STOCK PURCHASE WARRANT to Purchase Common Stock of Vonage Holdings Corp.

Exhibit 4.3

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THESECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.  IT MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVEREGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLESTATE SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATIONUNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.


To Purchase Common Stock of
Vonage Holdings Corp.

Date of Initial Issuance:

 

June 20, 2002

Number of Shares:

 

1,440,000

Initial Warrant Price:

 

$0.25

Expiration Date:

 

June 20, 2012

 

THISCERTIFIES THAT for value received, JEFFREY A. CITRON,or registered assigns (hereinafter called “Holder”), is entitled to purchasefrom VONAGE HOLDINGS CORP, a Delaware corporation (“the Company”),at any time during the Term of this Warrant, One Million Four Hundred FortyThousand (1,440,000) shares of common stock of the Company (“Common Stock”), atthe Warrant Price, payable as provided herein. The exercise of this Warrant shall be subject to the provisions,limitations and restrictions herein contained.  This Warrant may be exercised in whole or inpart.

1.             Definitions.

For all purposes of thisWarrant, the following terms shall have the meanings indicated

“Common Stock”shall mean and include the Company’s authorized common stock, as constituted at the date hereof.

“Exchange Act”shall mean the Securities Exchange Act of 1934, as amended from time to time.

“Securities Act”shall mean the Securities Act of 1933, as amended from time to time.

“Term of this Warrant” shall mean the period beginning on the date of initialissuance hereof and ending on the tenth (10th) anniversary of such date of initial issuance.

“Warrant Price”shall mean Twenty-Five Cents ($0.25) per share, subject to adjustment inaccordance with Section 5 hereof.

“Warrants” shallmean this Warrant and any other Warrant or Warrants issued in connection withthe Agreement to the original holder of this Warrant or issued to any transfereesof such original holder or subsequent holder.

“Warrant Shares”shall mean shares of Common Stock, subject to adjustment or change as hereinprovided, purchased or purchasable by Holder upon the exercise hereof.

2.             Exercise of Warrant.

2.1          Procedure for Exercise of Warrant.  To exercise this Warrant in whole or in part(but not as to any fractional share of Common Stock), Holder shall deliver tothe Company at its office referred to in Section 14 hereof at any time and fromtime to time during the Term of this Warrant: (i) the Notice of Exercise in theform of Exhibit A attached hereto, (ii) cash, certified or official bankcheck payable to the order of the Company, wire



 

transfer of funds to theCompany’s account, or cancellation of any indebtedness of the Company to Holder(or any combination of any of the foregoing) in the amount of the Warrant Pricefor each share being purchased, and (iii) this Warrant. Notwithstanding anyprovisions herein to the contrary, if the Current Market Price (as defined below)is greater than the Warrant Price (at the date of calculation, as set forthbelow), in lieu of exercising this Warrant as hereinabove permitted, Holder mayelect to receive shares of Common Stock equal to the value (as determinedbelow) of this Warrant (or the portion thereof being canceled) by surrender ofthis Warrant at the office of the Company referred to in Section 14 hereof,together with the Notice of Exercise, in which event the Company shall issue toHolder that number of whole shares of Common Stock computed using the followingformula:

CS = WCS x(CMP-WP)
                                CMP

Where

 

CS

equals the number of shares of Common Stock to be issued to Holder

 

WCS

equals 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)

 

CMP

equals the Current Market Price (at the date of such calculation.)  “Current Market Price” as at any date of calculation means the applicable one of the following:  (a) if the Common Stock is admitted to trading on a national securities exchange, the closing price quoted for the Common Stock on that exchange on the date of calculation; otherwise (b) if the Common Stock is quoted on a national quotation system, the mean between the closing bid ansd asked prices, regular way, as quoted on that system on the date of calculation; otherwise (c) if the Company has recently (at the date of calculation) established a price for the Common Stock through private securities sales or grants of purchase options that in the reasonable judgment of the Company’s Board of Directors accurately reflects the value of the Common Stock, the price so established.

 

WP

Equals the Warrant Price (as adjusted to the date of such calculation)

 

Inthe event of any exercise of the rights represented by this Warrant, a certificate orcertificates for the shares of Common Stock so purchased, registered in thename of Holder or such other name or namesas may be designated by Holder, shall be delivered to Holder hereofwithin a reasonable time, not exceeding fifteen (15) days, after the rightsrepresented by this Warrant shall have been so exercised; and, unless thisWarrant has expired, a new Warrant representing the number of shares (except aremaining fractional share), if any, with respect to which this Warrant shallnot then have been exercised shall also be issued to Holder hereof within suchtime.  The person in whose name anycertificate for shares ofCommon Stock is issued uponexercise of this Warrant shall for all purposes be deemed to have become theholder of record of such shares on the date on which Holder shall have compliedwith the conditions for exercise of this Warrant set forth above, irrespectiveof the date of delivery of such certificate, except that, if the date of suchcompliance 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 theclose of business on the next succeeding date on which the stock transfer booksare open.

2.2          Transfer Restriction Legend.  Each certificate for Warrant Shares shall bearthe following legend (and any additional legend required by (i) any applicablestate securities laws and (ii) any securities exchange upon which such WarrantShares may, at the time of such exercise, be listed) on the face thereof unlessat the time of exercise such Warrant Shares shall be registered under theSecurities Act:

“The shares representedby this certificate have not been registered under the Securities Act of 1933,as amended, and may not be sold or transferred in the absence of suchregistration or an exemption therefrom under said Act.”

Any certificateissued at any time in exchange or substitution for any certificate bearing suchlegend (except a new certificate issued upon completion of a publicdistribution under a registration statement of the securities

 

2



 

representedthereby) shall also bear such legend unless, in the opinion of counsel forHolder thereof (which counsel shall be reasonably satisfactory to the Company)the securities represented thereby are not, at such time, required by law to bear such legend.

3.             Covenants as to Common Stock.  TheCompany covenants and agrees that:

(a)           All shares of Common Stock that maybe issued upon the exercise of the rights represented by this Warrant shall,upon issuance, be validly issued, fully paid and nonassessable, and free fromall taxes, liens and charges with respect to the issue thereof.
(b)           It shall pay when due and payable anyand all federal and state taxes which may be payable in respect of the issue ofthis Warrant or any Common Stock or certificates therefor issuable upon theexercise of this Warrant.  The Companyfurther covenants and agrees that the Company shall at all times haveauthorized and reserved, free from preemptive rights, a sufficient number ofshares of Common Stock to provide for the exercise of the rights represented bythis Warrant.
(c)           if any shares of capital stock to bereserved for the purpose of the issuance of shares upon the exercise of thisWarrant require registration with or approval of any governmental authorityunder any federal or state law before such shares may be validly issued ordelivered upon exercise, then the Company shall in good faith and asexpeditiously as possible endeavor to secure such registration or approval, asthe case may be.  If and so long as theCommon Stock issuable upon the exercise of this Warrant is listed on anynational securities exchange, the Company shall, if permitted by the rules ofsuch exchange, list and keep listed on such exchange, upon official notice ofissuance, all shares of such Common Stock issuable upon exercise of thisWarrant.

4.             Representations and Warranties RegardingCapitalization Issues.  As of the initial issuance of this Warrant, theCompany does not have outstanding any securities convertible into orexchangeable for, or any rights to subscribe for or to purchase, or any optionsor warrants for the purchase of, or any agreement providing for the issuance(contingent or otherwise) of, or any calls, commitments or claims of anycharacter relating to, its capital stock, in each case other than as disclosedin writing to Holder prior to the date of issuance of this Warrant.

5.             Adjustment ofNumber of Shares.  Upon each adjustment of the Warrant Price as providedin Section 6, Holder shall thereafter be entitled to purchase, at the WarrantPrice resulting from such adjustment, only the number of shares (calculated to the nearest tenth of ashare) obtained by multiplying the Warrant Price in effect immediately prior tosuch adjustment by the number of shares purchasable pursuant hereto immediatelyprior to such adjustment and dividing the product thereof by the Warrant Priceresulting from such adjustment.

6.             Adjustment of Warrant Price.  As used in this Section 6, “Net Consideration PerShare” means (1) the amount equal to the total amount of consideration, ifany, received by the Company upon (x) the issuance or sale of shares of CommonStock or (y) the issuance or sale of any rights, options or warrantsexercisable or exchangeable for Common Stock, or (z) any security convertibleinto or exchangeable for shares of Common Stock plus (2) the minimum amount setforth in the terms of any of the securities referred to in clauses (x) and (y)as payable to the Company upon the exercise or conversion thereof, divided by(3) the aggregate number of shares of Common Stock that would be issued if allsuch rights, options or warrants or convertible or exchangeable securities wereexercised, or converted or exchanged to the fullest extent permitted by theirterms.  The Warrant Price shall besubject to adjustment from time to time as follows:

(a)           The Warrant Price, and the number ofshares of Common Stock issuable upon exercise of the Warrant, shall beproportionately adjusted each time the Company takes any of the followingactions after the date the Warrant was first issued:
(i)                                     Declares a dividend on the outstanding CommonStock payable in shares of its Common Stock, or securities convertible into orexchangeable for Common Stock;

 

3



(ii)                                  Subdivides the outstanding Common Stock;or
(iii)                               Combines the outstanding Common Stockinto a smaller number of shares.

The adjustment shall bemade as of the dividend record date or of the effective date of the subdivisionor combination.  The effect of theadjustment shall be such that each holder of Warrants shall, after theadjustment, be entitled on exercise thereof to receive the aggregate number andkind of shares that he, she or it would have been entitled to receive by virtueof such dividend, subdivision or combination had such shareholder exercised itsWarrant immediately prior to giving effect to such dividend, subdivision orcombination.

(b)           In case the Company shall issue, orfix a record date for the issuance of, to all holders of Common Stock, rights,options, or warrants to subscribe for or purchase Common Stock (or securitiesconvertible into or exchangeable for Common Stock), for a Net Consideration PerShare less than the Warrant Price in effect immediately prior to the issuance,or the fixing of a record date for issuance, of such rights, options orwarrants or convertible or exchangeable securities, then, in each case, theWarrant Price shall be reduced to a price (calculated to the nearest cent)calculated according to the formula:

ACP

=

PCP

X

OSC

+

AOP

 

 

 

 

 

 

PCP

 

 

 

 

 

 

 

 

 

 

 

OSS

 

where ACP is the adjustedWarrant Price,

PCP is the WarrantPrice in effect immediately prior to such record or issue date,

OSC is the numberof shares of Common Stock outstanding on such record or issue date,

AOP is the sum ofthe Net Consideration Per Share for all shares of Common Stock, rights, optionsor warrants or convertible or exchangeable securities issued in such issuance,as applicable, and

OSS is the numberof shares of Common Stock outstanding immediately subsequent to such issuance.

Any adjustment under thisSection 8(b) shall become effective at the close of business on the relevant recordor issue date. For the purpose of all such adjustments hereunder, the maximumnumber of shares of Common Stock which the holders of any such rights, options,warrants, or convertible or exchangeable securities shall be entitled tosubscribe for or purchase or convert or exchange such securities into shall bedeemed to be issued and outstanding.  Tothe extent the shares of Common Stock are not delivered, or securities convertibleinto or exchangeable for shares of Common Stock are not exercised or exchanged,before expiration of the time allowed for delivery, exercise or exchange, the WarrantPrice shall be readjusted to the Warrant Price which would then be in effecthad the adjustment required by this Section been made upon the basis ofdelivery of only the number of the number of shares of Common Stock (orsecurities convertible into or exchangeable for shares of Common Stock)actually issued.  On any change of thenumber of shares of Common Stock deliverable upon the exercise of any suchrights, options, or warrants or exercise or exchange of such convertible orexchangeable securities or any change in the consideration to be received bythe Company upon such exercise, exercise, or exchange, including, but notlimited to, a change resulting fromthe antidilution provisions thereof, the Warrant Price, as then ineffect, shall forthwith be readjusted to such Warrant Price as would have beenobtained had an adjustment been made upon the issuance of such rights, options,or warrants not exercised prior to such change, or securities not exercised orexchanged prior to such change, on the basis of such change; provided, that nosuch change shall at any time cause the Warrant Price hereunder to be greaterthan the initial Warrant Price. Any such readjustment shall apply only to sharesof Common Stock issued upon exercises of this Warrant taking place after suchexpiration.  In case any

 

4



purchase price may bepaid in a consideration part or all of which shall be in a form other than cash,the value of such consideration shall be as determined in good faith by theBoard of Directors of the Company, whose determination shall be conclusive absentmanifest error.  Shares of Common Stockowned by or held for the account of the Company or any majority-ownedsubsidiary shall not be deemed outstanding for the purpose of any suchcomputation.

(c)           In case the Company shall distributeto all holders of Common Stock (other than such distribution made to thestockholders of the Company in connection with a consolidation or merger towhich Section 6(e) is applicable or a reclassification or recapitalization towhich Section 6(j) is applicable) evidences of its indebtedness or assets orany shares of its capital stock (other than cash dividends or distributions anddividends payable in shares of Common Stock or securities convertible intoCommon Stock), or rights, options, or warrants to subscribe for or purchaseCommon Stock or securities convertible into or exchangeable for shares ofCommon Stock (excluding those with respect to the issuance of which anadjustment of the Warrant Price is provided pursuant to Section 6(a) or Section6(b) hereof), then, in each case, the holders of the Warrant shall be entitledto a proportionate share of any such distribution as though they were actualholders of the numbers of shares of Common Stock for which their respectiveWarrants are exercisable as of the record or issue date for the distribution inquestion. Any such distribution to the holders of the Warrants shall be madewhenever any of the corresponding distribution is made, and shall becomeeffective on the record or issue date for the determination of stockholdersentitled to receive such corresponding distribution.
(d)           In case the Company shall issue, sellor exchange shares of Common Stock or rights, options, or warrants to subscribefor or purchase Common Stock, or securities convertible into or exchangeablefor Common Stock (excluding shares, rights, options, warrants, or convertibleor exchangeable securities issued or issuable in any of the transactions withrespect to which an adjustment of the Warrant Price is provided pursuant toSections 8(a), 8(b), and 8(c) above) at a Net Consideration Per Share, asapplicable, lower than the Warrant Price in effect immediately prior to suchissuance, then the Warrant Price shall be reduced on the date of such issuanceto a price (calculated to the nearest cent) determined according to thefollowing formula:

ACP

=

PCP

X

OSC

+

$$$

 

 

 

 

 

 

PCP

 

 

 

 

 

 

 

 

 

 

 

OSS

 

where ACP is the adjustedWarrant Price,

PCP is the WarrantPrice in effect immediately prior to such record or issue date,

OSC is the numberof shares of Common Stock outstanding immediately prior to such issuance,

OSS is the numberof shares of Common Stock outstanding immediately subsequent to such issuance,and

$$$ is the sum ofthe Net Consideration Per Share for all shares of Common Stock, rights, optionsor warrants or convertible or exchangeable securities issued in such issuance,as applicable.

Any adjustment under thisSection 6(d) shall become effective at the close of business on the relevantrecord or issue date.  For the purpose ofall such adjustments hereunder, the maximum number of shares of Common Stockwhich the holders of any such rights, options, warrants, or convertible orexchangeable securities shall be entitled to subscribe for or purchase orconvert or exchange such securities into shall be deemed to be issued andoutstanding.  No further adjustment ofthe Warrant Price shall be made as a result of the actual issuance of shares ofCommon Stock on exercise of such rights, options, or warrants or on exercise orexchange of such convertible or exchangeable securities.  On the expiration or the termination of suchrights, options or warrants, or

 

5



the termination of such right to convert or exchange,the Warrant Price shall be readjusted to such Warrant Price as would have beenobtained had the adjustments made upon the issuance of such rights, options,warrants, or convertible or exchangeable securities been made upon the basis ofthe delivery of only the number of shares of Common Stock actually deliveredupon the exercise of such rights, options, or warrants or upon the exercise or exchangeof any such securities.  On any change ofthe number of shares of Common Stock deliverable upon the exercise of any suchrights, options, or warrants or exercise or exchange of such convertible orexchangeable securities or any change in the consideration to be received bythe Company upon such exercise, exercise, or exchange, including, but notlimited to, a change resulting from the antidilution provisions thereof, theWarrant Price, as then in effect, shall forthwith be readjusted to such WarrantPrice as would have been obtained had an adjustment been made upon the issuanceof such rights, options, or warrants not exercised prior to such change, or securitiesnot exercised or exchanged prior to such change, on the basis of such change;provided that no such change shall at any time cause the Warrant Pricehereunder to be greater than the initial Warrant Price.  Any readjustment under the preceding two sentencesshall apply only to shares of Common Stock issued upon exercises of thisWarrant taking place after such expiration or change.  In case the Company shall issue shares ofCommon Stock or any such rights, options, warrants, or convertible orexchangeable securities for a consideration consisting, in whole or in part, ofproperty other than cash or its equivalent, then the value of suchconsideration shall be as determined in good faith by the Board of Directors ofthe Company, whose determination shall be conclusive absent manifest error.  Shares of Common Stock owned by or held forthe account of the Company or any majority-owned subsidiary shall not be deemedoutstanding for the purpose of any such computation.

(e)           In case at any time the Company shallbe a party to any transaction in which the previously outstanding Common Stockshall be exercised or changed into or exchanged for securities of anothercorporation or interests in a non-corporate entity or other property (includingcash) or any combination of the foregoing (each such transaction being hereincalled a “Transaction”), then, if a holder of a Warrant shall so elect,as a condition of the consummation of the Transaction, lawful and adequateprovision shall be made so that the Warrant held by such holder shall beexercised into an equal number of securities of such other corporation orentity that have economic rights, voting powers (including rights with respectto election of directors), preferences, and other special rights, privileges,powers or immunities substantially identical to the Warrant and that provide,upon the exercise thereof at any time on or after the consummation of theTransaction, for the receipt of securities, cash or other property to whichsuch holder would have been entitled upon consummation of the Transaction ifsuch holder had exercised such Warrant immediately prior thereto (subject toadjustments from and after the consummation date as nearly equivalent aspossible to the adjustments provided for in this Section 6).  The Company will not effect any Transactionunless prior to the consummation thereof each corporation or entity which maybe required to deliver any securities or other property upon the exercise ofthe Warrant as provided herein shall assume the obligation to deliver to suchholder such securities or other property as, in accordance with the foregoingprovisions, such holder may be entitled to receive.  The foregoing provisions of this Section 6(e)shall similarly apply to successive mergers, consolidations, sales of assets,liquidations and recapitalizations.
(f)            No adjustment in the Warrant Priceshall be required if such adjustment is less than $.0025; provided, however,that any adjustments which by reason of this Section 6(f) are not required tobe made shall be carried forward and taken into account in any subsequentadjustment.
(g)           Upon each adjustment of the WarrantPrice as a result of the calculations made in Section 6(b), 6(c), or 6(d)hereof, any certificate evidencing the Warrant shall thereafter be exercisable,at the adjusted Warrant Price, for a number of shares calculated to the nextthousandth as follows:  First multiplythe “old” number of shares of Common Stock then obtainable through exercise infull of the Warrant by the “old” Warrant Price.  Second, divide the result by the “new” WarrantPrice.  “Old” refers to the number ofshares and Warrant Price in effect immediately prior to the adjustment, and “new”refers to the Warrant Price in effect immediately following the adjustment.
(h)           Whenever there shall be an adjustmentas provided in this Section 6, the Company shall promptly cause written noticethereof to be sent by registered mail, postage prepaid, to each holder ofWarrants, at its address as it shall appear in the Company’s stock records,which notice shall be accompanied by an officer’s

 

6



certificate setting forththe Warrant Price after such adjustment and setting forth a brief statement ofthe facts requiring such adjustment and the computation thereof, which officer’scertificate shall be conclusive evidence of the correctness of any suchadjustment absent manifest error.

(i)            The Company shall not be required toissue fractions of shares of Common Stock or other capital stock of the Companyupon exercise of the Warrant.  If anyfraction of a share would be issuable on exercise, the Company shall purchasesuch fraction for an amount in cash equal to the same fraction of the fairmarket value of a share of Common Stock on the date of exercise.
(j)            If the Common Stock issuable uponthe exercise of the Warrant shall be changed into the same or different numberof shares of any class or classes of stock, whether by reclassification orotherwise (other than a subdivision or combination of shares or stock dividendprovided for above), then and in each such event the holder of the Warrantshall have the right thereafter, upon exercise in full thereof, to obtain thekind and amount of shares of stock and other securities and property receivableupon such reorganization, reclassification or other change, by holders of thenumber of shares of Common Stock for which the Warrant could have beenexercised in full immediately prior to such reorganization, reclassification orchange, appropriately prorated to reflect any partial exercise of the Warrant,all subject to further adjustment as provided herein.
(k)           All calculations under this Section 6shall be made to the nearest cent or to the nearest one thousandth (1/1000) ofa share, as the case may be.
(l)            No adjustment in the Warrant Priceshall be required if such adjustment would result from the issuance of any ofthe following:  (A) shares of CommonStock issued upon exercise of the Warrant, (B) shares of Common Stock oroptions, warrants or other rights to purchase Common Stock issued or granted toemployees, officers or directors of, or consultants or advisors to the Companyor any subsidiary pursuant to stock purchase or stock option plans or otherarrangements approved by the Board of Directors; (C) shares of Common Stockissued pursuant to the exercise of options, warrants or other rights topurchase Common Stock or exercise of convertible securities outstanding on thedate hereof or granted in accordance with clause (B) above; (D) shares of CommonStock and/or rights, options or warrants to purchase Common Stock, and theCommon Stock issued pursuant to such options, warrants or other rights issuedfor consideration other than cash pursuant to a merger, consolidation, acquisitionor similar business combination approved by the holders of 66-2/3% of theoutstanding shares of the Company’s Series A Convertible Preferred Stock, parvalue $.00l per share; (E) shares of Common Stock issued pursuant to any bonafide equipment leasing arrangement, or debt financing from a bank or similarfinancial institution approved by the Board of Directors of the Company(including by all of the members thereof who were designated by holders of theaforementioned Preferred Stock); and (F) securities issued in a transactionwith a vendor, customer or strategic partner, up to a maximum of either (i)0.5% of outstanding shares of Common Stock on a fully diluted basis in a singletransaction or (ii) 2.0% of outstanding shares of Common Stock on a fullydiluted basis in the aggregate.

(m)          In any case in which the provisions ofthis Section 6 shall require that an adjustment shall become effectiveimmediately after a record date for an event, the Company may defer until theoccurrence of such event issuing to Holder of all or any part of this Warrantwhich is exercised after such record date and before the occurrence of suchevent the additional shares of capital stock issuable upon such exercise byreason of the adjustment required by such event over and above the shares of capitalstock issuable upon such exercise before giving effect to such adjustmentexercise; provided, however, that the Company shall deliver to such Holder adue bill or other appropriate instrument evidencing such Holder’s right toreceive such additional shares upon the occurrence of the event requiring suchadjustment.

7.             Ownership.

7.1          Ownership of This Warrant.  TheCompany may deem and treat the person in whose name this Warrant is registeredas the holder and owner hereof (notwithstanding any notations of ownership orwriting

 

7



hereon made by anyoneother than the Company) for all purposes and shall not be affected by anynotice to the contrary until presentation of this Warrant for registration oftransfer as provided in this Section 7.

7.2          Transfer and Replacement.  This Warrant and all rights hereunder aretransferable in whole or in part upon the books of the Company by Holder hereofin person or by duly authorized attorney, and a new Warrant or Warrants, of thesame tenor as this Warrant but registered in the name of the transferee ortransferees (and in the name of Holder, if a partial transfer is effected)shall be made and delivered by the Company upon surrender of this Warrant dulyendorsed, at the office of the Company referred to in Section 14 hereof,together with a properly executed Assignment (in the form of Exhibit Bor Exhibit C hereto, as the case may be).  Upon receipt by the Company of evidencereasonably satisfactory to it of the loss, theft or destruction, and, in suchcase, of indemnity or security reasonably satisfactory to it, and uponsurrender of this Warrant if mutilated, the Company shall make and deliver anew Warrant of like tenor, in lieu of this Warrant.  This Warrant shall be promptly cancelled bythe Company upon the surrender hereof in connection with any transfer orreplacement.  Except as otherwiseprovided above, in the case of the loss, theft or destruction of a Warrant, theCompany shall pay all expenses, taxes and other charges payable in connectionwith any transfer or replacement of this Warrant, other than stock transfertaxes (if any) payable in connection with a transfer of this Warrant, whichshall be payable by Holder.  Holder shallnot transfer this Warrant and the rights hereunder except in compliance with federaland state securities laws.

8.             Mergers, Consolidation, Sales.  In the case of any proposedconsolidation or merger of the Company with another entity, or the proposedsale of all or substantially all of its assets to another person or entity, orany proposed reorganization or reclassification of the capital stock of theCompany, then, as a condition of such consolidation, merger, sale,reorganization or reclassification, the Company shall give 30 days’ priorwritten notice thereof to Holder hereofand lawful and adequate provision shall be made whereby Holder shallthereafter have the right to receive upon the basis and upon the terms andconditions specified herein, in lieu of the shares of the Common Stock of theCompany immediately theretofore purchasable hereunder, such shares of stock,securities or assets as may (by virtue of such consolidation, merger, sale,reorganization or reclassification) be issued or payable with respect to or inexchange for the number of shares of such Common Stock purchasable hereunderimmediately before such consolidation, merger, sale, reorganization orreclassification. In any such case appropriate provision shall be made withrespect to the rights and interests of Holder to the end that the provisionshereof shall thereafter be applicable as nearly as may be practicable, inrelation to any shares of stock, securities or assets thereafter deliverableupon the exercise of this Warrant.

9.             Notice of Dissolution or Liquidation.  In case of anydistribution of the assets of the Company in dissolution or liquidation (exceptunder circumstances when the foregoing Section 8 shall be applicable), theCompany shall give notice thereof to Holder hereof and shall make nodistribution to shareholders until the expiration of thirty (30) days from thedate of mailing of the aforesaid notice and, in any case, Holder hereof mayexercise this Warrant within thirty (30) days from the date of the giving ofsuch notice, and all rights herein granted not so exercised within suchthirty-day period shall thereafter become null and void.

10.          Notice of Extraordinary Dividends.  If the Board of Directorsof the Company shall declare any dividend or other distribution on its CommonStock except out of earned surplus or by way of a stock dividend payable inshares of its Common Stock, the Company shall mail notice thereof to Holderhereof not less than thirty (30) days prior to the record date fixed fordetermining shareholders entitled to participate in such dividend or otherdistribution, and Holder hereof shall not participate in such dividend or otherdistribution unless this Warrant is exercised prior to such record date.  The provisions of this Section 10 shall notapply to distributions made in connection with transactions covered by Section8.

11.          Fractional Shares.  Fractional shares shall not be issued upon theexercise of this Warrant but in any case where Holder would, except for theprovisions of this Section 11, be entitled under the terms hereof to receive afractional share upon the complete exercise of this Warrant, the Company shall,upon the exercise of this Warrant for the largest number of whole shares thencalled for, pay a sum in cash equal to the excess of the value of such fractionalshare (determined in such reasonable manner as may be prescribed in good faithby the Board of Directors of the Company) over the Warrant Price for suchfractional share.

 

8



12.          Special Arrangements of the Company.  The Company covenants andagrees that during the Term of this Warrant, unless otherwise approved byHolder:

12.1        Shall Not Amend Certificate.  TheCompany shall not amend its certificate or articles, as the case may be, ofincorporation to eliminate as an authorized class of capital stock that classdenominated as “Common Stock” on the date hereof.

12.2        Shall Bind Successors.  This Warrant shall be binding upon anycorporation or other person or entity succeeding to the Company by merger,consolidation or acquisition of all or substantially all of the Company’sassets.

13.          Notices.  Any notice or other document requiredor permitted to be given or delivered to Holder shall be delivered at, or sentby certified or registered mail to, Holder at its address for notices set forthin the Agreement or to such other address as shall have been furnished to theCompany in writing by Holder.  Any noticeor other document required or permitted to be given or delivered to the Companyshall be delivered at, or sent by certified or registered mail to, the Companyat its address for notices set forth in the Agreement or to such other addressas shall have been furnished in writing to Holder by the Company.  Any notice so addressed and mailed byregistered or certified mail shall be deemed to be given when so mailed.  Any notice so addressed and otherwisedelivered shall be deemed to be given when actually received by the addressee.

14.          No Rights as Stockholder; Limitation of Liability.  This Warrant shall notentitle Holder to any of the rights of a shareholder of the Company except uponexercise in accordance with the terms hereof.  No provision hereof, in the absence ofaffirmative action by Holder to purchase shares of Common Stock, and no mereenumeration herein of the rights or privileges of Holder, shall give rise toany liability of Holder for the Warrant Price hereunder or as a shareholder ofthe Company, whether such liability is asserted by the Company or by creditorsof the Company.

15.          Law Governing.  THE VALIDITY, INTERPRETATION, ANDENFORCEMENT OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCEWITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OFLAW PRINCIPLES THEREOF.

16.          Amendments.  This Warrant and any provision hereofmay be changed, waived, discharged or terminated only by an instrument inwriting signed by both parties (or any respective predecessor in interest thereof). The headings in this Warrant are forpurposes of reference only and shall not affect the meaning or construction ofany of the provisions hereof.

IN WITNESS WHEREOF, theCompany has caused this Warrant to be signed by its duly authorized officerthis 20th day of June, 2002.

 

 

Vonage Holdings Corp.

 

 

 

By:

/s/

 

Title:

Secretary

 

 

9



EXHIBIT A

FORM OF NOTICE OF EXERCISE

[To be signedonly upon exercise of the Warrant]

TO BE EXECUTEDBY THE REGISTERED HOLDER
TO EXERCISE THE ATTACHED WARRANT

The undersigned herebyexercises the right to purchase                  shares of Common Stock which the undersigned is entitled to purchase by theterms of the attached Warrant according to the conditions thereof, and herewith

[check appropriatebox(es)]

o              makes payment of $                 therefor in cash;

o              makes payment of $                 therefor through cancellation of indebtedness; or

o                                         directsthe Company to issue             shares, and to withhold           shares in lieu of payment of the Warrant Price, as described in Section 2.1 ofthe Warrant.

All shares to be issuedpursuant hereto shall be issued in the name of and the initial address of suchperson to be entered on the books of Vonage Holdings Corp. shall be:

The shares are to be issued in certificates of thefollowing denominations:

 

 

 

 

[Type Name of Holder]

 

 

 

 

By:

 

 

Title:

 

 

 

 

Dated:

 

 

 

 

 

 

10



EXHIBIT B

FORM OF ASSIGNMENT
(ENTIRE)

[To be signedonly upon transfer of entire Warrant]

TO BE EXECUTEDBY THE REGISTERED HOLDER
TO TRANSFER THE ATTACHED WARRANT

FOR VALUE RECEIVED                        hereby sells, assigns and transfers unto                              all rights of the undersigned under and pursuant to the attached Warrant, andthe undersigned does hereby irrevocably constitute and appoint                                  Attorney to transfer said Warrant on the books of Vonage Holdings Corp., withfull power of substitution.

 

 

 

 

[Type Name of Holder]

 

 

 

 

By:

 

 

Title:

 

 

 

 

Dated:

 

 

 

 

 

NOTICE:

The signature to theforegoing Assignment must correspond to the name as written upon the face ofthe attached Warrant in every particular, without alteration or enlargement orany change whatsoever.

 

11



 

EXHIBIT C

FORM OF ASSIGNMENT
(PARTIAL)

[To be signedonly upon partial transfer of Warrant]

TO BE EXECUTEDBY THE REGISTERED HOLDER
TO TRANSFER THE ATTACHED WARRANT

FOR VALUE RECEIVED                        hereby sells, assigns and transfers unto                          (i) the rights of the undersigned to purchase                   shares of Common Stock under and pursuant to the attached Warrant, and (ii) ona non-exclusive basis, all other rights of the undersigned under and pursuantto the attached Warrant, it being understood that the undersigned shall retain,severally (and not jointly) with the transferee(s) named herein, all rightsassigned on such non-exclusive basis.  The undersigned does hereby irrevocably constitute and appoint                            Attorney to transfer said Warrant onthe books of Vonage Holdings Corp., with full power of substitution.

 

 

 

 

[Type Name of Holder]

 

 

 

 

By:

 

 

Title:

 

 

 

 

Dated:

 

 

 

 

 

NOTICE:

The signature to theforegoing Assignment must correspond to the name as written upon the face of theattached Warrant in every particular, without alteration or enlargement or anychange whatsoever.

 

12