EXHIBIT 10.4
NOTE EXCHANGE AGREEMENT
NOTE EXCHANGE AGREEMENT, dated as of October __, 2002 (this "Agreement"),
by and among FiberNet Telecom Group, Inc., a Delaware corporation (the
"Company"), and SDS Merchant Fund, LP (the "Purchaser").
R E C I T A L S
WHEREAS, the Purchaser has purchased from Nortel Networks Inc. ("Nortel")
that certain promissory note, issued on December 7, 2001 by the Company, in the
initial principal amount of $2,321,117.00 (the "Note"), pursuant to a Note
Purchase Agreement, of even date herewith, by and among Nortel and the Purchaser
(the "Purchase Agreement");
WHEREAS, the Company has agreed that, immediately upon completion of the
purchase of the Note pursuant to the Purchase Agreement, it will issue to the
Purchaser, in exchange for the Note, an aggregate of 9,002,040 shares of common
stock, par value $.001 per share, of the Company (the "Shares"); and
WHEREAS, the Company and the Purchaser 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 Note 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,
the Purchaser shall, immediately upon completion of the purchase of the Note
pursuant to the Purchase Agreement, surrender to the Company for exchange, the
Note, together with all appropriate endorsements and instruments of transfer,
and, in exchange therefor, the Company shall issue to the Purchaser the Shares.
The exchange described in this Section 1.1 is 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 Purchaser, 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 Note 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) 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
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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 Purchaser. The Purchaser
hereby represents and warrants to the Company, as of the date hereof and as of
the Closing Date, as follows:
(a) Organization and Standing of the Purchaser. The Purchaser is a limited
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its 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 organizational action, and no further
consent or authorization is required for the Purchaser to effect the
transactions contemplated hereby. When executed and delivered by the Purchaser,
this Agreement shall constitute valid and binding obligations of the Purchaser
enforceable against the 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 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.
(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
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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 the 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 the
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 or other documents 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 HEREBY (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.
ARTICLE III.
Covenants of the Parties
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:
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(a) Further Assurances. From and after the Closing Date, upon the request
of the Purchaser or the Company, the Company and the 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.
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 Purchaser's Representations and Warranties. The
representations and warranties of the 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 Purchaser. The 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 Purchaser 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) Surrender of Note. The Purchaser shall have surrendered to the Company
the Note together with all appropriate indorsements 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 Purchaser to
Close. The obligation hereunder of the Purchaser 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:
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(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 Purchaser
certificates representing the Shares (in such denominations as the Purchaser may
request) being acquired by the Purchaser at the Closing.
(e) Warrants. The Company shall have delivered to the Purchaser the
Warrants (in such denominations as the Purchaser may request) being acquired by
the Purchaser at the Closing.
The conditions set forth in this Section 4.2 are for the Purchaser's sole
benefit and may be waived only by the 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.
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 the 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
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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
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
Fax No.: (000) 000-0000
If to the Purchaser: SDS Merchant Fund, L.P.
c/o SDS Capital Partners
00 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx Xxxxx
Fax No.: (000) 000-0000
with copies (which copies
shall not constitute notice
to the Purchaser) to: Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
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 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.
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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 Note 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
SDS MERCHANT FUND, L.P.
By: SDS Capital Partners, LLC,
its general partner
By: /s/ Xxxxx Xxxxx
-------------------------------------
Name: Xxxxx Xxxxx
Title: Managing Member
