-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NfnE13jddKzNfeVnlOkLuUOuNw6pMzA3PtIqR60RZmCdzm3pZba3qecGStQ1BNKv OTrasnkxX3igvAiya0jc9w== 0000950123-02-010607.txt : 20021113 0000950123-02-010607.hdr.sgml : 20021113 20021112173728 ACCESSION NUMBER: 0000950123-02-010607 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20021113 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FIBERNET TELECOM GROUP INC\ CENTRAL INDEX KEY: 0001001868 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 133859938 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-56267 FILM NUMBER: 02818137 BUSINESS ADDRESS: STREET 1: 570 LEXINGTON AVENUE STREET 2: 3RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124056200 MAIL ADDRESS: STREET 1: 570 LEXINGTON AVENUE STREET 2: 3RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: DESERT NATIVE DESIGNS INC DATE OF NAME CHANGE: 19960517 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TORONTO DOMINION TEXAS INC CENTRAL INDEX KEY: 0001204496 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 909 FRANNIN ST STREET 2: SUITE 1700 CITY: HOUSTON STATE: TX ZIP: 77010 BUSINESS PHONE: 7136538200 MAIL ADDRESS: STREET 1: 909 FRANKLIN ST STREET 2: SUITE 1700 CITY: HOUSTON STATE: TX ZIP: 77010 SC 13D 1 y65341csc13d.txt SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D (RULE 13D-101) UNDER THE SECURITIES EXCHANGE ACT OF 1934 FIBERNET TELECOM GROUP, INC. (NAME OF ISSUER) Common Shares, par value $0.001 per share (TITLE OF CLASS OF SECURITIES) 315653105 (CUSIP NUMBER) Toronto Dominion (Texas), Inc. 909 Fannin, Suite 1700 Houston, Texas 77010 with a copy to: John Toufanian Latham & Watkins 885 Third Avenue New York, New York 10022 (212) 906-1200 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) October 30, 2002 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-l(b)(3) or (4), check the following box [ ]. Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule l3d-l(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The Information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Page 2 of 6 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Toronto Dominion (Texas), Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO (See Item 3) - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 85,219,943 (See Item 5) NUMBER OF ------------------------------------------------------------ SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 505,714,285 (See Item 5) REPORTING ------------------------------------------------------------ PERSON WITH 9 SOLE DISPOSITIVE POWER 85,219,943 (See Item 5) ------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 590,000,000 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 85,219,943 (See Item 5) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8.5% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. Page 3 of 6 ITEM 1 SECURITY AND ISSUER. This statement relates to common shares, par value $.001 per common share (the "Common Stock"), of FiberNet Telecom Group, Inc., a Delaware corporation (NASDAQ SC:FTGX) ("FiberNet"). FiberNet has its principal executive offices at 570 Lexington Avenue, 3rd Floor, New York, New York 10022. ITEM 2 IDENTITY AND BACKGROUND. (a) This statement is filed by Toronto Dominion (Texas), Inc. (the "Reporting Person"). The Reporting Person is organized under the laws of the state of Delaware. (b) The principal business of the Reporting Person is set forth on Schedule 1. The name, business address and principal occupation or employment of the executive officers, directors, controlling persons and trustees, as applicable of the Reporting Person and each corporation and other person ultimately in control of the Reporting Person is set forth on Schedule 1. (c) No person described in Item 2(b) nor, to the best knowledge of the Reporting Person, any person listed on Schedule 1 during the past five years has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors). (d) No person described in Item 2(b) nor, to the best knowledge of the Reporting Person, any person listed on Schedule 1 during the last five years has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (e) Except as set forth on Schedule 1, each person listed on Schedule 1 is a U.S. citizen. ITEM 3 SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Pursuant to a Purchase Agreement dated October 30, 2002 ("October Purchase Agreement"), between FiberNet, the Reporting Person, Deutsche Bank AG New York Branch ("Deutsche Bank"), Wachovia Investors, Inc. ("Wachovia"), Bank One, N.A. ("Bank One"), Nortel Networks Inc. ("Nortel") and IBM Credit Corporation ("IBM" and together with the Reporting Person, Deutsche Bank, Wachovia, Bank One, and Nortel the "Bank Lenders"), each Bank Lender purchased from FiberNet, and FiberNet sold to such Bank Lender, upon the terms and subject to the conditions set forth therein, the total number of shares of Common Stock set forth below next to such Bank Lender's name under the heading "Shares Purchased," and immediately exercisable warrants to acquire that number of shares of Common Stock set forth below next to such Bank Lender's name under the heading "Warrants," in exchange for the conversion of that amount of principal indebtedness under the Credit Agreement (defined below) Page 4 of 6 set forth below opposite such Bank Lender's name under the heading "Purchase Price."
SHARES PURCHASE REPORTING PERSON PURCHASED WARRANTS PRICE - ---------------- --------- -------- ----- Deutsche Bank AG New York Branch 120,476,190 30,119,048 $18,071,428.57 Wachovia Investors, Inc. 110,000,000 27,500,000 $16,500,000.00 Bank One, N.A 41,904,762 10,476,190 $ 6,285,714.29 IBM Credit Corporation 41,904,762 10,476,190 $ 6,285,714.29 Toronto Dominion (Texas), Inc. 62,857,143 15,714,286 $ 9,428,571.43
Pursuant to a Purchase Agreement dated November 11, 2002 ("November Purchase Agreement" and together with the October Purchase Agreement, the "Purchase Agreements"), between FiberNet, the Reporting Person and each other Bank Lender, each Bank Lender purchased from FiberNet, and FiberNet sold to such Bank Lender, upon the terms and subject to the conditions set forth therein, the total number of shares of Common Stock set forth below next to such Bank Lender's name under the heading "Shares Purchased," and immediately exercisable warrants to acquire that number of shares of Common Stock set forth below next to such Bank Lender's name under the heading "Warrants," in exchange for the conversion of that amount of accrued interest under the Credit Agreement (defined below) set forth below opposite such Bank Lender's name under the heading "Purchase Price."
SHARES PURCHASE NAME OF INVESTOR PURCHASED WARRANTS PRICE - ---------------- --------- -------- ----- Deutsche Bank AG New York Branch 5,476,190 5,476,190 $547,619.05 Wachovia Investors, Inc. 5,000,000 5,000,000 $500,000.00 Bank One, N.A 1,904,762 1,904,762 $190,476.19 IBM Credit Corporation 1,904,762 1,904,762 $190,476.19 Nortel Networks Inc. 2,857,143 2,857,143 $285,714.29 Toronto Dominion (Texas), Inc. 2,857,143 2,857,143 $285,714.29
The indebtedness and accrued interest converted pursuant to the Purchase Agreements was indebtedness and accrued interest under FiberNet'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, the "Credit Agreement"), among FiberNet Operations, Inc., Devnet, L.L.C., the financial institutions from time to time parties Page 5 of 6 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. In addition to the foregoing acquisition, in consideration of prior amendments to and waivers of the terms of the Credit Agreement, (a) Deutsche Bank acquired immediately exercisable warrants to purchase an aggregate of 709,227 shares of Common Stock; (b) the Reporting Person acquired warrants to purchase an aggregate of 934,229 shares of Common Stock.; (c) Wachovia acquired immediately exercisable warrants to purchase an aggregate of 566,666 shares of Common Stock; (d) First Chicago Investment Corporation, an affiliate of Bank One, acquired immediately exercisable warrants to purchase an aggregate of 233,129 shares of Common Stock; and (e) IBM acquired immediately exercisable warrants to purchase an aggregate of 75,000 shares of Common Stock. ITEM 4 PURPOSE OF TRANSACTION. Each Bank Lender executed the Purchase Agreements, and acquired shares of Common Stock and warrants thereunder, in connection with the conversion of an aggregate principal amount of $66,000,000 of principal indebtedness and $2,000,000 of accrued interest under the Credit Agreement. In connection with the execution of the Purchase Agreements, each Bank Lender entered into an Investor's Rights Agreement, dated October 31, 2002, as amended and restated by the First Amended and Restated Investor's Rights Agreement, dated November 11, 2002, pursuant to which FiberNet granted to each Bank Lender certain registration and preemptive rights, and each Bank Lender consented to certain transfer restrictions on the shares of Common Stock and warrants issued pursuant to the Purchase Agreements and shares of Common Stock issuable upon exercise of such warrants. In connection with the execution of the Purchase Agreements, FiberNet and each Bank Lender (other than Nortel) entered into a Stockholders Agreement, dated October 31, 2002, as amended and restated by the First Amended and Restated Stockholders Agreement, dated November 11, 2002, pursuant to which the parties thereto agreed to take certain actions to (a) cause two individuals approved by certain Bank Lenders to be elected to FiberNet's board of directors and (b) change the number of directors constituting the entire board of directors of FiberNet upon the request of certain Bank Lenders. The complete text of the Stockholders Agreement and Investor's Rights Agreement (each as amended and restated on November 11, 2002) is included in the exhibits hereto and incorporated herein by reference. ITEM 5 INTEREST IN SECURITIES OF THE ISSUER. (a) Pursuant to the terms of the Purchase Agreements, the Reporting Person acquired an aggregate of 65,714,286 shares of Common Stock, and warrants to purchase an aggregate of 18,571,429 shares of Common Stock. Together with the warrant to purchase 934,229 shares of Common Stock described in Item 3 such securities represent all of the equity securities of FiberNet held directly by the Reporting Person. Pursuant to information provided by FiberNet, such securities represent approximately 8.5% of the fully diluted number of issued and outstanding shares of FiberNet. Page 6 of 6 (b) Pursuant to the Shareholders Agreement (as amended and restated on November 11, 2002), the Reporting Person shares voting power with respect to the shares of Common Stock received by each Bank Lender (other than Nortel) pursuant to the Purchase Agreements and upon exercise of the warrants received by each such entity pursuant to the Purchase Agreements. Pursuant to the terms of the Investor's Rights Agreement (as amended and restated on November 11, 2002), each Bank Lender has agreed to certain transfer restrictions on the shares of Common Stock received it pursuant to the Purchase Agreements and upon exercise of the warrants received by it pursuant to the Purchase Agreements. The complete text of the Stockholders Agreement and Investor's Rights Agreement (each as amended and restated on November 11, 2002) is included in the exhibits hereto and is incorporated herein by reference. (c) not applicable. (d) not applicable. (e) not applicable. ITEM 6 CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS, OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Except as otherwise disclosed, there are no contracts, arrangements, understandings or relationships with respect to securities of FiberNet. For the complete text of each contract, arrangement, understanding and relationship with respect to securities of FiberNet see the Stockholders Agreement and Investor's Rights Agreement (each as amended and restated on November 11, 2002) attached hereto as exhibits. The text of each such agreement is incorporated herein by reference. ITEM 7 MATERIAL TO BE FILED AS EXHIBITS. - Purchase Agreement, dated October 30, 2002 - Purchase Agreement, dated November 11, 2002 - First Amended and Restated Stockholders Agreement, dated November 11, 2002 - First Amended and Restated Investor's Rights Agreement, dated November 11, 2002 After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. TORONTO DOMINION (TEXAS), INC. By: /s/ Jano Nixon ------------------------------------- Name: Jano Nixon Title: Vice President SCHEDULE 1 EXECUTIVE OFFICERS, DIRECTORS, CONTROLLING PERSONS AND TRUSTEES OF TORONTO DOMINION (TEXAS), INC. AND EACH PERSON ULTIMATELY IN CONTROL OF TORONTO DOMINION (TEXAS), INC. The principal business of Toronto Dominion (Texas), Inc. is providing financial services. The following individuals are directors of Toronto Dominion (Texas), Inc.
NAME BUSINESS ADDRESS/ PRINCIPAL OCCUPATION OR EMPLOYMENT - ---- ---------------------------------------------------- Thomas Spencer Vice Chair, The Toronto-Dominion Bank, 55 King Street, TD Tower, Toronto, Ontario, Canada M5K 1A2 Vic Huebner Managing Director, TD Securities (USA) Inc., 31 West 52nd Street, New York, NY 10019 Carole Clause Vice President and Director, TD Securities (USA) Inc., 909 Fannin Street, Houston, Texas 77010 Jano Nixon Vice President, TD Securities (USA) Inc. Warren Finlay Vice President, TD Securities (USA) Inc.
The following individuals are executive officers of Toronto Dominion (Texas), Inc.
NAME BUSINESS ADDRESS/ PRINCIPAL OCCUPATION OR EMPLOYMENT - ---- ---------------------------------------------------- Carole Clause Chairman of the Board The Toronto-Dominion Bank, 55 King Street, TD Tower, Toronto, Ontario, Canada M5K 1A2 Warren Finlay President The Toronto-Dominion Bank, 55 King Street, TD Tower, Toronto, Ontario, Canada M5K 1A2 Tracie Whitacre Secretary/Treasurer The Toronto-Dominion Bank, 55 King Street, TD Tower,
Toronto, Ontario, Canada M5K 1A2
The following individuals are directors of the Toronto-Dominion Bank, the person ultimately in control of the Reporting Person.
NAME AND POSITION WITH OR RELATIONSHIP OF THE TORONTO- DOMINION BANK NAME AND ADDRESS OF EMPLOYER CITIZENSHIP Mr. A. Charles Baillie The Toronto-Dominion Bank Canadian Chairman & Chief Executive Officer P.O. Box 1 Toronto-Dominion Centre Toronto, Ontario M5K 1A2 Mr. W. Edmund Clark The Toronto-Dominion Bank Canadian President & Chief Operating Officer P.O. Box 1 Toronto-Dominion Centre Toronto, Ontario M5K 1A2 Ms. Eleanor R. Clitheroe Corporate Director Canadian Director 19 Lewes Crescent North York, Ontario M4N 3J1 Mr. Marshall A. Cohen, Q.C. Counsel Canadian Director Cassels Brock & Blackwell Scotia Plaza, Suite 2100 40 King Street West Toronto, Ontario M5H 3C2 Dr. Wendy K. Dobson Professor and Director Canadian Director Institute for International Business Joseph L. Rotman School of Management University of Toronto 105 St. George Street Toronto, Ontario M5S 3E6 Darren Entwistle President and Chief Executive Officer Canadian Director TELUS Corporation 8th Floor, 555 Robson St. Vancouver, BC V6B 3K9 Mr. Henry H. Ketcham Chairman of the Board, U.S. Director President and Chief Executive Officer West Freser Timber Co. Ltd. 1000-1100 Melville Street Vancouver, BC V6E 4A6 Mr. Pierre H. Lessard President & Chief Executive Officer Canadian Director Metro Inc. 11011, boul.Maurice-Duplessis Montreal, Quebec H1C 1V6 Mr. Brian F. MacNeill Chairman of the Board Canadian Director Petro-Canada C/o Enbridge Inc. 30th Floor, 425 1st Street S.W. Calgary, Alberta T2F 3L8 Mr. Roger Phillips Corporate Director Canadian and Director C/o IPSCO Inc. British P.O. Box 1670 Armour Road Regina, Saskatchewan S4P 3C7 Mr. Edward S. Rogers President & Chief Executive Officer Canadian Director Rogers Communications Inc. 333 Bloor Street East 10th Floor Toronto, Ontario M4W 1G9 Ms. Helen K. Sinclair Chief Executive Officer Canadian Director BankWorks Trading Inc. 20 Adelaide Street East, 8th Floor Toronto, Ontario M5C 2T6 Mr. Donald R. Sobey Chairman Canadian Director Empire Company Limited 115 King Street Stellarton, N.S. B0K 1S0 Dr. Michael D. Sopico Corporate Director Canadian Director 2240 Chaneery Lane Oakville, Ontario L6J 6A3 Mr. John M. Thompson Corporate Director Canadian Director C/o IBM Corporation New Orchard Road Armonk, NY USA 10504 Mr. Richard M. Thomson c/o The Toronto-Dominion Bank Canadian Director, Former Chairman & CEO P.O. Box 1 Toronto-Dominion Centre Toronto, Ontario M5K 1A2
The following individuals are executive officers of The Toronto-Dominion Bank, the person ultimately in control of the Reporting Person.
POSITION WITH OR RELATIONSHIP TO THE NAME TORONTO-DOMINION BANK CITIZENSHIP Daniel A. Marinangeti Executive Vice President and Canadian Chief Financial Officer Andrea S. Rosen Vice Chair USA and Canadian Thomas R. Spencer Vice Chair Canadian Fredric J. Tomczyk Vice Chair Canadian Donald A. Wright Deputy Chair Canadian
EX-99.1 3 y65341cexv99w1.txt PURCHASE AGREEMENT FIBERNET TELECOM GROUP, INC. COMMON STOCK AND WARRANT PURCHASE AGREEMENT OCTOBER 30, 2002 TABLE OF CONTENTS
Page ---- 1. Purchase and Sale of Stock............................................ 1 1.1. Sale and Issuance of Common Stock and Warrants.................. 1 1.2. Closing......................................................... 1 2. Representations and Warranties of the Company......................... 2 2.1. Organization, Good Standing and Qualification................... 2 2.2. Subsidiaries.................................................... 2 2.3. Capitalization and Voting Rights................................ 2 2.4. Authorization................................................... 3 2.5. Valid Issuance of Common Stock.................................. 3 2.6. No Conflict with Laws or Other Instruments; Governmental Consents 4 2.7. Offering........................................................ 4 2.8. Returns and Complaints.......................................... 4 2.9. Litigation...................................................... 4 2.10. Intellectual Property........................................... 5 2.11. Compliance with Laws and Instruments............................ 5 2.12. Environmental Matters........................................... 5 2.13. Business Plan................................................... 7 2.14. Registration Rights............................................. 7 2.15. Corporate Documents............................................. 7 2.16. Title to Property and Assets.................................... 7 2.17. Financial Statements............................................ 7 2.18. Absence of Certain Changes...................................... 8 2.19. Absence of Undisclosed Liabilities.............................. 9 2.20. Tax Returns, Payments and Elections............................. 9 2.21. Brokers......................................................... 9 2.22. Available Credit................................................ 10 2.23. Private Placement............................................... 10 3. Representations and Warranties of the Investors....................... 10 3.1. Purchase Entirely for Own Account............................... 10 3.2. Disclosure of Information....................................... 10 3.3. Investment Experience........................................... 10 3.4. Accredited Investor............................................. 10 3.5. Restricted Securities........................................... 11 3.6. Further Limitations on Disposition.............................. 11 4. Conditions of Investor's Obligations at Closing....................... 11 4.1. Representations and Warranties.................................. 11 4.2. Performance; Material Adverse Change............................ 12 4.3. Compliance Certificate.......................................... 12 4.4. Qualifications.................................................. 12 4.5. Proceedings and Documents....................................... 12
i 4.6. Opinions of Company Counsel..................................... 12 4.7. Execution and Delivery of Transaction Documents; Issuance of Warrants and Common Stock 12 4.8. Seventh Amendment to the Amended and Restated Credit Agreement and Loan Documents 12 4.9. Good Standing Certificate....................................... 13 4.10. Secretary's Certificate......................................... 13 4.11. Consents........................................................ 13 4.12. Exchange of Certain Securities.................................. 13 4.13. Final Credit Approval........................................... 13 4.14. Company Indebtedness............................................ 13 4.15. Additional Fundraising.......................................... 14 4.16. Waivers by Holders of Existing Warrants......................... 14 4.17. Material Adverse Change, Suits and Defaults..................... 14 5. Indemnification....................................................... 14 5.1. Indemnification by the Company.................................. 14 5.2. Indemnification Procedures...................................... 15 6. Miscellaneous......................................................... 15 6.1. Survival of Representations and Warranties...................... 15 6.2. Exercise of Warrants............................................ 16 6.3. Successors...................................................... 16 6.4. Governing Law................................................... 16 6.5. Counterparts.................................................... 16 6.6. Interpretation.................................................. 16 6.7. Notices......................................................... 16 6.8. Finder's Fee.................................................... 18 6.9. Expenses........................................................ 18 6.10. Amendments and Waivers.......................................... 18 6.11. Severability.................................................... 18 6.12. Aggregation of Stock............................................ 18 6.13. Entire Agreement................................................ 18 6.14. Publication..................................................... 18 6.15. Confidentiality................................................. 19 6.16. Exculpation Among Investors..................................... 19 6.17. Register of Securities.......................................... 19 6.18. Replacement of Certificates..................................... 19 6.19. Interpretation of "Knowledge.".................................. 19
ii COMMON STOCK AND WARRANT PURCHASE AGREEMENT This Common Stock and Warrant Purchase Agreement (this "Agreement") is made as of the 30th day of October 2002, by and among FiberNet Telecom Group, Inc., a Delaware corporation (the "Company"), and the investors listed on Schedule I hereto (the "Investors"). WHEREAS, the Investors wish to purchase from the Company, and the Company wishes to sell to the Investors, upon the terms and subject to the conditions set forth herein, an aggregate of 440,000,000 shares of the Common Stock, par value $0.001 per share (the "Common Stock"), and warrants of the Company to purchase an aggregate of 110,000,000 shares of Common Stock, for an aggregate purchase price of $66,000,000; NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Purchase and Sale of Stock. 1.1. Sale and Issuance of Common Stock and Warrants. Upon the terms and subject to the conditions of this Agreement, each Investor agrees, severally and not jointly, to purchase at the Closing (as defined below), and the Company agrees to sell and issue to each Investor at the Closing, (a) that number of shares of Common Stock set forth opposite such Investor's name on Schedule I hereto under the heading "Shares Purchased," and (b) warrants, in substantially the form attached hereto as Exhibit A (the "Warrants"), to purchase that number of shares of Common Stock set forth opposite such Investor's name on Schedule I under the heading "Warrants" for the aggregate purchase price set forth opposite such Investor's name under the heading "Purchase Price" (as paid by means of the cancellation of indebtedness indicated thereon, the "Purchase Price"). The Warrants shall have an exercise price equal to $0.12 per share and shall be immediately exercisable. 1.2. Closing. The purchase and sale of the Common Stock and Warrants (the "Closing") shall take place at the offices of Latham & Watkins, 885 Third Avenue, New York, New York 10022, at 10:00 a.m., on the business day following the date on which all of the conditions to closing set forth in Article 4 have been satisfied or waived or at such other time and place as the Company and the Investors may mutually agree (the "Closing Date"). At the time of the Closing, the Company shall deliver to each Investor certificates representing the Common Stock and Warrants that such Investor is purchasing, as set forth on Schedule I attached hereto, against payment of the Purchase Price therefor. 2. Representations and Warranties of the Company. As of the date hereof and as of the Closing Date, the Company hereby represents and warrants to each Investor that, except as specifically set forth in the Schedule of Exceptions attached hereto as Schedule II (the "Schedule of Exceptions"), which exceptions shall be deemed to be representations and warranties as if made hereunder: 2.1. Organization, Good Standing and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and as presently proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the business, condition (financial or otherwise), projections or results of operations of the Company and its Subsidiaries (as defined below), taken as a whole (a "Material Adverse Effect"). 2.2. Subsidiaries. All of the subsidiaries of the Company (the "Subsidiaries") are identified in Schedule 2.2 to the Schedule of Exceptions. The equity interests of each of the Subsidiaries of the Company are identified in Schedule 2.2 to the Schedule of Exceptions. Each of the Subsidiaries of the Company identified in Schedule 2.2 to the Schedule of Exceptions is (i) a corporation or limited liability company duly organized or formed, validly existing and in good standing under the laws of its respective jurisdiction of organization set forth therein, has all requisite corporate or limited liability company power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and (ii) is qualified to do business and is in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except where the failure to be so qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. Schedule 2.2 to the Schedule of Exceptions completely and correctly sets forth the ownership of each Subsidiary of the Company. 2.3. Capitalization and Voting Rights. (a) As of the date hereof, the authorized capital of the Company consists of 2,000,000,000 shares of Common Stock, 64,331,722 shares of which were issued and outstanding as of September 30, 2002. All of the outstanding shares of Common Stock have been duly authorized, validly issued, fully paid and are nonassessable. Immediately after the consummation of the transactions contemplated by the Series H Share Exchange Agreement and the Series J Share Exchange Agreement (each as defined in Section 4.12 below), the Company will have no issued and outstanding shares of Preferred Stock. (b) The Company has reserved 16,166,720 shares of Common Stock for issuance to officers, directors, employees and consultants of the Company pursuant to its Equity Incentive Plan and certain other stock option arrangements duly adopted by the board of directors and approved by the stockholders of the Company (the "Stock Plan"). Of such reserved shares of Common Stock, options to purchase 13,746,512 shares have been granted and 2 are currently outstanding, and 2,420,208 shares remain available for issuance to officers, directors, employees and consultants pursuant to the Stock Plan. 103,452 shares of Common Stock have been issued pursuant to the Equity Incentive Plan. (c) Except as set forth on Schedule 2.3(c) to the Schedule of Exceptions, as of the date hereof, there are no outstanding options, warrants, rights (including conversion or preemptive rights, rights of first refusal or similar rights) or agreements, orally or in writing, for the purchase or acquisition from the Company of any shares of its capital stock or other securities. 2.4. Authorization. All corporate action on the part of the Company and the Subsidiaries and their respective officers, directors and stockholders (or in the case of Devnet, L.L.C., FiberNet Equal Access, L.L.C., a New York limited liability company ("Equal Access"), and Local Fiber, L.L.C., a New York limited liability company ("Local Fiber"), its partners and members) necessary for the authorization, execution and delivery of this Agreement, the Warrants, the Investor's Rights Agreement, the form of which is attached hereto as Exhibit B (the "Rights Agreement"), the Stockholders Agreement, the form of which is attached hereto as Exhibit C (the "Stockholders Agreement"), the Amended and Restated Credit Agreement, dated as of February 9, 2001, as amended prior to the date hereof and by the Agreement, Limited Waiver And Seventh Amendment, the form of which is attached hereto as Exhibit D (collectively, the "Credit Agreement"), and any documents to be executed in connection with the Credit Agreement (the "Loan Documents," collectively with this Agreement, the Warrants, the Rights Agreement, the Credit Agreement, and the Stockholders Agreement, the "Transaction Documents"), the performance of all obligations of the Company hereunder and thereunder, and the authorization, issuance, sale and delivery of the Common Stock and Warrants being sold hereunder and securities issuable upon exercise of the Warrants has been taken or will be taken prior to the Closing. Each of the Transaction Documents constitutes or, when executed and delivered, will constitute, the Company's valid and legally binding obligation, enforceable against the Company in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (c) to the extent the indemnification provisions contained in any of the Transaction Documents may be limited by applicable federal or state securities laws. 2.5. Valid Issuance of Common Stock. The Common Stock that is being purchased by the Investors hereunder, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, nonassessable, free of restrictions on transfer other than restrictions on transfer under the Transaction Documents and under applicable state and federal securities laws and, assuming the accuracy of each Investor's representations and warranties set forth in Article 3 of this Agreement, such Common Stock and the Warrants will have been issued in compliance with all applicable state and federal securities laws. The securities issuable upon exercise of the Warrants, upon issuance in accordance with the terms of the Warrants, will be duly and validly issued, fully paid, nonassessable, free of restrictions on transfer other than restrictions on transfer under the Transaction Documents and under applicable state and federal securities laws and will have been issued in compliance with all applicable state and federal securities laws. The 3 Company's equity securities outstanding as of the date of this Agreement have been issued in compliance with all applicable state and federal securities laws. 2.6. No Conflict with Laws or Other Instruments; Governmental Consents. The execution, delivery and performance by the Company and its Subsidiaries of the Transaction Documents to which each is a party and the consummation of the transactions contemplated by this Agreement and the other Transaction Documents: (a) will not require from the board of directors or stockholders of the Company or any of the Subsidiaries (or in the case of Devnet, L.L.C., Equal Access and Local Fiber, its partners or members) any consent or approval, except such as shall have been obtained prior to the Closing; (b) will not require any authorization, consent, approval, license, exemption of or filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality of government, except such filings as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"), and such other consents and approvals such as shall have been obtained or made prior to the Closing and except as could not reasonably be expected to have a Material Adverse Effect; (c) subject to the accuracy of the Investors' representations and warranties contained in Article 3 of this Agreement, will not cause the Company or any of the Subsidiaries to violate or contravene (i) any provision of law presently in effect, (ii) any rule or regulation presently in effect of any agency or government, (iii) any order, writ, judgment, injunction, decree, determination or award presently in effect, or (iv) any provision of its certificate of incorporation or bylaws or equivalent organizational documents, except, in the case of clauses (i) and (ii), as could not reasonably be expected to have a Material Adverse Effect; (d) will not violate or be in conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a default under, or require any consent, approval or authorization under, any indenture, loan or credit agreement, note agreement, deed of trust, mortgage, security agreement or other agreement, lease, instrument, commitment or arrangement to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries or any of their respective properties, assets or rights is bound, in each case, that is material to the Company and its Subsidiaries, taken as a whole; (e) will not result in the creation or imposition of any lien, encumbrance or other restriction on any of the properties, assets or rights of the Company or the Subsidiaries (in each case, other than pursuant to the terms of the Transaction Documents), except as would not have a Material Adverse Effect; and (f) will not result in the revocation, impairment, forfeiture or nonrenewal of any Permit (as defined below), except as would not have a Material Adverse Effect. 2.7. Offering. Subject to the truth and accuracy of each Investor's representations set forth in Article 3 of this Agreement, the offer, sale and issuance of the Common Stock and Warrants as contemplated by this Agreement and the issuance of the securities issuable upon exercise of the Warrants are exempt from the registration requirements of the Securities Act (as defined in Section 2.17), and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption. 2.8. Returns and Complaints. Except as it would not have a Material Adverse Effect, none of the Company and its Subsidiaries has received any written customer complaints concerning its products and/or services. 4 2.9. Litigation. Except as set forth in Schedule 2.9 of the Schedule of Exceptions, there are no actions, suits, proceedings, arbitrations or governmental investigations at law or in equity, or before or by any arbitrator or governmental instrumentality, domestic or foreign (including any environmental claims) that are, to the knowledge of the Company, pending or threatened against or affecting the Company or any of its Subsidiaries or any property of the Company or any of its Subsidiaries, which, if adversely determined, could reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries (i) is in violation of any applicable legal requirement (including environmental laws) which could reasonably be expected to have a Material Adverse Effect or (ii) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which could reasonably be expected to have a Material Adverse Effect. 2.10. Intellectual Property. To the knowledge of the Company, the Company and the Subsidiaries have obtained and hold in full force and effect the intellectual property, free from burdensome restrictions, which is necessary for the operation of its business as presently conducted except for that intellectual property which the failure to own or license could not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company, no product, process, method, substance, part or other material presently sold or employed by the Company or the Subsidiaries in connection with such business infringes any intellectual property owned by any other person, except as could not, individually and in the aggregate, reasonably be expected to have a Material Adverse Effect. All of the material intellectual property owned or used by the Company or the Subsidiaries as of the Closing Date is set forth in Schedule 2.10 to the Schedule of Exceptions. 2.11. Compliance with Laws and Instruments. None of the Company and the Subsidiaries is in violation or default (a) in any respect of any provision of its certificate of incorporation or bylaws or its equivalent organizational documents, or (b) in any material respect of any instrument, judgment, order, writ, decree, contract or agreement to which it is a party or by which it is bound, or (c) to the best of the Company's knowledge, of any provision of any federal or state statute, rule or regulation applicable to the Company or the Subsidiaries, as the case may be, which could reasonably be expected to have a Material Adverse Effect. 2.12. Environmental Matters. (a) The following terms shall be defined as follows: (i) "Environmental Laws" shall mean any and all current or future statutes, ordinances, orders, rules, regulations, guidance documents, judgments, governmental actions, or any other requirements of governmental authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity(as defined in 2.12.(a)(ii) below), (ii) the generation, use, storage, transportation or disposal of hazardous materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to the Company or the Subsidiaries or any Facility (as defined below), including the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.Section 9601 et seq.), the Hazardous Materials 5 Transportation Act (49 U.S.C.Section 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.Section 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C.Section 1251 et seq.), the Clean Air Act (42 U.S.C.Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.Section 2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.Section 136 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), the Oil Pollution Act (33 U.S.C.Section 2701 et seq.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C.Section 11001 et seq.), each as amended or supplemented, any analogous present or future state or local statutes or laws, and any regulations promulgated pursuant to any of the foregoing. (ii) "Hazardous Materials Activity" (i) any chemical, material or substance at any time defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous waste," "acutely hazardous waste," "radioactive waste," "biohazardous waste," "pollutant," "toxic pollutant," "contaminant," "restricted hazardous waste," "infectious waste," "toxic substances," or any other term or expression intended to define, list or classify substances by reason of properties harmful to health, safety or the indoor or outdoor environment (including harmful properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under any applicable Environmental Laws); (ii) any oil, petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iv) any flammable substances or explosives; (v) any radioactive materials; (vi) any asbestos-containing materials; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (ix) pesticides; and (x) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or which may or could pose a hazard to the health and safety of the owners, occupants or any persons in the vicinity of any Facility or to the indoor or outdoor environment. (iii) "Facilities" shall mean any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by the Company or the Subsidiaries or any of their respective predecessors or affiliates. (iv) "Property" shall mean all real property leased or owned by the Company or any Subsidiary either currently or in the past, excluding Rights of Way. Except as set forth in Schedule 2.12 to the Schedule of Exceptions: (v) neither the Company nor the Subsidiaries nor any of their respective Facilities are subject to any outstanding written order, consent decree or settlement agreement with any person relating to (a) any Environmental Law or (b) any Hazardous Materials Activity; (vi) neither the Company nor the Subsidiaries has received any letter or request for information under Section 104 of the Comprehensive 6 Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9604) or any comparable state law; (vii) there are and, to the Company's knowledge, have been, no conditions, occurrences, or Hazardous Materials Activities on any Facility which could reasonably be expected to form the basis of an environmental claim against the Company or the Subsidiaries; (viii) neither the Company nor the Subsidiaries nor, to the Company's knowledge, any predecessor of the Company or the Subsidiaries has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials Activities at any Facility, and neither the Company's nor the Subsidiaries' operations involves the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent; and (ix) compliance with all current requirements pursuant to or under Environmental Laws could not, individually or in the aggregate, reasonably be expected to give rise to a Material Adverse Effect. Notwithstanding anything in Schedule 2.12 to the Schedule of Exceptions to the contrary, no event or condition has occurred or is occurring with respect to the Company or the Subsidiaries relating to any Environmental Law or any Hazardous Materials Activity, including any matter disclosed on Schedule 2.12 to the Schedule of Exceptions, which individually or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect. 2.13. Business Plan. The business plan as amended, supplemented and previously delivered to each Investor (the "Business Plan") is a true and accurate copy of the Business Plan adopted by the Company. With respect to projections contained in the Business Plan, the Company represents only that such projections were prepared in good faith and that the Company reasonably believes there is a reasonable basis for such projections. 2.14. Registration Rights. Except as set forth on Schedule 2.14 to the Schedule of Exceptions, the Company has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity. 2.15. Corporate Documents. Except for amendments necessary to satisfy representations and warranties or conditions contained herein (the forms of which amendments have been approved by the Investors), the certificate of incorporation and the bylaws of the Company are in the form previously provided to special counsel for the Investors. 2.16. Title to Property and Assets. Each of the Company and the Subsidiaries has (i) good marketable and insurable fee simple title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective material properties and assets reflected in the financial statements referred to in Section 2.17 except for assets disposed of since the date of such financial statements in the ordinary course of business. Except as permitted by this Agreement and set forth on Schedule 2.16 to the Schedule of Exceptions, all such properties and assets are held free and clear of liens. 7 2.17. Financial Statements. The Company has timely filed all forms, statements and documents (the "SEC Documents") required to be filed by it with the Securities and Exchange Commission (the "SEC") and The Nasdaq SmallCap Market since September 30, 2001. All documents required to be filed as exhibits to the SEC Documents have been so filed, and all material contracts so filed as exhibits are in full force and effect, except those which have expired in accordance with their terms, and none of the Company and its Subsidiaries is in material default thereunder. As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the "Exchange Act"), and the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (collectively, the "Securities Act"). The financial statements of the Company, including the notes thereto, included in the SEC Documents (the "Company Financial Statements") complied as to form and substance in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto as of their respective dates, and were prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a basis consistent throughout the periods indicated and consistent with each other (except as may be indicated in the notes thereto or, in the case of unaudited statements included in Quarterly Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The Company Financial Statements fairly present in all material respects the consolidated financial condition and operating results of Company and its Subsidiaries at the dates and during the periods indicated therein (subject, in the case of unaudited statements, to normal, recurring year-end adjustments). Except as disclosed in the Company's periodic reports filed with the SEC, there has been no change in Company accounting policies since September 30, 2001. Except as set forth in the Company Financial Statements, the Company and its Subsidiaries have no material liabilities, contingent or otherwise, other than (a) liabilities incurred in the ordinary course of business subsequent to September 30, 2001 and (b) obligations under contracts and commitments incurred in the ordinary course of business and not required under GAAP to be reflected in the Company Financial Statements, which, in both cases, individually or in the aggregate, would not have a Material Adverse Effect. Except as disclosed in the Company Financial Statements, none of the Company and the Subsidiaries is a guarantor or indemnitor of any indebtedness of any other person, firm or corporation. 2.18. Absence of Certain Changes. From December 31, 2001 (the "Company Balance Sheet Date") to the date of this Agreement, the Company and its Subsidiaries have conducted their businesses in the ordinary course consistent with past practice and, except as disclosed in the Company's periodic reports filed with the SEC, there has not occurred: (a) any change, event or condition (whether or not covered by insurance) that has resulted in, or might reasonably be expected to result in, a Material Adverse Effect; (b) any acquisition, sale or transfer of any material asset of the Company or any of its Subsidiaries other than in the ordinary course of business and consistent with past practice; (c) any change in accounting methods or practices (including any change in depreciation or amortization policies or rates) by the Company or any revaluation by the Company of any of its or any of its Subsidiaries' assets; (d) any declaration, setting aside, or payment of a dividend or other distribution with respect to the shares of the Company or any Subsidiary, or any direct or indirect redemption, purchase or other acquisition by the Company or any Subsidiary of any of its shares of capital stock; (e) except as set forth on Schedule 2.18 to the Schedule of Exceptions, the entering into of any material contract or any material amendment by the Company or any Subsidiary, other than in the 8 ordinary course of business and as provided to the Investors; (f) any termination of, or default under, any material contract to which Company or any Subsidiary is a party or by which it is bound; (g) any amendment or change to the certificate of incorporation or bylaws or equivalent organizational documents of the Company or any Subsidiary; (h) any material change in any compensation arrangement or agreement with any employee of the Company or any Subsidiary; (i) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties, financial condition, operating results, prospects or business of the Company (as such business is presently conducted and as it is proposed to be conducted) and its Subsidiaries, taken as a whole; (j) any waiver by the Company or any Subsidiary of a valuable right or of a material debt owed to it; (k) any satisfaction or discharge of any lien, claim or encumbrance, or payment of any obligation by the Company or any Subsidiary, except in the ordinary course of business and that is not material to the assets, properties, financial condition, operating results or business of the Company (as such business is presently conducted and as it is proposed to be conducted); (l) any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets; (m) any mortgage, pledge, transfer of a security interest in, or lien, created by the Company or any Subsidiary, with respect to any of its material properties or assets, except for Permitted Liens (as defined in the Credit Agreement); or (n) any agreement or commitment by the Company or any Subsidiary to do any of the things described in this Section 2.18. 2.19. Absence of Undisclosed Liabilities. The Company has no material obligations or liabilities of any nature (matured or unmatured, fixed or contingent) other than (a) those set forth or adequately provided for in the consolidated balance sheet and the notes thereto as of December 31, 2001 (the "Company Balance Sheet Date") included in the Company Financial Statements (the "Company Balance Sheet"), (b) those incurred in the ordinary course of business and not required to be set forth in the Company Balance Sheet under GAAP, (c) those incurred in the ordinary course of business since the Company Balance Sheet Date and not reasonably likely to have a Material Adverse Effect; (d) those incurred in connection with the execution of the Transaction Documents, and (e) those disclosed in the Company's periodic reports filed with the SEC. 2.20. Tax Returns, Payments and Elections. All tax returns and reports of the Company and the Subsidiaries required to be filed by any such member have been timely filed, and all taxes required to be paid with respect to such tax returns to be due and payable and all material assessments, fees and other governmental charges upon the Company and the Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable. The Company does not know of any proposed tax assessment against the Company or the Subsidiaries which could reasonably be expected to have a Material Adverse Effect that is not being actively contested by the Company and the Subsidiaries in good faith and by appropriate proceedings and for which reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall not have been made or provided therefor. 2.21. Brokers. None of the Company and its Subsidiaries has any contract, arrangement or understanding with any broker, finder or similar agent with respect to the transactions contemplated by this Agreement. 9 2.22. Available Credit. After giving effect to the transactions occurring on the Closing Date, the Company will have not less than $3.3 million in cash and available credit. 2.23. Private Placement. No form of general solicitation or general advertising (as defined in Regulation D under the Securities Act) was used by the Company or any of its respective representatives (other than the Investors, as to whom the Company makes no representation) in connection with the offer and sale of the Common Stock and Warrants hereby, including, but not limited to, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Except as set forth on Schedule 2.23 to the Schedule of Exceptions, no securities of the same class as the Common Stock or Warrants have been issued and sold by the Company within the six-month period immediately prior to the date hereof. 3. Representations and Warranties of the Investors. Each Investor hereby represents and warrants that: 3.1. Purchase Entirely for Own Account. This Agreement is made by the Company with such Investor in reliance upon such Investor's representation to the Company, which by such Investor's execution of this Agreement such Investor hereby confirms, that the Common Stock and Warrants to be received by such Investor pursuant to this Agreement (collectively, the "Securities") will be acquired for investment for such Investor's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same, except in compliance with applicable federal or state securities laws. By executing this Agreement, such Investor further represents that such Investor does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. 3.2. Disclosure of Information. Such Investor believes it has received all the information it considers necessary and appropriate for deciding whether to purchase the Securities. Such Investor further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Common Stock and Warrants and the business, properties, prospects and financial condition of the Company. The foregoing, however, does not limit or modify the representations and warranties of the Company in this Agreement or the right of the Investors to rely thereon. 3.3. Investment Experience. Such Investor can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of its investment in the Common Stock and Warrants. If other than an individual, Investor also represents that it has not been organized for the purpose of acquiring the Securities. 3.4. Accredited Investor. Such Investor is an "accredited investor" within the meaning of SEC Rule 501 of Regulation D, as presently in effect. 10 3.5. Restricted Securities. Such Investor understands that the Securities it is purchasing are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such Securities may not be resold without registration under the Securities Act, except in certain limited circumstances. In this connection, such Investor represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act. 3.6. Further Limitations on Disposition. Without in any way limiting the representations set forth above, such Investor further agrees not to make any disposition of all or any portion of the Securities unless and until either, (a) there is then in effect a Registration Statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement; or (b) (i) such Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, (ii) if reasonably requested by the Company, such Investor shall have furnished the Company an opinion of counsel, in form and substance reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Act, and (iii) the transferee has agreed in writing to be bound by this Article 3, the Rights Agreement and the Stockholders Agreement (with respect to the Stockholders Agreement and the Rights Agreement to the extent that the transferor was so bound). It is agreed that the Company will not require opinions of counsel pursuant to this Section 3.6(b) for transactions made pursuant to Rule 144, provided that it receives appropriate representations from the seller with regard to compliance with Rule 144, except in unusual circumstances. Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be required by the Company for (i) a transfer to a Permitted Transferee (as defined in the Rights Agreement), or (ii) a transfer by an Investor to any entity directly or indirectly controlled by or controlling the Investor. 4. Conditions of Investor's Obligations at Closing. The obligations of each Investor under Section 1.1 of this Agreement are subject to the fulfillment on or before the Closing Date of each of the following conditions, the waiver of which shall not be effective against any Investor who does not consent in writing thereto: 4.1. Representations and Warranties. The representations and warranties of the Company contained in Article 2 shall be true in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality, which representation and warranties as so qualified shall be true and correct in all respects) on and as of the Closing Date as though such representations and warranties had been made on and as of the Closing Date. 11 4.2. Performance; Material Adverse Change. The Company shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing Date. There shall not have occurred a Material Adverse Effect. 4.3. Compliance Certificate. The Chief Executive Officer or the Chief Financial Officer of the Company shall deliver to each Investor at the Closing a certificate on behalf of the Company stating that the conditions specified in Sections 4.1 and 4.2 of this Agreement have been fulfilled. 4.4. Qualifications. All authorizations, approvals, waivers, consents or permits, if any, of any governmental authority or regulatory body of the United States or of any state or self regulatory agency that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement, including such as may be required under the Securities Act, under state Blue Sky laws and under HSR, shall have been duly obtained by and effective as of the Closing. 4.5. Proceedings and Documents. Receipt of all governmental, shareholder and third party consents and approvals necessary in connection with the issuance of the Common Stock and Warrants hereunder, and the related financings and other transactions contemplated hereby and expiration of all applicable waiting periods without any action being taken by any competent authority that could restrain, prevent or impose any materially adverse conditions on the issuance of the Common Stock and Warrants hereunder and no such law or regulation shall be applicable which in the reasonable judgment of the Administrative Agent under the Credit Agreement could reasonably be expected to have any such effect. 4.6. Opinions of Company Counsel. Each Investor shall have received from outside counsel for the Company, an opinion, dated as of the Closing Date, in substantially the form attached hereto as Exhibit E. 4.7. Execution and Delivery of Transaction Documents; Issuance of Warrants and Common Stock. Each Investor shall have received a duly executed copy of each Transaction Document executed by each other party thereto, and the Company shall have issued and delivered to each Investor certificates representing the shares of Common Stock and Warrants acquired by such Investor pursuant to this Agreement. 4.8. Seventh Amendment to the Amended and Restated Credit Agreement and Loan Documents. Each of the Borrowers (as defined in the Credit Agreement) and the Administrative Agent (as defined in the Credit Agreement) shall have entered into the Seventh Amendment to the Amended and Restated Credit Agreement in substantially the form attached hereto as Exhibit D (the "Seventh Amendment"), and any Loan Documents to which it is a party, in each case, with such changes as the authorized officers of the parties thereto shall have approved. Consents to the approval of the Credit Agreement and the Loan Documents shall have been executed and delivered by each lender whose consent is required under the terms of the Credit Agreement. 12 4.9. Good Standing Certificate. The Company shall have delivered to the special counsel of the Investors Certificates of Good Standing issued by the Secretary of State of the State of Delaware and of each state where the Company is authorized to do business. 4.10. Secretary's Certificate. The Company shall have delivered to the Company a certificate issued by the Secretary of the Company certifying as to the Company's certificate of incorporation and bylaws and resolutions and/or consents of the Company's board of directors and stockholders. 4.11. Consents. The Company shall have delivered to the Investors satisfactory evidence of the consent, approval or waiver of those parties whose consent, approval or waiver shall be necessary or advisable in connection with the execution of any Transaction Document and the performance of obligations thereunder, including pursuant to the contracts set forth on Schedule 2.6 to the Schedule of Exceptions. 4.12. Exchange of Certain Securities. The Company shall have consummated each of the transactions contemplated by each of the Nortel Note Exchange Agreement, the Series H Share Exchange Agreement, and the Series J Share Exchange Agreement, including 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 of the Company to Nortel Networks Inc. ("Nortel"), dated December 7, 2001 (the "Nortel Note"), into 9,002,040 shares of Common Stock. For purposes of this Agreement, the "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 9,002,040 shares of Common Stock; the "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 approximately 104,581,425 shares of Common Stock in exchange for all of its issued and outstanding shares of Series H Preferred Stock; and the "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 60,600,000 shares of Common Stock in exchange for all of its issued and outstanding shares of Series J-1 Preferred Stock. 4.13. Final Credit Approval. Each of the Investors and each affiliate of the investors shall have received final credit approval to enter into this Agreement and the documents contemplated by this Agreement (including the Credit Agreement and the Seventh Amendment) and perform each of its obligations under each such agreement. 4.14. Company Indebtedness. Giving effect to the conversion of indebtedness contemplated by this Agreement, the Company shall have (a) no indebtedness other than (1) $41 million of loans under the Credit Agreement, (2) $700,000 of capital lease obligations, and (3) $2,080,000 of indebtedness outstanding under the Promissory Note of the 13 Company to SDS Merchant Fund, L.P., dated March 14, 2002, and (b) only one class of capital stock outstanding, which shall be the Common Stock. 4.15. Additional Fundraising. The receipt by the Company of at least $3.3 million of net proceeds from the issuance of additional Common Stock and Warrants of the same class and series as, and otherwise identical to, the Common Stock and Warrants issued hereunder on terms satisfactory to the Investors (the "Required Equity"). The Company shall not utilize the proceeds of the Required Equity to fund the purchase of securities held by Nortel (including the Nortel Note and the Company's Series H Preferred Stock). 4.16. Waivers by Holders of Existing Warrants. The Company shall have obtained waivers from holders of its warrants outstanding immediately prior to the Closing Date (the "Pre-Existing Warrants") as required to provide that the number of shares of Common Stock acquirable under the terms thereof shall not increase as a result of the transactions contemplated by this Agreement, the Nortel Note Exchange Agreement, the Series H Share Exchange Agreement and the Series J Share Exchange Agreement. 4.17. Material Adverse Change, Suits and Defaults. There shall have occurred no material adverse change in the business, assets, condition (financial or otherwise), operations, performance, properties, prospects or projections of the Company since the end of the most recently ended fiscal year for which audited financial statements have been provided to the Investors or in the facts and information as represented to date. There shall exist no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that purports to materially and adversely affect the issuance of the Common Stock or Warrants hereunder or that could reasonably be expected to have a Material Adverse Effect. There shall exist no default under the Transaction Documents or event that, with notice and/or the passage of time, could become an event of default. There shall exist no facts, events or circumstances which come to the attention of any Investor, which, in its good faith determination, materially adversely affect the business, assets, condition (financial or otherwise), operations, performance, properties prospects and projections of the Company. 5. Indemnification. 5.1. Indemnification by the Company. Subject to the provisions of this Article 5, the Company agrees to indemnify the Investors and their respective officers, partners, employees, agents or representatives (collectively, "Investor-indemnified parties") against and to hold each Investor-indemnified party harmless from any and all damages, losses, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys' fees and expenses in connection with any action, claim, suit or proceeding) (collectively, "Damages") incurred or suffered by any Investor-indemnified party arising from or in connection with (a) any inaccuracy in any representation or the breach of any warranty of the Company or any Subsidiary under a Transaction Document, (b) the failure of the Company or any Subsidiary duly to perform or observe any term, provision, covenant or agreement to be performed or observed 14 by the Company or any Subsidiary pursuant to this Agreement or the Warrants, (c) the assertion by any person not a party to this Agreement of any claim against an Investor-indemnified Party in connection with the matters or transactions that are the subject of or contemplated by this Agreement or any of the other Transaction Documents, or (d) the status of any Investor-indemnified Party as a holder of equity interests in the Company or the existence or exercise of the rights and powers of such Investor-indemnified Party relating thereto. 5.2. Indemnification Procedures. (a) If the indemnified parties shall seek indemnification pursuant to this Article 5, the indemnified parties shall give prompt notice to the Company (as such, the "indemnifying party") of the assertion of any claim, or the commencement of any action, suit or proceeding, in respect of which indemnity may be sought hereunder and will give the indemnifying party such information with respect thereto as the indemnifying party may reasonably request, but no failure to give such notice shall relieve the indemnifying party of any liability hereunder, except to the extent of actual prejudice or damages suffered as a result thereof. The indemnifying party may, at its expense, participate in or assume the defense of any such action, suit or proceeding involving a third party with counsel reasonably acceptable to the indemnified party. The indemnified party will have the right to employ its counsel in any such action, but the fees and expenses of such counsel will be at the expense of such indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (ii) named parties include both the indemnified party and the indemnifying party, and such counsel has advised the indemnified party that there may be legal defenses available to it that are different from or in addition to those available to the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (iii) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees and expenses of counsel will be at the expense of the indemnifying party, and the indemnifying party shall reimburse or pay such fees and expenses as they are incurred. Whether or not the indemnifying party chooses to defend or prosecute any claim involving a third party, all the parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. (b) The indemnifying party shall not be liable under this Article 5 for any settlement effected without its consent of any claim, litigation or proceedings by a third party in respect of which indemnity may be sought hereunder, unless the indemnifying party refuses to acknowledge liability for indemnification under this Section 5.2 and/or declines to defend the indemnified party in such claim, litigation or proceeding. 6. Miscellaneous. 6.1. Survival of Representations and Warranties. Except as otherwise set forth in this Section 6.1, the representations and warranties of the Company and the Subsidiaries shall survive any investigation at any time made by or on behalf of the parties hereto and consummation of the transactions contemplated by this Agreement. 15 6.2. Exercise of Warrants. The Company shall use its reasonable best efforts to cause by February 1, 2003, each holder of its Pre-Existing Warrants to agree that, upon the request of the Company, such holder will agree to the repricing of the exercise price of such securities to $0.001 per share of Common Stock and that immediately following such repricing, such holder will exercise such securities. 6.3. Successors. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties under the Stockholders Agreement and hereunder. 6.4. Governing Law. This Agreement shall be governed by and construed under the laws of the State of New York, without regard to the principles of conflicts of law thereof. 6.5. 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. 6.6. 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." 6.7. Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (c) 5 days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) 1 day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the address as set forth below or at such other address as such party may designate by 10 days advance written notice to the other parties hereto: (i) if to the Company, to: FiberNet Telecom Group, Inc. 570 Lexington Avenue 3rd Floor New York, New York 10022 Attention: President Facsimile: (212) 421-8920 with a copy to: Willkie Farr & Gallagher 787 Seventh Avenue 16 New York, New York 10019 Attention: Gordon R. Caplan, Esq. Facsimile: (212) 728-8111 (ii) if to Investors, to: Deutsche Bank AG New York Branch 31 West 52nd Street New York, New York 10019 Attention: Alexander Richarz Telecopy: (646) 324-7455 Wachovia Investors, Inc. 301 S. College St. TW5 NC0537 Charlotte, NC 28288 Attention: Matthew Berk Telecopy: (704) 383-9831 Bank One, N.A. 55 West Monroe, 17th floor Mail Code IL1-0502 Chicago IL 60670-0502 IBM Credit Corporation North Castle Drive Armonk, NY 10504 Attn: Manager, Special Handling Nortel Networks Inc. MS 991-15-A40 2221 Lakeside Boulevard Richardson, Texas 75082 Attention: Customer Finance Telecopy: 972-684-3679 Toronto Dominion (Texas), Inc. 909 Fannin, Suite 1700 Houston, Texas 77010 Attn : Jano Nixon, Vice President with a copy to: Latham & Watkins 885 Third Avenue New York, New York 10022 17 Attention: John N. Toufanian, Esq. Facsimile: (212) 751-4864 6.8. Finder's Fee. Except as disclosed in the Schedule of Exceptions, each party represents that it neither is nor will be obligated for any finders' fee or commission in connection with this transaction. Each party agrees to indemnify and to hold harmless from any liability for any commission or compensation in the nature of a finders' fee (and the costs and expenses of defending against such liability or asserted liability) for which such party or any of its officers, partners, employees, or representatives is responsible, each other party and such other party's officers, partners, employees or representatives. 6.9. Expenses. Irrespective of whether the Closing is effected, the Company shall pay all costs and expenses incurred by it, its affiliates and the Investors with respect to the negotiation, execution, delivery and performance of this Agreement, including the reasonable fees and expenses of Latham & Watkins, counsel to the Investors. 6.10. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of more than 75% of the Common Stock (on a fully-diluted basis) issued or issuable hereunder. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Securities purchased under this Agreement at the time outstanding (including Securities into which such Securities are convertible), each future holder of all such Securities, and the Company. 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. 6.11. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 6.12. Aggregation of Stock. All shares of the Common Stock and all Warrants held or acquired by affiliated entities or persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. 6.13. Entire Agreement. This Agreement and the documents referred to herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein. 6.14. Publication. No party hereto shall use any other party's name or refer to any other party directly or indirectly in any advertisement, news release or professional or trade publication, or in any other manner, unless otherwise required by law or with such party's prior written consent, or pursuant to this Section 6.14. None of the parties to any of the Transaction Documents shall issue any press release or other public statement relating to this 18 Agreement or the transactions contemplated hereby unless advised by counsel that such disclosure is required by law and, in any case, without first giving the other parties the opportunity to review and comment upon such statement unless not reasonably practicable under the circumstances. 6.15. Confidentiality. Each party hereto agrees that, except with the prior written permission of the other parties, or as permitted by Section 6.14 of this Agreement, it shall at all times keep confidential and not divulge, furnish or make accessible to anyone any confidential information, knowledge or data concerning or relating to the business or financial affairs of the other parties to which such party has been or shall become privy by reason of this Agreement, discussions or negotiations relating to this Agreement, the performance of its obligations hereunder or the ownership of Common Stock and Warrants purchased hereunder. In addition, the Company agrees it will not disclose, and will not include in any public announcement, the name of the Investors, unless expressly agreed to by the Investors or unless and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement. The provisions of this Section 6.15 shall be in addition to, and not in substitution for, the provisions of any separate nondisclosure agreement executed by the parties hereto with respect to the transactions contemplated hereby. 6.16. Exculpation Among Investors. Each Investor acknowledges that it is not relying upon any person, firm or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each Investor agrees that no Investor nor the respective controlling persons, officers, directors, partners, agents, or employees of any Investor shall be liable to any other Investor for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the purchase of the Securities. 6.17. Register of Securities. The Company or its duly appointed agent shall maintain a separate register for the shares of Common Stock in which it shall register the issue and sale of all such shares. All transfers of securities shall be recorded on the register. The Company shall be entitled to regard the registered holder of its securities as the holder of such securities so registered for all purposes until the Company or its agent is required to record a transfer of such securities on its register. The Company or its agent shall be required to record a transfer when it receives the security to be transferred duly and properly endorsed by the registered holder thereof or by its attorney duly authorized in writing. 6.18. Replacement of Certificates. Upon receipt of a lost instrument certificate with indemnity provisions reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any certificate representing any Company securities, the Company shall issue a new certificate representing such securities in lieu of such lost, stolen, destroyed or mutilated certificate. 6.19. Interpretation of "Knowledge." Statements herein that are qualified as to the "knowledge of the Company" or similar statements shall mean the actual knowledge of the executive officers of the Company, after reasonable inquiry; provided that any statement qualified as to the "actual knowledge" of the Company shall mean the actual knowledge of the executive officers of the Company, without inquiry. 19 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. FIBERNET TELECOM GROUP, INC. By: ------------------------------------- Name: Title: DEUTSCHE BANK AG NEW YORK BRANCH By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: WACHOVIA INVESTORS, INC. By: ------------------------------------- Name: Title: BANK ONE, N.A. By: ------------------------------------- Name: Title: IBM CREDIT CORPORATION By: ------------------------------------- Name: Title: 20 NORTEL NETWORKS INC. By: ------------------------------------- Name: Title: TORONTO DOMINION (TEXAS), INC. By: ------------------------------------- Name: Title: SCHEDULE I
SHARES PURCHASE NAME OF INVESTOR PURCHASED WARRANTS PRICE(1) - ---------------- --------- -------- -------- Deutsche Bank AG New York Branch 120,476,190 30,119,048 $18,071,428.57 Wachovia Investors, Inc. 110,000,000 27,500,000 $16,500,000.00 Bank One, N.A 41,904,762 10,476,190 $ 6,285,714.29 IBM Credit Corporation 41,904,762 10,476,190 $ 6,285,714.29 Nortel Networks Inc. 62,857,143 15,714,286 $ 9,428,571.43 Toronto Dominion (Texas), 62,857,143 15,714,286 $ 9,428,571.43 Inc. TOTAL 440,000,000 110,000,000 $66,000,000.00
(1) To be paid by means of the conversion of $66,000,000 of principal indebtedness due under 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. SCHEDULE II SCHEDULE OF EXCEPTIONS EXHIBIT A FORM OF WARRANT EXHIBIT B FORM OF RIGHTS AGREEMENT EXHIBIT C FORM OF STOCKHOLDERS AGREEMENT EXHIBIT D CREDIT AGREEMENT AND FORM OF SEVENTH AMENDMENT EXHIBIT E FORM OF LEGAL OPINION EX-99.2 4 y65341cexv99w2.txt PURCHASE AGREEMENT FIBERNET TELECOM GROUP, INC. COMMON STOCK AND WARRANT PURCHASE AGREEMENT NOVEMBER 11, 2002 TABLE OF CONTENTS
Page ---- 1. Purchase and Sale of Stock............................................. 1 1.1. Sale and Issuance of Common Stock and Warrants................... 1 1.2. Closing.......................................................... 2 2. Representations and Warranties of the Company.......................... 2 2.1. Organization, Good Standing and Qualification.................... 2 2.2. Subsidiaries..................................................... 2 2.3. Capitalization and Voting Rights................................. 3 2.4. Authorization.................................................... 3 2.5. Valid Issuance of Common Stock................................... 4 2.6. No Conflict with Laws or Other Instruments; Governmental Consents 4 2.7. Offering......................................................... 5 2.8. Returns and Complaints........................................... 5 2.9. Litigation....................................................... 5 2.10. Intellectual Property............................................ 5 2.11. Compliance with Laws and Instruments............................. 6 2.12. Environmental Matters............................................ 6 2.13. Business Plan.................................................... 8 2.14. Registration Rights.............................................. 8 2.15. Corporate Documents.............................................. 8 2.16. Title to Property and Assets..................................... 8 2.17. Financial Statements............................................. 8 2.18. Absence of Certain Changes....................................... 9 2.19. Absence of Undisclosed Liabilities............................... 10 2.20. Tax Returns, Payments and Elections.............................. 10 2.21. Brokers.......................................................... 10 2.22. Intentionally Omitted............................................ 11 2.23. Private Placement................................................ 11 3. Representations and Warranties of the Investors........................ 11 3.1. Purchase Entirely for Own Account................................ 11 3.2. Disclosure of Information........................................ 11 3.3. Investment Experience............................................ 12 3.4. Accredited Investor.............................................. 12 3.5. Restricted Securities............................................ 12 3.6. Further Limitations on Disposition............................... 12 4. Conditions of Investor's Obligations at Closing........................ 13 4.1. Representations and Warranties................................... 13 4.2. Performance; Material Adverse Change............................. 13 4.3. Compliance Certificate........................................... 13 4.4. Qualifications................................................... 13 4.5. Proceedings and Documents........................................ 13
i
Page ---- 4.6. Opinions of Company Counsel...................................... 14 4.7. Execution and Delivery of Transaction Documents; Issuance of Warrants and Common Stock........................................ 14 4.8. Eighth Amendment to the Amended and Restated Credit Agreement and Loan Documents............................................... 14 4.9. Intentionally Omitted............................................ 14 4.10. Secretary's Certificate.......................................... 14 4.11. Consents......................................................... 14 4.12. Exchange of Certain Securities................................... 14 4.13. Final Credit Approval............................................ 15 4.14. Company Indebtedness............................................. 15 4.15. Additional Fundraising........................................... 15 4.16. Waivers by Holders of Existing Warrants.......................... 16 4.17. Material Adverse Change, Suits and Defaults...................... 16 5. Indemnification........................................................ 16 5.1. Indemnification by the Company................................... 16 5.2. Indemnification Procedures....................................... 17 6. Miscellaneous.......................................................... 17 6.1. Survival of Representations and Warranties....................... 18 6.2. Exercise of Warrants............................................. 18 6.3. Successors....................................................... 18 6.4. Governing Law.................................................... 18 6.5. Counterparts..................................................... 18 6.6. Interpretation................................................... 18 6.7. Notices.......................................................... 18 6.8. Finder's Fee..................................................... 20 6.9. Expenses......................................................... 20 6.10. Amendments and Waivers........................................... 20 6.11. Severability..................................................... 21 6.12. Aggregation of Stock............................................. 21 6.13. Entire Agreement................................................. 21 6.14. Publication...................................................... 21 6.15. Confidentiality.................................................. 21 6.16. Exculpation Among Investors...................................... 22 6.17. Register of Securities........................................... 22 6.18. Replacement of Certificates...................................... 22 6.19. Interpretation of "Knowledge."................................... 22
ii COMMON STOCK AND WARRANT PURCHASE AGREEMENT This Common Stock and Warrant Purchase Agreement (this "Agreement") is made as of the 11th day of November 2002, by and among FiberNet Telecom Group, Inc., a Delaware corporation (the "Company"), and the investors listed on Schedule I hereto (the "Investors"). WHEREAS, pursuant to a Purchase Agreement among the Company and the Investors dated October 30, 2002 (the "Old Purchase Agreement"), the Investors purchased from the Company, and the Company sold to the Investors, upon the terms and subject to the conditions set forth therein, an aggregate of 440,000,000 shares of the Common Stock, par value $0.001 per share (the "Common Stock"), and warrants of the Company to purchase an aggregate of 110,000,000 shares of Common Stock, for an aggregate purchase price of $66,000,000; WHEREAS, the Investors wish to purchase from the Company, and the Company wishes to sell to the Investors, upon the terms and subject to the conditions set forth herein, an aggregate of 20,000,000 shares of the Common Stock and warrants of the Company to purchase an aggregate of 20,000,000 shares of Common Stock, for an aggregate purchase price of $2,000,000; WHEREAS, in connection with the purchase and sale of Common Stock and warrants pursuant to this Agreement, the Company and the Investors are amending and restating the Investor's Rights Agreement, dated October 30, 2002, between the Company and the Investors (the "Existing Rights Agreement"), and the Stockholders Agreement, dated October 30, 2002, between the Company and certain of the Investors (the "Existing Stockholders Agreement"); NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Purchase and Sale of Stock. 1.1. Sale and Issuance of Common Stock and Warrants. Upon the terms and subject to the conditions of this Agreement, each Investor agrees, severally and not jointly, to purchase at the Closing (as defined below), and the Company agrees to sell and issue to each Investor at the Closing, (a) that number of shares of Common Stock set forth opposite such Investor's name on Schedule I hereto under the heading "Shares Purchased," and (b) warrants, in substantially the form attached hereto as Exhibit A (the "Warrants"), to purchase that number of shares of Common Stock set forth opposite such Investor's name on Schedule I under the heading "Warrants" for the aggregate purchase price set forth opposite such Investor's name under the heading "Purchase Price" (as paid by means of the cancellation of accrued interest on indebtedness, as indicated thereon, the "Purchase Price"). The Warrants shall have an exercise price equal to $0.12 per share and shall be immediately exercisable. 1.2. Closing. The purchase and sale of the Common Stock and Warrants (the "Closing") shall take place at the offices of Latham & Watkins, 885 Third Avenue, New York, New York 10022, at 10:00 a.m., on the business day following the date on which all of the conditions to closing set forth in Article 4 have been satisfied or waived or at such other time and place as the Company and the Investors may mutually agree (the "Closing Date"). At the time of the Closing, the Company shall deliver to each Investor certificates representing the Common Stock and Warrants that such Investor is purchasing, as set forth on Schedule I attached hereto, against payment of the Purchase Price therefor. 2. Representations and Warranties of the Company. As of the date hereof and as of the Closing Date, the Company hereby represents and warrants to each Investor that, except as specifically set forth in the Schedule of Exceptions attached hereto as Schedule II (the "Schedule of Exceptions"), which exceptions shall be deemed to be representations and warranties as if made hereunder: 2.1. Organization, Good Standing and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and as presently proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the business, condition (financial or otherwise), projections or results of operations of the Company and its Subsidiaries (as defined below), taken as a whole (a "Material Adverse Effect"). 2.2. Subsidiaries. All of the subsidiaries of the Company (the "Subsidiaries") are identified in Schedule 2.2 to the Schedule of Exceptions. The equity interests of each of the Subsidiaries of the Company are identified in Schedule 2.2 to the Schedule of Exceptions. Each of the Subsidiaries of the Company identified in Schedule 2.2 to the Schedule of Exceptions is (i) a corporation or limited liability company duly organized or formed, validly existing and in good standing under the laws of its respective jurisdiction of organization set forth therein, has all requisite corporate or limited liability company power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and (ii) is qualified to do business and is in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except where the failure to be so qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. Schedule 2.2 to the Schedule of Exceptions completely and correctly sets forth the ownership of each Subsidiary of the Company. 2.3. Capitalization and Voting Rights. 2 (a) As of the date hereof, the authorized capital of the Company consists of 2,000,000,000 shares of Common Stock, 716,515,187 shares of which are issued and outstanding, and no shares of Preferred Stock. All of the outstanding shares of Common Stock have been duly authorized, validly issued, fully paid and are nonassessable. (b) The Company has reserved 16,166,720 shares of Common Stock for issuance to officers, directors, employees and consultants of the Company pursuant to its Equity Incentive Plan and certain other stock option arrangements duly adopted by the board of directors and approved by the stockholders of the Company (the "Stock Plan"). Of such reserved shares of Common Stock, options to purchase 13,746,512 shares have been granted and are currently outstanding, and 2,420,208 shares remain available for issuance to officers, directors, employees and consultants pursuant to the Stock Plan. 103,452 shares of Common Stock have been issued pursuant to the Equity Incentive Plan. (c) Except as set forth on Schedule 2.3(c) to the Schedule of Exceptions, as of the date hereof, there are no outstanding options, warrants, rights (including conversion or preemptive rights, rights of first refusal or similar rights) or agreements, orally or in writing, for the purchase or acquisition from the Company of any shares of its capital stock or other securities. 2.4. Authorization. All corporate action on the part of the Company and the Subsidiaries and their respective officers, directors and stockholders (or in the case of Devnet, L.L.C., FiberNet Equal Access, L.L.C., a New York limited liability company ("Equal Access"), and Local Fiber, L.L.C., a New York limited liability company ("Local Fiber"), its partners and members) necessary for the authorization, execution and delivery of this Agreement, the Warrants, the First Amended and Restated Investor's Rights Agreement, attached hereto as Exhibit B (the "Rights Agreement"), the First Amended and Restated Stockholders Agreement, attached hereto as Exhibit C, (the "Stockholders Agreement"),the Eighth Amendment (as defined in Section 4.8), the Old Purchase Agreement, the Amended and Restated Credit Agreement, dated as of February 9, 2001 (as amended prior to the date hereof, the "Credit Agreement"), and any documents to be executed in connection with the Credit Agreement (the "Loan Documents," collectively with this Agreement, the Warrants, the Rights Agreement, the Credit Agreement, and the Stockholders Agreement, the "Transaction Documents"), the performance of all obligations of the Company hereunder and thereunder, and the authorization, issuance, sale and delivery of the Common Stock and Warrants being sold hereunder and securities issuable upon exercise of the Warrants has been taken or will be taken prior to the Closing. Each of the Transaction Documents constitutes or, when executed and delivered, will constitute, the Company's valid and legally binding obligation, enforceable against the Company in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (c) to the extent the indemnification provisions contained in any of the Transaction Documents may be limited by applicable federal or state securities laws. 2.5. Valid Issuance of Common Stock. The Common Stock that is being purchased by the Investors hereunder, when issued, sold and delivered in accordance with 3 the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, nonassessable, free of restrictions on transfer other than restrictions on transfer under the Transaction Documents and under applicable state and federal securities laws and, assuming the accuracy of each Investor's representations and warranties set forth in Article 3 of this Agreement, such Common Stock and the Warrants will have been issued in compliance with all applicable state and federal securities laws. The securities issuable upon exercise of the Warrants, upon issuance in accordance with the terms of the Warrants, will be duly and validly issued, fully paid, nonassessable, free of restrictions on transfer other than restrictions on transfer under the Transaction Documents and under applicable state and federal securities laws and will have been issued in compliance with all applicable state and federal securities laws. The Company's equity securities outstanding as of the date of this Agreement have been issued in compliance with all applicable state and federal securities laws. 2.6. No Conflict with Laws or Other Instruments; Governmental Consents. The execution, delivery and performance by the Company and its Subsidiaries of the Transaction Documents to which each is a party and the consummation of the transactions contemplated by this Agreement and the other Transaction Documents: (a) will not require from the board of directors or stockholders of the Company or any of the Subsidiaries (or in the case of Devnet, L.L.C., Equal Access and Local Fiber, its partners or members) any consent or approval, except such as shall have been obtained prior to the Closing; (b) will not require any authorization, consent, approval, license, exemption of or filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality of government, except such filings as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"), and such other consents and approvals such as shall have been obtained or made prior to the Closing and except as could not reasonably be expected to have a Material Adverse Effect; (c) subject to the accuracy of the Investors' representations and warranties contained in Article 3 of this Agreement, will not cause the Company or any of the Subsidiaries to violate or contravene (i) any provision of law presently in effect, (ii) any rule or regulation presently in effect of any agency or government, (iii) any order, writ, judgment, injunction, decree, determination or award presently in effect, or (iv) any provision of its certificate of incorporation or bylaws or equivalent organizational documents, except, in the case of clauses (i) and (ii), as could not reasonably be expected to have a Material Adverse Effect; (d) will not violate or be in conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a default under, or require any consent, approval or authorization under, any indenture, loan or credit agreement, note agreement, deed of trust, mortgage, security agreement or other agreement, lease, instrument, commitment or arrangement to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries or any of their respective properties, assets or rights is bound, in each case, that is material to the Company and its Subsidiaries, taken as a whole; (e) will not result in the creation or imposition of any lien, encumbrance or other restriction on any of the properties, assets or rights of the Company or the Subsidiaries (in each case, other than pursuant to the terms of the Transaction Documents), except as would not have a Material Adverse Effect; and (f) will not result in the revocation, impairment, forfeiture or nonrenewal of any Permit (as defined below), except as would not have a Material Adverse Effect. 2.7. Offering. Subject to the truth and accuracy of each Investor's representations set forth in Article 3 of this Agreement, the offer, sale and issuance of the 4 Common Stock and Warrants as contemplated by this Agreement and the issuance of the securities issuable upon exercise of the Warrants are exempt from the registration requirements of the Securities Act (as defined in Section 2.17), and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption. 2.8. Returns and Complaints. Except as it would not have a Material Adverse Effect, none of the Company and its Subsidiaries has received any written customer complaints concerning its products and/or services. 2.9. Litigation. Except as set forth in Schedule 2.9 of the Schedule of Exceptions, there are no actions, suits, proceedings, arbitrations or governmental investigations at law or in equity, or before or by any arbitrator or governmental instrumentality, domestic or foreign (including any environmental claims) that are, to the knowledge of the Company, pending or threatened against or affecting the Company or any of its Subsidiaries or any property of the Company or any of its Subsidiaries, which, if adversely determined, could reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries (i) is in violation of any applicable legal requirement (including environmental laws) which could reasonably be expected to have a Material Adverse Effect or (ii) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which could reasonably be expected to have a Material Adverse Effect. 2.10. Intellectual Property. To the knowledge of the Company, the Company and the Subsidiaries have obtained and hold in full force and effect the intellectual property, free from burdensome restrictions, which is necessary for the operation of its business as presently conducted except for that intellectual property which the failure to own or license could not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company, no product, process, method, substance, part or other material presently sold or employed by the Company or the Subsidiaries in connection with such business infringes any intellectual property owned by any other person, except as could not, individually and in the aggregate, reasonably be expected to have a Material Adverse Effect. All of the material intellectual property owned or used by the Company or the Subsidiaries as of the Closing Date is set forth in Schedule 2.10 to the Schedule of Exceptions. 2.11. Compliance with Laws and Instruments. None of the Company and the Subsidiaries is in violation or default (a) in any respect of any provision of its certificate of incorporation or bylaws or its equivalent organizational documents, or (b) in any material respect of any instrument, judgment, order, writ, decree, contract or agreement to which it is a party or by which it is bound, or (c) to the best of the Company's knowledge, of any provision of any federal or state statute, rule or regulation applicable to the Company or the Subsidiaries, as the case may be, which could reasonably be expected to have a Material Adverse Effect. 2.12. Environmental Matters. (a) The following terms shall be defined as follows: 5 (i) "Environmental Laws" shall mean any and all current or future statutes, ordinances, orders, rules, regulations, guidance documents, judgments, governmental actions, or any other requirements of governmental authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity(as defined in 2.12.(a)(ii) below), (ii) the generation, use, storage, transportation or disposal of hazardous materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to the Company or the Subsidiaries or any Facility (as defined below), including the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Section 136 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), the Oil Pollution Act (33 U.S.C. Section 2701 et seq.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section 11001 et seq.), each as amended or supplemented, any analogous present or future state or local statutes or laws, and any regulations promulgated pursuant to any of the foregoing. (ii) "Hazardous Materials Activity" (i) any chemical, material or substance at any time defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous waste," "acutely hazardous waste," "radioactive waste," "biohazardous waste," "pollutant," "toxic pollutant," "contaminant," "restricted hazardous waste," "infectious waste," "toxic substances," or any other term or expression intended to define, list or classify substances by reason of properties harmful to health, safety or the indoor or outdoor environment (including harmful properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under any applicable Environmental Laws); (ii) any oil, petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iv) any flammable substances or explosives; (v) any radioactive materials; (vi) any asbestos-containing materials; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (ix) pesticides; and (x) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or which may or could pose a hazard to the health and safety of the owners, occupants or any persons in the vicinity of any Facility or to the indoor or outdoor environment. (iii) "Facilities" shall mean any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by the Company or the Subsidiaries or any of their respective predecessors or affiliates. (iv) "Property" shall mean all real property leased or owned by the Company or any Subsidiary either currently or in the past, excluding Rights of Way. Except as set forth in Schedule 2.12 to the Schedule of Exceptions: 6 (v) neither the Company nor the Subsidiaries nor any of their respective Facilities are subject to any outstanding written order, consent decree or settlement agreement with any person relating to (a) any Environmental Law or (b) any Hazardous Materials Activity; (vi) neither the Company nor the Subsidiaries has received any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9604) or any comparable state law; (vii) there are and, to the Company's knowledge, have been, no conditions, occurrences, or Hazardous Materials Activities on any Facility which could reasonably be expected to form the basis of an environmental claim against the Company or the Subsidiaries; (viii) neither the Company nor the Subsidiaries nor, to the Company's knowledge, any predecessor of the Company or the Subsidiaries has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials Activities at any Facility, and neither the Company's nor the Subsidiaries' operations involves the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent; and (ix) compliance with all current requirements pursuant to or under Environmental Laws could not, individually or in the aggregate, reasonably be expected to give rise to a Material Adverse Effect. Notwithstanding anything in Schedule 2.12 to the Schedule of Exceptions to the contrary, no event or condition has occurred or is occurring with respect to the Company or the Subsidiaries relating to any Environmental Law or any Hazardous Materials Activity, including any matter disclosed on Schedule 2.12 to the Schedule of Exceptions, which individually or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect. 2.13. Business Plan. The business plan as amended, supplemented and previously delivered to each Investor (the "Business Plan") is a true and accurate copy of the Business Plan adopted by the Company. With respect to projections contained in the Business Plan, the Company represents only that such projections were prepared in good faith and that the Company reasonably believes there is a reasonable basis for such projections. 2.14. Registration Rights. Except as set forth on Schedule 2.14 to the Schedule of Exceptions, the Company has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity. 2.15. Corporate Documents. Except for amendments necessary to satisfy representations and warranties or conditions contained herein (the forms of which amendments have been approved by the Investors), the certificate of incorporation and the bylaws of the Company are in the form previously provided to special counsel for the Investors. 7 2.16. Title to Property and Assets. Each of the Company and the Subsidiaries has (i) good marketable and insurable fee simple title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective material properties and assets reflected in the financial statements referred to in Section 2.17 except for assets disposed of since the date of such financial statements in the ordinary course of business. Except as permitted by this Agreement and set forth on Schedule 2.16 to the Schedule of Exceptions, all such properties and assets are held free and clear of liens. 2.17. Financial Statements. The Company has timely filed all forms, statements and documents (the "SEC Documents") required to be filed by it with the Securities and Exchange Commission (the "SEC") and The Nasdaq SmallCap Market since September 30, 2001. All documents required to be filed as exhibits to the SEC Documents have been so filed, and all material contracts so filed as exhibits are in full force and effect, except those which have expired in accordance with their terms, and none of the Company and its Subsidiaries is in material default thereunder. As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the "Exchange Act"), and the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (collectively, the "Securities Act"). The financial statements of the Company, including the notes thereto, included in the SEC Documents (the "Company Financial Statements") complied as to form and substance in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto as of their respective dates, and were prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a basis consistent throughout the periods indicated and consistent with each other (except as may be indicated in the notes thereto or, in the case of unaudited statements included in Quarterly Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The Company Financial Statements fairly present in all material respects the consolidated financial condition and operating results of Company and its Subsidiaries at the dates and during the periods indicated therein (subject, in the case of unaudited statements, to normal, recurring year-end adjustments). Except as disclosed in the Company's periodic reports filed with the SEC, there has been no change in Company accounting policies since September 30, 2001. Except as set forth in the Company Financial Statements, the Company and its Subsidiaries have no material liabilities, contingent or otherwise, other than (a) liabilities incurred in the ordinary course of business subsequent to September 30, 2001 and (b) obligations under contracts and commitments incurred in the ordinary course of business and not required under GAAP to be reflected in the Company Financial Statements, which, in both cases, individually or in the aggregate, would not have a Material Adverse Effect. Except as disclosed in the Company Financial Statements, none of the Company and the Subsidiaries is a guarantor or indemnitor of any indebtedness of any other person, firm or corporation. 2.18. Absence of Certain Changes. From December 31, 2001 (the "Company Balance Sheet Date") to the date of this Agreement, the Company and its Subsidiaries have conducted their businesses in the ordinary course consistent with past practice and, except as disclosed in the Company's periodic reports filed with the SEC, there has not occurred: (a) any change, event or condition (whether or not covered by insurance) that has resulted in, or might reasonably be expected to result in, a Material Adverse Effect; (b) any acquisition, sale or 8 transfer of any material asset of the Company or any of its Subsidiaries other than in the ordinary course of business and consistent with past practice; (c) any change in accounting methods or practices (including any change in depreciation or amortization policies or rates) by the Company or any revaluation by the Company of any of its or any of its Subsidiaries' assets; (d) any declaration, setting aside, or payment of a dividend or other distribution with respect to the shares of the Company or any Subsidiary, or any direct or indirect redemption, purchase or other acquisition by the Company or any Subsidiary of any of its shares of capital stock; (e) except as set forth on Schedule 2.18 to the Schedule of Exceptions, the entering into of any material contract or any material amendment by the Company or any Subsidiary, other than in the ordinary course of business and as provided to the Investors; (f) any termination of, or default under, any material contract to which Company or any Subsidiary is a party or by which it is bound; (g) any amendment or change to the certificate of incorporation or bylaws or equivalent organizational documents of the Company or any Subsidiary; (h) any material change in any compensation arrangement or agreement with any employee of the Company or any Subsidiary; (i) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties, financial condition, operating results, prospects or business of the Company (as such business is presently conducted and as it is proposed to be conducted) and its Subsidiaries, taken as a whole; (j) any waiver by the Company or any Subsidiary of a valuable right or of a material debt owed to it; (k) any satisfaction or discharge of any lien, claim or encumbrance, or payment of any obligation by the Company or any Subsidiary, except in the ordinary course of business and that is not material to the assets, properties, financial condition, operating results or business of the Company (as such business is presently conducted and as it is proposed to be conducted); (l) any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets; (m) any mortgage, pledge, transfer of a security interest in, or lien, created by the Company or any Subsidiary, with respect to any of its material properties or assets, except for Permitted Liens (as defined in the Credit Agreement); or (n) any agreement or commitment by the Company or any Subsidiary to do any of the things described in this Section 2.18. 2.19. Absence of Undisclosed Liabilities. The Company has no material obligations or liabilities of any nature (matured or unmatured, fixed or contingent) other than (a) those set forth or adequately provided for in the consolidated balance sheet and the notes thereto as of December 31, 2001 (the "Company Balance Sheet Date") included in the Company Financial Statements (the "Company Balance Sheet"), (b) those incurred in the ordinary course of business and not required to be set forth in the Company Balance Sheet under GAAP, (c) those incurred in the ordinary course of business since the Company Balance Sheet Date and not reasonably likely to have a Material Adverse Effect; (d) those incurred in connection with the execution of the Transaction Documents, and (e) those disclosed in the Company's periodic reports filed with the SEC. 2.20. Tax Returns, Payments and Elections. All tax returns and reports of the Company and the Subsidiaries required to be filed by any such member have been timely filed, and all taxes required to be paid with respect to such tax returns to be due and payable and all material assessments, fees and other governmental charges upon the Company and the Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable. The Company does not know 9 of any proposed tax assessment against the Company or the Subsidiaries which could reasonably be expected to have a Material Adverse Effect that is not being actively contested by the Company and the Subsidiaries in good faith and by appropriate proceedings and for which reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall not have been made or provided therefor. 2.21. Brokers. None of the Company and its Subsidiaries has any contract, arrangement or understanding with any broker, finder or similar agent with respect to the transactions contemplated by this Agreement. 2.22. Intentionally Omitted. 2.23. Private Placement. No form of general solicitation or general advertising (as defined in Regulation D under the Securities Act) was used by the Company or any of its respective representatives (other than the Investors, as to whom the Company makes no representation) in connection with the offer and sale of the Common Stock and Warrants hereby, including, but not limited to, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Except as set forth on Schedule 2.23 to the Schedule of Exceptions, no securities of the same class as the Common Stock or Warrants have been issued and sold by the Company within the six-month period immediately prior to the date hereof. 3. Representations and Warranties of the Investors. Each Investor hereby represents and warrants that: 3.1. Purchase Entirely for Own Account. This Agreement is made by the Company with such Investor in reliance upon such Investor's representation to the Company, which by such Investor's execution of this Agreement such Investor hereby confirms, that the Common Stock and Warrants to be received by such Investor pursuant to this Agreement (collectively, the "Securities") will be acquired for investment for such Investor's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same, except in compliance with applicable federal or state securities laws. By executing this Agreement, such Investor further represents that such Investor does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. 3.2. Disclosure of Information. Such Investor believes it has received all the information it considers necessary and appropriate for deciding whether to purchase the Securities. Such Investor further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Common Stock and Warrants and the business, properties, prospects and financial condition of the Company. The foregoing, however, does not limit or modify the representations and warranties of the Company in this Agreement or the right of the Investors to rely thereon. 10 3.3. Investment Experience. Such Investor can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of its investment in the Common Stock and Warrants. If other than an individual, Investor also represents that it has not been organized for the purpose of acquiring the Securities. 3.4. Accredited Investor. Such Investor is an "accredited investor" within the meaning of SEC Rule 501 of Regulation D, as presently in effect. 3.5. Restricted Securities. Such Investor understands that the Securities it is purchasing are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such Securities may not be resold without registration under the Securities Act, except in certain limited circumstances. In this connection, such Investor represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act. 3.6. Further Limitations on Disposition. Without in any way limiting the representations set forth above, such Investor further agrees not to make any disposition of all or any portion of the Securities unless and until either, (a) there is then in effect a Registration Statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement; or (b) (i) such Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, (ii) if reasonably requested by the Company, such Investor shall have furnished the Company an opinion of counsel, in form and substance reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Act, and (iii) the transferee has agreed in writing to be bound by this Article 3, the Rights Agreement and the Stockholders Agreement (with respect to the Stockholders Agreement and the Rights Agreement to the extent that the transferor was so bound). It is agreed that the Company will not require opinions of counsel pursuant to this Section 3.6(b) for transactions made pursuant to Rule 144, provided that it receives appropriate representations from the seller with regard to compliance with Rule 144, except in unusual circumstances. Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be required by the Company for (i) a transfer to a Permitted Transferee (as defined in the Rights Agreement), or (ii) a transfer by an Investor to any entity directly or indirectly controlled by or controlling the Investor. 4. Conditions of Investor's Obligations at Closing. The obligations of each Investor under Section 1.1 of this Agreement are subject to the fulfillment on or before the Closing Date of each of the following conditions, the waiver of which shall not be effective against any Investor who does not consent in writing thereto: 11 4.1. Representations and Warranties. The representations and warranties of the Company contained in Article 2 shall be true in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality, which representation and warranties as so qualified shall be true and correct in all respects) on and as of the Closing Date as though such representations and warranties had been made on and as of the Closing Date. 4.2. Performance; Material Adverse Change. The Company shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing Date. There shall not have occurred a Material Adverse Effect. 4.3. Compliance Certificate. The Chief Executive Officer or the Chief Financial Officer of the Company shall deliver to each Investor at the Closing a certificate on behalf of the Company stating that the conditions specified in Sections 4.1 and 4.2 of this Agreement have been fulfilled. 4.4. Qualifications. All authorizations, approvals, waivers, consents or permits, if any, of any governmental authority or regulatory body of the United States or of any state or self regulatory agency that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement, including such as may be required under the Securities Act, under state Blue Sky laws and under HSR, shall have been duly obtained by and effective as of the Closing. 4.5. Proceedings and Documents. Receipt of all governmental, shareholder and third party consents and approvals necessary in connection with the issuance of the Common Stock and Warrants hereunder, and the related financings and other transactions contemplated hereby and expiration of all applicable waiting periods without any action being taken by any competent authority that could restrain, prevent or impose any materially adverse conditions on the issuance of the Common Stock and Warrants hereunder and no such law or regulation shall be applicable which in the reasonable judgment of the Administrative Agent under the Credit Agreement could reasonably be expected to have any such effect. 4.6. Opinions of Company Counsel. Each Investor shall have received from outside counsel for the Company, an opinion, dated as of the Closing Date, in substantially the form attached hereto as Exhibit D. 4.7. Execution and Delivery of Transaction Documents; Issuance of Warrants and Common Stock. Each Investor shall have received a duly executed copy of each Transaction Document executed by each other party thereto, and the Company shall have issued and delivered to each Investor certificates representing the shares of Common Stock and Warrants acquired by such Investor pursuant to this Agreement. 4.8. Eighth Amendment to the Amended and Restated Credit Agreement and Loan Documents. Each of the Borrowers (as defined in the Credit Agreement) and the Lenders (as defined in the Credit Agreement) shall have entered into the Eighth Amendment to the Amended and Restated Credit Agreement in substantially the form attached 12 as Exhibit E (the "Eighth Amendment"), and any Loan Documents to which it is a party, in each case, with such changes as the authorized officers of the parties thereto shall have approved. Consents to the approval of the Credit Agreement and the Loan Documents shall have been executed and delivered by each lender whose consent is required under the terms of the Credit Agreement. 4.9. Intentionally Omitted. 4.10. Secretary's Certificate. The Company shall have delivered to the Company a certificate issued by the Secretary of the Company certifying as to the Company's certificate of incorporation and bylaws and resolutions and/or consents of the Company's board of directors and stockholders. 4.11. Consents. The Company shall have delivered to the Investors satisfactory evidence of the consent, approval or waiver of those parties whose consent, approval or waiver shall be necessary or advisable in connection with the execution of any Transaction Document and the performance of obligations thereunder, including pursuant to the contracts set forth on Schedule 2.6 to the Schedule of Exceptions. 4.12. Exchange of Certain Securities. The Company shall have consummated the transactions contemplated by each of the Nortel Note Exchange Agreement, the SDS Note Exchange Agreement, the Series H Share Exchange Agreement, and the Series J Share Exchange Agreement, including 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 of the Company to Nortel Networks Inc. ("Nortel"), dated December 7, 2001 (the "Nortel Note"), into 9,002,040 shares of Common Stock. For purposes of this Agreement, the "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 9,002,040 shares of Common Stock; the "SDS Note Exchange Agreement" means the Note Exchange Agreement, dated as of November 8, 2002, by and between the Company and SDS Merchant Fund, L.P. as in effect on the date hereof, providing for the conversion of the entire aggregate principal amount, all accrued and unpaid interest thereon and all other amounts payable in respect of the promissory note issued by the Company to SDS Merchant Fund, L.P. in March 14, 2002 in an initial principal amount of $2,000,000; the "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 approximately 104,581,425 shares of Common Stock in exchange for all of its issued and outstanding shares of Series H Preferred Stock; and the "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 60,600,000 shares of Common Stock in exchange for all of its issued and outstanding shares of Series J-1 Preferred Stock. 13 4.13. Final Credit Approval. Each of the Investors and each affiliate of the investors shall have received final credit approval to enter into this Agreement and the documents contemplated by this Agreement (including the Credit Agreement and the Eighth Amendment) and perform each of its obligations under each such agreement. 4.14. Company Indebtedness. The Company shall have (a) no indebtedness other than (1) $41 million of loans under the Credit Agreement, (2) $700,000 of capital lease obligations, and (3) $2,080,000 of indebtedness outstanding under the Promissory Note of the Company to SDS Merchant Fund, L.P., dated March 14, 2002, and (b) only one class of capital stock outstanding, which shall be the Common Stock. 4.15. Additional Fundraising. The receipt by the Company of at least $3.3 million of net proceeds from the issuance of additional Common Stock and Warrants of the same class and series as, and otherwise identical to, the Common Stock and Warrants issued hereunder on terms satisfactory to the Investors (the "Required Equity"). The Company shall not utilize the proceeds of the Required Equity to fund the purchase of securities held by Nortel (including the Nortel Note and the Company's Series H Preferred Stock). 4.16. Waivers by Holders of Existing Warrants. The Company shall have obtained waivers from holders of its warrants outstanding immediately prior to the Closing Date (the "Pre-Existing Warrants") as required to provide that the number of shares of Common Stock acquirable under the terms thereof shall not increase as a result of the transactions contemplated by this Agreement, the Nortel Note Exchange Agreement, the SDS Note Exchange Agreement, the Series H Share Exchange Agreement and the Series J Share Exchange Agreement. 4.17. Material Adverse Change, Suits and Defaults. There shall have occurred no material adverse change in the business, assets, condition (financial or otherwise), operations, performance, properties, prospects or projections of the Company since the end of the most recently ended fiscal year for which audited financial statements have been provided to the Investors or in the facts and information as represented to date. There shall exist no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that purports to materially and adversely affect the issuance of the Common Stock or Warrants hereunder or that could reasonably be expected to have a Material Adverse Effect. There shall exist no default under the Transaction Documents or event that, with notice and/or the passage of time, could become an event of default. There shall exist no facts, events or circumstances which come to the attention of any Investor, which, in its good faith determination, materially adversely affect the business, assets, condition (financial or otherwise), operations, performance, properties prospects and projections of the Company. 5. Indemnification. 14 5.1. Indemnification by the Company. Subject to the provisions of this Article 5, the Company agrees to indemnify the Investors and their respective officers, partners, employees, agents or representatives (collectively, "Investor-indemnified parties") against and to hold each Investor-indemnified party harmless from any and all damages, losses, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys' fees and expenses in connection with any action, claim, suit or proceeding) (collectively, "Damages") incurred or suffered by any Investor-indemnified party arising from or in connection with (a) any inaccuracy in any representation or the breach of any warranty of the Company or any Subsidiary under a Transaction Document, (b) the failure of the Company or any Subsidiary duly to perform or observe any term, provision, covenant or agreement to be performed or observed by the Company or any Subsidiary pursuant to this Agreement or the Warrants, (c) the assertion by any person not a party to this Agreement of any claim against an Investor-indemnified Party in connection with the matters or transactions that are the subject of or contemplated by this Agreement or any of the other Transaction Documents, or (d) the status of any Investor-indemnified Party as a holder of equity interests in the Company or the existence or exercise of the rights and powers of such Investor-indemnified Party relating thereto. 5.2. Indemnification Procedures. (a) If the indemnified parties shall seek indemnification pursuant to this Article 5, the indemnified parties shall give prompt notice to the Company (as such, the "indemnifying party") of the assertion of any claim, or the commencement of any action, suit or proceeding, in respect of which indemnity may be sought hereunder and will give the indemnifying party such information with respect thereto as the indemnifying party may reasonably request, but no failure to give such notice shall relieve the indemnifying party of any liability hereunder, except to the extent of actual prejudice or damages suffered as a result thereof. The indemnifying party may, at its expense, participate in or assume the defense of any such action, suit or proceeding involving a third party with counsel reasonably acceptable to the indemnified party. The indemnified party will have the right to employ its counsel in any such action, but the fees and expenses of such counsel will be at the expense of such indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (ii) named parties include both the indemnified party and the indemnifying party, and such counsel has advised the indemnified party that there may be legal defenses available to it that are different from or in addition to those available to the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (iii) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees and expenses of counsel will be at the expense of the indemnifying party, and the indemnifying party shall reimburse or pay such fees and expenses as they are incurred. Whether or not the indemnifying party chooses to defend or prosecute any claim involving a third party, all the parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. (b) The indemnifying party shall not be liable under this Article 5 for any settlement effected without its consent of any claim, litigation or proceedings 15 by a third party in respect of which indemnity may be sought hereunder, unless the indemnifying party refuses to acknowledge liability for indemnification under this Section 5.2 and/or declines to defend the indemnified party in such claim, litigation or proceeding. 6. Miscellaneous. 6.1. Survival of Representations and Warranties. Except as otherwise set forth in this Section 6.1, the representations and warranties of the Company and the Subsidiaries shall survive any investigation at any time made by or on behalf of the parties hereto and consummation of the transactions contemplated by this Agreement. 6.2. Exercise of Warrants. The Company shall use its reasonable best efforts to cause by February 1, 2003, each holder of its Pre-Existing Warrants to agree that, upon the request of the Company, such holder will agree to the repricing of the exercise price of such securities to $0.001 per share of Common Stock and that immediately following such repricing, such holder will exercise such securities. 6.3. Successors. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties under the Stockholders Agreement and hereunder. 6.4. Governing Law. This Agreement shall be governed by and construed under the laws of the State of New York, without regard to the principles of conflicts of law thereof. 6.5. 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. 6.6. 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." 6.7. Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (c) 5 days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) 1 day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the address as set forth below or at such other address as such party may designate by 10 days advance written notice to the other parties hereto: (i) if to the Company, to: FiberNet Telecom Group, Inc. 16 570 Lexington Avenue 3rd Floor New York, New York 10022 Attention: President Facsimile: (212) 421-8920 with a copy to: Willkie Farr & Gallagher 787 Seventh Avenue New York, New York 10019 Attention: Gordon R. Caplan, Esq. Facsimile: (212) 728-8111 (ii) if to Investors, to: Deutsche Bank AG New York Branch 31 West 52nd Street New York, New York 10019 Attention: Alexander Richarz Telecopy: (646) 324-7455 Wachovia Investors, Inc. 301 S. College St. TW5 NC0537 Charlotte, NC 28288 Attention: Matthew Berk Telecopy: (704) 383-9831 Bank One, N.A. 55 West Monroe, 17th floor Mail Code IL1-0502 Chicago IL 60670-0502 IBM Credit Corporation North Castle Drive Armonk, NY 10504 Attn: Manager, Special Handling Nortel Networks Inc. MS 991-15-A40 2221 Lakeside Boulevard Richardson, Texas 75082 Attention: Customer Finance Telecopy: 972-684-3679 Toronto Dominion (Texas), Inc. 17 909 Fannin, Suite 1700 Houston, Texas 77010 Attn: Jano Nixon, Vice President with a copy to: Latham & Watkins 885 Third Avenue New York, New York 10022 Attention: John N. Toufanian, Esq. Facsimile: (212) 751-4864 6.8. Finder's Fee. Except as disclosed in the Schedule of Exceptions, each party represents that it neither is nor will be obligated for any finders' fee or commission in connection with this transaction. Each party agrees to indemnify and to hold harmless from any liability for any commission or compensation in the nature of a finders' fee (and the costs and expenses of defending against such liability or asserted liability) for which such party or any of its officers, partners, employees, or representatives is responsible, each other party and such other party's officers, partners, employees or representatives. 6.9. Expenses. Irrespective of whether the Closing is effected, the Company shall pay all costs and expenses incurred by it, its affiliates and the Investors with respect to the negotiation, execution, delivery and performance of this Agreement, including the reasonable fees and expenses of Latham & Watkins, counsel to the Investors. 6.10. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of more than 75% of the Common Stock (on a fully-diluted basis) issued or issuable hereunder. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Securities purchased under this Agreement at the time outstanding (including Securities into which such Securities are convertible), each future holder of all such Securities, and the Company. 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. 6.11. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 6.12. Aggregation of Stock. All shares of the Common Stock and all Warrants held or acquired by affiliated entities or persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. 18 6.13. Entire Agreement. This Agreement and the documents referred to herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein. 6.14. Publication. No party hereto shall use any other party's name or refer to any other party directly or indirectly in any advertisement, news release or professional or trade publication, or in any other manner, unless otherwise required by law or with such party's prior written consent, or pursuant to this Section 6.14. None of the parties to any of the Transaction Documents shall issue any press release or other public statement relating to this Agreement or the transactions contemplated hereby unless advised by counsel that such disclosure is required by law and, in any case, without first giving the other parties the opportunity to review and comment upon such statement unless not reasonably practicable under the circumstances. 6.15. Confidentiality. Each party hereto agrees that, except with the prior written permission of the other parties, or as permitted by Section 6.14 of this Agreement, it shall at all times keep confidential and not divulge, furnish or make accessible to anyone any confidential information, knowledge or data concerning or relating to the business or financial affairs of the other parties to which such party has been or shall become privy by reason of this Agreement, discussions or negotiations relating to this Agreement, the performance of its obligations hereunder or the ownership of Common Stock and Warrants purchased hereunder. In addition, the Company agrees it will not disclose, and will not include in any public announcement, the name of the Investors, unless expressly agreed to by the Investors or unless and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement. The provisions of this Section 6.15 shall be in addition to, and not in substitution for, the provisions of any separate nondisclosure agreement executed by the parties hereto with respect to the transactions contemplated hereby. 6.16. Exculpation Among Investors. Each Investor acknowledges that it is not relying upon any person, firm or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each Investor agrees that no Investor nor the respective controlling persons, officers, directors, partners, agents, or employees of any Investor shall be liable to any other Investor for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the purchase of the Securities. 6.17. Register of Securities. The Company or its duly appointed agent shall maintain a separate register for the shares of Common Stock in which it shall register the issue and sale of all such shares. All transfers of securities shall be recorded on the register. The Company shall be entitled to regard the registered holder of its securities as the holder of such securities so registered for all purposes until the Company or its agent is required to record a transfer of such securities on its register. The Company or its agent shall be required to record a transfer when it receives the security to be transferred duly and properly endorsed by the registered holder thereof or by its attorney duly authorized in writing. 19 6.18. Replacement of Certificates. Upon receipt of a lost instrument certificate with indemnity provisions reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any certificate representing any Company securities, the Company shall issue a new certificate representing such securities in lieu of such lost, stolen, destroyed or mutilated certificate. 6.19. Interpretation of "Knowledge." Statements herein that are qualified as to the "knowledge of the Company" or similar statements shall mean the actual knowledge of the executive officers of the Company, after reasonable inquiry; provided that any statement qualified as to the "actual knowledge" of the Company shall mean the actual knowledge of the executive officers of the Company, without inquiry. 20 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. FIBERNET TELECOM GROUP, INC. By: ------------------------------------- Name: Title: DEUTSCHE BANK AG NEW YORK BRANCH By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: WACHOVIA INVESTORS, INC. By: ------------------------------------- Name: Title: BANK ONE, N.A. By: ------------------------------------- Name: Title: IBM CREDIT CORPORATION By: ------------------------------------- Name: Title: NORTEL NETWORKS INC. By: ------------------------------------- Name: Title: TORONTO DOMINION (TEXAS), INC. By: ------------------------------------- Name: Title: SCHEDULE I
SHARES PURCHASE NAME OF INVESTOR PURCHASED WARRANTS PRICE(1) - ---------------- --------- --------- ------------- Deutsche Bank AG New York 5,476,190 5,476,190 $ 547,619.05 Branch Wachovia Investors, Inc. 5,000,000 5,000,000 $ 500,000.00 Bank One, N.A 1,904,762 1,904,762 $ 190,476.19 IBM Credit Corporation 1,904,762 1,904,762 $ 190,476.19 Nortel Networks Inc. 2,857,143 2,857,143 $ 285,714.29 Toronto Dominion (Texas), Inc. 2,857,143 2,857,143 $ 285,714.29 TOTAL 20,000,000 20,000,000 $2,000,000.00
(1) To be paid by means of the conversion of $2,000,000 of accrued interest on indebtedness due under 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. SCHEDULE II SCHEDULE OF EXCEPTIONS EXHIBIT A FORM OF WARRANT EXHIBIT B RIGHTS AGREEMENT EXHIBIT C STOCKHOLDERS AGREEMENT EXHIBIT D FORM OF OPINION EXHIBIT E EIGHTH AMENDMENT EX-99.3 5 y65341cexv99w3.txt FIRST AMENDED AND RESTATED STOCKHOLDER AGREEMENT FIBERNET TELECOM GROUP, INC. FIRST AMENDED AND RESTATED STOCKHOLDERS AGREEMENT NOVEMBER 11, 2002 TABLE OF CONTENTS
Page ---- I. Covenants........................................................... 1 A. Negative Covenants with Other Holders of Common Stock......... 1 II. Voting.............................................................. 1 A. Election of Directors......................................... 1 III. Miscellaneous....................................................... 2 A. Legends....................................................... 2 B. Termination of Covenants...................................... 3 C. Attendance at Meetings........................................ 3 D. Further Assurances............................................ 4 E. Proxies....................................................... 4 F. Entire Agreement.............................................. 4 G. Recapitalizations, Etc........................................ 4 H. Successors and Assigns........................................ 4 I. Amendments and Waivers........................................ 5 J. Notices....................................................... 5 K. Severability.................................................. 5 L. Specific Performance; Delays or Omissions; Remedies Cumulative 6 M. Attorney's Fees............................................... 6 N. Governing Law................................................. 6 O. Counterparts.................................................. 6 P. Titles and Subtitles.......................................... 6
-i- FIBERNET TELECOM GROUP, INC. FIRST AMENDED AND RESTATED STOCKHOLDERS AGREEMENT This First Amended and Restated Stockholders Agreement (this "Agreement") is made as of November 11, 2002, between FiberNet Telecom Group, Inc., a Delaware corporation (the "Company") and the investors listed on Exhibit A hereto, each of which is herein referred to as an "Investor". RECITALS Pursuant to a Purchase Agreement among the Company and the Investors dated October 30, 2002 (the "Old Purchase Agreement"), the Investors purchased from the Company, and the Company sold to the Investors, upon the terms and subject to the conditions set forth therein, shares of the Common Stock, par value $0.001 per share, and warrants of the Company to purchase shares of Common Stock (the "Old Warrants"); The Company and the Investors have entered into a Common Stock and Warrant Purchase Agreement (the "Purchase Agreement") of even date herewith pursuant to which the Company desires to sell to the Investors, and the Investors desire to purchase from the Company, shares of the Company's Common Stock and warrants to purchase an additional amount of such shares (the "New Warrants" and together with the Old Warrants, the "Warrants"). A condition to the Investors' obligations under the Purchase Agreement is that the Company and the Investors enter into this Agreement in order to provide the Investors with certain rights with respect to 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: I. COVENANTS A. Negative Covenants with Other Holders of Common Stock. The Company shall not enter into any agreement with an existing or future investor acquiring shares of the Company's Common Stock in connection with such investor's investment that has the effect of establishing any material rights or otherwise providing any material benefits for such investor that have not been received by the Investors under this Agreement, the Old Purchase Agreement, the Purchase Agreement, or the First Amended and Restated Investors Rights Agreement entered into concurrently herewith, unless, in any such case, each Investor has been offered the opportunity to receive, for no additional consideration, such rights and the benefits of such agreement. II. VOTING A. Election of Directors. At any annual or special shareholders meeting, and whenever the shareholders of the Company act by written consent with respect to election of directors, each Investor agrees to vote or otherwise give such Investor's consent in respect of all shares of the Company's Common Stock acquired by such Investor pursuant to the Purchase Agreement or Old Purchase Agreement or upon any exercise of any Warrants, and the Company shall take all necessary and desirable actions within its control, in order to cause: 1. the election to the Board of two Independent Individuals (as defined below) approved by Investors holding shares of the Company's capital stock entitled to cast a majority of the total number of votes entitled to be cast by all Investors in the election of directors to the Company's Board of Directors (the "Majority Investors"); 2. the authorized number of directors of the Board as set forth in the Company's Certificate of Incorporation or other similar document (in each case, as amended, amended and restated or otherwise modified from time to time) of the Company and/or the Bylaws of the Company to remain at six or such other number as the Majority Investors may specify from time to time in a notice delivered to the Company and the other Investors; 3. the removal from the Board (with or without cause) of any director approved hereunder by the Majority Investors, upon the written request of the Majority Investors for the removal of such director, but only upon such written request; provided, however, that the removal of any director for cause or otherwise shall not prejudice the right of the Majority Investors to nominate pursuant to this Agreement a substitute director to fill the vacancy created by such removal; and 4. upon any vacancy in the Board as a result of any individual approved as provided in clause (1) above ceasing to be a member of the Board, whether by resignation, removal or otherwise, the election to the Board of an individual approved by the Majority Investors. For purposes of this Agreement, an "Independent Individual" shall mean any natural person who upon election to the Board will be an "independent director" within the meaning of the rules and regulations of the primary national securities exchange or automated quotation system on which shares of the Company's Common Stock are traded. III. MISCELLANEOUS. A. Legends. Each certificate representing shares of Common Stock held by an Investor or any subsequent holder of such shares to which rights under this Agreement are transferred pursuant to the terms of Section III.H shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws): "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF AN AGREEMENT WHICH PLACES CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED HEREBY. ANY -2- PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS." The Company agrees that, during the term of this Agreement, it will not remove, and will not permit to be removed (upon registration of transfer, reissuance or otherwise), the legend set forth above from any such certificate and will place or cause to be placed such legend on any new certificate issued to represent shares of Common Stock held by the Investors and such transferees theretofore represented by a certificate carrying such legend. At any time after the termination of the Company's and the Investors' obligations under Section II of this Agreement pursuant to the terms of Section III.B and in connection with any transfer of the shares evidenced by a certificate legended pursuant to this Section III.A, any holder of a stock certificate so legended may surrender such certificate to the Company for removal of such legend, and the Company will duly reissue a new certificate without such legend. B. Termination of Covenants. All covenants of the Company and the Investors contained in Section I and Section II of this Agreement shall expire and terminate upon the earliest of, 1. the closing of a Qualified Public Offering (as defined in the First Amended and Restated Investor's Rights Agreement, dated November 11, 2002, between the Company and the Investors), or 2. (i) the sale, lease or other disposition of all or substantially all of the assets of the Company or (ii) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the shareholders of the Company immediately prior to such consolidation, merger or reorganization, own less than 50% of the Company's voting power immediately after such consolidation, merger or reorganization, or (iii) any transaction or series of related transactions to which the Company is a party in which in excess of 50% of the Company's voting power is transferred, excluding any consolidation or merger effected exclusively to change the domicile of the Company (a "Change in Control"), or 3. the date upon which the aggregate securities of the Company then held by the Investors that are a party to this Agreement on the date hereof comprise less than 30% of the Company's Common Stock outstanding on a fully-diluted basis. C. Attendance at Meetings. Each of the Investors agrees to be present, either in person or by proxy, at all meetings of shareholders of the Company at which one or more members of the Board are to be elected, so that all shares held by such Investor may be voted for the election of the directors as set forth herein; provided, that the Company shall have given notice of such meeting to each Investor not less than 10 days prior to the date of such meeting (unless waived in writing by such person). Each Investor may abstain from voting at all such meetings with respect to any matter except for the election of directors. -3- D. Further Assurances. The Company agrees to take all actions required to ensure that the rights given to the parties hereunder are effective and that they enjoy the benefits thereof. The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all of the provisions of this Agreement and in the taking of all such actions as may be appropriate in order to protect the rights of the parties hereunder against impairment. E. Proxies. Each Investor hereby grants to each other Investor an irrevocable proxy (a "Proxy") with respect to the voting of the shares of capital stock of the Company owned or controlled by such Investor in accordance with this Agreement. The Proxy granted by each Investor to each other Investor is exercisable by any Investor at any time or from time to time, commencing with the breach by any Investor granting the Proxy of its obligation to vote its shares of capital stock in accordance with this the Agreement. Each Proxy shall expire upon the termination of the Company's and the Investors' obligations under Section II of this Agreement pursuant to the terms of Section III.B. Each Investor agrees that each Proxy granted hereby is coupled with an interest. F. 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. G. 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 Common Stock, 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 Common Stock by reason of any stock dividend, split, combination, recapitalization, liquidation, reclassification, merger, consolidation or otherwise. H. Successors and Assigns. Except as provided below, 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 Common Stock or Warrants). 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. The rights of an Investor under Sections I and II of this Agreement may be assigned to any Permitted Transferee (as defined below) or to any transferee or assignee in connection with the transfer or assignment of at least 40% of such Investor's Common Stock (on a fully diluted basis); provided, that (a) such transfer is otherwise 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. For purposes of this Agreement, a "Permitted Transferee" shall mean (i) in the case of an Investor who is an individual, such person's -4- 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. I. Amendments and Waivers. Any term of this Agreement may be amended or waived only with the written consent of the Company and Investors holding at least 75% of the shares of Common Stock (on a fully-diluted basis) issued pursuant to the Purchase Agreement or the Old Purchase Agreement and then held by all Investors. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Investor. Notwithstanding the foregoing, if in any particular instance a party's obligations or rights under this Agreement are adversely affected thereby in a disproportionately adverse manner from that in which other parties are affected by application of this Section, the consent of such party shall also be required in such instance. J. 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. K. 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. L. Specific Performance; Delays or Omissions; Remedies Cumulative. The parties hereto hereby declare that it is impossible to measure in money the damages which will accrue to a party hereto or to their heirs, personal representatives, or assigns by reason of a failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable without the requirement for the posting of a bond. If any party hereto or his heirs, personal representatives, or assigns institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that such party or such personal representative has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists. 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 -5- 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. M. 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. N. 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. O. 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. P. Titles and Subtitles. 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. [Signature Page Follows] -6- The parties have executed this Stockholders Agreement as of the date first above written. COMPANY: FIBERNET TELECOM GROUP, INC. By: ---------------------------- Name: Title: INVESTORS: DEUTSCHE BANK AG NEW YORK BRANCH By: ---------------------------------------- Name: Title: By: ---------------------------------------- Name: Title: WACHOVIA INVESTORS, INC. By: ---------------------------------------- Name: Title: BANK ONE, N.A. By: ---------------------------------------- Name: Title: IBM CREDIT CORPORATION By: ---------------------------------------- Name: Title: TORONTO DOMINION (TEXAS), INC. By: ---------------------------------------- Name: Title: EXHIBIT A
NAME OF INVESTOR ADDRESS ---------------- ------- Deutsche Bank AG New York Deutsche Bank AG New York Branch Branch 31 West 52nd Street New York, New York 10019 Attention: Alexander Richarz Telecopy: (646) 324-7455 Wachovia Investors, Inc. Wachovia Investors, Inc. 301 S. College St., TW5 NC0537, Charlotte, NC 28288 Attention: Matthew Berk Telecopy: (704) 383-9831 Bank One, N.A. FNBC Leasing Corporation 55 West Monroe, 17th floor Mail Code IL1-0502 Chicago IL 60670-0502 IBM Credit Corporation IBM Credit Corporation North Castle Drive Armonk, NY 10504 Attn: Manager, Special Handling Toronto Dominion (Texas), Toronto Dominion (Texas), Inc. Inc. 909 Fannin, Suite 1700 Houston, Texas 77010 Attn: Jano Nixon, Vice President
EX-99.4 6 y65341cexv99w4.txt FIRST AMENDED AND RESTATED INVESTOR'S RIGHTS AGR. FIBERNET TELECOM GROUP, INC. FIRST AMENDED AND RESTATED INVESTOR'S RIGHTS AGREEMENT NOVEMBER 11, 2002 TABLE OF CONTENTS
Page ---- 1. Definitions........................................................... 1 2. Registration Rights................................................... 4 2.1 Shelf Registration............................................. 4 2.2 Company Registration........................................... 5 2.3 Obligations of the Company..................................... 6 2.4 Furnish Information............................................ 8 2.5 Expenses of Registration....................................... 8 2.6 Delay of Registration.......................................... 8 2.7 Indemnification................................................ 8 2.8 Reports Under Securities Exchange Act of 1934.................. 10 2.9 Assignment of Registration Rights.............................. 11 2.10 Limitations on Subsequent Registration Rights.................. 11 2.11 Market-Standoff Agreement...................................... 11 2.12 Termination of Registration Rights............................. 12 3. Transfer Restrictions................................................. 12 3.1 Restrictions on Transfer....................................... 12 3.2 Right of First Offer........................................... 12 4. Miscellaneous......................................................... 14 4.1 Legends........................................................ 14 4.2 Entire Agreement............................................... 14 4.3 Recapitalizations, Etc......................................... 14 4.4 Successors and Assigns......................................... 15 4.5 Amendments and Waivers......................................... 15 4.6 Notices........................................................ 15 4.7 Severability................................................... 15 4.8 Delays or Omissions; Remedies Cumulative....................... 15 4.9 Attorney's Fees................................................ 16 4.10 Governing Law.................................................. 16 4.11 Counterparts................................................... 16 4.12 Interpretation................................................. 16
-i- FIBERNET TELECOM GROUP, INC. FIRST AMENDED AND RESTATED INVESTOR'S RIGHTS AGREEMENT This First Amended and Restated Investor's Rights Agreement (this "Agreement") is made as of November 11, 2002, between FiberNet Telecom Group, Inc., a Delaware corporation (the "Company") and the investors listed on Exhibit A hereto, each of which is herein referred to as an "Investor". RECITALS Pursuant to a Purchase Agreement among the Company and the Investors dated October 30, 2002 (the "Old Purchase Agreement"), certain Investors purchased from the Company, and the Company sold to the Investors, upon the terms and subject to the conditions set forth therein, shares of the Common Stock, par value $0.001 per share, and warrants of the Company to purchase shares of Common Stock (the "Old Warrants"); The Company and the Investors have entered into a Common Stock and Warrant Purchase Agreement (the "Purchase Agreement") of even date herewith pursuant to which the Company desires to sell to the Investors, and the Investors desire to purchase from the Company, shares of the Company's Common Stock and warrants to purchase an additional amount of such shares (the "New Warrants" and together with the Old Warrants, the "Warrants"). A condition to the Investors' obligations under the Purchase Agreement is that the Company and the Investors enter into this Agreement in order to provide the Investors with certain rights to register shares of the Company's Common Stock. The Company desires to induce the Investors to purchase shares of Common Stock pursuant to the Purchase Agreement by agreeing to the terms and conditions set forth herein. AGREEMENT The parties agree as follows: 1. DEFINITIONS. For purposes of this Agreement: (a) "Business Day" means a day other than a Saturday or Sunday or any federal holiday. (b) "Common Stock" means the common stock, par value $0.001, of the Company. (c) "Credit Agreement" means the Company's Amended and Restated Credit Agreement dated as of February 9, 2001 (as amended, supplemented, amended and restated or otherwise modified from time to time) among FiberNet Operations, Inc., Devnet, L.L.C., the financial institutions from time to time parties thereto as lenders, Deutsche Bank AG New York Branch, as administrative agent, Toronto Dominion (USA) Securities Inc., as syndication agent, and Wachovia Investors, Inc., as documentation agent. (d) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (e) "Exempt Registration" means (i) a registration statement relating to the sale of securities by the Company pursuant to a stock option, stock purchase or similar benefit plan or an SEC Rule 145 transaction or (ii) a registration statement filed by the Company pursuant to the terms of the New Equity Registration Rights Agreement. (f) "Form S-3" means such form under the Securities Act as in effect on the date hereof or any successor form under the Securities Act that is intended to be used as a short form for the registration of distributions of secondary shares. (g) "New Equity Registration Rights Agreement" means the Registration Rights Agreement dated as of October 30, 2002, by and among the Company and the purchasers listed on Schedule I thereto as in effect on the date hereof. (h) "Nortel Note Exchange Agreement" means the Note Exchange Agreement, dated as of October 30, 2002, by and between the Company and SDS Merchant Fund, L.P. as in effect on the date hereof, pursuant to which the promissory note issued by the Company to Nortel Networks Inc. on December 7, 2001, will be surrendered to the Company in exchange for shares of Common Stock. (i) "Permitted Sale" means either (1) a transfer of Common Stock or Warrants to any Permitted Transferee, or (2) a transfer of Common Stock and Warrants in connection with a disposition of all of the equity interests of the Company and all of the Company's obligations under the Credit Agreement held by the transferor. (j) "Permitted Transferee" means (i) in the case of an Investor who is an individual, such person's ancestors, descendants or spouse, or any custodian or trustee for the account of such person (or for the account of such person's ancestors, descendants or spouse), (ii) in the case of an Investor which is a partnership or limited liability company, any constituent partner or member of such entity, (iii) in the case of an Investor which is a corporation, any parent corporation or wholly-owned subsidiary corporation or any officer, director or 10% stockholder of such corporation, and (iv) any other Investor. (k) "person" means any individual, corporation, partnership, limited liability company, trust, business, association or governmental or political subdivision thereof, governmental agency or other entity. (l) "Purchase Price" means an amount per share equal to $0.15 (subject to adjustment for stock splits, stock dividends, stock recombinations and similar transactions). (m) "Qualified Public Offering" shall mean any firm commitment underwritten public offering by the Company of its Common Stock yielding gross proceeds to -2- the Company of at least $50.0 million at a per share price to the public of at least $10 (subject to adjustment for stock splits, stock dividends, stock recombinations and similar transactions). (n) "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act and the declaration or ordering of effectiveness of such registration statement or document. (o) The term "Registrable Securities" means the shares of Common Stock issuable or issued to the Investors (i) pursuant to the Purchase Agreement, (ii) in connection with the exercise of Warrants issued or issuable pursuant to the Purchase Agreement or Old Purchase Agreement, (iii) as Liquidated Damages pursuant to Section 2.1(b) hereof, (iv) pursuant to the Old Purchase Agreement and (v) as (or issuable upon the conversion, exercise or exchange of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares listed in clauses (i), (ii), (iii), (iv) and this clause (v). Notwithstanding the foregoing, securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions, and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale. (p) The number of shares of "Registrable Securities then outstanding" shall equal the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities. (q) "SDS Note Exchange Agreement" means the Note Exchange Agreement, dated as of November 8, 2002, by and between the Company and SDS Merchant Fund, L.P. as in effect on the date hereof, providing for the conversion of the entire aggregate principal amount, all accrued and unpaid interest thereon and all other amounts payable in respect of the promissory note issued by the Company to SDS Merchant Fund, L.P. in March, 2002 in an initial principal amount of $2,000,000. (r) "SEC" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. (s) "Securities Act" means the Securities Act of 1933, as amended. (t) "Series H Share Exchange Agreement" means the Share Exchange Agreement, dated as of October 30, 2002, by and among the Company and each of the purchasers whose names appear on the signature pages thereto, pursuant to which the Company will issue Common Stock in exchange for all of its issued and outstanding shares of Series H Preferred Stock. (u) "Series J Share Exchange Agreement" means the Series J-1 Share Exchange Agreement, dated as of October 30, 2002, by and among the Company and each of the purchasers whose names appear on the signature pages thereto, pursuant to which the Company -3- will issue Common Stock in exchange for all of its issued and outstanding shares of Series J-1 Preferred Stock. (v) "Trading Day" means, with respect to any security, any day on which the principal market (including any formal or informal over the counter market) in which such security is then traded or on which a quoted price therefor may be ascertained is open for business. (w) "Transfer Restriction Period" means, (i) with respect to each Investor other than Nortel Networks Inc., the period of time commencing on the date of this Agreement and ending upon the first anniversary of the date of this Agreement, and (ii) with respect to Nortel Networks Inc., the period of time commencing on the date of this Agreement and ending on February 28, 2003. 2. REGISTRATION RIGHTS 2.1 SHELF REGISTRATION. (a) Filing. The Company shall (i) prepare and file with the SEC a shelf registration statement on Form S-3 (the "Shelf Registration Statement") pursuant to Rule 415 under the Securities Act relating to all of the Registrable Securities within 60 days of the date hereof (the "Filing Deadline") and (ii) use its best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act within 180 days of the date hereof (the "Effectiveness Deadline"). The Shelf Registration Statement may also include all of the "Registrable Securities" as defined in the New Equity Registration Rights Agreement. The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended to the extent necessary to ensure that it is available for resale of Registrable Securities by the holders thereof entitled to the benefits of this Section 2.1(a) and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the SEC as announced from time to time, until all Registrable Securities covered by such Shelf Registration Statement have been sold pursuant thereto. (b) Liquidated Damages. If (i) the Shelf Registration Statement is not filed with the SEC on or prior to the Filing Deadline, (ii) the Shelf Registration Statement has not been declared effective by the SEC on or prior to the Effectiveness Deadline, or (iii) prior to the sale of all Registrable Securities covered by such Shelf Registration Statement, the Shelf Registration Statement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within two Business Days by a post-effective amendment to the Shelf Registration Statement that cures such failure and that is itself declared effective within five Business Days of filing such post-effective amendment to such Registration Statement (each such event referred to in clauses (i) through (iii), a "Registration Default"), then the Company hereby agrees to pay to each record holder of Registrable Securities liquidated damages ("Liquidated Damages") for the period during which such Registration Default continues at a per annum rate of 6% (or, for any period of time during which such Registration Default continues -4- after June 30, 2004, 8%) of the Purchase Price of such Registrable Securities. Liquidated Damages shall be paid in shares of Common Stock at a per share rate equal to the Purchase Price. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Shelf Registration Statement, (2) upon the effectiveness of the Shelf Registration Statement, or (3) upon the filing of a post-effective amendment to the Shelf Registration Statement that causes the Shelf Registration Statement to again be declared effective or made usable, the Liquidated Damages payable with respect to the Registrable Securities as a result of such clause (i), (ii), or (iii), as applicable, shall cease to accrue. Notwithstanding anything to the contrary in this Section 2.1(b), if a Registration Default shall have occurred in connection with the Company's exercise of its rights under Section 2.1(c) hereof, such Registration Default shall not be deemed to occur until one Business Day following the termination of the postponement or suspension permitted pursuant to such Section 2.1(c). All accrued Liquidated Damages shall be paid to the holders of Registrable Securities entitled thereto on the last Business Day of each month in which such Liquidated Damages accrued. Notwithstanding the fact that any securities for which Liquidated Damages are due cease to be Registrable Securities, all obligations of the Company to pay Liquidated Damages with respect to securities shall survive until such time as such obligations with respect to such securities shall have been satisfied in full. (c) Postponing Or Suspending Filing Or Effectiveness Of A Registration Statement. If (i) there is material non-public information regarding the Company which the Company's Board of Directors reasonably determines not to be in the Company's best interest to disclose and which the Company is not otherwise required to disclose, or (ii) there is a significant business opportunity (including the acquisition or disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other similar transaction) available to the Company which such Board of Directors reasonably determines not to be in the Company's best interest to disclose, then the Company may postpone or suspend filing or effectiveness of a registration statement for a period not to exceed 20 consecutive days, provided that the Company may not postpone or suspend its obligation under this Section 2.1(c) for more than 45 days in the aggregate during any 12 month period; provided, however, that no such postponement or suspension shall be permitted for consecutive 20 day periods, arising out of the same set of facts, circumstances or transactions. 2.2 COMPANY REGISTRATION. (a) INITIATION. If the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Investors) any of its stock in connection with a public offering of such securities for cash (other than an Exempt Registration), the Company shall, at such time, promptly give each Investor notice of such registration. Upon the written request of each Investor given within 20 days after receipt by such Investor of the Company's notice, the Company shall, subject to the provisions of Section 2.2(b), -5- cause to be registered all of the Registrable Securities that each such Investor has requested to be registered. (b) UNDERWRITTEN OFFERING. In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required under Section 2.2(a) to include an Investor's securities in such underwriting unless such Investor accepts the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters advise the Company in writing will not adversely affect the marketing of the Company's capital stock. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the maximum amount of securities sold other than by the Company that the underwriters determine would not adversely affect the marketing of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine would not adversely affect the marketing of the offering (the securities so included to be apportioned pro rata (to the nearest 100 shares) among the selling stockholders according to the total amount of securities entitled to be included therein owned by each selling stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders). For purposes of the preceding apportionment, for any participating Investor that is a partnership, limited liability company or corporation, the partners, retired partners, members, retired members and stockholders of such Investor, or the estates and family members of any such partners, members, retired partners or members and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling stockholder," and any pro-rata reduction with respect to such "selling stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all persons included in such "selling stockholder," as defined in this sentence. 2.3 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 2 to effect the registration of any Registrable Securities, in addition to any other obligations of the Company under this Agreement, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its reasonable best efforts to cause such registration statement to become effective. (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act. (c) Furnish to the Investors such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of such Registrable Securities. (d) Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Investors, provided that the Company shall -6- not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement with the managing underwriter of such offering in usual and customary form and consistent with the other provisions of this Agreement. Each Investor participating in such underwriting shall also enter into and perform its obligations under such an agreement. (f) Promptly notify each Investor of Registrable Securities covered by the registration statement at any time when the Company becomes aware of the happening of any event as a result of which the registration statement or the prospectus included in such registration statement or any supplement to the prospectus (as then in effect) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading or, if for any other reason it shall be necessary during such time period to amend or supplement the registration statement or the prospectus in order to comply with the Securities Act, whereupon, in either case, each Investor shall immediately cease to use such registration statement or prospectus for any purpose and, as promptly as reasonably practicable thereafter, the Company shall prepare and file with the SEC, and furnish without charge to the appropriate Investors and managing underwriters, if any, a supplement or amendment to such registration statement or prospectus which will correct such statement or omission or effect such compliance and such copies thereof as the Investors and any underwriters may reasonably request. (g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange or over-the-counter market on which similar securities issued by the Company are then listed, if applicable. (h) Provide a transfer agent and registrar for such Registrable Securities and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. (i) Use its reasonable best efforts, after the effectiveness of a registration statement under the Securities Act qualifying a public offering of Registrable Securities held by an Investor, to issue and deliver, upon delivery of a certificate representing shares of Registrable Securities held by such Investor, that number of Registrable Securities represented by such certificate to the Depository Trust Company ("DTC") account on the Investor's behalf via the Deposit Withdrawal Agent Commission System ("DWAC"). (j) Use its reasonable best efforts to furnish, at the request of any Investor requesting registration of Registrable Securities pursuant to Section 2.2, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to Section 2.2, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the 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 -7- underwriters, if any, and to the Investors requesting registration of Registrable Securities (to the extent the then applicable standards of professional conduct permit said letter to be addressed to the Investors). 2.4 FURNISH INFORMATION. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Investor's Registrable Securities. 2.5 EXPENSES OF REGISTRATION. All expenses other than underwriting discounts and commissions incurred in connection with registrations initiated pursuant to this Section 2, including all registration, filing and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of one special counsel for the selling Investors selected by Investors selling a majority of the subject Registrable Securities with the approval of the Company, which approval shall not be unreasonably withheld, shall be borne by the Company. 2.6 DELAY OF REGISTRATION. No Investor shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2. 2.7 INDEMNIFICATION. In the event any Registrable Securities are included in a registration statement under this Section 2: (a) INDEMNIFICATION BY THE COMPANY. The Company will indemnify and hold harmless each Investor, any underwriter (as defined in the Securities Act) for such Investor, and each person, if any, who controls such Investor or underwriter within the meaning of the Securities Act or the Exchange Act, and their respective officers, directors, partners, members, brokers, investment advisors, employees, legal counsel, accountants, and agents (collectively, the "Indemnified Parties"), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Indemnified Person, as incurred, any legal or other -8- expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 2.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to any Indemnified Person for any such loss, claim, damage, liability, or action to the extent that it arises solely out of or is based solely upon a Violation which occurs in reasonable reliance upon and in conformity with written information furnished expressly for use in connection with such registration, by such Indemnified Person. (b) INDEMNIFICATION BY THE INVESTORS. To the extent permitted by law, each selling Investor will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Investor selling securities in such registration statement and any controlling person of any such underwriter or other Investor, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs solely in reliance upon and in conformity with written information furnished by such Investor expressly for use in connection with such registration; and each such Investor will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 2.7(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 2.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Investor, which consent shall not be unreasonably withheld; provided, that in no event shall any indemnity under this Section 2.7(b) exceed the net proceeds from the offering received by such Investor. (c) PROCEDURES. Promptly after receipt by an indemnified party under this Section 2.7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.7, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have -9- to any indemnified party otherwise than under this Section 2.7. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. The indemnity agreements contained in this Section 2.7 shall not apply to amounts paid in settlement of any loss, claim, damage, liability or action if such settlement is effected without the consent of the indemnifying party. (d) CONTRIBUTION. If the indemnification provided for in this Section 2.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided, that in no event shall any contribution by an Investor under this Section 2.7(d) exceed the net proceeds from the offering received by such Investor. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. (e) UNDERWRITING AGREEMENT. Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. (f) SURVIVAL. The obligations of the Company and Investors under this Section 2.7 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 2, and otherwise. 2.8 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making available to the Investors the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit an Investor to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times for so long as the Company remains subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Investors to use Form S-3 for the sale of their Registrable Securities; -10- (c) file with the SEC in a timely manner all reports and other documents as may be required of the Company under the Securities Act and the Exchange Act; and (d) furnish to any Investor, so long as the Investor owns any Registrable Securities, forthwith upon request (i) a written statement by the Company whether it has complied with the reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Investor of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 2.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to register securities granted Investors under Section 2 may be assigned to any Permitted Transferee or any transferee or assignee in connection with the transfer or assignment of all or any portion of such Investor's Registrable Securities; provided, that (a) such transfer may otherwise be effected in accordance with applicable securities laws and other restrictions on transfer applicable to such shares, (b) notice of such assignment is given to the Company and (c) such transferee or assignee agrees to be bound by all provisions of this Agreement. 2.10 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the date of this Agreement, the Company shall not, without the prior written consent of Investors holding at least a majority of the then outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 2 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of its securities will not reduce the amount of the Registrable Securities of the Investors which is included or (b) except pursuant to the New Equity Registration Rights Agreement, to make a demand registration which could result in such registration statement being declared effective within 120 days after the effective date of any registration effected pursuant to Section 2. 2.11 MARKET-STANDOFF AGREEMENT. (a) MARKET-STANDOFF PERIOD; AGREEMENT. In connection with a Qualified Public Offering of the Company's equity securities for cash subsequent to the date herein and upon request of the underwriters managing such offering of the Company's securities, each Investor hereby agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than any disposed of in the registration and those acquired by the Investor in the registration or thereafter in open market transactions) without the prior written consent of such underwriters, for such period of time (not to exceed (i) 180 days with respect to the next Qualified Public Offering and (ii) 90 days with respect to each other Qualified Public Offering, or in each case such shorter period as the Company agrees to with any other person) from the effective date of such registration as may -11- be requested by such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of such Qualified Public Offering. (b) LIMITATIONS. The obligations described in Section 2.11(a) shall apply only if and to the extent that all officers and directors of the Company enter into similar agreements. If any standoff or lockup restrictions imposed on any holder of securities of the Company is waived or terminated, then such waiver or termination shall be granted to all Investors subject to standoff or lockup restrictions pro rata based on the number of shares of Common Stock beneficially held by such holder and the Investors. From and after the date of this Agreement, the Company shall use its reasonable best efforts to ensure that all holders of capital stock of the Company agree to be bound by terms substantially similar to those set forth in this Section 2.11. (c) STOP-TRANSFER INSTRUCTIONS. In order to enforce the foregoing covenants, the Company may impose stop-transfer instructions with respect to the securities of each Investor (and the securities of every other person subject to the restrictions in Section 2.11(a)). 2.12 TERMINATION OF REGISTRATION RIGHTS. No Investor shall be entitled to exercise any registration right provided for in this Section 2 after the earlier of (a) such time as Rule 144 is available for the sale of all of such Investor's Registrable Securities during a three-month period without registration, without reference to Rule 144(k) and (b) 2 years after the consummation of the Company's next Qualified Public Offering. 3. TRANSFER RESTRICTIONS. 3.1 RESTRICTIONS ON TRANSFER. Unless waived pursuant to Section 4.5, during the Transfer Restriction Period, each Investor agrees not to transfer any shares of Common Stock or Warrants received pursuant to the Purchase Agreement or Old Purchase Agreement or upon any exercise of such Warrants, except pursuant to a Permitted Sale. 3.2 RIGHT OF FIRST OFFER. (a) GENERAL. Each Investor shall have a right of first offer to purchase its pro rata share of all Equity Securities, as defined below, that the Company may, from time to time, propose to sell and issue after the date of this Agreement, other than the Equity Securities excluded by Section 3.2(c) hereof. Each Investor's pro rata share is equal to the ratio of (a) the number of shares of the Company's Common Stock (including all shares of Common Stock issued or issuable upon conversion, exercise or exchange of securities of the Company) which such Investor holds immediately prior to the issuance of such Equity Securities to (b) the total number of shares of the Company's outstanding Common Stock (including all shares of Common Stock issued or issuable upon conversion, exercise or exchange of securities of the Company) immediately prior to the issuance of the Equity Securities. The term "Equity Securities" means (i) any Common Stock, preferred stock or other equity security of the Company, (ii) any security convertible, with or without consideration, into any common stock, preferred stock or other equity security of the Company (including any option or warrant to purchase such a convertible security) and (iii) any security carrying any warrant or right to -12- subscribe to or purchase any common stock, preferred stock or other equity security of the Company, and any such warrant or right. (b) EXERCISE OF RIGHTS. If the Company proposes to issue any Equity Securities, it shall give each Investor written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same. Each Investor shall have 5 Business Days from the receipt of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of Equity Securities to be purchased. Notwithstanding the foregoing, the Company shall not be required to offer or sell such Equity Securities to any Investor who would cause the Company to be in violation of applicable federal securities laws by virtue of such offer or sale, (c) EXCLUDED SECURITIES. The rights of first offer established by this Section 3 shall have no application to any of the following Equity Securities: (i) up to 100,441,177 shares of Common Stock, and/or options, warrants or other Common Stock purchase rights and the Common Stock issued pursuant to such options, warrants or other rights (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like), issued to employees, officers, directors or strategic partners of, or consultants, advisors, lenders, vendors or lessors to, the Company or any of its subsidiaries pursuant to the Company's stock incentive plans or pursuant to other similar arrangements that are approved by the Board of Directors (including the representatives of the Investors); (ii) [Intentionally Omitted]; (iii) any shares of Common Stock issued in connection with any stock split, stock dividend or recapitalization by the Company; (iv) any Equity Securities that are issued by the Company to the holders of the Company's Common Stock and warrants on a pro rata basis pursuant to a registration statement filed under the Securities Act; (v) any Equity Securities issued pursuant to any rights or agreements outstanding as of the date of this Agreement, or options or warrants outstanding as of the date of this Agreement as set forth in the Schedule of Exceptions to the Purchase Agreement (including Equity Securities issued by the Company pursuant to Nortel Note Exchange Agreement, SDS Note Exchange Agreement, the Series H Share Exchange Agreement, and the Series J Share Exchange Agreement); (vi) Common Stock and warrants (and Common Stock issuable upon exercise of such warrants) issued by the Company pursuant to the Common Stock Purchase Agreement dated as of October 30, 2002, by and between the Company and the entities listed on Exhibit A thereto; or (vii) any Equity Securities issued pursuant to the transactions described in Section 2.5.B(iii)(d) of the Credit Agreement if the proceeds from such issuance are -13- used to prepay the Loans (as defined in the Credit Agreement) and permanently reduce the Commitments (as defined in the Credit Agreement) in accordance with Section 2.5.C. of the Credit Agreement. 4. MISCELLANEOUS. 4.1 LEGENDS. Each certificate representing shares of Common Stock held by an Investor or any subsequent holder of such shares shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws): "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW. THE SALE, TRANSFER OR PLEDGE OF THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF AN AGREEMENT BETWEEN THE COMPANY AND CERTAIN HOLDERS OF ITS SECURITIES, AS THE SAME MAY BE AMENDED AND IN EFFECT FROM TIME TO TIME. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY." The Company shall be obligated to reissue promptly unlegended certificates at the request of any holder of a security legended pursuant to this Section 4 if such holder shall have obtained an opinion of counsel at such holder's expense (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend. The Company shall be obligated to reissue promptly certificates not having the second paragraph of the legend set forth above at the request of any holder of a security legended pursuant to this Section 4.1 if such holder is not a party to this Agreement or a person who is an Investor or transferee of an Investor hereunder. 4.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements relating to the subject matter hereof existing among any of the parties hereto are expressly canceled. 4.3 RECAPITALIZATIONS, ETC.. The provisions of this Agreement (including any calculation of share ownership) shall apply, to the full extent set forth herein with respect to the Registrable Securities, to any and all shares of capital stock of the Company or any capital stock, partnership or member units or any other security evidencing ownership interests in any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange for, or in substitution of the Registrable Securities by reason of any stock dividend, split, combination, recapitalization, liquidation, reclassification, merger, consolidation or otherwise. -14- 4.4 SUCCESSORS AND ASSIGNS. Except as otherwise provided in this Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties (including transferees of any Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 4.5 AMENDMENTS AND WAIVERS. Any term of Section 2 of this Agreement may be amended or waived only with the written consent of the Company and the holders of at least 75% of the Registrable Securities then outstanding. Any other term of this Agreement may be amended or waived only with the written consent of the Investors holding at least 75% of the Common Stock (on a fully-diluted basis) issued pursuant to the Purchase Agreement or the Old Purchase Agreement and then held by all Investors. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Investor. Notwithstanding the foregoing, if in any particular instance a party's obligations or rights under this Agreement are adversely affected thereby in a disproportionately adverse manner from that in which other parties are affected by application of this Section, the consent of such party shall also be required in such instance. 4.6 NOTICES. Unless otherwise provided, any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by telegram or confirmed fax, or if mailed to a domestic address, 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party's address or fax number as set forth below or on Exhibit A hereto or as subsequently modified by written notice. 4.7 SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision shall be excluded from this Agreement, (b) the balance of the Agreement shall be interpreted as if such provision were so excluded and (c) the balance of the Agreement shall be enforceable in accordance with its terms. 4.8 DELAYS OR OMISSIONS; REMEDIES CUMULATIVE. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative. -15- 4.9 ATTORNEY'S FEES. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and disbursements in addition to any other relief to which such party may be entitled. 4.10 GOVERNING LAW. This Agreement and all acts and transactions pursuant hereto shall be governed, construed and interpreted in accordance with the laws of the State of New York, without giving effect to principles of conflicts of laws. 4.11 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 4.12 INTERPRETATION. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. When used in this Agreement, the terms "include," "including," "includes" and other derivations of such word shall be deemed to be followed by the phrase "without limitation." [Signature Page Follows] -16- The parties have executed this Investor's Rights Agreement as of the date first above written. COMPANY: FIBERNET TELECOM GROUP, INC. By:____________________________ Name: Title: INVESTORS: DEUTSCHE BANK AG NEW YORK BRANCH By:________________________________________ Name: Title: By:________________________________________ Name: Title: WACHOVIA INVESTORS, INC. By:________________________________________ Name: Title: BANK ONE, N.A. By:________________________________________ Name: Title: IBM CREDIT CORPORATION By:________________________________________ Name: Title: NORTEL NETWORKS INC. By:________________________________________ Name: Title: TORONTO DOMINION (TEXAS), INC. By:________________________________________ Name: Title: EXHIBIT A
NAME OF INVESTOR ADDRESS ---------------- ------- Deutsche Bank AG New York Branch Deutsche Bank AG New York Branch 31 West 52nd Street New York, New York 10019 Attention: Alexander Richarz Telecopy: (646) 324-7455 Wachovia Investors, Inc. Wachovia Investors, Inc. 301 S. College St., TW5 NC0537, Charlotte, NC 28288 Attention: Matthew Berk Telecopy: (704) 383-9831 Bank One, N.A. FNBC Leasing Corporation 55 West Monroe, 17th floor Mail Code IL1-0502 Chicago IL 60670-0502 IBM Credit Corporation IBM Credit Corporation North Castle Drive Armonk, NY 10504 Attn: Manager, Special Handling Toronto Dominion (Texas), Inc. Toronto Dominion (Texas), Inc. 909 Fannin, Suite 1700 Houston, Texas 77010 Attn : Jano Nixon, Vice President Nortel Networks Inc. Nortel Networks Inc. MS 991-15-A40 2221 Lakeside Boulevard Richardson, Texas 75082 Attention: Customer Finance Telecopy: 972-684-3679
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