EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made and entered
into as of October 30, 2002, by and among FiberNet Telecom Group, Inc., a
Delaware corporation (the "Company"), and the purchasers listed on Schedule I
hereto (the "Purchasers").
This Agreement is being entered into pursuant to the Common Stock Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions.
-----------
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(m).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Board" shall have meaning set forth in Section 3(n).
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Closing Date" means the date of the closing of the purchase and sale of
the Shares pursuant to the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" means the Company's Common Stock, par value $0.001 per
share.
"Effectiveness Date" means with respect to the Registration Statement the
earlier of the 90th day following the Closing Date or the date which is within
five (5) Business Days of the date on which the Commission informs the Company
that the Commission (i) will not review
the Registration Statement or (ii) that the Company may request the acceleration
of the effectiveness of the Registration Statement and the Company makes such
request.
"Effectiveness Period" shall have the meaning set forth in Section 2.
--------------------
"Event" shall have the meaning set forth in Section 7(e).
-----
"Event Date" shall have the meaning set forth in Section 7(e).
----------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Filing Date" means the 30th day following the Closing Date.
-----------
"Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
-----------------
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
------------------
"Investor Rights Agreement" means that certain investors' rights agreement
dated as of even date herewith, by and among the Company and the lenders under
its senior credit facility.
"Losses" shall have the meaning set forth in Section 5(a).
------
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.
"Registrable Securities" means (i) the shares of Common Stock issued to the
Purchasers pursuant to the Purchase Agreement; (ii) the shares of Common Stock
issuable upon exercise of the Warrants; (iii) the shares of Common Stock
issuable pursuant to the Series J-1 Share Exchange Agreement dated as of October
30, 2002 by and among the Company and each
-2-
of the holders of the Company's Series J-1 preferred stock; (iv) the shares of
Common Stock issuable upon the exercise of the Series A and Series B warrants
issued to the holders of the Company's Series J-1 preferred stock; (v) the
shares of Common Stock issuable to SDS Merchant Fund, L.P. ("SDS") pursuant to
the Note Exchange Agreement dated as of October 30, 2002 by and among the
Company and SDS (in connection with the surrender by SDS of the promissory note
issued December 7, 2001 by the Company to Nortel Networks, Inc.); (vi) the
shares of Common Stock issued pursuant to the Share Exchange Agreement dated as
of October 30, 2002 by and among the Company and each of the purchasers therein
named (which agreement provides for the issuance of Common Stock upon surrender
of shares of the Company's Series H preferred stock); and (vii) all shares of
Common Stock issuable to SDS pursuant to any agreement entered into after the
date hereof between SDS and the Company providing for the surrender by SDS to
the Company of that certain promissory note issued by the Company to SDS in
March, 2002 in an initial principal amount of $2,000,000.
"Registration Statement" means the registration statements and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in such registration
statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Special Counsel" means one special counsel to the Holders, for which the
Holders will be reimbursed by the Company pursuant to Section 4.
2. Resale Registration.
--------------------
On or prior to the Filing Date the Company shall prepare and file
with the Commission a "resale" Registration Statement covering all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (except if the Company is
not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance herewith). The Company shall (i) not permit any securities other than
the Registrable Securities and the securities listed on Schedule II hereto to be
included in the
-3-
Registration Statement and (ii) use its reasonable best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
Effectiveness Date, and to keep such Registration Statement continuously
effective under the Securities Act until such date as is the earlier of (x) the
date when all Registrable Securities covered by such Registration Statement have
been sold or (y) the date on which the Registrable Securities may be sold
without any restriction pursuant to Rule 144 as determined by the counsel to the
Company pursuant to a written opinion letter, addressed to the Company's
transfer agent to such effect (the "Effectiveness Period").
3. Registration Procedures.
------------------------
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Prepare and file with the Commission on or prior to the Filing Date, a
Registration Statement on Form S-3 (or if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3 such registration
shall be on another appropriate form in accordance herewith) in accordance with
the method or methods of distribution thereof as specified by the Holders
(except if otherwise directed by the Holders), and use its reasonable best
efforts to cause the Registration Statement to become effective and remain
effective as provided herein; provided, however, that not less than five (5)
Business Days prior to the filing of the Registration Statement or any related
Prospectus (other than documents incorporated by reference therein) or any
amendment or supplement thereto, and not less than one (1) Business Day prior to
the filing of any document that would be incorporated therein by reference, the
Company shall (i) furnish to the Holders and any Special Counsel, copies of all
such documents proposed to be filed, which documents (other than those
incorporated by reference) will be subject to the review of such Holders and
such Special Counsel, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of counsel to such Holders, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities or the Special Counsel shall reasonably object in writing
within three (3) Business Days of their receipt thereof.
(b) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond as promptly as possible, but in no event later than ten (10)
business days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as possible
provide the Holders true and complete copies of all correspondence from and to
the Commission relating to the Registration Statement; and (iv) comply in all
material
-4-
respects with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold and any Special
Counsel as promptly as possible (and, in the case of (i)(A) below, not less than
five (5) days prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one (1) Business Day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is filed; (B) when the Commission
notifies the Company whether there will be a "review" of such Registration
Statement and whenever the Commission comments in writing on such Registration
Statement and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of, (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority of the Registrable
Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(f) Furnish to each Holder and any Special Counsel, without charge, at
least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, and, to the extent
requested by such Person, all documents
-5-
incorporated or deemed to be incorporated therein by reference, and all exhibits
(including those previously furnished or incorporated by reference) promptly
after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder and any Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the selling
Holders and any Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold pursuant
to a Registration Statement, which certificates shall be free of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any Holder may request at least two (2) Business
Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section 3(c)(vi), as
promptly as possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(k) Use its reasonable best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on The Nasdaq SmallCap
Market, OTC Bulletin Board or any other securities exchange, quotation system or
market, if any, on which similar securities issued by the Company are then
listed as and when required pursuant to the Purchase Agreement.
-6-
(l) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) The Company may require each selling Holder to furnish to the Company
information regarding such Holder and the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who fails to furnish such information within a reasonable time
after receiving such request.
If the Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any Registrable
Securities under the Registration Statement until it has received copies of the
Prospectus as then amended or supplemented as contemplated in Section 3(g) and
notice from the Company that such Registration Statement and any post-effective
amendments thereto have become effective as contemplated by Section 3(c) and
(ii) it and its officers, directors or Affiliates, if any, will comply with the
prospectus delivery requirements of the Securities Act as applicable to them in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
Each Holder agrees by its acquisition of such Registrable Securities that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi),
such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
(n) If (i) there is material non-public information regarding the Company
which the Company's Board of Directors (the "Board") 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, but not limited to, 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 the Board reasonably determines not to be in the Company's best
interest to disclose, then the Company may postpone
-7-
or suspend filing or effectiveness of a registration statement for a period not
to exceed 30 consecutive days, provided that the Company may not postpone or
suspend its obligation under this Section 3(n) 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 30 day periods,
arising out of the same set of facts, circumstances or transactions.
4. Registration Expenses.
---------------------
All fees and expenses incident to the performance of or compliance with
this Agreement by the Company, except as and to the extent specified in this
Section 4, shall be borne by the Company whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with The
Nasdaq SmallCap Market and each other securities exchange or market on which
Registrable Securities are required hereunder to be listed, (B) with respect to
filings required to be made with the National Association of Securities Dealers,
Inc. and the NASD Regulation, Inc. and (C) in compliance with state securities
or Blue Sky laws (including, without limitation, fees and disbursements of
counsel for the Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as the Holders of
a majority of Registrable Securities may designate)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company
and Special Counsel for the Holders, in the case of the Special Counsel, to a
maximum amount of $5,000, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement, including, without limitation, the Company's
independent public accountants (including the expenses of any comfort letters or
costs associated with the delivery by independent public accountants of a
comfort letter or comfort letters). In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
5. Indemnification.
---------------
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and
-8-
the officers, directors, agents and employees of each such controlling Person,
to the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and attorneys' fees) and expenses (collectively, "Losses"),
as incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading; provided that (i) the foregoing indemnity
shall not apply to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such Holder
or such other Indemnified Party furnished in writing to the Company by such
Holder expressly for use therein, which information was reasonably relied on by
the Company for use therein or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto, and (ii) the foregoing
indemnity shall not inure to a Holder or to any Person from whom the Person
asserting any Loss purchased Registrable Securities if copies of the Prospectus
were timely delivered to the Holders or their representatives pursuant hereto
and a copy of the Prospectus (as then amended and supplemented if the Company
shall have furnished any amendments or supplements thereto) was not sent or
given by or on behalf of such Holder or such other Person to the Person
asserting such Loss, if required by law so to have been delivered, at or prior
to the written confirmation of the sale of any Registrable Securities to such
Person, and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such Loss. The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which the
Company is aware in connection with the transactions contemplated by this
Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to any appeal or review), as incurred, to the extent arising solely out of or
based solely upon any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or arising
solely out of or based solely upon any omission of a material fact required to
be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in any
information so furnished in writing by such Holder or other Indemnified Party to
the Company specifically for inclusion in the Registration Statement or such
Prospectus and that such information was reasonably relied upon by the Company
for use in the Registration Statement, such Prospectus or such form of
prospectus or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of
-9-
Registrable Securities and was reviewed and expressly approved in writing by
such Holder expressly for use in the Registration Statement, such Prospectus or
such form of Prospectus.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel (which shall be reasonably acceptable to the
Indemnifying Party) that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, the Indemnifying Party shall be responsible for reasonable fees and
expenses of no more than one counsel for Indemnified Parties. The Indemnifying
Party shall not be liable for any settlement of any such Proceeding effected
without its written consent, which consent shall not be unreasonably withheld or
delayed. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or
-10-
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying, Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties
6. Rule 144.
--------
As long as any Holder owns any Shares, the Company covenants to timely file
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to Section 13(a) or 15(d) of the Exchange Act and to promptly furnish
the Holders with true and complete copies of all such filings. As long as any
Holder owns any Shares, if the Company is not required to file reports pursuant
to Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to
the Holders and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action as any Holder
may reasonably request, all to the extent required from time to time to enable
such Person to sell the Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act, including providing any legal opinions relating to such sale
pursuant to Rule 144. Upon the
-11-
request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
7. Miscellaneous.
-------------
(a) Remedies. In the event of a breach by the Company or by a Holder, of
any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Other than the Investor Rights Agreement,
neither the Company nor any of its subsidiaries has, as of the date hereof
entered into and currently in effect, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Except as disclosed in Schedule 2.1(c) of the Purchase Agreement, neither the
Company nor any of its subsidiaries has previously entered into any agreement
currently in effect granting any registration rights with respect to any of its
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the then outstanding
Registrable Securities, the Company shall not grant to any Person the right to
request the Company to register any securities of the Company (other than in
connection with the Investor Rights Agreement), under the Securities Act unless
the rights so granted are subject in all respects to the prior rights in full of
the Holders set forth herein, and are not otherwise in conflict with the
provisions of this Agreement.
(c) No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto, the
holders of the "Registrable Securities" as defined in the Investor Rights
Agreement, or as disclosed in Schedule 2.1(c) of the Purchase Agreement) may
include securities of the Company in the Registration Statement, and the Company
shall not after the date hereof enter into any agreement providing such right to
any of its securityholders, unless the right so granted is subject in all
respects to the prior rights in full of the Holders set forth herein, and is not
otherwise in conflict with the provisions of this Agreement.
(d) Intentionally Omitted.
---------------------
(e) Failure to File Registration Statement and Other Events. The Company
and the Purchasers agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Time or if
certain other events occur. The Company and the Holders further agree
-12-
that it would not be feasible to ascertain the extent of such damages with
precision. Accordingly, if (A) the Registration Statement is not filed on or
prior to the Filing Date, or (B) the Registration Statement is not declared
effective by the Commission on or prior to the 120th day after the Closing Date,
or (C) the Company fails to file with the Commission a request for acceleration
in accordance with Rule 461 promulgated under the Securities Act within five (5)
Business Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be "reviewed," or not subject to further review, or (D) the Registration
Statement is filed with and declared effective by the Commission but thereafter
ceases to be effective as to all Registrable Securities at any time prior to the
expiration of the Effectiveness Period, without being succeeded immediately by a
subsequent Registration Statement filed with and declared effective by the
Commission, or (E) the Company has breached Section 3(n), or (F) trading in the
Common Stock shall be suspended or if the Common Stock is delisted from The
Nasdaq SmallCap Market or the OTC Bulletin Board for any reason for more than
five Business Days in the aggregate (any such failure or breach being referred
to as an "Event," and for purposes of clauses (A) and (B) the date on which such
Event occurs, or for purposes of clause (C) the date on which such five Business
Day period is exceeded, or for purposes of clause (D) after more than fifteen
Business Days, or for purposes of clause (F) the date on which such three
Business Day period is exceeded, being referred to as "Event Date"), the Company
shall pay an amount as liquidated damages to each Holder equal to 0.3284% for
the first calendar month and 0.5365% per calendar month thereafter or portion
thereof of the Holder's initial investment in the Shares (as determined in
accordance with Schedule III attached hereto) from the Event Date (provided
that, with respect to the Event described in clause (B), the "first calendar
month" shall be deemed to commence on the 30th day prior to the applicable Event
Date) until the applicable Event is cured; provided, that, liquidated damages
for the first calendar month upon the occurrence of an Event shall be payable in
cash only, and for each calendar month thereafter shall be payable at the
Company's option in cash or shares of Common Stock. Notwithstanding anything to
the contrary in this paragraph (e), if (i) any of the Events described in
clauses (A), (B) or (C) shall have occurred, (II) on or prior to the applicable
Event Date, the Company shall have exercised its rights under Section 3(n)
hereof and (III) the postponement or suspension permitted pursuant to such
Section 3(n) shall remain effective as of such applicable Event Date, then the
applicable Event Date shall be deemed instead to occur on the second Business
Day following the termination of such postponement or suspension. If the Company
elects to pay in shares of Common Stock, the number of such shares of Common
Stock to be issued to the Holders pursuant to this paragraph (e) shall be based
on the liquidated damage amount divided by the average closing bid price of the
Common Stock for the five trading days prior to such Event Date and shall be
issuable promptly upon receipt by the Company of a written demand from a Holder
made on or after the Event Date.
(f) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
a majority of the Registrable Securities outstanding.
(g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and
-13-
effective on the earlier of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice prior to 5:00 p.m., New York City time, on a Business Day,
(ii) the Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice later than 5:00 p.m., New York City time, on any date and
earlier than 11:59 p.m., New York City time, on such date, (iii) the Business
Day following the date of mailing, if sent by nationally recognized overnight
courier service or (iv) actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be with
respect to each Holder at its address set forth under its name on Schedule I
attached hereto, or with respect to the Company, addressed to:
FiberNet Telecom Group, Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice.
(h) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns and
shall inure to the benefit of each Holder and its successors and assigns. The
Company may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of each Holder. Each Purchaser may
assign its rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.
(i) Assignment of Registration Rights. The rights of each Holder hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any Affiliate of such Holder or any
other Holder or Affiliate of any other Holder of all or a portion of the
Registrable Securities if: (i) the Holder agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment, (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment the further
disposition of such securities by the transferee or assignees is restricted
under the Securities Act and applicable state securities laws, (iv) at or before
the time the Company receives the written notice contemplated by clause (ii) of
this Section, the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions of this Agreement, (v) such transfer shall
have been made in accordance with the applicable requirements of the Purchase
Agreement, and (vi) at least 1,000,000 shares of Registrable Securities
(appropriately adjusted for any stock dividend, split or combination of the
Common Stock) are being transferred to such transferee or assignee in connection
with such assignment of rights. In addition, each Holder shall have the right to
-14-
assign its rights hereunder to any other Person with the prior written consent
of the Company, which consent shall not be unreasonably withheld. The rights to
assignment shall apply to the Holders (and to subsequent) successors and
assigns.
(j) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(k) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law thereof.
(l) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(m) Severability. If any term, provision, covenant or restriction of this
Agreement is held to be invalid, illegal, void or unenforceable in any respect,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(n) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
(o) Shares Held by the Company and its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other than any Holder or transferees or successors or assigns thereof if such
Holder is deemed to be an Affiliate solely by reason of its holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-15-
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
FIBERNET TELECOM GROUP, INC.
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President and Chief Executive
Officer
PURCHASERS:
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Investor
By: /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President, Xxxxxx Enterprises
By: /s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
Title: Investor
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Investor
By: /s/ Xxxxx D'Anduno
---------------------------------------
Name: Xxxxx D'Anduno
Title: Investor
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: Chairman, Xxxxx Xxxx, Inc.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxx
Xxxxxx & Associates
By: /s/ Xxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Director, Alexander Enterprise
Holdings Corp.
By: /s/ Xxxx Xxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxx
Title: Investor
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxx
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxx
Title: General Partner,
Xxxxxxxx Xxxxxxxxx
8701 Opportunities Fund
By: /s/ Xxxxxx Xxxxxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: President, SMFS, Inc.
By: /s/ Xxxxxxxx Xxxxx
---------------------------------------
Name: Xxxxxxxx Xxxxx
Title: President, LPS Consultants Inc.
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Sole Member, MLS Investments LLC
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Investor
By: /s/ Xxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Investor
By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Financial Officer
DMG Legacy Fund LLC
By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Financial Officer
DMG Legacy International Ltd.
By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Financial Officer
DMG Legacy Institutional
Fund LLC
By: /s/ Xxxxx X. Xxxxx
---------------------------------------
Name: Xxxxx X. Xxxxx
Title: Principal
Sargon Capital International
Fund Ltd.
By: /s/ Xxxxx X. Xxxxx
---------------------------------------
Name: Xxxxx X. Xxxxx
Title: General Counsel,
SDS Merchant Fund LP
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Investor
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Trustee, Xxxxx Xxxxx
Marital Trust
