NEITHER THIS SECURITY NOR THE SECURITIES
INTO WHICH THIS SECURITY IS EXERCISABLE HAS BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.
No. PAW-_____
Number of Shares Purchasable
upon
Issue Date: _____________,
2006
Exercise of the Warrant:
______
PLACEMENT AGENT’S
WARRANT
GUARDIAN TECHNOLOGIES
INTERNATIONAL, INC.
THIS PLACEMENT AGENT’S WARRANT (the
“ Warrant ”) certifies that, for value received,
Midtown Partners & Co., LLC (the “ Holder ”)
is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, (i) at any time
on or after the date hereof (such date, the “ First
Initial Exercise Date ”) to subscribe for and purchase up
to ______ shares of common stock, $.001 par value per share (the
“ Common Stock ”), of Guardian Technologies
International, Inc. (the “ Company ”) (such
shares, the “ First Closing Warrant Shares ”)
and (ii) at any time on or after the later of the Second Closing
Date or the Second Closing Payment Date (as defined in Section
2(d)(ii) below) (the later of such dates, the “ Second
Initial Exercise Date ”) and subject to the exercise
limitations and cancellation provisions set forth in Section
2(d)(ii), to subscribe for and purchase up to ______ shares of
Common Stock of the Company (such shares, the “ Second
Closing Warrant Shares ” and together with the First
Closing Warrant Shares, the “ Warrant Shares ”)
and on or prior to the close of business on the 5 year anniversary
of the First Initial Exercise Date (such date, the “ First
Termination Date ”) in connection with the First Closing
Warrant Shares or the 5 year anniversary of the Second Initial
Exercise Date (such date, the “ Second Termination
Date ”) in connection with the Second Closing Warrant
Shares, but not thereafter. The purchase price of one share
of Common Stock under this Warrant shall be equal to the Exercise
Price, as defined in Section 2(b). This Warrant is being
issued by the Company to the Placement Agent pursuant to the terms
of the Placement Agent Agreement.
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The term “ Warrant ”
as defined herein shall hereafter include any warrant into which
this Warrant may be divided, exchanged or combined and any Warrant
as the same may be modified or amended from time to
time.
Section 1 .
Definitions . Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain
Securities Purchase Agreement (the “ Purchase
Agreement ”), dated November __, 2006, among the Company
and the purchasers signatory thereto.
Section 2 .
Exercise .
a)
Exercise of Warrant
. Exercise of the purchase rights
represented by this Warrant may be made, in whole or in part, at
any time or times on or after the First Initial Exercise Date in
connection with the First Closing Warrant Shares or, subject to
Section 2(d)(ii), on or after the Second Initial Exercise Date in
connection with the Second Closing Warrant Shares and on or before
the First Termination Date in connection with the First Closing
Warrant Shares or on or before the Second Termination Date in
connection with the Second Closing Warrant Shares by delivery to
the Company of a duly executed facsimile copy of the Notice of
Exercise Form annexed hereto (or such other office or agency
of the Company as it may designate by notice in writing to the
registered Holder at the address of such Holder appearing on the
books of the Company); and, within 3 Trading Days of the date said
Notice of Exercise is delivered to the Company, the Holder shall
deliver to the Company this Warrant together with payment of
the aggregate Exercise Price of the shares thereby purchased by
wire transfer or cashier’s check drawn on a United States
bank in immediately available United States dollars. The
Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases. The
Company shall deliver any objection to any Notice of Exercise Form
within 1 Business Day of receipt of such notice.
b)
Exercise Price . The exercise price per share of the Common
Stock under this Warrant shall be $1.15634 subject to adjustment
hereunder (the “ Exercise Price ”).
c)
Cashless Exercise
. At any time after the First
Initial Exercise Date in connection with the First Closing Warrant
Shares or, subject to Section 2(d)(ii) below, at any time after the
Second Initial Exercise Date in connection with the Second Closing
Warrant Shares, this Warrant may be exercised by means of a
“cashless exercise” in which the Holder shall be
entitled to receive a certificate for the number of Warrant Shares
equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
(A) = the VWAP on the Trading Day
immediately preceding the date of such election;
(B) = the Exercise Price of this
Warrant, as adjusted; and
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(X) = the number of Warrant Shares
issuable upon exercise of this Warrant in accordance with the terms
of this Warrant by means of a cash exercise rather than a cashless
exercise.
In addition, on the First Termination
Date in connection with the First Closing Warrant Shares or on the
Second Termination Date in connection with the Second Closing
Warrant Shares, this Warrant shall be automatically exercised via
cashless exercise pursuant to this Section 2(c).
d)
Exercise Limitations
.
i.
Holder’s Restrictions
. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the
right to exercise any portion of this Warrant, pursuant to Section
2(c) or otherwise, to the extent that after giving effect to such
issuance after exercise as set forth on the applicable Notice of
Exercise, such Holder (together with such Holder’s
Affiliates, and any other person or entity acting as a group
together with such Holder or any of such Holder’s
Affiliates), as set forth on the applicable Notice of Exercise,
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by such Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon exercise of this 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 (A) exercise of the remaining, nonexercised portion
of this Warrant beneficially owned by such Holder or any of its
Affiliates and (B) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Company
(including, without limitation, any other Warrants) subject
to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by such Holder or
any of its affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2(d)(i), 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 a Holder that the Company is
not representing to such Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and such Holder
is solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation
contained in this Section 2(d)(i) applies, the determination of
whether this Warrant is exercisable (in relation to other
securities owned by such Holder together with any Affiliates) and
of which a portion of this Warrant is exercisable shall be in the
sole discretion of a Holder, and the submission of a Notice of
Exercise shall be deemed to be each Holder’s determination of
whether this Warrant is exercisable (in relation to other
securities owned by such Holder together with any Affiliates) and
of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage
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limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
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 2(d)(i), in
determining the number of outstanding shares of Common Stock, a
Holder may rely on the number of outstanding shares of Common Stock
as reflected in (x) the Company’s most recent Form 10-Q or
Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company
or the Company’s Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written request
of a Holder, the Company shall within two Trading Days confirm
orally and in writing to such Holder the number of shares of Common
Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by such Holder or its Affiliates since the
date as of which such number of outstanding shares of Common Stock
was reported. The “ Beneficial Ownership
Limitation ” shall be 4.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon exercise of this
Warrant. The Beneficial Ownership Limitation provisions of
this Section 2(d)(i) may be waived by such Holder, at the election
of such Holder, upon not less than 61 days’ prior notice to
the Company to change the Beneficial Ownership Limitation to 9.99%
of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock upon
exercise of this Warrant, and the provisions of this Section
2(d)(i) shall continue to apply. Upon such a change by a
Holder of the Beneficial Ownership Limitation from such 4.99%
limitation to such 9.99% limitation, the Beneficial Ownership
Limitation may not be further waived by such Holder. The
provisions of this paragraph shall be construed and implemented in
a manner otherwise than in strict conformity with the terms of this
Section 2(d)(i) to correct this paragraph (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 this Warrant.
ii.
Payment of Subscription Amounts at
Second Closing .
Notwithstanding any other provision of this Warrant,
until such time as the full amount of the Subscription Amount for
the Second Closing (the “ Second Closing Subscription
Amount ”) has been paid and delivered to the Company by a
Purchaser pursuant to the Purchase Agreement, the Warrants issued
to the Holder pursuant to this Placement Agent’s Warrant to
purchase the Second Closing Warrant Shares attributable to such
Purchaser’s Second Closing Subscription Amount shall not be
exercisable.
4
If, within 15 Trading Days after the
Company delivers to Purchasers the Notice to Holders (the “
Second Closing Payment Date ”), any Purchaser has not
paid and delivered the full amount of the Second Closing
Subscription Amount for the Second Closing required of such
Purchaser by the Purchase Agreement (each such event, a “
Failed Debenture Purchase ”), the portion of this
Warrant attributable to any such Failed Debenture Purchase (such
portion of this Warrant, the “ Second Closing Unpaid
Placement Agent Warrants ”) shall not become exercisable
hereunder. Promptly upon the occurrence of a Failed Debenture
Purchase, the Company shall send notice to the Holder requiring the
Holder to deliver this Warrant to the Company and the Company shall
cancel the Second Closing Unpaid Placement Agent Warrants and shall
reissue to the Holder a Warrant for the remaining portion of the
Warrants.
e)
Mechanics of Exercise
.
i.
Authorization of Warrant
Shares . The Company
covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant will,
upon exercise of the purchase rights represented by this Warrant
and upon payment therefor, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens and
charges created by the Company in respect of the issue thereof
(other than taxes in respect of any transfer occurring
contemporaneously with such issue).
ii.
Delivery of Certificates Upon
Exercise . Certificates
for shares purchased hereunder shall be transmitted by the transfer
agent of the Company to the Holder by crediting the account of the
Holder’s prime broker with the Depository Trust Company
through its Deposit Withdrawal Agent Commission (“
DWAC ”) system if the Company is a participant in such
system, and otherwise by physical delivery to the address specified
by the Holder in the Notice of Exercise within 3 Trading Days from
the delivery to the Company of the Notice of Exercise Form,
surrender of this Warrant (if required) and payment of the
aggregate Exercise Price as set forth above (“ Warrant
Share Delivery Date ”). This Warrant shall be
deemed to have been exercised on the date the Exercise Price is
received by the Company. The Warrant Shares shall be deemed
to have been issued, and Holder or any other person so designated
to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the Warrant
has been exercised by payment to the Company of the Exercise Price
(or by cashless exercise, if permitted) and all taxes required to
be paid by the Holder, if any, pursuant to Section 2(e)(vii) prior
to the issuance of such shares, have been paid.
iii.
Delivery of New Warrants Upon
Exercise . If this
Warrant shall have been exercised in part, the Company shall, at
the request of a Holder and upon surrender of this Warrant
certificate, at the time of
5
delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.
iv.
Rescission Rights
. If the Company fails to cause its
transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to this
Section 2(e)(iv) by the second Trading Day following the Warrant
Share Delivery Date, then the Holder will have the right to rescind
such exercise.
v.
Compensation for Buy-In on Failure to
Timely Deliver Certificates Upon Exercise . In addition to any other rights available to
the Holder, if the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing
the Warrant Shares pursuant to an exercise on or before the second
Trading Day following the Warrant Share Delivery Date, and if after
such date the Holder is required by its broker to purchase (in an
open market transaction or otherwise) or the Holder’s
brokerage firm otherwise purchases, shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a
“ Buy-In ”), then the Company shall (1) pay in
cash to the Holder the amount by which (x) the Holder’s total
purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained
by multiplying (A) the number of Warrant Shares that the Company
was required to deliver to the Holder in connection with the
exercise at issue times (B) the price at which the sell order
giving rise to such purchase obligation was executed, and (2) at
the option of the Holder, either reinstate the portion of the
Warrant and equivalent number of Warrant Shares for which such
exercise was not honored or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of
$10,000, under clause (1) of the immediately preceding sentence the
Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of
the Company, evidence of the amount of such loss. Nothing
herein shall limit a Holder’s right to pursue any other
remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to
timely deliver certificates representing shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms
hereof.
6
vi.
No Fractional Shares or
Scrip . No fractional
shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant. As to any fraction of a share
which Holder would otherwise be entitled to purchase upon such
exercise, the Company shall at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to
such fraction multiplied by the Exercise Price or round up to the
next whole share.
vii.
Charges, Taxes and Expenses
. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any
issue or transfer tax or other incidental expense in respect of the
issuance of such certificate, all of which taxes and expenses shall
be paid by the Company, and such certificates shall be issued in
the name of the Holder or in such name or names as may be directed
by the Holder; provided , however , that in the event
certificates for Warrant Shares are to be issued in a name other
than the name of the Holder, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder; and the Company may require, as
a condition thereto, the payment of a sum sufficient to reimburse
it for any transfer tax incidental thereto.
viii.
Closing of Books
. The Company will not close its
stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms
hereof.
f)
Call Provision . Subject to the provisions of Section 2(d) and
this Section 2(f), if, after the Effective Date (i) the Closing
Price on each of 20 consecutive Trading Days (the “
Measurement Period ,” which 20 consecutive Trading Day
period shall not have commenced until after the Effective Date)
exceeds 200% of the then Exercise Price (subject to adjustment for
forward and reverse stock splits, recapitalizations, stock
dividends and the like after the First Initial Exercise Date) (the
“ Threshold Price ”), (ii) the daily trading
volume for such Measurement Period, exceeds 100,000 shares of
Common Stock per Trading Day (subject to adjustment for forward and
reverse stock splits, recapitalizations, stock dividends and the
like after the First Initial Exercise Date) and (iii) the Holder is
not in possession of any information that constitutes, or might
constitute, material non-public information, then the Company may,
within one Trading Day of the end of such Measurement Period, call
for cancellation of all or any portion of this Warrant for which a
Notice of Exercise has not yet been delivered (such right, a
“ Call ”) for consideration equal to $.001 per
Share. To exercise this right, the Company must deliver to
the Holder an irrevocable written notice (a “ Call
Notice ”), indicating therein the portion of unexercised
portion of this Warrant to which such notice applies. If the
conditions set forth below for such Call are satisfied from the
period from the date of the Call Notice through and including the
Call Date (as defined below), then any portion of this Warrant
subject to such Call Notice for which a Notice of Exercise shall
not have been received by the Call Date will be cancelled at 6:30
p.m. (New York City time) on the fifteenth Trading Day after the
date the Call Notice is received by the Holder (such date and time,
the “ Call Date ”). Any unexercised
portion of this Warrant to which the
7
Call Notice does not pertain will be
unaffected by such Call Notice. In furtherance thereof, the
Company covenants and agrees that it will honor all Notices of
Exercise with respect to Warrant Shares subject to a Call Notice
that are tendered through 6:30 p.m. (New York City time) on the
Call Date. The parties agree that any Notice of Exercise
delivered following a Call Notice which calls less than all the
Warrants shall first reduce to zero the number of Warrant Shares
subject to s
