1
FORM OF WARRANT
CONFIDENTIAL
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER SAID
ACT UNLESS ADVANCED SWITCHING COMMUNICATIONS, INC. RECEIVES A SATISFACTORY
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE COMMON STOCK
FOR VALUE RECEIVED, ADVANCED SWITCHING COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), hereby grants to Broadband Office, Inc., a Delaware
corporation (the "Holder"), the right to purchase from the Company at any time
Two Hundred and Twenty-Two Thousand (222,000) shares of fully paid and
nonassessable Common Stock, par value $.005 of the Company (the "Common Stock"),
at the price specified in Section 2 hereof, as may be adjusted from time to time
pursuant to Section 5 hereof (the "Warrant Price"), subject to the provisions
and upon the terms and conditions hereinafter set forth.
1. Term of Warrant.
The purchase right represented by this Warrant is exercisable, in
whole or in part, at any time after the date hereof and prior to the
thirty-sixth (36th) month anniversary of the date hereof (the "Expiration
Date").
2. Warrant Price. The Warrant Price is $8.00 per share, subject to
adjustment from time to time pursuant to Section 5 hereof.
3. Method of Exercise; Payment.
Subject to Section 1 hereof, the purchase right represented by this
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (with the notice of exercise form attached hereto as Exhibit 1 duly
executed) at the principal office of the Company, and by the payment to the
Company, by certified check or wire transfer, of an amount equal to the then
applicable Warrant Price per share multiplied by the number of shares then being
purchased. The Holder may exercise the purchase right represented by this
Warrant without the payment of cash (hereinafter a "Cashless Exercise"), by
reducing the number of shares of Common Stock obtainable upon its exercise and
payment in cash so as to yield a number of shares of Common Stock upon the
exercise of this Warrant equal to the product of (a) the number of shares of
Common Stock issuable as of the date of exercise (the "Exercise Date")
2
upon the exercise of such Warrant (if payment of the Warrant Price were being
made in cash) and (b) the Cashless Exercise Ratio. As used herein, the "Cashless
Exercise Ratio" shall mean a fraction, the numerator of which is the excess of
the Fair Market Value per share of the Common Stock on the Exercise Date over
the Warrant Price as of the Exercise Date and the denominator of which is the
Fair Market Value per share of the Common Stock on the Exercise Date. Upon
surrender of this Warrant, the number of shares of Common Stock deliverable upon
a Cashless Exercise shall be equal to the number of shares of Common Stock
issuable upon the exercise of the Warrant that the Holder specifies are to be
exercised pursuant to a Cashless Exercise multiplied by the Cashless Exercise
Ratio.
Upon the surrender of this Warrant and the payment of the per share
Exercise Price or upon a Cashless Exercise, the Company shall, as promptly as
practicable and in any event within fourteen (14) days thereafter, execute and
deliver, in accordance with such notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in such
notice. At the time of delivery of this Warrant, appropriate notation will be
made designating the number of shares purchased and the Warrant shall then be
returned to the Holder if it has been exercised in part. The Company shall pay
all expenses, taxes and other charges payable in connection with the
preparation, issuance and delivery of stock certificates, except that, in case
stock certificates shall be registered in a name or names other than the name of
the Holder, funds sufficient to pay all transfer taxes which shall be payable
upon the issuance of stock certificates shall be paid by the Holder hereof at
the time of delivery of the notice of exercise or promptly upon receipt of a
written request of the Company for payment.
4. Stock Fully Paid; Reservation of Shares.
All Common Stock which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be fully paid and
nonassessable, and free from all liens and charges with respect to the issue
thereof. During the period within which the rights represented by this Warrant
may be exercised, the Company will at all times have authorized, and reserved
for the purpose of the issuance upon exercise of the purchase rights evidenced
by this Warrant, a sufficient number of shares of its Common Stock to provide
for the exercise of the rights represented by this Warrant.
5. Adjustment of Warrant Price and Number of Shares.
The kind of securities purchasable upon the exercise of this
Warrant, the Warrant Price and the number of shares purchasable upon exercise of
this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events as follows:
(a) Reclassification, Consolidation or Merger. In case of any
(i) reclassification or change of outstanding securities of the class 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), (ii) merger or consolidation of the Company with or
into another corporation in which the Company is not the surviving entity, or a
reverse triangular merger in which the Company is the surviving entity but the
shares of the
-2-
3
Company's capital stock outstanding immediately prior to the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash, or otherwise, or (iii) sale or transfer of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation, sale or transfer,
the Company, or such successor corporation, as the case may be, shall execute a
new Warrant, providing that the Holder shall have the right to exercise such new
Warrant and procure upon such exercise, in lieu of each share of Common Stock
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, consolidation or merger by a holder of one share of
Common Stock. 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 5. The provisions of Section 5(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers and transfers.
(b) Subdivision or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Common Stock, the Warrant Price shall be proportionately decreased
in the case of a subdivision or increased in the case of a combination.
(c) Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to Common
Stock payable in, or make any other distribution with respect to Common Stock
(except any distribution specifically provided for in the foregoing Section 5(a)
or Section 5(b)) of Common Stock, then the Warrant Price shall be adjusted, from
and after the date of determination of stockholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(a) the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (b) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
(d) Other Distributions. If the Company at any time while this
Warrant is outstanding and unexpired shall distribute to holders of its Common
Stock any of its assets (including cash), then the Holder shall, upon exercise
of the Warrant, be entitled to a proportionate share of any such distribution
(without interest thereon) as though it was the holder of the number of shares
of Common Stock into which the Warrant was exercisable as of the record date
fixed for the determination of the holders of Common Stock entitled to receive
such distribution.
(e) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 5 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors shall make an appropriate adjustment in
the Warrant Price so as to protect the rights of the Company and the Holder of
this Warrant.
-3-
4
(f) Adjustment of Number of Shares. Upon each adjustment in the
Warrant Price pursuant to any of Sections 5(a), (b) or (c) hereof, the number of
shares of Common Stock purchasable hereunder shall be adjusted, to the nearest
whole share, to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately prior to
such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter.
(g) Minimum Adjustment. The adjustments required by the
preceding sections of this Section 5 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that no adjustment
of the Warrant Price or the number of shares of Common Stock issuable upon
exercise of this Warrant that would otherwise be required shall be made unless
and until such adjustment either by itself or with other adjustments not
previously made increases or decreases by at least 1% the Warrant Price or the
number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount shall be carried forward and made as
soon as such adjustment, together with other adjustments required by this
Section 5 and not previously made, would result in a minimum adjustment. For the
purpose of any adjustment, any specified event shall be deemed to have occurred
at the close of business on the date of its occurrence. In computing adjustments
under this Section 5, fractional interests in Common Stock shall be taken into
account to the nearest one-hundredth of a share.
6. Notice of Adjustments.
Whenever any Warrant Price shall be adjusted pursuant to Section 5
hereof, the Company shall prepare promptly a certificate signed by its chief
financial officer setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, the Warrant Price or Prices after giving effect to such
adjustment and the number of shares then purchasable upon exercise of this
Warrant, and shall cause copies of such certificate to be mailed (by first class
mail, postage prepaid) to the Holder at the address specified in Section 10(d)
hereof, or at such other address as may be provided to this Company in writing
by the Holder.
7. Fractional Shares.
The Company shall not be required to issue any fractional shares
of Common Stock in connection with any exercise hereunder, and in the event the
Company elects not to issue such fractional shares in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Warrant Price then in effect.
8. Compliance with Securities Act.
The Holder, by acceptance of this Warrant, represents, warrants,
covenants and agrees that:
-4-
5
(a) This Warrant and the shares of Common Stock to be issued
upon exercise hereof are being acquired for investment and that it will not
offer, sell or otherwise dispose of this Warrant or any shares of Common Stock
to be issued upon exercise hereof except under circumstances which will not
result in a violation of the Securities Act of 1933, as amended (the "Act").
(b) Holder is "accredited investor" as defined in Rule 501(a)
under the Act.
(c) Upon exercise of this Warrant, the Holder hereof shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the shares of Common Stock so purchased are being acquired for
investment and not with a view toward distribution or resale.
(d) All shares of Common Stock issued upon exercise of this
Warrant (unless registered under the Act) shall be stamped or imprinted with a
legend substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION
OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED."
9. Transfer.
Prior to an underwritten public offering of Common Stock for
aggregate gross proceeds to the Company of at least $25 million, no Holder of
this Warrant shall sell, assign, transfer, pledge, hypothecate, mortgage,
encumber or dispose of all or any of this Warrant or the shares of Common Stock
or securities issuable upon exercise hereof.
10. Miscellaneous.
(a) No Rights as Stockholder. No Holder of this Warrant shall
be entitled to vote or receive dividends or be deemed the holder of Common Stock
or any other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the Holder, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issuance of
stock, reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger, conveyance or otherwise) or to receive notice
of meetings, or to receive dividends or subscription rights or otherwise until
the
-5-
6
Warrant shall have been exercised and the shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein.
(b) Replacement. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement or bond reasonably satisfactory in form and amount to the Company or,
in the case of mutilation, on surrender and cancellation of this Warrant, the
Company, at its expense, will execute and deliver, in lieu of this Warrant, a
new Warrant of like tenor.
(c) Notice of Capital Changes. In case:
(i) the Company shall declare any dividend or
distribution payable to the holders of its Common Stock;
(ii) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation or business organization; or
(iii) there shall be a voluntary or involuntary
dissolution; liquidation or winding up of the Company;
then the Company shall give the Holder written notice, in the manner set forth
in Section 10(d) below, of the date on which a record shall be taken for such
dividend or distribution or for determining stockholders entitled to vote upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up and of the date when any such transaction shall take
place, as the case may be.
(d) Notice.
(i) Any notice or communication shall be in writing and
delivered in person or mailed by first-class mail addressed as follows:
if to the Company:
Advanced Switching Communications, Inc.
0000 Xxxxx Xxxxxxxxx
Xxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Secretary
if to the Holder:
The Holder's address as it appears on the records of
the Company.
-6-
7
(ii) The Company or the Holder by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(iii) Failure to mail a notice or communication to a
Holder or any defect in it shall not affect its sufficiency with respect to
other Holders (if any). If a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.
(e) Amendment. This Warrant may be amended by the Company
without the consent of any Holder for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective provision contained herein or
adding or changing any other provisions with respect to matters or questions
arising under this Warrant as the Company may deem necessary or desirable
(including, without limitation, any addition or modification to provide for
compliance with the transfer restrictions set forth herein); provided, however,
that such action shall not adversely affect the rights of any Holder. Any
amendment or supplement to this Warrant that has an adverse effect on the
interests of the Holder shall require the written consent of the Holder of this
Warrant (or, after the date specified by Section 9 hereof, the Holders of a
majority of the then outstanding Warrants). The consent of each Holder affected
shall be required for any amendment pursuant to which the Warrant Price would be
increased, the number of shares of Common Stock issuable upon exercise of this
Warrant would be decreased (other than pursuant to adjustments provided herein)
or the antidilution provisions in Section 5 are altered in a manner which
adversely affects the Holder.
(f) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation 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 to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions in this
Warrant.
(g) Successors. All agreements of the Company in this Warrant
shall bind its successors. All agreements of the Holder in this Agreement shall
bind its successors.
(h) Governing Law. This Warrant shall be governed by and
construed under the laws of the State of Delaware without regard to its conflict
of laws or principles.
-7-
8
This Warrant is executed as of this 21st day of June, 2000.
ADVANCED SWITCHING COMMUNICATIONS, INC.
By: /s/ [SIG]
--------------------------------
Name: XXXXX X. D'XXXXXX
--------------------------------
Title: CFO
--------------------------------
-8-
9
EXHIBIT 1
NOTICE OF EXERCISE
TO: ADVANCED SWITCHING COMMUNICATIONS, INC.
1. The undersigned hereby elects to purchase _______ shares of the
Common Stock of Advanced Switching Communications, Inc. pursuant to the terms of
the attached warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
------------------------------------------
(Name)
------------------------------------------
------------------------------------------
(Address)
3. 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 distribution or reselling
such shares.
------------------------------------------
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
-9-
