-----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, H1IsAK43cH2VuDA0YGEfAlA5BKsosa4/ukFv7g0/tbb6gAgfiXUIpBYXuffCQ6J2 wXYqkm6qpJgQ3w8gduLmuQ== 0001130319-02-001044.txt : 20021104 0001130319-02-001044.hdr.sgml : 20021104 20021104082434 ACCESSION NUMBER: 0001130319-02-001044 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20021104 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-56267 FILM NUMBER: 02807493 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: NORTEL NETWORKS CORP CENTRAL INDEX KEY: 0000072911 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 621262580 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 8200 DIXIE ROAD SUITE 100 STREET 2: BRAMPTON CITY: ONTARIO CANADA STATE: A6 ZIP: L6T 5P6 BUSINESS PHONE: 9058631103 MAIL ADDRESS: STREET 1: 8200 DIXIE ROAD STREET 2: SUITE 100 BRAMPTON CITY: ONTARIO CANADA STATE: A6 ZIP: L6T 5P6 FORMER COMPANY: FORMER CONFORMED NAME: NORTHERN ELECTRIC CO LTD DATE OF NAME CHANGE: 19760324 FORMER COMPANY: FORMER CONFORMED NAME: NORTHERN TELECOM LTD DATE OF NAME CHANGE: 19940831 SC 13D/A 1 t08117sc13dza.txt SCHEDULE 13D/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- SCHEDULE 13D/A (RULE 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (AMENDMENT NO. 2)(1) FiberNet Telecom Group, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.001 - -------------------------------------------------------------------------------- (Title of Class of Securities) 315653105 -------------------------------------------------------- (CUSIP Number) Deborah J. Noble Corporate Secretary Nortel Networks Corporation 8200 Dixie Road, Suite 100 Brampton, Ontario L6T 5P6 Canada (905) 863-1103 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Persons 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 that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. [ ] Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (1) 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 this cover page shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act. CUSIP NO. 315653105 Page 2 of 14 - ------------------------------------------------------------------------------------------------------------------------------------ 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Nortel Networks Corporation - ------------------------------------------------------------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - ------------------------------------------------------------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------------------------------------------------------------ 4 SOURCE OF FUNDS OO * - ------------------------------------------------------------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - ------------------------------------------------------------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Canada - ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF SHARES 7 SOLE VOTING POWER 78,571,429 ** --------------------------------------------------------------------------------------------------------- BENEFICIALLY OWNED BY 8 SHARED VOTING POWER 0 --------------------------------------------------------------------------------------------------------- EACH REPORTING PERSON 9 SOLE DISPOSITIVE POWER 78,571,429 ** --------------------------------------------------------------------------------------------------------- WITH 10 SHARED DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 78,571,429 ** - ------------------------------------------------------------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ------------------------------------------------------------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.7% *** - ------------------------------------------------------------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON CO - ------------------------------------------------------------------------------------------------------------------------------------
Page 3 of 14 CUSIP NO. 315653105 * In consideration for the receipt of 62,857,143 shares of Common Stock of the Issuer and the Warrant (as defined below), Nortel Networks Inc. exchanged $9,428,571 of senior debt of the Issuer previously held by Nortel Networks Inc. ** Includes 15,714,286 shares of Common Stock of the Issuer issuable upon exercise of a warrant received from the Issuer on October 30, 2002 and with an exercise price of $0.12/share (the "Warrant"). *** Calculated, pursuant to Exchange Act Rule 13d-3, on the basis of: (a) 716,515,187 shares of Common Stock of the Issuer issued and outstanding as of October 30, 2002 post-closing of the transactions described herein, as represented to Nortel Networks Inc. by the Issuer; and (b) the 15,714,286 shares of Common Stock of the Issuer subject to the Warrant, which is currently exercisable. CUSIP NO. 315653105 Page 4 of 14 AMENDMENT NO. 2 TO SCHEDULE 13D This Amendment No. 2 amends the Statement on Schedule 13D filed on February 12, 2001, as amended by Amendment No. 1 filed on December 11, 2001 (as amended, the "Statement"), by and on behalf of Nortel Networks Corporation with respect to its beneficial ownership of shares of common stock, par value $0.001 per share (the "Common Stock"), of FiberNet Telecom Group, Inc. ("FiberNet"). Capitalized terms used and not defined herein have the meanings set forth in the Statement. The Statement, as amended by this Amendment No. 2, is referred to herein as "Schedule 13D". With respect to Items 2, 4, 5 and 6 of the Statement, the Schedule I attached to the Statement is hereby replaced with the Schedule I attached hereto. ITEM 1. SECURITY AND ISSUER Item 1 of the Statement is hereby amended to include the following after the first sentence: The 78,571,429 shares of Common Stock beneficially owned by Nortel Networks Corporation consist of: (a) 62,857,143 shares of Common Stock and (b) 15,714,286 shares of Common Stock issuable upon exercise of a warrant (the "Warrant"), at an exercise price of $0.12 per share. The Common Stock and the Warrant are held by Nortel Networks Inc., a wholly-owned subsidiary of Nortel Networks Limited, which in turn is a subsidiary of Nortel Networks Corporation. ITEM 2. IDENTITY AND BACKGROUND Item 2(d)-(e) is hereby restated: (d) - (e) During the last five years, neither Nortel Networks Corporation nor, to the knowledge of Nortel Networks Corporation, any of the persons listed on Schedule I hereto (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding 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. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Item 3 of the Statement is hereby amended to include the following paragraphs after the first paragraph: Nortel Networks Inc. sold all of its remaining Common Stock (9,826,865 shares of Common Stock) and Series H Preferred Stock (104,578 shares of Series H Preferred Stock) on October 30, 2002 for $0.0413 per share of Common Stock and $3.1503 per share of Series H Preferred Stock pursuant to the Stock Purchase Agreement dated October 30, 2002 by and among Nortel Networks Inc. and the purchasers listed on Exhibit A attached thereto. On October 30, 2002, Nortel Networks Inc. received 62,857,143 shares of Common Stock and the Warrant from FiberNet for $9,428,571 of senior debt of FiberNet previously held by Nortel Networks Inc. ITEM 4. PURPOSE OF THE TRANSACTION Item 4 of the Statement is hereby amended to read as follows: CUSIP NO. 315653105 Page 5 of 14 The 11,459,041 shares of Common Stock beneficially owned by Nortel Networks Inc. at February 1, 2001 were issuable upon the conversion of 426,333 shares of Series H Preferred Stock and 62,500 shares of Series I Preferred Stock. At their respective original issuance dates, the Series H Preferred Stock was convertible into 4,263,330 shares of Common Stock and the Series I Preferred Stock was convertible into 625,000 shares of Common Stock. Pursuant to the Certificate of Incorporation, following the issuance by FiberNet of 6,440,000 shares of Common Stock and warrants to purchase approximately 1,488,000 shares of Common Stock, the number of shares of Common Stock into which the Series H Preferred Stock is convertible increased to 9,744,755 and the number of shares of Common Stock into which the Series I Preferred Stock is convertible increased to 1,714,286. As of December 7, 2001, and as the result of accrued dividends payable with respect to the Series H Preferred Stock and Series I Preferred Stock, the Series H Preferred Stock was convertible into an aggregate of 10,472,366 shares of Common Stock and the Series I Preferred Stock was convertible into an aggregate of 1,901,253 shares of Common Stock. In connection with the December 7, 2001 transaction, Nortel Networks Inc. (a) converted 373,947 shares of Series H Preferred Stock into 8,547,360 shares of Common Stock, and (b) converted all of its shares of Series I Preferred Stock into 1,901,253 shares of Common Stock. In addition, in connection with the December 7, 2001 transaction, the number of shares of Common Stock into which Nortel Networks Inc.'s remaining 100,000 shares of Series H Preferred Stock are convertible increased to 7,633,588. Nortel Networks Inc. sold all of its remaining Common Stock (9,826,865 shares of Common Stock) and Series H Preferred Stock (104,578 shares of Series H Preferred Stock, which included 4,578 shares due to accrued dividends) on October 30, 2002 for $0.0413 per share of Common Stock and $3.1503 per share of Series H Preferred Stock. On October 30, 2002, Nortel Networks Inc. received 62,857,143 shares of Common Stock and the Warrant from FiberNet for $9,428,571 of senior debt of FiberNet previously held by Nortel Networks Inc. The October 30, 2002 transaction was part of a larger corporate transaction by FiberNet, which included the sale of FiberNet senior debt held by several other investors to FiberNet for shares of Common Stock and warrants from FiberNet, as well as the issuance of shares of Common Stock of FiberNet to new investors. As part of this larger corporate transaction, Nortel Networks Inc. sold certain other FiberNet debt to a third party pursuant to the Note Purchase Agreement dated as of October 30, 2002 by and among Nortel Networks Inc. and SDS Merchant Fund, L.P. Nortel Networks Inc. plans to sell a further approximately $286,000 of senior debt to FiberNet for further shares of Common Stock of FiberNet. Except as set forth in this Schedule 13D, neither Nortel Networks Corporation nor, to the best of Nortel Networks Corporation's knowledge, any of the individuals named on Schedule I hereto has any plans or proposals that relate to or that would result in or relate to any of the actions specified in subparagraphs (a) through (j) of Item 4 of the instructions to Schedule 13D, other than (subject to the Investor's Rights Agreement described in Item 6) sales of shares of Common Stock of FiberNet that Nortel Networks Inc. may make from time to time based on market conditions. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) Number and Percentage of Securities Owned: The first paragraph of Item 5(a) is hereby amended to read as follows: Nortel Networks Corporation is the beneficial owner of 78,571,429 shares of Common Stock, representing approximately 10.7% of the Common Stock issued and outstanding. The 78,571,429 shares CUSIP NO. 315653105 Page 6 of 14 include 15,714,286 shares of Common Stock issuable upon conversion of the Warrant, at an exercise price of $0.12 per share. (b) Type of Ownership: Item 5(b) is hereby amended to read as follows: Nortel Networks Corporation has the sole power to vote or to direct the vote or to dispose or direct the disposition of the 78,571,429 shares of Common Stock. (c) Transactions in Securities: Item 5(c) is hereby amended to read as follows: Nortel Networks Inc. sold 9,826,865 shares of Common Stock and 104,578 shares of Series H Preferred Stock on October 30, 2002, in a private sale, for $0.0413 per share of Common Stock and $3.1503 per share of Series H Preferred Stock, pursuant to the Stock Purchase Agreement dated October 30, 2002 by and among Nortel Networks Inc. and the purchasers listed on Exhibit A attached thereto. Except as otherwise described herein, neither Nortel Networks Corporation nor, the best of Nortel Networks Corporation's knowledge, any of the individuals named in Schedule I hereto has effected any transaction in FiberNet Common Stock or Series H Preferred Stock during the past 60 days. (d) Right to Receive Dividends: Item 5(d) is hereby amended to read as follows: Nortel Networks Inc. holds all rights associated with its shares of Common Stock and the Warrant, including the right to receive dividends on such shares of Common Stock. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER Item 6 is hereby amended to include the following paragraphs: Nortel Networks Inc. is also a party to a Common Stock and Warrant Purchase Agreement made as of October 30, 2002 by and among FiberNet and Deutsche Bank AG New York Branch, Wachovia Investors, Inc., Bank One, N.A., IBM Credit Corporation, Nortel Networks Inc., and Toronto Dominion (Texas), Inc. (collectively, the "Investors"), in order to provide for, subject to certain conditions, the purchase by the Investors from FiberNet of an aggregate of 440,000,000 shares of Common Stock and warrants of FiberNet to purchase an aggregate of 110,000,000 shares of Common Stock for an aggregate purchase price of $66,000,000 (as paid by means of cancellation of indebtedness). The warrants have an exercise price equal to $0.12 per share and are immediately exercisable. Nortel Networks Inc. is also party to an Investor's Rights Agreement made as of October 30, 2002 between FiberNet and the Investors, in order to provide the Investors with certain rights to register shares of FiberNet's Common Stock. Pursuant to the Investor's Rights Agreement, and subject to certain conditions, in connection with a "Qualified Public Offering", as defined in the Investor's Rights Agreement, of FiberNet's equity securities for cash and upon request of the underwriters managing such offering of FiberNet's securities, Nortel Networks Inc. has agreed not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of FiberNet (other than any disposed of in the registration and those acquired by Nortel Networks Inc. in the registration or thereafter in open market transactions) without the prior written consent of such underwriters, for CUSIP NO. 315653105 Page 7 of 14 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 FiberNet agrees to with any other person) from the effective date of such registration as may be requested by such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of such Qualified Public Offering. Nortel Networks Inc. has also agreed not to transfer any of its shares of Common Stock or the Warrant, or Common Stock received upon any exercise of the Warrant, during the period from October 30, 2002 to February 28, 2003, except pursuant to a "Permitted Sale", as defined in the Investor's Rights Agreement. Nortel Networks Inc. has also agreed to a right of first offer to purchase its pro rata share of all FiberNet "Equity Securities", as defined in the Investor's Rights Agreement, that FiberNet may, from time to time, propose to sell and issue after October 30, 2002, other than certain excluded Equity Securities. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Item 7 is hereby amended to include the following: Exhibit 5 Common Stock and Warrant Purchase Agreement made as of October 30, 2002 by and among FiberNet Telecom Group, Inc. and Deutsche Bank AG New York Branch, Wachovia Investors, Inc., Bank One, N.A., IBM Credit Corporation, Nortel Networks Inc., and Toronto Dominion (Texas), Inc. Exhibit 6 Investor's Rights Agreement made as of October 30, 2002 between FiberNet Telecom Group, Inc. and Deutsche Bank AG New York Branch, Wachovia Investors, Inc., Bank One, N.A., IBM Credit Corporation, Nortel Networks Inc., and Toronto Dominion (Texas), Inc. Exhibit 7 Stock Purchase Agreement dated as of October 30, 2002 by and among Nortel Networks Inc. and the purchasers listed on Exhibit A attached thereto. Exhibit 8 Note Purchase Agreement dated as of October 30, 2002 by and among Nortel Networks Inc. and SDS Merchant Fund, L.P. CUSIP NO. 315653105 Page 8 of 14 SIGNATURES 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. Date: November 1, 2002 NORTEL NETWORKS CORPORATION /s/ [Conformed Signature] ------------------------------ By: Katharine B. Stevenson Title: Treasurer /s/ [Conformed Signature] ----------------------------- By: Blair F. Morrison Title: Assistant Secretary CUSIP NO. 315653105 Page 9 of 14 SCHEDULE I NORTEL NETWORKS CORPORATION AND NORTEL NETWORKS LIMITED DIRECTORS AND EXECUTIVE OFFICERS The name, citizenship, present principal occupation or employment, and the name of any corporation or other organization in which such employment is conducted, of each of the directors and executive officers of Nortel Networks Corporation and Nortel Networks Limited is set forth below. Unless otherwise indicated below, the business address of each director and executive officer is Nortel Networks Corporation and Nortel Networks Limited, 8200 Dixie Road, Suite 100, Brampton, Ontario L6T 5P6, Canada.
NAME AND CITIZENSHIP PRINCIPAL OCCUPATION AND ADDRESS - -------------------- -------------------------------- DIRECTORS James Johnston Blanchard Piper Rudnick American 901-15th Street, N.W., Suite 700 Washington, D.C. 20005-2301 U.S.A. Robert Ellis Brown President and Chief Executive Officer Canadian/British Bombardier Inc. 800 Rene-Levesque Boulevard West, 29th Floor Montreal, Quebec H3B 1Y8 Canada John Edward Cleghorn Chairman of the Board Canadian SNC-Lavalin Group Inc. 200 Bay Street, South Tower, Suite 3115 Royal Bank Plaza Toronto, Ontario M5J 2J5 Canada Frank Andrew Dunn President and Chief Executive Officer Canadian Nortel Networks Corporation and Nortel Networks Limited L. Yves Fortier Chairman and Senior Partner Canadian Ogilvy Renault 1981 McGill College Avenue, 12th Floor Montreal, Quebec H3A 3C1 Canada
CUSIP NO. 315653105 Page 10 of 14 Robert Alexander Ingram Chief Operating Officer and President, American Pharmaceutical Operations GlaxoSmithKline 5 Moore Drive, Research Triangle Park, N.C. 27709 U.S.A. William Arthur Owens Co-Chief Executive Officer and Vice Chairman American Teledesic LLC 1445 120th Avenue N.E. Bellevue, Washington 98005 U.S.A. Guylaine Saucier 1321 Sherbrooke Street West, Apartment C-61 Canadian Montreal, Quebec H3G 1J4 Canada Sherwood Hubbard Smith, Jr. Chairman Emeritus of the Board American CP&L One Hanover Square Building 421 Fayetteville Street Mall Raleigh, N.C. 27601-1748 U.S.A. Lynton Ronald Wilson Chairman of the Board Canadian CAE Inc. 483 Bay Street (Chairman of the Board of Nortel Networks Floor 7, North Tower Corporation and Nortel Networks Limited) Toronto, Ontario M5G 2E1 Canada OFFICERS Frank Andrew Dunn President and Chief Executive Officer Canadian Douglas Charles Beatty Chief Financial Officer Canadian Nicholas John DeRoma Chief Legal Officer American D. Gregory Mumford Chief Technology Officer Canadian Pascal Debon President, Wireless Networks French
CUSIP NO. 315653105 Page 11 of 14 Chahram Bolouri President, Global Operations Canadian Brian William McFadden President, Optical Networks Canadian Gary Richard Donahee President, Americas American Stephen Charles Pusey President, Europe, Middle East and Africa U.K. Susan Spradley President, Wireline Networks American Masood Ahmad Tariq President, Asia American/Canadian William John Donovan Senior Vice-President, Human Resources American Michael Jerard Gollogly Controller Canadian Adrian Joseph Donoghue General Auditor Canadian Katharine Berghuis Stevenson Treasurer Canadian/American Deborah Jean Noble Corporate Secretary Canadian Richard Clyde Ricks Chief Information Officer American Steven Leo Schilling President, Enterprise Accounts American Linda Faye Mezon Assistant Controller Canadian/American John Marshall Doolittle Vice President, Tax Canadian
CUSIP NO. 315653105 Page 12 of 14 Blair Fraser Morrison Assistant Secretary Canadian MaryAnne Elizabeth Pahapill Assistant Treasurer Canadian
CUSIP NO. 315653105 Page 13 of 14 DIRECTORS AND OFFICERS OF NORTEL NETWORKS INC. The name, citizenship, present principal occupation or employment, and the name of any corporation or other organization in which such employment is conducted, of each of the directors and executive officers of Nortel Networks Inc. is set forth below. Unless otherwise indicated below, the business address of each director and executive officer is Nortel Networks Inc., 200 Athens Way, Nashville, Tennessee 37228-1397 USA. DIRECTORS Mary M. Cross President and Vice-President, Finance American Katharine B. Stevenson Treasurer, Nortel Networks Corporation Canadian/American and Nortel Networks Limited 8200 Dixie Road, Suite 100 Brampton, Ontario L6T 5P6 Canada OFFICERS Mary M. Cross President and Vice-President, Finance American Lynn C. Egan Assistant Secretary American Thomas A. Gigliotti Assistant Secretary American 4006 E. Chapel Hill-Nelson Highway Research Triangle Park, North Carolina 27709 USA Ernest R. Higginbotham Assistant Secretary American 2221 Lakeside Blvd. Richardson, Texas 75082-4399 USA Paul T. Knudsen Assistant Secretary Canadian 5405 Windward Parkway Alpharetta, Georgia 30004 USA Monica L. Lester Assistant Treasurer American
CUSIP NO. 315653105 Page 14 of 14 Claudio Morfe Assistant Secretary American 880 Technology Park Billerica, Massachusetts 01821 USA Deborah J. Noble Corporate Secretary, Nortel Networks Corporation Canadian and Nortel Networks Limited Assistant Secretary, Nortel Networks Inc. 8200 Dixie Road, Suite 100 Brampton, Ontario L6T 5P6 Canada Roger A. Schecter Secretary American
EX-5 3 t08117exv5.txt COMMON STOCK AND WARRANT PURCHASE AGREEMENT EXECUTION COPY EXHIBIT 5 FIBERNET TELECOM GROUP, INC. COMMON STOCK AND WARRANT PURCHASE AGREEMENT OCTOBER 30, 2002 EXECUTION COPY 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
i EXECUTION COPY 4.5. Proceedings and Documents......................................................................12 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 EXECUTION COPY 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. EXECUTION COPY 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 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. 2 EXECUTION COPY (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 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. 3 EXECUTION COPY 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. 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 4 EXECUTION COPY 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 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 5 EXECUTION COPY 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 Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9604) or any comparable state law; 6 EXECUTION COPY (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. 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 7 EXECUTION COPY 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 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 8 EXECUTION COPY 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 EXECUTION COPY 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 EXECUTION COPY 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 EXECUTION COPY 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 EXECUTION COPY 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 EXECUTION COPY 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 EXECUTION COPY 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 EXECUTION COPY 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 EXECUTION COPY 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 EXECUTION COPY 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 EXECUTION COPY 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 EXECUTION COPY IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. FIBERNET TELECOM GROUP, INC. By: /s/ Michael S. Liss __________________________________________ Name: Michael S. Liss Title: President and Chief Executive Officer DEUTSCHE BANK AG NEW YORK BRANCH By: /s/ David J. Bell __________________________________________ Name: David J. Bell Title: Director By: /s/ Alexander Richarz __________________________________________ Name: Alexander Richarz Title: Vice President WACHOVIA INVESTORS, INC. By: /s/ Matthew Berk __________________________________________ Name: Matthew Berk Title: Authorized Officer BANK ONE, N.A. By: /s/ Michele L. Quentin __________________________________________ Name: Michele L. Quentin Title: Assistant Vice President IBM CREDIT CORPORATION By: /s/ Luc Grenon __________________________________________ Name: Luc Grenon Title: Director, Credit Operations EXECUTION COPY NORTEL NETWORKS INC. By: /s/ Elias Makris __________________________________________ Name: Elias Makris Title: Director, Customer Finance TORONTO DOMINION (TEXAS), INC. By: /s/ Jano Nixon __________________________________________ Name: Jano Nixon Title: Vice President EXECUTION COPY 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), Inc. 62,857,143 15,714,286 $9,428,571.43 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. EX-6 4 t08117exv6.txt INVESTOR'S RIGHTS AGREEMENT EXHIBIT 6 EXECUTION COPY FIBERNET TELECOM GROUP, INC. INVESTOR'S RIGHTS AGREEMENT OCTOBER 30, 2002 EXECUTION COPY 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.............................................................................7 2.5 Expenses of Registration........................................................................8 2.6 Delay of Registration...........................................................................8 2.7 Indemnification.................................................................................8 2.8 Reports Under Securities Exchange Act of 1934..................................................10 2.9 Assignment of Registration Rights..............................................................11 2.10 Limitations on Subsequent Registration Rights..................................................11 2.11 Market-Standoff Agreement......................................................................11 2.12 Termination of Registration Rights.............................................................12 3. Transfer Restrictions...................................................................................12 3.1 Restrictions on Transfer.......................................................................12 3.2 Right of First Offer...........................................................................12 4. Miscellaneous...........................................................................................13 4.1 Legends........................................................................................13 4.2 Entire Agreement...............................................................................14 4.3 Recapitalizations, Etc.........................................................................14 4.4 Successors and Assigns.........................................................................14 4.5 Amendments and Waivers.........................................................................14 4.6 Notices........................................................................................15 4.7 Severability...................................................................................15 4.8 Delays or Omissions; Remedies Cumulative.......................................................15 4.9 Attorney's Fees................................................................................15 4.10 Governing Law..................................................................................15 4.11 Counterparts...................................................................................16 4.12 Interpretation.................................................................................16
-i- EXECUTION COPY FIBERNET TELECOM GROUP, INC. INVESTOR'S RIGHTS AGREEMENT This Investor's Rights Agreement (this "Agreement") is made as of October 30, 2002, between FiberNet Telecom Group, Inc., a Delaware corporation (the "Company") and the investors listed on Exhibit A hereto, each of which is herein referred to as an "Investor". RECITALS The Company and the Investors have entered into a Common Stock and Warrant Purchase Agreement (the "Purchase Agreement") of even date herewith pursuant to which the Company desires to sell to the Investors, and the Investors desire to purchase from the Company, shares of the Company's Common Stock and warrants to purchase an additional amount of such shares (the "Warrant"). A condition to the Investors' obligations under the Purchase Agreement is that the Company and the Investors enter into this Agreement in order to provide the Investors with certain rights to register shares of the Company's Common Stock. The Company desires to induce the Investors to purchase shares of Common Stock pursuant to the Purchase Agreement by agreeing to the terms and conditions set forth herein. AGREEMENT The parties agree as follows: 1. DEFINITIONS. For purposes of this Agreement: (a) "Business Day" means a day other than a Saturday or Sunday or any federal holiday. (b) "Common Stock" means the common stock, par value $0.001, of the Company. (c) "Credit Agreement" means the Company's Amended and Restated Credit Agreement dated as of February 9, 2001 (as amended, supplemented, amended and restated or otherwise modified from time to time prior to the date hereof) among FiberNet Operations, Inc., Devnet, L.L.C., the financial institutions from time to time parties thereto as lenders, Deutsche Bank AG New York Branch, as administrative agent, Toronto Dominion (USA) Securities Inc., as syndication agent, and Wachovia Investors, Inc., as documentation agent. (d) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (e) "Exempt Registration" means (i) a registration statement relating to the sale of securities by the Company pursuant to a stock option, stock purchase or similar EXECUTION COPY benefit plan or an SEC Rule 145 transaction or (ii) a registration statement filed by the Company pursuant to the terms of the New Equity Registration Rights Agreement. (f) "Form S-3" means such form under the Securities Act as in effect on the date hereof or any successor form under the Securities Act that is intended to be used as a short form for the registration of distributions of secondary shares. (g) "New Equity Registration Rights Agreement" means the Registration Rights Agreement dated as of October 30, 2002, by and among the Company and the purchasers listed on Schedule I thereto as in effect on the date hereof. (h) "Nortel Note Exchange Agreement" means the Note Exchange Agreement, dated as of October 30, 2002, by and between the Company and SDS Merchant Fund, L.P. as in effect on the date hereof, pursuant to which the promissory note issued by the Company to Nortel Networks Inc. on December 7, 2001, will be surrendered to the Company in exchange for shares of Common Stock. (i) "Permitted Sale" means either (1) a transfer of Common Stock or Warrants to any Permitted Transferee, or (2) a transfer of Common Stock and Warrants in connection with a disposition of all of the equity interests of the Company and all of the Company's obligations under the Credit Agreement held by the transferor. (j) "Permitted Transferee" means (i) in the case of an Investor who is an individual, such person's ancestors, descendants or spouse, or any custodian or trustee for the account of such person (or for the account of such person's ancestors, descendants or spouse), (ii) in the case of an Investor which is a partnership or limited liability company, any constituent partner or member of such entity, (iii) in the case of an Investor which is a corporation, any parent corporation or wholly-owned subsidiary corporation or any officer, director or 10% stockholder of such corporation, and (iv) any other Investor. (k) "person" means any individual, corporation, partnership, limited liability company, trust, business, association or governmental or political subdivision thereof, governmental agency or other entity. (l) "Purchase Price" means an amount per share equal to $0.15 (subject to adjustment for stock splits, stock dividends, stock recombinations and similar transactions). (m) "Qualified Public Offering" shall mean any firm commitment underwritten public offering by the Company of its Common Stock yielding gross proceeds to the Company of at least $50.0 million at a per share price to the public of at least $10 (subject to adjustment for stock splits, stock dividends, stock recombinations and similar transactions). (n) "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act and the declaration or ordering of effectiveness of such registration statement or document. -2- EXECUTION COPY (o) The term "Registrable Securities" means the shares of Common Stock issuable or issued to the Investors (i) pursuant to the Purchase Agreement, (ii) in connection with the exercise of the warrants issued or issuable pursuant to the Purchase Agreement, (iii) as Liquidated Damages pursuant to Section 2.1(b) hereof, and (iv) as (or issuable upon the conversion, exercise or exchange of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares listed in clauses (i), (ii), (iii) and this clause (iv). Notwithstanding the foregoing, securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions, and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale. (p) The number of shares of "Registrable Securities then outstanding" shall equal the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities. (q) "SEC" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. (r) "Securities Act" means the Securities Act of 1933, as amended. (s) "Series H Share Exchange Agreement" means the Share Exchange Agreement, dated as of October 30, 2002, by and among the Company and each of the purchasers whose names appear on the signature pages thereto, pursuant to which the Company will issue Common Stock in exchange for all of its issued and outstanding shares of Series H Preferred Stock. (t) "Series J Share Exchange Agreement" means the Series J-1 Share Exchange Agreement, dated as of October 30, 2002, by and among the Company and each of the purchasers whose names appear on the signature pages thereto, pursuant to which the Company will issue Common Stock in exchange for all of its issued and outstanding shares of Series J-1 Preferred Stock. (u) "Trading Day" means, with respect to any security, any day on which the principal market (including any formal or informal over the counter market) in which such security is then traded or on which a quoted price therefor may be ascertained is open for business. (v) "Transfer Restriction Period" means, (i) with respect to each Investor other than Nortel Networks Inc., the period of time commencing on the date of this Agreement and ending upon the first anniversary of the date of this Agreement, and (ii) with respect to Nortel Networks Inc., the period of time commencing on the date of this Agreement and ending on February 28, 2003. -3- EXECUTION COPY 2. REGISTRATION RIGHTS 2.1 SHELF REGISTRATION. (a) Filing. The Company shall (i) prepare and file with the SEC a shelf registration statement on Form S-3 (the "Shelf Registration Statement") pursuant to Rule 415 under the Securities Act relating to all of the Registrable Securities within 60 days of the date hereof (the "Filing Deadline") and (ii) use its best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act within 180 days of the date hereof (the "Effectiveness Deadline"). The Shelf Registration Statement may also include all of the "Registrable Securities" as defined in the New Equity Registration Rights Agreement. The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended to the extent necessary to ensure that it is available for resale of Registrable Securities by the holders thereof entitled to the benefits of this Section 2.1(a) and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the SEC as announced from time to time, until all Registrable Securities covered by such Shelf Registration Statement have been sold pursuant thereto. (b) Liquidated Damages. If (i) the Shelf Registration Statement is not filed with the SEC on or prior to the Filing Deadline, (ii) the Shelf Registration Statement has not been declared effective by the SEC on or prior to the Effectiveness Deadline, or (iii) prior to the sale of all Registrable Securities covered by such Shelf Registration Statement, the Shelf Registration Statement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within two Business Days by a post-effective amendment to the Shelf Registration Statement that cures such failure and that is itself declared effective within five Business Days of filing such post-effective amendment to such Registration Statement (each such event referred to in clauses (i) through (iii), a "Registration Default"), then the Company hereby agrees to pay to each record holder of Registrable Securities liquidated damages ("Liquidated Damages") for the period during which such Registration Default continues at a per annum rate of 6% (or, for any period of time during which such Registration Default continues after June 30, 2004, 8%) of the Purchase Price of such Registrable Securities. Liquidated Damages shall be paid in shares of Common Stock at a per share rate equal to the Purchase Price. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Shelf Registration Statement, (2) upon the effectiveness of the Shelf Registration Statement, or (3) upon the filing of a post-effective amendment to the Shelf Registration Statement that causes the Shelf Registration Statement to again be declared effective or made usable, the Liquidated Damages payable with respect to the Registrable Securities as a result of such clause (i), (ii), or (iii), as applicable, shall cease to accrue. Notwithstanding anything to the contrary in this Section 2.1(b), if a Registration Default shall have occurred in connection with the Company's exercise of its rights under Section 2.1(c) hereof, such Registration Default shall not be deemed to occur until one Business Day following the termination of the postponement or suspension permitted pursuant to such Section 2.1(c). -4- EXECUTION COPY All accrued Liquidated Damages shall be paid to the holders of Registrable Securities entitled thereto on the last Business Day of each month in which such Liquidated Damages accrued. Notwithstanding the fact that any securities for which Liquidated Damages are due cease to be Registrable Securities, all obligations of the Company to pay Liquidated Damages with respect to securities shall survive until such time as such obligations with respect to such securities shall have been satisfied in full. (c) Postponing Or Suspending Filing Or Effectiveness Of A Registration Statement. If (i) there is material non-public information regarding the Company which the Company's Board of Directors reasonably determines not to be in the Company's best interest to disclose and which the Company is not otherwise required to disclose, or (ii) there is a significant business opportunity (including the acquisition or disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other similar transaction) available to the Company which such Board of Directors reasonably determines not to be in the Company's best interest to disclose, then the Company may postpone or suspend filing or effectiveness of a registration statement for a period not to exceed 20 consecutive days, provided that the Company may not postpone or suspend its obligation under this Section 2.1(c) for more than 45 days in the aggregate during any 12 month period; provided, however, that no such postponement or suspension shall be permitted for consecutive 20 day periods, arising out of the same set of facts, circumstances or transactions. 2.2 COMPANY REGISTRATION. (a) INITIATION. If the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Investors) any of its stock in connection with a public offering of such securities for cash (other than an Exempt Registration), the Company shall, at such time, promptly give each Investor notice of such registration. Upon the written request of each Investor given within 20 days after receipt by such Investor of the Company's notice, the Company shall, subject to the provisions of Section 2.2(b), cause to be registered all of the Registrable Securities that each such Investor has requested to be registered. (b) UNDERWRITTEN OFFERING. In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required under Section 2.2(a) to include an Investor's securities in such underwriting unless such Investor accepts the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters advise the Company in writing will not adversely affect the marketing of the Company's capital stock. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the maximum amount of securities sold other than by the Company that the underwriters determine would not adversely affect the marketing of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, -5- EXECUTION COPY which the underwriters determine would not adversely affect the marketing of the offering (the securities so included to be apportioned pro rata (to the nearest 100 shares) among the selling stockholders according to the total amount of securities entitled to be included therein owned by each selling stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders). For purposes of the preceding apportionment, for any participating Investor that is a partnership, limited liability company or corporation, the partners, retired partners, members, retired members and stockholders of such Investor, or the estates and family members of any such partners, members, retired partners or members and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling stockholder," and any pro-rata reduction with respect to such "selling stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all persons included in such "selling stockholder," as defined in this sentence. 2.3 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 2 to effect the registration of any Registrable Securities, in addition to any other obligations of the Company under this Agreement, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its reasonable best efforts to cause such registration statement to become effective. (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act. (c) Furnish to the Investors such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of such Registrable Securities. (d) Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Investors, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement with the managing underwriter of such offering in usual and customary form and consistent with the other provisions of this Agreement. Each Investor participating in such underwriting shall also enter into and perform its obligations under such an agreement. (f) Promptly notify each Investor of Registrable Securities covered by the registration statement at any time when the Company becomes aware of the happening of any event as a result of which the registration statement or the prospectus included in such registration statement or any supplement to the prospectus (as then in effect) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements -6- EXECUTION COPY therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading or, if for any other reason it shall be necessary during such time period to amend or supplement the registration statement or the prospectus in order to comply with the Securities Act, whereupon, in either case, each Investor shall immediately cease to use such registration statement or prospectus for any purpose and, as promptly as reasonably practicable thereafter, the Company shall prepare and file with the SEC, and furnish without charge to the appropriate Investors and managing underwriters, if any, a supplement or amendment to such registration statement or prospectus which will correct such statement or omission or effect such compliance and such copies thereof as the Investors and any underwriters may reasonably request. (g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange or over-the-counter market on which similar securities issued by the Company are then listed, if applicable. (h) Provide a transfer agent and registrar for such Registrable Securities and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. (i) Use its reasonable best efforts, after the effectiveness of a registration statement under the Securities Act qualifying a public offering of Registrable Securities held by an Investor, to issue and deliver, upon delivery of a certificate representing shares of Registrable Securities held by such Investor, that number of Registrable Securities represented by such certificate to the Depository Trust Company ("DTC") account on the Investor's behalf via the Deposit Withdrawal Agent Commission System ("DWAC"). (j) Use its reasonable best efforts to furnish, at the request of any Investor requesting registration of Registrable Securities pursuant to Section 2.2, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to Section 2.2, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Investors requesting registration of Registrable Securities and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Investors requesting registration of Registrable Securities (to the extent the then applicable standards of professional conduct permit said letter to be addressed to the Investors). 2.4 FURNISH INFORMATION. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Investor's Registrable Securities. -7- EXECUTION COPY 2.5 EXPENSES OF REGISTRATION. All expenses other than underwriting discounts and commissions incurred in connection with registrations initiated pursuant to this Section 2, including all registration, filing and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of one special counsel for the selling Investors selected by Investors selling a majority of the subject Registrable Securities with the approval of the Company, which approval shall not be unreasonably withheld, shall be borne by the Company. 2.6 DELAY OF REGISTRATION. No Investor shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2. 2.7 INDEMNIFICATION. In the event any Registrable Securities are included in a registration statement under this Section 2: (a) INDEMNIFICATION BY THE COMPANY. The Company will indemnify and hold harmless each Investor, any underwriter (as defined in the Securities Act) for such Investor, and each person, if any, who controls such Investor or underwriter within the meaning of the Securities Act or the Exchange Act, and their respective officers, directors, partners, members, brokers, investment advisors, employees, legal counsel, accountants, and agents (collectively, the "Indemnified Parties"), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Indemnified Person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 2.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to any Indemnified Person for any such loss, claim, damage, liability, or action to the extent that it arises solely out of or is based solely upon a Violation which occurs in reasonable reliance upon and in conformity with written information furnished expressly for use in connection with such registration, by such Indemnified Person. (b) INDEMNIFICATION BY THE INVESTORS. To the extent permitted by law, each selling Investor will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Investor -8- EXECUTION COPY selling securities in such registration statement and any controlling person of any such underwriter or other Investor, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs solely in reliance upon and in conformity with written information furnished by such Investor expressly for use in connection with such registration; and each such Investor will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 2.7(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 2.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Investor, which consent shall not be unreasonably withheld; provided, that in no event shall any indemnity under this Section 2.7(b) exceed the net proceeds from the offering received by such Investor. (c) PROCEDURES. Promptly after receipt by an indemnified party under this Section 2.7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.7, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.7. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. The indemnity agreements contained in this Section 2.7 shall not apply to amounts paid in settlement of any loss, claim, damage, liability or action if such settlement is effected without the consent of the indemnifying party. (d) CONTRIBUTION. If the indemnification provided for in this Section 2.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, 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, -9- EXECUTION COPY damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided, that in no event shall any contribution by an Investor under this Section 2.7(d) exceed the net proceeds from the offering received by such Investor. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. (e) UNDERWRITING AGREEMENT. Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. (f) SURVIVAL. The obligations of the Company and Investors under this Section 2.7 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 2, and otherwise. 2.8 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making available to the Investors the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit an Investor to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times for so long as the Company remains subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Investors to use Form S-3 for the sale of their Registrable Securities; (c) file with the SEC in a timely manner all reports and other documents as may be required of the Company under the Securities Act and the Exchange Act; and (d) furnish to any Investor, so long as the Investor owns any Registrable Securities, forthwith upon request (i) a written statement by the Company whether it has complied with the reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Investor of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. -10- EXECUTION COPY 2.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to register securities granted Investors under Section 2 may be assigned to any Permitted Transferee or any transferee or assignee in connection with the transfer or assignment of all or any portion of such Investor's Registrable Securities; provided, that (a) such transfer may otherwise be effected in accordance with applicable securities laws and other restrictions on transfer applicable to such shares, (b) notice of such assignment is given to the Company and (c) such transferee or assignee agrees to be bound by all provisions of this Agreement. 2.10 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the date of this Agreement, the Company shall not, without the prior written consent of Investors holding at least a majority of the then outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 2 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of its securities will not reduce the amount of the Registrable Securities of the Investors which is included or (b) except pursuant to the New Equity Registration Rights Agreement, to make a demand registration which could result in such registration statement being declared effective within 120 days after the effective date of any registration effected pursuant to Section 2. 2.11 MARKET-STANDOFF AGREEMENT. (a) MARKET-STANDOFF PERIOD; AGREEMENT. In connection with a Qualified Public Offering of the Company's equity securities for cash subsequent to the date herein and upon request of the underwriters managing such offering of the Company's securities, each Investor hereby agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than any disposed of in the registration and those acquired by the Investor in the registration or thereafter in open market transactions) without the prior written consent of such underwriters, for such period of time (not to exceed (i) 180 days with respect to the next Qualified Public Offering and (ii) 90 days with respect to each other Qualified Public Offering, or in each case such shorter period as the Company agrees to with any other person) from the effective date of such registration as may be requested by such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of such Qualified Public Offering. (b) LIMITATIONS. The obligations described in Section 2.11(a) shall apply only if and to the extent that all officers and directors of the Company enter into similar agreements. If any standoff or lockup restrictions imposed on any holder of securities of the Company is waived or terminated, then such waiver or termination shall be granted to all Investors subject to standoff or lockup restrictions pro rata based on the number of shares of Common Stock beneficially held by such holder and the Investors. From and after the date of this Agreement, the Company shall use its reasonable best efforts to ensure that all holders of capital stock of the Company agree to be bound by terms substantially similar to those set forth in this Section 2.11. (c) STOP-TRANSFER INSTRUCTIONS. In order to enforce the foregoing covenants, the Company may impose stop-transfer instructions with respect to the securities of -11- EXECUTION COPY each Investor (and the securities of every other person subject to the restrictions in Section 2.11(a)). 2.12 TERMINATION OF REGISTRATION RIGHTS. No Investor shall be entitled to exercise any registration right provided for in this Section 2 after the earlier of (a) such time as Rule 144 is available for the sale of all of such Investor's Registrable Securities during a three-month period without registration, without reference to Rule 144(k) and (b) 2 years after the consummation of the Company's next Qualified Public Offering. 3. TRANSFER RESTRICTIONS. 3.1 RESTRICTIONS ON TRANSFER. Unless waived pursuant to Section 4.5, during the Transfer Restriction Period, each Investor agrees not to transfer any shares of Common Stock or Warrants received pursuant to the Purchase Agreement or received upon any exercise of the Warrants, except pursuant to a Permitted Sale. 3.2 RIGHT OF FIRST OFFER. (a) GENERAL. Each Investor shall have a right of first offer to purchase its pro rata share of all Equity Securities, as defined below, that the Company may, from time to time, propose to sell and issue after the date of this Agreement, other than the Equity Securities excluded by Section 3.2(c) hereof. Each Investor's pro rata share is equal to the ratio of (a) the number of shares of the Company's Common Stock (including all shares of Common Stock issued or issuable upon conversion, exercise or exchange of securities of the Company) which such Investor holds immediately prior to the issuance of such Equity Securities to (b) the total number of shares of the Company's outstanding Common Stock (including all shares of Common Stock issued or issuable upon conversion, exercise or exchange of securities of the Company) immediately prior to the issuance of the Equity Securities. The term "Equity Securities" means (i) any Common Stock, preferred stock or other equity security of the Company, (ii) any security convertible, with or without consideration, into any common stock, preferred stock or other equity security of the Company (including any option or warrant to purchase such a convertible security) and (iii) any security carrying any warrant or right to subscribe to or purchase any common stock, preferred stock or other equity security of the Company, and any such warrant or right. (b) EXERCISE OF RIGHTS. If the Company proposes to issue any Equity Securities, it shall give each Investor written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same. Each Investor shall have 5 Business Days from the receipt of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of Equity Securities to be purchased. Notwithstanding the foregoing, the Company shall not be required to offer or sell such Equity Securities to any Investor who would cause the Company to be in violation of applicable federal securities laws by virtue of such offer or sale, (c) EXCLUDED SECURITIES. The rights of first offer established by this Section 3 shall have no application to any of the following Equity Securities: -12- EXECUTION COPY (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, the Series H Share Exchange Agreement, the Series J Share Exchange Agreement) and any agreement entered into after the date hereof between SDS Merchant Fund, L.P. and the Company providing for the conversion of the entire aggregate principal amount, all accrued and unpaid interest thereon and all other amounts payable in respect of the promissory note issued by the Company to SDS Merchant Fund, L.P. in March, 2002 in an initial principal amount of $2,000,000; (vi) Common Stock and warrants (and Common Stock issuable upon exercise of such warrants) issued by the Company pursuant to the Common Stock Purchase Agreement dated as of October 30, 2002, by and between the Company and the entities listed on Exhibit A thereto; or (vii) any Equity Securities issued pursuant to the transactions described in Section 2.5.B(iii)(d) of the Credit Agreement if the proceeds from such issuance are used to prepay the Loans (as defined in the Credit Agreement) and permanently reduce the Commitments (as defined in the Credit Agreement) in accordance with Section 2.5.C. of the Credit Agreement. 4. MISCELLANEOUS. 4.1 LEGENDS. Each certificate representing shares of Common Stock held by an Investor or any subsequent holder of such shares shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws): -13- EXECUTION COPY "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW. THE SALE, TRANSFER OR PLEDGE OF THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF AN AGREEMENT BETWEEN THE COMPANY AND CERTAIN HOLDERS OF ITS SECURITIES, AS THE SAME MAY BE AMENDED AND IN EFFECT FROM TIME TO TIME. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY." The Company shall be obligated to reissue promptly unlegended certificates at the request of any holder of a security legended pursuant to this Section 4 if such holder shall have obtained an opinion of counsel at such holder's expense (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend. The Company shall be obligated to reissue promptly certificates not having the second paragraph of the legend set forth above at the request of any holder of a security legended pursuant to this Section 4.1 if such holder is not a party to this Agreement or a person who is an Investor or transferee of an Investor hereunder. 4.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements relating to the subject matter hereof existing among any of the parties hereto are expressly canceled. 4.3 RECAPITALIZATIONS, ETC.. The provisions of this Agreement (including any calculation of share ownership) shall apply, to the full extent set forth herein with respect to the Registrable Securities, to any and all shares of capital stock of the Company or any capital stock, partnership or member units or any other security evidencing ownership interests in any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange for, or in substitution of the Registrable Securities by reason of any stock dividend, split, combination, recapitalization, liquidation, reclassification, merger, consolidation or otherwise. 4.4 SUCCESSORS AND ASSIGNS. Except as otherwise provided in this Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties (including transferees of any Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 4.5 AMENDMENTS AND WAIVERS. Any term of Section 2 of this Agreement may be amended or waived only with the written consent of the Company and the holders of at -14- EXECUTION COPY least 75% of the Registrable Securities then outstanding. Any other term of this Agreement may be amended or waived only with the written consent of the Investors holding at least 75% of the Common Stock (on a fully-diluted basis) issued pursuant to the Purchase Agreement and then held by all Investors. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Investor. Notwithstanding the foregoing, if in any particular instance a party's obligations or rights under this Agreement are adversely affected thereby in a disproportionately adverse manner from that in which other parties are affected by application of this Section, the consent of such party shall also be required in such instance. 4.6 NOTICES. Unless otherwise provided, any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by telegram or confirmed fax, or if mailed to a domestic address, 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party's address or fax number as set forth below or on Exhibit A hereto or as subsequently modified by written notice. 4.7 SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision shall be excluded from this Agreement, (b) the balance of the Agreement shall be interpreted as if such provision were so excluded and (c) the balance of the Agreement shall be enforceable in accordance with its terms. 4.8 DELAYS OR OMISSIONS; REMEDIES CUMULATIVE. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative. 4.9 ATTORNEY'S FEES. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and disbursements in addition to any other relief to which such party may be entitled. 4.10 GOVERNING LAW. This Agreement and all acts and transactions pursuant hereto shall be governed, construed and interpreted in accordance with the laws of the State of New York, without giving effect to principles of conflicts of laws. -15- EXECUTION COPY 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- EXECUTION COPY The parties have executed this Investor's Rights Agreement as of the date first above written. COMPANY: FIBERNET TELECOM GROUP, INC. By: /s/Michael S. Liss --------------------------------------------- Name: Michael S. Liss Title: President and Chief Executive Officer INVESTORS: DEUTSCHE BANK AG NEW YORK BRANCH By: /s/David J. Bell --------------------------------------------- Name: David J. Bell Title: Director By: /s/Alexander Richarz --------------------------------------------- Name: Alexander Richarz Title: Vice President WACHOVIA INVESTORS, INC. By: /s/Matthew Berk --------------------------------------------- Name: Authorized Officer Title: BANK ONE, N.A. By: /s/Michele L. Quentin --------------------------------------------- Name: Michele L. Quentin Title: Assistant Vice President EXECUTION COPY IBM CREDIT CORPORATION By: /s/Luc Grenon --------------------------------------------- Name: Luc Grenon Title: Director, Credit Operations NORTEL NETWORKS INC. By: /s/Elias Makris --------------------------------------------- Name: Elais Makris Title: Director, Customer Finance TORONTO DOMINION (TEXAS), INC. By: /s/Jano Nixon --------------------------------------------- Name: Jano Nixon Title: Vice President EXECUTION COPY 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
EX-7 5 t08117exv7.txt STOCK PURCHASE AGREEMENT EXECUTION COPY EXHIBIT 7 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated as of October 30, 2002 (this "Agreement"), by and among Nortel Networks Inc., a Delaware corporation (the "Seller"), and the purchasers listed on Exhibit A attached hereto (each, a "Purchaser" and collectively, the "Purchasers"). The parties hereto agree as follows: ARTICLE I. PURCHASE AND SALE OF STOCK Section 1.1. Purchase and Sale of Stock. Upon the following terms and conditions, and in consideration of and in express reliance upon such terms and conditions and the representations, warranties and covenants of this Agreement, the Seller shall sell to the Purchasers, and the Purchasers shall purchase from the Seller, an aggregate of 9,826,865 shares of common stock, par value $.001 per share (the "Common Stock"), of FiberNet Telecom Group, Inc., a Delaware corporation (the "Company"), and an aggregate of 104,578 shares of Series H Preferred Stock, par value $.001 per share, of the Company, including accrued dividends thereon (the "Preferred Stock" and, together with the Common Stock, the "Shares"), in each case, in the amounts and at the aggregate cash purchase prices (each a "Purchase Price") set forth opposite their respective names on Schedule 1.1 hereto. The aggregate Purchase Price is $735,000. Section 1.2. Closing. The closing (the "Closing") of the purchase and sale of the Shares to be acquired by the Purchasers from the Seller under this Agreement shall take place at the offices of Jenkens & Gilchrist Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174 at 10:00 a.m., New York time] (i) on or before October __, 2002, provided, that all of the conditions set forth in Article IV hereof shall have been fulfilled or waived in accordance herewith, or (ii) at such other time and place or on such date as the Purchasers and the Seller may agree upon (such date on which the Closing occurs, the "Closing Date"). At the Closing, the Seller shall deliver or cause to be delivered to each Purchaser all certificates representing the number of Shares that such Purchaser is purchasing pursuant to the terms hereof, together with stock powers duly endorsed in blank, and all other appropriate instruments of transfer. At the Closing, each Purchaser shall deliver its Purchase Price by wire transfer to an account designated by the Seller. ARTICLE II. REPRESENTATIONS AND WARRANTIES Section 2.1. Representations and Warranties of the Seller. The Seller hereby represents and warrants to the Purchasers, as of the date hereof and the Closing Date, as follows: (a) Organization, Good Standing and Power. The Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. The Seller is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary except for any jurisdictions (alone or in the aggregate) in which the failure to be so qualified will not have a Material Adverse Effect. For the purposes of this Agreement, "Material Adverse Effect" means any condition, circumstance, or situation that would prohibit or hinder the Seller from executing this Agreement and/or performing any of its obligations hereunder or thereunder in any material respect. (b) Authorization; Enforcement. The Seller has the requisite power and authority to enter into and perform this Agreement and to sell the Shares in accordance with the terms hereof. The execution, delivery and performance of this Agreement by the Seller and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and no further consent or authorization is required for the Seller to effect the transactions contemplated by this Agreement. When executed and delivered by the Seller, this Agreement shall constitute a valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application. (c) No Conflicts. The execution, delivery and performance of this Agreement by the Seller and the consummation by the Seller of the transactions contemplated hereby do not and will not (i) violate any provision of the Seller's Certificate of Incorporation or Bylaws, each as amended to date, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Seller is a party or by which any of the Seller's properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Seller or by which any property or asset of the Seller is bound or affected, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. The Seller is not required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or issue and sell the Shares in accordance with the terms hereof. (d) Title to Shares. The Seller has the right to transfer good, valid and marketable title in and to all of the Shares, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances. (e) Certain Fees. The Seller has not employed any broker or finder or incurred any liability for any brokerage, investment banking, commission, finders', structuring or financial advisory fees or other similar fees in connection with this Agreement or the transactions contemplated hereby. 2 Section 2.2. Representations and Warranties of the Purchasers. Each Purchaser hereby represents and warrants to the Seller with respect solely to itself and not with respect to any other Purchaser, as of the date hereof and as of the Closing Date, as follows: (a) Organization and Standing of the Purchasers. If the Purchaser is an entity, such Purchaser is a corporation, limited liability company or partnership duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. (b) Authorization and Power. The Purchaser has the requisite power and authority to enter into and perform this Agreement and to purchase the Shares being sold to it hereunder. The execution, delivery and performance of this Agreement by the Purchaser and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate (or other organizational) action, and no further consent or authorization is required for such Purchaser to effect the transactions contemplated by this Agreement. When executed and delivered by the Purchaser, this Agreement shall constitute valid and binding obligations of each Purchaser enforceable against such Purchaser in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application. (c) No Conflict. The execution, delivery and performance of this Agreement by the Purchaser and the consummation by the Purchaser of the transactions contemplated hereby do not and will not (i) violate any provision of the Purchaser's charter or organizational documents, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Purchaser is a party or by which the Purchaser's properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Purchaser or by which any property or asset of the Purchaser is bound or affected, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, materially and adversely affect Purchaser's ability to perform its obligations under this Agreement. (d) Acquisition for Investment. The Purchaser is purchasing the Shares solely for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution. The Purchaser does not have a present intention to sell any of the Shares, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of any of the Shares, to or through any person or entity. (e) Assessment of Risks. The Purchaser acknowledges that it (i) has such knowledge and experience in financial and business matters that such Purchaser is capable of evaluating the merits and risks of such Purchaser's investment in the Company (by virtue of its purchase of 3 Shares hereunder), (ii) is able to bear the financial risks associated with an investment in the Shares and (iii) has been given full access to such records of the Company and to the officers of the Company as it has deemed necessary or appropriate to conduct its due diligence investigation with respect to the Shares. (f) No General Solicitation. The Purchaser acknowledges that the Shares were not offered to such Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio or (ii) any seminar or meeting to which such Purchaser was invited by any of the foregoing means of communications. (g) Accredited Investor. The Purchaser is an "accredited investor" (as defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended). (h) Legend. The Purchaser hereby acknowledges and agrees that the certificates representing the Shares may contain the following, or a substantially similar, legend, which legend shall be removed only upon receipt by the Company of an opinion of its counsel, which opinion shall be satisfactory to the Company, that such legend may be so removed: THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR FIBERNET TELECOM GROUP, INC. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED. (i) Certain Fees. The Purchaser has not employed any broker or finder or incurred any liability for any brokerage, investment banking, commission, finders', structuring or financial advisory fees or other similar fees in connection with this Agreement or the transactions contemplated hereby. (j) Reliance on Representations. The Company is hereby expressly permitted to rely on the Purchaser's representations and warranties set forth in Sections 2.2(d) through (h), inclusive. 4 ARTICLE III. COVENANTS OF THE PARTIES Section 3.1. Covenants. The parties hereto hereby covenant with each other as follows, which covenants are for the benefit of such parties and their respective permitted assigns: (a) Further Assurances. From and after the Closing Date, upon the request of any Purchaser or the Seller, the Seller and each Purchaser shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement. (b) Commercially Reasonable Efforts. Each party hereto will use commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable, consistent with applicable law, to consummate and make effective in the most expeditious manner practicable the transactions contemplated hereby, including without limitation, making all regulatory and other filings required by applicable law as promptly as practicable after the date hereof. ARTICLE IV. CONDITIONS Section 4.1. Conditions Precedent to the Obligation of the Seller to Close and to Sell the Shares. The obligation hereunder of the Seller to close and sell the Shares to the Purchasers at the Closing is subject to the satisfaction or waiver, at or before the Closing of the conditions set forth below: (a) Accuracy of the Purchasers' Representations and Warranties. The representations and warranties of each Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date. (b) Performance by the Purchasers. Each Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchasers at or prior to the Closing. (c) No Injunction, Statute or Rule. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (d) Delivery of Purchase Price. The Purchase Price for the Shares shall have been delivered to the Seller. 5 The conditions set forth in this Section 4.1 are for the Seller's sole benefit and may be waived only by the Seller at any time in its sole discretion. Section 4.2. Conditions Precedent to the Obligation of the Purchasers to Close and to Purchase the Shares. The obligation hereunder of the Purchasers to purchase the Shares and to consummate the transactions contemplated by this Agreement is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below: (a) Accuracy of the Seller's Representations and Warranties. Each of the representations and warranties of the Seller in this Agreement shall be true and correct in all material respects as of the Closing Date, except for representations and warranties that speak as of a particular date, which shall be true and correct in all material respects as of such date. (b) Performance by the Seller. The Seller shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Seller at or prior to the Closing. (c) No Injunction, Statute or Rule. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (d) Certificates. The Seller shall have delivered to the Purchasers certificates representing the Shares (in such denominations as each Purchaser may request) being acquired by the Purchasers at the Closing. (e) Share Exchange Agreement. The Company shall have executed and delivered to the Purchasers a Share Exchange Agreement, substantially in the form attached as Exhibit B hereto (the "Share Exchange Agreement"). The conditions set forth in this Section 4.2 are for each Purchaser's sole benefit and may be waived only by a Purchasers (only with respect to such Purchaser) at any time in its sole discretion. ARTICLE V. MISCELLANEOUS Section 5.1. Fees and Expenses. Each party hereto shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement and the transactions contemplated hereby. Section 5.2. Entire Agreement; Amendment. This Agreement and the Share Exchange Agreement contain the entire understanding and agreement (written or oral) of the parties hereto with respect to the subject matter hereof and, except as specifically set forth herein or in the Share Exchange Agreement, neither the Seller nor any Purchaser make any representation, 6 warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein. No provision of this Agreement may be waived or amended other than by a written instrument signed by each party hereto. Any amendment or waiver effected in accordance with this Section 5.2 shall be binding upon each such party and its permitted assigns. Section 5.3. Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to the Seller: Nortel Networks Inc. MS 991-15-A40 2221 Lakeside Boulevard Richardson, TX 75082 Attn: Customer Finance Fax No.: (972) 684-3679 If to any Purchaser: At the address of such Purchaser set forth on Exhibit A attached hereto. Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto. Section 5.4. Waivers. No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. Section 5.5. Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof. Section 5.6. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither party hereto may assign its rights or obligations under this Agreement (by operation of law or otherwise) without the prior written consent of each other party hereto, and any attempted assignment without such consent shall be void ab initio. Section 5.7. No Third Party Beneficiaries. Except as provided in Section 2.2(j) hereof, this Agreement is intended for the benefit of the parties hereto and their respective permitted 7 successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity. Section 5.8. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the choice of law provisions thereof. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted. Section 5.9. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. Section 5.10. Severability. The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible. Section 5.11. Waiver of Jury Trial. EACH PARTY HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR LITIGATION OF ANY TYPE BROUGHT BY ANY SUCH PARTY AGAINST ANY OTHER PARTY HERETO, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH PARTY HERETO HEREBY AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. THE AGREEMENT OF EACH PARTY HERETO TO THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OTHER PARTY HERETO TO ENTER INTO THIS AGREEMENT. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written. NORTEL NETWORKS INC. By: /s/ Elias Makris _____________________________________ Name: Elias Makris Title: Director, Customer Finance PURCHASERS: [conformed name of each purchaser] _____________________________________ By: [conformed signature] _____________________________________ Name: [conformed name] Title: [conformed title] EXHIBIT A LIST OF PURCHASERS Eliot D. Gersten Trustee LPS Consultants Inc. Jack Gilbert SMFS Inc. MSL Investments LLC Robert W. Duggan Penny Lane Partners, L.P. Alexander Enterprise Holdings Corp. Steven H. Tishman Trautman Wasserman 8701 Opportunities Fund Dr. Stuart Jacobson Randall M. Tuggle Jerdan Enterprises Alan R. Cohen Judith E. Olinger Helen Jones Marital Trust Tom Contino/Jerry D'Anduno Burnham Hill Holding LLC SDS Merchant Fund, LP Sargon Capital International Fund Ltd. DMG Legacy Fund LLC DMG Legacy Institutional Fund LLC DMG Legacy International Ltd. EXHIBIT B FORM OF SHARE EXCHANGE AGREEMENT EXECUTION COPY SHARE EXCHANGE AGREEMENT SHARE EXCHANGE AGREEMENT, dated as of October __, 2002 (this "Agreement"), by and among FiberNet Telecom Group, Inc., a Delaware corporation (the "Company"), and each of the purchasers whose names appear on the signature pages hereto (collectively, the "Purchasers"). R E C I T A L S WHEREAS, the Purchasers have purchased from Nortel Networks Inc. ("Nortel") an aggregate of 104,578 shares of the Company's Series H Preferred Stock, par value $.001 per share, including accrued dividends thereon (the "Preferred Stock"), together with an aggregate of 9,826,865 shares of the Company's common stock, par value $.001 per share (the "Common Stock"), pursuant to a Stock Purchase Agreement, of even date herewith, by and among Nortel and the Purchasers (the "Purchase Agreement"); WHEREAS, the Company has agreed that, immediately upon completion of the purchase of the Preferred Stock and Common Stock pursuant to the Purchase Agreement, it will issue to the Purchasers in exchange for each share of Preferred Stock 975 shares of Common Stock (the "Shares"); and WHEREAS, the Company and the Purchasers desire to enter into this Agreement to set forth certain matters relating to such exchange. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows: ARTICLE I. EXCHANGE Section 1.1. Exchange of Preferred Stock for Shares. Upon the following terms and conditions, and in consideration of and in express reliance upon such terms and conditions and the representations, warranties and covenants of this Agreement, each Purchaser shall, immediately upon completion of the purchase of the Preferred Stock pursuant to the Purchase Agreement, surrender to the Company for exchange, certificates representing all shares of Preferred Stock held by such Purchaser and, in exchange for each share so surrendered, the Company shall issue to such Purchaser 104,581,425 Shares. The number of shares of Preferred Stock being so surrendered by each Purchaser and the number of Shares being issued to such Purchaser in exchange therefor are each set forth opposite the respective name of such Purchaser on Schedule 1.1 hereto. The exchanges described in this Section 1.1 are referred to herein as the "Exchange". Section 1.2. Closing. The closing (the "Closing") of the Exchange shall take place at the same place as, and immediately following, the "Closing", as defined in the Purchase Agreement. The date of the Closing is referred to herein as the "Closing Date". ARTICLE II. REPRESENTATIONS AND WARRANTIES Section 2.1. Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchasers, as of the date hereof and the Closing Date, as follows: (a) Organization, Good Standing and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary except for any jurisdictions (alone or in the aggregate) in which the failure to be so qualified will not have a Material Adverse Effect. For the purposes of this Agreement, "Material Adverse Effect" means any condition, circumstance, or situation that would prohibit or hinder the Company from executing this Agreement and/or performing any of its obligations hereunder or thereunder in any material respect. (b) Authorization; Enforcement. The Company has the requisite power and authority to enter into and perform this Agreement and to consummate the Exchange. The execution, delivery and performance of this Agreement by the Company have been duly and validly authorized by all necessary corporate action, and no further consent or authorization is required for the Company to effect the transactions contemplated hereby. When executed and delivered by the Company, the Agreement shall constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application. (c) Issuance of Shares. The Shares have been duly authorized by all necessary corporate action and, when issued in accordance with the terms hereof upon surrender of the Preferred Stock in the Exchange, the Shares shall be validly issued and outstanding, fully paid and non-assessable. (d) No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby does not and will not (i) violate any provision of the Company's Certificate of Incorporation or Bylaws, each as amended to date, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party or by which any of the Company's properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected, except, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) 2 above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. The Company is not required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or consummate the Exchange in accordance with the terms hereof (other than any filings, consents and approvals which may be required to be made by the Company under applicable state and federal securities laws, rules or regulations, or the rules of the Nasdaq SmallCap Market, prior to or subsequent to the Closing). Section 2.2. Representations and Warranties of the Purchasers. Each Purchaser hereby represents and warrants to the Company with respect solely to itself and not with respect to any other Purchaser, as of the date hereof and as of the Closing Date, as follows: (a) Organization and Standing of the Purchasers. If the Purchaser is an entity, such Purchaser is a corporation, limited liability company or partnership duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. (b) Authorization and Power. The Purchaser has the requisite power and authority to enter into and perform this Agreement and to consummate the Exchange. The execution, delivery and performance of this Agreement the Purchaser and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate (or other organizational) action, and no further consent or authorization is required for such Purchaser to effect the transactions contemplated hereby. When executed and delivered by the Purchaser, this Agreement shall constitute valid and binding obligations of each Purchaser enforceable against such Purchaser in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application. (c) No Conflict. The execution, delivery and performance of this Agreement by the Purchaser and the consummation by the Purchaser of the transactions contemplated hereby does not and will not (i) violate any provision of the Purchaser's charter or organizational documents, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Purchaser is a party or by which the Purchaser's properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Purchaser or by which any property or asset of the Purchaser is bound or affected, except, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, materially and adversely affect Purchaser's ability to perform its obligations hereunder. 3 (d) Acquisition for Investment. The Purchaser is acquiring the Shares solely for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution. The Purchaser does not have a present intention to sell any of the Shares, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of any of the Shares, to or through any person or entity. (e) Assessment of Risks. The Purchaser acknowledges that it (i) has such knowledge and experience in financial and business matters that such Purchaser is capable of evaluating the merits and risks of such Purchaser's investment in the Company (by virtue of its purchase of Shares hereunder), (ii) is able to bear the financial risks associated with an investment in the Shares and (iii) has been given full access to such records of the Company and to the officers of the Company as it has deemed necessary or appropriate to conduct its due diligence investigation with respect to the Shares. (f) No General Solicitation. The Purchaser acknowledges that the Shares were not offered to such Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio or (ii) any seminar or meeting to which such Purchaser was invited by any of the foregoing means of communications. (g) Accredited Investor. The Purchaser is an "accredited investor" (as defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended). (h) Legend. The Purchaser hereby acknowledges and agrees that the certificates representing the Shares may contain the following, or a substantially similar, legend, which legend shall be removed only upon receipt by the Company of an opinion of its counsel, which opinion shall be satisfactory to the Company, that such legend may be so removed: THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR FIBERNET TELECOM GROUP, INC. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED. (i) Certain Fees. The Purchaser has not employed any broker or finder or incurred any liability for any brokerage, investment banking, commission, finders', structuring or financial advisory fees or other similar fees in connection with this Agreement or the transactions contemplated hereby. 4 ARTICLE III. COVENANTS OF THE PARTIES; WAIVERS Section 3.1. Covenants. The parties hereto hereby covenant with each other as follows, which covenants, as applicable, are for the benefit of such parties and their respective permitted assigns: (a) Further Assurances. From and after the Closing Date, upon the request of any Purchaser or the Company, the Company and each Purchaser shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement. (b) Commercially Reasonable Efforts. Each party hereto will use commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable, consistent with applicable law, to consummate and make effective in the most expeditious manner practicable the transactions contemplated hereby, including without limitation, making all required regulatory and other filings required by applicable law as promptly as practicable after the date hereof. Section 3.2. Waivers. Each Purchaser hereby agrees that its acceptance of the Shares to be issued to it pursuant to this Agreement shall constitute full satisfaction by the Company of its obligation to deliver shares of Common Stock to such Purchaser hereunder and pursuant to the terms of the Preferred Stock as set forth in the Certificate of Designations for the Preferred Stock, and each Purchaser hereby irrevocably waives any right it may have to receive any additional shares of Common Stock, other than the Shares to be issued to it hereunder, pursuant to the terms of such Certificate of Designations (including any anti-dilution provisions contained therein). ARTICLE IV. CONDITIONS Section 4.1. Conditions Precedent to the Obligation of the Company to Close. The obligation hereunder of the Company to close and effect the Exchange at the Closing is subject to the satisfaction or waiver, at or before the Closing of the conditions set forth below: (a) Accuracy of the Purchasers' Representations and Warranties. The representations and warranties of each Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date. (b) Performance by the Purchasers. Each Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchasers at or prior to the Closing. 5 (c) No Injunction, Statute or Rule. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (d) Surrender of Preferred Stock. The Purchasers shall have surrendered to the Company all certificates representing the Preferred Stock, together with duly executed stock powers or other appropriate instruments of transfer. The conditions set forth in this Section 4.1 are for the Company's sole benefit and may be waived only by the Company at any time in its sole discretion. Section 4.2. Conditions Precedent to the Obligation of the Purchasers to Close. The obligation hereunder of the Purchasers to close and effect the Exchange is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below: (a) Accuracy of the Company's Representations and Warranties. Each of the representations and warranties of the Company in this Agreement shall be true and correct in all material respects as of the Closing Date, except for representations and warranties that speak as of a particular date, which shall be true and correct in all material respects as of such date. (b) Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing. (c) No Injunction, Statute or Rule. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (d) Certificates. The Company shall have delivered to the Purchasers certificates representing the Shares (in such denominations as each Purchaser may request) being acquired by the Purchasers at the Closing. The conditions set forth in this Section 4.2 are for each Purchaser's sole benefit and may be waived only by a Purchasers (only with respect to such Purchaser) at any time in its sole discretion. ARTICLE V. MISCELLANEOUS Section 5.1. Fees and Expenses. Each party hereto shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. 6 Section 5.2. Entire Agreement; Amendment. This Agreement and the Purchase Agreement contain the entire understanding and agreement (written or oral) of the parties hereto with respect to the subject matter hereof and, except as specifically set forth herein or in the Purchase Agreement, neither the Company nor any Purchaser make any representation, warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein. No provision of this Agreement may be waived or amended other than by a written instrument signed by each party hereto. Any amendment or waiver effected in accordance with this Section 5.2 shall be binding upon each such party and its permitted assigns. Section 5.3. Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to the Company: FiberNet Telecom Group, Inc. 570 Lexington Avenue New York, New York 10022 Attention: President Tel. No.: (212) 405-6200 Fax No.: (212) 421-8860 with copies (which copies shall not constitute notice to the Company) to: Willkie Farr & Gallagher 787 Seventh Avenue New York, New York 10019 Attention: Gordon Caplan Tel No.: (212) 728-8000 Fax No.: (212) 728-8111 If to any Purchaser: At the address of such Purchaser set forth on Exhibit A attached to the Purchase Agreement. Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto. Section 5.4. Waivers. No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any 7 delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. Section 5.5. Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof. Section 5.6. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither party hereto may assign its rights or obligations under this Agreement (by operation of law or otherwise) without the prior written consent of each other party hereto, and any attempted assignment without such consent shall be void ab initio. Section 5.7. No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity. Section 5.8. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the choice of law provisions thereof. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted. Section 5.9. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. Section 5.10. Severability. The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, the parties hereto have caused this Share Exchange Agreement to be duly executed by their respective authorized officers as of the date first above written. FIBERNET TELECOM GROUP, INC. By: ------------------------------------------ Name: Title: PURCHASERS: --------------------------------------------- By: ------------------------------------------ Name: Title: --------------------------------------------- By: ------------------------------------------ Name: Title: SCHEDULE 1.1 SHARES TO BE EXCHANGED
- -------------------------------------------------------------------------------------------- SHARES OF SERIES H PREFERRED SHARES OF COMMON STOCK BEING PURCHASER STOCK BEING SURRENDERED ISSUED IN THE EXCHANGE - -------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
SCHEDULE 1.1 SHARES TO BE PURCHASED
PURCHASE SHARES OF SHARES OF SERIES H PURCHASER PRICE COMMON STOCK PREFERRED STOCK --------- ----------- ------------ ------------------ Eliot D. Gersten Trustee $ 1,555.56 20,798 227.012 LPS Consultants Inc. $ 3,888.89 51,994 567.529 Jack Gilbert $ 4,666.67 62,393 681.036 SMFS Inc. $ 35,000.00 467,946 5,107.762 MSL Investments LLC $ 23,333.33 311,964 3,405.175 Robert W. Duggan $ 15,555.56 207,976 2,270.117 Penny Lane Partners, L.P. $ 27,222.22 363,958 3,972.705 Alexander Enterprise Holdings Corp. $ 23,333.33 311,964 3,405.175 Steven H. Tishman $ 3,111.11 41,596 454.024 Trautman Wasserman 8701 Opportunities Fund $ 15,555.56 207,976 2,270.117 Dr. Stuart Jacobson $ 7,777.78 103,988 1,135.058 Randall M. Tuggle $ 7,777.78 103,988 1,135.058 Jerdan Enterprises $ 38,888.89 519,940 5,675.291 Alan R. Cohen $ 2,333.33 31,197 340.518 Judith E. Olinger $ 3,888.89 51,994 567.529 Helen Jones Marital Trust $ 3,888.89 51,994 567.529 Tom Contino/Jerry D'Anduno $ 7,777.78 103,988 1,135.058 Burnham Hill Holding LLC $ 35,000.00 467,941 5,107.751 SDS Merchant Fund, LP $133,777.78 1,788,594 19,523.002 Sargon Capital International Fund Ltd. $147,777.78 1,975,772 21,566.107 DMG Legacy Fund LLC $ 9,644.44 128,946 1,407.473 DMG Legacy Institutional Fund LLC $ 89,693.33 1,199,190 13,089.491 DMG Legacy International Ltd. $ 93,551.11 1,250,768 13,652.481
EX-8 6 t08117exv8.txt NOTE PURCHASE AGREEMENT EXECUTION COPY Exhibit 8 NOTE PURCHASE AGREEMENT NOTE PURCHASE AGREEMENT, dated as of October 30, 2002 (this "Agreement"), by and among Nortel Networks Inc., a Delaware corporation (the "Seller"), and SDS Merchant Fund, L.P., a Delaware limited partnership (the "Purchaser"). WHEREAS, on December 7, 2001, FiberNet Telecom Group, Inc., a Delaware corporation (the "Company") issued a certain promissory note in an initial principal amount of $2,321,117 (the "Note"); WHEREAS, the current outstanding principal balance under the Note is $450,102, together with accrued interest thereon; and WHEREAS, the Seller desires to sell and transfer to the Purchaser, and the Purchaser desires to purchase from the Seller, the Note, upon the terms and conditions set forth herein. NOW THEREFORE, the parties hereto agree as follows: ARTICLE I. PURCHASE AND SALE OF NOTE Section 1.1. Purchase and Sale of Note. Upon the following terms and conditions, and in consideration of and in express reliance upon such terms and conditions and the representations, warranties and covenants of this Agreement, the Seller shall sell to the Purchaser, and the Purchaser shall purchase from the Seller, the Note for a cash purchase price (the "Purchase Price") of $150,000. Section 1.2. Closing. The closing (the "Closing") of the purchase and sale of the Note to be acquired by the Purchaser from the Seller under this Agreement shall take place at the offices of Jenkens & Gilchrist Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174 at 10:00 a.m., New York time (i) on or before October __, 2002, provided, that all of the conditions set forth in Article IV hereof shall have been fulfilled or waived in accordance herewith, or (ii) at such other time and place or on such date as the Purchaser and the Seller may agree upon (such date on which the Closing occurs, the "Closing Date"). At the Closing, the Seller shall deliver or cause to be delivered to the Purchaser the Note that the Purchaser is purchasing pursuant to the terms hereof, together with all appropriate endorsements and other appropriate instruments of transfer. At the Closing, the Purchaser shall deliver the Purchase Price by wire transfer to an account designated by the Seller. ARTICLE II. REPRESENTATIONS AND WARRANTIES Section 2.1. Representations and Warranties of the Seller. The Seller hereby represents and warrants to the Purchaser, as of the date hereof and the Closing Date, as follows: (a) Organization, Good Standing and Power. The Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. The Seller is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary except for any jurisdictions (alone or in the aggregate) in which the failure to be so qualified will not have a Material Adverse Effect. For the purposes of this Agreement, "Material Adverse Effect" means any condition, circumstance, or situation that would prohibit or hinder the Seller from executing this Agreement and/or performing any of its obligations hereunder or thereunder in any material respect. (b) Authorization; Enforcement. The Seller has the requisite power and authority to enter into and perform this Agreement and to sell the Note in accordance with the terms hereof. The execution, delivery and performance of this Agreement by the Seller and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and no further consent or authorization is required for the Seller to effect the transactions contemplated by this Agreement. When executed and delivered by the Seller, this Agreement shall constitute a valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application. (c) No Conflicts. The execution, delivery and performance of this Agreement by the Seller and the consummation by the Seller of the transactions contemplated hereby do not and will not (i) violate any provision of the Seller's Certificate of Incorporation or Bylaws, each as amended to date, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Seller is a party or by which any of the Seller's properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Seller or by which any property or asset of the Seller is bound or affected, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. The Seller is not required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or issue and sell the Note in accordance with the terms hereof. (d) Title to Note. The Seller has the right to transfer good, valid and marketable title in and to the Note, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances. 2 (e) Certain Fees. The Seller has not employed any broker or finder or incurred any liability for any brokerage, investment banking, commission, finders', structuring or financial advisory fees or other similar fees in connection with this Agreement or the transactions contemplated hereby. Section 2.2. Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Seller, as of the date hereof and as of the Closing Date, as follows: (a) Organization and Standing of the Purchaser. The Purchaser is a limited partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. (b) Authorization and Power. The Purchaser has the requisite power and authority to enter into and perform this Agreement and to purchase the Note being sold to it hereunder. The execution, delivery and performance of this Agreement by the Purchaser and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary organizational action, and no further consent or authorization is required for such Purchaser to effect the transactions contemplated by this Agreement. When executed and delivered by the Purchaser, this Agreement shall constitute valid and binding obligations of the Purchaser enforceable against such Purchaser in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application. (c) No Conflict. The execution, delivery and performance of this Agreement by the Purchaser and the consummation by the Purchaser of the transactions contemplated hereby do not and will not (i) violate any provision of the Purchaser's organizational documents, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Purchaser is a party or by which the Purchaser's properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Purchaser or by which any property or asset of the Purchaser is bound or affected, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, materially and adversely affect Purchaser's ability to perform its obligations under this Agreement. (d) Acquisition for Investment. The Purchaser is purchasing the Note solely for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution. The Purchaser does not have a present intention to sell the Note, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of the Note, to or through any person or entity. 3 (e) Assessment of Risks. The Purchaser acknowledges that it (i) has such knowledge and experience in financial and business matters that such Purchaser is capable of evaluating the merits and risks of such Purchaser's investment in the Company (by virtue of its purchase of Note hereunder), (ii) is able to bear the financial risks associated with an investment in the Note and (iii) has been given full access to such records of the Company and to the officers of the Company as it has deemed necessary or appropriate to conduct its due diligence investigation with respect to the Note. (f) No General Solicitation. The Purchaser acknowledges that the Note was not offered to such Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio or (ii) any seminar or meeting to which such Purchaser was invited by any of the foregoing means of communications. (g) Accredited Investor. The Purchaser is an "accredited investor" (as defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended). (h) Certain Fees. The Purchaser has not employed any broker or finder or incurred any liability for any brokerage, investment banking, commission, finders', structuring or financial advisory fees or other similar fees in connection with this Agreement or the transactions contemplated hereby. (i) Reliance on Representations. The Company is hereby expressly permitted to rely on the Purchaser's representations and warranties set forth in Sections 2.2(d) through (g), inclusive. ARTICLE III. COVENANTS OF THE PARTIES Section 3.1. Covenants. The parties hereto hereby covenant with each other as follows, which covenants are for the benefit of such parties and their respective permitted assigns: (a) Further Assurances. From and after the Closing Date, upon the request the Purchaser or the Seller, the Seller and the Purchaser shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement. (b) Commercially Reasonable Efforts. Each party hereto will use commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable, consistent with applicable law, to consummate and make effective in the most expeditious manner practicable the transactions contemplated hereby, including without limitation, making all regulatory and other filings required by applicable law as promptly as practicable after the date hereof. 4 ARTICLE IV. CONDITIONS Section 4.1. Conditions Precedent to the Obligation of the Seller to Close and to Sell the Note. The obligation hereunder of the Seller to close and sell the Note to the Purchaser at the Closing is subject to the satisfaction or waiver, at or before the Closing of the conditions set forth below: (a) Accuracy of the Purchaser's Representations and Warranties. The representations and warranties of the Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date. (b) Performance by the Purchaser. The Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchaser at or prior to the Closing. (c) No Injunction, Statute or Rule. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (d) Delivery of Purchase Price. The Purchase Price for the Note shall have been delivered to the Seller. The conditions set forth in this Section 4.1 are for the Seller's sole benefit and may be waived only by the Seller at any time in its sole discretion. Section 4.2. Conditions Precedent to the Obligation of the Purchaser to Close and to Purchase the Note. The obligation hereunder of the Purchaser to purchase the Note and to consummate the transactions contemplated by this Agreement is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below: (a) Accuracy of the Seller's Representations and Warranties. Each of the representations and warranties of the Seller in this Agreement shall be true and correct in all material respects as of the Closing Date, except for representations and warranties that speak as of a particular date, which shall be true and correct in all material respects as of such date. (b) Performance by the Seller. The Seller shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Seller at or prior to the Closing. (c) No Injunction, Statute or Rule. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or 5 governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (d) Note. The Seller shall have delivered to the Purchaser the Note acquired by the Purchaser at the Closing, together with all appropriate indorsements and other instruments of transfer. (e) Note Exchange Agreement. The Company shall have executed and delivered to the Purchaser a Note Exchange Agreement, substantially in the form attached as Exhibit B hereto (the "Note Exchange Agreement"). The conditions set forth in this Section 4.2 are for the Purchaser's sole benefit and may be waived only by the Purchaser at any time in its sole discretion. ARTICLE V. MISCELLANEOUS Section 5.1. Fees and Expenses. Each party hereto shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement and the transactions contemplated hereby. Section 5.2. Entire Agreement; Amendment. This Agreement and the Note Exchange Agreement contain the entire understanding and agreement (written or oral) of the parties hereto with respect to the subject matter hereof and, except as specifically set forth herein or in the Note Exchange Agreement, neither the Seller nor the Purchaser make any representation, warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein. No provision of this Agreement may be waived or amended other than by a written instrument signed by each party hereto. Any amendment or waiver effected in accordance with this Section 5.2 shall be binding upon each such party and its permitted assigns. Section 5.3. Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to the Seller: Nortel Networks Inc. MS 991-15-A40 2221 Lakeside Boulevard Richardson, TX 75082 6 Attn: Customer Finance Fax No.: (972) 684-3679 If to the Purchaser: SDS Merchant Fund, L.P. c/o SDS Capital Partners, LLC 53 Forest Avenue, 2nd Floor Old Greenwich, Connecticut 06870 Attention: Steve Derby Fax No.: (203) 967-5851 Either party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto. Section 5.4. Waivers. No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. Section 5.5. Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof. Section 5.6. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither party hereto may assign its rights or obligations under this Agreement (by operation of law or otherwise) without the prior written consent of each other party hereto, and any attempted assignment without such consent shall be void ab initio. Section 5.7. No Third Party Beneficiaries. Except as provided in Section 2.2(j) hereof, this Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity. Section 5.8. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the choice of law provisions thereof. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted. Section 5.9. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. Section 5.10. Severability. The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to 7 be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible. Section 5.11. Waiver of Jury Trial. EACH PARTY HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR LITIGATION OF ANY TYPE BROUGHT BY ANY SUCH PARTY AGAINST THE OTHER PARTY HERETO, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH PARTY HERETO HEREBY AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. THE AGREEMENT OF EACH PARTY HERETO TO THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE OTHER PARTY HERETO TO ENTER INTO THIS AGREEMENT. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written. NORTEL NETWORKS INC. By: /s/ Elias Makris _____________________________________ Name: Elias Makris Title: Director, Customer Finance SDS MERCHANT FUND, L.P. By: SDS Capital Partners, LLC, its general partner By: /s/ Steve Derby _____________________________________ Name: Steve Derby Title: General Counsel EXHIBIT B FORM OF NOTE EXCHANGE AGREEMENT EXECUTION COPY NOTE EXCHANGE AGREEMENT NOTE EXCHANGE AGREEMENT, dated as of October __, 2002 (this "Agreement"), by and among FiberNet Telecom Group, Inc., a Delaware corporation (the "Company"), and SDS Merchant Fund, LP (the "Purchaser"). R E C I T A L S WHEREAS, the Purchaser has purchased from Nortel Networks Inc. ("Nortel") that certain promissory note, issued on December 7, 2001 by the Company, in the initial principal amount of $2,321,117.00 (the "Note"), pursuant to a Note Purchase Agreement, of even date herewith, by and among Nortel and the Purchaser (the "Purchase Agreement"); WHEREAS, the Company has agreed that, immediately upon completion of the purchase of the Note pursuant to the Purchase Agreement, it will issue to the Purchaser, in exchange for the Note, an aggregate of 9,002,040 shares of common stock, par value $.001 per share, of the Company (the "Shares"); and WHEREAS, the Company and the Purchaser desire to enter into this Agreement to set forth certain matters relating to such exchange. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows: ARTICLE I. EXCHANGE Section 1.1. Exchange of Note for Shares. Upon the following terms and conditions, and in consideration of and in express reliance upon such terms and conditions and the representations, warranties and covenants of this Agreement, the Purchaser shall, immediately upon completion of the purchase of the Note pursuant to the Purchase Agreement, surrender to the Company for exchange, the Note, together with all appropriate endorsements and instruments of transfer, and, in exchange therefor, the Company shall issue to the Purchaser the Shares. The exchange described in this Section 1.1 is referred to herein as the "Exchange". Section 1.2. Closing. The closing (the "Closing") of the Exchange shall take place at the same place as, and immediately following, the "Closing", as defined in the Purchase Agreement. The date of the Closing is referred to herein as the "Closing Date". ARTICLE II. REPRESENTATIONS AND WARRANTIES Section 2.1. Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser, as of the date hereof and the Closing Date, as follows: (a) Organization, Good Standing and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary except for any jurisdictions (alone or in the aggregate) in which the failure to be so qualified will not have a Material Adverse Effect. For the purposes of this Agreement, "Material Adverse Effect" means any condition, circumstance, or situation that would prohibit or hinder the Company from executing this Agreement and/or performing any of its obligations hereunder or thereunder in any material respect. (b) Authorization; Enforcement. The Company has the requisite power and authority to enter into and perform this Agreement and to consummate the Exchange. The execution, delivery and performance of this Agreement by the Company have been duly and validly authorized by all necessary corporate action, and no further consent or authorization is required for the Company to effect the transactions contemplated hereby. When executed and delivered by the Company, the Agreement shall constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application. (c) Issuance of Shares. The Shares have been duly authorized by all necessary corporate action and, when issued in accordance with the terms hereof upon surrender of the Note in the Exchange, the Shares shall be validly issued and outstanding, fully paid and non-assessable. (d) No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby does not and will not (i) violate any provision of the Company's Certificate of Incorporation or Bylaws, each as amended to date, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party or by which any of the Company's properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected, except, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. The Company is not required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or consummate the Exchange in accordance with the terms hereof (other than any filings, consents and approvals which may be required to be made by the Company under 2 applicable state and federal securities laws, rules or regulations, or the rules of the Nasdaq SmallCap Market, prior to or subsequent to the Closing). Section 2.2. Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company, as of the date hereof and as of the Closing Date, as follows: (a) Organization and Standing of the Purchaser. The Purchaser is a limited partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. (b) Authorization and Power. The Purchaser has the requisite power and authority to enter into and perform this Agreement and to consummate the Exchange. The execution, delivery and performance of this Agreement the Purchaser and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary organizational action, and no further consent or authorization is required for the Purchaser to effect the transactions contemplated hereby. When executed and delivered by the Purchaser, this Agreement shall constitute valid and binding obligations of the Purchaser enforceable against the Purchaser in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application. (c) No Conflict. The execution, delivery and performance of this Agreement by the Purchaser and the consummation by the Purchaser of the transactions contemplated hereby does not and will not (i) violate any provision of the Purchaser's organizational documents, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Purchaser is a party or by which the Purchaser's properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Purchaser or by which any property or asset of the Purchaser is bound or affected, except, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, materially and adversely affect Purchaser's ability to perform its obligations hereunder. (d) Acquisition for Investment. The Purchaser is acquiring the Shares solely for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution. The Purchaser does not have a present intention to sell any of the Shares, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of any of the Shares, to or through any person or entity. (e) Assessment of Risks. The Purchaser acknowledges that it (i) has such knowledge and experience in financial and business matters that such Purchaser is capable of evaluating the 3 merits and risks of such Purchaser's investment in the Company (by virtue of its purchase of Shares hereunder), (ii) is able to bear the financial risks associated with an investment in the Shares and (iii) has been given full access to such records of the Company and to the officers of the Company as it has deemed necessary or appropriate to conduct its due diligence investigation with respect to the Shares. (f) No General Solicitation. The Purchaser acknowledges that the Shares were not offered to the Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio or (ii) any seminar or meeting to which the Purchaser was invited by any of the foregoing means of communications. (g) Accredited Investor. The Purchaser is an "accredited investor" (as defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended). (h) Legend. The Purchaser hereby acknowledges and agrees that the certificates or other documents representing the Shares may contain the following, or a substantially similar, legend, which legend shall be removed only upon receipt by the Company of an opinion of its counsel, which opinion shall be satisfactory to the Company, that such legend may be so removed: THE SECURITIES REPRESENTED HEREBY (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR FIBERNET TELECOM GROUP, INC. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED. (i) Certain Fees. The Purchaser has not employed any broker or finder or incurred any liability for any brokerage, investment banking, commission, finders', structuring or financial advisory fees or other similar fees in connection with this Agreement or the transactions contemplated hereby. ARTICLE III. COVENANTS OF THE PARTIES Section 3.1. Covenants. The parties hereto hereby covenant with each other as follows, which covenants, as applicable, are for the benefit of such parties and their respective permitted assigns: 4 (a) Further Assurances. From and after the Closing Date, upon the request of the Purchaser or the Company, the Company and the Purchaser shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement. (b) Commercially Reasonable Efforts. Each party hereto will use commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable, consistent with applicable law, to consummate and make effective in the most expeditious manner practicable the transactions contemplated hereby, including without limitation, making all required regulatory and other filings required by applicable law as promptly as practicable after the date hereof. ARTICLE IV. CONDITIONS Section 4.1. Conditions Precedent to the Obligation of the Company to Close. The obligation hereunder of the Company to close and effect the Exchange at the Closing is subject to the satisfaction or waiver, at or before the Closing of the conditions set forth below: (a) Accuracy of the Purchaser's Representations and Warranties. The representations and warranties of the Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date. (b) Performance by the Purchaser. The Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchaser at or prior to the Closing. (c) No Injunction, Statute or Rule. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (d) Surrender of Note. The Purchaser shall have surrendered to the Company the Note together with all appropriate indorsements other appropriate instruments of transfer. The conditions set forth in this Section 4.1 are for the Company's sole benefit and may be waived only by the Company at any time in its sole discretion. Section 4.2. Conditions Precedent to the Obligation of the Purchaser to Close. The obligation hereunder of the Purchaser to close and effect the Exchange is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below: 5 (a) Accuracy of the Company's Representations and Warranties. Each of the representations and warranties of the Company in this Agreement shall be true and correct in all material respects as of the Closing Date, except for representations and warranties that speak as of a particular date, which shall be true and correct in all material respects as of such date. (b) Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing. (c) No Injunction, Statute or Rule. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (d) Certificates. The Company shall have delivered to the Purchaser certificates representing the Shares (in such denominations as the Purchaser may request) being acquired by the Purchaser at the Closing. (e) Warrants. The Company shall have delivered to the Purchaser the Warrants (in such denominations as the Purchaser may request) being acquired by the Purchaser at the Closing. The conditions set forth in this Section 4.2 are for the Purchaser's sole benefit and may be waived only by the Purchaser at any time in its sole discretion. ARTICLE V. MISCELLANEOUS Section 5.1. Fees and Expenses. Each party hereto shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. Section 5.2. Entire Agreement; Amendment. This Agreement and the Purchase Agreement contain the entire understanding and agreement (written or oral) of the parties hereto with respect to the subject matter hereof and, except as specifically set forth herein or in the Purchase Agreement, neither the Company nor the Purchaser make any representation, warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein. No provision of this Agreement may be waived or amended other than by a written instrument signed by each party hereto. Any amendment or waiver effected in accordance with this Section 5.2 shall be binding upon each such party and its permitted assigns. Section 5.3. Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered 6 on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to the Company: FiberNet Telecom Group, Inc. 570 Lexington Avenue New York, New York 10022 Attention: President Fax No.: (212) 421-8860 with copies (which copies shall not constitute notice to the Company) to: Willkie Farr & Gallagher 787 Seventh Avenue New York, New York 10019 Attention: Gordon Caplan Fax No.: (212) 728-8111 If to the Purchaser: SDS Merchant Fund, L.P. c/o SDS Capital Partners 53 Forest Avenue, 2nd Floor Old Greenwich, Connecticut 06870 Attention: Steve Derby Fax No.: (203) 967-5851 with copies (which copies shall not constitute notice to the Purchaser) to: Jenkens & Gilchrist Parker Chapin LLP The Chrysler Building 405 Lexington Avenue New York, New York 10174 Attention: Christopher S. Auguste Fax No.: (212) 704-6288 Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto. Section 5.4. Waivers. No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 7 Section 5.5. Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof. Section 5.6. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither party hereto may assign its rights or obligations under this Agreement (by operation of law or otherwise) without the prior written consent of each other party hereto, and any attempted assignment without such consent shall be void ab initio. Section 5.7. No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity. Section 5.8. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the choice of law provisions thereof. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted. Section 5.9. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. Section 5.10. Severability. The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, the parties hereto have caused this Note Exchange Agreement to be duly executed by their respective authorized officers as of the date first above written. FIBERNET TELECOM GROUP, INC. By: ------------------------------------------ Name: Michael S. Liss Title: President and CEO SDS MERCHANT FUND, L.P. By: SDS Capital Partners, LLC, its general partner By: ------------------------------------------ Name: Steve Derby Title: Managing Member -----END PRIVACY-ENHANCED MESSAGE-----