Exhibit 3
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO VOIP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 5,000,000 shares of Common
Stock of VoIP, Inc. (subject to adjustment as
provided herein)
COMMON STOCK PURCHASE WARRANT
Issue Date: October 5, 2005
No.
VoIP, INC., a corporation organized under the laws of the State of
Texas (the "Company"), hereby certifies that, for value received, WQN, Inc.,
00000 Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000, or its assigns (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time after the Issue Date until August 1, 2010 (the
"Expiration Date"), up to 5,000,000 fully paid and nonassessable shares of
Common Stock at a per share purchase price of $0.001. The aforedescribed
purchase price per share, as adjusted from time to time as herein provided, is
referred to herein as the "Purchase Price." The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein. The Company may reduce the Purchase Price without the consent
of the Holder. Capitalized terms used and not otherwise defined herein shall
have the meanings set forth in that certain asset purchase agreement (the
"Asset Purchase Agreement"), of even date herewith, entered into by the Company
and Holder.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include VoIP, Inc. and any
corporation which shall succeed or assume the obligations of VoIP,
Inc. hereunder.
(b) The term "Common Stock" includes (a) the Company's common
stock, $.001 par value per share (the "Common Stock"), as authorized
on the date hereof, and (b) any other securities into which or for
which the Common Stock may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or
otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of the Warrant at any time
shall be entitled to receive, or shall have received, on the exercise
of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for
or in replacement of Common Stock or Other Securities pursuant to
Section 5 or otherwise.
(d) The term "Warrant Shares" shall mean the Common Stock
issuable upon exercise of this Warrant.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the date
hereof, through and including the Expiration Date, the Holder hereof shall be
entitled to receive, upon exercise of this Warrant in whole in accordance with
the terms of Subsection 1.2 or upon exercise of this Warrant in part in
accordance with Subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by the
Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such Holder and surrender of the original Warrant within four (4)
days of exercise, to the Company at its principal office or at the office of
its Warrant Agent (as hereinafter defined), accompanied by payment, in cash,
wire transfer or by certified or official bank check payable to the order of
the Company, in the amount obtained by multiplying the number of shares of
Common Stock for which this Warrant is then exercisable by the Purchase Price
then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part (but not
for a fractional share) by surrender of this Warrant in the manner and at the
place provided in subsection 1.2 except that the amount payable by the Holder
on such partial exercise shall be the amount obtained by multiplying (a) the
number of whole shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, the whole number of shares of Common
Stock for which such Warrant may still be exercised.
1.4. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance
with the provisions of this Warrant. If the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.
1.5. Delivery of Stock Certificates, etc. on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder hereof as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within four (4) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder hereof, or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share of Common Stock, together with any other stock
or other securities and property (including cash, where applicable) to which
such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.
1.6. Cashless Exercise.
(a) At the option of the Holder, exercise of this Warrant may be
made in whole or part by delivery of Common Stock issuable upon
exercise of the Warrants in accordance with Section (b) below for the
number of Common Stock specified in such form (as such exercise number
shall be adjusted to reflect any adjustment in the total number of
shares of Common Stock issuable to the holder per the terms of this
Warrant) and the holder shall thereupon be entitled to receive the
number of duly authorized, validly issued, fully-paid and
non-assessable shares of Common Stock determined as provided herein.
(b) If the Fair Market Value of one share of Common Stock is
greater than the Purchase Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the holder
may elect to receive shares equal to the value (as determined below)
of this Warrant (or the portion thereof being cancelled) by surrender
of this Warrant at the principal office of the Company together with
the properly endorsed Subscription Form in which event the Company
shall issue to the holder a number of shares of Common Stock computed
using the following formula:
X = Y (A - B)
------
A
Where X = the number of shares of Common Stock to be issued to the
holder
Y = the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised,
the portion of the Warrant being exercised (at the date of such
calculation)
A = the Fair Market Value of one share of the Company's Common
Stock (at the date of such calculation)
B = Purchase Price (as adjusted to the date of such calculation)
(c) "Fair Market Value" shall mean the closing or last sale
price, respectively, reported for the last business day immediately
preceding the date of exercise on the Company's principal trading
market.
2. Adjustment for Reorganization, Consolidation, Merger, etc.
2.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any
plan or arrangement contemplating the dissolution of the Company, then, in each
such case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and
property (including cash) to which such Holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be,
if such Holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided in Section 2.3 and Section
3.
2.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause
to be delivered the stock and other securities and property (including cash,
where applicable) receivable by the Holder of the Warrants after the effective
date of such dissolution pursuant to this Section 2 to a bank or trust company
(a "Trustee") having its principal office in New York, NY, as trustee for the
Holder of the Warrants.
2.3. Adjustments to Purchase Price for Diluting Issues.
(a) Special Definitions. For purposes of this Section 2.3, the
following definitions shall apply:
(i) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities (as defined below), excluding rights or
options granted to employees, directors or consultants of the
Company pursuant to an option plan adopted by the Board of
Directors of the Company to acquire up to that number of shares
of Common Stock as is equal to fifteen (15%) percent of the
Common Stock outstanding (provided that, for purposes of this
Subsection 2.3(a)(i), all shares of Common Stock issuable upon
(A) exercise of options granted or available for grant under
plans approved by the Board of Directors, (B) conversion of
shares of Preferred Stock, or (C) conversion of Preferred Stock
issuable upon conversion or exchange of any Convertible
Security, shall be deemed to be outstanding).
(ii) "Original Issue Date" shall mean the date of this
Warrant.
(iii) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(iv) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 2.3(c)
below, deemed to be issued) by the Company after the Original
Issue Date and other than shares of Common Stock issued or
issuable:
(A) as a dividend or distribution on the Preferred
Stock;
(B) by reason of a dividend, stock split, split-up or
other distribution on shares of Common Stock excluded from
the definition of Additional Shares of Common Stock by the
foregoing clause (A);
(C) upon the exercise of options excluded from the
definition of "Option" in Section 2.3(a)(i); or
(D) upon conversion of shares of the Preferred Stock.
(v) "Rights to Acquire Common Stock" (or "Rights") shall
mean all rights issued by the Company to acquire common stock
whatever by exercise of a warrant, option or similar call or
conversion of any existing instruments, in either case for
consideration fixed, in amount or by formula, as of the date of
issuance.
(b) No Adjustment of Conversion Rate. No adjustment in the
number of shares of Common Stock into which this Warrant is
exercisable shall be made, by adjustment in the Purchase Price thereof
unless the consideration per share (determined pursuant to Section
2.3(e) below for an Additional Share of Common Stock issued or deemed
to be issued by the Company is less than the applicable Purchase Price
in effect on the date of, and immediately prior to, the issue of such
additional shares.
(c) Issue of Securities Deemed Issue of Additional Shares of
Common Stock. If the Company at any time or from time to time after
the Original Issue Date shall issue any Options or Convertible
Securities or other Rights to Acquire Common Stock, then the maximum
number of shares of Common Stock (as set forth in the instrument
relating thereto without regard to any provision contained therein for
a subsequent adjustment of such number) issuable upon the exercise of
such Options, Rights or, in the case of Convertible Securities, the
conversion or exchange of such Convertible Securities, shall be deemed
to be Additional Shares of Common Stock issued as of the time of such
issue, provided that Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share
(determined pursuant to Section 2.3(e) hereof) of such Additional
Shares of Common Stock would be less than the applicable Purchase
Price in effect on the date of and immediately prior to such issue, or
such record date, as the case may be, and provided further that in any
such case in which Additional Shares of Common Stock are deemed to be
issued:
(i) No further adjustment in the Purchase Price shall be
made upon the subsequent issue of shares of Common Stock upon
the exercise of such Rights or conversion or exchange of such
Convertible Securities;
(ii) Upon the expiration or termination of any unexercised
Option or Right, the Purchase Price shall not be readjusted, but
the Additional Shares of Common Stock deemed issued as the
result of the original issue of such Option or Right shall not
be deemed issued for the purposes of any subsequent adjustment
of the Purchase Price; and
(iii) In the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange
of any Option, Right or Convertible Security, including, but not
limited to, a change resulting from the anti-dilution provisions
thereof, the Purchase Price then in effect shall forthwith be
readjusted to such Purchase Price as would have obtained had the
adjustment that was made upon the issuance of such Option, Right
or Convertible Security not exercised or converted prior to such
change been made upon the basis of such change, but no further
adjustment shall be made for the actual issuance of Common Stock
upon the exercise or conversion of any such Option, Right or
Convertible Security.
(d) Adjustment of Purchase Price upon Issuance of Additional
Shares of Common Stock. If the Company shall at any time after the
Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to
Section 2.3(c), but excluding shares issued as a dividend or
distribution or upon a stock split or combination as provided in
Section 3), without consideration or for a consideration per share
less than the applicable Purchase Price in effect on the date of and
immediately prior to such issue, then and in such event, such Purchase
Price shall be reduced, concurrently with such issue to a price
(calculated to the nearest cent) determined by multiplying such
Purchase Price by a fraction, (i) the numerator of which shall be (A)
the number of shares of Common Stock outstanding immediately after
such issue plus (B) the number of shares of Common Stock which the
aggregate consideration received by the Company for the total number
of Additional Shares of Common Stock so issued would purchase at such
Conversion Rate; and (ii) the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such issue.
(e) Determination of Consideration. For purposes of this Section
2.3(e), the consideration received by the Company for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate of cash received by the Company, excluding
amounts paid or payable for accrued interest or accrued
dividends;
(B) insofar as it consists of property other than cash,
be computed at the fair market value thereof at the time of
such issue, as determined in good faith by the Board of
Directors; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other
assets of the Company for consideration which covers both,
be the proportion of such consideration so received,
computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(ii) Options, Rights and Convertible Securities. The
consideration per share received by the Company for Additional
Shares of Common Stock deemed to have been issued pursuant to
Section 2.3(c), relating to Options, Rights and Convertible
Securities, shall be determined by dividing,
(A) the total amount, if any, received or receivable by
the Company as consideration for the issue of such Options,
Rights or Convertible Securities, plus the minimum
aggregate amount of additional consideration (as set forth
in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of
such consideration) payable to the Company upon the
exercise of such Options, Rights or the conversion or
exchange of such Convertible Securities, by
(B) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of
such Options or the conversion or exchange of such
Convertible Securities.
2.4. No Adjustment Below Par Value. Notwithstanding anything in this
Warrant to the contrary, no adjustment shall be made to the Purchase Price if
the Purchase Price resulting from such adjustment reduces the Purchase Price to
an amount less than the par value of the Common Stock.
3. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such event, and
the product so obtained shall thereafter be the Purchase Price then in effect.
The Purchase Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive event or events described herein in this
Section 4. The number of shares of Common Stock that the Holder of this Warrant
shall thereafter, on the exercise hereof as provided in Section 1, be entitled
to receive shall be adjusted to a number determined by multiplying the number
of shares of Common Stock that would otherwise (but for the provisions of this
Section 3) be issuable on such exercise by a fraction of which (a) the
numerator is the Purchase Price that would otherwise (but for the provisions of
this Section 3) be in effect, and (b) the denominator is the Purchase Price in
effect on the date of such exercise.
4. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on
the exercise of the Warrants, the Company, at its expense, will promptly cause
its Chief Financial Officer or other appropriate designee to compute such
adjustment or readjustment in accordance with the terms of the Warrant and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or receivable by the
Company for any additional shares of Common Stock (or Other Securities) issued
or sold or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be outstanding, and
(c) the Purchase Price and the number of shares of Common Stock to be received
upon exercise of this Warrant, in effect immediately prior to such adjustment
or readjustment and as adjusted or readjusted as provided in this Warrant. The
Company will forthwith mail a copy of each such certificate to the Holder of
the Warrant.
5. Reservation of Stock, etc. Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrant.
6. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered Holder hereof (a "Transferor"). On the
surrender for exchange of this Warrant, with the Transferor's endorsement in
the form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with an opinion of counsel reasonably satisfactory to the Company that
the transfer of this Warrant will be in compliance with applicable securities
laws, the Company at Transferor's expense but with payment by the Transferor of
any applicable transfer taxes, will issue and deliver to or on the order of the
Transferor thereof a new Warrant or Warrants of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock called for on the face or faces of the Warrant so
surrendered by the Transferor. No such transfers shall result in a public
distribution of the Warrant.
7. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense, twice only, will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
8. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to
the contrary.
9. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (a) personally served, (b)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (c) delivered by reputable air courier service with charges
prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (x) upon hand
delivery or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is
to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (y) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be: (i) if to the Company to: VoIP,
Inc., 00000 XX00 Xxxxxx, Xxxxx 000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000, Attn:
Xxxxxx Xxxxxxx, President and CEO, telecopier: (000) 000-0000, with a copy by
telecopier only to: Xxxxxx X. Xxxxx, Xxxxxxx Xxxxx LLP, 0000 Xxxx Xxxxxx, Xxxxx
0000, Xxxxxx, Xxxxx 00000, telecopier: (000) 000-0000, (ii) if to the Holder,
to the address and telecopier number listed on the first paragraph of this
Warrant.
10. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the laws of Texas. Any dispute relating to this
Warrant shall be adjudicated in Dallas County in the State of Texas. The
headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.
VoIP, INC.
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Name: Xxxxxx Xxxxxxx
Title: President and CSO
Witness:
/s/ Xxxxxxx Xxxxxxx
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