ex10-3.htm


    Exhibit
10.3

     

    THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES
LAWS.  THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN EXEMPTION UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS.

    


    VOID
AFTER 5:00 P.M., NEW YORK, NEW YORK TIME, ON THE EXPIRATION DATE (AS DEFINED
BELOW).

     

    
      	 Date of
      Issuance:  February 12, 2009	
              Number
      of Shares:  30,000,000

            


    

     

    


    WARRANT TO
PURCHASE

    SHARES OF CLASS A COMMON
STOCK OF

    DELTATHREE,
INC.

    


    


    This certifies that, for value
received, D4 Holdings, LLC, a Delaware limited liability company, and its
permitted assigns or successors in interest (the “Holder”), is entitled
to purchase from deltathree, Inc., a Delaware corporation (the “Company”), subject to
the terms and conditions hereof, at any time on or after the date of this
Warrant and before 5:00 P.M., New York, New York time on the date which is ten
(10) years after the date hereof (the “Expiration Date”),
that number of fully paid and non-assessable shares of the Company’s Class A
common stock, par value $0.001 (the “Common Stock”), as
set forth in and subject to the limitations of Section 2 hereof.

    


    This Warrant is issued by the Company
pursuant to the terms and conditions of that certain Securities Purchase
Agreement, dated as of February 10, 2009, by and between the Company and the
Holder (the “Purchase
Agreement”).

    


    1. Definitions.  As
used in this Warrant, the following terms shall have the meanings set forth
below:

     

    (a) “Affiliate” means any
person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, a person, as such
terms are used and construed under Rule 144 promulgated under the Securities
Act.

     

    (b) “Exercise Price” means
$0.04 per share (as the same may be adjusted from time to time pursuant to the
terms of this Warrant).

     

    (c) “Fair Market Value”
means, on any particular date (a) if the Common Stock is then traded on a
securities exchange, the average of the closing prices of such Common Stock on
such exchange over the five trading day period ending on such date, (b) if the
Common Stock is then regularly traded over-the-counter, the average of the
closing sale prices or secondarily the closing bid of such Common Stock over the
five trading day period ending on such date, or (c) if there is no active public
trading market for the Common Stock, the fair market value of one share of the
Warrant Shares as determined in good faith by the Board of Directors of the
Company.

     

    (d) “Person” (whether or
not capitalized) means an individual, entity, partnership, limited liability
company, corporation, association, trust, joint venture, unincorporated
organization or any other form of entity not specifically listed herein, and any
government, governmental department or agency or political subdivision
thereof.

     

    (e) “Securities Act” means
the Securities Act of 1933, as amended, and all of the rules and regulations
promulgated thereunder.

     

    (f) “Warrant” means this
Warrant and all stock purchase warrants issued in exchange therefor pursuant to
the terms thereof.

     

    (g) “Warrant Shares”
means the shares of Common Stock issuable upon exercise of this
Warrant.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2. Exercise of Warrant.

     

    (a) Number of Shares Underlying
Warrant.  This Warrant shall be exercisable for up to 30,000,000 shares of Common
Stock, as adjusted from time to time pursuant to the terms of this
Warrant.

     

    (b) Exercisability of
Warrant.  The Holder may exercise the purchase rights
represented by this Warrant, in whole or in part, at any time, from time to time
on or after the date that is thirty (30) days following the date of this
Warrant, and before 5:00 P.M. New York, New York time, on the Expiration Date
(the “Exercise
Period”).

     

    (c) Exercise Procedure.

     

    (i) The
purchase rights represented by this Warrant may be exercised by the Holder, in
whole or in part, by delivery of a notice of exercise in the form set forth on
the last page hereof (the “Exercise Notice”) at
the principal office of the Company, and by the payment to the Company of the
aggregate Exercise Price (in accordance with the next sentence) in an amount
equal to the Exercise Price per share multiplied by the number of Warrant Shares
then being purchased.  The aggregate purchase price for Warrant Shares
being purchased hereunder pursuant to such exercise may be paid either (A) by
cash or wire transfer of immediately available funds, (B) by cancellation of
indebtedness, or (C) any combination of the foregoing.

     

    (ii) No
fractional shares arising out of the above formula for determining the number of
shares to be issued to the Holder shall be issued, and the Company shall in lieu
thereof make payment to the Holder of cash in the amount of such fraction
multiplied by the Fair Market Value of one (1) share of the Warrant Shares on
the date of exercise.

     

    (iii) In the
event of any exercise of the rights represented by this Warrant, certificates
for the Warrant Shares so purchased shall be delivered to the Holder as soon as
practicable and, unless this Warrant has been fully exercised or has expired, a
new Warrant representing the portion of the Warrant Shares, if any, with respect
to which this Warrant shall not then have been exercised shall also be issued to
the Holder as soon as practicable.  Such exercise shall be deemed to
have been made immediately prior to the close of business on the date the Holder
delivers the Exercise Notice with respect to such exercise.   The
Person or Persons entitled to receive the Warrant Shares shall be treated for
all purposes as the record holder of such Warrant Shares as of such
date.

     

    (iv) The
issuance of certificates for Warrant Shares upon exercise of this Warrant will
be made without charge to the Holder for any issuance tax in respect thereof or
any other cost incurred by the Company in connection with such
exercise.

     

    3. Reservation of Warrant
Shares; Stock Fully Paid.  During the Exercise Period, the
Company shall reserve and keep available for issuance upon the exercise of the
Warrant such number of its authorized but unissued shares of Common Stock as
will be sufficient to permit the exercise in full of all outstanding
Warrants.  The Warrant Shares, upon issuance in accordance with the
terms of this Warrant, will be validly issued, fully paid and nonassessable, and
free from all taxes, liens and charges with respect to the issuance
thereof.

     

    4. No Voting Rights; Limitations of Liability.  This
Warrant will not entitle the Holder to any voting rights or other rights as a
shareholder of the Company.  No provision of this Warrant, in the
absence of affirmative action by the Holder to purchase Warrant Shares, and no
enumeration in this Warrant of the rights or privileges of the Holder, will give
rise to any liability of such Holder as a stockholder of the
Company.

     

    5. Restrictions on Transfer.

     

    (a) The
Holder agrees that the Holder will not transfer, sell or otherwise dispose of
this Warrant without the express consent of the Company in its reasonable
discretion.  Notwithstanding the foregoing, the Holder may transfer
all or any portion of this Warrant to an affiliate (as such term is defined in
Rule 405 promulgated under the Securities Act) of the Holder.

     

    (b) The
Holder agrees not to sell, pledge, distribute, offer for sale, transfer or
otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise
except under circumstances which will not result in a violation of the
Securities Act.  Upon exercise of this Warrant, the Holder shall
confirm in writing, by executing the form attached hereto, that the securities
purchased thereby are being acquired for investment solely for the Holder’s own
account and not as a nominee for any other person, and not with a view toward
distribution or resale.

     

    (c) The
certificates representing the Warrant Shares shall have affixed thereto a legend
in substantially the following form, in addition to other legends required by
applicable state law:

     

    THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES
LAWS.  THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN EXEMPTION UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d) With
respect to any offer, sale or other disposition of this Warrant or any Warrant
Shares, the Holder agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof together with a written opinion of the
Holder’s counsel, if reasonably requested by the Company, to the effect that
such offer, sale or other disposition of this Warrant or such Warrant Shares may
be effected without registration under the Securities Act or qualification under
any applicable state securities laws, and indicating whether or not under the
Securities Act certificates for this Warrant or such Warrant Shares, as the case
may be, to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to insure compliance with
the Securities Act.  If the Company shall consent to the transfer of
this Warrant or such Warrant Shares, then each certificate representing this
Warrant or the Warrant Shares thus transferred (except a transfer pursuant to
Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to insure compliance with the Securities Act, unless in
the aforesaid reasonably satisfactory opinion of counsel for the Holder or the
security holder, as the case may be, such legend is not necessary in order to
insure compliance with the Securities Act.  The Company may issue stop
transfer instructions to its transfer agent in connection with such
restrictions.

     

    6. Miscellaneous.

     

    (a) Amendment and Waiver.  Except
as otherwise provided herein, the provisions of this Warrant may be amended only
if the Company has obtained the prior written consent of the
Holder.

     

    (b) Notices.  Any
notices required to be sent to the Holder will be delivered to the address set
forth below.  Any notices required to be sent to the Company will be
delivered to the principal office of the Company as set forth on the signature
page hereto.  Any party may change the address to which correspondence
to it is to be addressed by written notification as provided
herein.  All notices required or permitted hereunder, to be effective,
shall be in writing and shall be deemed effectively given: (i) when sent by
confirmed facsimile if sent during normal business hours of the recipient, if
not, then on the next business day, (ii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or
(iii) one (1) business day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of
receipt.

     

    If to the
Holder, to:

    


    D4
Holdings, LLC

    349-L
Copperfield Blvd., #407

    Concord,
NC 28025

    Attention: Robert
Stevanovski, Manager

    Facsimile:  704.260.3304

    


    With a
copy to (which shall not constitute notice):

    


    Bingham
McCutchen LLP

    2020 K
Street, NW

    Washington,
DC 20006

    Attention:  Andrew
M. Ray, Esquire

    Facsimile:  202.373.6452

    


    (c) Descriptive Headings;
Pronouns.  The descriptive headings of the paragraphs of this
Warrant are inserted for convenience only and do not constitute a part of this
Warrant.  All pronouns or any variation thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person, persons, entity or entities may require.

     

    (d) Governing Law.  This
Warrant shall be governed by and construed in accordance with the internal and
substantive laws of the State of Delaware and without regard to any conflicts of
laws concepts which would apply the substantive law of some other
jurisdiction.

     

    (e) Successors and
Assigns.  Subject to Section 5, the provisions of this Warrant
shall be binding upon, and inure to the benefit of, the respective successors
and assigns of the parties hereto.

     

    (f) Severability.  In
the event that any one or more of the provisions of this Warrant shall for any
reason be held to be invalid, illegal or unenforceable, in whole or in part or
in any respect, or in the event that any one or more of the provisions of this
Warrant operate or would prospectively operate to invalidate this Warrant, then
and in any such event, such provision(s) only shall be deemed null and void and
shall not affect any other provision of this Warrant and the remaining
provisions of this Warrant shall remain operative and in full force and effect
and in no way shall be affected, prejudiced, or disturbed thereby.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (g) Waiver of Jury
Trial.  EACH OF THE COMPANY AND THE HOLDER WAIVES ALL RIGHTS TO
TRIAL BY JURY OF ANY SUITS, CLAIMS, COUNTERCLAIMS, AND ACTIONS OF ANY KIND
ARISING UNDER OR RELATING TO THIS AGREEMENT.  EACH OF THE COMPANY AND
THE HOLDER ACKNOWLEDGES THAT THIS IS A WAIVER OF A LEGAL RIGHT AND REPRESENTS TO
THE OTHER THAT THIS WAIVER IS MADE KNOWINGLY AND VOLUNTARILY.  THE
COMPANY AND THE HOLDER EACH AGREE THAT ALL SUCH SUITS, CLAIMS, COUNTERCLAIMS,
AND ACTIONS SHALL BE TRIED BEFORE A JUDGE OF A COURT OF COMPETENT JURISDICTION,
WITHOUT A JURY.

     

    (h) Adjustments.

     

    (i) If at any
time after the date hereof there is any change in the outstanding shares of
capital stock of the Company by reason of stock dividends, splits,
recapitalizations, reclassifications, combinations or exchanges of shares,
separations, reorganizations, liquidations, or the like, the number and class of
shares available under this Warrant in the aggregate and the Exercise Price, as
applicable, shall be correspondingly adjusted to give the Holder, on exercise
for the same aggregate Exercise Price, the total number, class, and kind of
shares as the Holder would have owned had the Warrant been exercised prior to
the event and had the Holder continued to hold such shares until after the event
requiring adjustment.  The form of this Warrant need not be changed
because of any adjustment in the number of Warrant Shares subject to this
Warrant.

     

    (ii) In case
of any reclassification or change of outstanding securities of the class and
series issuable upon exercise of this Warrant (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into a continuing corporation (other than a merger
with another corporation in which the Company is a continuing corporation and
which does not result in any reclassification or change of outstanding
securities issuable upon exercise of this Warrant), or in case of a sale of all
or substantially all of the assets of the Company, unless this Warrant shall
have been exercised or terminated in accordance with its terms, the Company, or
such successor or purchasing corporation, shall execute a new Warrant, which
provides that the Holder shall have the right to exercise such new Warrant and
procure upon such exercise in lieu of each Warrant Share theretofore issuable
upon exercise of this Warrant the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change,
merger or transfer by a holder of one share of the type of security issuable
upon exercise of this Warrant.  Such new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6(h).  The provisions of this
Section 6(h)(ii) shall similarly apply to successive reclassifications, changes,
mergers or transfers.

     

    (iii) If at any
time after the date hereof any change occurs in the outstanding capital stock of
the Company or any other event occurs as to which the other provisions of this
Section 6(h) are not strictly applicable or if strictly applicable would not
protect the purchase rights of the Holder in accordance with such provisions,
then the independent members of the Board of Directors of the Company (which
members shall not be Affiliates of the Holder) shall, in their reasonable good
faith judgment, make an adjustment in the number and class of shares available
under the Warrant, the Exercise Price or the application of such provisions, as
applicable, so as to protect such purchase rights as aforesaid.  The
adjustment shall be such as to give the Holder upon exercise for the same
aggregate Exercise Price the total number, class and kind of shares as the
Holder would have owned had this Warrant been exercised prior to the event and
had the Holder continued to hold such shares until after the event requiring
adjustment.

     

    (iv) Whenever
the Exercise Price shall be adjusted pursuant to this Section 6(h), the Company
shall issue a certificate signed by its chief financial officer or other
executive officer setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Exercise Price (and, if applicable, the number and type
of security for which the Warrant may be exercised) after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by first
class mail, postage prepaid) to the Holder.

     

    [Signature
page follows]

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of date first written above.

    


    DELTATHREE,
INC.

    


    


    By:        /s/ Efraim
Baruch                  


    Name:   Efraim
Baruch

    Title:     Chief
Executive Officer

    


    Address:

    


    419
Lafayette Street

    New York,
NY 10003

    Attention: Peter
Friedman

    Facsimile:  212.500.4888

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    NOTICE OF
EXERCISE

    


    
      	
               
      

            	
              TO:

            	
              DELTATHREE,
      INC.

            


    

    


    1.           The
undersigned hereby elects to purchase __________ shares of Class A common stock,
par value $0.001 (the “Common Stock”), of
deltathree, Inc. (the “Company”) pursuant to
the terms of that certain Warrant issued by the Company to D4 Holdings, LLC as
of ________ __, 2009, and tenders herewith payment of the purchase price of such
shares in full, together with all applicable transfer taxes, if any, in
accordance with the election set forth in paragraph 2 below.

    


    2.           Manner
of Exercise.  The undersigned Holder elects to exercise the Warrant
for such shares of Common Stock in the following manner:

    


    
       

Cash
Exercise.  The undersigned tenders herewith payment of the
aggregate Exercise Price for the Common Stock in full in the form of cash or
wire transfer of immediately available funds.

    

    


    
       

Cancellation of
Indebtedness.  The undersigned hereby elects to exercise this
Warrant by means of cancellation of outstanding indebtedness of the Company, by
delivery to the Company of instruments or certificates, duly endorsed for
transfer, evidencing debt securities of the Company having a value equal to the
aggregate Exercise Price of the Common Stock.

    

    


    3.           Please
issue a certificate or certificates representing said securities in the name of
the undersigned or in such other name as is specified below:

    


    ________________________________

    (Name)

    
 

    ________________________________

    


    ________________________________

    (Address)

    


    4.           The
undersigned represents that the aforesaid shares of Common Stock are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof, and that the
undersigned has no present intention of distributing or reselling such shares in
violation of applicable securities laws.

    


    


              
______________________________

    (Signature)

    __________________________

    (Date)