EXHIBIT S
CONVERSION AND EXCHANGE
AGREEMENT dated as of November 30,
1999 ("Agreement") by and among
FIBERNET TELECOM GROUP, INC., a
Nevada corporation (the
"Company"), and certain
noteholders ("Noteholders") of the
Company listed on Annex I hereto.
Recitals
WHEREAS, each Noteholder purchased a 4% Senior Secured Convertible
Note due May 7, 2004 of the Company ("4% May Note") or an 8% Senior Secured
Convertible Note due May 7, 2004 of the Company ("8% May Note" and together with
the 4% May Note, the "May Notes") pursuant to the Securities Purchase Agreement
dated as of May 7, 1999 ("May Purchase Agreement"), as amended, by and among the
Company and the purchasers listed therein, or an 8% Senior Secured Convertible
Note due September 28, 2004 of the Company ("8% September Note" and together
with the May Notes, the "Notes") pursuant to the Securities Purchase Agreement
dated as of September 28, 1999 ("September Purchase Agreement" and together with
the May Purchase Agreement, the "Purchase Agreements"), by and among the Company
and the purchasers listed therein, all in such aggregate principal amounts as
set forth on Annex I hereto.
WHEREAS, the Notes provide that the Notes shall be deemed convertible
into shares of Common Stock, $.001 par value ("Common Stock") of the Company
upon the conversion of the Notes held by the Majority in Interest (as defined
herein), which is currently Signal Equity Partners, L.P. (formerly Signal
Capital Partners, L.P.) ("Signal").
WHEREAS, the Company and the Noteholders wish to provide herein for
the conversion of the Notes into shares of Common Stock and the immediate
exchange of such shares of Common Stock into which the Notes are convertible for
shares of Series D Preferred Stock, $.001 par value ("Series D Preferred") of
the Company in the case of the 4% May Notes, shares of Series E Preferred Stock,
$.001 par value ("Series E Preferred") of the Company in the case of the 8% May
Notes, and shares of Series F Preferred Stock, $.001 par value ("Series F
Preferred" and together with the Series D Preferred and Series E Preferred, the
"Preferred Stock") of the Company in the case of the 8% September Notes.
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed thereto in the May Purchase Agreement or
the September Purchase Agreement, whichever is applicable and as specified
herein.
Section 2. Conversion of Notes.
(a) Signal, as the Majority in Interest (as defined in the May
Purchase Agreement and the September Purchase Agreement), hereby converts the
aggregate principal amount of its 4% May Note and 8% September Note into that
number of shares of Common Stock set forth on Annex I hereto as of the date
hereof.
(b) Each of the parties hereby acknowledges that the aggregate
principal amount of such Note or Notes held by each Noteholder shall be
converted into the number of shares of Common Stock set forth on Annex I hereto
in accordance with the terms of the Notes (the "Conversion") simultaneously with
the conversion of the 4% May Note and 8% September Note held by Signal.
Section 3. Agreement to Exchange Common Stock.
(a) Authorization. The Company has authorized the issuance of 500,000
shares of Series D Preferred, 750,000 shares of Series E Preferred and 500,000
shares of Series F Preferred.
(b) Exchange. The parties hereto agree that immediately upon the
Conversion at the Closing (as defined herein), the Company shall issue the
number of shares of: (i) Series D Preferred to those Noteholders who owned 4%
May Notes prior to the Conversion set forth beside such Noteholder's name on
Annex I; (ii) Series E Preferred to those Noteholders who owned 8% May Notes
prior to the Conversion set forth beside such Noteholder's name on Annex I; and
(iii) Series F Preferred to those Noteholders who owned 8% September Notes prior
to the Conversion set forth beside such Noteholder's name on Annex I, all in
exchange for shares of Common Stock received by each such Noteholder in the
Conversion (such transactions referred to as the "Exchange"); provided, that the
Company shall not issue fractional shares of Preferred Stock upon the Exchange
and shall distribute cash in lieu of such fractional shares in an amount equal
to the product of (x) the Fair Market Value Per Share of Common Stock and (y)
the number of shares of Common Stock not exchanged for shares of Preferred
Stock. For purposes of this Agreement, "Fair Market Value Per Share" shall mean
the fair value of each share of Common Stock as determined in good faith by the
Board of Directors of the Company minus ten percent (10%) illiquidity discount.
(c) Delivery. At the Closing, the Company will deliver to each
Noteholder a certificate or certificates registered in the Noteholder's name,
representing the number of shares of Preferred Stock owed to such Noteholder in
exchange for such Noteholder's shares of Common Stock received pursuant to the
Conversion.
(d) Closing. The closing ("Closing") of the Conversion and the
Exchange will take place at the offices of X'Xxxxxxxx Graev & Karabell, LLP, 30
Rockefeller Plaza, New York, New York, on or about 10:00 a.m., New York City
time, on November 30, 1999 (the "Closing Date") or at such other time and place
as the Company and the Majority in Interest may mutually agree upon.
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Section 4. Amendments to Certain Agreements.
(a) Pursuant to the terms hereof, each of the Purchase Agreements
will be deemed amended as follows:
(i)All of the terms Article VII ("Events of Default") of
each of the Purchase Agreements shall be deleted in their entirety and
replaced with "[INTENTIONALLY OMITTED]"; and
(ii) All references to the "Notes", "Collateral", "Loan
Parties" or other references applicable to the issuance of Notes but
not applicable to Preferred Stock will be deemed modified to
accurately reflect that the Purchasers (as respectively defined in
each Purchase Agreement) hold equity securities in the form of
Preferred Stock and Common Stock and no longer hold debt securities.
(b) The Company and the Noteholders shall take any and all action
necessary on or after the date hereof, including, without limitation, the
execution of amendments and/or supplemental agreements or instruments, to effect
the intent of this Section 4.
(c) The changes and amendments to each of the Purchase Agreements
contemplated herein shall constitute the only changes and amendments to such
Purchase Agreements as of the date hereof, and the Registration Rights Agreement
and the Stockholders Agreement shall remain in full force and effect.
Section 5. Termination of the Collateral Agreements; Cancellation of
Notes.
(a) It is understood and agreed by the parties hereto that all of the
Collateral Agreements will be automatically terminated and of no further force
or effect immediately upon Closing.
(b) The Company and the Noteholders shall take any and all action
necessary, on or after the date hereof, including, without limitation, the
execution of UCC termination statements or other instruments to effect a release
of liens, to effect the intent of this Section 5 and to ensure, among other
things, that all of the Collateral shall be released and that the Noteholders
shall have no further rights thereto as lenders or secured parties.
(c) It is understood and agreed by the parties hereto that the Notes
shall be cancelled and the Company's obligations thereunder shall terminate upon
the Closing.
Section 6. Representations and Warranties of the Company.
The Company represents and warrants to each Noteholder as of the date
hereof as follows:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of State of Nevada.
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(b) The Company has the power to execute, deliver and perform its
obligations under this Agreement and to issue the Preferred Stock.
(c) The execution, delivery and performance by the Company of this
Agreement and the issuance of the Preferred Stock of the Company have been duly
authorized by all required corporate or Noteholder action of the Company.
(d) Except the consents required by the Majority in Interest in
accordance with the Purchase Agreements, no filing with or consent or approval
of, by other action by, any Governmental Authority or other Person is or will be
required by any Applicable Law or agreement in connection with the execution,
delivery and performance by the Company of this Agreement.
(e) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms.
(f) The Preferred Stock, when issued and delivered in accordance with
the terms of this Agreement for the consideration provided for herein, will be
duly and validly issued, fully paid and nonassessable, and will be free of
restrictions on transfer other than restrictions on transfer under this
Agreement, the Stockholders Agreement and under applicable state and federal
securities laws.
(g) The issuance of the Preferred Stock contemplated hereby is exempt
from registration under the Securities Act of 1933, as amended (the "Act"), and
has been made in compliance with the Act and all applicable state securities or
blue sky laws.
Section 7. Representations and Warranties of the Noteholders.
Each Noteholder, severally and only with respect to itself, represents
and warrants to the Company as follows:
(a) Such Noteholder is acquiring the Preferred Stock to be purchased
by it or him and, should such Noteholder acquire other capital stock of the
Company issuable upon conversion of any Preferred Stock, it or he will acquire
such other capital stock, for its or his own account, for investment and not
with a view to the distribution thereof, nor with any present intention of
distributing the same.
(b) Such Noteholder understands that the Preferred Stock has not been,
and any other capital stock of the Company issuable upon conversion of any
Preferred Stock, will not be, registered under the Act, by reason of its
issuance in a transaction exempt from the registration requirements of the Act,
and that they must be held indefinitely unless a subsequent disposition thereof
is registered under the Act or is exempt from registration.
(c) Such Noteholder is an "accredited investor," as defined in Rule
501 (the provisions of which are known to such Noteholder) promulgated under the
Act and has been
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advised by individuals with such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
investment in the Company, has the ability to bear the economic risks of its
investment for an indefinite period of time, has been furnished with and has
had access to such information as reasonably requested and has had the
opportunity to ask, and has received satisfactory answers for, questions of
the Company.
(d) Such Noteholder has all requisite power and authority to enter
into this Agreement, to perform its or his obligations hereunder, and to
consummate the transactions contemplated hereby. Such Noteholder has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company.
(e) Such Noteholder has taken all requisite corporate, partnership or
other action necessary to authorize its or his execution and delivery of this
Agreement, its or his performance of its or his obligations hereunder, and its
or his consummation of the transactions contemplated hereby. This Agreement has
been executed and delivered by an officer or duly authorized representative of
each Noteholder in accordance with such authorization. This Agreement
constitutes valid and binding obligations of such Noteholder, enforceable in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, and similar laws affecting creditors' rights generally and to
general principles of equity.
(f) No person or entity acting on behalf or under the authority of
such Noteholder is or will be entitled to any broker's, finder's, or similar fee
or commission in connection with the transactions contemplated hereby which
would become an obligation of the Company.
Section 8. Conditions of Closing.
The obligation of the parties to consummate the Conversion and
Exchange is subject to the following conditions:
(a) Notes. Each Noteholder shall have (i) delivered its Note duly
endorsed for surrender to the Company and (ii) delivered a properly completed
and executed "Information Sheet" (attached as Exhibit C to the Information
Memorandum dated November 19, 1999 and distributed to the Noteholders).
(b) Certificate of Designation. The Company shall have filed the
Certificate of Designation for the Series D Preferred, Series E Preferred and
Series F Preferred with the Secretary of State of Nevada.
(c) The Noteholders shall have received a legal opinion from Xxxxxx
Xxxxxx, Nevada counsel to the Company, in such form and substance reasonably
satisfactory to the Noteholders.
Section 9. Transfer of Securities.
(a) The Preferred Stock shall only be transferable in accordance with
the Stockholders Agreement and applicable state and federal securities laws.
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(b) Each certificate representing Preferred Stock shall be stamped or
otherwise imprinted with a legend substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM. IN ADDITION, THE TRANSFER OF
THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE
STOCKHOLDERS AGREEMENT DATED AS OF MAY 7, 1999, AS AMENDED, BY AND
AMONG FIBERNET TELECOM GROUP, INC. AND THE STOCKHOLDERS LISTED THEREIN.
NO TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED."
Section 10. Notices.
Subject to the express provisions of this Agreement, all
communications provided for or permitted hereunder shall be in writing,
personally delivered to an officer or other responsible employee of the
addressee or sent by registered mail, charges prepaid, or by telecopy with
confirmed receipt (with hard copy to follow), telegram or other means of
recorded telecommunication, charges prepaid, to the applicable address set forth
below or to such other address as either party hereto may from time to time
designate to the other in such manner, provided that no communication shall be
sent by mail pending any threatened or during any actual postal strike or other
disruption of postal service in the United States. Any communication so
personally delivered shall be deemed to have been validly and effectively given
on the date of such delivery. Any communication so sent by registered mail shall
be deemed to have been validly and effectively given on the tenth Business Day
next following the day on which it is sent. Any communication so sent by
telecopy, telegram or other means of recorded telecommunication shall be deemed
to have been validly and effectively given on the Business Day next following
the day on which it is sent.
Communications sent to the Company shall be addressed to:
FiberNet Telecom Group, Inc.
000 Xxxxxxxxx Xxxxxx, Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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With a copy to:
X'XXXXXXXX GRAEV & KARABELL, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Communications sent to the Noteholders shall be addressed to each such
Noteholder's address in the Company's records.
Section 11. Governing Law. This Agreement shall be governed by the
laws of the State of New York without giving effect to any choice of law or
conflict of law provisions.
Section 12. Successors and Assigns. This Agreement shall bind and inure
to the benefit of the parties and their respective successors and assigns,
transferees, legal representatives and heirs.
Section 13. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto contain the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements and understandings with
respect hereto.
Section 14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed and delivered shall be deemed to be an
original, but all of which when taken together shall constitute but one and the
same instrument; either party may execute this Agreement by signing any
counterpart of it.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
FIBERNET TELECOM GROUP, INC.
By:
--------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President and Chief Executive
Officer
NOTEHOLDERS:
-----------
[A signature page for each Noteholder
will follow.]
SIGNAL EQUITY PARTNERS, L.P.
By: Signal Equity Advisors, L.P. Its:
General Partner
By: Signal Equity Advisors, Inc. Its:
General Partner
By:
--------------------------------------
Name:
Title:
BURDEN DIRECT INVESTMENT FUND III
By: Xxxxxxx A.M. Burden & Co., L.P.
Its: Managing General Partner
By: Burden Brothers, Inc.,
Its: Sole General Partner
By:
--------------------------------------
Name:
Title:
[Signature Page to Conversion and Exchange Agreement]
PEQUOT SCOUT FUND, LP
By:
--------------------------------------
Name:
Title:
XXXXX XXXX PARTNERS, L.P.
By: Xxxxx Xxxx Associates, L.P.
Its: General Partner
By: Xxxxx Xxxx, Inc.
Its: General Partner
By:
--------------------------------------
Name:
Title:
ALEXANDER ENTERPRISE HOLDINGS CORP.
By:
--------------------------------------
Name:
Title:
KING STREET CAPITAL LTD.
By:
--------------------------------------
Name:
Title:
KING STREET CAPITAL LP
By:
--------------------------------------
Name:
Title:
[Signature Page to Conversion and Exchange Agreement]
TAURUS TELECOMMUNICATION, INC.
By:
--------------------------------------
Name:
Title:
EXETER CAPITAL PARTNERS IV, L.P.
By: Exeter IV Advisors, L.P.
Its: General Partner
By: Exeter IV Advisors, Inc.
Its: General Partner
By:
--------------------------------------
Name:
Title:
EXETER EQUITY PARTNERS, L.P.
By: Exeter Equity Advisors, L.P.
Its: General Partner
By: Exeter Equity Advisors, Inc.
Its: General Partner
By:
--------------------------------------
Name:
Title:
WATERVIEW PARTNERS, LP
By: BRCM LLC
Its: General Partner
By:
--------------------------------------
Name:
[Signature Page to Conversion and Exchange Agreement]
Title:
DELTA OPPORTUNITY FUND, LTD.
By:
--------------------------------------
Name:
Title:
DELTA OPPORTUNITY FUND (INSTITUTIONAL),
LLC
By: Xxxx & Xxxxxxxx Management, LLC
By:
--------------------------------------
Name:
Title:
OVERBROOK FUND I, LLC
By:
--------------------------------------
Name:
Title:
-----------------------------------------
Xxxxxxxx X. Xxxx
MADISON INVESTMENT PARTNERS II LP
By: Madison Investment Partners II LLC
Its: General Partner
By:
--------------------------------------
Name:
Title:
[Signature Page to Conversion and Exchange Agreement]
-----------------------------------------
Xxxxxx X. Xxxxxxxxx
FIBER ISLAND, LLC
By:
--------------------------------------
Name:
Title:
-----------------------------------------
Xxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxxx Xxxxxx
-----------------------------------------
Xxxxxxx Xxxxx
PRISM PARTNERS I, L.P.
By:
--------------------------------------
Name:
Title:
THE RAPTOR GLOBAL PORTFOLIO LTD.
By: Tudor Investment Corp.
Its: Investment Advisor
By:
--------------------------------------
Name:
[Signature Page to Conversion and Exchange Agreement]
Title:
[Signature Page to Conversion and Exchange Agreement]
ANNEX I
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Noteholders
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Please see the attached tables.
