EXHIBIT D
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
Pursuant to a Purchase Agreement among the Company and the Investors
dated October 30, 2002 (the "Old Purchase Agreement"), certain 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 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
"Warrant"). 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
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 prior
to the date hereof) 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 the 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
Share 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.
-14-
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 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.
-15-
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:
----------------------
Name:
Title:
INVESTORS:
DEUTSCHE BANK AG NEW YORK BRANCH
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
WACHOVIA INVESTORS, INC.
By:
----------------------------------
Name:
Title:
BANK ONE, N.A.
By:
----------------------------------
Name:
Title:
IBM CREDIT CORPORATION
By:
----------------------------------
Name:
Title:
NORTEL NETWORKS INC.
By:
----------------------------------
Name:
Title:
TORONTO DOMINION (TEXAS), INC.
By:
----------------------------------
Name:
Title:
EXHIBIT A
NAME OF INVESTOR ADDRESS
------------------------------ ------------------------------
Deutsche Bank AG New York Deutsche Bank AG New York
Branch Branch
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx Xxxxxxx
Telecopy: (000) 000-0000
Wachovia Investors, Inc. Wachovia Investors, Inc.
000 X. Xxxxxxx Xx.,
XX0 XX0000,
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxx
Telecopy: (000) 000-0000
Bank One, N.A. FNBC Leasing Corporation
55 West Monroe, 17th floor
Mail Code XX0-0000
Xxxxxxx IL 60670-0502
IBM Credit Corporation IBM Credit Corporation
Xxxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Manager, Special
Handling
Toronto Dominion (Texas), Inc. Toronto Dominion (Texas), Inc.
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn : Xxxx Xxxxx, Vice
President
Nortel Networks Inc. Nortel Networks Inc.
MS 991-15-A40
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxx 00000
Attention: Customer Finance
Telecopy: 000-000-0000
