Exhibit 10.51
 
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THIS WARRANT OR THE SHARES OF COMMON STOCK UNDERLYING ITS EXERCISE UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO XFONE, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
 
Right to Purchase up to 157,500 Shares of Common Stock of
 
XFONE, INC.
 
(subject to adjustment as provided herein)
 
COMMON STOCK PURCHASE WARRANT
 
No. _________________
 
Issue Date: September 27, 2005

 
XFONE, INC., a corporation organized under the laws of the State of Nevada (the
“Company”), hereby certifies that, for value received, LAURUS MASTER FUND, LTD.,
or assigns (the “Holder”), is entitled, subject to the terms set forth below, to
purchase from the Company (as defined below) from and after the Issue Date of
this Warrant and at any time or from time to time before 5:00 p.m., New York
time, through the close of business September 27, 2010 (the “Expiration Date”),
up to 157,500 fully paid and nonassessable shares of Common Stock (as
hereinafter defined), $0.001 par value per share, at the applicable Exercise
Price (as defined below) per share. The number of such shares of Common Stock
and the applicable Exercise Price per share are subject to adjustment as
provided herein. Reference is made to the Securities Purchase Agreement entered
into by the Company and Holder dated as of the date hereof (as the same may be
amended, modified and/or supplemented from time to time), (the “Purchase
Agreement”). Capitalized terms used but not otherwise defined herein shall have
the meanings given them in the Purchase Agreement.
 
As used herein the following terms, unless the context otherwise requires, have
the following respective meanings:
 
(a)  The term “Company” shall include XFONE, INC. and any corporation which
shall succeed, or assume the obligations of, XFONE, INC. hereunder.
 
(b)  The term “Common Stock” includes (i) the Company’s Common Stock, par value
$0.001 per share; and (ii) any other securities into which or for which any of
the securities described in the preceding clause (i) 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, pursuant to Section 3 and/or 4 hereof, 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 4 or otherwise.
 
(i)  The “Exercise Price” applicable under this Warrant shall be $3.80.
 
1.  Exercise of Warrant.
 
1.1.  Number of Shares Issuable upon Exercise. From and after the issue date of
this Warrant through and including the Expiration Date, the Holder shall be
entitled to receive, upon exercise of this Warrant in whole or in part, by (a)
delivery of an original or fax copy of an exercise notice in the form attached
hereto as Exhibit A (the “Exercise Notice”), (b) surrender of this Warrant, and
(c) making payment to the Company as set forth herein, shares of Common Stock of
the Company, subject to adjustment pursuant to Section 4.
 

 
1.2.  Company Acknowledgment. The Company will, at the time of the exercise of
this 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.
 
1.3.  Trustee for Warrant Holders. In the event that a bank or trust company
shall have been appointed as trustee for the Holders of this Warrant pursuant to
Subsection 3.2, such bank or trust company shall have all the powers and duties
of a warrant agent (as hereinafter described) and shall accept, in its own name
for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant .
 
2.  Procedure for Exercise.
 
2.1.  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 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 in accordance herewith. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
three (3) 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, 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.
 
2.2.  Exercise.
 
(a)  Payment may be made by wire transfer to the Company in an amount equal to
the applicable aggregate Exercise Price, for the number of Common Shares
specified in such Exercise Notice (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 (or Other Securities) determined as
provided herein.
 
3.  Effect of Reorganization, Etc.; Adjustment of Exercise Price.
 
3.1.  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, 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 4.
 
3.2.  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,
concurrently with any distributions made to holders of its Common Stock, shall
at its expense deliver or cause to be delivered to the Holder the stock and
other securities and property (including cash, where applicable) receivable by
the Holder pursuant to Section 3.1, or, if the Holder shall so instruct the
Company, to a bank or trust company specified by the Holder and having its
principal office in New York, NY as trustee for the Holder (the “Trustee”).
 
3.3.  Continuation of Terms. Upon any reorganization, consolidation, merger or
transfer (and any dissolution following any transfer) referred to in this
Section 3, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then the Company’s
securities and property (including cash, where applicable) receivable by the
Holder will be delivered to the Holder or the Trustee as contemplated by Section
3.2.
 
4.  Extraordinary Events Regarding Common Stock. (I) 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 or any preferred stock issued by
the Company (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 Exercise Price shall,
simultaneously with the happening of such event, be adjusted by multiplying the
then Exercise 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 Exercise Price then in effect. The Exercise 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. (II) The number of shares of Common
Stock that the Holder 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 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Exercise Price that would otherwise (but for the
provisions of this Section 4) be in effect, and (b) the denominator is the
Exercise Price in effect on the date of such exercise (taking into account the
provisions of this Section 4). Notwithstanding the provisions of this Section
4(II), with effect upon the irrevocable payment in full of the Obligations (as
defined in the Master Security Agreement) no further adjustment to the number of
shares of Common Stock required by this Section 4(II) shall be required.
 
5.  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 this Warrant, 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 this 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 Exercise 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 this Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 11 hereof).
 
6.  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 this Warrant, shares of Common Stock (or Other Securities)
from time to time issuable on the exercise of this Warrant.
 
7.  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”) in whole or in
part. 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 subject to compliance with the requirements set forth in
the Transferor Endorsement Form, together with evidence reasonably satisfactory
to the Company demonstrating compliance with applicable securities laws, which
shall include, without limitation, the provision of a legal opinion from the
Transferor’s counsel (at the Holder’s expense) that such transfer is exempt from
the registration requirements of applicable securities laws, the Company at its
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 of like tenor, in the name of the Transferor and/or the transferee(s)
specified in such Transferor Endorsement Form (each a “Transferee”), 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.
 
8.  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 will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
 
9.  Registration Rights. The Holder has been granted certain registration rights
by the Company. These registration rights are set forth in a Registration Rights
Agreement entered into by the Company and Holder dated as of the date hereof, as
the same may be amended, modified and/or supplemented from time to time.
 
10.  Maximum Exercise. Notwithstanding anything contained herein to the
contrary, the Holder shall not be entitled to exercise this Warrant in
connection with that number of shares of Common Stock which would exceed the
difference between (i) 4.99% of the issued and outstanding shares of Common
Stock and (ii) the number of shares of Common Stock beneficially owned by the
Holder for the purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act, as amended, and Regulation 13d-3 thereunder. The conversion limitation
described in this Section 10 shall automatically become null and void following
notice to the Company upon the occurrence and during the continuance of an Event
of Default under and as defined in the Note made by the Company to the Holder
dated the date hereof (as amended, modified or supplemented from time to time,
the “Note”), or upon 75 days prior notice to the Company, except that at no time
shall the number of shares of Common Stock beneficially owned by the Holder
exceed 19.99% of the outstanding shares of Common Stock. Notwithstanding
anything contained herein to the contrary, the number of shares of Common Stock
issuable by the Company and acquirable by the Holder at a price below $3.10 per
share pursuant to the terms of this Warrant, the Note, the Purchase Agreement
(as defined in the Note), any Related Agreement (as defined in the Purchase
Agreement) or otherwise, shall not exceed an aggregate of 1,377,533 shares of
Common Stock (subject to appropriate adjustment for stock splits, stock
dividends, or other similar recapitalizations affecting the Common Stock) (the
“Maximum Common Stock Issuance”), unless the issuance of Common Stock hereunder
in excess of the Maximum Common Stock Issuance shall first be approved by the
Company’s shareholders. If at any point in time and from time to time the number
of shares of Common Stock issued pursuant to the terms of this Warrant, the
Note, the Purchase Agreement or any Related Agreement, together with the number
of shares of Common Stock that would then be issuable by the Company to the
Holder in the event of a conversion or exercise pursuant to the terms of this
Warrant, the Note, the Purchase Agreement, any Related Agreement or otherwise,
would exceed the Maximum Common Stock Issuance but for this Section 10, the
Company shall promptly call a shareholders meeting to solicit shareholder
approval for the issuance of the shares of Common Stock hereunder in excess of
the Maximum Common Stock Issuance. Notwithstanding anything contained herein to
the contrary, the Holder shall not, pursuant to any Exercise Notice, be entitled
to exercise this Warrant on an Exercise Date for fewer than 3,000 shares of
Common Stock.
 
11.  Warrant Agent. The Company may, by written notice to the each Holder of the
Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
 
12.  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.
 
13.  Notices, Etc. All notices and other communications from the Company to the
Holder shall be delivered by a nationally recognized overnight courier or mailed
by first class registered or certified mail, postage prepaid, at such address as
may have been furnished to the Company in writing by such Holder or, until any
such Holder furnishes to the Company an address, then to, and at the address of,
the last Holder who has so furnished an address to the Company.
 
14.  The Holder has substantial experience in evaluating, lending and investing
in private placement transactions of securities in companies similar to the
Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests. The
Holder must bear the economic risk of this transaction until the Common Stock
issuable upon exercise of this Warrant are sold pursuant to: (i) an effective
registration statement under the 1933 Act; or (ii) an exemption from
registration is available with respect to such sale. The Holder represents that
by reason of its, or of its management’s, business and financial experience, the
Holder has the capacity to evaluate the merits and risks of its investment in
the Note, the Warrant and the securities deriving from this transaction, and to
protect its own interests in connection with the transactions contemplated in
the Securities Purchase Agreement and any Related Agreement (as defined in the
Securities Purchase Agreement), and is experienced in evaluating and investing
in private placement transactions of securities of companies in a similar stage
of development. Further, Holder has not lent the monies involved and entered
into this transaction as a result of any form of general advertising, including
advertisements, articles, notices, or other communications in any newspaper,
magazine, or similar media, or telecommunications in connection with the
transactions contemplated in the Securities Purchases Agreement or any Related
Agreement. The Holder represents that it is an “accredited investor” within the
meaning of Regulation D under the 1933 Act.
 
15.  Holder’s Status. The Holder shall not, by virtue of its status as a Holder
of the Warrant, be entitled to any rights of a shareholder in the Company,
either at law or equity, and the rights of the Holder are limited to those
expressly set forth in this Warrant.
 
16.  Voluntary Adjustment by the Company. The Company may, at any time and at
its sole discretion, during the effective term of this Warrant, reduce the then
current Exercise Price to any amount below the then current Exercise Price, for
such period of time deemed appropriate by the Board of Directors of the Company
in the exercise of their good faith business judgment.
 
17.  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 GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY
ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE
BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN
THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE
THIS PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. The prevailing party
shall be entitled to recover from the other party its reasonable attorneys’ fees
and costs. In the event that any provision of this Warrant is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Warrant.
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 hereof. The Company acknowledges that
legal counsel participated in the preparation of this Warrant and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Warrant to favor any party against the other party.
 
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IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.
 

 
XFONE, INC.
   
WITNESS:
   
By:       
 
Name: Guy Nissenson
                                                                   
Title: President & CEO

 

 

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Exhibit A
 
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)
 
TO: XFONE, INC.
 
Attention: Chief Financial Officer
 
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):
 ________
 
________ shares of the Common Stock covered by such Warrant; or
 ________
 
the maximum number of shares of Common Stock covered by such Warrant pursuant to
the cashless exercise procedure set forth in Section 2.

 
The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
 ________
 
$__________ in lawful money of the United States; and/or
 ________
 
the cancellation of such portion of the attached Warrant as is exercisable for a
total of _______ shares of Common Stock (using a Fair Market Value of $_______
per share for purposes of this calculation); and/or
 ________
 
the cancellation of such number of shares of Common Stock as is necessary, in
accordance with the formula set forth in Section 2.2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in Section 2.

 
The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to ______________________________________________ whose
address is
___________________________________________________________________________.
 
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the “Securities Act”) or pursuant to an exemption from
registration under the Securities Act.
 
Dated:       
                                                                       
                       
(Signature must conform to name of holder as specified on the face of the
Warrant)
     
Address:     
                                                                         

 

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Exhibit B
 
FORM OF TRANSFEROR ENDORSEMENT
 
(To Be Signed Only On Transfer Of Warrant)
 
For value received, the undersigned hereby sells, assigns, and transfers unto
the person(s) named below under the heading “Transferees” the right represented
by the within Warrant to purchase the percentage and number of shares of Common
Stock of XFONE, INC.into which the within Warrant relates specified under the
headings “Percentage Transferred” and “Number Transferred,” respectively,
opposite the name(s) of such person(s) and appoints each such person Attorney to
transfer its respective right on the books of XFONE, INC.with full power of
substitution in the premises.
 
Transferees
 
Address
 
Percentage Transferred
 
Number
Transferred
                                                     
                                                    
                                                                         
                                                     
                                                    
                                                                         
                                                     
                                                    
                                                                         
                                                     
                                                    
                                                                         

 

 
Dated:        
                                                                                    
 
(Signature must conform to name of holder as specified on the face of the
Warrant)
     
Address:      
             
                                                                          
 
SIGNED IN THE PRESENCE OF:
 
                                                                                                
 
(Name)
ACCEPTED AND AGREED:
 
[TRANSFEREE]
 
                                                                                           
 
(Name)