Exhibit C
FIBERNET TELECOM GROUP, INC.
INVESTOR'S RIGHTS AGREEMENT
October 30, 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 .......................................... 7
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. ...................................................... 13
4.1 Legends ...................................................... 13
4.2 Entire Agreement ............................................. 14
4.3 Recapitalizations, Etc. ...................................... 14
4.4 Successors and Assigns ....................................... 14
4.5 Amendments and Waivers ....................................... 14
4.6 Notices ...................................................... 15
4.7 Severability ................................................. 15
4.8 Delays or Omissions; Remedies Cumulative ..................... 15
4.9 Attorney's Fees .............................................. 15
4.10 Governing Law ................................................ 15
4.11 Counterparts ................................................. 16
1.1. Interpretation ............................................... 16
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FIBERNET TELECOM GROUP, INC.
INVESTOR'S RIGHTS AGREEMENT
This Investor's Rights Agreement (this "Agreement") is made as of October
30, 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
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 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.
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(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, (iii) as Liquidated Damages pursuant to Section 2.1(b)
hereof, and (iv) 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) and this clause (iv). 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) "SEC" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
(r) "Securities Act" means the Securities Act of 1933, as amended.
(s) "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.
(t) "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 will issue Common Stock in exchange for all of its
issued and outstanding shares of Series J-1 Preferred Stock.
(u) "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.
(v) "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.
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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 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).
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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), 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,
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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 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
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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 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.
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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 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
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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 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,
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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;
(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.
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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 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
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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 received upon any exercise of the 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 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:
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(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) any options, warrants or other securities convertible
into or exchangeable for capital stock of the Company that are outstanding as of
the date hereof;
(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
issuable by the Company pursuant to Nortel Note Exchange Agreement, the Series H
Share Exchange Agreement, the Series J Share Exchange Agreement) and any
agreement entered into after the date hereof between SDS Merchant Fund, L.P. and
the Company 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;
(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 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):
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"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.
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
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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.
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.
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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.
1.1. 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, NA
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 Branch Deutsche Bank AG New York Branch
00 Xxxx /00/xx 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
Tel: (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
