EXHIBIT 10.5
SHARE EXCHANGE AGREEMENT
SHARE EXCHANGE AGREEMENT, dated as of October __, 2002 (this "Agreement"),
by and among FiberNet Telecom Group, Inc., a Delaware corporation (the
"Company"), and each of the purchasers whose names appear on the signature pages
hereto (collectively, the "Purchasers").
R E C I T A L S
WHEREAS, the Purchasers have purchased from Nortel Networks Inc. ("Nortel")
an aggregate of 104,578 shares of the Company's Series H Preferred Stock, par
value $.001 per share, including accrued dividends thereon (the "Preferred
Stock"), together with an aggregate of 9,826,865 shares of the Company's common
stock, par value $.001 per share (the "Common Stock"), pursuant to a Stock
Purchase Agreement, of even date herewith, by and among Nortel and the
Purchasers (the "Purchase Agreement");
WHEREAS, the Company has agreed that, immediately upon completion of the
purchase of the Preferred Stock and Common Stock pursuant to the Purchase
Agreement, it will issue to the Purchasers in exchange for each share of
Preferred Stock 975 shares of Common Stock (the "Shares"); and
WHEREAS, the Company and the Purchasers desire to enter into this Agreement
to set forth certain matters relating to such exchange.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto hereby agree as follows:
ARTICLE I.
Exchange
Section 1.1. Exchange of Preferred Stock for Shares. Upon the following
terms and conditions, and in consideration of and in express reliance upon such
terms and conditions and the representations, warranties and covenants of this
Agreement, each Purchaser shall, immediately upon completion of the purchase of
the Preferred Stock pursuant to the Purchase Agreement, surrender to the Company
for exchange, certificates representing all shares of Preferred Stock held by
such Purchaser and, in exchange for each share so surrendered, the Company shall
issue to such Purchaser 104,581,425 Shares. The number of shares of Preferred
Stock being so surrendered by each Purchaser and the number of Shares being
issued to such Purchaser in exchange therefor are each set forth opposite the
respective name of such Purchaser on Schedule 1.1 hereto. The exchanges
described in this Section 1.1 are referred to herein as the "Exchange".
Section 1.2. Closing. The closing (the "Closing") of the Exchange shall
take place at the same place as, and immediately following, the "Closing", as
defined in the Purchase Agreement. The date of the Closing is referred to herein
as the "Closing Date".
ARTICLE II.
Representations and Warranties
Section 2.1. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchasers, as of the date hereof and the
Closing Date, as follows:
(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
The Company is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary except for
any jurisdictions (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect. For the purposes of this
Agreement, "Material Adverse Effect" means any condition, circumstance, or
situation that would prohibit or hinder the Company from executing this
Agreement and/or performing any of its obligations hereunder or thereunder in
any material respect.
(b) Authorization; Enforcement. The Company has the requisite power and
authority to enter into and perform this Agreement and to consummate the
Exchange. The execution, delivery and performance of this Agreement by the
Company have been duly and validly authorized by all necessary corporate action,
and no further consent or authorization is required for the Company to effect
the transactions contemplated hereby. When executed and delivered by the
Company, the Agreement shall constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditor's rights and remedies or
by other equitable principles of general application.
(c) Issuance of Shares. The Shares have been duly authorized by all
necessary corporate action and, when issued in accordance with the terms hereof
upon surrender of the Preferred Stock in the Exchange, the Shares shall be
validly issued and outstanding, fully paid and non-assessable.
(d) No Conflicts. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby does not and will not (i) violate any provision of the
Company's Certificate of Incorporation or Bylaws, each as amended to date, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company is a party or by which any of the
Company's properties or assets are bound, or (iii) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or by which any property or asset of the Company is bound or
affected, except, in all cases, other than violations pursuant to clauses (i) or
(iii) (with respect to federal and state securities laws)
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above, except, for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The Company is not required under
federal, state, foreign or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or consummate the Exchange in accordance with
the terms hereof (other than any filings, consents and approvals which may be
required to be made by the Company under applicable state and federal securities
laws, rules or regulations, or the rules of the Nasdaq SmallCap Market, prior to
or subsequent to the Closing).
Section 2.2. Representations and Warranties of the Purchasers. Each
Purchaser hereby represents and warrants to the Company with respect solely to
itself and not with respect to any other Purchaser, as of the date hereof and as
of the Closing Date, as follows:
(a) Organization and Standing of the Purchasers. If the Purchaser is an
entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. The Purchaser has the requisite power and
authority to enter into and perform this Agreement and to consummate the
Exchange. The execution, delivery and performance of this Agreement the
Purchaser and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate (or other organizational)
action, and no further consent or authorization is required for such Purchaser
to effect the transactions contemplated hereby. When executed and delivered by
the Purchaser, this Agreement shall constitute valid and binding obligations of
each Purchaser enforceable against such Purchaser in accordance with their
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor's rights and remedies or by other equitable principles of general
application.
(c) No Conflict. The execution, delivery and performance of this Agreement
by the Purchaser and the consummation by the Purchaser of the transactions
contemplated hereby does not and will not (i) violate any provision of the
Purchaser's charter or organizational documents, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Purchaser is a party or by which the Purchaser's properties or
assets are bound, or (iii) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Purchaser or by
which any property or asset of the Purchaser is bound or affected, except, in
all cases, other than violations pursuant to clauses (i) or (iii) (with respect
to federal and state securities laws) above, except, for such conflicts,
defaults, terminations, amendments, acceleration, cancellations and violations
as would not, individually or in the aggregate, materially and adversely affect
Purchaser's ability to perform its obligations hereunder.
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(d) Acquisition for Investment. The Purchaser is acquiring the Shares
solely for its own account for the purpose of investment and not with a view to
or for sale in connection with any distribution. The Purchaser does not have a
present intention to sell any of the Shares, nor a present arrangement (whether
or not legally binding) or intention to effect any distribution of any of the
Shares, to or through any person or entity.
(e) Assessment of Risks. The Purchaser acknowledges that it (i) has such
knowledge and experience in financial and business matters that such Purchaser
is capable of evaluating the merits and risks of such Purchaser's investment in
the Company (by virtue of its purchase of Shares hereunder), (ii) is able to
bear the financial risks associated with an investment in the Shares and (iii)
has been given full access to such records of the Company and to the officers of
the Company as it has deemed necessary or appropriate to conduct its due
diligence investigation with respect to the Shares.
(f) No General Solicitation. The Purchaser acknowledges that the Shares
were not offered to such Purchaser by means of any form of general or public
solicitation or general advertising, or publicly disseminated advertisements or
sales literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media or
broadcast over television or radio or (ii) any seminar or meeting to which such
Purchaser was invited by any of the foregoing means of communications.
(g) Accredited Investor. The Purchaser is an "accredited investor" (as
defined in Rule 501 of Regulation D under the Securities Act of 1933, as
amended).
(h) Legend. The Purchaser hereby acknowledges and agrees that the
certificates representing the Shares may contain the following, or a
substantially similar, legend, which legend shall be removed only upon receipt
by the Company of an opinion of its counsel, which opinion shall be satisfactory
to the Company, that such legend may be so removed:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR FIBERNET
TELECOM GROUP, INC. SHALL HAVE RECEIVED AN OPINION OF ITS
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.
(i) Certain Fees. The Purchaser has not employed any broker or finder or
incurred any liability for any brokerage, investment banking, commission,
finders', structuring or financial advisory fees or other similar fees in
connection with this Agreement or the transactions contemplated hereby.
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ARTICLE III.
Covenants of the Parties; Waivers
Section 3.1. Covenants. The parties hereto hereby covenant with each other
as follows, which covenants, as applicable, are for the benefit of such parties
and their respective permitted assigns:
(a) Further Assurances. From and after the Closing Date, upon the request
of any Purchaser or the Company, the Company and each Purchaser shall execute
and deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
(b) Commercially Reasonable Efforts. Each party hereto will use
commercially reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable,
consistent with applicable law, to consummate and make effective in the most
expeditious manner practicable the transactions contemplated hereby, including
without limitation, making all required regulatory and other filings required by
applicable law as promptly as practicable after the date hereof.
Section 3.2. Waivers. Each Purchaser hereby agrees that its acceptance of
the Shares to be issued to it pursuant to this Agreement shall constitute full
satisfaction by the Company of its obligation to deliver shares of Common Stock
to such Purchaser hereunder and pursuant to the terms of the Preferred Stock as
set forth in the Certificate of Designations for the Preferred Stock, and each
Purchaser hereby irrevocably waives any right it may have to receive any
additional shares of Common Stock, other than the Shares to be issued to it
hereunder, pursuant to the terms of such Certificate of Designations (including
any anti-dilution provisions contained therein).
ARTICLE IV.
Conditions
Section 4.1. Conditions Precedent to the Obligation of the Company to
Close. The obligation hereunder of the Company to close and effect the Exchange
at the Closing is subject to the satisfaction or waiver, at or before the
Closing of the conditions set forth below:
(a) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing.
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(c) No Injunction, Statute or Rule. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(d) Surrender of Preferred Stock. The Purchasers shall have surrendered to
the Company all certificates representing the Preferred Stock, together with
duly executed stock powers or other appropriate instruments of transfer.
The conditions set forth in this Section 4.1 are for the Company's sole benefit
and may be waived only by the Company at any time in its sole discretion.
Section 4.2. Conditions Precedent to the Obligation of the Purchasers to
Close. The obligation hereunder of the Purchasers to close and effect the
Exchange is subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below:
(a) Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company in this Agreement shall be true
and correct in all material respects as of the Closing Date, except for
representations and warranties that speak as of a particular date, which shall
be true and correct in all material respects as of such date.
(b) Performance by the Company. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(c) No Injunction, Statute or Rule. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(d) Certificates. The Company shall have delivered to the Purchasers
certificates representing the Shares (in such denominations as each Purchaser
may request) being acquired by the Purchasers at the Closing.
The conditions set forth in this Section 4.2 are for each Purchaser's sole
benefit and may be waived only by a Purchasers (only with respect to such
Purchaser) at any time in its sole discretion.
ARTICLE V.
Miscellaneous
Section 5.1. Fees and Expenses. Each party hereto shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.
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Section 5.2. Entire Agreement; Amendment. This Agreement and the Purchase
Agreement contain the entire understanding and agreement (written or oral) of
the parties hereto with respect to the subject matter hereof and, except as
specifically set forth herein or in the Purchase Agreement, neither the Company
nor any Purchaser make any representation, warranty, covenant or undertaking
with respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by each party hereto. Any amendment or waiver effected in
accordance with this Section 5.2 shall be binding upon each such party and its
permitted assigns.
Section 5.3. Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to the Company: FiberNet Telecom Group, Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
with copies (which copies
shall not constitute notice
to the Company) to: Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
If to any Purchaser: At the address of such Purchaser set
forth on Exhibit A attached to the Purchase
Agreement.
Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto.
Section 5.4. Waivers. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any
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delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.
Section 5.5. Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 5.6. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.
Neither party hereto may assign its rights or obligations under this Agreement
(by operation of law or otherwise) without the prior written consent of each
other party hereto, and any attempted assignment without such consent shall be
void ab initio.
Section 5.7. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person or entity.
Section 5.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions thereof. This Agreement shall not
be interpreted or construed with any presumption against the party causing this
Agreement to be drafted.
Section 5.9. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart.
Section 5.10. Severability. The provisions of this Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.
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IN WITNESS WHEREOF, the parties hereto have caused this Share Exchange
Agreement to be duly executed by their respective authorized officers as of the
date first above written.
FIBERNET TELECOM GROUP, INC.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President and Chief Executive Officer
PURCHASERS:
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Investor
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President, Xxxxxx Enterprises
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Investor
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Investor
By: /s/ Xxxxx D'Anduno
-------------------------------------
Name: Xxxxx D'Anduno
Title: Investor
By: /s/ Cass Sunther
-------------------------------------
Name: Cass Sunther
Title: Managing Member, Xxxxxxx Xxxx Holdings, LLC
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Xxxxxx & Associates
By: /s/ Xxxxx Xxxxxxxxx
-------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Director, Alexander Enterprises Holdings
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxx
Title: Investor
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxx
Title: General Partner, Xxxxxxxx Xxxxxxxxx
8701 Opportunities Fund
By: /s/ Xxxxxx Xxxxxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: President, SMFS, Inc.
By: /s/ Xxxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxxxx Xxxxx
Title: President, LPS Consultants Inc.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Sole Member, MLS Investments LLC
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Investor
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Investor
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Financial Officer
DMG Legacy Fund LLC
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Financial Officer
DMG Legacy International Ltd.
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Financial Officer
DMG Legacy Institutional Fund LLC
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: Principal
Sargon Capital International Fund Ltd.
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: General Counsel, SDS Merchant Fund LP
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Investor
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: Chairman, Xxxxx Xxxx, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Trustee, Xxxxx Xxxxx Marital Trust
