exv4w2



 





Exhibit 4.2



NEITHER THIS WARRANT NOR THE SECURITIES FOR WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. THIS WARRANT
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.




ACE*COMM CORPORATION




WARRANT




			
	 	 	 
	Warrant No. [ ]
	 	Dated: June 8, 2007






     ACE*COMM CORPORATION, a Maryland corporation (the “Company”), hereby certifies that, for value
received, [Name of Holder] or its registered assigns (the “Holder”), is entitled to purchase from
the Company up to a total of [       ]1 shares of common stock, $0.01 par value per
share (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares,
the “Warrant Shares”) at an exercise price equal to $0.84 per share (as adjusted from time to time
as provided in Section 9, the “Exercise Price”), at any time and from time to time from and
after the date hereof and through and including the date that is seven years from the date of
issuance hereof (the “Expiration Date”), and subject to the following terms and conditions. This
Warrant (this “Warrant”) is one of a series of similar warrants issued pursuant to that certain
Securities Purchase Agreement, dated as of June 4, 2007 by and among the Company and the Purchasers
identified therein (the “Purchase Agreement”). All such warrants are referred to herein,
collectively, as the “Warrants.”



     1. Definitions. In addition to the terms defined elsewhere in this Warrant,
capitalized terms that are not otherwise defined herein have the meanings given to such terms in
the Purchase Agreement.



     2. Registration of Warrant. The Company shall register this Warrant, upon records to
be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record
Holder hereof from time to time. The Company may deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to
the Holder, and for all other purposes, absent actual notice to the contrary.





 




			
	1	 	as set forth on Schedule 2.1 of the Purchase
Agreement.




 









 










     3. Registration of Transfers. This Warrant and all rights hereunder are transferable
in whole or in part upon the books of the Company by the Holder hereof; provided, however, that the
transferee shall agree in writing to be bound by the terms and subject to the conditions of this
Warrant and the Purchase Agreement. The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment
attached hereto duly completed and signed, to the Transfer Agent or to the Company at its address
specified herein. Upon any such registration or transfer, a new warrant to purchase Common Stock,
in substantially the form of this Warrant (any such new warrant, a “New Warrant”), evidencing the
portion of this Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed
the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant.



     4. Exercise and Duration of Warrants.



          (a) Subject to the limitations set forth in Section 12 hereof, this Warrant shall be
exercisable by the registered Holder at any time and from time to time on or after the date hereof
to and including the Expiration Date. At 6:30 P.M., New York City time on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall be and become void and of no value;
provided that, if the average of the Closing Prices for the five Trading Days immediately prior to
(but not including) the Expiration Date exceeds the Exercise Price on the Expiration Date, then
this Warrant shall be deemed to have been exercised in full (to the extent not previously
exercised, and subject to the limitations set forth in Section 12 hereof) on a “cashless
exercise” basis at 6:30 P.M. New York City time on the Expiration Date. Notwithstanding anything
to the contrary herein, the Expiration Date shall be extended for each day following the Effective
Date that the Registration Statement is not effective.




          (b) A Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in
the form attached hereto (the “Exercise Notice”), appropriately completed and duly signed, and (ii)
payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being
exercised (which may take the form of a “cashless exercise” if so indicated in the Exercise Notice
and if a “cashless exercise” may occur at such time pursuant to Section 10 below), and the
date such items are delivered to the Company (as determined in accordance with the notice
provisions hereof) is an “Exercise Date.” 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
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. The Holder shall deliver
the original Warrant to the Company within thirty (30) days after the full exercise of this
Warrant, provided, that the Holder’s failure to so deliver the original Warrant shall not
affect the validity of such exercise or any of the Company’s obligations under this Warrant and the
Company’s sole remedy for the Holder’s failure to deliver the original Warrant shall be to obtain
an affidavit of lost warrant from the Holder.




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     5. Delivery of Warrant Shares.



          (a) Subject to Section 5(c) below and the limitations set forth in Section 12,
upon exercise of this Warrant, the Company shall promptly (but in no event later than three Trading
Days after the Exercise Date) issue or cause to be issued and cause to be delivered to or upon the
written order of the Holder and in such name or names as the Holder may designate, a certificate
for the Warrant Shares issuable upon such exercise, free of restrictive legends unless a
registration statement covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder is not then effective and the Warrant Shares are not freely transferable
without volume restrictions pursuant to Rule 144 under the Securities Act. The Holder, or any
Person so designated by the Holder to receive Warrant Shares, shall be deemed to have become holder
of record of such Warrant Shares as of the Exercise Date. The Company shall, upon request of the
Holder, use its best efforts to deliver Warrant Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation performing similar
functions.




          (b) Subject to Section 5(c) below and the limitations set forth in Section 12
hereof, this Warrant is exercisable, either in its entirety or, from time to time, for a portion of
the number of Warrant Shares. Upon surrender of this Warrant following one or more partial
exercises, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing
the right to purchase the remaining number of Warrant Shares.




          (c) In addition to any other rights available to a Holder, if the Company fails to deliver or
cause to be delivered to the Holder a certificate representing Warrant Shares by the third Trading
Day after the date on which delivery of such certificate is required by this Warrant, and if after
such third 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 the Warrant Shares that the
Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three
Trading 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 Common Stock) shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or certificates representing
such Common Stock 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
Price on the date of the event giving rise to the Company’s obligation to deliver such certificate.




          (d) The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms
and subject to the conditions hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect to any provision
hereof, the recovery of any judgment against any Person or any action to enforce the same, or any
setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or alleged violation
of law by the Holder or any other Person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in connection with the issuance of
Warrant Shares (other than such




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limitations contemplated by this Warrant). Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon exercise of the
Warrant as required pursuant to the terms hereof.




          (e) Each certificate for Warrant Shares shall bear a restrictive legend to the extent and as
provided in the Purchase Agreement and any certificate issued at any time in exchange or
substitution for any certificate bearing such legend shall also bear such legend, unless, in the
opinion of counsel for the Holder thereof (which opinion shall be reasonably satisfactory to
counsel for the Company), the securities represented thereby are not, at such time, required by law
to bear such legend.




     6. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of
Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue
or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect
of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any certificates for Warrant Shares or
Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder shall be
responsible for all other tax liability that may arise as a result of holding or transferring this
Warrant or receiving Warrant Shares upon exercise hereof.



     7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and procedures and pay such
other reasonable third-party costs as the Company may prescribe.



     8. Reservation of Warrant Shares. The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued and otherwise
unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon
exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable
and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other
contingent purchase rights of persons other than the Holder (taking into account the adjustments
and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable
and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance
with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.
The Company will take all such action as may be necessary to assure that such shares of Common
Stock may be issued as provided herein without violation of any applicable law or regulation, or of
any requirements of any securities exchange or automated quotation system upon which the Common
Stock may be listed.



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     9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon
exercise of this Warrant are subject to adjustment from time to time as set forth in this
Section 9.



          (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any
class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding
shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of
Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of Common Stock
outstanding immediately before such event and of which the denominator shall be the number of
shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to
clause (i) of this paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution, and any adjustment
pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the
effective date of such subdivision or combination.




          (b) Pro Rata Distributions. If the Company, at any time while this Warrant is
outstanding, distributes to holders of Common Stock (i) evidences of its indebtedness, (ii) any
security (other than a distribution of Common Stock covered by the preceding paragraph), (iii)
rights or warrants to subscribe for or purchase any security, or (iv) cash or any other asset (in
each case, “Distributed Property”), then in each such case the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to receive such
distribution shall be adjusted (effective on such record date) to equal the product of such
Exercise Price times a fraction of which the denominator shall be the average of the Closing Prices
for the five Trading Days immediately prior to (but not including) such record date and of which
the numerator shall be such average less the then fair market value of the Distributed Property
distributed in respect of one outstanding share of Common Stock, as determined by the Company’s
independent certified public accountants that regularly examine the financial statements of the
Company (an “Appraiser”). In such event, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall be a nationally
recognized accounting firm), in which case such fair market value shall be deemed to equal the
average of the values determined by each of the Appraiser and such appraiser. As an alternative to
the foregoing adjustment to the Exercise Price, at the request of the Holder delivered before the
90th day after such record date, the Company will deliver to such Holder, within five Trading Days
after such request (or, if later, on the effective date of such distribution), the Distributed
Property that such Holder would have been entitled to receive in respect of the Warrant Shares for
which this Warrant could have been exercised immediately prior to such record date. If such
Distributed Property is not delivered to a Holder pursuant to the preceding sentence, then upon
expiration of or any exercise of the Warrant that occurs after such record date, such Holder shall
remain entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise
(if applicable), such Distributed Property.




          (c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i)
the Company effects any merger or consolidation of the Company with or into another Person, (ii)
the Company effects any sale of all or substantially all of its assets in one or a series of
related transactions, (iii) any tender offer or exchange offer (whether by the Company

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or another Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, (iv) the Company effects
any reclassification of the Common Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for other securities, cash or property
(other than as a result of a subdivision or combination of shares of Common Stock covered by
Section 9(a) above), or (v) there is a Change of Control (in any such case, a “Fundamental
Transaction”), then the Holder shall have the right thereafter to receive), upon exercise of this
Warrant, the same amount and kind of securities, cash or property as it would have been entitled to
receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon
exercise in full of this Warrant (the “Alternate Consideration”). The aggregate Exercise Price for
this Warrant will not be affected by any such Fundamental Transaction, but the Company shall
apportion such aggregate Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.
In the event of a Fundamental Transaction, the Company or the successor or purchasing Person, as
the case may be, shall execute with the Holder a written agreement providing that:





     (x) this Warrant shall thereafter entitle the Holder to purchase the Alternate
Consideration in accordance with this Section 9(c),




     (y) in the case of any such successor or purchasing Person, upon such consolidation,
merger, statutory exchange, combination, sale or conveyance such successor or purchasing
Person shall be jointly and severally liable with the Company for the performance of all of
the Company’s obligations under this Warrant and the Purchase Agreement, and




     (z) if registration or qualification is required under the Exchange Act or applicable
state law for the public resale by the Holder of shares of stock and other securities so
issuable upon exercise of this Warrant, such registration or qualification shall be
completed prior to such reclassification, change, consolidation, merger, statutory exchange,
combination or sale.


If, in the case of any Fundamental Transaction, the Alternate Consideration includes shares of
stock, other securities, other property or assets of a Person other than the Company or any such
successor or purchasing Person, as the case may be, in such Fundamental Transaction, then such
written agreement shall also be executed by such other Person and shall contain such additional
provisions to protect the interests of the Holder as the Board of Directors of the Company shall
reasonably consider necessary by reason of the foregoing. At the Holder’s request, any successor
to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a New
Warrant consistent with the foregoing provisions and evidencing the Holder’s right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise thereof. The terms of any
agreement pursuant to which a Fundamental Transaction is effected




6









 







shall include terms requiring any such successor or surviving entity to comply with the provisions
of this paragraph (c) and insuring that the Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. Without
limiting the foregoing, in the event of a Fundamental Transaction, at the request of the Holder
delivered before the 90th day after such Fundamental Transaction, the Company (or any such
successor or surviving entity) will purchase the Warrant from the Holder for a purchase price,
payable in cash within five Trading Days after such request (or, if later, on the effective date of
the Fundamental Transaction), equal to the Black-Scholes value of the remaining unexercised portion
of this Warrant on the date of such request.




          (d) Subsequent Equity Sales.





          (i) If, at any time while this Warrant is outstanding, the Company or any Subsidiary
issues additional shares of Common Stock or rights, warrants, options or other securities or
debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise
entitling any Person to acquire shares of Common Stock (collectively, “Common Stock
Equivalents”) at an effective net price to the Company per share of Common Stock (the
“Effective Price”) less than the Exercise Price (as adjusted hereunder to such date), then
the Exercise Price shall be reduced to equal the Effective Price. For purposes of this
paragraph, in connection with any issuance of any Common Stock Equivalents, (A) the maximum
number of shares of Common Stock potentially issuable at any time upon conversion, exercise
or exchange of such Common Stock Equivalents (the “Deemed Number”) shall be deemed to be
outstanding upon issuance of such Common Stock Equivalents, (B) the Effective Price
applicable to such Common Stock shall equal the minimum dollar value of consideration
payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or
exchange them into Common Stock (net of any discounts, fees, commissions and other
expenses), divided by the Deemed Number, and (C) no further adjustment shall be made to the
Exercise Price upon the actual issuance of Common Stock upon conversion, exercise or
exchange of such Common Stock Equivalents.




          (ii) If, at any time while this Warrant is outstanding, the Company directly or
indirectly issues Common Stock Equivalents with an Effective Price or a number of underlying shares that floats or resets or otherwise varies or is subject to adjustment based (directly
or indirectly) on market prices of the Common Stock (a “Floating Price Security”), then for
purposes of applying the preceding paragraph in connection with any subsequent exercise, the
Effective Price will be determined separately on each Exercise Date and will be deemed to
equal the lowest Effective Price at which any holder of such Floating Price Security is
entitled to acquire Common Stock on such Exercise Date (regardless of whether any such
holder actually acquires any shares on such date).




          (iii) The Company shall not issue any Common Stock Equivalents at an Effective Price
less than the Exercise Price (as adjusted hereunder to such date) unless prior to such
issuance (A) the Holder has consented to such issuance in writing and (B) the Company shall
have obtained all necessary shareholder and other approvals required for the Conversion
Price under this Warrant to be reduced to such Effective Price.



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          (iv) Notwithstanding the foregoing, no adjustment will be made under this paragraph (d)
in respect of any issuances of Common Stock or Common Stock Equivalents made pursuant to the
definition of Excluded Stock except for clause (D) thereof.



          (e) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise
Price pursuant to paragraphs (a), (b) or (d) of this Section, the number of Warrant Shares that may
be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that
after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased
number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately
prior to such adjustment.




          (f) Calculations. All calculations under this Section 9 shall be made to the
nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or for the account of
the Company, and the disposition of any such shares shall be considered an issue or sale of Common
Stock.




          (g) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this
Section 9, the Company at its expense will promptly compute such adjustment in accordance
with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a
statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other
securities issuable upon exercise of this Warrant (as applicable), describing the transactions
giving rise to such adjustments and showing in detail the facts upon which such adjustment is
based. Upon written request, the Company will promptly deliver a copy of each such certificate to
the Holder and to the Company’s Transfer Agent.




          (h) Notice of Corporate Events. If the Company (i) declares a dividend or any other
distribution of cash, securities or other property in respect of its Common Stock, including
without limitation any granting of rights or warrants to subscribe for or purchase any capital
stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement
contemplating or solicits stockholder approval for a Fundamental Transaction or (iii) authorizes
the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the
Company shall deliver to the Holder a notice describing the material terms and conditions of such
transaction, at least 20 calendar days prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or vote with respect to such
transaction, and the Company will take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Warrant prior to such time so as to
participate in or vote with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the corporate action
required to be described in such notice.




8









 








     10. Payment of Exercise Price. The Holder, at its election, may either pay the
Exercise Price in immediately available funds, or satisfy its obligation to pay the Exercise Price
through a “cashless exercise,” in which event the Company shall issue to the Holder the number of
Warrant Shares determined as follows:




               X = Y [(A-B)/A]



          where:





               X = the number of Warrant Shares to be
issued to the Holder.




               Y = the number of Warrant Shares with
respect to which this Warrant is being
exercised.




               A = the Current Market Price (as of the
date of such calculation) of one share of
Common Stock.




               B = the Exercise Price (as adjusted to the
date of such calculation).



          For purposes of this Warrant, the “Current Market Price” of one share of the Company’s Common
Stock as of a particular date shall be determined as follows: (a) if traded on a national
securities exchange or through the Nasdaq Stock Market, the Current Market Price shall be deemed to
be the arithmetic average of the VWAPs for the five consecutive Trading Days immediately preceding
the applicable date; (b) if traded over-the-counter but not on the Nasdaq Stock Market, the Current
Market Price shall be deemed to be the average of the closing bid and asked prices as of five
business days immediately prior to the date of exercise indicated in the Notice of Exercise; and
(c) if there is no active public market, the Current Market Price shall be the fair market value of
the Common Stock as of the date of exercise, as determined by an independent appraiser selected in
good faith by the Holder.




          For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and
acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to
have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to
have commenced, on the date this Warrant was originally issued pursuant to the Purchase Agreement.




     11. Subject to the provisions of this Section 11, if following the two-year
anniversary of the date hereof, the Closing Prices for any 30 consecutive Trading Days are 200%
greater than the Exercise Price (the “Threshold Price”), then the Company will have the right, but
not the obligation (the “Call Right”), on 45 Trading Days prior written notice to the Holder, to
redeem any unexercised portion of this Warrant specified in that notice (the “Call Amount”). For
purposes of example only, if the Exercise Price is $1.00, then the Threshold Price would be $3.00
for the condition set forth in the preceding sentence to be satisfied.



          (a) To exercise the Call Right, the Company shall deliver to the Holder (a) an irrevocable
written notice (a “Call Notice”), indicating the Call Amount and (b) an Exchange Warrant (as
defined below). The date that the Company delivers the Call Notice to the Holders will be referred
to as the “Call Date.” Within 45 Trading Days of receipt of the Call Notice, the Holder shall
exercise this Warrant for up to the Call Amount in accordance with Section 4(b) above (provided,
that the Holder shall not have the right to elect “cashless exercise” pursuant to





9









 







Section 10 in connection with such exercise). Any portion of the Call Amount that is not exercised by 6:30 p.m.
(New York City time) on the 45th Trading Day following the date of receipt of the Call Notice (the “Redemption Date”) shall be cancelled; provided, that if the
average of the Closing Prices for the five Trading Days immediately prior to (but not
including) the Expiration Date exceeds the Exercise Price on the Expiration Date, then this Warrant
shall be deemed to have been exercised in full (to the extent not previously exercised) on a
“cashless exercise” basis at 6:30 P.M. New York City time on the Expiration Date if a “cashless
exercise” may occur at such time pursuant to Section 10 above. Any unexercised portion of this
Warrant to which the Call Notice does not pertain (the “Remaining Portion”) will be unaffected by
such Call Notice. The Company covenants and agrees that it will honor any Exercise Notice with
respect to the Call Amount that is tendered from the Call Date through and including 6:30 p.m. (New
York City time) on the Redemption Date.




          (b) Notwithstanding anything to the contrary set forth in this Warrant, the Company may not
require the cancellation of any unexercised Call Amount (and any Call Notice will be void), unless
from the beginning of the 30 consecutive Trading Days used to determine whether the Common Stock
has achieved the Threshold Price through the Redemption Date (the “Call Period”) (i) the Closing
Prices for each Trading Day during such Call Period exceeds the Threshold Price, (ii) the Company
shall have honored in accordance with the terms of this Warrant any Exercise Notice delivered by
6:30 p.m. (New York City time) on the Redemption Date, and (iii) the Registration Statement shall
be effective as to all Warrant Shares and the Prospectus thereunder available for use by the Holder
for the resale all such Warrant Shares.




          (c) Concurrently with the delivery of a Call Notice, the Company shall issue and deliver to
the Holder an Exchange Warrant (the “Exchange Warrant”), containing the same terms and conditions
as this Warrant, except that (i) the Exchange Warrant will entitle the Holder to purchase up to
such number of shares of Common Stock equal to the amount of Warrant Shares indicated in the Call
Notice as being subject to such Call Notice, and (ii) the “Exercise Price” for the Exchange Warrant
will equal [ ]% of the Closing Price on the Trading Day immediately preceding the Call Date. Any
Call Notice that is delivered without an Exchange Warrant meeting the requirements of this
Section 11(c) will be void and of no effect.




          (d) Notwithstanding anything to the contrary herein, if following the two-year anniversary of
the Effective Date the average of the Closing Prices for any 30 consecutive Trading Days are 200%
greater than the Exercise Price, then the Holder shall have the right to send the Company a written
notice (the “Holder Notice”) requiring the Company to exercise its Call Right with respect to all
or any portion of this Warrant. Upon receipt of the Holder Notice, the Company shall issue the
Call Notice to the Holder in accordance with this Section 11.




     12. Limitation on Exercise.




          (i) Subject to Section 12(ii), the number of shares of Common Stock that may be
acquired by a Holder upon any exercise of Warrants (or otherwise in respect hereof) shall be
limited to the extent necessary to insure that, following such exercise (or other issuance),
the total number of shares of Common Stock then beneficially owned by such Holder and its
Affiliates and any other Persons whose beneficial ownership of Common Stock would be
aggregated with such Holder’s for purposes of Section 13(d) of



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the Exchange Act, does not
exceed 4.999% of the total number of issued and outstanding shares of Common Stock
(including for such purpose the shares of Common Stock issuable upon such conversion) (the
“Threshold Percentage”). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.




          (ii) Notwithstanding the provisions of Section 12(i), the Holder shall have the right
at any time and from time to time, to waive the provisions of this Section insofar as they
relate to the Threshold Percentage or to increase its Threshold Percentage (but not in
excess of 9.999% (or such lower percentage if Section 16 of the Exchange Act or the rules
promulgated thereunder (or any successor statute or rules) is changed to reduce the
beneficial ownership percentage threshold thereunder to a percentage less than 9.999%)) by
written instrument delivered to the Company, but (i) any such waiver or increase will not be
effective until the 61st day after such notice is delivered to the Company, and (ii) any
such waiver or increase or decrease will apply only to the Holder and not to any other
holder of Warrants.




          (iii) Notwithstanding anything to the contrary contained herein, if the Trading Market
is the Nasdaq Small-Cap Market or any other market or exchange with similar applicable
rules, then the maximum number of shares of Common Stock that the Company may issue pursuant
to the Transaction Documents at an effective purchase price less than the Closing Price on
the Trading Day immediately preceding the Closing Date equals 19.99% of the outstanding shares of Common Stock immediately preceding the Closing Date (the “Issuable Maximum”),
unless the Company obtains stockholder approval. If, at the time any Holder requests an
exercise of any of the Warrants and/or a conversion of any of the Series A Notes (or the
Company is required or permitted to pay in shares of Common Stock any principal or interest
due under the Series A Notes), the Actual Minimum would cause the Issuable Maximum to be
exceeded (and if the Company has not previously obtained the required stockholder approval),
then the Company shall issue to the Holder requesting such exercise and/or such conversion
(and/or such payment of principal or interest) a number of shares of Common Stock not
exceeding such Holder’s pro-rata portion of the Issuable Maximum (based on such Holder’s
share (vis-à-vis other Holders) of the aggregate purchase price paid under the Purchase
Agreement and taking into account any Warrant Shares previously issued to such Holder). For
the purposes hereof, “Actual Minimum” shall mean, as of any date, the maximum aggregate
number of shares of Common Stock then issued or potentially issuable in the future pursuant
to the Transaction Documents, including any Underlying Shares issuable upon exercise in full
of all Warrants, without giving effect to (x) any limits on the number of shares of Common
Stock that may be owned by a Holder at any one time, or (y) any additional Underlying Shares
that could be issuable as a result of any future possible adjustments made under Section
9(d).



     13. Fractional Shares. The Company shall not be required to issue or cause to be
issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant
Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant,
the number of Warrant Shares to be issued will be rounded up to the nearest whole share or right to
purchase the nearest whole share, as the case may be.



11









 





     14. Notices. Any and all notices or other communications or deliveries hereunder
(including without limitation any Exercise Notice) shall be in writing and shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m.
(New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number specified in this
Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any
Trading Day, (iii) the Trading Day following the date of mailing, if sent by a nationally
recognized overnight courier service specifying next Business Day delivery, or (iv) upon actual
receipt by the party to whom such notice is required to be given, if by hand delivery. The address
and facsimile number of a party for such notices or communications shall be as set forth in the
Purchase Agreement, unless changed by such party by two Trading Days’ prior notice to the other
party in accordance with this Section 14.



     15. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon
30 days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into
which the Company or any new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its corporate trust or
stockholders services business shall be a successor warrant agent under this Warrant without any
further act. Any such successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s
last address as shown on the Warrant Register.



     16. Extension of Expiration Date. At the option of the Holder, the Expiration Date may
be extended for the number of Trading Days during any period occurring after the Required
Effectiveness Date in which (i) trading in the Common Stock is suspended by any Trading Market,
(ii) the Registration Statement is not effective, or (iii) the prospectus included in the
Registration Statement may not be used by the Holders for the resale of Registrable Securities
thereunder.



     17. Miscellaneous.



          (a) Subject to the restrictions on transfer set forth on the first page hereof and in
Section 3, this Warrant may be assigned by the Holder. This Warrant may not be assigned by
the Company except to a successor in the event of a Fundamental Transaction or with the prior
written consent of the Holder. This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. Subject to the preceding sentence,
nothing in this Warrant shall be construed to give to any Person other than the Company and the
Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant,
together with the other Transaction Documents, constitutes the entire agreement of the parties with
respect to the subject matter hereof. This Warrant may be amended only in writing signed by the
Company and the Holder and their successors and assigns. The restrictions set forth in Section
12 hereof may not be amended or waived.




12









 








          (b) The Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the Holder against impairment. Without limiting the generality of
the foregoing, the Company (i) will not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, (ii) will take all such action as may be reasonably
necessary or appropriate in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares on the exercise of this Warrant, and (iii) will not close its
stockholder books or records in any manner which interferes with the timely exercise of this
Warrant.




          (c) Governing Law; Venue; Waiver Of Jury Trial. all questions
concerning the construction, validity, enforcement and interpretation of this warrant shall be
governed by and construed and enforced in accordance with the laws of the state of new york (except
for matters governed by corporate law in the state of Maryland). each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in the city of new
york, borough of manhattan, for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with respect to the
enforcement of any of the transaction documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper. each party
hereby irrevocably waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for notices
to it under this agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. the company hereby waives all rights to
a trial by jury.




          (d) The headings herein are for convenience only, do not constitute a part of this Warrant and
shall not be deemed to limit or affect any of the provisions hereof.




          (e) In case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt
in good faith to agree upon a valid and enforceable provision which shall be a commercially
reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision
in this Warrant.




[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]




13









 








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



	 	 	 	 	 
	 	ACE*COMM CORPORATION

 	 
	 	By:  	 	 
	 	 	Name: 	 	 
	 	 	Title:  	 	 
	 




14









 





EXHIBIT G




FORM OF EXERCISE NOTICE



(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the
foregoing Warrant)




To: ACE*COMM CORPORATION



The undersigned is the Holder of Warrant No.                      (the “Warrant”) issued by ACE*COMM
CORPORATION, a Maryland corporation (the “Company”). Capitalized terms used herein and not
otherwise defined have the respective meanings set forth in the Warrant.





	1.	 	The Warrant is currently exercisable to purchase a total of                      Warrant Shares.
	 
	2.	 	The undersigned Holder hereby exercises its right to purchase                      Warrant
Shares pursuant to the Warrant.
	 
	3.	 	The Holder intends that payment of the Exercise Price shall be made as (check one):




____ “Cash Exercise” under Section 10



____ “Cashless Exercise” under Section 10





	4.	 	If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $                     to
the Company in accordance with the terms of the Warrant.
	 
	5.	 	Pursuant to this exercise, the Company shall deliver to the Holder                      Warrant
Shares in accordance with the terms of the Warrant.
	 
	6.	 	Following this exercise, the Warrant shall be exercisable to purchase a total of                      Warrant Shares.





[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]




 









 







IN WITNESS WHEREOF, the undersigned has caused this Exercise Notice to be duly executed as
of the date indicated below.








	 	 	 	 	 
	Dated:                     , ___ 	Name of Holder:
 	 
	 	(Print) 	 	 
	 	
By:	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 	
(Signature must conform in all respects to name of holder as
specified on the face of the Warrant)
	 



 









 







FORM OF ASSIGNMENT





     [To be completed and signed only upon transfer of Warrant]



     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto                                                      the right represented by the within Warrant to purchase            
                       share
of Common Stock of ACE*COMM CORPORATION to which the within Warrant relates and appoints             attorney to transfer said right on the books of ACE*COMM CORPORATION with full
power of substitution in the premises.





	 	 	 	 	 
	Dated:                     , ___ 	 
 	 
	 	  	 (Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
 	 
	 
	 	  	 Address of Transferee
 	 
	 
	 	  	 
 
	 
	 
	 	  	 
 
	 








In the presence of: