signed by, or bear the facsimile signature of, the Chief Executive Officer, President, Chief Financial Officer or Treasurer, Secretary or Assistant Secretary of the Company and shall bear a facsimile of the Company’s seal. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the capacity in which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect as if he or she had not ceased to be such at the date of issuance. All of the Warrants shall initially be represented by one or more book-entry certificates (each a “Book-Entry Warrant Certificate”).

 

2.2.         Effect of Countersignature. Unless and until countersigned by the Warrant Agent pursuant to this Warrant Agreement, a Warrant shall be invalid and of no effect and may not be exercised by the holder thereof.

 

  

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2.3.           Registration.

 

2.3.1.          Warrant Register. The Warrant Agent shall maintain books (“Warrant Register”), for the registration of original issuance and the registration of transfer of the Warrants. Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the Company. To the extent the Warrants are DTC eligible as of the Issuance Date, all of the Warrants shall be represented by one or more Book-Entry Warrant Certificates deposited with the Depository Trust Company (the “Depository”) and registered in the name of Cede & Co., a nominee of the Depository. Ownership of beneficial interests in the Book-Entry Warrant Certificates shall be shown on, and the transfer of such ownership shall be effected through, records maintained (i) by the Depository or its nominee for each Book-Entry Warrant Certificate; (ii) by institutions that have accounts with the Depository (such institution, with respect to a Warrant in its account, a “Participant”); or (iii) directly on the book-entry records of the Warrant Agent with respect only to owners of beneficial interests that represent such direct registration.

 

If the Warrants are not DTC Eligible as of the Issuance Date or the Depository subsequently ceases to make its book-entry settlement system available for the Warrants, the Company may instruct the Warrant Agent regarding making other arrangements for book-entry settlement within ten (10) days after the Depository ceases to make its book-entry settlement available. In the event that the Company does not make alternative arrangements for book-entry settlement within ten (10) days or the Warrants are not eligible for, or it is no longer necessary to have the Warrants available in, book-entry form, the Warrant Agent shall provide written instructions to the Depository to deliver to the Warrant Agent for cancellation each Book-Entry Warrant Certificate, and the Company shall instruct the Warrant Agent to deliver to the Depository definitive Warrant Certificates in physical form evidencing such Warrants. Such definitive Warrant Certificates shall be in substantially the form annexed hereto as Exhibit A.

 

2.3.2.          Beneficial Owner; Registered Holder. The term “beneficial owner” shall mean any person in whose name ownership of a beneficial interest in the Warrants evidenced by a Book-Entry Warrant Certificate is recorded in the records maintained by the Depository or its nominee. Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the person in whose name such Warrant shall be registered upon the Warrant Register (“registered holder”), as the absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on the Warrant Certificate made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

2.4           Uncertificated Warrants. Notwithstanding the foregoing and anything else herein to the contrary, the Warrants may be issued in uncertificated form.

 

3.           Terms and Exercise of Warrants.

 

3.1.         Exercise Price. Each Warrant shall, when countersigned by the Warrant Agent, entitle the registered holder thereof, subject to the provisions of such Warrant and of this Warrant Agreement, to purchase from the Company the number of shares of Common Stock stated therein, at the price of $____ per whole share, subject to the subsequent adjustments provided in Section 4 hereof. The term “Exercise Price” as used in this Warrant Agreement refers to the price per share at which Common Stock may be purchased at the time a Warrant is exercised.

 

3.2.         Duration of Warrants. A Warrant may be exercised only during the period (“Exercise Period”) commencing on the Issuance Date and terminating at 5:00 P.M., New York City time on September ____, 2018 (“Expiration Date”). Each Warrant not exercised on or before the Expiration Date shall become void, and all rights thereunder and all rights in respect thereof under this Warrant Agreement shall cease at the close of business on the Expiration Date.

 

  

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3.3.            Exercise of Warrants.

 

3.3.1.          Exercise and Payment. A registered holder may exercise a Warrant by delivering, not later than 5:00 P.M., New York time, on any business day during the Exercise Period (the “Exercise Date”) to the Warrant Agent at its corporate trust department (i) the Warrant Certificate evidencing the Warrants to be exercised, or, in the case of a Book-Entry Warrant Certificate, the Warrants to be exercised (the “Book-Entry Warrants”) shown on the records of the Depository to an account of the Warrant Agent at the Depository designated for such purpose in writing by the Warrant Agent to the Depository from time to time, (ii) an election to purchase the Warrant Shares underlying the Warrants to be exercised (“Election to Purchase”), properly completed and executed by the registered holder on the reverse of the Warrant Certificate or, in the case of a Book-Entry Warrant Certificate, properly delivered by the Participant in accordance with the Depository’s procedures, and (iii) the Warrant Price for each Warrant to be exercised in lawful money of the United States of America by certified or official bank check or by bank wire transfer in immediately available funds.

If any of (A) the Warrant Certificate or the Book-Entry Warrants, (B) the Election to Purchase, or (C) the Warrant Price therefor, is received by the Warrant Agent after 5:00 P.M., New York time, on the specified Exercise Date, the Warrants will be deemed to be received and exercised on the business day next succeeding the Exercise Date. If the date specified as the Exercise Date is not a business day, the Warrants will be deemed to be received and exercised on the next succeeding day that is a business day. If the Warrants are received or deemed to be received after the Expiration Date, the exercise thereof will be null and void and any funds delivered to the Warrant Agent will be returned to the registered holder or Participant, as the case may be, as soon as practicable. In no event will interest accrue on funds deposited with the Warrant Agent in respect of an exercise or attempted exercise of Warrants. The validity of any exercise of Warrants will be determined by the Company in its sole discretion and such determination will be final and binding upon the registered holder or Participant, as applicable, and the Warrant Agent. Neither the Company nor the Warrant Agent shall have any obligation to inform a registered holder or the Participant, as applicable, of the invalidity of any exercise of Warrants.

 

The Warrant Agent shall deposit all funds received by it in payment of the Warrant Price in the account of the Company maintained with the Warrant Agent for such purpose and shall advise the Company via telephone at the end of each day on which funds for the exercise of the Warrants are received of the amount so deposited to its account. The Warrant Agent shall promptly confirm such telephonic advice to the Company in writing.

 

3.3.2.          Issuance of Certificates. The Warrant Agent shall, by 11:00 A.M. New York Time on the business day following the Exercise Date of any Warrant, advise the Company or the transfer agent and registrar in respect of (a) the Warrant Shares issuable upon such exercise as to the number of Warrants exercised in accordance with the terms and conditions of this Agreement, (b) the instructions of each registered holder or Participant, as the case may be, with respect to delivery of the Warrant Shares issuable upon such exercise, and the delivery of definitive Warrant Certificates, as appropriate, evidencing the balance, if any, of the Warrants remaining after such exercise, (c) in case of a Book-Entry Warrant Certificate, the notation that shall be made to the records maintained by the Depository, its nominee for each Book-Entry Warrant Certificate, or a Participant, as appropriate, evidencing the balance, if any, of the Warrants remaining after such exercise and (d) such other information as the Company or such transfer agent and registrar shall reasonably require.

 

The Company shall, by 5:00 P.M., New York time, on the third business day next succeeding the Exercise Date of any Warrant and the clearance of the funds in payment of the Warrant Price, execute, issue and deliver to the Warrant Agent, the Warrant Shares to which such registered holder or Participant, as the case may be, is entitled, in fully registered form, registered in such name or names as may be directed by such registered holder or the Participant, as the case may be. Upon receipt of such Warrant Shares, the Warrant Agent shall, by 5:00 P.M., New York time, on the third Business Day next succeeding such Exercise Date, transmit such Warrant Shares to or upon the order of the registered holder or Participant, as the case may be.

 

In lieu of delivering physical certificates representing the Warrant Shares issuable upon exercise, provided the Company’s transfer agent is participating in the Depository’s Fast Automated Securities Transfer program, the Company shall use its reasonable best efforts to cause its transfer agent to electronically transmit the Warrant Shares issuable upon exercise to the Depository by crediting the account of the Depository or of the Participant through its Deposit Withdrawal Agent Commission system. The time periods for delivery described in the immediately preceding paragraph shall apply to the electronic transmittals described herein.

 

  

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3.3.3.          Valid Issuance. All shares of Common Stock issued upon the proper exercise of a Warrant in conformity with this Warrant Agreement shall be validly issued, fully paid and nonassessable.

 

3.3.4.          No Fractional Exercise. Warrants may be exercised only in whole numbers of Warrant Shares. No fractional Warrant Shares are to be issued upon the exercise of the Warrant, but rather the number of Warrant Shares to be issued shall be rounded up or down, as applicable, to the nearest whole number. If fewer than all of the Warrants evidenced by a Warrant Certificate are exercised, a new Warrant Certificate for the number of unexercised Warrants remaining shall be executed by the Company and countersigned by the Warrant Agent as provided in Section 2 of this Warrant Agreement, and delivered to the holder of this Warrant Certificate at the address specified on the books of the Warrant Agent or as otherwise specified by such registered holder. If fewer than all the Warrants evidenced by a Book-Entry Warrant Certificate are exercised, a notation shall be made to the records maintained by the Depository, its nominee for each Book-Entry Warrant Certificate, or a Participant, as appropriate, evidencing the balance of the Warrants remaining after such exercise.

 

3.3.5           No Transfer Taxes. The Company shall not be required to pay any stamp or other tax or governmental charge required to be paid in connection with any transfer involved in the issue of the Warrant Shares upon the exercise of Warrants; and in the event that any such transfer is involved, the Company shall not be required to issue or deliver any Warrant Shares until such tax or other charge shall have been paid or it has been established to the Company’s satisfaction that no such tax or other charge is due.

 

3.3.6           Date of Issuance. Each person in whose name any such certificate for shares of Common Stock is issued shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Warrant was surrendered and payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

 

3.3.7           Cashless Exercise Under Certain Circumstances.

 

(i)          The Company shall provide to the registered holder prompt written notice of any time that the Company is unable to issue the Warrant Shares via DTC transfer or otherwise (without restrictive legend), because (A) the Commission has issued a stop order with respect to the Registration Statement, (B) the Commission otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, (C) the Company has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or (D) otherwise (each a “Restrictive Legend Event”). To the extent that a Restrictive Legend Event occurs after the registered holder has exercised a Warrant in accordance with the terms of the Warrants but prior to the delivery of the Warrant Shares, the Company shall, at the election of the registered holder to be given within five (5) days of receipt of notice of the Restrictive Legend Event, either (A) rescind the previously submitted Election to Purchase and the Company shall return all consideration paid by registered holder for such shares upon such rescission or (B) treat the attempted exercise as a cashless exercise as described in the next paragraph and refund the cash portion of the exercise price to the registered holder.

 

(ii)         If a Restrictive Legend Event has occurred and no exemption from the registration requirements is available, the Warrant shall only be exercisable on a cashless basis. Notwithstanding anything herein to the contrary, the Company shall not be required to make any cash payments or net cash settlement to the registered holder in lieu of issuance of the Warrant Shares. Upon a “cashless exercise”, the Holder shall be entitled to receive a certificate (or book entry) for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

	  	
(A)

	
= the VWAP on the Business Day immediately preceding the date on which the registered holder elects to exercise the Warrant by means of a “cashless exercise,” as set forth in the applicable Election to Purchase;

	
  

	
 

	  	
(B)

	
= the Exercise Price of the Warrant, as it may have been adjusted hereunder; and

	
  

	
 

	  	
(X)

	
= the number of Warrant Shares that would be issuable upon exercise of the Warrant in accordance with the terms of the Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

  

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Upon receipt of an Election to Purchase for a cashless exercise, the Warrant Agent will promptly deliver a copy of the Election to Purchase to the Company to confirm the number of Warrant Shares issuable in connection with the cashless exercise. The Company shall calculate and transmit to the Warrant Agent, and the Warrant Agent shall have no obligation under this section to calculate, the number of Warrant Shares issuable in connection with the cashless exercise.

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (each, a “Trading Market”), the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

3.3.8           Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the registered holder the number of Warrant Shares that are not disputed.

 

4.          Adjustments.

 

4.1        Adjustment upon Subdivision or Combination of Common Stock. If the Company at any time after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. If the Company at any time after the Issuance Date combines (by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 4.1 shall become effective at the close of business on the date the subdivision or combination becomes effective. Company shall promptly notify Warrant Agent of any such adjustment and give specific instructions to Warrant Agent with respect to any adjustments to the warrant register.

 

4.2         Adjustment for Other Distributions. In the event the Company shall fix a record date for the making of a dividend or distribution to all holders of Common Stock of any evidences of indebtedness or assets or subscription rights or warrants (excluding those referred to in Section 4.1 or other dividends paid out of retained earnings), 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 VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP 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 registered holder 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.

 

  

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4.3.    Reclassification, Consolidation, Purchase, Combination, Sale or Conveyance. If, at any time while the Warrants are outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization 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, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another person whereby such other person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other person or other persons making or party to, or associated or affiliated with the other persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of a Warrant, the registered holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock, if any, of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction. 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 registered holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) and for which shareholders received any equity securities of the Successor Entity, to assume in writing all of the obligations of the Company under this Warrant Agreement in accordance with the provisions of this Section 4.3 pursuant to written agreements and shall, upon the written request of the registered holder of a Warrant, deliver to the registered holder in exchange for this Warrant created by this Agreement a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity), if any, plus any Alternate Consideration, receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which the Warrant is exercisable immediately prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock, if any, plus any Alternate Consideration (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of such Warrant immediately prior to the consummation of such Fundamental Transaction). Upon the occurrence of any such Fundamental Transaction the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant Agent Agreement and the Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Agreement and the Warrant with the same effect as if such Successor Entity had been named as the Company herein.

 

The Company shall instruct the Warrant Agent to mail by first class mail, postage prepaid, to each registered holder of a Warrant, written notice of the execution of any such amendment, supplement or agreement. Any supplemented or amended agreement entered into by the successor corporation or transferee shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 4. The Warrant Agent shall be under no responsibility to determine the correctness of any provisions contained in such agreement relating either to the kind or amount of securities or other property receivable upon exercise of warrants or with respect to the method employed and provided therein for any adjustments and shall be entitled to rely upon the provisions contained in any such agreement. The provisions of this Section 4.3 shall similarly apply to successive reclassifications, changes, consolidations, mergers, sales and conveyances of the kind described above.

 

  

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4.4           Other Events. If any event occurs of the type contemplated by the provisions of Section 4.1, 4.2 or 4.3 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features to all holders of Common Stock for no consideration), then the Company's Board of Directors will in good faith make an adjustment in the Exercise Price and the number of Warrant Shares so as to protect the rights of the registered holder.

 

4.5.          Notices of Changes in Warrant. Upon every adjustment of the Warrant Price or the number of shares issuable upon exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified in Sections 4.1 or 4.2, then, in any such event, the Company shall give written notice to each registered holder, at the last address set forth for such holder in the warrant register, of the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.

 

4.6.          No Fractional Shares. Notwithstanding any provision contained in this Warrant Agreement to the contrary, the Company shall not issue fractional shares upon exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, round up or down, as applicable, to the nearest whole number the number of the shares of Common Stock to be issued to the registered holder.

4.7.          Form of Warrant. The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued after such adjustment may state the same Warrant Price and the same number of shares as is stated in the Warrants initially issued pursuant to this Warrant Agreement. However, the Company may at any time in its sole discretion make any change in the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed.

 

5.           Transfer and Exchange of Warrants.

 

5.1.          Registration of Transfer. The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register, upon surrender of such Warrant for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent. The Warrants so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon request.

 

5.2.          Procedure for Surrender of Warrants. Warrants may be surrendered to the Warrant Agent, together with a written request for exchange or transfer reasonably acceptable to Warrant Agent, duly executed by the registered holder thereof, or by a duly authorized attorney, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the registered holder of the Warrants so surrendered, representing an equal aggregate number of Warrants; provided, however, that except as otherwise provided herein or in any Book-Entry Warrant Certificate, each Book-Entry Warrant Certificate may be transferred only in whole and only to the Depository, to another nominee of the Depository, to a successor depository, or to a nominee of a successor depository; provided further, however, that in the event that a Warrant surrendered for transfer bears a restrictive legend, the Warrant Agent shall not cancel such Warrant and issue new Warrants in exchange therefor until the Warrant Agent has received an opinion of counsel for the Company stating that such transfer may be made and indicating whether the new Warrants must also bear a restrictive legend. Upon any such registration of transfer, the Company shall execute, and the Warrant Agent shall countersign and deliver, in the name of the designated transferee a new Warrant Certificate or Warrant Certificates of any authorized denomination evidencing in the aggregate a like number of unexercised Warrants.

 

  

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5.3.          Fractional Warrants. The Warrant Agent shall not be required to effect any registration of transfer or exchange which will result in the issuance of a Warrant Certificate for a fraction of a Warrant.

 

5.4.          Service Charges. A service charge shall be made for any exchange or registration of transfer of Warrants, as negotiated between Company and Warrant Agent.

5.5.          Warrant Execution and Countersignature. The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the terms of this Warrant Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5, and the Company, whenever required by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose.

 

6.              Limitations on Exercise. Neither the Warrant Agent nor the Company shall effect any exercise of any Warrant, and a registered holder shall not have the right to exercise any portion of a Warrant, to the extent that after giving effect to the issuance of shares of Common Stock after exercise as set forth on the applicable Election to Purchase, the registered holder (together with such registered holder’s Affiliates (as defined in Rule 405 under The Securities Act of 1933), and any other persons acting as a group together with the registered holder or any of the registered holder’s Affiliates), would beneficially own in excess of 4.99% of the Company’s Common Stock. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the registered holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of the Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon exercise of the remaining, nonexercised portion of any Warrant beneficially owned by the registered holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 6, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the registered holder that neither the Warrant Agent nor the Company is representing to the registered holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the registered holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 6 applies, the determination of whether a Warrant is exercisable (in relation to other securities owned by the registered holder together with any Affiliates) and of which portion of a Warrant is exercisable shall be in the sole discretion of the registered holder, and the submission of an Election to Purchase shall be deemed to be the registered holder’s determination of whether such Warrant is exercisable (in relation to other securities owned by the registered holder together with any Affiliates) and of which portion of a Warrant is exercisable, and neither the Warrant Agent nor the Company shall have any obligation to verify or confirm the accuracy of such determination and neither of them shall have any liability for any error made by the registered holder. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6, in determining the number of outstanding shares of Common Stock, a registered holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. The provisions of this Section 6 shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6 to correct this subsection (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of a Warrant.

7.           Other Provisions Relating to Rights of Holders of Warrants.

 

7.1.          No Rights as Stockholder. Except as otherwise specifically provided herein, a registered holder, solely in its capacity as a holder of a Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant Agreement be construed to confer upon a registered holder, solely in its capacity as the registered holder of a Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the registered holder of the Warrant Shares which it is then entitled to receive upon the due exercise of a Warrant. A Warrant does not entitle the registered holder thereof to any of the rights of a stockholder.

 

  

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7.2.          Lost, Stolen, Mutilated, or Destroyed Warrants. If any Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may on such terms as to indemnity (including obtaining an open penalty bond protecting the Warrant Agent) or otherwise as they may in their discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the Warrant so lost, stolen, mutilated, or destroyed. Any such new Warrant shall constitute a substitute contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any time enforceable by anyone.

 

7.3.          Reservation of Common Stock. The Company shall at all times reserve and keep available a number of its authorized but unissued shares of Common Stock that will be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Warrant Agreement.

 

8.           Concerning the Warrant Agent and Other Matters.

 

8.1           Concerning the Warrant Agent. The Warrant Agent:

 

a)           shall have no duties or obligations other than those set forth herein and no duties or obligations shall be inferred or implied;

 

b)           may rely on and shall be held harmless by the Company in acting upon any certificate, statement, instrument, opinion, notice, letter, facsimile transmission, telegram or other document, or any security delivered to it, and reasonably believed by it to be genuine and to have been made or signed by the proper party or parties;

 

c)           may rely on and shall be held harmless by the Company in acting upon written or oral instructions or statements from the Company with respect to any matter relating to its acting as Warrant Agent;

d)           May consult with counsel satisfactory to it (including counsel for the Company) and shall be held harmless by the Company in relying on the advice or opinion of such counsel in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion of such counsel;

 

e)           solely shall make the final determination as to whether or not a Warrant received by Warrant Agent is duly, completely and correctly executed, and Warrant Agent shall be held harmless by the Company in respect of any action taken, suffered or omitted by Warrant Agent hereunder in good faith and in accordance with its determination;

 

f)            shall not be obligated to take any legal or other action hereunder which might, in its judgment subject or expose it to any expense or liability unless it shall have been furnished with an indemnity satisfactory to it; and

 

g)           shall not be liable or responsible for any failure of the Company to comply with any of its obligations relating to the Registration Statement or this Warrant Agreement, including, without limitation, obligations under applicable regulation or law.

 

8.2           Payment of Taxes. The Company will from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of the Warrants or such shares. The Warrant Agent shall not register any transfer or issue or deliver any Warrant Certificate(s) or Warrant Shares unless or until the persons requesting the registration or issuance shall have paid to the Warrant Agent for the account of the Company the amount of such tax, if any, or shall have established to the reasonable satisfaction of the Company that such tax, if any, has been paid.

 

  

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8.3         Resignation, Consolidation, or Merger of Warrant Agent.

 

8.3.1.       Appointment of Successor Warrant Agent. The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of the Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost. Any successor Warrant Agent (but not including the initial Warrant Agent), whether appointed by the Company or by such court, shall be a corporation organized and existing under the laws of the State of New York, in good standing and having its principal office in the Borough of Manhattan, City and State of New York, and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority. After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.

 

8.3.2.          Notice of Successor Warrant Agent. In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the transfer agent for the Common Stock not later than the effective date of any such appointment.

 

8.3.3.          Merger or Consolidation of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant Agent under this Warrant Agreement without any further act.

 

8.4.           Fees and Expenses of Warrant Agent.

 

8.4.1.          Remuneration. The Company agrees to pay the Warrant Agent reasonable remuneration in an amount separately agreed to between Company and Warrant Agent for its services as Warrant Agent hereunder and will reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder.

 

8.4.2.          Further Assurances. The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing of the provisions of this Warrant Agreement.

8.5.           Liability of Warrant Agent.

 

8.5.1.          Reliance on Company Statement. Whenever in the performance of its duties under this Warrant Agreement, the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a statement signed by the President of the Company and delivered to the Warrant Agent. The Warrant Agent may rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Warrant Agreement.

 

  

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8.5.2.          Indemnity. The Warrant Agent shall be liable hereunder only for its own gross negligence, willful misconduct or bad faith. The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, claims, losses, damages, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Warrant Agreement except as a result of the Warrant Agent’s gross negligence, willful misconduct, or bad faith.

 

8.5.3.          Limitation of Liability. The Warrant Agent’s aggregate liability, if any, during the term of this Warrant Agreement with respect to, arising from, or arising in connection with this Warrant Agreement, or from all services provided or omitted to be provided under this Warrant Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the amounts paid or payable hereunder by the Company to Warrant Agent as fees and charges, but not including reimbursable expenses.

 

8.5.4           Disputes. In the event any question or dispute arises with respect to the proper interpretation of this Warrant Agreement or the Warrant Agent’s duties hereunder or the rights of the Company or of any holder of a Warrant, the Warrant Agent shall not be required to act and shall not be held liable or responsible for refusing to act until the question or dispute has been judicially settled (and the Warrant Agent may, if it deems it advisable, but shall not be obligated to, file a suit in interpleader or for a declaratory judgment for such purpose) by final judgment rendered by a court of competent jurisdiction, binding on all parties interested in the matter which is no longer subject to review or appeal, or settled by a written document in form and substance satisfactory to the Warrant Agent and executed by the Company and each other interested party. In addition, the Warrant Agent may require for such purpose, but shall not be obligated to require, the execution of such written settlement by all the Warrant holders, as applicable, and all other parties that may have an interest in the settlement.

 

8.5.5           Exclusions. The Warrant Agent shall have no responsibility with respect to the validity of this Warrant Agreement or with respect to the validity or execution of any Warrant (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Warrant Agreement or in any Warrant; nor shall it be responsible to make any adjustments required under the provisions of Section 4 hereof or responsible for the manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Warrant Agreement or any Warrant or as to whether any shares of Common Stock will when issued be valid and fully paid and nonassessable.

8.6.        Acceptance of Agency. The Warrant Agent hereby accepts the agency established by this Warrant Agreement and agrees to perform the same upon the terms and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently account for, and pay to the Company, all moneys received by the Warrant Agent for the purchase of shares of Common Stock through the exercise of Warrants.

 

9.           Miscellaneous Provisions.

 

9.1.        Successors. All the covenants and provisions of this Warrant Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns.

 

  

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9.2.        Notices. Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or on the Company shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:

 

InterCloud Systems, Inc.

331 Newman Springs Road, Building 1, Suite 104

Red Bank, NJ 07701

Attn: Chief Executive Officer

 

Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company), as follows:

Corporate Stock Transfer

3200 Cherry Creek Drive South

Denver, CO 80209

Attn: Compliance Department

 

with a copy in each case to: 

Pryor Cashman LLP

7 Times Square

New York, NY 10036

Attn: M. Ali Panjwani, Esq.

 

and:

Aegis Capital Corp.         

810 Seventh Avenue, 11th Fl

New York, NY 10019

Attn: Compliance Department

 

and:

 

ReedSmith LLP

599 Lexington Avenue

 New York, NY 10022

Attn: Yvan-Claude Pierre, Esq.

 

and;

Corporate Stock Transfer

3200 Cherry Creek Drive South

Denver, CO 80209

Attention: General Counsel

9.3.         Applicable law. The validity, interpretation, and performance of this Warrant Agreement and of the Warrants shall be governed in all respects by the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Warrant Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenience forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.2 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim.

 

9.4.         Persons Having Rights under this Warrant Agreement. Nothing in this Warrant Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties hereto and the registered holders of the Warrants and, for purposes of Sections 3.3, 9.3 and 9.8, the Underwriter, any right, remedy, or claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. The Underwriters shall be deemed to be an express third-party beneficiary of this Warrant Agreement with respect to Sections 3.3, 9.3 and 9.8 hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Warrant Agreement shall be for the sole and exclusive benefit of the parties hereto (and the Underwriters with respect to the Sections 3.3, 9.3 and 9.8 hereof) and their successors and assigns and of the registered holders of the Warrants.

 

  

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9.5.         Examination of the Warrant Agreement. A copy of this Warrant Agreement shall be available at all reasonable times at the office of the Warrant Agent in the city of Denver, State of Colorado, for inspection by the registered holder of any Warrant. The Warrant Agent may require any such holder to submit his Warrant for inspection by it.

9.6.          Counterparts. This Warrant Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

 

9.7.          Effect of Headings. The Section headings herein are for convenience only and are not part of this Warrant Agreement and shall not affect the interpretation thereof.

 

9.8           Amendments. This Warrant Agreement may be amended by the parties hereto without the consent of any registered holder for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect to matters or questions arising under this Warrant Agreement as the parties may deem necessary or desirable and that the parties deem shall not adversely affect the interest of the registered holders. All other modifications or amendments, including any amendment to increase the Warrant Price or shorten the Exercise Period, shall require the written consent of the Underwriter and the registered holders of a majority of the then outstanding Warrants.

 

9.9           Severability. This Warrant Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Warrant Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Warrant Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

9.10         Force Majeure. In the event either party is unable to perform its obligations under the terms of this Warrant Agreement because of acts of God, strikes, failure of carrier or utilities, equipment or transmission failure or damage that is reasonably beyond its control, or any other cause that is reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes. Performance under this Warrant Agreement shall resume when the affected party or parties are able to perform substantially that party’s duties.

 

9.11         Consequential Damages. Notwithstanding anything in this Warrant Agreement to the contrary, neither party to this Warrant Agreement shall be liable to the other party for any consequential, indirect, special or incidental damages under any provision of this Agreement or for any consequential, indirect, punitive, special or incidental damages arising out of any act or failure to act hereunder even if that party has been advised of or has foreseen the possibility of such damages.

 

  

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IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the parties hereto as of the day and year first above written.

 

	  	
INTERCLOUD SYSTEMS, INC.

	  	  
	  	
By:

	  
	  	
Name:

	  
	  	
Title:

	  
	  	  
	  	
CORPORATE STOCK TRANSFER

	  	  
	  	
By:

	  
	  	
Name:

	  
	  	
Title:

	  

 

  

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Exhibit A

 

[FORM OF WARRANT CERTIFICATE]

 

EXERCISABLE ONLY IF COUNTERSIGNED BY THE WARRANT

AGENT AS PROVIDED HEREIN.

 

Warrant Certificate Evidencing Warrants to Purchase

Common Stock, par value of $0.0001 per share, as described herein.

 

INTERCLOUD SYSTEMS, INC.

 

	
No. ___________

	
[CUSIP_________]

 

	
VOID AFTER 5:00 P.M., NEW YORK TIME,

	
ON _______ __, 2018

 

This certifies that ________________________ or registered assigns is the registered holder of _____________________ warrants to purchase certain securities (each a “Warrant”). Each Warrant entitles the holder thereof, subject to the provisions contained herein and in the Warrant Agreement (as defined below), to purchase from InterCloud Systems, Inc., a Delaware corporation (the “Company”), [_______] shares (collectively, the “Warrant Shares”) of Common Stock, par value $0.0001 per share, of the Company (“Common Stock”), at the Exercise Price set forth below. The price per share at which each Warrant Share may be purchased at the time each Warrant is exercised (the “Exercise Price”) is $____ initially, subject to adjustments as set forth in the Warrant Agreement (as defined below).

 

Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Warrant Agreement.

 

Subject to the terms of the Warrant Agreement, each Warrant evidenced hereby may be exercised in whole but not in part at any time, as specified herein, on any Business Day (as defined below) occurring during the period (the “Exercise Period”) commencing the date of detachability of the Warrants from the Common Stock as set forth in Section 2.4 of the Warrant Agreement and terminating on the earlier to occur of 5:00 P.M., New York City time, on September  __, 2018 (the “Expiration Date”). Each Warrant remaining unexercised after 5:00 P.M., New York City time, on the Expiration Date shall become void, and all rights of the holder of this Warrant Certificate evidencing such Warrant shall cease.

The holder of the Warrants represented by this Warrant Certificate may exercise any Warrant evidenced hereby by delivering, not later than 5:00 P.M., New York time, on any Business Day during the Exercise Period (the “Exercise Date”) to Corporate Stock Transfer (the “Warrant Agent”, which term includes any successor warrant agent under the Warrant Agreement described below) at its corporate trust department at_________________________, (i) this Warrant Certificate or, in the case of a Book-Entry Warrant Certificate (as defined in the Warrant Agreement), the Warrants to be exercised (the “Book-Entry Warrants”) as shown on the records of The Depository Trust Company (the “Depository”) to an account of the Warrant Agent at the Depository designated for such purpose in writing by the Warrant Agent to the Depository, (ii) an election to purchase (“Election to Purchase”), properly executed by the holder hereof on the reverse of this Warrant Certificate or properly executed by the institution in whose account the Warrant is recorded on the records of the Depository (the “Participant”), and substantially in the form included on the reverse of this Warrant Certificate and (iii) the Exercise Price for each Warrant to be exercised in lawful money of the United States of America by certified or official bank check or by bank wire transfer in immediately available funds, unless cashless exercise is permitted under the Warrant Agreement.

 

As used herein, the term “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law or executive order to remain closed.

 

  

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Warrants may be exercised only in whole numbers of Warrants. No fractional Warrant Shares are to be issued upon the exercise of this Warrant, but rather the number of Warrant Shares to be issued shall be rounded up or down, as applicable, to the nearest whole number. If fewer than all of the Warrants evidenced by this Warrant Certificate are exercised, a new Warrant Certificate for the number of Warrants remaining unexercised shall be executed by the Company and countersigned by the Warrant Agent as provided in Section 2 of the Warrant Agreement, and delivered to the registered holder of this Warrant Certificate at the address specified on the books of the Warrant Agent or as otherwise specified by such registered holder.

 

This Warrant Certificate is issued under and in accordance with the Warrant Agreement, dated as of September __, 2013 (the “Warrant Agreement”), between the Company and the Warrant Agent and is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions the holder of this Warrant Certificate and the beneficial owners of the Warrants represented by this Warrant Certificate consent by acceptance hereof. Copies of the Warrant Agreement are on file and can be inspected at the above-mentioned office of the Warrant Agent and at the office of the Company at 331 Newman Springs Road, Building 1, Suite 104, Red Bank, NJ 07701.

 

The Company shall provide to the registered holder prompt written notice of any time that the Company is unable to issue the Warrant Shares via DTC transfer or otherwise (without restrictive legend), because (A) the Commission has issued a stop order with respect to the Registration Statement, (B) the Commission otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, (C) the Company has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or (D) otherwise (each a “Restrictive Legend Event”). To the extent that a Restrictive Legend Event occurs after the registered holder has exercised a Warrant in accordance with the terms of the Warrants but prior to the delivery of the Warrant Shares, the Company shall, at the election of the registered holder to be given within five (5) days of receipt of notice of the Restrictive Legend Event, either (A) rescind the previously submitted Election to Purchase and the Company shall return all consideration paid by registered holder for such shares upon such rescission or (B) treat the attempted exercise as a cashless exercise as described in the next paragraph and refund the cash portion of the exercise price to the registered holder.

 

If a Restrictive Legend Event has occurred and no exemption from the registration requirements is available, the Warrant shall only be exercisable on a cashless basis. Notwithstanding anything herein to the contrary, the Company shall not be required to make any cash payments or net cash settlement to the registered holder in lieu of issuance of the Warrant Shares. Upon a “cashless exercise”, the Holder shall be entitled to receive a certificate (or book entry) for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

	  	
(A)

	
= the VWAP on the Business Day immediately preceding the date on which the registered holder elects to exercise the Warrant by means of a “cashless exercise,” as set forth in the applicable Election to Purchase;

	
  

	
 

	  	
(B)

	
= the Exercise Price of the Warrant, as it may have been adjusted hereunder; and

	
  

	
 

	  	
(X)

	
= the number of Warrant Shares that would be issuable upon exercise of the Warrant in accordance with the terms of the Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

Upon receipt of an Election to Purchase for a cashless exercise, the Warrant Agent will promptly deliver a copy of the Election to Purchase to the Company to confirm the number of Warrant Shares issuable in connection with the cashless exercise. The Company shall calculate and transmit to the Warrant Agent, and the Warrant Agent shall have no obligation under this section to calculate, the number of Warrant Shares issuable in connection with the cashless exercise.

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (each, a “Trading Market”), the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

  

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The Exercise Price and the number of Warrant Shares purchasable upon the exercise of each Warrant shall be subject to adjustment as provided pursuant to Section 4 of the Warrant Agreement.

 

Upon due presentment for registration of transfer or exchange of this Warrant Certificate at the stock transfer division of the Warrant Agent, the Company shall execute, and the Warrant Agent shall countersign and deliver, as provided in Section 5 of the Warrant Agreement, in the name of the designated transferee one or more new Warrant Certificates of any authorized denomination evidencing in the aggregate a like number of unexercised Warrants, subject to the limitations provided in the Warrant Agreement.

 

Neither this Warrant Certificate nor the Warrants evidenced hereby entitles the registered holder thereof to any of the rights of a shareholder of the Company, including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights to vote or to consent or to receive notice as shareholders in respect of the meetings of shareholders or the election of directors of the Company or any other matter.

 

The Warrant Agreement and this Warrant Certificate may be amended as provided in the Warrant Agreement including, under certain circumstances described therein, without the consent of the holder of this Warrant Certificate or the Warrants evidenced thereby.

 

THIS WARRANT CERTIFICATE AND ALL RIGHTS HEREUNDER AND UNDER THE WARRANT AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS FORMED AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

 

This Warrant Certificate shall not be entitled to any benefit under the Warrant Agreement or be valid or obligatory for any purpose, and no Warrant evidenced hereby may be exercised, unless this Warrant Certificate has been countersigned by the manual signature of the Warrant Agent.

 

  

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IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

 

Dated as of September __, 2013

 

	  	
INTERCLOUD SYSTEMS, INC.

	  	  
	  	
By:

	  
	  	
Name:

	  
	  	
Title:

	  

 

Corporate Stock Transfer,

as Warrant Agent

 

	
By: 

	  	  
	
Name:

	  	  
	
Title:

	  	  

 

  

18

  

[REVERSE]

 

Instructions for Exercise of Warrant

 

To exercise the Warrants evidenced hereby, the holder or Participant must, by 5:00 P.M., New York time, on the specified Exercise Date, deliver to the Warrant Agent at its stock transfer division, a certified or official bank check or a bank wire transfer in immediately available funds, in each case payable to the Warrant Agent at Account No. ____, in an amount equal to the Exercise Price in full for the Warrants exercised. In addition, the Warrant holder or Participant must provide the information required below and deliver this Warrant Certificate to the Warrant Agent at the address set forth below and the Book-Entry Warrants to the Warrant Agent in its account with the Depository designated for such purpose. The Warrant Certificate and this Election to Purchase must be received by the Warrant Agent by 5:00 P.M., New York time, on the specified Exercise Date.

 

ELECTION TO PURCHASE

TO BE EXECUTED IF WARRANT HOLDER DESIRES

TO EXERCISE THE WARRANTS EVIDENCED HEREBY

 

The undersigned hereby irrevocably elects to exercise, on __________, ____ (the “Exercise Date”), _____________ Warrants, evidenced by this Warrant Certificate, to purchase, _________________ shares (the “Warrant Shares”) of Common Stock, par value of $0.0001 per share (the “Common Stock”) of InterCloud Systems, Inc., a Delaware corporation (the “Company”), and represents that on or before the Exercise Date

 

£ such holder has tendered payment for such Warrant Shares by certified or official bank check or bank wire transfer in immediately available funds to the order of the Company c/o Corporate Stock Transfer, 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209, in the amount of $_____________ in accordance with the terms hereof, or

 

£ [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 3.3.7 of the Warrant Agreement, to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 3.3.7.

 

The undersigned requests that said number of Warrant Shares be in fully registered form, registered in such names and delivered, all as specified in accordance with the instructions set forth below.

 

If said number of Warrant Shares is less than all of the Warrant Shares purchasable hereunder, the undersigned requests that a new Warrant Certificate evidencing the remaining balance of the Warrants evidenced hereby be issued and delivered to the holder of the Warrant Certificate unless otherwise specified in the instructions below.

 

  

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Dated: ______________ __, ____

 

	  	
Name

	  	  
	  	  	
(Please Print)

	  
	  	  	  	  
	  	
/ / /  / - /  /  /- /  /   /  /  /

	  	
(Insert Social Security or Other Identifying Number of Holder)

	  	  	  	  
	  	
Address

	  	  
	  	  	  	  
	  	  	  	  
	  	
Signature

	  	  

 

This Warrant may only be exercised by presentation to the Warrant Agent at one of the following locations:

 

By hand at:

 

By mail at:

 

The method of delivery of this Warrant Certificate is at the option and risk of the exercising holder and the delivery of this Warrant Certificate will be deemed to be made only when actually received by the Warrant Agent. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to assure timely delivery.

 

(Instructions as to form and delivery of Warrant Shares and/or Warrant Certificates)

 

	
Name in which Warrant Shares

	  	  	  
	
are to be registered if other than

	  	  	  
	
in the name of the registered holder

	  	  	  
	
of this Warrant Certificate:

	  	  	  
	  	  	  	  
	
Address to which Warrant Shares

	  	  	  
	
are to be mailed if other than to the

	  	  	  
	
address of the registered holder of

	  	  	  
	
this Warrant Certificate as shown on

	  	  	  
	
the books of the Warrant Agent:

	  	  	  
	  	  	
(Street Address)

	  
	  	  	  	  
	  	  	  	  
	  	  	
(City and State) (Zip Code)

	  
	  	  	  	  
	
Name in which Warrant Certificate

	  	  	  
	
evidencing unexercised Warrants, if any,

	  	  	  
	
are to be registered if other than in the

	  	  	  
	
name of the registered holder of this

	  	  	  
	
Warrant Certificate:

	  	  	  

 

  

20

  

 

	
Address to which certificate representing unexercised Warrants, if any, are to be mailed if other than to the address of  the registered holder of this Warrant  Certificate as shown on the books of  the Warrant Agent:

	  	  	  
	  	  	
(Street Address)

	  	  	  
	  	  	  	  
	  	  	
(City and State) (Zip Code)

	  	  	  
	  	  	
Dated:

	  	  	  
	  	  	  	  
	  	  	
Signature

	  	  	  
	  	  	
Signature must conform in all respects to the name of the holder as specified on the face of this Warrant Certificate.  If Warrant Shares, or a Warrant Certificate evidencing unexercised Warrants, are to be issued in a name other than that of the registered holder hereof or are to be delivered to an address other than the address of such holder as shown on the books of the Warrant Agent, the above signature must be guaranteed by a an Eligible Guarantor Institution (as that term is defined in Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended).

 

	
SIGNATURE GUARANTEE

	  
	  	  	  
	
Name of Firm                                                   

	  	  
	
Address                                                            

	  	  
	
Area Code and Number

	  	  
	
Authorized Signature

	  	  
	
Name                                                                

	  	  
	
Title                                                                  

	  	  
	
Dated:                                                               

	  	,  200___ 

 

  

21

  

ASSIGNMENT

 

(FORM OF ASSIGNMENT TO BE EXECUTED IF WARRANT HOLDER

DESIRES TO TRANSFER WARRANTS EVIDENCED HEREBY)

 

FOR VALUE RECEIVED, _________________ HEREBY SELL(S), ASSIGN(S) AND TRANSFER(S) UNTO

________________________________________________________

__________________________________

_______________________________________

 

	
(Please print name and address

	
(Please insert social security or

	
including zip code of assignee)

	
other identifying number of assignee)

 

the rights represented by the within Warrant Certificate and does hereby irrevocably constitute and appoint ____________ Attorney to transfer said Warrant Certificate on the books of the Warrant Agent with full power of substitution in the premises.

 

	  	  	
Dated:

	  	  	  
	  	  	  
	  	  	
Signature

	  	  	  
	  	  	
(Signature must conform in all respects to the name of the holder as specified on the face of this Warrant Certificate and must bear a signature guarantee by an Eligible Guarantor Institution (as that term is defined in Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended).

 

	
SIGNATURE GUARANTEE

	  
	  	  	  
	
Name of Firm                                                   

	  	  
	
Address                                                            

	  	  
	
Area Code and Number

	  	  
	
Authorized Signature

	  	  
	
Name                                                                

	  	  
	
Title                                                                  

	  	  
	
Dated:                                                               

	  	,  200___ 

 

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