EXHIBIT 4.2
FIBERNET TELECOM GROUP, INC.
FIRST AMENDED AND RESTATED
INVESTOR'S RIGHTS AGREEMENT
November 11, 2002
TABLE OF CONTENTS
Page
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1. Definitions............................................................1
2. Registration Rights....................................................4
2.1 Shelf Registration...............................................4
2.2 Company Registration.............................................5
2.3 Obligations of the Company.......................................6
2.4 Furnish Information..............................................8
2.5 Expenses of Registration.........................................8
2.6 Delay of Registration............................................8
2.7 Indemnification..................................................8
2.8 Reports Under Securities Exchange Act of 1934...................10
2.9 Assignment of Registration Rights...............................11
2.10 Limitations on Subsequent Registration Rights...................11
2.11 Market-Standoff Agreement.......................................11
2.12 Termination of Registration Rights..............................12
3. Transfer Restrictions.................................................12
3.1 Restrictions on Transfer........................................12
3.2 Right of First Offer............................................12
4. Miscellaneous.........................................................14
4.1 Legends.........................................................14
4.2 Entire Agreement................................................14
4.3 Recapitalizations, Etc..........................................14
4.4 Successors and Assigns..........................................15
4.5 Amendments and Waivers..........................................15
4.6 Notices.........................................................15
4.7 Severability....................................................15
4.8 Delays or Omissions; Remedies Cumulative........................15
4.9 Attorney's Fees.................................................16
4.10 Governing Law...................................................16
4.11 Counterparts....................................................16
4.12 Interpretation..................................................16
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FIBERNET TELECOM GROUP, INC.
FIRST AMENDED AND RESTATED
INVESTOR'S RIGHTS AGREEMENT
---------------------------
This First Amended and Restated Investor's Rights Agreement (this
"Agreement") is made as of November 11, 2002, between FiberNet Telecom Group,
Inc., a Delaware corporation (the "Company") and the investors listed on Exhibit
A hereto, each of which is herein referred to as an "Investor".
RECITALS
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Pursuant to a Purchase Agreement among the Company and the Investors dated
October 30, 2002 (the "Old Purchase Agreement"), the Investors purchased from
the Company, and the Company sold to the Investors, upon the terms and subject
to the conditions set forth therein, shares of the Common Stock, par value
$0.001 per share, and warrants of the Company to purchase shares of Common Stock
(the "Old Warrants");
The Company and the Investors have entered into a Common Stock and Warrant
Purchase Agreement (the "Purchase Agreement") of even date herewith pursuant to
which the Company desires to sell to the Investors, and the Investors desire to
purchase from the Company, shares of the Company's Common Stock and warrants to
purchase an additional amount of such shares (the "New Warrants" and together
with the Old Warrants, the "Warrants"). A condition to the Investors'
obligations under the Purchase Agreement is that the Company and the Investors
enter into this Agreement in order to provide the Investors with certain rights
to register shares of the Company's Common Stock. The Company desires to induce
the Investors to purchase shares of Common Stock pursuant to the Purchase
Agreement by agreeing to the terms and conditions set forth herein.
AGREEMENT
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The parties agree as follows:
1. Definitions.
For purposes of this Agreement:
(a) "Business Day" means a day other than a Saturday or Sunday or any
federal holiday.
(b) "Common Stock" means the common stock, par value $0.001, of the
Company.
(c) "Credit Agreement" means the Company's Amended and Restated Credit
Agreement dated as of February 9, 2001 (as amended, supplemented, amended and
restated or otherwise modified from time to time) among FiberNet Operations,
Inc., Devnet, L.L.C., the financial institutions from time to time parties
thereto as lenders, Deutsche Bank AG
New York Branch, as administrative agent, Toronto Dominion (USA) Securities
Inc., as syndication agent, and Wachovia Investors, Inc., as documentation
agent.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(e) "Exempt Registration" means (i) a registration statement relating to
the sale of securities by the Company pursuant to a stock option, stock purchase
or similar benefit plan or an SEC Rule 145 transaction or (ii) a registration
statement filed by the Company pursuant to the terms of the New Equity
Registration Rights Agreement.
(f) "Form S-3" means such form under the Securities Act as in effect on the
date hereof or any successor form under the Securities Act that is intended to
be used as a short form for the registration of distributions of secondary
shares.
(g) "New Equity Registration Rights Agreement" means the Registration
Rights Agreement dated as of October 30, 2002, by and among the Company and the
purchasers listed on Schedule I thereto as in effect on the date hereof.
(h) "Nortel Note Exchange Agreement" means the Note Exchange Agreement,
dated as of October 30, 2002, by and between the Company and SDS Merchant Fund,
L.P. as in effect on the date hereof, pursuant to which the promissory note
issued by the Company to Nortel Networks Inc. on December 7, 2001, will be
surrendered to the Company in exchange for shares of Common Stock.
(i) "Permitted Sale" means either (1) a transfer of Common Stock or
Warrants to any Permitted Transferee, or (2) a transfer of Common Stock and
Warrants in connection with a disposition of all of the equity interests of the
Company and all of the Company's obligations under the Credit Agreement held by
the transferor.
(j) "Permitted Transferee" means (i) in the case of an Investor who is an
individual, such person's ancestors, descendants or spouse, or any custodian or
trustee for the account of such person (or for the account of such person's
ancestors, descendants or spouse), (ii) in the case of an Investor which is a
partnership or limited liability company, any constituent partner or member of
such entity, (iii) in the case of an Investor which is a corporation, any parent
corporation or wholly-owned subsidiary corporation or any officer, director or
10% stockholder of such corporation, and (iv) any other Investor.
(k) "person" means any individual, corporation, partnership, limited
liability company, trust, business, association or governmental or political
subdivision thereof, governmental agency or other entity.
(l) "Purchase Price" means an amount per share equal to $0.15 (subject to
adjustment for stock splits, stock dividends, stock recombinations and similar
transactions).
(m) "Qualified Public Offering" shall mean any firm commitment underwritten
public offering by the Company of its Common Stock yielding gross proceeds to
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the Company of at least $50.0 million at a per share price to the public of at
least $10 (subject to adjustment for stock splits, stock dividends, stock
recombinations and similar transactions).
(n) "register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement or document.
(o) The term "Registrable Securities" means the shares of Common Stock
issuable or issued to the Investors (i) pursuant to the Purchase Agreement, (ii)
in connection with the exercise of Warrants issued or issuable pursuant to the
Purchase Agreement or Old Purchase Agreement, (iii) as Liquidated Damages
pursuant to Section 2.1(b) hereof, (iv) pursuant to the Old Purchase Agreement
and (v) as (or issuable upon the conversion, exercise or exchange of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
shares listed in clauses (i), (ii), (iii), (iv) and this clause (v).
Notwithstanding the foregoing, securities shall only be treated as Registrable
Securities if and so long as they have not been (A) sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction, or (B) sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof so that all transfer restrictions, and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale.
(p) The number of shares of "Registrable Securities then outstanding" shall
equal the number of shares of Common Stock outstanding which are, and the number
of shares of Common Stock issuable pursuant to then exercisable or convertible
securities which are, Registrable Securities.
(q) "SDS Note Exchange Agreement" means the Note Exchange Agreement, dated
as of November 11, 2002, by and between the Company and SDS Merchant Fund, L.P.
as in effect on the date hereof, providing for the conversion of the entire
aggregate principal amount, all accrued and unpaid interest thereon and all
other amounts payable in respect of the promissory note issued by the Company to
SDS Merchant Fund, L.P. in March, 2002 in an initial principal amount of
$2,000,000.
(r) "SEC" means the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.
(s) "Securities Act" means the Securities Act of 1933, as amended.
(t) "Series H Share Exchange Agreement" means the Share Exchange Agreement,
dated as of October 30, 2002, by and among the Company and each of the
purchasers whose names appear on the signature pages thereto, pursuant to which
the Company will issue Common Stock in exchange for all of its issued and
outstanding shares of Series H Preferred Stock.
(u) "Series J Share Exchange Agreement" means the Series J-1 Share Exchange
Agreement, dated as of October 30, 2002, by and among the Company and each of
the purchasers whose names appear on the signature pages thereto, pursuant to
which the Company
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will issue Common Stock in exchange for all of its issued and outstanding shares
of Series J-1 Preferred Stock.
(v) "Trading Day" means, with respect to any security, any day on which the
principal market (including any formal or informal over the counter market) in
which such security is then traded or on which a quoted price therefor may be
ascertained is open for business.
(w) "Transfer Restriction Period" means, (i) with respect to each Investor
other than Nortel Networks Inc., the period of time commencing on the date of
this Agreement and ending upon the first anniversary of the date of this
Agreement, and (ii) with respect to Nortel Networks Inc., the period of time
commencing on the date of this Agreement and ending on February 28, 2003.
2. Registration Rights
2.1 Shelf Registration.
(a) Filing. The Company shall (i) prepare and file with the SEC a shelf
registration statement on Form S-3 (the "Shelf Registration Statement") pursuant
to Rule 415 under the Securities Act relating to all of the Registrable
Securities within 60 days of the date hereof (the "Filing Deadline") and (ii)
use its best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act within 180 days of the date hereof (the
"Effectiveness Deadline"). The Shelf Registration Statement may also include all
of the "Registrable Securities" as defined in the New Equity Registration Rights
Agreement.
The Company shall use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective, supplemented and amended to the
extent necessary to ensure that it is available for resale of Registrable
Securities by the holders thereof entitled to the benefits of this Section
2.1(a) and to ensure that it conforms with the requirements of this Agreement,
the Securities Act and the policies, rules and regulations of the SEC as
announced from time to time, until all Registrable Securities covered by such
Shelf Registration Statement have been sold pursuant thereto.
(b) Liquidated Damages.
If (i) the Shelf Registration Statement is not filed with the SEC on or
prior to the Filing Deadline, (ii) the Shelf Registration Statement has not been
declared effective by the SEC on or prior to the Effectiveness Deadline, or
(iii) prior to the sale of all Registrable Securities covered by such Shelf
Registration Statement, the Shelf Registration Statement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded within two Business Days by a
post-effective amendment to the Shelf Registration Statement that cures such
failure and that is itself declared effective within five Business Days of
filing such post-effective amendment to such Registration Statement (each such
event referred to in clauses (i) through (iii), a "Registration Default"), then
the Company hereby agrees to pay to each record holder of Registrable Securities
liquidated damages ("Liquidated Damages") for the period during which such
Registration Default continues at a per annum rate of 6% (or, for any period of
time during which such Registration Default continues
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after June 30, 2004, 8%) of the Purchase Price of such Registrable Securities.
Liquidated Damages shall be paid in shares of Common Stock at a per share rate
equal to the Purchase Price. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Shelf Registration Statement, (2) upon the
effectiveness of the Shelf Registration Statement, or (3) upon the filing of a
post-effective amendment to the Shelf Registration Statement that causes the
Shelf Registration Statement to again be declared effective or made usable, the
Liquidated Damages payable with respect to the Registrable Securities as a
result of such clause (i), (ii), or (iii), as applicable, shall cease to accrue.
Notwithstanding anything to the contrary in this Section 2.1(b), if a
Registration Default shall have occurred in connection with the Company's
exercise of its rights under Section 2.1(c) hereof, such Registration Default
shall not be deemed to occur until one Business Day following the termination of
the postponement or suspension permitted pursuant to such Section 2.1(c).
All accrued Liquidated Damages shall be paid to the holders of Registrable
Securities entitled thereto on the last Business Day of each month in which such
Liquidated Damages accrued. Notwithstanding the fact that any securities for
which Liquidated Damages are due cease to be Registrable Securities, all
obligations of the Company to pay Liquidated Damages with respect to securities
shall survive until such time as such obligations with respect to such
securities shall have been satisfied in full.
(c) Postponing Or Suspending Filing Or Effectiveness Of A Registration
Statement.
If (i) there is material non-public information regarding the Company which
the Company's Board of Directors reasonably determines not to be in the
Company's best interest to disclose and which the Company is not otherwise
required to disclose, or (ii) there is a significant business opportunity
(including the acquisition or disposition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer or other similar
transaction) available to the Company which such Board of Directors reasonably
determines not to be in the Company's best interest to disclose, then the
Company may postpone or suspend filing or effectiveness of a registration
statement for a period not to exceed 20 consecutive days, provided that the
Company may not postpone or suspend its obligation under this Section 2.1(c) for
more than 45 days in the aggregate during any 12 month period; provided,
however, that no such postponement or suspension shall be permitted for
consecutive 20 day periods, arising out of the same set of facts, circumstances
or transactions.
2.2 Company Registration.
(a) Initiation. If the Company proposes to register (including for this
purpose a registration effected by the Company for stockholders other than the
Investors) any of its stock in connection with a public offering of such
securities for cash (other than an Exempt Registration), the Company shall, at
such time, promptly give each Investor notice of such registration. Upon the
written request of each Investor given within 20 days after receipt by such
Investor of the Company's notice, the Company shall, subject to the provisions
of Section 2.2(b),
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cause to be registered all of the Registrable Securities that each such Investor
has requested to be registered.
(b) Underwritten Offering. In connection with any offering involving an
underwriting of shares of the Company's capital stock, the Company shall not be
required under Section 2.2(a) to include an Investor's securities in such
underwriting unless such Investor accepts the terms of the underwriting as
agreed upon between the Company and the underwriters selected by it (or by other
persons entitled to select the underwriters), and then only in such quantity as
the underwriters advise the Company in writing will not adversely affect the
marketing of the Company's capital stock. If the total amount of securities,
including Registrable Securities, requested by stockholders to be included in
such offering exceeds the maximum amount of securities sold other than by the
Company that the underwriters determine would not adversely affect the marketing
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters determine would not adversely affect the marketing of the offering
(the securities so included to be apportioned pro rata (to the nearest 100
shares) among the selling stockholders according to the total amount of
securities entitled to be included therein owned by each selling stockholder or
in such other proportions as shall mutually be agreed to by such selling
stockholders). For purposes of the preceding apportionment, for any
participating Investor that is a partnership, limited liability company or
corporation, the partners, retired partners, members, retired members and
stockholders of such Investor, or the estates and family members of any such
partners, members, retired partners or members and any trusts for the benefit of
any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all persons included in such "selling stockholder,"
as defined in this sentence.
2.3 Obligations of the Company. Whenever required under this Section 2 to
effect the registration of any Registrable Securities, in addition to any other
obligations of the Company under this Agreement, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its reasonable best efforts to cause such
registration statement to become effective.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act.
(c) Furnish to the Investors such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of such Registrable Securities.
(d) Use its reasonable best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Investors,
provided that the Company shall
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not be required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any such
states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement with the managing
underwriter of such offering in usual and customary form and consistent with the
other provisions of this Agreement. Each Investor participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.
(f) Promptly notify each Investor of Registrable Securities covered by the
registration statement at any time when the Company becomes aware of the
happening of any event as a result of which the registration statement or the
prospectus included in such registration statement or any supplement to the
prospectus (as then in effect) contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements therein (in
the case of the prospectus, in light of the circumstances under which they were
made) not misleading or, if for any other reason it shall be necessary during
such time period to amend or supplement the registration statement or the
prospectus in order to comply with the Securities Act, whereupon, in either
case, each Investor shall immediately cease to use such registration statement
or prospectus for any purpose and, as promptly as reasonably practicable
thereafter, the Company shall prepare and file with the SEC, and furnish without
charge to the appropriate Investors and managing underwriters, if any, a
supplement or amendment to such registration statement or prospectus which will
correct such statement or omission or effect such compliance and such copies
thereof as the Investors and any underwriters may reasonably request.
(g) Cause all such Registrable Securities registered pursuant hereunder to
be listed on each securities exchange or over-the-counter market on which
similar securities issued by the Company are then listed, if applicable.
(h) Provide a transfer agent and registrar for such Registrable Securities
and a CUSIP number for all such Registrable Securities, in each case not later
than the effective date of such registration.
(i) Use its reasonable best efforts, after the effectiveness of a
registration statement under the Securities Act qualifying a public offering of
Registrable Securities held by an Investor, to issue and deliver, upon delivery
of a certificate representing shares of Registrable Securities held by such
Investor, that number of Registrable Securities represented by such certificate
to the Depository Trust Company ("DTC") account on the Investor's behalf via the
Deposit Withdrawal Agent Commission System ("DWAC").
(j) Use its reasonable best efforts to furnish, at the request of any
Investor requesting registration of Registrable Securities pursuant to Section
2.2, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to Section 2.2,
if such securities are being sold through underwriters, or, if such securities
are not being sold through underwriters, on the date that the registration
statement with respect to such securities becomes effective, (i) an opinion,
dated such date, of the counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given to underwriters
in an underwritten public offering, addressed to the
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underwriters, if any, and to the Investors requesting registration of
Registrable Securities and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Investors requesting registration of Registrable Securities (to the extent
the then applicable standards of professional conduct permit said letter to be
addressed to the Investors).
2.4 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 2 with
respect to the Registrable Securities of any selling Investor that such Investor
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Investor's Registrable
Securities.
2.5 Expenses of Registration. All expenses other than underwriting
discounts and commissions incurred in connection with registrations initiated
pursuant to this Section 2, including all registration, filing and qualification
fees, printers' and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one special counsel for
the selling Investors selected by Investors selling a majority of the subject
Registrable Securities with the approval of the Company, which approval shall
not be unreasonably withheld, shall be borne by the Company.
2.6 Delay of Registration. No Investor shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.7 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 2:
(a) Indemnification by the Company. The Company will indemnify and hold
harmless each Investor, any underwriter (as defined in the Securities Act) for
such Investor, and each person, if any, who controls such Investor or
underwriter within the meaning of the Securities Act or the Exchange Act, and
their respective officers, directors, partners, members, brokers, investment
advisors, employees, legal counsel, accountants, and agents (collectively, the
"Indemnified Parties"), against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the Securities Act,
the Exchange Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law; and the Company will pay to each
such Indemnified Person, as incurred, any legal or other
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expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 2.7(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable to
any Indemnified Person for any such loss, claim, damage, liability, or action to
the extent that it arises solely out of or is based solely upon a Violation
which occurs in reasonable reliance upon and in conformity with written
information furnished expressly for use in connection with such registration, by
such Indemnified Person.
(b) Indemnification by the Investors. To the extent permitted by law, each
selling Investor will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, any underwriter, any other Investor selling securities in such registration
statement and any controlling person of any such underwriter or other Investor,
against any losses, claims, damages, or liabilities (joint or several) to which
any of the foregoing persons may become subject, under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs solely in reliance upon and in conformity with
written information furnished by such Investor expressly for use in connection
with such registration; and each such Investor will pay, as incurred, any legal
or other expenses reasonably incurred by any person intended to be indemnified
pursuant to this Section 2.7(b), in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 2.7(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Investor, which consent shall
not be unreasonably withheld; provided, that in no event shall any indemnity
under this Section 2.7(b) exceed the net proceeds from the offering received by
such Investor.
(c) Procedures. Promptly after receipt by an indemnified party under this
Section 2.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
2.7, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have
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to any indemnified party otherwise than under this Section 2.7. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation. The indemnity agreements
contained in this Section 2.7 shall not apply to amounts paid in settlement of
any loss, claim, damage, liability or action if such settlement is effected
without the consent of the indemnifying party.
(d) Contribution. If the indemnification provided for in this Section 2.7
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; provided, that in no event shall any contribution by an Investor
under this Section 2.7(d) exceed the net proceeds from the offering received by
such Investor. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Underwriting Agreement. Notwithstanding the foregoing, to the extent
that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
(f) Survival. The obligations of the Company and Investors under this
Section 2.7 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 2, and otherwise.
2.8 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Investors the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit an Investor to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times for so long as the Company
remains subject to the periodic reporting requirements under Sections 13 or
15(d) of the Exchange Act;
(b) take such action, including the voluntary registration of its Common
Stock under Section 12 of the Exchange Act, as is necessary to enable the
Investors to use Form S-3 for the sale of their Registrable Securities;
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(c) file with the SEC in a timely manner all reports and other documents as
may be required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Investor, so long as the Investor owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company
whether it has complied with the reporting requirements of SEC Rule 144, the
Securities Act and the Exchange Act, or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Investor
of any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
2.9 Assignment of Registration Rights. The rights to cause the Company to
register securities granted Investors under Section 2 may be assigned to any
Permitted Transferee or any transferee or assignee in connection with the
transfer or assignment of all or any portion of such Investor's Registrable
Securities; provided, that (a) such transfer may otherwise be effected in
accordance with applicable securities laws and other restrictions on transfer
applicable to such shares, (b) notice of such assignment is given to the Company
and (c) such transferee or assignee agrees to be bound by all provisions of this
Agreement.
2.10 Limitations on Subsequent Registration Rights. From and after the date
of this Agreement, the Company shall not, without the prior written consent of
Investors holding at least a majority of the then outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder (a) to include such securities in any registration filed under Section 2
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of its securities will not reduce the amount of the
Registrable Securities of the Investors which is included or (b) except pursuant
to the New Equity Registration Rights Agreement, to make a demand registration
which could result in such registration statement being declared effective
within 120 days after the effective date of any registration effected pursuant
to Section 2.
2.11 Market-Standoff Agreement.
(a) Market-Standoff Period; Agreement. In connection with a Qualified
Public Offering of the Company's equity securities for cash subsequent to the
date herein and upon request of the underwriters managing such offering of the
Company's securities, each Investor hereby agrees not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of any
securities of the Company (other than any disposed of in the registration and
those acquired by the Investor in the registration or thereafter in open market
transactions) without the prior written consent of such underwriters, for such
period of time (not to exceed (i) 180 days with respect to the next Qualified
Public Offering and (ii) 90 days with respect to each other Qualified Public
Offering, or in each case such shorter period as the Company agrees to with any
other person) from the effective date of such registration as may
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be requested by such managing underwriters and to execute an agreement
reflecting the foregoing as may be requested by the underwriters at the time of
such Qualified Public Offering.
(b) Limitations. The obligations described in Section 2.11(a) shall apply
only if and to the extent that all officers and directors of the Company enter
into similar agreements. If any standoff or lockup restrictions imposed on any
holder of securities of the Company is waived or terminated, then such waiver or
termination shall be granted to all Investors subject to standoff or lockup
restrictions pro rata based on the number of shares of Common Stock beneficially
held by such holder and the Investors. From and after the date of this
Agreement, the Company shall use its reasonable best efforts to ensure that all
holders of capital stock of the Company agree to be bound by terms substantially
similar to those set forth in this Section 2.11.
(c) Stop-Transfer Instructions. In order to enforce the foregoing
covenants, the Company may impose stop-transfer instructions with respect to the
securities of each Investor (and the securities of every other person subject to
the restrictions in Section 2.11(a)).
2.12 Termination of Registration Rights. No Investor shall be entitled to
exercise any registration right provided for in this Section 2 after the earlier
of (a) such time as Rule 144 is available for the sale of all of such Investor's
Registrable Securities during a three-month period without registration, without
reference to Rule 144(k) and (b) 2 years after the consummation of the Company's
next Qualified Public Offering.
3. Transfer Restrictions.
3.1 Restrictions on Transfer. Unless waived pursuant to Section 4.5, during
the Transfer Restriction Period, each Investor agrees not to transfer any shares
of Common Stock or Warrants received pursuant to the Purchase Agreement or Old
Purchase Agreement or upon any exercise of such Warrants, except pursuant to a
Permitted Sale.
3.2 Right of First Offer.
(a) General. Each Investor shall have a right of first offer to purchase
its pro rata share of all Equity Securities, as defined below, that the Company
may, from time to time, propose to sell and issue after the date of this
Agreement, other than the Equity Securities excluded by Section 3.2(c) hereof.
Each Investor's pro rata share is equal to the ratio of (a) the number of shares
of the Company's Common Stock (including all shares of Common Stock issued or
issuable upon conversion, exercise or exchange of securities of the Company)
which such Investor holds immediately prior to the issuance of such Equity
Securities to (b) the total number of shares of the Company's outstanding Common
Stock (including all shares of Common Stock issued or issuable upon conversion,
exercise or exchange of securities of the Company) immediately prior to the
issuance of the Equity Securities. The term "Equity Securities" means (i) any
Common Stock, preferred stock or other equity security of the Company, (ii) any
security convertible, with or without consideration, into any common stock,
preferred stock or other equity security of the Company (including any option or
warrant to purchase such a convertible security) and (iii) any security carrying
any warrant or right to
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subscribe to or purchase any common stock, preferred stock or other equity
security of the Company, and any such warrant or right.
(b) Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Investor shall have 5
Business Days from the receipt of such notice to agree to purchase its pro rata
share of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Investor who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale,
(c) Excluded Securities. The rights of first offer established by this
Section 3 shall have no application to any of the following Equity Securities:
(i) up to 100,441,177 shares of Common Stock, and/or options, warrants or
other Common Stock purchase rights and the Common Stock issued pursuant to such
options, warrants or other rights (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like), issued to employees,
officers, directors or strategic partners of, or consultants, advisors, lenders,
vendors or lessors to, the Company or any of its subsidiaries pursuant to the
Company's stock incentive plans or pursuant to other similar arrangements that
are approved by the Board of Directors (including the representatives of the
Investors);
(ii) [Intentionally Omitted];
(iii) any shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company;
(iv) any Equity Securities that are issued by the Company to the holders of
the Company's Common Stock and warrants on a pro rata basis pursuant to a
registration statement filed under the Securities Act;
(v) any Equity Securities issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, or options or warrants outstanding
as of the date of this Agreement as set forth in the Schedule of Exceptions to
the Purchase Agreement (including Equity Securities issued by the Company
pursuant to Nortel Note Exchange Agreement, SDS Note Exchange Agreement, the
Series H Share Exchange Agreement, and the Series J Share Exchange Agreement);
(vi) Common Stock and warrants (and Common Stock issuable upon exercise of
such warrants) issued by the Company pursuant to the Common Stock Purchase
Agreement dated as of October 30, 2002, by and between the Company and the
entities listed on Exhibit A thereto; or
(vii) any Equity Securities issued pursuant to the transactions described
in Section 2.5.B(iii)(d) of the Credit Agreement if the proceeds from such
issuance are
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used to prepay the Loans (as defined in the Credit Agreement) and permanently
reduce the Commitments (as defined in the Credit Agreement) in accordance with
Section 2.5.C. of the Credit Agreement.
4. Miscellaneous.
4.1 Legends. Each certificate representing shares of Common Stock held by
an Investor or any subsequent holder of such shares shall be stamped or
otherwise imprinted with legends substantially similar to the following (in
addition to any legend required under applicable state securities laws):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED
FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAW.
THE SALE, TRANSFER OR PLEDGE OF THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF AN AGREEMENT BETWEEN THE COMPANY AND CERTAIN HOLDERS OF ITS
SECURITIES, AS THE SAME MAY BE AMENDED AND IN EFFECT FROM TIME TO TIME. COPIES
OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
COMPANY."
The Company shall be obligated to reissue promptly unlegended certificates
at the request of any holder of a security legended pursuant to this Section 4
if such holder shall have obtained an opinion of counsel at such holder's
expense (which counsel may be counsel to the Company) reasonably acceptable to
the Company to the effect that the securities proposed to be disposed of may
lawfully be so disposed of without registration, qualification or legend. The
Company shall be obligated to reissue promptly certificates not having the
second paragraph of the legend set forth above at the request of any holder of a
security legended pursuant to this Section 4.1 if such holder is not a party to
this Agreement or a person who is an Investor or transferee of an Investor
hereunder.
4.2 Entire Agreement. This Agreement constitutes the entire agreement among
the parties hereto pertaining to the subject matter hereof, and any and all
other written or oral agreements relating to the subject matter hereof existing
among any of the parties hereto are expressly canceled.
4.3 Recapitalizations, Etc.. The provisions of this Agreement (including
any calculation of share ownership) shall apply, to the full extent set forth
herein with respect to the Registrable Securities, to any and all shares of
capital stock of the Company or any capital stock, partnership or member units
or any other security evidencing ownership interests in any successor or assign
of the Company (whether by merger, consolidation, sale of assets or otherwise)
that may be issued in respect of, in exchange for, or in substitution of the
Registrable Securities by reason of any stock dividend, split, combination,
recapitalization, liquidation, reclassification, merger, consolidation or
otherwise.
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4.4 Successors and Assigns. Except as otherwise provided in this Agreement,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties
(including transferees of any Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
4.5 Amendments and Waivers. Any term of Section 2 of this Agreement may be
amended or waived only with the written consent of the Company and the holders
of at least 75% of the Registrable Securities then outstanding. Any other term
of this Agreement may be amended or waived only with the written consent of the
Investors holding at least 75% of the Common Stock (on a fully-diluted basis)
issued pursuant to the Purchase Agreement or the Old Purchase Agreement and then
held by all Investors. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each Investor. Notwithstanding the foregoing, if
in any particular instance a party's obligations or rights under this Agreement
are adversely affected thereby in a disproportionately adverse manner from that
in which other parties are affected by application of this Section, the consent
of such party shall also be required in such instance.
4.6 Notices. Unless otherwise provided, any notice required or permitted by
this Agreement shall be in writing and shall be deemed sufficient upon delivery,
when delivered personally or by overnight courier or sent by telegram or
confirmed fax, or if mailed to a domestic address, 48 hours after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party's address or
fax number as set forth below or on Exhibit A hereto or as subsequently modified
by written notice.
4.7 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
4.8 Delays or Omissions; Remedies Cumulative. No delay or omission to
exercise any right, power or remedy accruing to any party under this Agreement,
upon any breach or default of any other party under this Agreement, shall impair
any such right, power or remedy of such non-breaching or non-defaulting party
nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party, shall be cumulative and not alternative.
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4.9 Attorney's Fees. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorney's fees, costs and
disbursements in addition to any other relief to which such party may be
entitled.
4.10 Governing Law. This Agreement and all acts and transactions pursuant
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of New York, without giving effect to principles of conflicts of
laws.
4.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.12 Interpretation. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement. When used in this Agreement, the terms "include,"
"including," "includes" and other derivations of such word shall be deemed to be
followed by the phrase "without limitation."
[Signature Page Follows]
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The parties have executed this Investor's Rights Agreement as of the date
first above written.
COMPANY:
--------
FIBERNET TELECOM GROUP, INC.
By: /s/ Xxxxxxx X. Xxxx
---------------------------------
Name: Xxxxxxx X. Xxxx
Title: President and Chief Executive
Officer
INVESTORS:
----------
DEUTSCHE BANK AG NEW YORK BRANCH
By: /s/ Xxxxx X. Xxxx
------------------------------
Name: Xxxxx X. Xxxx
Title: Director
By: /s/ Xxxxxxxxx Xxxxxxx
------------------------------
Name: Xxxxxxxxx Xxxxxxx
Title: Vice President
WACHOVIA INVESTORS, INC.
By: /s/ Xxxxxxx Xxxx
------------------------------
Name: Xxxxxxx Xxxx
Title: Authorized Officer
BANK ONE, N.A.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Assistant Vice President
IBM CREDIT CORPORATION
By: /s/ Xxx Xxxxxx
------------------------------
Name: Xxx Xxxxxx
Title: Director, Credit Operations
NORTEL NETWORKS INC.
By: /s/ Xxxxx Xxxxxx
------------------------------
Name: Xxxxx Xxxxxx
Title: Director, Customer Finance
TORONTO DOMINION (TEXAS), INC.
By: /s/ Xxxx Xxxxx
------------------------------
Name: Xxxx Xxxxx
Title: Vice President
