Exhibit 10.5
EXCHANGE AGREEMENT
AND PLAN OF REORGANIZATION
THIS AGREEMENT, dated as of the 26th day of February 1999, between Xxxx Atlantic
Network Systems Company ("Xxxx") and FLAG Telecom Holdings Limited (the
"Company")
WITNESSETH:
WHEREAS, pursuant to an exchange of Shares made contemporaneously herewith, Xxxx
has exchanged 21,996,928 Shares in FLAG Limited ("FLAG") solely in exchange for
21,996,928 Shares in the Company as an element of a larger transaction that is
intended to qualify as a tax-free exchange under Section 351 of the United
States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, Xxxx owns an additional 217,536,730 Shares in FLAG, which Xxxx wishes
to transfer in exchange for, and which the Company wishes Xxxx to transfer in
exchange for, 217,536,730 Shares in the Company, if and when Xxxx obtains
Regulatory Approval as described in Clause 2.1; and
WHEREAS, the Company has agreed to issue 217,536,730 Shares of the Company to
Xxxx in exchange for Xxxx'x transferring to the Company all of Xxxx'x remaining
Shares in FLAG.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 For purposes of this Agreement, the following terms shall have the
following meanings and terms defined elsewhere in this Agreement shall
have the meanings ascribed thereto:
"Affiliate" shall mean, with respect to any entity, any company or
other entity controlling, controlled by or under common control with
such first entity. For purposes of this Agreement, "control" means the
possession directly or indirectly through beneficial ownership or
otherwise of the power to direct or cause the direction of the
management or policies of a company or other entity, whether through
the ownership of voting securities, by contract or otherwise and
cognate terms shall have a corresponding meaning.
"Credit Agreement" shall mean the credit agreement dated 28 January
1998, among FLAG, the lenders from time to time parties thereto,
Barclays Bank PLC, as administrative agent, and the International Trust
Company of Bermuda Limited, as collateral trustee (the "Collateral
Trustee").
"Regulatory Approval" shall mean (i) the approval by the United States
Federal Communications Commission ("FCC") of an application by Xxxx
Atlantic Corporation or its Affiliate to provide interLATA
telecommunications services in New York State under section 271 of the
Communications Act of 1934, as amended, and (ii) any additional
approval which Xxxx and the Company jointly determine is required from
the FCC in the event that the exchange of Shares contemplated in Clause
2.1(b) will or may result in a change of control of the Company.
"Shares" shall mean shares of ordinary voting common stock of FLAG or
the Company, as relevant.
"Stock Option Plan" shall mean the FLAG Limited 1998 Long-Term
Incentive Plan, as assumed by the Company.
1.2 References to any document (including this Agreement) are references to
that document as amended, consolidated, supplemented, novated or
replaced from time to time.
2. EXCHANGE OF SHARES
2.1 As soon as is practicable, but in no event more than five days, after
the receipt by Xxxx or its Affiliate of Regulatory Approval:
(a) the Company shall apply to the Bermuda Monetary Authority for
consent for the transfer by Xxxx to the Company of Xxxx'x
Shares in FLAG; and
(b) as soon as such consent is obtained,
(i) Xxxx shall transfer 217,536,730 Shares in FLAG (being
all of Xxxx'x remaining Shares in FLAG) to the
Company; and
(ii) the Company shall in exchange for the Shares
transferred to it pursuant to (i) issue to Xxxx or
its Affiliate 217,536,730 (or such other number of
Shares as may be required pursuant to Clause 3.2)
Shares in the Company.
The exchange described in this Clause is intended to constitute, and
shall be treated by the parties as, a tax-free reorganization under
Section 368 of the Code.
2.2 Simultaneously with the exchange of Shares referred to in Clause
2.1(b), Xxxx shall procure the immediate resignation from the board of
directors of FLAG of all directors nominated by Xxxx.
2.3 In the event that neither Xxxx nor any of its Affiliates shall have
obtained Regulatory Approval within three years after the date hereof,
the obligation of Xxxx to exchange its Shares in FLAG for Shares in the
Company and the obligation of the Company to issue Shares in the
Company in exchange for Xxxx'x Shares in FLAG as provided herein, each
shall terminate and all rights and obligations hereunder shall become
null and void.
2.4 The parties acknowledge that the Shares in FLAG held by Xxxx and the
Company are subject to security interests in favour of the Collateral
Trustee under the Credit Agreement and agree that the transfer of
Shares in FLAG provided for herein shall be subject to any subsisting
security interests required in accordance with the terms of the Credit
Agreement.
2.5 The obligations set forth in Clause 2.1 shall continue after any
initial public offering by the Company or an Affiliate thereof.
3. OBLIGATIONS CONCERNING SHARES
3.1 Prior to the completion of the transfers referred to in Clause 2.1(b),
the Company shall not issue any additional shares or other interests in
the Company except for:
(a) additional shares issued in connection with an initial public
offering of the Shares in the Company; and
(b) additional shares or other interests which represent common
stock (or options or warrants to purchase the same) issued by
the Company under the Stock Option Plan.
3.2 In the event of any recapitalisation, forward or reverse split, stock
dividend, reorganisation, merger, consolidation, spin-off, combination,
repurchase or exchange of Shares of the Company, the number of Shares
in the Company which the Company shall issue to Xxxx in exchange for
Xxxx'x Shares in FLAG in accordance with Clause 2.1(b) shall be
adjusted proportionately so as to prevent dilution or enlargement of
Xxxx'x rights in the Company, other than any dilution which may result
from the issuance of Shares of the Company as provided in Clause 3.1.
3.3 The Company covenants that it will at all times reserve and keep
available free from any pre-emptive rights out of its authorised but
unissue share capital a sufficient number of Shares for issue pursuant
to the exchange described in Clause 2.1(b).
3.4 The Company covenants that if any Shares required to be reserved for
purposes of this Agreement require registration with or approval of any
governmental authority or listing on any securities exchange before
such Shares may be issued, the Company will in good faith and as
expeditiously as possible use its reasonable endeavours to cause such
Shares to be duly registered, approved or listed, as the case may be.
3.5 All Shares allotted pursuant to this Agreement shall rank pari passu in
all respects with the Shares of the Company in issue at that time and
shall accordingly entitle Xxxx to participate in full in all dividends
or other distributions paid or made on the issued Shares
of the Company after the date of allotment other than any dividend or
other distribution previously declared or recommended or resolved to be
paid or made if the record date therefor shall be before the date of
allotment.
4. ASSIGNMENT
Save as otherwise provided herein, the benefits and obligations
conferred by this Agreement upon each of the parties are personal to
that party and shall not be, and shall not be capable of being,
assigned, delegated, transferred or otherwise disposed of and any
attempted assignment, delegation, transfer or other disposition in
violation of this Clause shall be void, except that Xxxx may assign,
delegate, transfer or otherwise dispose of its interest herein to an
Affiliate of Xxxx, as long as such Affiliate (i) acquires from Xxxx all
of Xxxx'x Shares in both FLAG and the Company and (ii) agrees to be
bound by the terms of this Agreement.
5. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties and
supersedes any previous agreements, arrangements or understandings
between them relating to the subject matter hereof.
Each party acknowledges that it is not relying on any statements,
warranties or representations given or made by the other party relating
to the subject matter hereof, save as expressly set out in this
Agreement.
6. VARIATION
No variation or amendment to this Agreement shall be effective unless
in writing signed by authorised representatives of each of the parties.
7. NOTICES
Any notice, request, demand or other communication required or
permitted hereunder shall be in writing and shall be sufficiently given
if in English, and delivered by hand or sent by prepaid international
courier of international reputation addressed to the appropriate party
at the following address or to such other address or places as such
party may from time to time designate:
if to the Company: FLAG Telecom Holdings Limited
The Emporium Xxxxxxxx
00 Xxxxx Xxxxxx -- 0xx xxxxx
Xxxxxxxx XX00, Xxxxxxx
Attention: Chairman and CEO
Tel: 0 000 000 0000
Fax: 0 000 000 0000
with a copy to: FLAG Telecom Limited
000 Xxxxx Xxxxxx -- 0xx Xxxxx
Xxxxxx X0X 0XX
U.K.
Attention: General Counsel
Tel: 00 000 000 0000
Fax: 00 000 000 0000
if to Xxxx: Xxxx Atlantic
1095 Avenue of the Americas
Xxx Xxxx, XX 00000
XXX
Attention: President --
International Group
with a copy to: Xxxx Atlantic
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
XXX
Attention: Associate General
Counsel--International
Tel: 0 000 000 0000
Fax: 0 000 000 0000
Any notice, request, demand or other communication given or made
pursuant to this Clause shall be deemed to have been received (i) in
the case of hand delivery or courier, on the date of receipt as
evidenced by a receipt of delivery from the recipient, (ii) in the case
of mail delivery, on the date which is seven days after the mailing
thereof and (iii) in the case of transmission by facsimile, on the date
of transmission with confirmed answer back. Each such communication
sent by facsimile shall be promptly confirmed by notice in writing
hand-delivered or sent by courier, mail or air mail as provided herein,
but failure to send such a confirmation shall not affect the validity
of such communication.
8. COUNTERPARTS
This Agreement may be executed in counterparts. Any single counterpart
or set of counterparts signed, in either case, by both Parties herein
shall constitute a full and original agreement for all purposes.
9. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of New York without regard to the laws of New York governing
conflicts of law.
IN WITNESS WHEREOF the parties have entered into this Agreement as of the date
and year first above written.
FLAG TELECOM HOLDINGS LIMITED XXXX ATLANTIC NETWORK SYSTEMS
COMPANY
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxxxx X. Xxxxx
-------------------------------- ---------------------------
Name: Xxxxxx Xxxxxx Name: Xxxxxx X. Xxxxx
Title: Deputy Chairperson Title: President
