AMENDED AND RESTATED SERIES C
WARRANT
NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
CHINA VOIP & DIGITAL TELECOM INC.
AMENDED AND RESTATED WARRANT TO PURCHASE COMMON
STOCK
Warrant No.:
Number of Shares of Common Stock:
16,489,852
Original Date of Issuance: December
21, 2007 (" Issuance Date ")
Amendment Date:
December 8, 2008 (" Amendment Date ")
China VoIP & Digital Telecom Inc., a
Nevada corporation (the " Company "), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, CASTLERIGG MASTER INVESTMENTS LTD.,
the registered holder hereof or its permitted assigns (the "
Holder "), is entitled, subject to the terms set forth
below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, upon surrender of this Warrant to
Purchase Common Stock (including any Warrants to purchase Common
Stock issued in exchange, transfer or replacement hereof, the "
Warrant "), at any time or times on or after the date
hereof, but not after 11:59 p.m., New York Time, on the Expiration
Date (as defined below), SIXTEEN MILLION FOUR HUNDRED EIGHTY NINE
THOUSAND EIGHT HUNDRED AND FIFTY TWO (16,489,852) fully paid
nonassessable shares of Common Stock (as defined below) (the "
Warrant Shares "). Except as otherwise defined herein,
capitalized terms in this Warrant shall have the meanings set forth
in Section 16. This Amended and Restated Warrant amends,
supplements, modifies and completely restates and supersedes the
warrant, dated as of the Original Issuance Date (the " Existing
Warrant "), issued by the Company to the Holder for the
exercise of 6,353,297 shares of Common Stock, but shall not, except
as specifically amended hereby or as set forth in the Holder's
Amendment and Exchange Agreement (as defined below), constitute a
release, satisfaction or novation of any of the obligations under
the Existing Warrant or any other Transaction Document (as defined
in the Securities Purchase Agreement). This Amended and
Restated Warrant is one of an issue of Amended and Restated
Warrants to Purchase Common Stock (the " SPA Warrants ")
amending
and restating the terms of the Existing
Warrant pursuant to Section 1 of that certain Amendment and
Exchange Agreement, dated as of December 8, 2008 (the "
Replacement Date "), by and between the Buyer (as defined in
the Securities Purchase Agreement) and the Company (the "
Amendment and Exchange Agreement ").
1.
EXERCISE OF WARRANT
.
(a)
Mechanics of Exercise
. Subject to the terms and
conditions hereof (including, without limitation, the limitations
set forth in Section 1(f)), this Warrant may be exercised by the
Holder on any day on or after the date hereof in whole or in part,
by (i) delivery of a written notice, in the form attached
hereto as Exhibit A (the " Exercise Notice "), of the
Holder's election to exercise this Warrant and (ii) (A)
payment to the Company of an amount equal to the applicable
Exercise Price multiplied by the number of Warrant Shares as to
which this Warrant is being exercised (the " Aggregate Exercise
Price ") in cash or by wire transfer of immediately available
funds or (B) by notifying the Company that this Warrant is being
exercised pursuant to a Cashless Exercise (as defined in Section
1(d)). The Holder shall not be required to deliver the
original Warrant in order to effect an exercise hereunder.
Execution and delivery of the Exercise Notice with respect to
less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant
evidencing the right to purchase the remaining number of Warrant
Shares. On or before the first Business Day following the
date on which the Company has received each of the Exercise Notice
and the Aggregate Exercise Price (or notice of a Cashless Exercise)
(the " Exercise Delivery Documents "), the Company shall
transmit by facsimile an acknowledgment of confirmation of receipt
of the Exercise Delivery Documents to the Holder and the Company's
transfer agent (the " Transfer Agent "). On or before
the third Trading Day following the date on which the Company has
received all of the Exercise Delivery Documents (the " Share
Delivery Date "), the Company shall (X) provided that the
Transfer Agent is participating in The Depository Trust Company ("
DTC ") Fast Automated Securities Transfer Program, upon the
request of the Holder, credit such aggregate number of shares of
Common Stock to which the Holder is entitled pursuant to such
exercise to the Holder's or its designee's balance account with DTC
through its Deposit Withdrawal Agent Commission system, or (Y) if
the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and dispatch by overnight
courier to the address as specified in the Exercise Notice, a
certificate, registered in the Company's share register in the name
of the Holder or its designee, for the number of shares of Common
Stock to which the Holder is entitled pursuant to such exercise.
Upon delivery of the Exercise Delivery Documents, the Holder
shall be deemed for all corporate purposes to have become the
holder of record of the Warrant Shares with respect to which this
Warrant has been exercised, irrespective of the date such Warrant
Shares are credited to the Holder's DTC account or the date of
delivery of the certificates evidencing such Warrant Shares, as the
case may be. If this Warrant is submitted in connection with
any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise
is greater than the number of Warrant Shares being acquired upon an
exercise, then the Company shall as soon as practicable and in no
event later than three Business Days after any exercise and at its
own expense, issue a new Warrant (in accordance with Section 7(d))
representing the right to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant,
less the number of Warrant Shares with respect to which this
Warrant is exercised. No fractional shares
of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common
Stock to be issued shall be rounded up to the nearest whole number.
The Company shall pay any and all taxes which may be payable
with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant. NOTWITHSTANDING ANY PROVISION
OF THIS WARRANT TO THE CONTRARY, NO MORE THAN THE MAXIMUM
ELIGIBILITY NUMBER OF WARRANT SHARES SHALL BE EXERCISABLE
HEREUNDER.
(b)
Exercise Price . For purposes of this Warrant, " Exercise
Price " means $0.2168, subject to adjustment as provided
herein.
(c)
Company's Failure to Timely Deliver
Securities . If the Company
shall fail for any reason or for no reason to issue to the Holder
within three (3) Trading Days of receipt of the Exercise Delivery
Documents, a certificate for the number of shares of Common Stock
to which the Holder is entitled and register such shares of Common
Stock on the Company's share register or to credit the Holder's
balance account with DTC for such number of shares of Common Stock
to which the Holder is entitled upon the Holder's exercise of this
Warrant, then, in addition to all other remedies available to the
Holder, the Company shall pay in cash to the Holder on each day
after such third Trading Day that the issuance of such shares of
Common Stock is not timely effected an amount equal to 1.5% of the
product of (A) the sum of the number of shares of Common Stock not
issued to the Holder on a timely basis and to which the Holder is
entitled and (B) the Closing Sale Price of the shares of Common
Stock on the Trading Day immediately preceding the last possible
date which the Company could have issued such shares of Common
Stock to the Holder without violating Section 1(a). In
addition to the foregoing, if within three (3) Trading Days after
the Company's receipt of the facsimile copy of a Exercise Notice
the Company shall fail to issue and deliver a certificate to the
Holder and register such shares of Common Stock on the Company's
share register or credit the Holder's balance account with DTC for
the number of shares of Common Stock to which the Holder is
entitled upon the Holder's exercise hereunder, and if on or after
such Trading Day the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving
from the Company (a " Buy-In "), then the Company shall,
within three Business Days after the Holder's request and in the
Holder's discretion, either (i) pay cash to the Holder in an amount
equal to the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased
(the " Buy-In Price "), at which point the Company's
obligation to deliver such certificate (and to issue such shares of
Common Stock) or credit such Holder's balance account with DTC
shall terminate, or (ii) promptly honor its obligation to deliver
to the Holder a certificate or certificates representing such
shares of Common Stock or credit such Holder's balance account with
DTC and pay cash to the Holder in an amount equal to the excess (if
any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Bid Price on the date
of exercise.
(d)
Cashless Exercise
. Notwithstanding anything
contained herein to the contrary, if a registration statement
covering the resale of the Warrant Shares that are the subject of
the Exercise Notice (the " Unavailable Warrant Shares ") is
not available for the resale of such
Unavailable Warrant Shares, the Holder
may, in its sole discretion, exercise this Warrant in whole or in
part and, in lieu of making the cash payment otherwise contemplated
to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, elect instead to receive upon such
exercise the "Net Number" of shares of Common Stock determined
according to the following formula (a " Cashless Exercise
"):
Net Number = (A x B) - (A x
C)
B
For purposes of the foregoing
formula:
A= the total number of shares with
respect to which this Warrant is then being exercised.
B= the Closing Sale Price of the shares
of Common Stock (as reported by Bloomberg) on the date immediately
preceding the date of the Exercise Notice.
C= the Exercise Price then in effect for
the applicable Warrant Shares at the time of such
exercise.
(e)
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
Holder the number of Warrant Shares that are not disputed and
resolve such dispute in accordance with Section 12.
(f)
Limitations on Exercises
.
(i)
Beneficial Ownership
. The Company shall not effect the
exercise of this Warrant, and the Holder shall not have the right
to exercise this Warrant, to the extent that after giving effect to
such exercise, such Person (together with such Person's affiliates)
would beneficially own in excess of 4.99% (the " Maximum
Percentage ") of the shares of Common Stock outstanding
immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of shares
of Common Stock beneficially owned by such Person and its
affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude
shares of Common Stock which would be issuable upon (A) exercise of
the remaining, unexercised portion of this Warrant beneficially
owned by such Person and its affiliates and (B) exercise or
conversion of the unexercised or unconverted portion of any other
securities of the Company beneficially owned by such Person and its
affiliates (including, without limitation, any convertible notes or
convertible preferred stock or warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for
purposes of this
paragraph, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the " Exchange Act ").
For purposes of this Warrant, in determining the number of
outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as reflected in (1)
the Company's most recent Form 10-K, Form 10-KSB, Form 10-Q, Form
10-QSB, Current Report on Form 8-K or other public filing with the
Securities and Exchange Commission, as the case may be, (2) a more
recent public announcement by the Company or (3) any other notice
by the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. For any reason at any
time, upon the written or oral request of the Holder, the Company
shall within one (1) Business Day confirm orally and in writing to
the 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 the SPA Securities
and the SPA Warrants, by the Holder and its affiliates since the
date as of which such number of outstanding shares of Common Stock
was reported. By written notice to the Company, the Holder
may from time to time increase or decrease the Maximum Percentage
to any other percentage not in excess of 9.99% specified in such
notice; provided that (i) any such increase will not be effective
until the sixty-first (61 st ) day after such notice is
delivered to the Company, and (ii) any such increase or decrease
will apply only to the Holder and not to any other holder of SPA
Warrants. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity
with the terms of this Section 1(f) 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.
(ii)
Principal Market Regulation
. The Company shall not be
obligated to issue any shares of Common Stock upon exercise of this
Warrant or conversion of SPA Securities and no Buyer shall be
entitled to receive any shares of Common Stock if the issuance of
such shares of Common Stock would exceed that number of shares of
Common Stock which the Company may issue upon exercise or
conversion, as applicable, of the SPA Warrants and SPA Securities
or otherwise without breaching the Company's obligations under the
rules or regulations of any applicable Eligible Market (the "
Exchange Cap "), except that such limitation shall not apply
in the event that the Company (A) obtains the approval of its
shareholders as required by the applicable rules of the Eligible
Market for issuances of shares of Common Stock in excess of such
amount or (B) obtains a written opinion from outside counsel to the
Company that such approval is not required, which opinion shall be
reasonably satisfactory to the Required Holders. Until such
approval or written opinion is obtained,
no Buyer shall be issued in the
aggregate, upon exercise or conversion, as applicable, of any SPA
Warrants or SPA Securities, shares of Common Stock in an amount
greater than the product of the Exchange Cap multiplied by a
fraction, the numerator of which is the total number of shares of
Common Stock underlying the SPA Warrants issued to such Buyer
pursuant to the Securities Purchase Agreement on the Issuance Date
and the denominator of which is the aggregate number of shares of
Common Stock underlying the SPA Warrants issued to the Buyers
pursuant to the Securities Purchase Agreement on the Issuance Date
(with respect to each Buyer, the " Exchange Cap Allocation
"). In the event that any Buyer shall sell or otherwise
transfer any of such Buyer's SPA Warrants, the transferee shall be
allocated a pro rata portion of such Buyer's Exchange Cap
Allocation, and the restrictions of the prior sentence shall apply
to such transferee with respect to the portion of the Exchange Cap
Allocation allocated to such transferee. In the event that
any holder of SPA Warrants shall exercise all of such holder's SPA
Warrants into a number of shares of Common Stock which, in the
aggregate, is less than such holder's Exchange Cap Allocation, then
the difference between such holder's Exchange Cap Allocation and
the number of shares of Common Stock actually issued to such holder
shall be allocated to the respective Exchange Cap Allocations of
the remaining holders of SPA Warrants on a pro rata basis in
proportion to the shares of Common Stock underlying the SPA
Warrants then held by each such holder.
(g)
Insufficient Authorized
Shares . If at any time
while this Warrant remain outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common
Stock to satisfy its obligation to reserve for issuance upon
exercise of this Warrant at least a number of shares of Common
Stock equal to 130% (the " Required Reserve Amount ") of the
number of shares of Common Stock as shall from time to time be
necessary to effect the exercise of all of this Warrant then
outstanding (an " Authorized Share Failure "), then the
Company shall immediately take all action necessary to increase the
Company's authorized shares of Common Stock to an amount sufficient
to allow the Company to reserve the Required Reserve Amount for
this Warrant then outstanding. Without limiting the
generality of the foregoing sentence, as soon as practicable after
the date of the occurrence of an Authorized Share Failure, but in
no event later than sixty (60) days after the occurrence of such
Authorized Share Failure, the Company shall hold a meeting of its
stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such
meeting, the Company shall provide each stockholder with a proxy
statement and shall use its best efforts to solicit its
stockholders' approval of such increase in authorized shares of
Common Stock and to cause its board of directors to recommend to
the stockholders that they approve such proposal.
2.
ADJUSTMENT OF EXERCISE PRICE AND
NUMBER OF WARRANT SHARES .
The Exercise Price and the number of Warrant Shares shall be
adjusted from time to time as follows:
(a)
Adjustment upon Issuance of shares of
Common Stock . If and
whenever on or after the Subscription Date the Company issues or
sells, or in accordance with this Section 2 is deemed to have
issued or sold, any shares of Common Stock (including the issuance
or sale of shares of Common Stock owned or held by or for the
account of the Company, but excluding shares of Common Stock deemed
to have been issued by the Company in connection with any Excluded
Securities) for a consideration per share (the " New Issuance
Price ") less than the Exercise Price (the " Applicable
Price ") in effect immediately prior to such issue or sale or
deemed issuance or sale (the foregoing a " Dilutive Issuance
"), then immediately after such Dilutive Issuance, the Exercise
Price then in effect shall be reduced to an amount equal to the New
Issuance Price. Upon each such adjustment of the Exercise
Price hereunder, the number of Warrant Shares shall be adjusted to
the number of shares of Common Stock determined by multiplying the
Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares acquirable upon exercise of this
Warrant immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such
adjustment. For purposes of determining the adjusted Exercise
Price under this Section 2(a), the following shall be
applicable:
(i)
Issuance of Options
. If the Company in any manner
grants any Options and the lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such
Option or upon conversion, exercise or exchange of any Convertible
Securities issuable upon exercise of any such Option is less than
the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the
Company at the time of the granting or sale of such Option for such
price per share. For purposes of this Section 2(a)(i), the
"lowest price per share for which one share of Common Stock is
issuable upon exercise of such Options or upon conversion, exercise
or exchange of such Convertible Securities issuable upon exercise
of any such Option" shall be equal to the sum of the lowest amounts
of consideration (if any) received or receivable by the Company
with respect to any one share of Common Stock upon the granting or
sale of the Option, upon exercise of the Option and upon
conversion, exercise or exchange of any Convertible Security
issuable upon exercise of such Option. No further adjustment
of the Exercise Price or number of Warrant Shares shall be made
upon the actual issuance of such shares of Common Stock or of such
Convertible Securities upon the exercise of such Options or upon
the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities.
(ii)
Issuance of Convertible
Securities . If the
Company in any manner issues or sells any Convertible Securities
and the lowest price per share for which one share of Common Stock
is issuable upon the
conversion, exercise or exchange thereof
is less than the Applicable Price, then such share of Common Stock
shall be deemed to be outstanding and to have been issued and sold
by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the
purposes of this Section 2(a)(ii), the "lowest price per share for
which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof" shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by
the Company with respect to one share of Common Stock upon the
issuance or sale of the Convertible Security and upon conversion,
exercise or exchange of such Convertible Security. No further
adjustment of the Exercise Price or number of Warrant Shares shall
be made upon the actual issuance of such shares of Common Stock
upon conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which
adjustment of this Warrant has been or is to be made pursuant to
other provisions of this Section 2(a), no further adjustment of the
Exercise Price or number of Warrant Shares shall be made by reason
of such issue or sale.
(iii)
Change in Option Price or Rate of
Conversion. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exercise
or exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at
any time, the Exercise Price and the number of Warrant Shares in
effect at the time of such increase or decrease shall be adjusted
to the Exercise Price and the number of Warrant Shares which would
have been in effect at such time had such Options or Convertible
Securities provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion rate,
as the case may be, at the time initially granted, issued or sold.
For purposes of this Section 2(a)(iii), if the terms of any
Option or Convertible Security that was outstanding as of the date
of issuance of this Warrant are increased or decreased in the
manner described in the immediately preceding sentence, then such
Option or Convertible Security and the shares of Common Stock
deemed issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such increase or
decrease. No adjustment pursuant to this Section 2(a)(iii)
shall be made if such adjustment would result in an increase of the
Exercise Price then in effect or a decrease in the number of
Warrant Shares.
(iv)
Calculation of Consideration
Received . In case any
Option or Convertible Security is issued in connection with the
issue or sale of other securities of the Company, together
comprising one integrated transaction, (x) the Options will be
deemed to have been issued for a value
determined by use of the Black Scholes
Option Pricing Model (the " Option Value ") and (y) the
other securities issued or sold in such integrated transaction
shall be deemed to have been issued for the difference of (I) the
aggregate consideration received by the Company, less (II) the
Option Value. If any shares of Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will
be deemed to be the net amount received by the Company therefor.
If any shares of Common Stock,
