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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ____)*
FiberNet Telecom Group, Inc.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
315653105
(CUSIP Number)
Mr. Timothy P. Bradley
Signal Capital Partners, L.P.
10 East 53rd Street, 32nd Floor
New York, NY 10022
212-872-1180
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
May 7, 1999
(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 Sections 240.13d-1(e),
240.13d-1(f) or 240.13d-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
Section 240.13d-7 for other parties to whom copies of this statement
are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of
the Act (however, see the Notes).
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CUSIP NO. 315653105 Page 2 of 10
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Signal Capital Partners, L.P.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [X]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See Instructions) OO
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization State of Delaware
Number of Shares
Beneficially Owned
by Each Reporting
Person With 7. Sole Voting Power 5,382,334
8. Shared Voting Power 12,070,000*
9. Sole Dispositive Power 5,382,334
10. Shared Dispositive Power 12,070,000*
11. Aggregate Amount Beneficially Owned by Each Reporting Person 17,452,334*
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 79.5%*
14. Type of Reporting Person (See Instructions)
PN
*Includes shares of Common Stock of FiberNet Telecom Group, Inc. (the "Issuer")
beneficially owned by LPS Consultants, Inc. ("LPS"), LTJ Group, Inc. ("LTJ") and
SMFS, Inc. ("SMFS") subject to an irrevocable proxy ("Proxy") dated as of May 7,
1999 whereby Signal Capital Partners, L.P., Trident Telecom Partners LLC and
Concordia Telecom Management, L.L.C. may exercise voting rights related to such
shares for the earlier of three years or the occurrence of other events. Signal
Capital Partners, L.P. disclaims beneficial ownership of shares owned by LPS,
LTJ and SMFS.
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CUSIP NO. 315653105 Page 3 of 10
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Trident Telecom Partners LLC
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [X]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See Instructions) OO
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization State of Delaware
Number of Shares
Beneficially Owned
by Each Reporting
Person With 7. Sole Voting Power 5,351,332
8. Shared Voting Power 12,070,000*
9. Sole Dispositive Power 5,351,332
10. Shared Dispositive Power 12,070,000*
11. Aggregate Amount Beneficially Owned by Each Reporting Person 17,421,332*
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 79.5%*
14. Type of Reporting Person (See Instructions)
CO
*Includes shares of Common Stock of FiberNet Telecom Group, Inc. (the "Issuer")
beneficially owned by LPS Consultants, Inc. ("LPS"), LTJ Group, Inc. ("LTJ") and
SMFS, Inc. ("SMFS") subject to an irrevocable proxy ("Proxy") dated as of May 7,
1999 whereby Signal Capital Partners, L.P., Trident Telecom Partners LLC and
Concordia Telecom Management, L.L.C. may exercise voting rights related to such
shares for the earlier of three years or the occurrence of other events. Trident
Telecom Management LLC disclaims beneficial ownership of shares owned by LPS,
LTJ and SMFS.
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CUSIP NO. 315653105 Page 4 of 10
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Concordia Telecom Management, L.L.C.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [X]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See Instructions) OO
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization State of Delaware
Number of Shares
Beneficially Owned
by Each Reporting
Person With 7. Sole Voting Power 1,668,334
8. Shared Voting Power 12,070,000*
9. Sole Dispositive Power 1,668,334
10. Shared Dispositive Power 12,070,000*
11. Aggregate Amount Beneficially Owned by Each Reporting Person 13,738,334*
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 75.3%*
14. Type of Reporting Person (See Instructions)
CO
*Includes shares of Common Stock of FiberNet Telecom Group, Inc. (the "Issuer")
beneficially owned by LPS Consultants, Inc. ("LPS"), LTJ Group, Inc. ("LTJ") and
SMFS, Inc. ("SMFS") subject to an irrevocable proxy ("Proxy") dated as of May 7,
1999 whereby Signal Capital Partners, L.P., Trident Telecom Partners LLC and
Concordia Telecom Management, L.L.C. may exercise voting rights related to such
shares for the earlier of three years or the occurrence of other events.
Concordia Telecom Management, L.L.C. disclaims beneficial ownership of shares
owned by LPS, LTJ and SMFS.
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CUSIP NO. 315653105 Page 5 of 10
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to the Common Stock,
$.001 par value (the "Common Stock"), of FiberNet Telecom Group, Inc., a Nevada
corporation (the "Issuer"). The principal executive offices of the Issuer are
located at 570 Lexington Avenue, New York, New York 10022.
ITEM 2. IDENTITY AND BACKGROUND.
(a) -(c) Pursuant to Rule 13d-1(k)(1)-(2) of Regulation 13D-G
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended (the "Act"), Signal Capital Partners, L.P., a Delaware limited
partnership ("Signal" and a "Reporting Person", Trident Telecom Partners LLC, a
Delaware limited liability company ("Trident" or a "Reporting Person") and
Concordia Telecom Management, L.L.C., a Delaware limited liability corporation
("Concordia" or a "Reporting Person") (Signal, Trident and Concordia are
jointly referred to as the "Reporting Persons") hereby jointly file this
statement on Schedule 13D. The Reporting Persons are jointly making this filing
because they may be deemed to constitute a "group" within the meaning of Section
13(d)(3) of the Act.
Signal is a private equity investment partnership formed to
invest in the telecommunications, information technology and media industries.
Signal Capital Advisors, L.P., a Delaware limited partnership ("Signal Advisors
LP"), is the general partner of Signal. Signal Advisors LP is principally
engaged in the business of serving as general partner to Signal. Signal Capital
Advisors, Inc., a Delaware corporation ("Signal Advisors Inc."), is the general
partner of Signal Advisors LP. Signal Advisors Inc. is principally engaged in
the business of serving as general partner to Signal Advisors LP.
The principal business address of Signal, Signal Advisors LP
and Signal Advisors Inc. is 10 E. 53rd Street, 32nd Floor, New York, New York
10022.
The managing partners of Signal are Timothy P. Bradley,
Alfred J. Puchala, Jr. and Charles T. Lake II. The foregoing individuals are
citizens of the United States and their principal business address is c/o Signal
Capital Partners, L.P., 10 E. 53rd Street, 32nd Floor, New York, New York 10022.
Their respective principal occupations in Signal Advisors LP and Signal Advisors
Inc. are set forth below.
NAME OCCUPATION
Timothy P. Bradley Managing Partner, Signal Advisors LP
President and Director, Signal Advisors Inc.
Alfred J. Puchala, Jr. Managing Partner, Signal Advisors LP
Vice President and Director, Signal Advisors Inc.
Charles T. Lake II Managing Partner, Signal Advisors LP
Vice President and Director, Signal Advisors Inc.
Trident is a limited liability company formed to invest in the
telecommunications industry. The managing member of Trident is Trident Telecom
Management, L.L.C., a
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CUSIP NO. 315653105 Page 6 of 10
Delaware limited liability company ("Trident Management"). Trident Management is
principally engaged in the business of serving as managing member of Trident.
Needham Management, Inc., a Nevada corporation ("Needham") is the managing
member of Trident Management. Needham is principally engaged in the business of
serving as managing member of limited liability companies formed to invest in
opportunities primarily in the telecommunications industry, including Trident.
The principal business address of Trident, Trident Management
and Needham is 350 Park Avenue, 14th Floor, New York, New York 10022.
Listed in the table below are the principal occupations of the
directors and officers in Needham.
NAME OCCUPATION
Ronald W. Kuzon President and Director, Needham
Gerald M. Goldberg Treasurer, Secretary and Director, Needham
The foregoing individuals are citizens of the United States
and their principal business address is c/o Trident Telecom Partners LLP, 350
Park Avenue, 14th Floor, New York, New York 10022.
Concordia is a limited liability company formed to invest in
the telecommunications industry. Michael S. Liss, an individual, is the sole
member of Concordia. Mr. Liss' principal occupation is President, Chief
Executive Officer and a Director of the Issuer. Mr. Liss is a citizen of the
United States. The principal business address of Concordia and Mr. Liss is c/o
FiberNet Telecom Group, Inc., 570 Lexington Avenue, New York, New York 10022.
(d) None of the entities or persons identified in this
Item 2 has, during the last five years, been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors).
(e) None of the entities or persons identified in this
Item 2 has, during the last five years, 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 AND OTHER CONSIDERATION.
On May 7, 1999 (the "Closing Date"), the Reporting Persons and
other investors ("Investors" and together with the Reporting Persons, the
"Investing Persons") entered into a Securities Purchase Agreement (the
"Securities Purchase Agreement") with the Issuer for the sale of $13.9 million
aggregate amount of 4% to 8% Senior Secured Convertible Notes ("Notes") of the
Issuer and 133,333 shares of Series C Preferred Stock ("Series C Preferred
Stock"), each of which is convertible into shares of Common Stock, and
approximately 7.9 million five-year warrants to purchase shares of common stock,
$.001 par value per share ("Common Stock") of
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CUSIP NO. 315653105 Page 7 of 10
the Issuer at $.67 to $1.50 per share ("Warrants" and together with the Notes
and the Series C Preferred Stock, the "Securities"). The Notes and the Series C
Preferred Stock are convertible into Common Stock at $1.50 per share. The Issuer
may also sell an additional $1.5 million of securities on substantially the same
terms as those described above (the above events and the other transactions and
events contemplated by the Securities Purchase Agreement are referred to as the
"Transaction"). The source of the funds used to purchase the Securities was the
working capital of the Investing Persons.
ITEM 4. PURPOSE OF TRANSACTION.
The Reporting Persons acquired the Securities for investment
purposes. As part of the Transaction, the size of the Board of Directors of the
Issuer (the "Board") increased from three to six directors, with the addition of
Michael S. Liss, Timothy P. Bradley and Richard Sayers on the Closing Date,
although Mr. Liss did not commence service as a Director on the Board until May
11, 1999. The Transaction also contemplates that on May 22, 1999, (i) Santo
Petrocelli, Sr., Frank Chiaino and Lawrence S. Polan will resign from the Board,
and (ii) Roy (Trey) D. Farmer III, Charles J. Mahoney and Joseph Tortoretti will
be elected to the Board. Those persons elected to the Board on the Record Date
and on May 22, 1999 will constitute a majority of the directors of the Board of
the Issuer. Frank Chiaino resigned as President and Chief Executive Officer of
the Issuer on the Closing Date. Michael S. Liss was elected to serve as
President and Chief Executive Officer and Roy (Trey) D. Farmer III was elected
to serve as Executive Vice President on the Closing Date, and Messrs. Liss and
Farmer commenced service in such positions on May 11, 1999. Messrs. Petrocelli
and Polan also resigned as executive officers from the Company and its
subsidiaries.
The Investing Persons, SMFS, Inc. ("SMFS"), LTJ Group, Inc.
("LTJ"), LPS Consultants, Inc. ("LPS") and the Issuer also entered into a
Stockholders Agreement dated as of the Closing Date ("Stockholders Agreement")
as part of the Transaction to provide for certain rights relating to the
Securities. In addition, the Investing Persons, SMFS, LTJ, LPS, Frank Chiaino
and the Issuer entered into a Registration Rights Agreement dated as of the
Closing Date (the "Registration Rights Agreement") as part of the Transaction to
provide for certain registration rights relating to the Securities.
All shares of the Issuer's Series B Voting Preferred Stock,
$.001 par value per share, were also redeemed for an aggregate amount of $80.00
as part of the Transaction.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The Reporting Persons as a group beneficially own,
directly and indirectly, an aggregate of 24,472,000 shares (the "Total Shares")
of Common Stock, or approximately 84.5% of the Issuer's Common Stock assuming
conversion of the Securities and other warrants and options beneficially owned
by the Reporting Persons, which includes
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CUSIP NO. 315653105 Page 8 of 10
shares of Common Stock beneficially owned by LPS, LTJ and SMFS which are subject
to an irrevocable proxy ("Proxy") granted to the Reporting Persons as part of
the Transaction and more fully described in Item 6 below. The Reporting Persons
as a group share the power to vote or direct the voting of and to dispose or
direct the disposition of 12,070,000 shares beneficially owned by LPS, SMFS and
LTJ subject to the Proxy more fully described in Item 6. Although the Reporting
Persons may be deemed to constitute a "group" within the meaning of Section
13(d)(3) of the Act, each Reporting Person disclaims beneficial ownership of
shares beneficially owned by LPS, LTJ and SMFS subject to the Proxy.
(b) Signal Advisors Inc., as general partner of Signal
Advisors LP, and Signal Advisors LP, as general partner of Signal, may be deemed
to share the beneficial ownership of 17,452,334 shares of the Total Shares.
Messrs. Bradley, Puchala and Lake, in their respective positions in Signal,
Signal Advisors Inc. and Signal Advisors LP as listed in Item 2 above, may also
be deemed to share the power to vote or direct the voting of and to dispose or
direct the disposition of 17,452,334 shares of the Total Shares. All such
entities and individuals hereby disclaim beneficial ownership of shares
beneficially owned by Trident, Concordia, LPS, SMFS and LTJ. All such entities
and individuals hereby disclaim beneficial ownership of 5,382,334 shares of the
Total Shares beneficially and directly owned by Signal, except to the extent of
any such individual's pecuniary interest therein.
Trident Management, as the managing member of Trident, and
Needham, as the managing member of Trident Management, may be deemed to share
the beneficial ownership of 17,421,332 shares of the Total Shares, which
includes shares subject to the Proxy. Messrs. Kuzon and Goldberg, in their
respective positions in Needham as listed in Item 2 above, may also be deemed to
share the power to vote or direct the voting of and to dispose or direct the
disposition of 17,421,332 shares of the Total Shares, which includes shares
subject to the Proxy. All such entities and individuals hereby disclaim
beneficial ownership of shares beneficially owned by Signal, Concordia, LPS,
SMFS and LTJ. All such entities and individuals hereby disclaim beneficial
ownership of 5,351,332 of the Total Shares beneficially and directly owned by
Trident, except to the extent of any such individual's pecuniary interest
therein.
Michael S. Liss, as the sole member of Concordia, may be
deemed to share the beneficial ownership of 13,738,334 shares of the Total
Shares, which includes shares subject to the Proxy. Mr. Liss disclaims
beneficial ownership of shares beneficially owned, directly or indirectly, by
Trident, Signal, LPS, SMFS and LTJ.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
As part of the Transaction, the Reporting Persons will have
voting rights for shares of Common Stock beneficially owned by LPS, LTJ and
SMFS, Inc., which together
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beneficially own approximately 34.2% of the Common Stock of the Issuer on a
fully diluted bases, pursuant to the Proxy for the earlier of three years from
the Closing Date or the occurrence of other events, including the sale of the
Issuer's Common Stock in a public offering. Under certain circumstances, Signal
alone will control the voting rights related to the Proxy.
Under the Registration Rights Agreement, the Reporting Persons
have rights to demand that the Issuer register under the Securities Act of 1933,
as amended, shares of Common Stock. The Investors holding Common Stock would
have the right to participate in such registration, subject to certain
conditions. Under the Stockholders Agreement, Investors will be required to vote
shares of Common Stock beneficially owned by them to approve a sale of all or
substantially all the assets of the Issuer or a merger or consolidation of the
Issuer which is approved by the Board and any directors appointed by Signal. The
Notes also contain certain provisions which give Signal or Trident rights to
declare Notes held by the Investing Persons immediately due and payable upon a
declaration of an event of default (as described in the Securities Purchase
Agreement) by Signal or Trident, as well as convertible to shares of Common
Stock if Signal or Trident converts its notes into Common Stock.
The foregoing descriptions do not purport to be complete and
are qualified in their entirety by reference to the Securities Purchase
Agreement, the Stockholders Agreement and the Registration Rights Agreement
which are being filed, as Exhibits A, H and I, respectively, to this Schedule
13D and are incorporated by reference herein.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit A - Securities Purchase Agreement dated as of May 7, 1999
Exhibit B - Form of 8% Senior Secured Convertible Note
Exhibit C - Form of 6% Senior Secured Convertible Note
Exhibit D - Form of 4% Senior Secured Convertible Note
Exhibit E - Form of Warrant
Exhibit F - Form of Warrant
Exhibit G - Certificate of Designation of Series C Preferred Stock
Exhibit H - Stockholders Agreement dated as of May 7, 1999
Exhibit I - Registration Rights Agreement dated as of May 7, 1999
Exhibit J - Proxy for LPS
Exhibit K - Proxy for SMFS
Exhibit L - Proxy for LTJ
Exhibit M - Stock Redemption Agreement dated as of May 7, 1999
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Signature
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.
Dated: May 17, 1999
SIGNAL CAPITAL PARTNERS, L.P.
By: Signal Capital Advisors, L.P.
Its: General Partner
By: Signal Capital Advisors, Inc.
Its: General Partner
By: /s/ Timothy P. Bradley
-----------------------------------
Director
TRIDENT TELECOM PARTNERS LLC
By: Trident Telecom Management, L.L.C.
Its: Managing Member
By: Needham Management, Inc.
Its: Managing Member
By: /s/ Ronald W. Kuzon
-----------------------------------
President
CONCORDIA TELECOM MANAGEMENT, L.L.C.
By: /s/ Michael S. Liss
-----------------------------------
Sole Member
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EXHIBIT A
SECURITIES PURCHASE AGREEMENT
dated as of May 7, 1999 (the
"Agreement") by and among FIBERNET
TELECOM GROUP, INC., a Nevada
corporation (the "Company"), and the
purchasers listed on Annex I hereto,
and any successors or assigns thereto
(the "Purchasers").
PREAMBLE
The Company wishes to sell and issue to the Purchasers the Notes,
the Warrants and the Preferred Stock (each as defined below), and the Purchasers
desire to purchase and accept such Notes, the Warrants and Preferred Stock, all
upon and subject to the terms and conditions hereof. The proceeds of the sale
and issuance of such Notes, the Warrants and Preferred Stock shall be utilized
in the manner specified on Schedule 6.8. The Notes, the Warrant and the
Preferred Stock to be purchased under this Agreement are collectively referred
to as "Securities."
NOW THEREFORE, the parties to this Agreement hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. Capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings assigned to thereto in the Notes and
Preferred Stock. As used in this Agreement, the following terms shall have the
following respective meanings:
"Act" shall mean the Securities Act of 1933, together with any
applicable regulations, as the same may be amended from time to time.
"Agreement" shall have the meaning given to such term in the
caption.
"Affiliate" shall mean, with respect to any Person, (i) a director
or officer of such Person, (ii) a spouse, parent, sibling or descendant of such
Person (or a spouse, parent, sibling or descendant of any director or executive
officer of such Person), and (iii) any other Person that, directly or indirectly
through one or more intermediaries, Controls, or is Controlled by, or is under
common Control with, such Person.
"all or substantially all" means, for the purposes thereof, (i) all
or substantially all of the assets of the Company, (ii) 50% or more of the
Company's interest in any Subsidiary and/or (iii) all or substantially all of
the assets of any Subsidiary.
"Applicable Law" shall mean, with respect to any Person, property,
transaction or event, all present and future applicable laws, statutes,
regulations, treaties, judgments and decrees and all applicable official
directives, rules, consents, approvals, authorizations, orders, guidelines and
policies of any Governmental Authority or Persons having authority over or
applicable to such Person or any of its assets or properties.
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"Bankruptcy Code" shall mean the United States Bankruptcy Code, 11
U.S.C.ss.11 et seq., as amended from time to time.
"Buildings and Fixtures" means all plant, buildings, structures,
erections, improvements, appurtenances and fixtures (including fixed machinery
and fixed equipment) situate on any of the Real Property.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banks are authorized or required to be closed in New York, New
York.
"Capital Lease Obligations" shall mean, with respect to any Person
on any date, the obligations of such Person to pay rent or other amounts under
any lease of (or other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required to be
classified and accounted for as capital leases on a balance sheet of such Person
as of such date computed in accordance with GAAP.
"Certificate of Designation" shall mean the Certificate of
Designation of the Preferred Stock of the Company.
"Closing" shall mean the issuance and purchase of the Securities
on the Closing Date hereunder.
"Closing Date" shall mean May 7, 1999, or such other date as the
Purchasers and the Company shall agree.
"Code" shall mean the Internal Revenue Service Code of 1986, as
amended, and the rules and regulations thereunder, as from time to time in
effect, or any successor thereto.
"Collateral" shall mean all of the "Collateral" as respectively
defined in the Collateral Agreements.
"Collateral Agent" shall mean the Majority in Interest, in its
capacity as collateral agent together with its successors and assigns in such
capacity, for the Purchasers.
"Collateral Agent Agreement" shall mean the Collateral Agent
Agreement dated as of the date hereof by and among the Collateral Agent and the
Purchasers.
"Collateral Agreements" shall mean the Pledge Agreement, the
Parent Pledge Agreement, the General Security Agreement and the Guaranty.
"Common Stock" means the common stock, par value $.001 per share,
of the Company.
"Company" shall have the meaning given to such term in the
caption.
"Concordia" means Concordia Telecom Management, L.L.C., a Delaware
limited liability company.
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"Contaminant" includes, but is not limited to, any pollutants,
dangerous substances, liquid waste, industrial waste, hauled liquid waste, toxic
substances, hazardous wastes, hazardous materials, hazardous substances or
contaminants, including any of the foregoing as defined in any Environmental Law
and other terms of similar import.
"Control" shall mean, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Employee Plan" means any "employee benefit plan" (as defined in
Section 3(3) of ERISA) as well as any other plan, program or arrangement
involving direct and indirect compensation, under which the Company or any ERISA
Affiliate of the Company has any present or future obligations or liability on
behalf of its employees or former employees, contractual employees or their
dependents or beneficiaries.
"Encumbrances" means all security interests, Liens, pledges,
charges, easements and restrictions.
"Environmental Activity" means any past, present or future activity,
event or circumstance in respect to a Contaminant, including, without
limitation, its storage, use, holding, collection, purchase, accumulation,
assessment, generation, manufacture, construction, processing, treatment,
stabilization, disposition, handling or transportation, or its Release, escape,
leaching, dispersal or migration into the natural environment, including the
movement through or in the air, soil, surface water or groundwater.
"Environmental Laws" at any date shall mean all provisions of
Applicable Law or any Judgments relating to the environment, occupational health
or safety, or any Environmental Activity, whether or not having the force of
law, including all administrative orders, directed duties, licenses,
authorizations and permits of, and agreements with, any Governmental Authority.
"Equal Access" shall mean FiberNet Equal Access, L.L.C., a New York
limited liability company.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations promulgated thereunder.
"ERISA Affiliate" means any Person (including any trade or business,
whether incorporated or not) which together with any Loan Party would be deemed
to be a member of the same "controlled group" within the meaning of Section
414(b) of the Code, under "common control" within the meaning of Section 414(c)
of the Code or a member of the same "affiliated service group" within the
meaning of Section 414(m) of the Code.
"Event of Default" shall mean any of the events set forth in Article
VII of this Agreement.
"Exchange Act" shall mean the Securities Exchange of 1934, together
with any applicable regulations, as the same may be amended from time to time.
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"Fair Market Value" shall mean the good faith determination of the
Board of Directors of the Company of the value of the shares of Common Stock as
provided in the Notes minus ten percent (10%) illiquidity discount.
"FiberNet Note" shall mean the note dated as of March 23, 1999 from
FiberNet Telecom to Trident Technology in the principal aggregate amount of up
to $800,000.
"FiberNet Telecom" shall mean FiberNet Telecom, Inc., a Delaware
corporation.
"Filing Expiration" shall mean the earlier of (i) the date upon
which any comment period provided for in the Exchange Act during which the SEC
may comment on any Exchange Act Filings (as defined in Section 6.17(a) of this
Agreement) has expired without receipt of comments from the SEC and (ii) the
date of the resolution of any comments received by the Company from the SEC.
"Financial Officer" of any Person shall mean its chief financial
officer or principal accounting officer.
"Fiscal Year" shall mean, with respect to any Loan Party, the
one-year period ending on December 31 of any year.
"General Security Agreement" shall mean the General Security
Agreement dated as of the date hereof by the Loan Parties in favor of the
Purchasers.
"Governmental Authority" shall mean Congress, any legislature,
assembly, council or other legislative body and any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court or any judicial or quasi-judicial body or
authority, in each case whether of or involving the United States of America or
any political subdivision thereof.
"Guaranty" shall mean the Guaranty Agreement dated as of the date
hereof among the Purchasers, FiberNet Telecom, Local Fiber and Equal Access.
"Historical Financial Statements" shall mean the audited financial
statements of each of the Loan Parties for the fiscal year ended December 31,
1997 and the audited financial statements of each of the Loan Parties for the
fiscal year ended December 31, 1998, in each case, delivered to the Purchasers
and included in Annex II hereto.
"Indebtedness" of any Person, without duplication, (i) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (ii) all obligations of such Person evidenced by (or which
customarily would be evidenced by) bonds, debentures, notes or similar
instruments, (iii) all reimbursement obligations of such Person with respect to
letters of credit and similar instruments, (iv) all obligations of such Person
under conditional sale or other title retention agreements relating to property
or assets purchased by such Person, (v) all obligations of such Person issued or
assumed as the deferred purchase price of property or services, other than
accounts payable incurred and paid on terms customary in the business of such
Person (it being understood that the "deferred purchase price" in connection
with any purchase of property or assets shall include only that portion of the
purchase price
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which shall be deferred beyond the date on which the purchase is actually
consummated), (vi) all obligations of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed, (vii) all obligations of
such Person under forward sales, futures, options and other similar hedging
arrangements (including interest rate hedging or protection agreements), (viii)
all obligations of such Person to purchase or otherwise pay for merchandise,
materials, supplies, services or other property under an arrangement which
provides that payment for such merchandise, materials, supplies, services or
other property shall be made regardless of whether delivery of such merchandise,
materials, supplies, services or other property is ever made or tendered, (ix)
any Guaranties by such Person of obligations of others and (x) all Capital Lease
Obligations of such Person.
"Intellectual Property Rights" means all industrial and intellectual
property rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service mark applications, copyrights, copyright applications, know-how, trade
secrets, proprietary processes and formulae, confidential information,
franchises, licenses, inventions, instructions, marketing materials, trade
dress, logos and designs and all documentation and media constituting,
describing or relating to the foregoing, including, without limitation, manuals,
memoranda and records.
"Investor Directors" shall mean the Directors to be designated by
the Purchasers to the Board of Directors of the Company as of the date hereof.
"Joint Venture" shall mean any partnership or collaboration between
or among Persons effected pursuant to the execution of agreements providing for
such partnership or collaboration.
"Judgments" shall mean all judgments, injunctions, orders and
decrees of all courts and arbitrators in proceedings or actions in which the
Person in question is a party or by which any of its assets or properties is
bound.
"Liability" means any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.
"Lien" shall mean, with respect to any asset, (i) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest of any kind
whatsoever in or on such asset (including the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction), (ii)
the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or title retention agreement relating to such asset and (iii) in
the case of securities, any purchase option, call, appreciation right or similar
right of a third party with respect to such securities.
"Liquidation" shall have the meaning ascribed to such term in the
Certificate of Designation.
"Loan Documents" shall mean this Agreement, the Notes, the Warrants
and the Collateral Agreements.
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"Loan Parties" shall mean the Company, Local Fiber, Equal Access
and FiberNet Telecom (each, a "Loan Party").
"Local Fiber" shall mean Local Fiber, L.L.C., a New York limited
liability company.
"LPS" shall mean LPS Consultants, Inc.
"LTJ" shall mean LTJ Group, Inc.
"Majority in Interest" shall mean Signal so long as (i) Alfred
Puchala, Jr. ("Puchala") or Timothy Bradley ("Bradley") are employed by Signal
or its Affiliates and have primary responsibility for decisions in connection
with Signal's investment in the Company and (ii) the aggregate amount of the
Note to be issued to Signal hereunder (or, if such Note is converted, the
aggregate number of shares of Common Stock owned or held by Signal) (the "Signal
Investment Amount") is greater than the aggregate amount of the Note to be
issued to Trident hereunder (or, if such Note is converted, the aggregate number
of shares of Common Stock owned or held by Trident) (the "Trident Investment
Amount"); provided, that if (x) the Trident Investment Amount is greater than
the Signal Investment Amount or (y) both Puchala and Bradley cease to be
involved in the capacity described in clause (i) above and (z) Ronald Kuzon
("Kuzon") is employed by Trident or its Affiliates and has primary
responsibility for decisions in connection with Trident's investment in the
Company, then "Majority in Interest" shall mean Trident (all of such conditions
described immediately above referred to as the "Majority Requirements"); and
further provided, that when the Majority Requirements no longer apply, "Majority
in Interest" shall mean the Person or Persons controlling no less than fifty
percent (50%) of the Note Purchase Price (as defined in Section 2.1(a)) or
issued and outstanding shares of Preferred Stock (as defined in Section 2.1(b)).
"Managing Purchasers" shall mean the Purchasers listed under the
heading "Managing Purchasers" on Annex I hereto.
"Material Adverse Effect" shall mean (i) a material adverse effect
on the business, assets, liabilities, operations, results of operations,
condition (financial or otherwise), ability to carry on its business or a
significant part thereof or prospects of Equal Access and Local Fiber
individually, and the Company and FiberNet Telecom taken as a whole, (ii) any
impairment of the ability of Equal Access and Local Fiber individually, and the
Company and FiberNet Telecom taken as a whole to perform any of its material
obligations under any Transaction Document to which such Loan Party is a party
or (iii) any impairment of any security interest or Lien of the Purchasers or
Collateral Agent in the Collateral. If a dispute shall arise as to whether there
has been a Material Adverse Effect, such dispute shall be conclusively resolved
by the Majority in Interest in their good faith reasonable discretion.
"Obligations" shall mean the respective obligations of each Loan
Party under any Loan Document to which such Loan Party is party.
"Organizational Document" shall mean, with respect to any Person,
each instrument or other document that (i) defines the existence of such Person,
including its articles or certificate of incorporation or organization, as filed
or recorded with an applicable
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Governmental Authority, or (ii) governs the internal affairs of such Person,
including its by-laws, in each case as amended, supplemented or restated.
"Other Purchasers" shall mean the Purchasers listed under the
heading "Other Purchasers" on Annex I hereto.
"Parent Pledge Agreement" shall mean the Pledge Agreement dated as
of the date hereof between the Company and the Collateral Agent.
"Permitted Encumbrances" means (i) Encumbrances for Taxes not yet
due and payable or being contested in good faith by appropriate proceedings and
for which there are adequate reserves on the books, (ii) workers or unemployment
compensation liens arising in the ordinary course of business; and (iii)
mechanic's, materialman's, supplier's, vendor's or similar liens arising in the
ordinary course of business securing amounts that are not delinquent.
"Permitted Liens" shall mean (i) liens arising by operation of law
in the ordinary course of business that, individually and in the aggregate, do
not in any material respect interfere with the use of any of the assets subject
thereto, (ii) minor imperfections of title which do not materially detract from
the value of the property affected or materially impair the operations of the
Company or any Loan Party and (iii) liens for taxes not yet due and payable.
"Person" shall be construed broadly and shall include any natural
person, company, partnership, joint venture, corporation, business trust,
unincorporated organization or Governmental Authority.
"Pledge Agreement" shall mean the Pledge Agreement dated as of the
date hereof between FiberNet Telecom and the Collateral Agent.
"Redemption Agreement" means the Stock Redemption Agreement dated as
of the date hereof among the Company, LPS, LTJ and SMFS.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of the date hereof by and among the Purchasers and the
Company.
"Release" includes discharge, spray, inject, inoculate, abandon,
deposit, spill, leak, seep, pour, emit, empty, throw, dump, place and exhaust,
(and words of similar import) and when used as a noun, has a similar meaning.
"Responsible Officer" of any Person shall mean the Chief Executive
Officer or a Financial Officer of such Person.
"SEC" means the Securities and Exchange Commission.
"Series B Preferred Stock" shall mean the Series B Voting Preferred
Stock, $.001 par value per share, of the Company.
"Signal" means Signal Capital Partners, L.P., a Delaware limited
partnership.
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"SMFS" shall mean SMFS, Inc.
"Stockholders Agreement" shall mean the Stockholders Agreement dated
as of the date hereof by and among the Company, the Purchasers, SMFS, Inc., LPS
Consultants, Inc. and LTJ Group, Inc.
"Subsidiaries" shall mean FiberNet Telecom, Equal Access and Local
Fiber and/or any successors thereto.
"Taxes" means, with respect to any Person, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, capital and transfer,
transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties and other taxes, fees,
assessments or charges of any kind whatsoever, together with all interest and
penalties, additions to tax, surtaxes and other additional amounts imposed by
any taxing authority (domestic or foreign) on such entity (if any) and (ii) any
liability for the payment of any amount of the type described in the immediately
preceding clause (i) as a result of being a "transferee" (within the meaning of
Section 6901 of the Code or any other Applicable Law) of another entity or a
member of an affiliated or combined group.
"Transaction Documents" shall mean this Agreement, the
Registration Rights Agreement, the Stockholders Agreement, the Redemption
Agreement, the Collateral Agreements, the Notes, the Warrants and the
Guaranty.
"Trident" means Trident Telecom Partners LLC, a Delaware limited
liability company .
"Trident Technology" means Trident Technology Partners LLC, a
Wyoming limited liability corporation.
1.2 Terms Generally.
The definitions in Section 1.1 shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation".
1.3 Use of Defined Terms.
Terms defined in this Agreement and used in any Exhibit, Schedule,
Certificate, Annex or any Transaction Document or other document delivered in
connection with this Agreement, shall have the meanings assigned herein unless
otherwise defined or the context otherwise requires.
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1.4 Cross-References.
Unless otherwise specified, references in this Agreement or any
Transaction Document to any Article or Section are references to such Article or
Section of this Agreement or such Transaction Document, as the case may be, and
references in any Article, Section or definition to any clause are references to
such clause of such Section, Article or definition.
1.5 Accounting Terms; GAAP.
Except as otherwise expressly provided herein, all terms of an accounting
or financial nature shall be construed in accordance with GAAP, consistently
applied, and all financial statements or accounting determinations required
herein to be prepared or made in accordance with GAAP shall be prepared or made
in accordance with GAAP applied on a consistent basis.
ARTICLE II
ISSUANCE OF THE NOTE AND PREFERRED STOCK
2.1 Issuance of Note and Preferred Stock.
Subject to the terms and conditions contained herein, at the Closing, the
Company has authorized the issuance of:
(a) Senior Secured Convertible Notes due May 7, 2004 of the Company
dated the Closing Date in the principal aggregate amount of $13,900,000 (the
"Note Purchase Price") to be issued as follows;
(i) the 8% Senior Secured Convertible Note due May 7, 2004 of
the Company dated the Closing Date in the form attached hereto as Exhibit
A-1 (the "8% Note");
(ii) the 6% Senior Secured Convertible Note due May 7, 2004 of
the Company dated the Closing Date in the form attached hereto as Exhibit
A-2 (the 6% Note"); and
(iii) the 4% Senior Secured Convertible Note due May 7, 2004
of the Company dated the Closing Date in the form attached hereto as
Exhibit A-3 (the "4% Note" and collectively with the 8% Note and the 6%
Note, the "Notes" and each a "Note").
(b) 133,333, shares of Series C Preferred Stock, $.001 par value
(the "Preferred Stock"), of the Company for a purchase price of $1.50 per share
(the "Purchase Price Per Share") or $200,000 in the aggregate (the "Preferred
Stock Purchase Price"); and
(c) 6,204,000 warrants to purchase shares of Common Stock at $.67
per share ("Class A Warrants") and 1,600,000 warrants to purchase shares of
Common Stock at $1.50 per share ("Class B Warrants", and together with the Class
A Warrants, the "Warrants"), dated the Closing Date in the form of Exhibit B-1
and Exhibit B-2 attached hereto.
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2.2 Agreement to Sell Securities.
At the Closing, the Company shall sell (i) to each Other Purchaser, and
each Other Purchaser shall purchase from the Company, an 8% Note in the
principal amount set forth on Annex I and the number of shares of Preferred
Stock listed next to such Other Purchaser in Annex I, (ii) to Concordia and
Trident, and Concordia and Trident shall each purchase from the Company, a 4%
Note in the principal amounts set forth on Annex I, and the number of shares of
Preferred Stock listed next to Concordia and Trident in Annex I, (iii) to
Signal, and Signal shall purchase from the Company, a 6% Note in the principal
amount set forth on Annex I and the number of shares of Preferred Stock listed
next to Signal in Annex I and (iv) (A) to each Managing Purchaser, and each
Managing Purchaser shall purchase from the Company, Class B Warrants in such
numbers as set forth on Annex II hereto, and (B) to each Purchaser, and each
Purchaser shall purchase from the Company, the number of Class A Warrants, all
as listed next to such Purchaser in Annex I, each for the consideration price
listed in Annex I; provided, that the parties hereto agree that Penny Lane
Partners, L.P. shall fund its portion of the Note Purchase Price as set forth on
Annex I, hereto within 10 days hereof.
2.3 Delivery of Securities.
(a) At the Closing, the Company shall deliver (i) to each Purchaser
a Note (each payable to the order of such Purchaser), the stock certificate for
the Preferred Stock to be purchased by such Purchaser (with such certificate
registered in the name of such Purchaser), each duly executed by the Company and
(ii) (A) the number of Class A Warrants to be issued to each Purchaser and (B)
the number of Class B Warrants as set forth on Annex II to be issued to the
Managing Purchasers, as duly executed by the Company;
(b) Delivery shall be made against receipt by the Company of the
Note Purchase Price and the Preferred Stock Purchase Price by wire transfer of
immediately available funds.
2.4 The Closing.
The Closing hereunder, subject to the satisfaction or waiver of the
conditions set forth in Article IV, will take place at the offices of O'Sullivan
Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New York 10112,
simultaneously with the execution and delivery of this Agreement.
2.5 Subsequent Closing.
Within 14 days of the date hereof the Company shall sell to a Person or
Persons to be determined by the Majority in Interest an 8% Note in the principal
amount of up to $1,500,000 and a pro rata number of shares of Preferred Stock
and Warrants for the consideration price listed in Annex I pursuant to the terms
and conditions contained herein at a closing, to be held 14 days from the date
hereof; provided, that any sale hereunder shall be subject to any filings
required by Applicable Law.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Each Loan Party, as applicable, represents and warrants to each
Purchaser as of the date hereof as set forth below.
3.1 Organization, Etc.
Each of the Company and FiberNet Telecom is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated. Each of Equal Access and Local Fiber is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of New York. Each Loan Party has all requisite power and
authority and has all governmental licenses, approvals, consents and
authorizations necessary to own or lease its property and assets and to carry on
its business as currently conducted and is qualified to do business in each
jurisdiction in which the nature of the business conducted or the property owned
or leased by it requires such qualification. Schedule 3.1 sets forth (a) a
correct and complete list of each jurisdiction in which each Loan Party is
qualified to do business and (b) the jurisdiction where each Loan Party is
incorporated.
3.2 Corporate Power and Authority; No required Consents or Approvals.
(a) Each Loan Party has the power to execute, deliver and perform
its obligations under each Transaction Document to which it is a party, to grant
Liens pursuant to the Collateral Agreements to which it is a party and, in the
case of the Company, to issue and sell the Securities hereunder and to deliver
the Securities to the Purchasers.
(b) The execution, delivery and performance by each Loan Party of
each Transaction Document to which it is a party, including the execution and
delivery of the Notes and Warrant by the Company and the issuance of Preferred
Stock by the Company, have been duly authorized by all required corporate,
partnership and/or stockholder action, as applicable, of such Loan Party and
will not (i) violate any provision of Applicable Law, any Judgment or any
Organizational Document of any Loan Party, (ii) conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default (or give rise to any right of termination, modification, cancellation or
acceleration) under, any Contract (as defined below) to which any Loan Party is
party or (iii) result in the creation or imposition of any Lien (other than a
Permitted Lien) upon any property of any Loan Party.
(c) The Company has delivered to the Purchasers correct and complete
copies of the respective Organizational Documents of each Loan Party. All
minutes of meetings and all written consents of the directors and stockholders
or members of each of Loan Party were delivered to counsel for the Purchasers.
(d) Except as set forth on Schedule 3.2(d), and except for the
filing of financing statements, no filing with or consent or approval of, or
other action by, any Governmental Authority or other Person is or will be
required by any Applicable Law or agreement in connection with the execution,
delivery and performance by each Loan Party of any Transaction Document to which
it is a party, any borrowings hereunder or the grant by the applicable Loan
Party to the Purchasers of any Lien pursuant to the Collateral Agreements.
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3.3 Enforceability.
Each Transaction Document to which each Loan Party is a party has been
duly executed and delivered by such Loan Party, and constitutes the legal, valid
and binding obligation of such Loan Party, enforceable in accordance with its
terms.
3.4 Financial Information.
(a) Schedule 3.4(a) sets forth the following financial statements
(the "Financial Statements"): (i) the pro forma consolidated balance sheets of
the Company and its Subsidiaries as of the date hereof, giving effect to the
transactions contemplated by this Agreement (the "Opening Balance Sheet"), (ii)
the unaudited balance sheet of the Company and its Subsidiaries as of March 31,
1999, and the related unaudited statements of operations and cash flows for the
periods then ended and (iii) the Historical Financial Statements.
(b) Except as set forth on Schedule 3.4(b), the Financial
Statements, including the notes thereto, (i) present fairly the consolidated
financial position and results of operations of the respective entities at the
dates and for the periods indicated, (ii) are in accordance with the books and
records of such entities, and (iii) have been prepared in accordance with GAAP.
(c) Except as set forth on Schedule 3.4(c), at the date of the
Opening Balance Sheet, neither the Company nor any Subsidiary had any liability
of any nature or any loss contingency (as such term is used in the Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975) that was not adequately disclosed or provided for
on the Opening Balance Sheet, including the notes thereto.
(d) The net accounts receivable reflected in the Opening Balance
Sheet arose from bona fide transactions in the ordinary course of business with
unaffiliated third parties, and the goods and services involved have been sold,
delivered and performed to the account obligors, and no further goods are
required to be provided and no further services are required to be rendered in
order to complete the sales and fully render the services and to entitle the
Company to collect such accounts receivable in full. Such net accounts
receivable (i) have not been assigned or pledged to any other person or entity
and (ii) are not subject to any right of set-off in respect of any obligations
of the Company or otherwise. Adequate provision has been made for collection,
losses, contractual discounts and other adjustments from third-party payors.
3.5 Absence of Changes.
Except as set forth on Schedule 3.5, since December 31, 1998, there has
not been:
(a) any adverse change in the condition (financial or otherwise),
assets, liabilities, operations, earnings or prospects of any Loan Party;
(b) any damage, destruction or loss (whether or not covered by
insurance) affecting any asset of any Loan Party in excess of $25,000;
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(c) any liability or loss contingency incurred by any Loan Party
that would have to be disclosed on financial statements (including the notes
thereto) in accordance with GAAP, other than liabilities incurred in the
ordinary course of business consistent with past practice;
(d) any commitment to borrow money or provide financial support to
any person or entity entered into by any Loan Party;
(e) any payment or discharge of any liability by any Loan Party
outside the ordinary course of business consistent with past practice;
(f) any sale, assignment, license, or other disposition of any
material asset or right of any Loan Party outside the ordinary course of
business consistent with past practice;
(g) any declaration or payment of any dividend or other distribution
with respect to any shares of capital stock of any Loan Party;
(h) any labor trouble, problem or grievance affecting the business
of any Loan Party;
(i) any write-down of the value of any inventory of any Loan Party,
or any write-off as uncollectible of any accounts or notes receivable of any
Loan Party, in each case outside the ordinary course of business consistent with
past practice;
(j) any general uniform increase in the direct or indirect
compensation of employees of any Loan Party (including, without limitation, any
increase pursuant to any bonus, pension, profit-sharing, deferred compensation,
or other plan or commitment);
(k) any capital expenditure or commitment therefor by any Loan Party
for additions to property, plant or equipment in excess of $25,000;
(l) any change in the accounting or tax methods, practices, or
assumptions followed by any Loan Party; or
(m) any other transaction or event relating to any Loan Party not in
the ordinary course of business consistent with past practice.
3.6 Litigation.
There are no actions (including derivative actions), suits or proceedings
at law or in equity instituted or, to the Company's knowledge, threatened with
respect to the transactions contemplated by the Transaction Documents. Except as
set forth on Schedule 3.6, there are no other actions (including derivative
actions), suits or proceedings at law or in equity or by or before any
Governmental Authority instituted or, to the knowledge of the Company after due
inquiry, threatened against or affecting any Loan Party or any of their
respective businesses, properties or rights, and no Loan Party is a party to any
arbitration, or currently anticipates becoming a party to any arbitration. None
of such actions, suits or proceedings disclosed on Schedule 3.6 has resulted or
could reasonably be expected to result in a Material Adverse Effect. No Loan
Party is subject to, or if subject to in default with respect to, any order,
injunction or
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decree of any Governmental Authority which has resulted or could reasonably be
expected to result in a Material Adverse Effect.
3.7 Compliance With Laws.
Except as set forth on Schedule 3.7, no Loan Party is in violation of, or
in default with respect to, any Applicable Law (including, without limitation,
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and all Environmental
Laws) or Judgment.
3.8 Employee Plans.
Schedule 3.8 contains a list of all Employee Plans sponsored, maintained
or contributed to by each Loan Party and their Affiliates and ERISA Affiliates.
Except as disclosed on Schedule 3.8, no Loan Party, or any of their Affiliates
or ERISA Affiliates, has in the six-year period ending on the Closing Date
sponsored, made contributions to, or had any liability to any Employee Plan;
each Employee Plan sponsored by or maintained by each Loan Party or any ERISA
Affiliate is maintained and administered in material compliance with all
provisions of ERISA, the Code and all other Applicable Law; each Employee Plan
sponsored by each Loan Party has been operated and administered in compliance
with all Applicable Law; no Loan Party nor any ERISA Affiliate has breached the
fiduciary rules of ERISA, the Code or any other corresponding rules under any
other Applicable Law; all required employer and employee contributions and
premiums under all Employee Plans have been made by each Loan Party or ERISA
Affiliates in a timely manner; there are no existing past funding obligations of
any kind owed by any Loan Party or ERISA Affiliate with respect to any Employee
Plan; no Loan Party or ERISA Affiliate has agreed to provide any post-retirement
health or welfare benefits to any employees, former employees or retired
employees of any Loan Party, or any ERISA Affiliate.
3.9 Taxes.
Except as set forth on Schedule 3.9: (i) Each Loan Party has filed or
caused to be filed all tax returns, reports or statements ("Tax Returns")
required to have been filed by it or them on or before the date hereof and such
Tax Returns are true, correct and complete in all material respects, (ii) each
Loan Party has paid all Taxes shown to be due on the Tax Returns referred to in
clause (i) and any other Taxes for which it could be required to pay under the
filings in clause (i), (iii) no Loan Party has waived in writing any statute of
limitations in respect of Taxes which waiver is currently in effect, (iv) no
issues that have been raised in writing by the relevant taxing authority in
connection with the examination of the Tax Returns referred to in clause (i) are
currently pending, (v) all deficiencies asserted or assessments made as a result
of any examination of the Tax Returns referred to in clause (i) by a taxing
authority have been paid in full, (vi) no Loan Party has incurred any liability
to make any payments that either alone or in conjunction with any other payments
could constitute a "parachute payment" within the meaning of Section 280G of the
Code, (vii) no Loan Party is presently required to make any adjustments or
changes either on, before, or after the Closing Date, to its accounting methods,
(ix) no Loan Party has ever been a member of an affiliated, consolidated or
unitary group for Tax purposes other than a group in which it currently is a
member; and (x) no Loan Party has ever been a party to a Tax sharing, indemnity
or similar agreement.
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Except as set forth on Schedule 3.9, each Loan Party has properly and
timely filed or caused to be filed all federal and local tax returns, reports or
statements that are required to be filed by it and has paid or caused to be paid
all taxes shown to be due and payable on such returns or on any assessments
(including taxes with respect to real property) received by it, other than any
taxes or assessments the validity of which it is contesting in good faith by
appropriate proceedings and with respect to which adequate accounting reserves
have been set aside to the extent required by GAAP. The charges, accruals and
reserves of each Loan Party in respect of taxes and other governmental charges
are adequate.
3.10 Real Property - Owned or Leased.
(a) Schedule 3.10(a) contains a list and brief description of all of
the owned real property of the Company and each of its Subsidiaries (the "Owned
Property") and all real property in which the Company or any of its Subsidiaries
has a leasehold interest held under leases (the "Leased Property") including the
name of the lessor and any requirement of consent of the lessor to consummate
the transactions contemplated hereby. The Owned Property and the Leased Property
(together, the "Real Property") constitute all real properties used or occupied
by the Company and its Subsidiaries.
(b) With respect to the Real Property, except as set forth in
Schedule 3.10(b):
(i) no portion thereof is subject to any pending condemnation
proceeding by any public or quasi-public authority or Governmental
Authority and there is no threatened condemnation or proceedings with
respect thereto;
(ii) the physical condition of the Real Property is sufficient
to permit the continued conduct of the business of the Company or its
Subsidiaries as presently conducted and as presently proposed to be
conducted subject to the provision of usual and customary maintenance and
repair performed in the ordinary course with respect to similar properties
of like age and construction;
(iii) with respect to the Leased Property, the Company or one
its Subsidiaries is the owner and holder of all the leasehold estates
purported to be granted by such related lease and each such lease is in
full force and effect and constitutes a valid and binding obligation of
the Company or such Subsidiary;
(iv) no notice of any increase in the assessed valuation of
the Real Property and no notice of any contemplated special assessment has
been received by the Company or any of its Subsidiaries and there is no
threatened special assessment pertaining to any of the Real Property;
(v) there are no Contracts, written or oral, to which the
Company or any of its Subsidiaries is a party, granting to any party or
parties the right of use or occupancy of any portion of the parcels of the
Real Property;
(vi) there are no parties (other than the Company or any of
its Subsidiaries) in possession of the Owned Property;
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(vii) with respect to the Leased Property, there have been no
discussions or correspondence with the landlord or lessor concerning
renewal terms for those leases scheduled to expire within six months of
the date hereof;
(viii) all of the Buildings and Fixtures on the Owned Property
were constructed in accordance with all Applicable Laws and the Company or
its Subsidiaries has adequate rights of ingress and egress into the Owned
Property for the operation of the business of the Company or its
Subsidiaries;
(ix) none of the Owned Property or the Buildings and Fixtures
thereon, nor their use, operation or maintenance for the purpose of
carrying on the business of the Company or its Subsidiaries, violates any
restrictive covenant or any provision of any Law or encroaches on any
property owned by any other Person; and
(x) there are no outstanding work orders from or required by
any municipality, police department, fire department, sanitation, health
or safety authorities or from any other Person and there are no matters
under discussion with or by the Company or any of its Subsidiaries
relating to work orders.
(c) Leased Real Property. Except as set forth on Schedule 3.10(c),
neither the Company nor any of its Subsidiaries is a party to, or under any
agreement to become a party to, any lease with respect to real property other
than the Leased Property, true, correct and complete copies of which have been
provided to the Purchasers. With respect to each lease (i) the lease (or a
notice in respect of the lease) has been properly registered in the appropriate
land registry office, (ii) all rents and additional rents have been paid, (iii)
no waiver, indulgence or postponement of the lessee's obligations has been
granted by the lessor, (iv) there exists no event of default or event,
occurrence, condition or act (including the transactions contemplated hereby)
which, with the giving of notice, the lapse of time or the happening of any
other event or condition, could become a default under the lease, and (v) all of
the covenants to be performed by any party under the leases have been fully
performed. Each of the Leased Properties is adequate and suitable for the
purposes for which it is presently being used and as presently proposed to be
used and the Company or its Subsidiaries have adequate rights of ingress and
egress into each of the Leased Properties.
3.11 Intellectual Property.
(a) To the Company's Knowledge (as defined herein), the Company and
each of its Subsidiaries have the unimpaired right to use, sell, license and
dispose of, and have the right to bring actions for the infringement of, all
Intellectual Property Rights necessary or required for the conduct of the
business of the Company or its Subsidiaries as currently conducted and as
currently proposed to be conducted and such rights to use, sell, license,
dispose of and bring actions are sufficient for such conduct of the business of
the Company or its Subsidiaries.
(b) To the Company's Knowledge, except as set forth in Schedule 3.11
there are no royalties, honoraria, fees or other payments payable by the Company
or any of its Subsidiaries to any Person by reason of the ownership, use,
license, sale or disposition of the Intellectual Property Rights.
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(c) To the Company's Knowledge, except as set forth in Schedule
3.11(c), no activity, service or procedure currently conducted or currently
proposed to be conducted by the Company or any of its Subsidiaries violates or
will violate any Contract of such Person with any third party or infringes any
Intellectual Property Right of any other party.
(d) To the Company's Knowledge, except as set forth in Schedule
3.11, neither the Company nor any of its Subsidiaries has received from any
third party in the past five years any notice, charge, claim or other assertion
that the Company or such Subsidiary is infringing any Intellectual Property
Right of any third party or committed any acts of unfair competition, and no
such claim is impliedly threatened.
(e) To the Company's Knowledge, except as set forth in Schedule
3.11, neither the Company nor any of its Subsidiaries has sent to any third
party in the past five years or otherwise communicated to another Person any
notice, charge, claim or other assertion of infringement by or misappropriation
of any Intellectual Property Right of the Company or such Subsidiary by such
other Person or any acts of unfair competition by such other Person, nor is any
such infringement, misappropriation or unfair competition occurring or
threatened.
(f) Schedule 3.11 contains a true and complete list of all
applications, filings and other formal actions made or taken pursuant to
Applicable Laws by the Company or any of its Subsidiaries to perfect or protect
its or the Subsidiary's interest in the Intellectual Property Rights.
(g) To the Company's Knowledge, except as set forth on Schedule
3.11, no Person other than the Company or any of its Subsidiaries has been
granted any interest in a right to use all or any portion of the Intellectual
Property Rights necessary or required for the conduct of the business of the
Company or its Subsidiaries.
(h) The Purchasers have been provided with a true and complete copy
of all Contracts that comprise or are related to the Intellectual Property
Rights used in or required for the conduct of the business of the Company or its
Subsidiaries.
(i) For purposes of this Section 3.11, "Knowledge" shall mean the
good faith due diligence, investigation and imputed knowledge of the Company.
3.12 Contracts.
Schedule 3.12 sets forth a complete list as of the Closing Date hereof of
each material agreement, contract, guaranty, indenture or instrument to which a
Loan Party is a party or by which any of their respective properties are or may
be bound (collectively, "Contracts"), correct and complete copies of which have
been provided to the Purchasers. Each Contract is the binding obligation of the
respective Loan Parties thereto and, to the knowledge of the Company, the
binding obligation of each other parties thereto, in each case, enforceable in
accordance with its terms. No Loan Party is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Contract to which it is a party. No Loan Party is a party to
any agreement, instrument or corporate restriction that has resulted or could
reasonably be expected to result in a Material Adverse Effect.
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3.13 No Material Misstatements.
All information, including financial information, provided, or to be
provided from time to time, to the Purchasers in connection with this Agreement
and the other Transaction Documents is true and correct and none of the
documentation furnished to the Purchasers by the Company or any of its
Subsidiaries, including the Historical Financial Statements nor any other
statement furnished by or on behalf of the Company or any of its Subsidiaries or
any other Loan Party to the Purchasers in connection with the negotiation or
confirmation of the transactions as contemplated hereby or by the other
Transaction Documents, contains or will contain any untrue statement of a
material fact or omits or will omit as of such time, a material fact necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading, and all such statements, taken as a whole,
together with this Agreement, do not and will not contain any untrue statement
of a material fact or omit a material fact necessary to make the statements
contained herein or therein not misleading and all expressions of expectation,
intention, belief and opinion contained therein were, and will be, honestly made
on reasonable grounds after due and careful inquiry by the Company (and any
other person who furnished such material). There is not, and will not be, any
fact which the Company or any other Loan Party has not disclosed to the
Purchasers in writing which has had a Material Adverse Effect, or is reasonably
likely to have a Material Adverse Effect.
3.14 Outstanding Debt.
Schedule 3.14 lists all Indebtedness of each Loan Party immediately after
giving effect to the use of proceeds in accordance with Schedule 6.8. There does
not exist any breach, default or event of default (however defined) under any
Contract relating to or evidencing any Indebtedness of the Loan Parties (or any
event which, with only the giving of notice or the passage of time or both,
would result in such a breach or default).
3.15 Investment Company Act and Public Utility Holding Company Act.
No Loan Party is an "investment company" or an "affiliate" of an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940, as amended. No Loan Party is a "holding company"
as defined in, or subject to regulation under, the Public Utility Holding
Company Act of 1935, as amended.
3.16 Solvency.
Each Loan Party is not, and immediately following the issuance of the
Notes and giving effect to the Loan Parties' obligation to repay same, will not
be, "insolvent" nor an "insolvent person" within the meaning of the Bankruptcy
Code, the Uniform Fraudulent Transfer Act as in effect on the date hereof in the
State of New York or any other applicable fraudulent conveyance or preference
laws, as applicable. The fair value of the aggregate assets of each Loan Party
exceeds, and immediately following the issue of the Notes and giving effect to
such Loan Party's obligation to repay same, will exceed its total liabilities
(including subordinated, unmatured, unliquidated, disputed and contingent
liabilities). Neither the assets of any Loan Party are nor immediately following
the sale of the Note hereunder will they be, unreasonably small in relation to
any business or transaction in which such corporation is or is about to be
engaged. No Loan
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Party intends to, nor believes that it will, nor should it reasonably believe it
will, incur debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be received by each Loan Party
and the amounts to be payable on or in respect of its obligations).
3.17 Capital Stock; Equity Capital.
Except as set forth on Schedule 3.17, there are no restrictions upon the
voting rights associated with, or the transfer of, any of the capital stock of
the Company, except as provided by (a) United States or state securities laws or
(b) the terms and provisions of the Transaction Documents.
3.18 Capitalization.
The authorized share capital (or limited liability company membership
interests) of each Loan Party is as set forth on Schedule 3.18. Except as set
forth on Schedule 3.18, all issued and outstanding shares of capital stock of
each of the Loan Parties are duly authorized and validly issued, fully paid,
nonassessable, free and clear of all Liens other than those in favor of
Purchasers, and such shares were issued in compliance with all applicable state,
provincial and federal laws concerning the issuance of securities. The capital
stock of each of the Loan Parties is owned by the stockholders or members in the
amounts set forth on Schedule 3.18. No shares of the capital stock of any Loan
Party other than those described above, are issued and outstanding. Except as
set forth on Schedule 3.18, there are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or understandings for
the purchase or acquisition from any Loan Party of any shares of capital stock
or other securities of any such entity.
3.19 Employee Disputes.
Except as set forth on Schedule 3.19, there are no disputes pending or, to
the best knowledge of the Company after diligent inquiry, threatened, between
any Loan Party and any of their respective employees, other than individual
employee grievances arising in the ordinary course of business which could not
reasonably be expected to result in a Material Adverse Effect.
3.20 Telecommunications Permits.
Except as set forth on Schedule 3.20, the Company and its Subsidiaries
possess all permits, licenses, approvals or rulings (collectively, "Permits")
from the applicable Governmental Authority related to the conduct of the
business of the Company and its Subsidiaries, and all such Permits are valid and
will not expire and no action by the Company or its Subsidiaries is required to
renew or maintain the validity of such Permits within six months of the date
hereof.
3.21 Securities Laws.
The offering, sale and purchase of the Securities contemplated hereby are
exempt from registration under the Securities Act. The issuance of all other
shares of capital stock of the
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Company on or before the date hereto has been made in compliance with the
Securities Act and all applicable state securities or blue sky laws.
3.22 Accounts and Notes Receivable.
Except as set forth in Schedule 3.22, all the accounts receivable and
notes receivable owing to the Company or any of its Subsidiaries as of the date
hereof constitute, and as of the Closing Date will constitute, legal, valid and
enforceable, claims arising from bona fide transactions in the ordinary course
of business, subject to bankruptcy, insolvency, moratorium, reorganization and
other similar laws affecting creditors' rights generally, there are no asserted
claims, refusals to pay or other rights of set-off against any thereof and none
of such accounts or notes receivable is in jeopardy of non-payment. Neither the
Company nor any of its Subsidiaries has accelerated the collection of accounts
receivable, other than in the ordinary course of business consistent with past
custom and practice. Schedule 3.22 sets forth a complete and accurate aging of
all accounts receivable as of date hereof from both the due date and the invoice
date.
3.23 Accounts and Notes Payable.
Except as set forth in Schedule 3.23, all accounts payable and notes
payable by the Company or any of its Subsidiaries to third parties as of the
date hereof arose, and as of the Closing will have arisen, in the ordinary
course of business, and there is no such account payable or note payable
delinquent in its payment other than accounts and notes payable being disputed
in good faith. Neither the Company nor any of its Subsidiaries has delayed or
postponed the payment of accounts payable and other obligations and Liabilities,
other than in the ordinary course of business, consistent with past custom and
practice.
3.24 Suppliers and Vendors.
Except in the ordinary course of business, no supplier to or vendor of the
Company or any of its Subsidiaries has (i) canceled or otherwise terminated, or,
threatened to cancel or otherwise terminate, its relationship with the Company
or any of its Subsidiaries, (ii) decreased, limited or otherwise adversely
modified, or threatened to decrease, limit or otherwise adversely modify, the
services, supplies or materials it provides to the Company or any of its
subsidiaries, or (iii) failed to honor any warranty obligations, and the
transactions proposed to be consummated pursuant to this Agreement and the other
Transaction Documents shall not materially adversely affect the relationship of
the Company or any of its Subsidiaries with any supplier, vendor, franchisee or
licensee.
3.25 Customer Relations, Profitability.
Neither the Company nor any of its Subsidiaries has notice that any
customer, agent, representative or supplier of the Company or any of its
Subsidiaries intends to discontinue, diminish or change its relationship with
the Company or any of its Subsidiaries. Each such relationship is in material
conformity with standard industry terms and conditions. Each such relationship
wherein the Company or such Subsidiary is obligated to perform under contract
services with respect to the business of the Company or its Subsidiaries is
priced at a profit level reasonably consistent with the Company's or such
Subsidiary's practices.
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3.26 Year 2000.
(a) All hardware and software products used by the Company and its
Subsidiaries in the administration and business operations of the Company and
its Subsidiaries will be able to accurately process date data (including, but
not limited to, calculating, comparing and sequencing) from, into and between
the twentieth century (through year 1999), the year 2000 and the twenty-first
century, including leap year calculations, when used in accordance with the
product documentation accompanying such hardware and software products.
(b) All software products offered by the Company or any of its
Subsidiaries will be able to accurately process date data (including, but not
limited to, calculating, comparing and sequencing) from, into and between the
twentieth century (through your 1999), the year 2000 and the twenty-first
century, including leap year calculations, when used in accordance with the
product documentation accompanying such software products.
3.27 SEC Filings.
Schedule 3.27 lists all filings made by the Company pursuant to the rules
and regulations of the Act and the Exchange Act. Except as set forth on Schedule
3.27, the Company has filed all filings required by the Act and Exchange Act
("Filings" and each, a "Filing") with the SEC. No Filing contains an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.28 Equipment.
Except as set forth on Schedule 3.28, all computer, switching and voice,
data and video communication devices and equipment, information management
systems and all related peripheral devices or equipment (collectively,
"Equipment"), is state of the art Equipment functioning and in working order
consistent with the intended use of such Equipment.
3.29 Related Transactions.
Except as set forth on Schedule 3.29, and except for compensation to
regular employees of the Company and its Subsidiaries, no current or former
director or officer of the Company or its Subsidiaries or holder of any capital
stock of the Company or its Subsidiaries has been (i) a party to any material
transaction with the Company or its Subsidiaries, or (ii) the direct or indirect
owner of an interest (other than non-affiliated holdings in publicly held
companies) in any business organization that is or was a competitor, supplier or
customer of the Company or its Subsidiaries.
3.30 Fairness Opinion.
The Company engaged Gerard Klauer Mattison & Co., Inc. ("Gerard Klauer")
for the purposes of rendering an opinion to the Board of Directors of the
Company to be dated as of the date hereof that the consideration to be received
by the Company in connection with the transactions contemplated by the
Transaction Documents is fair from a financial point of view to the Company.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
4.1 Purchasers Representations and Warranties.
Each Purchaser, severally and only with respect to itself, represents and
warrants to the Company as follows:
(a) Such Purchaser is acquiring the Securities to be purchased by it
or him and, should such Purchaser acquire other securities of the Company
issuable upon conversion, redemption, or exercise of any Securities, it or he
will acquire such other securities, for its or his own account, for investment
and not with a view to the distribution thereof, nor with any present intention
of distributing the same (except any distributions to be made by Trident or
Trident Technology to its members).
(b) Such Purchaser understands that the Securities have not been,
and any other securities of the Company issuable upon conversion, redemption, or
exercise of any Securities, will not be, registered under the Act, by reason of
their issuance in a transaction exempt from the registration requirements of the
Act, and that they must be held indefinitely unless a subsequent disposition
thereof is registered under the Act or is exempt from registration.
(c) Such Purchaser is an "accredited investor," as defined in Rule
501 (the provisions of which are known to such Purchaser) promulgated under the
Act and has been advised by individuals with such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Company, has the ability to bear the economic
risks of its investment for an indefinite period of time, has been furnished
with and has had access to such information as reasonably requested and has had
the opportunity to ask, and has received answers for, questions of the Company.
4.2 Authority.
Such Purchaser has all requisite power and authority to enter into the
Transaction Documents to which it is a party, to perform its or his obligations
thereunder, and to consummate the transactions contemplated thereby. Such
Purchaser has not been organized, reorganized or recapitalized specifically for
the purpose of investing in the Company.
4.3 Enforceability.
Such Purchaser has taken all requisite corporate, partnership or other
action necessary to authorize its or his execution and delivery of the
Transaction Documents to which it or he is a party, its or his performance of
its or his obligations thereunder, and its or his consummation of the
transactions contemplated thereby. Each Transaction Document has been executed
and delivered by an officer or duly authorized representative of each Purchaser
in accordance with such authorization. This Agreement constitutes and, upon
their execution and delivery, the other Transaction Documents to which it is a
party will constitute, valid and binding obligations of such Purchaser,
enforceable in accordance with their terms, subject to applicable bankruptcy,
reorganization, insolvency, and similar laws affecting creditors' rights
generally and to general principles of equity.
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4.4 Brokers and Finders.
No person or entity acting on behalf or under the authority of such
Purchaser is or will be entitled to any broker's, finder's, or similar fee or
commission in connection with the transactions contemplated hereby which would
become an obligation of the Company.
ARTICLE V
CONDITIONS TO PURCHASE
5.1 Conditions to Obligations of Purchasers on the Closing Date.
The obligation of the Purchasers to purchase the Securities hereunder is
subject to the satisfaction of the following conditions:
(a) Notes. Each Purchaser shall have received a duly executed Note
from the Company in accordance with the provisions of Section 2.3.
(b) Preferred Stock. Each Purchaser shall have received a
certificate for its respective shares of Preferred Stock from the Company in
accordance with the provisions of Section 2.3.
(c) Warrant. Each Purchaser shall have received a duly executed
Class A Warrant and/or Class B Warrant, as applicable, from the Company in
accordance with the provisions of Section 2.3.
(d) Stockholders Agreement. The Company shall have duly executed and
delivered the Stockholders Agreement substantially in the form of Exhibit C
attached hereto, and the Purchasers shall have received a duly executed
counterpart thereof.
(e) Registration Rights Agreement. The Company shall have duly
executed and delivered the Registration Rights Agreement substantially in the
form of Exhibit D attached hereto, and the Purchasers shall have received a duly
executed counterpart thereof.
(f) Collateral Agreements. The applicable Loan Party shall have duly
executed and delivered the Collateral Agreements and any other agreements,
documents or instruments required in connection therewith and the Purchasers
shall have received a duly executed counterpart thereof. The Collateral
Agreements shall be in full force and effect and no default or Event of Default
shall have occurred and be continuing thereunder. Each Purchaser shall have
received evidence satisfactory to it or him of the perfection and priority of
all security interests and Liens contemplated by the Collateral Agreements or
arrangements satisfactory to the Purchasers shall have been made for such
perfection.
(g) Charter Amendment. The Company shall have filed and the
Secretary of State of Nevada shall have accepted a Certificate of Designation
setting forth the preferences, privileges, rights and powers of the Preferred
Stock substantially in the form of Exhibit E attached hereto.
(h) Corporate Documents. The Purchasers shall have received:
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(i) a copy of the certificate of incorporation or articles of
organization, as applicable, of each Loan Party, including all amendments
thereto, certified as of a recent date by an appropriate public official
of its jurisdiction of incorporation and a certificate as to the good
standing or existence of such party in such jurisdiction;
(ii) a certificate of a Responsible Officer of the Company and
each other Loan Party dated the Closing Date and certifying (A) a correct
and complete copy of each Organizational Document of such party as in
effect on the Closing Date and at all times since a date prior to the date
of the resolutions described in the following clause (B), (if applicable),
(B) a correct and complete copy of resolutions duly adopted by the board
of directors (or general and/or limited partners) of such party,
authorizing the execution, delivery and performance of the Transaction
Documents, the sale of the Securities hereunder, the granting of Liens
pursuant to the Collateral Agreements and the other transactions
contemplated hereby and thereby, as applicable, (C) that the certificate
of incorporation (or articles of organization) of such party has not been
amended since the date of the last amendment thereto shown on the
certificate of good standing or existence furnished pursuant to clause (i)
above, and (D) as to the incumbency and specimen signature of each officer
of such party who shall execute any Transaction Document or any other
document delivered in connection herewith;
(iii) a certificate of a Responsible Officer of each Loan
Party as to the incumbency and specimen signature of the Responsible
Officer executing the certificate pursuant to clause (ii) above;
(iv) a certificate from the Secretary of State of each state
in the United States of America in which each Loan Party is required to be
qualified to do business as a foreign corporation, certifying as to such
qualification and such party's good standing in such state or province;
and
(v) such other documents as the Purchasers or O'Sullivan Graev
& Karabell, LLP, counsel to the Purchasers, may reasonably request.
(i) Financing Statements, Etc. Each of the Purchasers shall have
received evidence satisfactory to it that each document (including, without
limitation, each Uniform Commercial Code financing statement) required by law or
reasonably requested by the Purchasers to be filed, registered or recorded in
order to create in favor of the Purchasers perfected Liens on the Collateral,
shall be executed and delivered to the Purchasers to be filed, registered or
recorded in each jurisdiction in which the filing, registration or recording
thereof is so required or requested.
(j) Lien Search. The Purchasers shall have been satisfied with the
results of a search of the Uniform Commercial Code filings and other
registrations of Liens made with respect to each Loan Party in such
jurisdictions as the Purchasers shall reasonably require, including the
jurisdictions in which Uniform Commercial Code filings and registrations shall
be made pursuant to clause (i) hereof, which shall not have disclosed any prior
Lien or security interest in the Collateral, other than any Liens being released
contemporaneously with the Closing or Liens permitted hereunder.
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(k) Other Searches. The Purchasers shall have been satisfied with
the results of litigation and judgement searches with respect to each Loan Party
for the jurisdictions of the principal place of business of such Persons.
(l) No Defaults. Each Loan Party shall be in compliance with the
terms and provisions set forth in the Transaction Documents to which it is a
party. Neither the Company nor any Loan Party shall be in material default under
any Contract and no Event of Default or Default under this Agreement shall have
occurred and be continuing or shall occur upon consummation of this Agreement.
(m) Insurance. The Company shall have obtained insurance in
compliance with Section 6.12 and the Purchasers shall have received evidence
satisfactory to them of such issuance.
(n) Requisite Approvals. Each Loan Party shall have obtained all
required governmental, and other consents, licenses, permits and approvals
relating to the transactions contemplated by this Agreement and the other
Transaction Documents, which consents, licenses, permits and approvals shall be
acceptable to Purchasers and their counsel.
(o) Representations and Warranties. The representations and
warranties of each Loan Party contained herein and in any other Transaction
Document and in any certificate or other instrument delivered pursuant to any of
the foregoing shall be correct as though made on and as of the Closing Date.
(p) Officer's Certificate. The Purchasers shall have received
certificates signed by a Responsible Officer of each Loan Party confirming
compliance with the conditions precedent set forth herein on and as of the
Closing Date.
(q) Fees and Expenses. All fees, expenses and other consideration
owing by the Company to the Purchasers under the terms of this Agreement, the
other Transaction Documents or any other document executed in connection
herewith shall have been paid or delivered in full.
(r) Legal Opinions. The Purchasers shall have received a legal
opinion from (i) Paul, Hastings, Janofsky & Walker LLP, counsel to the Company,
covering the matters set forth on Exhibit F attached hereto, and as the
Purchasers shall reasonably request, (ii) a regulatory opinion from Swidler
Berlin Shereff Friedman, LLP, special telecommunications counsel to the Company,
covering such matters as the Purchasers shall reasonably request and (iii)
Thomas Kimble, Nevada counsel to the Company, covering such matters as the
Purchasers shall reasonably request.
(s) Contracts. The Purchasers shall have received true and complete
copies of, and be satisfied with the terms of, each Contract.
(t) Payment of Proceeds. The Purchasers shall have received a
letter, in form and substance satisfactory to them, directing the payment of the
proceeds of the sale of the Securities.
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(u) Agent for Service of Process. The Purchasers shall have received
and been satisfied with a letter appointing FiberNet Equal Access, L.L.C. as the
agent for service of process of each Loan Party.
(v) Legal Matters. All matters relating to this Agreement and the
other Transaction Documents and the transactions contemplated hereby and thereby
shall be satisfactory to the Purchasers and O'Sullivan Graev & Karabell, LLP,
counsel to the Purchasers.
(w) Proxy. Each of SMFS, LPS and LTJ shall have executed and
delivered the an irrevocable voting proxy for any shares of any Loan Party owned
by each SMFS, LPS and LTJ substantially in the form of Exhibit G attached
hereto, and the Purchasers shall have received a duly executed counterpart
thereof.
(x) Resignations. Each of Santo Petrocelli, Sr., Lawrence S. Polan
and Frank Chiaino shall have resigned from any executive positions held by him
in any Loan Party, which resignations shall be effective on the Closing Date.
(y) FiberNet Note. The FiberNet Note shall have been paid in full
simultaneously with the Closing, and no obligations thereunder shall be
outstanding.
(z) Other Agreements. All agreements or contracts providing for the
registration under the Act of any securities of the Company or its Subsidiaries
or stockholder agreement, voting agreement or irrevocable proxies relating to
any securities of the Company or its Subsidiaries shall be terminated as of the
Closing Date.
(aa) Closing Fee. The Company shall pay a fee equal to four percent
(4%) of the Note Purchase Price and the Preferred Stock Purchase Price ("Closing
Fee") to be divided in equal sums to the Managing Purchasers by wire transfer to
the respective bank accounts designated by the Managing Purchasers of
immediately available funds payable out of proceeds of the transactions
contemplated hereby. In lieu of $100,000 of the Closing Fee, the Company shall
issue to Concordia, Trident and Signal or Signal's Affiliates warrants to
purchase 100,000 shares of Common Stock at a $1.50 per share price to be divided
equally among Concordia, Trident and Signal or Signal's Affiliates.
(bb) Redemption of Series B Preferred Stock. All issued and
outstanding shares of Series B Preferred Stock shall be redeemed by the Company.
(cc) Other Matters. The Purchasers shall have received such other
consents, documents and financial information as they may require.
ARTICLE VI
COVENANTS
From the Closing Date until the indefeasible payment of the Notes by the
Company or so long as the Preferred Stock shall be issued and outstanding, the
Company covenants as follows in this Article VI.
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6.1 Payment of Principal, Premium and Interest.
The Company shall duly and punctually pay the principal of (and premium,
if any) and interest on the Notes in accordance with the terms of the Notes and
this Agreement.
6.2 Corporate Existence.
The Company shall and shall cause each of its Subsidiaries to do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect their corporate (or partnership or limited liability company) existence
and any necessary state or other qualifications.
6.3 Obligations and Taxes.
The Company shall and shall cause each of its Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (a) all Taxes imposed upon them or upon their income or profits or in
respect of their business or property unless such Taxes are being paid in
accordance with the terms of an agreement with the applicable Taxing authority
or are being contested in good faith and adequate reserves have been established
on the books of the Company therefor, (b) all lawful claims for labor, materials
and supplies, (c) all required payments under any Indebtedness and (d) all other
obligations; provided, however, that it shall not be required to pay or
discharge or to cause to be paid or discharged any such amount so long as the
validity or amount thereof shall be contested in good faith in an appropriate
manner and appropriate reserves and accruals have been made with respect
thereto.
6.4 Performance Under Agreements.
The Company shall and shall cause each of its Subsidiaries, as applicable,
to perform their obligations under this Agreement, each Transaction Document,
and each other Contract to which they are a party; provided, however, that
neither the Company nor any of its Subsidiaries shall be required to so perform
their obligations under any Contract (other than this Agreement and any other
Transaction Document) to the extent it is reasonably contesting such obligations
in good faith and in an appropriate manner and, if required by GAAP, they have
made appropriate reserves and accruals with respect thereto.
6.5 Access to Properties and Inspections.
The Company shall and shall cause and each of its Subsidiaries to maintain
financial records in accordance with accounting practices and controls
sufficient to allow the Company to prepare the financial statements,
certificates and reports required by Section 6.11 and to provide such
information with respect to the Collateral as the Managing Purchasers may
reasonably request; and, upon written notice, at all reasonable times and as
often as the Managing Purchasers may reasonably request, permit any authorized
representative or agent of the Managing Purchasers to visit and inspect their
properties and records (including all records relating to Collateral), and to
make extracts from such records and permit any authorized representative or
agent of the Managing Purchasers to discuss its affairs, finances and condition
with such officers, key employees and independent chartered accountants acting
as auditors as the Managing Purchasers shall deem appropriate. Delivery of a
copy of this Agreement to
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the respective independent chartered accountants acting as auditors shall
constitute instructions to such accountants to discuss the financial condition
of the Loan Parties with the Managing Purchasers and their representatives, and
to permit the Managing Purchasers and their representatives to inspect, copy and
make extracts from all financial statements, analyses, work papers and other
documents and information (including electronically stored documents and
information) prepared by such accountants with respect to the Loan Parties.
6.6 Defense of Claims.
The Company shall and shall cause each of its Subsidiaries to diligently
defend themselves and their properties from and against any lawsuits or claims.
6.7 Notices of Litigation, Claims, Etc.
The Company shall (or, if applicable, shall cause its Subsidiaries to),
promptly upon obtaining notice of the occurrence thereof (but in no event more
than 10 days after obtaining notice of the occurrence thereof), provide the
Managing Purchasers with written notice of any of the following events:
(a) the issuance by any Governmental Authority of any injunction,
order or decision involving any Loan Party or any of their respective
properties;
(b) the filing or commencement of any action, suit or proceeding
against or affecting any Loan Party or the properties of any of the same,
whether at law or in equity or by or before any court or any United States,
state, municipal, foreign or other Governmental Authority;
(c) the imposition of any Lien which is not a Permitted Lien;
(d) any claim, demand or action impairing title to any of the
properties or assets of any Loan Party;
(e) any other adverse action by or notice from a Governmental
Authority with respect to any Loan Party or any of their respective properties;
(f) any Event of Default under the Notes;
(g) any default by any Loan Party under any Contract evidencing
Indebtedness if such default is likely to have a Material Adverse Effect; and
(h) any development in the business or affairs of any Loan Party
which is likely to have a Material Adverse Effect.
Each notice shall specify, as applicable, (i) the nature and extent thereof,
(ii) any rights of any other parties thereto with respect to termination,
acceleration or similar provisions and (iii) any corrective action taken or
proposed to be taken with respect thereto.
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6.8 Proceeds.
The Company shall use the proceeds of the sale of the Securities as
provided in Schedule 6.8.
6.9 Compliance.
The Company and each of its Subsidiaries shall comply in all material
respects with all Applicable Law and Judgments, including Environmental Laws
and, subject to Section 6.10, maintain all required clearances, consents,
permits and approvals of Governmental Authorities.
6.10 Business and Properties.
The Company and each of its Subsidiaries shall:
(a) at all times do or cause to be done all things necessary to (i)
preserve, renew and keep in full force and effect the material rights, licenses,
permits, franchises and concessions necessary to, or used or useful in the
conduct of, its business; and (ii) keep its assets and properties used or useful
in the conduct of its business in good repair, working order and condition,
ordinary wear and tear excepted, and from time to time make, or cause to be
made, all necessary and proper repairs, renewals and replacements, betterments
and improvements thereto, all as in the reasonable judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; and
(b) as promptly as possible after obtaining knowledge of the
occurrence thereof, furnish written notice to the Purchasers of the institution
of any proceeding for the condemnation or other taking of any property of the
Company or any of its Subsidiaries.
6.11 Financial Statements and Reports.
The Company shall furnish to the Managing Purchasers:
(a) as soon as available but in any event within ninety (90) days
after the end of each Fiscal Year (commencing with the Fiscal Year ending
December 31, 1999 consolidated and consolidating balance sheets, income
statements and cash flow statements of the Company and its Subsidiaries, showing
its financial condition as at the end of such Fiscal Year and the results of its
operations for such Fiscal Year, all the foregoing financial statements (other
than the consolidating schedules) to be audited by independent accountants of
nationally-recognized standing in the United States reasonably acceptable to the
Purchasers and prepared in accordance with GAAP;
(b) as soon as available but in any event within 30 days after the
commencement of each Fiscal Year, current and projected annual budgets,
operating plans and financial projections for the Company and its Subsidiaries
on a consolidated and consolidating basis (presented on a monthly basis) for
such fiscal year;
(c) as soon as available but in any event within 30 days after the
end of each month, commencing with May, 1999, the unaudited consolidated and
consolidating balance
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sheets, income statements and cash flow statements (along with comparisons to
budget), showing the financial condition as at the end of such month, and the
results of operations for such month and for the then elapsed portion of the
Fiscal Year, for the Company and its Subsidiaries in each case prepared in
accordance with GAAP, subject to normal year-end adjustments (none of which
alone or in the aggregate would result in a Material Adverse Effect) and the
absence of notes thereto;
(d) as soon as received, copies of any notice of potential liability
or charge or complaint received by any Loan Party from any Governmental
Authority;
(e) concurrently with the statements provided pursuant to clauses
(a) and (c), certificate of a Financial Officer containing a narrative
discussion by a Financial Officer of the financial condition and results of
operation of the Company for the periods covered by such statements;
(f) promptly upon their becoming available, copies of any
statements, reports and other communications, if any, which the Company shall
have provided to its stockholders;
(g) promptly upon receipt thereof, copies of all financial and
management reports submitted to the Company by its independent auditors in
connection with each annual audit of the books of the Company and its
Subsidiaries; and
(h) promptly, from time to time, such other information (in writing
if so requested) regarding the assets and properties (including the Collateral)
and operations, business affairs and financial condition of any Loan Party as
the Purchasers may reasonably request.
Each certificate of the Financial Officer of the Company (and, in the case of
year-end financial statements and reports, the independent auditors of the
Company) delivered under this Section 6.11 shall certify that the statement or
report to which such certificate relates fairly presents in all material
respects the financial position and results of operations of the Company and its
Subsidiaries at the dates thereof and for the periods then ended and has been
prepared in accordance with GAAP, in the case of unaudited financial statements,
subject to normal year-end audit adjustments (none of which alone or in the
aggregate would result in a Material Adverse Effect) and the absence of notes
thereto. The audit report with respect to the financial statements referred to
in clause (a) shall not contain a "going concern" or like qualification or
exception or any qualification arising out of the scope of the audit.
6.12 Insurance.
The Company and each of its Subsidiaries shall maintain insurance
(including business interruption insurance) on the business and properties of
the Company and its Subsidiaries to such extent and against such risks,
including fire and other risks insured against by extended coverage, and
workers' compensation insurance and public liability insurance against claims
for personal injury or death or property damage occurring upon, in, about or in
connection with, the use of any properties owned, occupied or controlled by the
Company or any Subsidiary of the Company, in each case as is customary with
companies similarly situated and in the same or similar businesses, and shall
provide evidence to the Managing Purchasers of such insurance upon its request.
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6.13 Employee Plans.
The Company and each other Loan Party shall (and shall cause their ERISA
Affiliates) to (a) comply in all material respects with the provisions of all
Applicable Law which is applicable to any Employee Plan (including ERISA and the
Code, if such party is subject to such laws); (b) operate and administer each
Employee Plan in accordance with all Applicable law; (c) not terminate or
withdraw from any Employee Plan if such withdrawal could result in a material
liability to accrue against any Loan Party (or any ERISA Affiliates); (d) not
fail to make full payment when due of all amounts which, under the provisions of
any Employee Plan, any Loan Party (or any ERISA Affiliate) is required to pay as
a contribution or premium payment thereto; (e) furnish to each Lender, as soon
as possible, and in any event with ten (10) days after any Responsible Officer
of a Loan Party knows or has reason to know of any of the following events,
written notice of the same: (i) the withdrawal from or termination of any
Employee Plan by any Loan Party or any ERISA Affiliate), if such termination or
withdrawal could result in any material liability to any Loan Party (or ERISA
Affiliate); (ii) that any Employee Plan is not in compliance with any Applicable
Law; or (iii) that any required employer or employee contributions or premiums
have not been made on a timely basis to any Employee Plan sponsored by or
contributed to by any Loan Party (or ERISA Affiliate).
6.14 Local Fiber Approval.
The Company and Local Fiber shall take any and all necessary steps to (i)
obtain the approval of the New York State Public Utilities Commission required
under Section 101 of the New York Public Service Laws ("Approval") regarding
Local Fiber and (ii) to keep the Guaranty in full force and effect in accordance
with the terms and provisions thereof immediately following the Closing.
6.15 Further Assurances.
The Company and each of its Subsidiaries shall duly execute and deliver,
or cause to be duly executed and delivered, at its own cost and expense, such
further instruments and documents and take or cause to be taken all such action,
in each case as may be necessary or proper in the reasonable judgment of the
Managing Purchasers, to carry out the provisions and purposes of this Agreement
and the other Transaction Documents and to better assure and confirm unto the
Managing Purchasers, its rights and remedies under this Agreement and the other
Transaction Documents.
6.16 Transfer of Securities.
(a) The Securities shall only be transferable in accordance with the
Stockholders Agreement.
(b) Each certificate representing Securities shall (unless otherwise
permitted by the provisions of paragraph (c) and (d) below) be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
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UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM. IN ADDITION, THE TRANSFER OF THESE SECURITIES IS SUBJECT
TO THE CONDITIONS SPECIFIED IN THE STOCKHOLDERS AGREEMENT DATED AS
OF MAY 7, 1999 BY AND AMONG FIBERNET TELECOM GROUP, INC. AND THE
STOCKHOLDERS LISTED THEREIN. NO TRANSFER OF THESE SECURITIES SHALL
BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED."
6.17 Additional Covenants.
(a) The Company and the Stockholders shall take any and all
necessary actions to make all filings required by the regulations contained in
Rule 14f-1 of the Exchange Act (the "Exchange Act Filings") immediately after
the Closing.
(b) The Company and the Stockholders shall take any and all
necessary actions to increase the size of the Board to seven (7) directors, of
which Timothy Bradley, Trey Farmer, Joseph Tortoretti and [to be named] shall be
replacements effective on the Filing Expiration Date (such event, the "Board
Change").
6.18 Post-Closing Covenants.
Subject to approval by the Board of Directors of the Company, within 90
days after Closing, (i) the Company shall move its jurisdiction of incorporation
from Nevada to Delaware and (ii) FiberNet Telecom shall be merged with and in to
the Company.
6.19 Negative Covenants.
For so long as the Notes remain outstanding or the Preferred Stock is
issued and outstanding, except as expressly contemplated by this Agreement or
any other Transaction Document, the Company shall not and shall cause each of
its Subsidiaries without the affirmative written consent of the Majority in
Interest to:
(a) sell, lease, transfer or assign any of its assets, tangible or
intangible, other than as relating to the conduct of the business of the Company
or its Subsidiaries in the ordinary course, consistent with past custom and
practice;
(b) sell or transfer all or substantially all equity interests of
the Company and/or any Subsidiary;
(c) enter into any Contract (or series of related Contracts) that
requires expenditures; and/or the incurrence of obligations not provided for in
the Operating Budget (as defined herein);
(d) permit its capital expenditures and commitments therefor to
exceed or be less than the amounts budgeted in the current capital expenditure
budget (the "Operating Budget"), a
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true, correct and complete copy of which has been delivered to the Investor on
or prior to the date hereof;
(e) delay or postpone the payment of accounts payable and other
obligations and Liabilities or accelerate the collection of accounts receivable,
other than in the ordinary course of business consistent with past custom and
practice;
(f) enter into any employment Contract or collective bargaining
agreement, written or oral, or modify the terms of any such existing Contract or
agreement outside the ordinary course of business;
(g) grant any increase in the base compensation of any of its
executive officers or employees above the amounts provided for in the budget
prepared by the Company in excess of 5%;
(h) adopt, amend, modify or terminate any Employee Plan, bonus,
incentive, severance or other plan, Contract or commitment for the benefit of
any of its officers or employees;
(i) enter into any transaction with any of its officers, employees
or Affiliates (or any directors, officers or employees of such Affiliate), other
than ordinary course employment arrangements entered into in accordance with
past custom or practice;
(j) in any manner take or cause to be taken any action which is
designed, intended or might reasonably be anticipated to have the effect of
discouraging customers, employees, suppliers, lessors, and other associates of
the Company or any of its Subsidiaries from maintaining the same business
relationships with the Company or any of its Subsidiaries after the date of this
Agreement as were maintained prior to the date of this Agreement;
(k) issue or sell any equity interests or issue or sell any
securities convertible into, exercisable or exchangeable for or options or
warrants to purchase or rights to subscribe for, any equity interests;
(l) declare or pay a distribution on any equity interests, change
the number of authorized shares of its equity interests or reclassify, combine,
split, subdivide or redeem or otherwise repurchase any of its equity interests,
or issue, deliver, pledge or encumber any additional equity interests or other
securities equivalent to, or exchangeable for, equity interests or enter into
any Contract to do any of the foregoing;
(m) incur any Indebtedness above $250,000 or issue any securities
evidencing any Indebtedness;
(n) create or suffer to exist any Encumbrance above $250,000 on any
of its assets or properties other than Permitted Encumbrances;
(o) change its accounting principles or policies;
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(p) engage in any business or activity other than those conducted or
proposed to be conducted by the Company and the Subsidiaries as of the date
hereof;
(q) amend any of its Charter Documents in such a way that would have
a Material Adverse Effect on the rights of Trident in relation to Signal
hereunder without the prior written consent of Trident;
(r) take or omit to take any action which would result in the
representations and warranties contained in this Agreement and the other
Transaction Documents being untrue on the Closing Date;
(s) change the primary business or activity of FiberNet Telecom as a
holding company of limited liability company interests of Equal Access and Local
Fiber;
(t) create any subsidiary or Joint Venture; and/or
(u) agree or otherwise commit to take any of the actions set forth
above.
6.20 Other Negative Covenants.
(a) Prior to the Board Change, the Board of Directors of the Company
shall not without the consent of at least one of the Investor Directors
authorize any executive actions, agreements, contracts, arrangements,
obligations or similar arrangements, or take any action that is deemed or could
be deemed by the Majority in Interest to adversely affect the rights, privileges
and/or interests of the Purchasers under this Agreement, the Transaction
Documents and/or any other certificates, agreements or documents related
thereto.
ARTICLE VII
EVENTS OF DEFAULT
(a) The following events shall constitute an "Event of Default"
under the Notes issued pursuant to this Agreement:
(i) default shall be made in any payment of principal of this
or any Note issued pursuant to this Agreement when the same shall become
due and payable;
(ii) default shall be made in any payment of interest on the
Notes when the same shall become due and payable, and such interest shall
remain unpaid for 3 days after such due date;
(iii) default shall be made in any payment in principal or
interest on any other Indebtedness of the Company and its Subsidiaries
that had not been cured in accordance with the terms of such Indebtedness
and/or any Indebtedness of any Loan Party in excess of $200,000 shall be
declared due and payable prior to its stated maturity by reason of an
event of default with respect thereto;
(iv) any redemption of the Preferred Stock by the Company and
its Subsidiaries;
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(v) any representation, covenant or warranty made by any Loan
Party under or in connection with any Transaction Document, or any
certificate or other instrument furnished in connection with any
Transaction Document or the transactions contemplated thereby, shall prove
to have been false or misleading when made in any material respect, and
such default (if curable) shall remain uncured and unwaived for a period
of 5 days;
(vi) default shall be made in the due observance or
performance of any covenant or agreement (other than as contemplated by
clause (i) or (ii) above) to be observed or performed by any Loan Party
under the Notes or any Transaction Document, and such default (if curable)
shall remain uncured and unwaived for a period of 10 days;
(vii) default shall be made in any payment to be made upon the
exercise of the Purchaser's right under Section 3 of the Certificate of
Designation of the Preferred Stock of the Company with respect to the
Purchaser's shares of Common Stock in the Company, regardless of whether
or not the Company has sufficient funds legally available for purchase of
such shares or is contractually permitted to make such payment;
(viii) the Company or any Loan Party shall (A) voluntarily
commence any proceeding or file any petition seeking relief under Title 11
of the United States Code or any other Federal or state bankruptcy,
insolvency or similar law, (B) consent to the institution of any such
proceeding or the filing of any such petition, (C) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator or similar
official for the Company or such Loan Party or for all or a substantial
part of its properties, (D) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (E)
make a general assignment for the benefit of creditors, or (F) admit in
writing its inability to pay its debts as they become due;
(ix) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction
seeking (A) relief in respect of the Company or any Loan Party, or of all
or a substantial part of the properties thereof, under Title 11 of the
United States Code or any other Federal or state bankruptcy, insolvency or
similar law, (B) the appointment of a receiver, trustee, custodian,
sequestrator or similar official for the Company or any Loan Party or for
a substantial part of the properties thereof, or (C) the winding up or
liquidation of the Company or any Loan Party; and an order or decree
approving or ordering any of the foregoing shall be issued by a court
having jurisdiction and continue unstayed and in effect for 60 days;
(x) final judgment for the payment of money in excess of
$200,000 shall be rendered against the Company or any Loan Party and the
same shall remain undischarged or unbonded for a period of 60 consecutive
days during which execution shall not be effectively stayed; or
(xi) any officer of the Company or any Loan Party shall have
been convicted of any felony or of any other crime relevant to his office
or employment.
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(b) In case of any Event of Default and at any time thereafter
during the continuance of such Event of Default, the Majority in Interest may,
by written notice to the Company, declare its Note or Notes to be due and
payable in full both as to principal and interest; provided, however, that no
notice need be given to the Company if acceleration is based upon the Events of
Default described in clause (viii) or (ix) of paragraph (a) above, in either of
which cases the Notes shall automatically become due and payable without any
action on the part of any Holder. Upon a declaration by the Majority in Interest
that its Note or Notes is or are due and payable as provided in this clause (b)
and written notice by the Majority in Interest to the remaining Holders of the
same, the Notes held by the remaining Holders shall be deemed to be due and
payable in full both as to principal and interest.
(c) In case an Event of Default shall have occurred and be
continuing, the Majority in Interest may proceed to protect and enforce their
rights either by suit in equity or by action at law, whether for the specific
performance of any covenant or agreement contained in this Agreement or the
Notes or in aid of the exercise of any power granted in this Agreement or the
Notes, or proceed to enforce the payment of this Note or to enforce any other
legal or equitable right of the Holders. No remedy conferred hereunder is
intended to be exclusive of any other remedy and each such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or
currently or hereafter existing at law or in equity or by statute or otherwise.
ARTICLE VIII
MISCELLANEOUS
8.1 Communication.
Subject to the express provisions of this Agreement, all communications
provided for or permitted hereunder shall be in writing, personally delivered to
an officer or other responsible employee of the addressee or sent by registered
mail, charges prepaid, or by telecopy with confirmed receipt (with hard copy to
follow), telegram or other means of recorded telecommunication, charges prepaid,
to the applicable address set forth below or to such other address as either
party hereto may from time to time designate to the other in such manner,
provided that no communication shall be sent by mail pending any threatened or
during any actual postal strike or other disruption of postal service in the
United States. Any communication so personally delivered shall be deemed to have
been validly and effectively given on the date of such delivery. Any
communication so sent by registered mail shall be deemed to have been validly
and effectively given on the tenth Business Day next following the day on which
it is sent. Any communication so sent by telecopy, telegram or other means of
recorded telecommunication shall be deemed to have been validly and effectively
given on the Business Day next following the day on which it is sent.
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Communications sent to any Loan Party shall be addressed to:
FiberNet Telecom Group, Inc.
570 Lexington Avenue
New York, New York 10022
Attention: President
Telephone: (212) 421-4900
Telecopier: (212) 421-8860
Communications sent to the Purchasers shall be addressed to each
Purchaser's address listed on Annex I:
With a copy to:
O'SULLIVAN GRAEV & KARABELL, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Gordon R. Caplan, Esq.
Telephone: (212) 408-2400
Telecopier: (212) 408-2420
8.2 Survival of Representations, Warranties and Covenants.
All agreements, representations, warranties and covenants made by or on
behalf of the Company in the Transaction Documents, including due diligence
costs, and otherwise with respect thereto or any transactions contemplated
thereby are material, shall be considered to have been relied upon by the
Purchasers and shall survive the execution and delivery of the Transaction
Documents or any investigation made at any time by or on behalf of the
Purchasers and any disposition or payment of the Notes until repayment in full
of all Indebtedness of the Company to the Purchasers (including the Note and the
other amounts due under this Agreement) or so long as any shares of Preferred
Stock shall be issued and outstanding. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to the Transaction Documents or in connection with the transactions
contemplated hereby shall be deemed representations and warranties made by the
Company pursuant hereto. The obligations of the Company pursuant to Sections 8.5
and 8.6 shall survive the payment in full and the cancellation of the Notes and
the termination of this Agreement for the period of three years from the
termination of this Agreement.
8.3 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding on the parties
hereto, their respective successors and any assignees or transferees of some or
all of the parties' rights or obligations hereunder; provided that, except as
provided in the following sentence, neither this Agreement, nor the benefit
hereof, may be assigned by the Company without the prior written consent of the
Purchasers.
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8.4 Expenses of the Purchasers.
The Company agrees to pay all out-of-pocket expenses reasonably incurred
by the Purchasers associated with the preparation, execution and delivery of
this Agreement and the other Transaction Documents, including due diligence
costs, and reasonably incurred by the Purchasers in connection with the purchase
of the Notes, Warrants and Preferred Stock hereunder and the transactions
comprising the financing and issuance of the FiberNet Note by FiberNet Telecom
to Trident Technology (such transactions collectively, the "Bridge Financing"),
all filings with any Governmental Authority, compliance with any Applicable Law,
or otherwise in connection with this Agreement, any other Transaction Document
or the Notes, Warrants or Preferred Stock issued hereunder, including, but not
limited to, the fees and disbursements of O'Sullivan Graev & Karabell, LLP,
counsel for the Purchasers and Ehrenreich Eilenberg Krause & Zivian LLP, counsel
to Trident Technology in connection with the Bridge Financing. All amounts due
under this Section 8.4 shall be payable on demand of the Purchasers therefor by
wire transfer of immediately available funds to any designated bank account. All
statements, reports, certificates, opinions, appraisals and other documents or
information required to be furnished to the Purchasers by the Company under this
Agreement shall be supplied by the Company without cost to the Purchasers.
8.5 Indemnification.
(a) In addition to all rights and remedies available to the
Purchasers at law or in equity, the Company shall indemnify the Purchasers, each
subsequent holder of the Note and the Preferred Stock and their respective
affiliates, stockholders, officers, directors, employees, agents,
representatives, counsel, successors and permitted assigns (collectively, the
"Indemnified Persons") and save and hold each of them harmless against and pay
on behalf of or reimburse such party as and when incurred for any loss
(including, without limitation, diminutions in value and consequential damages),
liability, demand, claim, action, cause of action, cost, damage, deficiency, tax
(including any taxes imposed with respect to such indemnity payments), penalty,
fine or expense, whether or not arising out of any claims by or on behalf of any
other Loan Party or any third party, including interest, penalties, reasonable
attorneys' fees and expenses and all amounts paid in investigation, defense or
settlement of any of the foregoing (collectively, "Losses") which any such party
may suffer, sustain or become subject to, as a result of, in connection with,
relating or incidental to or by virtue of:
(i) any misrepresentation or breach of warranty on the part of
the Company under Article III of this Agreement or under any Transaction
Document;
(ii) without duplication of subsection (a)(i) above, any
misrepresentation in or omission from any of the representations,
warranties, statements, schedules and exhibits hereto, certificates or
other instruments or documents furnished to the Purchasers by the Company
and/or any other Loan Party made in or pursuant to this Agreement or under
any other Transaction Document;
(iii) any nonfulfillment or breach of any covenant or
agreement on the part of the Company or any other Loan Party under this
Agreement or under any other Transaction Document;
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(iv) any action, demand, proceeding, investigation or claim by
any third party (including, without limitation, Governmental Authorities)
against or affecting any Indemnified Person which, if successful, would
give rise to or evidence the existence of or relate to a breach of any of
the representations, warranties or covenants of the any other Loan Party;
(v) any claim (whenever made) relating in any way to a Loan
Party and any claim (whenever made) arising out of, relating to, resulting
from or caused by any transaction, status, event, condition, occurrence or
situation relating to, arising out of or in connection with (A) the status
or conduct of any Loan Party, (B) the execution, performance and delivery
of the Transaction Documents and the documents and agreements contemplated
thereby or (C) any actions taken by or omitted to be taken by any of the
Indemnified Persons in connection with this Agreement or any other
Transaction Document or the documents and agreements contemplated hereby
and thereby.
(b) Notwithstanding the foregoing, and subject to the following
sentence, upon judicial determination, which is final and no longer appealable,
that the act or omission giving rise to the indemnification hereinabove provided
resulted out of or was based upon the Indemnified Person's gross negligence,
fraud or willful misconduct was by the Indemnified Person, the Company shall not
be responsible for any Losses sought to be indemnified in connection therewith
by such Indemnified Person, and the Company shall be entitled to recover from
the Indemnified Person all amounts previously paid in full or partial
satisfaction of such indemnity with interest thereon at the rate of 15.0% per
annum calculated on the basis of a year of 365 days, together with all costs and
expenses of the Company reasonably incurred in effecting such recovery, if any.
(c) All indemnification rights hereunder shall survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, regardless of any investigation, inquiry or examination
made for or on behalf of, or any knowledge of the Purchasers and/or any of the
Indemnified Persons or the acceptance by the Purchasers of any certificate or
opinion. In addition, for purposes of determining whether there has been a
breach, and the amount of any Losses that are the subject matter of a claim for
indemnification hereunder, each representation and warranty contained in this
Agreement shall be read without regard and without giving effect to any
materiality or knowledge standard or qualification contained in such
representation or warranty.
(d) If for any reason the indemnity provided for in this Section 8.5
is unavailable to any Indemnified Person or is insufficient to hold each such
Indemnified Person harmless from all such Losses arising with respect to the
transactions contemplated by this Agreement, then the Company shall contribute
to the amount paid or payable in respect of such Loss in such proportion as is
appropriate to reflect not only the relative benefits received by any Loan Party
on the one hand and such Indemnified Person on the other but also the relative
fault of any Loan Party and the Indemnified Person as well as any relevant
equitable considerations. In addition, Company agrees to reimburse any
Indemnified Person upon demand for all reasonable expenses (including legal
counsel fees) incurred by such Indemnified Person or any such other Person in
connection with investigating, preparing or defending any such action or claim.
The indemnity,
39
<PAGE> 40
contribution and expenses reimbursement obligations that the Company has under
this Section 8.5 shall be in addition to any liability that the Company may
otherwise have. The Company further agrees that the indemnification and
reimbursement commitments set forth in this Agreement shall apply whether or not
the Indemnified Person is a formal party to any such lawsuits, claims or other
proceedings.
8.6 Environmental Liability.
In addition to any indemnification of the Purchasers provided for in this
Section 8.5, the Company shall indemnify and hold harmless the Indemnified
Persons against and from any and all Losses of any nature whatsoever suffered or
incurred by any Indemnified Person whether upon realization of any security for
the Obligations, or as a lender to the Company, or as successor to or assignee
of any right or interest of the Company, or as a result of any order,
investigation or action by any Governmental Authority relating to the Company or
its business or assets, or as mortgagee in possession, or as
successor-in-interest to the Company by foreclosure deed or deed in lieu of
foreclosure, under or on account of any Environmental Law, including the
assertion of any lien thereunder, with respect to:
(a) the Release or threat of Release of a Contaminant, or the
presence of any Contaminant at, on or near any property owned, leased or
controlled by any Loan Party;
(b) the Release of a Contaminant owned by, or under the charge,
management or control of any Loan Party or any predecessor or assignor of any
Loan Party, at a place other than property owned, leased or controlled by any
Loan Party;
(c) any costs of removal or remedial action incurred by any
Governmental Authority or any costs incurred by any other Person or damages from
injury to, destruction, or loss of natural resources in relation to any property
owned, leased or controlled by any Loan Party or any contiguous real property or
elsewhere, including reasonable costs of assessing such injury, destruction or
loss incurred pursuant to any Environmental Laws;
(d) liability for personal injury or property damage arising under
any statutory or common law tort theory, including, without limitation, damages
assessed for the maintenance of a public or private nuisance or for the carrying
on of a dangerous activity at, on or near any property owned, leased or
controlled by any Loan Party or elsewhere; and/or
(e) any other environmental matter within the jurisdiction of any
Governmental Authority.
(f) The Company's obligation under this Section 8.6(f) shall arise
upon the discovery of the presence of any Contaminant, whether or not any
Governmental Authority has taken or threatened any action in connection with the
presence of any Contaminant.
(g) Any indemnification of the Purchasers or any other Indemnified
Person by the Company pursuant to this Section 8.6 shall be effected by wire
transfer of immediately available funds from the Company to an account
designated by the Purchasers or any other Indemnified Person within fifteen (15)
days after the determination thereof.
40
<PAGE> 41
8.7 GOVERNING LAW.
(a) ALL QUESTIONS CONCERNING THE CONSTRUCTION, INTERPRETATION AND
VALIDITY OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE
OR CONFLICT OF LAW PROVISION OR RULE (WHETHER IN THE STATE OF NEW YORK OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) THE PARTIES TO THIS AGREEMENT AGREE THAT JURISDICTION AND VENUE
IN ANY ACTION BROUGHT BY ANY PARTY HERETO PURSUANT TO THIS AGREEMENT SHALL
PROPERLY (BUT NOT EXCLUSIVELY) LIE IN ANY FEDERAL OR STATE COURT LOCATED IN THE
STATE OF NEW YORK. BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PARTIES
HERETO IRREVOCABLY SUBMIT TO THE JURISDICTION OF SUCH COURTS FOR THEMSELVES AND
IN RESPECT OF THEIR PROPERTY WITH RESPECT TO SUCH ACTION. THE PARTIES HERETO
IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY
OBJECTION THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE
RESOLUTION OF SUCH ACTION.
(c) THE COMPANY HEREBY DESIGNATES AND APPOINTS FIBERNET EQUAL
ACCESS, L.L.C. AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE
COMPANY WITH THE WRITTEN CONSENT OF THE PURCHASERS WHICH IRREVOCABLY AGREE IN
WRITING TO SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS
IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL
TO THE COMPANY AT ITS ADDRESS PROVIDED IN SECTION 8.1 EXCEPT THAT UNLESS
OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT
AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE COMPANY
REFUSES TO ACCEPT SERVICE, THE COMPANY HEREBY AGREES THAT SERVICE UPON IT BY
MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
OF THE PURCHASERS TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY
OTHER JURISDICTION.
(d) DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON. THEREFORE, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR
41
<PAGE> 42
REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
8.8 Rights and Waivers.
(a) The rights and remedies of the Purchasers under the Transaction
Documents and in connection therewith: (i) are cumulative, (ii) may be exercised
as often and in such order as the Purchasers consider appropriate, (iii) are in
addition to the rights and remedies of the Purchasers under the general law, and
(iv) shall not be capable of being waived or varied except by virtue of an
express waiver or variation in writing signed by an officer of the Purchasers;
and in particular any failure to exercise or any delay in exercising any of such
rights and remedies shall, to the extent permitted by law, not operate as a
waiver or variation of that or any other such right or remedy; any defective or
partial exercise of any of such rights shall, to the extent permitted by law,
not preclude any other or future exercise of that or any other such right or
remedy; and no act or course of conduct or negotiation on the part of the
Purchasers or on its behalf shall, to the extent permitted by law, in any way
preclude the Purchasers from exercising any such right or remedy or constitute a
suspension or variation of any such right or remedy.
(b) No Transaction Document nor any provision thereof, may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the parties thereto.
8.9 Amendments
No amendments to, or modification of, this Agreement shall be made without
the written consent of the Company and the Majority in Interest.
8.10 No Fiduciary Relationship.
No provision in this Agreement or in any of the other Transaction
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by the Purchasers to any other Loan Party.
8.11 No duty.
All attorneys, accountants, appraisers, and other professional Persons and
consultants retained by the Purchasers shall have the right to act exclusively
in the interest of the Purchasers and shall have no duty of disclosure, duty of
loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to the Company or any of the Company's shareholders or any other
Person.
8.12 Construction.
The Company and the Purchasers acknowledge that each of them has had the
benefit of legal counsel of its own choice and has been afforded an opportunity
to review this Agreement and the other Transaction Documents with its legal
counsel and that this Agreement and the other Transaction Documents shall be
construed as if jointly drafted by the Purchasers and the Company.
42
<PAGE> 43
8.13 Severability.
Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, and such invalid, void or otherwise unenforceable
provisions shall be null and void. It is the intent of the parties, however,
that any invalid, void or otherwise unenforceable provisions be automatically
replaced by other provisions which are as similar as possible in terms to such
invalid, void or otherwise unenforceable provisions but are valid and
enforceable to the fullest extent permitted by law.
8.14 Counterparts.
This Agreement may be executed in two or more counterparts, each of which
when executed and delivered shall deemed to be an original, but all of which
when taken together shall constitute but one and the same instrument; either
party may execute this Agreement by signing any counterpart of it.
8.15 Headings.
Article and Section headings and the Table of Contents used herein are for
convenience of reference only and are not to affect the construction of, or to
be taken into consideration in interpreting, this Agreement.
8.16 Entire Agreement.
This Agreement, together with the other Transaction Documents, constitutes
the entire agreement between the parties relating to the subject matter hereof
and, except as stated herein or in the instruments and documents to be executed
and delivered pursuant hereto, contains all the representations and warranties
of the respective parties relating to the subject matter hereof.
8.17 Time of Essence.
Time shall be of the essence of this Agreement and the other Transaction
Documents, provided that the time for doing or completing any matter provided
for herein may be extended or abridged by an agreement in writing signed by the
parties or by their respective counsel who are hereby expressly appointed in
this regard.
43
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their authorized officers, all as of
the day and year first above written.
FIBERNET TELECOM GROUP, INC.
By:
-----------------------------------------
Name:
Title:
SIGNAL CAPITAL PARTNERS, L.P.
By: Signal Capital Advisors, L.P.
Its: General Partner
By: Signal Capital Advisors, Inc.
Its: General Partner
By:
-----------------------------------------
Name:
Title:
TRIDENT TELECOM PARTNERS LLC
By: Trident Telecom Management LLC
Its: Managing Member
By: Needham Management, Inc.
Its: Managing Member
By:
-----------------------------------------
Name:
Title:
<PAGE> 45
CONCORDIA TELECOM MANAGMENT, L.L.C.
By:
-----------------------------------------
Name: Michael S. Liss
Title: Sole Member
BURDEN DIRECT INVESTMENT FUND III
By: William A.M. Burden & Co., L.P.
Its: Managing General Partner
By: Burden Brothers, Inc.,
Its: Sole General Partner
By:
-----------------------------------------
Name: Jeffrey A. Weber
Title: President and CEO
PEQUOT SCOUT FUND, LP
By:
-----------------------------------------
Name:
Title:
PENNY LANE PARTNERS, L.P.
By: Penny Lane Associates, L.P.
Its: General Partner
By: Penny Lane, Inc.
Its: General Partner
By:
-----------------------------------------
Name: William R. Denslow, Jr.
Title: Chairman, Penny Lane, Inc.
<PAGE> 46
LANCER OFFSHORE, INC.
By:
-----------------------------------------
Name:
Title:
ALEXANDER ENTERPRISE HOLDINGS CORP.
By:
-----------------------------------------
Name:
Title:
KING STREET CAPITAL LTD.
By:
-----------------------------------------
Name:
Title:
KING STREET CAPITAL LP
By:
-----------------------------------------
Name:
Title:
TAURUS TELECOMMUNICATION, INC.
By:
-----------------------------------------
Name:
Title:
<PAGE> 47
Annex I
PURCHASERS
<TABLE>
<CAPTION>
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
Principal Number of Shares Number Aggregate
Managing Purchasers Amount of Series C of Purchase
Name and Address of Note Preferred Stock Warrants Price
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Signal Capital Partners, L.P
10 E. 53rd Street
32nd Floor
New York, NY 10022
Attn: Timothy Bradley
Telephone: (212) 872-1180
Telecopier: (212) 872-1192 $4,534,750.00 43,499.00 2,024,000 $4,600,000.00
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
Trident Telecom Partners LLC
350 Park Avenue
14th Floor
New York, NY 10022
Attn: Gerald Goldberg
Telephone: (212) 753-4718
Telecopier: (212) 753-5977 $4,189,715.00 40,189.00 2,068.00 $4,250,000.00
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
Concordia Telecom Management, L.L.C.
c/o FiberNet Telecom Group, Inc.
570 Lexington Avenue, 3rd Floor
New York, NY 10022
Attn: Michael S. Liss
Telephone: (212) 421-4900
Telecopier: (212) 421-8860 $492,908.00 4,728.00 220,000 $500,000.00
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
<CAPTION>
Other Purchasers
Name and Address
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Burden Direct Investment Fund III
10 E. 53rd Street
32nd Floor
New York, NY 10022
Attn: Jeffrey Weber
Telephone: (212) 872-1133
Telecopier: (212) 872-1199 $985,816.00 9,456.00 440,000 $1,000,000.00
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
Alexander Enterprise Holdings Corp.
c/o Alpha Investment Management, Inc.
499 Park Avenue, 24th Floor
New York, NY 10022
Attn: Richard O'Connell
Telephone: (212) 702-0606
Telecopier: (212) 421-0169 $887,234.00 8,511.00 396,000 $900,000.00
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
</TABLE>
<PAGE> 48
<TABLE>
<CAPTION>
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
<S> <C> <C> <C> <C>
King Street Capital Ltd.
575 Lexington Avenue
New York, NY 10022
Attn: Ara Cohen
Telephone: (212) 350-4434
Telecopier: (212) 350-4702 $236,596.00 2,269.00 84,480.00 $240,000.00
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
King Street Capital LP
575 Lexington Avenue
New York, NY 10022
Attn: Ara Cohen
Telephone: (212) 350-4434
Telecopier: (212) 350-4702 $256,312.00 2,459.00 91,520 $260,000.00
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
Pequot Scout Fund, LP
500 Nyala Farm Road
Westport, CT 06880
Attn: Mark Broach
Telephone: (203) 429-2203
Telecopier: (203) 429-2410 $985,816.00 9,456.00 352,000 $1,000,000.00
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
Penny Lane Partners, L.P.
767 Fifth Avenue
New York, NY 10153
Attn: William R. Denslow Jr.
Telephone: (212) 980-4292
Telecopier: (212) 319-6046 $739,362.00 7,092.00 264,000 $750,000.00
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
Taurus Telecommunication, Inc.
3625 Ridge Run
Canandaigua, , N.Y. 14424
Attn: Richard Sayers
Telephone: (716) 396-0130
Telecopier: (716) 396-9237 $98,582.00 946.00 44,000 $100,000.00
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
Lancer Offshore, Inc.
375 Park Avenue
New York, NY 10152
Attn: Michael Lauer
Telephone: (212) 521-8400
Telecopier: (212-521-8401 $492,908.00 4,728.00 220,000 $500,000.00
- ------------------------------------------- ------------------- ------------------- --------------- ---------------------
</TABLE>
<PAGE> 49
Annex II
<TABLE>
<CAPTION>
MANAGING PURCHASERS Number of Class B Warrants
- ------------------- --------------------------
<S> <C>
Concordia Telecom Management, L.L.C. 891,667
Trident Telecom Management LLC 416,666
Signal Capital Partners, L.P. 291,667
</TABLE>
<PAGE> 50
Annex III
[To be provided by Company.]
<PAGE> 1
EXHIBIT B
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAW OF ANY STATE. THIS
NOTE MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. IN ADDITION, THE TRANSFER
OF THIS NOTE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE SECURITIES
PURCHASE AGREEMENT DATED AS OF MAY 7, 1999 BY AND AMONG FIBERNET TELECOM
GROUP, INC. AND THE PURCHASERS NAMED THEREIN. NO TRANSFER OF THIS NOTE
SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT" WITHIN THE MEANING
OF SECTION 1272, ET SEQ. OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED. UPON WRITTEN REQUEST, THE COMPANY WILL PROVIDE TO ANY HOLDER
OF THE NOTE (1) THE ISSUE PRICE AND DATE OF THE NOTE, (2) THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT ON THE NOTE AND (3) THE ORIGINAL YIELD TO
MATURITY OF THE NOTE. SUCH REQUEST SHOULD BE SENT TO THE COMPANY AT
570 LEXINGTON AVENUE, NEW YORK, NEW YORK 10022, ATTN: CHIEF FINANCIAL
OFFICER.
------------------------
FIBERNET TELECOM GROUP, INC.
SENIOR SECURED CONVERTIBLE NOTE
$_____________ May 7, 1999
FIBERNET TELECOM GROUP, INC., a Nevada corporation (the "Company"),
for value received, hereby promises to pay to [PURCHASER] (the "Purchaser"), or
its registered assigns, the principal amount of [____________] DOLLARS
($___________). The Purchaser and any registered assigns thereof are referred to
as the "Holder." This Note is originally being issued pursuant to the Securities
Purchase Agreement dated the date hereof (the "Securities Purchase Agreement"),
by and among the Company and the purchasers named therein. The holders of the
Notes issued under the Securities Purchase Agreement are collectively referred
to as the "Holders." Capitalized terms used and not defined herein shall have
the meanings ascribed to them in the Securities Purchase Agreement. The
following terms shall apply to this Note:
Section 1. Principal Payments.
(a) The principal amount of this Note shall be payable in full upon
the earliest date (the "Maturity Date") of (i) a Qualified Public Offering, (ii)
the sale of the stock or limited liability company membership interests, as
applicable, of the Company or its Subsidiaries, (iii)
<PAGE> 2
any public or private financing of debt or equity securities of the Company with
net proceeds in excess of $50,000,000 to the Company or (iv) May 7, 2004.
(b) Payments of the principal amount of this Note shall be amortized
as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Year Principal
-----------------------------------------------------------------
<S> <C>
May 7, 2000 10%
-----------------------------------------------------------------
May 7, 2001 10%
-----------------------------------------------------------------
May 7, 2002 20%
-----------------------------------------------------------------
May 7, 2003 30%
-----------------------------------------------------------------
May 7, 2004 30%
-----------------------------------------------------------------
</TABLE>
Section 2. Interest.
(a) The Company shall pay interest on the unpaid principal of this
Note at the rate of 8% per annum (calculated on the basis of a year of 360 days
comprised of 12 30-day months), payable, 4% in cash and 4% in cash or in kind,
which amount, if paid in kind at the Holder's option, will be convertible into
that number of shares of Common Stock determined by dividing such amount by the
Fair Market Value of such shares at the time of conversion, (i) on each June 30
and December 31, commencing on December 31, 1999, (ii) on the Maturity Date of
this Note, and (iii) after such Maturity Date, on demand. At the Company's
option, any payment of capitalized interest shall be subject to Section 3 of
this Note.
(b) The Company shall also pay interest (to the extent permitted by
law) on any overdue principal of or interest on this Note at the rate of 14% per
annum (calculated as set forth above), from the due date of such principal or
interest until payment in full thereof.
Section 3. Optional Prepayment. This Note may be prepaid in whole or in
part at any time or from time to time at the option of the Company upon 20 days
written notice to the Holder without penalty.
Section 4. Conversion.
(a) Conversion. The Holder shall have the right up to the time of
repayment of this Note to convert the unpaid principal and interest of this Note
into fully-paid and nonassessable shares of Common Stock of the Company at a
price of $1.50 per share (the "Conversion Price"), subject to adjustment for
dilution.
(b) Mechanics of Conversion. Before any Holder of this Note shall be
entitled to receive the Common Stock into which this Note has been converted,
such Holder shall surrender this Note duly endorsed, at the Company's principal
corporate office stating therein the name or names in which the certificate or
certificates for the Common Stock are to be issued. The Company shall, promptly
thereafter, issue and deliver to such Holder at the address specified by such
Holder, or to the nominee or nominees of such Holder, a certificate or
certificates for the
2
<PAGE> 3
Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such conversion as provided in paragraph (a) above and
the person or persons entitled to receive the Common Stock shall be treated for
all purposes as the record holder or holders of such Common Stock as of such
date.
(c) Fractional Shares and Certificate as to Adjustment. Upon
conversion, the Company (unless otherwise requested by the Majority in Interest)
will issue fractional shares of its Common Stock upon conversion of this Note,
and shall not distribute cash in lieu of such fractional shares. The number of
full shares of Common Stock issuable upon conversion of this Note shall be
computed on the basis of the aggregate number of shares of Common Stock in to
which the Note is to be converted. If fractional shares of Common Stock which
would otherwise be issuable upon conversion of any such share are not issued,
the Company shall pay a cash adjustment in respect of such fractional interest
in an amount equal to the product of (i) the price of one share of Common Stock
as determined in good faith by the Board of Directors of the Company (the
"Board") and (ii) such fractional interest. The holders of fractional interests
shall not be entitled to any rights as stockholders of the Company in respect of
such fractional interests.
(d) Upon written notice of conversion of the Note or Notes held by
the Majority in Interest to the remaining Holders of the Notes issued under the
Securities Purchase Agreement, the remaining Holders shall be deemed to have
converted their respective Notes to that number of fully paid and nonassessable
shares of Common Stock in accordance with this Section 4.
(e) The Company shall treat the conversion of the Notes to shares of
Common Stock as the exchange of the principal amount of the Notes for the shares
of Common Stock and shall not treat any portion of the shares of Common Stock as
received in exchange for the accrual for interest or original issue discount.
Section 5. Adjustments.
The Conversion Price for each share of Common Stock of the Company
shall be subject to adjustment from time to time as follows:
(a) If the Company shall, at any time or from time to time after the
date hereof, issue any shares of Common Stock (or be deemed to have issued
shares of Common Stock as provided herein), other than Excluded Stock (as
defined herein) without consideration or for a consideration per share less than
the Conversion Price, in effect immediately prior to the issuance of such Common
Stock, then the Conversion Price, as in effect immediately prior to each such
issuance, shall forthwith be lowered to a price equal to the quotient obtained
by dividing:
(i) an amount equal to the sum of (x) the total number of
shares of Common Stock outstanding on a fully-diluted basis
immediately prior to such issuance, multiplied by the Conversion
Price in effect immediately prior to such issuance, and (y) the
consideration received by the Company upon such issuance; by
3
<PAGE> 4
(ii) the total number of shares of Common Stock outstanding on
a fully-diluted basis immediately after the issuance of such Common
Stock.
(b) For the purposes of any adjustment of the Conversion Price
pursuant to clause (a) above, the following provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall be
deemed to be the amount of cash paid therefor after deducting
therefrom any discounts, commissions or placement fees payable by
the Company to any underwriter or placement agent in connection with
the issuance and sale thereof.
(ii) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the Fair Value Per Share (as
defined herein) thereof as determined in good faith by the Board of
Directors of the Company, irrespective of any accounting treatment.
(iii) In the case of the issuance of options to purchase or rights
to subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock, or options to purchase or
rights to subscribe for such convertible or exchangeable securities
except for options to acquire Excluded Stock:
(A) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have
been issued at the time such options or rights were issued and
for a consideration equal to the consideration (determined in
the manner provided in Sections 5(b)(i) and 5(b)(ii) above),
if any, received by the Company upon the issuance of such
options or rights plus the minimum purchase price provided in
such options or rights for the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for
such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been
issued at the time such securities, options, or rights were
issued and for a consideration equal to the consideration
received by the Company for any such securities and related
options or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of
any related options or rights (the consideration in each case
to be determined in the manner provided in Sections 5(b)(i)
and 5(b)(ii) above);
(C) on any change in the number of shares or exercise
price of Common Stock deliverable upon exercise of any such
options or rights or conversions of or exchanges for such
securities, other than a change resulting
4
<PAGE> 5
from the antidilution provisions thereof, the Conversion Price
shall forthwith be readjusted to the Conversion Price as would
have been obtained had the adjustment made upon the issuance
of such options, rights or securities not converted prior to
such change or options or rights related to such securities
not converted prior to such change been made upon the basis of
such change; and
(D) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such
convertible or exchangeable securities, the Conversion Price
shall forthwith be readjusted to the Conversion Price as would
have been obtained had the adjustment made upon the issuance
of such options, rights, securities or options or rights
related to such securities been made upon the basis of the
issuance of only the number of shares of Common Stock actually
issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities, or upon the
exercise of the options or rights related to such securities
and subsequent conversion or exchange thereof.
(c) If, at any time after the date hereof, the number of shares of
Common Stock outstanding is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Conversion
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of this Note shall be increased in proportion to
such increase in outstanding shares.
(d) If, at any time after the date hereof, the number of shares of
Common Stock outstanding is decreased by a combination of the outstanding shares
of Common Stock, then, following the record date for such combination, the
Conversion Price shall be appropriately increased so that the number of shares
of Common Stock issuable on conversion of this Note shall be decreased in
proportion to such decrease in outstanding shares.
(e) In the event of any capital reorganization of the Company, any
reclassification of the stock of the Company (other than a change in par value
or from par value to no par value or from no par value to par value or as a
result of a stock dividend or subdivision, split-up or combination of shares),
or any consolidation or merger of the Company, each share of Common Stock into
which this Note may be converted shall after such reorganization,
reclassification, consolidation, or merger be convertible into the kind and
number of shares of stock or other securities or property of the Company or of
the Company resulting from such consolidation or surviving such merger to which
the Holder of the number of shares of Common Stock deliverable (immediately
prior to the time of such reorganization, reclassification, consolidation or
merger) upon conversion of this Note would have been entitled upon such
reorganization, reclassification, consolidation or merger. The provisions of
this clause shall similarly apply to successive reorganizations,
reclassifications, consolidations or mergers.
(f) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least .1% in such
Conversion Price; provided, that any adjustments not required to be made by
virtue of this sentence shall be carried
5
<PAGE> 6
forward and taken into account in any subsequent adjustment. All calculations
under Sections 5(a) through 5(e) above shall be made to the nearest one
hundredth (1/100) of a cent or the nearest one tenth (1/10) of a share, as the
case may be.
(g) In any case in which the provisions of this Section 5(g) shall
require that an adjustment shall become effective immediately after a record
date of an event, the Company may defer until the occurrence of such event (A)
issuing to the Holder of any Note converted after such record date and before
the occurrence of such event the shares of capital stock issuable upon such
conversion by reason of the adjustment required by such event in addition to the
shares of capital stock issuable upon such conversion before giving effect to
such adjustments, and (B) if applicable, paying to such Holder any amount in
cash in lieu of a fractional share of capital stock pursuant to Section 5(c)
above; provided, however, that the Company shall deliver to such Holder an
appropriate instrument evidencing such Holder's right to receive such additional
shares and such cash.
(h) Whenever the Conversion Price shall be adjusted as provided in
Section 5(a), the Company shall make available for inspection during regular
business hours, at its principal executive offices or at such other place as may
be designated by the Company, a statement, signed by its chief executive
officer, showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment. The Company
shall also cause a copy of such statement to be sent by first class certified
mail, return receipt requested and postage prepaid, to the Holder affected by
the adjustment at such Holder's address appearing on the Company's records.
Where appropriate, such copy may be given in advance and may be included as part
of any notice required to be mailed under the provisions of Section 5(i) below.
(i) If the Company shall propose to take any action of the types
described in clauses (c), (d) or (e) of this Section 5, the Company shall give
notice to each Holder, which notice shall specify the record date, if any, with
respect to any such action and the date on which such action is to take place.
Such notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Conversion Price and the
number, kind or class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or deliverable
upon conversion of the Note. In the case of any action which would require the
fixing of a record date, such notice shall be given at least twenty (20) days
prior to the date so fixed, and in case of all other action, such notice shall
be given at least thirty (30) days prior to the taking of such proposed action.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of any such action.
(j) The Company shall at all times keep reserved, free from
preemptive rights, out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the Note, sufficient
number of shares of Common Stock to provide for the conversion of the Notes.
(k) Without duplication of any other adjustment provided for in this
Section 5, at any time the Company makes or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Company other than shares of Common
Stock, provision shall be made so that each Holder shall receive
6
<PAGE> 7
upon conversion thereof, in addition to the shares of Common Stock receivable
thereupon, the number of securities of the Company which it would have received
had its Note been converted into shares of Common Stock on the date of such
event and had such holder thereafter, during the period from the date of such
event to and including the date of conversion, retained such securities
receivable by it pursuant to this paragraph during such period, subject to the
sum of all other adjustments called for during such period under this Section 5
with respect to the rights of such Holder.
(l) In the event that the Majority in Interest consents in writing
to limit, or waive in its entirety, any anti-dilution adjustment to which the
holders of the Notes would otherwise be entitled hereunder, the Company shall
not be required to make any adjustment whatsoever with respect to the Note in
excess of such limit or at all, as the terms of such consent may dictate.
(m) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 5 and in
the taking of all such action as may be necessary or appropriate in order to
protect the exercise rights of the Holders of the Notes against impairment.
(n) The computations of all amounts under this Section 5 shall be
made assuming all other anti-dilution or similar adjustments to be made to the
terms of all other securities resulting from the transaction causing an
adjustment pursuant to this Section 5 have previously been made so as to
maintain the relative economic interest of the Note vis a vis all other
securities issued by the Company.
(o) The Company shall take or cause to be taken such steps as shall
be necessary to ensure that the par value per share of Common Stock is at all
time less than or equal to the Conversion Price.
(p) For purposes of the Note, (i) "Excluded Stock" shall mean up to
5,000,000 shares (as adjusted equitably for stock dividends, stock splits,
combinations, etc.) of Common Stock issuable upon (A) exercise of stock options
granted to officers and employees of the Company or its subsidiaries, (B) shares
of Common Stock issued upon conversion of shares of Preferred Stock, including
in the case of both (A) and (B), any additional shares of Common Stock as may be
issued by virtue of antidilution provisions, if any, applicable to such options,
warrants or shares, as the case may be, and (C) shares of Common Stock issued
upon exercise, (ii) "Fair Value Per Share" shall mean the fair value of each
share of Stock, as determined in good faith by the Board, and (iii) "Stock"
shall mean (A) the presently issued and outstanding shares of Common Stock and
Preferred Stock and any options or stock subscription warrants exercisable
therefor (which options and warrants shall be deemed to be that number of
outstanding shares of Stock for which they are exercisable), (B) any additional
shares of capital stock of the Company hereafter issued and outstanding and (C)
any shares of capital stock of the Company into which such shares may be
converted or for which they may be exchanged or exercised.
7
<PAGE> 8
Section 6. Form of Payments.
All payments of principal of and interest on this Note shall be made
in such coin or currency of the United States of America as at the time of
payment shall be legal tender therein for the payment of public and private
debts and shall be payable by wire transfer of immediately available funds to
the account of the Holder at such banking institution as the Holder designates,
or, if requested by the Holder, by certified or official bank check mailed to
the Holder at the address of the Holder set forth on the records of the Company
or such other address as shall be designated in writing by the Holder to the
Company.
Section 7. Exchange or Replacement of Note.
(a) The Holder, at its option, may in person or by duly authorized
attorney surrender this Note for exchange, at the office or agency of the
Company maintained pursuant to Section 9(a) and receive in exchange therefor a
new Note in the same aggregate principal amount as the unpaid principal amount
of the Note so surrendered, each such new Note to be dated as of the date to
which interest has been paid on the Note so surrendered and payable to the
Holder.
(b) Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction, or mutilation of this Note, and in case of loss,
theft or destruction of indemnity reasonably satisfactory to it, and upon
surrender and cancellation of this Note, if mutilated, the Company shall make
and deliver a new Note of like tenor in lieu of this Note. Any Note made and
delivered in accordance with this paragraph shall be dated the date hereof.
Section 8. Amendments.
(a) This Note may not be amended or modified in any respect unless
the Majority in Interest consents and such amendment or modification is set
forth in writing and signed by the party against whom enforcement thereof is
sought; provided, however, that no amendment or modification shall be made to
this Note which would have a Material Adverse Effect on the rights of Trident
vis a vis the rights of Signal hereunder without the prior written consent of
Trident. Any such amendment or modification shall be binding upon each Holder
and future Holder of this Note.
(b) With respect to Section 4 and this Section 8 only under this
Note, the Majority in Interest will be deemed to be a third party beneficiary in
order to effect the rights set forth hereunder.
Section 9. Office or Agency.
(a) So long as this Note remains outstanding, the Company shall
maintain an office or agency (which shall initially be the principal place of
business of the Company located at 570 Lexington Avenue, New York, New York
10022) where notices, presentations and demands to or upon the Company in
respect of this Note may be given.
(b) All notices to be given by the Company to the Holder in respect
of this Note shall be delivered or mailed to the address of the Holder set forth
on the records of the Company or such other address as shall be designated in
writing by the Holder to the Company.
8
<PAGE> 9
Section 10. Events of Default.
In the case of the happening of an Event of Default, then the
indebtedness evidenced by this Note shall become due and payable as provided in
Article VII of the Securities Purchase Agreement.
Section 11. Extension of Maturity. If any payment of principal of or
interest on this Note shall become due on a Saturday, Sunday or a public holiday
under the Laws of the State of New York or the United States of America, such
payment shall be made on the next succeeding business day and such extension of
time shall in such case be included in computing interest in connection with
such payment.
Section 12. Costs and Expenses. The Company shall pay all reasonable costs
and expenses, including reasonable attorneys' fees, incurred by the Holder in
collecting or enforcing this Note during the continuance of any Event of
Default.
Section 13. Waivers.
(a) The Company and all endorsers, sureties and guarantors of this
Note, hereby jointly and severally waive presentment, demand for payment, notice
of dishonor, notice of protest, and protest in connection with the delivery,
acceptance, performance, default, endorsement or guaranty of this Note.
(b) No delay by the Holder in exercising any power or right
hereunder shall operate as a waiver of any power or right, nor shall any single
or partial exercise of any power or right preclude other or further exercise
thereof, or the exercise of any other power or right hereunder or otherwise. No
waiver or modification of the terms hereof shall be valid unless set forth in
writing by the Majority in Interest.
Section 14. Transfer of Note. Subject to the restrictions on transfer set
forth herein and in the Securities Purchase Agreement, this Note and all rights
hereunder are transferable, in whole or in part, at any time and from time to
time. Any transfer shall be effected by the Holder in person or by duly
authorized attorney by surrendering this Note, properly endorsed, at the agency
or office of the Company referred to in Section 9(a). Each taker and holder of
this Note, by taking or holding the same, consents and agrees that this Note,
when endorsed, in blank, shall be deemed negotiable, and, when so endorsed the
holder hereof may be treated by the Company and all other persons dealing with
this Note as the absolute owner hereof for any purposes and as the person
entitled to exercise the rights represented by this Note, or to the transfer
hereof on the books of the Company, any notice to the contrary notwithstanding;
but until such transfer on such books, the Company may treat the registered
holder hereof as the owner hereof for all purposes.
Section 15. Governing Law; Jurisdiction.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY LAW OR RULE THAT
WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK TO BE
APPLIED.
9
<PAGE> 10
THE COMPANY HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK
STATE COURT FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS NOTE. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE COMPANY AND THE HOLDER HERETO IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 7.1 OF THE SECURITIES
PURCHASE AGREEMENT. NOTHING IN THIS NOTE OR THE SECURITIES PURCHASE AGREEMENT
WILL AFFECT THE RIGHT OF THE COMPANY OR THE HOLDER TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
10
<PAGE> 11
FIBERNET TELECOM GROUP, INC.
By:
-----------------------------
Name:
Title:
ATTEST:
- ---------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT C
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAW OF ANY STATE. THIS
NOTE MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. IN ADDITION, THE TRANSFER
OF THIS NOTE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE SECURITIES
PURCHASE AGREEMENT DATED AS OF MAY 7, 1999 BY AND AMONG FIBERNET TELECOM
GROUP, INC. AND THE PURCHASERS NAMED THEREIN. NO TRANSFER OF THIS NOTE
SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT" WITHIN THE MEANING OF
SECTION 1272, ET SEQ. OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
UPON WRITTEN REQUEST, THE COMPANY WILL PROVIDE TO ANY HOLDER OF THE NOTE
(1) THE ISSUE PRICE AND DATE OF THE NOTE, (2) THE AMOUNT OF ORIGINAL ISSUE
DISCOUNT ON THE NOTE AND (3) THE ORIGINAL YIELD TO MATURITY OF THE NOTE.
SUCH REQUEST SHOULD BE SENT TO THE COMPANY AT 570 LEXINGTON AVENUE, NEW
YORK, NEW YORK 10022, ATTN: CHIEF FINANCIAL OFFICER.
------------------------
FIBERNET TELECOM GROUP, INC.
SENIOR SECURED CONVERTIBLE NOTE
$_____________ May 7, 1999
FIBERNET TELECOM GROUP, INC., a Nevada corporation (the "Company"),
for value received, hereby promises to pay to [PURCHASER] (the "Purchaser"), or
its registered assigns, the principal amount of [____________] DOLLARS
($___________). The Purchaser and any registered assigns thereof are referred to
as the "Holder." This Note is originally being issued pursuant to the Securities
Purchase Agreement dated the date hereof (the "Securities Purchase Agreement"),
by and among the Company and the purchasers named therein. The holders of the
Notes issued under the Securities Purchase Agreement are collectively referred
to as the "Holders." Capitalized terms used and not defined herein shall have
the meanings ascribed to them in the Securities Purchase Agreement. The
following terms shall apply to this Note:
Section 1. Principal Payments.
(a) The principal amount of this Note shall be payable in full upon
the earliest date (the "Maturity Date") of (i) a Qualified Public Offering, (ii)
the sale of the stock or limited liability company membership interests, as
applicable, of the Company or its Subsidiaries, (iii)
<PAGE> 2
any public or private financing of debt or equity securities of the Company with
net proceeds in excess of $50,000,000 to the Company or (iv) May 7, 2004.
(b) Payments of the principal amount of this Note shall be amortized
as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Year Principal
-----------------------------------------------------------------
<S> <C>
May 7, 2000 10%
-----------------------------------------------------------------
May 7, 2001 10%
-----------------------------------------------------------------
May 7, 2002 20%
-----------------------------------------------------------------
May 7, 2003 30%
-----------------------------------------------------------------
May 7, 2004 30%
-----------------------------------------------------------------
</TABLE>
Section 2. Interest.
(a) The Company shall pay interest on the unpaid principal of this
Note at the rate of 6% per annum (calculated on the basis of a year of 360 days
comprised of 12 30-day months), payable at 3% in cash and 3% in cash or in kind,
which amount, if paid in kind at the Holder's option, will be convertible into
that number of shares of Common Stock determined by dividing such amount by the
Fair Market Value of such shares at the time of conversion, (i) on each June 30
and December 31, commencing on December 31, 1999, (ii) on the Maturity Date of
this Note, and (iii) after such Maturity Date, on demand. At the Company's
option, any payment of capitalized interest shall be subject to Section 3 of
this Note.
(b) The Company shall also pay interest (to the extent permitted by
law) on any overdue principal of or interest on this Note at the rate of 14% per
annum (calculated as set forth above), from the due date of such principal or
interest until payment in full thereof. Section 3. Optional Prepayment. This
Note may be prepaid in whole or in part at any time or from time to time at the
option of the Company upon 20 days written notice to the Holder without penalty.
Section 3. Optional Prepayment. This Note may be prepaid in whole or in
part at any time or from time to time at the option of the Company upon 20 days
written notice to the Holder without penalty.
Section 4. Conversion.
(a) Conversion. The Holder shall have the right up to the time of
repayment of this Note to convert the unpaid principal and interest of this Note
into fully-paid and nonassessable shares of Common Stock of the Company at a
price of $1.50 per share (the "Conversion Price"), subject to adjustment for
dilution.
(b) Mechanics of Conversion. Before any Holder of this Note shall be
entitled to receive the Common Stock into which this Note has been converted,
such Holder shall surrender this Note duly endorsed, at the Company's principal
corporate office stating therein the name or names in which the certificate or
certificates for the Common Stock are to be issued. The Company shall, promptly
thereafter, issue and deliver to such Holder at the address specified by
2
<PAGE> 3
such Holder, or to the nominee or nominees of such Holder, a certificate or
certificates for the Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such conversion as provided in paragraph
(a) above and the person or persons entitled to receive the Common Stock shall
be treated for all purposes as the record holder or holders of such Common Stock
as of such date.
(c) Fractional Shares and Certificate as to Adjustment. Upon
conversion, the Company (unless otherwise requested by the Majority in Interest)
will issue fractional shares of its Common Stock upon conversion of this Note,
and shall not distribute cash in lieu of such fractional shares. The number of
full shares of Common Stock issuable upon conversion of this Note shall be
computed on the basis of the aggregate number of shares of Common Stock in to
which the Note is to be converted. If fractional shares of Common Stock which
would otherwise be issuable upon conversion of any such share are not issued,
the Company shall pay a cash adjustment in respect of such fractional interest
in an amount equal to the product of (i) the price of one share of Common Stock
as determined in good faith by the Board of Directors of the Company (the
"Board") and (ii) such fractional interest. The holders of fractional interests
shall not be entitled to any rights as stockholders of the Company in respect of
such fractional interests.
(d) Upon written notice of conversion of the Note or Notes held by
the Majority in Interest to the remaining Holders of the Notes issued under the
Securities Purchase Agreement, the remaining Holders shall be deemed to have
converted their respective Notes to that number of fully paid and nonassessable
shares of Common Stock in accordance with this Section 4.
(e) The Company shall treat the conversion of the Notes to shares of
Common Stock as the exchange of the principal amount of the Notes for the shares
of Common Stock and shall not treat any portion of the shares of Common Stock as
received in exchange for the accrual for interest or original issue discount.
Section 5. Adjustments.
The Conversion Price for each share of Common Stock of the Company
shall be subject to adjustment from time to time as follows:
(a) If the Company shall, at any time or from time to time after the
date hereof, issue any shares of Common Stock (or be deemed to have issued
shares of Common Stock as provided herein), other than Excluded Stock (as
defined herein) without consideration or for a consideration per share less than
the Conversion Price, in effect immediately prior to the issuance of such Common
Stock, then the Conversion Price, as in effect immediately prior to each such
issuance, shall forthwith be lowered to a price equal to the quotient obtained
by dividing:
(i) an amount equal to the sum of (x) the total number of shares of
Common Stock outstanding on a fully-diluted basis immediately prior to
such issuance, multiplied by the Conversion Price in effect immediately
prior to such issuance, and (y) the consideration received by the Company
upon such issuance; by
3
<PAGE> 4
(ii) the total number of shares of Common Stock outstanding on a
fully-diluted basis immediately after the issuance of such Common Stock.
(b) For the purposes of any adjustment of the Conversion Price
pursuant to clause (a) above, the following provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash in a public
offering or private placement, the consideration shall be deemed to be the
amount of cash paid therefor after deducting therefrom any discounts,
commissions or placement fees payable by the Company to any underwriter or
placement agent in connection with the issuance and sale thereof.
(ii) In the case of the issuance of Common Stock for a consideration
in whole or in part other than cash, the consideration other than cash
shall be deemed to be the Fair Value Per Share (as defined herein) thereof
as determined in good faith by the Board of Directors of the Company,
irrespective of any accounting treatment.
(iii) In the case of the issuance of options to purchase or rights
to subscribe for Common Stock, securities by their terms convertible into
or exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities except for
options to acquire Excluded Stock:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at
the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in
Sections 5(b)(i) and 5(b)(ii) above), if any, received by the
Company upon the issuance of such options or rights plus the minimum
purchase price provided in such options or rights for the Common
Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities, options, or rights were issued and for a consideration
equal to the consideration received by the Company for any such
securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the additional consideration, if any, to be received by the Company
upon the conversion or exchange of such securities or the exercise
of any related options or rights (the consideration in each case to
be determined in the manner provided in Sections 5(b)(i) and
5(b)(ii) above);
(C) on any change in the number of shares or exercise price of
Common Stock deliverable upon exercise of any such options or rights
or conversions of or exchanges for such securities, other than a
change resulting
4
<PAGE> 5
from the antidilution provisions thereof, the Conversion Price
shall forthwith be readjusted to the Conversion Price as would have
been obtained had the adjustment made upon the issuance of such
options, rights or securities not converted prior to such change or
options or rights related to such securities not converted prior to
such change been made upon the basis of such change; and
(D) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price shall forthwith be
readjusted to the Conversion Price as would have been obtained had
the adjustment made upon the issuance of such options, rights,
securities or options or rights related to such securities been made
upon the basis of the issuance of only the number of shares of
Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities, or upon
the exercise of the options or rights related to such securities and
subsequent conversion or exchange thereof.
(c) If, at any time after the date hereof, the number of shares of
Common Stock outstanding is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Conversion
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of this Note shall be increased in proportion to
such increase in outstanding shares.
(d) If, at any time after the date hereof, the number of shares of
Common Stock outstanding is decreased by a combination of the outstanding shares
of Common Stock, then, following the record date for such combination, the
Conversion Price shall be appropriately increased so that the number of shares
of Common Stock issuable on conversion of this Note shall be decreased in
proportion to such decrease in outstanding shares.
(e) In the event of any capital reorganization of the Company, any
reclassification of the stock of the Company (other than a change in par value
or from par value to no par value or from no par value to par value or as a
result of a stock dividend or subdivision, split-up or combination of shares),
or any consolidation or merger of the Company, each share of Common Stock into
which this Note may be converted shall after such reorganization,
reclassification, consolidation, or merger be convertible into the kind and
number of shares of stock or other securities or property of the Company or of
the Company resulting from such consolidation or surviving such merger to which
the Holder of the number of shares of Common Stock deliverable (immediately
prior to the time of such reorganization, reclassification, consolidation or
merger) upon conversion of this Note would have been entitled upon such
reorganization, reclassification, consolidation or merger. The provisions of
this clause shall similarly apply to successive reorganizations,
reclassifications, consolidations or mergers.
(f) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least .1% in such
Conversion Price; provided, that any adjustments not required to be made by
virtue of this sentence shall be carried
5
<PAGE> 6
forward and taken into account in any subsequent adjustment. All calculations
under Sections 5(a) through 5(e) above shall be made to the nearest one
hundredth (1/100) of a cent or the nearest one tenth (1/10) of a share, as the
case may be.
(g) In any case in which the provisions of this Section 5(g) shall
require that an adjustment shall become effective immediately after a record
date of an event, the Company may defer until the occurrence of such event (A)
issuing to the Holder of any Note converted after such record date and before
the occurrence of such event the shares of capital stock issuable upon such
conversion by reason of the adjustment required by such event in addition to the
shares of capital stock issuable upon such conversion before giving effect to
such adjustments, and (B) if applicable, paying to such Holder any amount in
cash in lieu of a fractional share of capital stock pursuant to Section 5(c)
above; provided, however, that the Company shall deliver to such Holder an
appropriate instrument evidencing such Holder's right to receive such additional
shares and such cash.
(h) Whenever the Conversion Price shall be adjusted as provided in
Section 5(a), the Company shall make available for inspection during regular
business hours, at its principal executive offices or at such other place as may
be designated by the Company, a statement, signed by its chief executive
officer, showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment. The Company
shall also cause a copy of such statement to be sent by first class certified
mail, return receipt requested and postage prepaid, to the Holder affected by
the adjustment at such Holder's address appearing on the Company's records.
Where appropriate, such copy may be given in advance and may be included as part
of any notice required to be mailed under the provisions of Section 5(i) below.
(i) If the Company shall propose to take any action of the types
described in clauses (c), (d) or (e) of this Section 5, the Company shall give
notice to each Holder, which notice shall specify the record date, if any, with
respect to any such action and the date on which such action is to take place.
Such notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Conversion Price and the
number, kind or class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or deliverable
upon conversion of the Note. In the case of any action which would require the
fixing of a record date, such notice shall be given at least twenty (20) days
prior to the date so fixed, and in case of all other action, such notice shall
be given at least thirty (30) days prior to the taking of such proposed action.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of any such action.
(j) The Company shall at all times keep reserved, free from
preemptive rights, out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the Note, sufficient
number of shares of Common Stock to provide for the conversion of the Notes.
(k) Without duplication of any other adjustment provided for in this
Section 5, at any time the Company makes or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Company other than shares of Common
Stock, provision shall be made so that each Holder shall receive
6
<PAGE> 7
upon conversion thereof, in addition to the shares of Common Stock receivable
thereupon, the number of securities of the Company which it would have received
had its Note been converted into shares of Common Stock on the date of such
event and had such holder thereafter, during the period from the date of such
event to and including the date of conversion, retained such securities
receivable by it pursuant to this paragraph during such period, subject to the
sum of all other adjustments called for during such period under this Section 5
with respect to the rights of such Holder.
(l) In the event that the Majority in Interest consents in writing
to limit, or waive in its entirety, any anti-dilution adjustment to which the
holders of the Notes would otherwise be entitled hereunder, the Company shall
not be required to make any adjustment whatsoever with respect to the Note in
excess of such limit or at all, as the terms of such consent may dictate.
(m) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 5 and in
the taking of all such action as may be necessary or appropriate in order to
protect the exercise rights of the Holders of the Notes against impairment.
(n) The computations of all amounts under this Section 5 shall be
made assuming all other anti-dilution or similar adjustments to be made to the
terms of all other securities resulting from the transaction causing an
adjustment pursuant to this Section 5 have previously been made so as to
maintain the relative economic interest of the Note vis a vis all other
securities issued by the Company.
(o) The Company shall take or cause to be taken such steps as shall
be necessary to ensure that the par value per share of Common Stock is at all
time less than or equal to the Conversion Price.
(p) For purposes of the Note, (i) "Excluded Stock" shall mean up to
5,000,000 shares (as adjusted equitably for stock dividends, stock splits,
combinations, etc.) of Common Stock issuable upon (A) exercise of stock options
granted to officers and employees of the Company or its subsidiaries, (B) shares
of Common Stock issued upon conversion of shares of Preferred Stock, including
in the case of both (A) and (B), any additional shares of Common Stock as may be
issued by virtue of antidilution provisions, if any, applicable to such options,
warrants or shares, as the case may be, and (C) shares of Common Stock issued
upon exercise, (ii) "Fair Value Per Share" shall mean the fair value of each
share of Stock, as determined in good faith by the Board, and (iii) "Stock"
shall mean (A) the presently issued and outstanding shares of Common Stock and
Preferred Stock and any options or stock subscription warrants exercisable
therefor (which options and warrants shall be deemed to be that number of
outstanding shares of Stock for which they are exercisable), (B) any additional
shares of capital stock of the Company hereafter issued and outstanding and (C)
any shares of capital stock of the Company into which such shares may be
converted or for which they may be exchanged or exercised.
7
<PAGE> 8
Section 6. Form of Payments.
All payments of principal of and interest on this Note shall be made
in such coin or currency of the United States of America as at the time of
payment shall be legal tender therein for the payment of public and private
debts and shall be payable by wire transfer of immediately available funds to
the account of the Holder at such banking institution as the Holder designates,
or, if requested by the Holder, by certified or official bank check mailed to
the Holder at the address of the Holder set forth on the records of the Company
or such other address as shall be designated in writing by the Holder to the
Company.
Section 7. Exchange or Replacement of Note.
(a) The Holder, at its option, may in person or by duly authorized
attorney surrender this Note for exchange, at the office or agency of the
Company maintained pursuant to Section 9(a) and receive in exchange therefor a
new Note in the same aggregate principal amount as the unpaid principal amount
of the Note so surrendered, each such new Note to be dated as of the date to
which interest has been paid on the Note so surrendered and payable to the
Holder.
(b) Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction, or mutilation of this Note, and in case of loss,
theft or destruction of indemnity reasonably satisfactory to it, and upon
surrender and cancellation of this Note, if mutilated, the Company shall make
and deliver a new Note of like tenor in lieu of this Note. Any Note made and
delivered in accordance with this paragraph shall be dated the date hereof.
Section 8. Amendments.
(a) This Note may not be amended or modified in any respect unless
the Majority in Interest consents and such amendment or modification is set
forth in writing and signed by the party against whom enforcement thereof is
sought; provided, however, that no amendment or modification shall be made to
this Note which would have a Material Adverse Effect on the rights of Trident
vis a vis the rights of Signal hereunder without the prior written consent of
Trident. Any such amendment or modification shall be binding upon each Holder
and future Holder of this Note.
(b) With respect to Section 4 and this Section 8 only under this
Note, the Majority in Interest will be deemed to be a third party beneficiary in
order to effect the rights set forth hereunder.
Section 9. Office or Agency.
(a) So long as this Note remains outstanding, the Company shall
maintain an office or agency (which shall initially be the principal place of
business of the Company located at 570 Lexington Avenue, New York, New York
10022) where notices, presentations and demands to or upon the Company in
respect of this Note may be given.
(b) All notices to be given by the Company to the Holder in respect
of this Note shall be delivered or mailed to the address of the Holder set forth
on the records of the Company or such other address as shall be designated in
writing by the Holder to the Company.
8
<PAGE> 9
Section 10. Events of Default.
In the case of the happening of an Event of Default, then the
indebtedness evidenced by this Note shall become due and payable as provided in
Article VII of the Securities Purchase Agreement.
Section 11. Extension of Maturity. If any payment of principal of or
interest on this Note shall become due on a Saturday, Sunday or a public holiday
under the Laws of the State of New York or the United States of America, such
payment shall be made on the next succeeding business day and such extension of
time shall in such case be included in computing interest in connection with
such payment.
Section 12. Costs and Expenses. The Company shall pay all reasonable costs
and expenses, including reasonable attorneys' fees, incurred by the Holder in
collecting or enforcing this Note during the continuance of any Event of
Default.
Section 13. Waivers.
(a) The Company and all endorsers, sureties and guarantors of this
Note, hereby jointly and severally waive presentment, demand for payment, notice
of dishonor, notice of protest, and protest in connection with the delivery,
acceptance, performance, default, endorsement or guaranty of this Note.
(b) No delay by the Holder in exercising any power or right
hereunder shall operate as a waiver of any power or right, nor shall any single
or partial exercise of any power or right preclude other or further exercise
thereof, or the exercise of any other power or right hereunder or otherwise. No
waiver or modification of the terms hereof shall be valid unless set forth in
writing by the Majority in Interest.
Section 14. Transfer of Note. Subject to the restrictions on transfer set
forth herein and in the Securities Purchase Agreement, this Note and all rights
hereunder are transferable, in whole or in part, at any time and from time to
time. Any transfer shall be effected by the Holder in person or by duly
authorized attorney by surrendering this Note, properly endorsed, at the agency
or office of the Company referred to in Section 9(a). Each taker and holder of
this Note, by taking or holding the same, consents and agrees that this Note,
when endorsed, in blank, shall be deemed negotiable, and, when so endorsed the
holder hereof may be treated by the Company and all other persons dealing with
this Note as the absolute owner hereof for any purposes and as the person
entitled to exercise the rights represented by this Note, or to the transfer
hereof on the books of the Company, any notice to the contrary notwithstanding;
but until such transfer on such books, the Company may treat the registered
holder hereof as the owner hereof for all purposes.
Section 15. Governing Law; Jurisdiction.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY LAW OR RULE THAT
WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK TO BE
APPLIED.
9
<PAGE> 10
THE COMPANY HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK
STATE COURT FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS NOTE. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE COMPANY AND THE HOLDER HERETO IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 7.1 OF THE SECURITIES
PURCHASE AGREEMENT. NOTHING IN THIS NOTE OR THE SECURITIES PURCHASE AGREEMENT
WILL AFFECT THE RIGHT OF THE COMPANY OR THE HOLDER TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
10
<PAGE> 11
FIBERNET TELECOM GROUP, INC.
By:
------------------------------
Name:
Title:
ATTEST:
- -------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT D
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAW OF ANY STATE. THIS
NOTE MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. IN ADDITION, THE TRANSFER
OF THIS NOTE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE SECURITIES
PURCHASE AGREEMENT DATED AS OF MAY 7, 1999 BY AND AMONG FIBERNET TELECOM
GROUP, INC. AND THE PURCHASERS NAMED THEREIN. NO TRANSFER OF THIS NOTE
SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT" WITHIN THE MEANING OF
SECTION 1272, ET SEQ. OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
UPON WRITTEN REQUEST, THE COMPANY WILL PROVIDE TO ANY HOLDER OF THE NOTE
(1) THE ISSUE PRICE AND DATE OF THE NOTE, (2) THE AMOUNT OF ORIGINAL ISSUE
DISCOUNT ON THE NOTE AND (3) THE ORIGINAL YIELD TO MATURITY OF THE NOTE.
SUCH REQUEST SHOULD BE SENT TO THE COMPANY AT 570 LEXINGTON AVENUE, NEW
YORK, NEW YORK 10022, ATTN: CHIEF FINANCIAL OFFICER.
------------------------
FIBERNET TELECOM GROUP, INC.
SENIOR SECURED CONVERTIBLE NOTE
$_____________ May 7, 1999
FIBERNET TELECOM GROUP, INC., a Nevada corporation (the "Company"),
for value received, hereby promises to pay to [PURCHASER] (the "Purchaser"), or
its registered assigns, the principal amount of [____________] DOLLARS
($___________). The Purchaser and any registered assigns thereof are referred to
as the "Holder." This Note is originally being issued pursuant to the Securities
Purchase Agreement dated the date hereof (the "Securities Purchase Agreement"),
by and among the Company and the purchasers named therein. The holders of the
Notes issued under the Securities Purchase Agreement are collectively referred
to as the "Holders." Capitalized terms used and not defined herein shall have
the meanings ascribed to them in the Securities Purchase Agreement. The
following terms shall apply to this Note:
Section 1. Principal Payments.
(a) The principal amount of this Note shall be payable in full upon
the earliest date (the "Maturity Date") of (i) a Qualified Public Offering, (ii)
the sale of the stock or limited liability company membership interests, as
applicable, of the Company or its Subsidiaries, (iii)
<PAGE> 2
any public or private financing of debt or equity securities of the Company with
net proceeds in excess of $50,000,000 to the Company or (iv) May 7, 2004.
(b) Payments of the principal amount of this Note shall be amortized
as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Year Principal
-----------------------------------------------------------------
<S> <C>
May 7, 2000 10%
-----------------------------------------------------------------
May 7, 2001 10%
-----------------------------------------------------------------
May 7, 2002 20%
-----------------------------------------------------------------
May 7, 2003 30%
-----------------------------------------------------------------
May 7, 2004 30%
-----------------------------------------------------------------
</TABLE>
Section 2. Interest.
(a) The Company shall pay interest on the unpaid principal of this
Note at the rate of 4% per annum (calculated on the basis of a year of 360 days
comprised of 12 30-day months), payable, 2% in cash and 2% in cash or in kind,
which amount, if paid in kind at the Holder's option, will be convertible into
that number of shares of Common Stock determined by dividing such amount by the
Fair Market Value of such shares at the time of conversion, (i) on each June 30
and December 31, commencing on December 31, 1999, (ii) on the Maturity Date of
this Note, and (iii) after such Maturity Date, on demand. At the Company's
option, any payment of capitalized interest shall be subject to Section 3 of
this Note.
(b) The Company shall also pay interest (to the extent permitted by
law) on any overdue principal of or interest on this Note at the rate of 14% per
annum (calculated as set forth above), from the due date of such principal or
interest until payment in full thereof.
Section 3. Optional Prepayment. This Note may be prepaid in whole or in
part at any time or from time to time at the option of the Company upon 20 days
written notice to the Holder without penalty.
Section 4. Conversion.
(a) Conversion. The Holder shall have the right up to the time of
repayment of this Note to convert the unpaid principal and interest of this Note
into fully-paid and nonassessable shares of Common Stock of the Company at a
price of $1.50 per share (the "Conversion Price"), subject to adjustment for
dilution.
(b) Mechanics of Conversion. Before any Holder of this Note shall be
entitled to receive the Common Stock into which this Note has been converted,
such Holder shall surrender this Note duly endorsed, at the Company's principal
corporate office stating therein the name or names in which the certificate or
certificates for the Common Stock are to be issued. The Company shall, promptly
thereafter, issue and deliver to such Holder at the address specified by
2
<PAGE> 3
such Holder, or to the nominee or nominees of such Holder, a certificate or
certificates for the Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such conversion as provided in paragraph
(a) above and the person or persons entitled to receive the Common Stock shall
be treated for all purposes as the record holder or holders of such Common Stock
as of such date.
(c) Fractional Shares and Certificate as to Adjustment. Upon
conversion, the Company (unless otherwise requested by the Majority in Interest)
will issue fractional shares of its Common Stock upon conversion of this Note,
and shall not distribute cash in lieu of such fractional shares. The number of
full shares of Common Stock issuable upon conversion of this Note shall be
computed on the basis of the aggregate number of shares of Common Stock in to
which the Note is to be converted. If fractional shares of Common Stock which
would otherwise be issuable upon conversion of any such share are not issued,
the Company shall pay a cash adjustment in respect of such fractional interest
in an amount equal to the product of (i) the price of one share of Common Stock
as determined in good faith by the Board of Directors of the Company (the
"Board") and (ii) such fractional interest. The holders of fractional interests
shall not be entitled to any rights as stockholders of the Company in respect of
such fractional interests.
(d) Upon written notice of conversion of the Note or Notes held by
the Majority in Interest to the remaining Holders of the Notes issued under the
Securities Purchase Agreement, the remaining Holders shall be deemed to have
converted their respective Notes to that number of fully paid and nonassessable
shares of Common Stock in accordance with this Section 4.
(e) The Company shall treat the conversion of the Notes to shares of
Common Stock as the exchange of the principal amount of the Notes for the shares
of Common Stock and shall not treat any portion of the shares of Common Stock as
received in exchange for the accrual for interest or original issue discount.
Section 5. Adjustments.
The Conversion Price for each share of Common Stock of the Company
shall be subject to adjustment from time to time as follows:
(a) If the Company shall, at any time or from time to time after the
date hereof, issue any shares of Common Stock (or be deemed to have issued
shares of Common Stock as provided herein), other than Excluded Stock (as
defined herein) without consideration or for a consideration per share less than
the Conversion Price, in effect immediately prior to the issuance of such Common
Stock, then the Conversion Price, as in effect immediately prior to each such
issuance, shall forthwith be lowered to a price equal to the quotient obtained
by dividing:
(i) an amount equal to the sum of (x) the total number of
shares of Common Stock outstanding on a fully-diluted basis immediately
prior to such issuance, multiplied by the Conversion Price in effect
immediately prior to such issuance, and (y) the consideration received by
the Company upon such issuance; by
3
<PAGE> 4
(ii) the total number of shares of Common Stock outstanding on
a fully-diluted basis immediately after the issuance of such Common Stock.
(b) For the purposes of any adjustment of the Conversion Price
pursuant to clause (a) above, the following provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall be deemed to
be the amount of cash paid therefor after deducting therefrom any
discounts, commissions or placement fees payable by the Company to any
underwriter or placement agent in connection with the issuance and sale
thereof.
(ii) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the Fair Value Per Share (as defined
herein) thereof as determined in good faith by the Board of Directors of
the Company, irrespective of any accounting treatment.
(iii) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock, or options to purchase
or rights to subscribe for such convertible or exchangeable securities
except for options to acquire Excluded Stock:
(A) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in Sections 5(b)(i) and 5(b)(ii) above), if any, received
by the Company upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the
Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities, options, or rights were issued and for a consideration
equal to the consideration received by the Company for any such
securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the additional consideration, if any, to be received by the Company
upon the conversion or exchange of such securities or the exercise
of any related options or rights (the consideration in each case to
be determined in the manner provided in Sections 5(b)(i) and
5(b)(ii) above);
(C) on any change in the number of shares or exercise
price of Common Stock deliverable upon exercise of any such options
or rights or conversions of or exchanges for such securities, other
than a change resulting
4
<PAGE> 5
from the antidilution provisions thereof, the Conversion Price shall
forthwith be readjusted to the Conversion Price as would have been
obtained had the adjustment made upon the issuance of such options,
rights or securities not converted prior to such change or options
or rights related to such securities not converted prior to such
change been made upon the basis of such change; and
(D) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price shall forthwith be
readjusted to the Conversion Price as would have been obtained had
the adjustment made upon the issuance of such options, rights,
securities or options or rights related to such securities been made
upon the basis of the issuance of only the number of shares of
Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities, or upon
the exercise of the options or rights related to such securities and
subsequent conversion or exchange thereof.
(c) If, at any time after the date hereof, the number of shares of
Common Stock outstanding is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Conversion
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of this Note shall be increased in proportion to
such increase in outstanding shares.
(d) If, at any time after the date hereof, the number of shares of
Common Stock outstanding is decreased by a combination of the outstanding shares
of Common Stock, then, following the record date for such combination, the
Conversion Price shall be appropriately increased so that the number of shares
of Common Stock issuable on conversion of this Note shall be decreased in
proportion to such decrease in outstanding shares.
(e) In the event of any capital reorganization of the Company, any
reclassification of the stock of the Company (other than a change in par value
or from par value to no par value or from no par value to par value or as a
result of a stock dividend or subdivision, split-up or combination of shares),
or any consolidation or merger of the Company, each share of Common Stock into
which this Note may be converted shall after such reorganization,
reclassification, consolidation, or merger be convertible into the kind and
number of shares of stock or other securities or property of the Company or of
the Company resulting from such consolidation or surviving such merger to which
the Holder of the number of shares of Common Stock deliverable (immediately
prior to the time of such reorganization, reclassification, consolidation or
merger) upon conversion of this Note would have been entitled upon such
reorganization, reclassification, consolidation or merger. The provisions of
this clause shall similarly apply to successive reorganizations,
reclassifications, consolidations or mergers.
(f) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least .1% in such
Conversion Price; provided, that any adjustments not required to be made by
virtue of this sentence shall be carried
5
<PAGE> 6
forward and taken into account in any subsequent adjustment. All calculations
under Sections 5(a) through 5(e) above shall be made to the nearest one
hundredth (1/100) of a cent or the nearest one tenth (1/10) of a share, as the
case may be.
(g) In any case in which the provisions of this Section 5(g) shall
require that an adjustment shall become effective immediately after a record
date of an event, the Company may defer until the occurrence of such event (A)
issuing to the Holder of any Note converted after such record date and before
the occurrence of such event the shares of capital stock issuable upon such
conversion by reason of the adjustment required by such event in addition to the
shares of capital stock issuable upon such conversion before giving effect to
such adjustments, and (B) if applicable, paying to such Holder any amount in
cash in lieu of a fractional share of capital stock pursuant to Section 5(c)
above; provided, however, that the Company shall deliver to such Holder an
appropriate instrument evidencing such Holder's right to receive such additional
shares and such cash.
(h) Whenever the Conversion Price shall be adjusted as provided in
Section 5(a), the Company shall make available for inspection during regular
business hours, at its principal executive offices or at such other place as may
be designated by the Company, a statement, signed by its chief executive
officer, showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment. The Company
shall also cause a copy of such statement to be sent by first class certified
mail, return receipt requested and postage prepaid, to the Holder affected by
the adjustment at such Holder's address appearing on the Company's records.
Where appropriate, such copy may be given in advance and may be included as part
of any notice required to be mailed under the provisions of Section 5(i) below.
(i) If the Company shall propose to take any action of the types
described in clauses (c), (d) or (e) of this Section 5, the Company shall give
notice to each Holder, which notice shall specify the record date, if any, with
respect to any such action and the date on which such action is to take place.
Such notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Conversion Price and the
number, kind or class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or deliverable
upon conversion of the Note. In the case of any action which would require the
fixing of a record date, such notice shall be given at least twenty (20) days
prior to the date so fixed, and in case of all other action, such notice shall
be given at least thirty (30) days prior to the taking of such proposed action.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of any such action.
(j) The Company shall at all times keep reserved, free from
preemptive rights, out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the Note, sufficient
number of shares of Common Stock to provide for the conversion of the Notes.
(k) Without duplication of any other adjustment provided for in this
Section 5, at any time the Company makes or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Company other than shares of Common
Stock, provision shall be made so that each Holder shall receive
6
<PAGE> 7
upon conversion thereof, in addition to the shares of Common Stock receivable
thereupon, the number of securities of the Company which it would have received
had its Note been converted into shares of Common Stock on the date of such
event and had such holder thereafter, during the period from the date of such
event to and including the date of conversion, retained such securities
receivable by it pursuant to this paragraph during such period, subject to the
sum of all other adjustments called for during such period under this Section 5
with respect to the rights of such Holder.
(l) In the event that the Majority in Interest consents in writing
to limit, or waive in its entirety, any anti-dilution adjustment to which the
holders of the Notes would otherwise be entitled hereunder, the Company shall
not be required to make any adjustment whatsoever with respect to the Note in
excess of such limit or at all, as the terms of such consent may dictate.
(m) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 5 and in
the taking of all such action as may be necessary or appropriate in order to
protect the exercise rights of the Holders of the Notes against impairment.
(n) The computations of all amounts under this Section 5 shall be
made assuming all other anti-dilution or similar adjustments to be made to the
terms of all other securities resulting from the transaction causing an
adjustment pursuant to this Section 5 have previously been made so as to
maintain the relative economic interest of the Note vis a vis all other
securities issued by the Company.
(o) The Company shall take or cause to be taken such steps as shall
be necessary to ensure that the par value per share of Common Stock is at all
time less than or equal to the Conversion Price.
(p) For purposes of the Note, (i) "Excluded Stock" shall mean up to
5,000,000 shares (as adjusted equitably for stock dividends, stock splits,
combinations, etc.) of Common Stock issuable upon (A) exercise of stock options
granted to officers and employees of the Company or its subsidiaries, (B) shares
of Common Stock issued upon conversion of shares of Preferred Stock, including
in the case of both (A) and (B), any additional shares of Common Stock as may be
issued by virtue of antidilution provisions, if any, applicable to such options,
warrants or shares, as the case may be, and (C) shares of Common Stock issued
upon exercise, (ii) "Fair Value Per Share" shall mean the fair value of each
share of Stock, as determined in good faith by the Board, and (iii) "Stock"
shall mean (A) the presently issued and outstanding shares of Common Stock and
Preferred Stock and any options or stock subscription warrants exercisable
therefor (which options and warrants shall be deemed to be that number of
outstanding shares of Stock for which they are exercisable), (B) any additional
shares of capital stock of the Company hereafter issued and outstanding and (C)
any shares of capital stock of the Company into which such shares may be
converted or for which they may be exchanged or exercised.
7
<PAGE> 8
Section 6. Form of Payments.
All payments of principal of and interest on this Note shall be made
in such coin or currency of the United States of America as at the time of
payment shall be legal tender therein for the payment of public and private
debts and shall be payable by wire transfer of immediately available funds to
the account of the Holder at such banking institution as the Holder designates,
or, if requested by the Holder, by certified or official bank check mailed to
the Holder at the address of the Holder set forth on the records of the Company
or such other address as shall be designated in writing by the Holder to the
Company.
Section 7. Exchange or Replacement of Note.
(a) The Holder, at its option, may in person or by duly authorized
attorney surrender this Note for exchange, at the office or agency of the
Company maintained pursuant to Section 9(a) and receive in exchange therefor a
new Note in the same aggregate principal amount as the unpaid principal amount
of the Note so surrendered, each such new Note to be dated as of the date to
which interest has been paid on the Note so surrendered and payable to the
Holder.
(b) Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction, or mutilation of this Note, and in case of loss,
theft or destruction of indemnity reasonably satisfactory to it, and upon
surrender and cancellation of this Note, if mutilated, the Company shall make
and deliver a new Note of like tenor in lieu of this Note. Any Note made and
delivered in accordance with this paragraph shall be dated the date hereof.
Section 8. Amendments.
(a) This Note may not be amended or modified in any respect unless
the Majority in Interest consents and such amendment or modification is set
forth in writing and signed by the party against whom enforcement thereof is
sought; provided, however, that no amendment or modification shall be made to
this Note which would have a Material Adverse Effect on the rights of Trident
vis a vis the rights of Signal hereunder without the prior written consent of
Trident. Any such amendment or modification shall be binding upon each Holder
and future Holder of this Note.
(b) With respect to Section 4 and this Section 8 only under this
Note, the Majority in Interest will be deemed to be a third party beneficiary in
order to effect the rights set forth hereunder.
Section 9. Office or Agency.
(a) So long as this Note remains outstanding, the Company shall
maintain an office or agency (which shall initially be the principal place of
business of the Company located at 570 Lexington Avenue, New York, New York
10022) where notices, presentations and demands to or upon the Company in
respect of this Note may be given.
(b) All notices to be given by the Company to the Holder in respect
of this Note shall be delivered or mailed to the address of the Holder set forth
on the records of the Company or such other address as shall be designated in
writing by the Holder to the Company.
8
<PAGE> 9
Section 10. Events of Default.
In the case of the happening of an Event of Default, then the
indebtedness evidenced by this Note shall become due and payable as provided in
Article VII of the Securities Purchase Agreement.
Section 11. Extension of Maturity. If any payment of principal of or
interest on this Note shall become due on a Saturday, Sunday or a public holiday
under the Laws of the State of New York or the United States of America, such
payment shall be made on the next succeeding business day and such extension of
time shall in such case be included in computing interest in connection with
such payment.
Section 12. Costs and Expenses. The Company shall pay all reasonable costs
and expenses, including reasonable attorneys' fees, incurred by the Holder in
collecting or enforcing this Note during the continuance of any Event of
Default.
Section 13. Waivers.
(a) The Company and all endorsers, sureties and guarantors of this
Note, hereby jointly and severally waive presentment, demand for payment, notice
of dishonor, notice of protest, and protest in connection with the delivery,
acceptance, performance, default, endorsement or guaranty of this Note.
(b) No delay by the Holder in exercising any power or right
hereunder shall operate as a waiver of any power or right, nor shall any single
or partial exercise of any power or right preclude other or further exercise
thereof, or the exercise of any other power or right hereunder or otherwise. No
waiver or modification of the terms hereof shall be valid unless set forth in
writing by the Majority in Interest.
Section 14.Transfer of Note. Subject to the restrictions on transfer set
forth herein and in the Securities Purchase Agreement, this Note and all rights
hereunder are transferable, in whole or in part, at any time and from time to
time. Any transfer shall be effected by the Holder in person or by duly
authorized attorney by surrendering this Note, properly endorsed, at the agency
or office of the Company referred to in Section 9(a). Each taker and holder of
this Note, by taking or holding the same, consents and agrees that this Note,
when endorsed, in blank, shall be deemed negotiable, and, when so endorsed the
holder hereof may be treated by the Company and all other persons dealing with
this Note as the absolute owner hereof for any purposes and as the person
entitled to exercise the rights represented by this Note, or to the transfer
hereof on the books of the Company, any notice to the contrary notwithstanding;
but until such transfer on such books, the Company may treat the registered
holder hereof as the owner hereof for all purposes.
Section 15. Governing Law; Jurisdiction.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY LAW OR RULE THAT
WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK TO BE
APPLIED.
9
<PAGE> 10
THE COMPANY HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK
STATE COURT FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS NOTE. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE COMPANY AND THE HOLDER HERETO IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 7.1 OF THE SECURITIES
PURCHASE AGREEMENT. NOTHING IN THIS NOTE OR THE SECURITIES PURCHASE AGREEMENT
WILL AFFECT THE RIGHT OF THE COMPANY OR THE HOLDER TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
10
<PAGE> 11
FIBERNET TELECOM GROUP, INC.
By: _______________________________
Name:
Title:
ATTEST:
_______________________________________
Name:
Title:
<PAGE> 1
EXHIBIT E
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND NOT WITH A VIEW TO THE DISTRIBUTION THEREOF AND HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES OR BLUE SKY LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION UNDER SUCH ACT OR LAWS AND THE
RULES AND REGULATIONS THEREUNDER. IN ADDITION, THE TRANSFER OF THIS WARRANT IS
SUBJECT TO THE TERMS OF THE STOCKHOLDERS AGREEMENT DATED AS OF MAY 7, 1999 AMONG
FIBERNET TELECOM GROUP, INC. AND CERTAIN STOCKHOLDERS NAMED THEREIN. COPIES OF
SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
HEREOF TO THE SECRETARY OF FIBERNET TELECOM GROUP, INC.
FIBERNET TELECOM GROUP, INC.
COMMON STOCK WARRANT
May __, 1999
This certifies that, for value received, [PURCHASER] or its
successors, assigns and/or transferees, (the "Holder"), is entitled to purchase
from FIBERNET TELECOM GROUP, INC., a Nevada corporation (the "Corporation"),
________________shares of Common Stock of the Corporation at a per share price
equal to $0.67 (as adjusted from time to time as provided in Section 3 hereof,
the "Exercise Price"), at any time or from time to time during the Exercise
Period. "Exercise Period" shall mean the period commencing on the Date of
Issuance (as defined herein) and ending at midnight on May 7, 2004. The
Corporation shall give the Holder written notice of the expiration of the
Exercise Period at least 30 days but not more than 90 days prior to the
expiration of the Exercise Period; failure to give such notice properly shall
result in the Exercise Period being extended for an additional 30 days.
This Warrant is one of one or more warrants (the "Warrants") of the
same form and having the same terms as this Warrant (other than differences in
the Holder and the number of Warrant Shares (as defined herein) issuable),
entitling the holders of such Warrants (collectively, the "Holders" and each,
individually, a "Holder") initially to purchase up to an aggregate of 6,204,000
shares of Common Stock. The Warrants have been issued pursuant to a certain
Securities Purchase Agreement, dated as of May 7, 1999 (as amended from time to
time, the "Purchase Agreement"), among the Corporation and the Purchasers (as
defined therein), and the Holder is entitled to certain benefits as set forth
therein and to certain benefits, and subject to certain restrictions on
transfer, described in the Stockholders Agreement, dated as of May 7, 1999,
among the Corporation and certain stockholders of the Corporation named therein
(the "Stockholders Agreement"). The Corporation shall keep a copy of the
Purchase Agreement and
<PAGE> 2
any amendments thereto, at its principal place of business and shall furnish,
without charge, copies thereof to the Holder upon request.
Certain terms used in this Warrant are defined in Section 13 herein.
Section 1. Exercise of Warrant.
At the option of the Holder, the Holder may exercise the rights
represented by this Warrant as follows:
(a) The rights represented by this Warrant may be exercised by the
Holder hereof, in whole or in part at any time or from time to time during the
Exercise Period, by delivering to the Corporation at its offices set forth on
the signature pages hereof, the following three items: (i) a written notice
executed by the Holder (or its authorized representative) electing to exercise
all or any portion of this Warrant, and if the Holder is exercising this Warrant
in part, identifying the number of Warrant Shares to be acquired, such notice to
be substantially in the Form of Subscription attached hereto, (ii) this Warrant,
and (iii) payment to the Corporation of the Exercise Price for each share (or
fraction thereof) being purchased by delivery of any combination of one or more
of the following: (A) cash, wire transfer or check or (B) reduction of the
monetary Obligations owing to the Holder pursuant to the Purchase Agreement or
the Notes.
(b) In addition to the exercise of all of the Warrants by the
payment of the Exercise Price in cash or check as set forth in Section 1(a)
above, and in lieu of any such payment, the Holder has the right to exercise the
Warrants by surrendering a Warrant with the attached Form of Subscription duly
executed, in exchange for the number of Warrant Shares equal to the product of
(x) the number of shares of Common Stock as to which the surrendered Warrant is
being exercised multiplied by (y) a fraction, the numerator of which is the
Current Market Price (as defined in Section 11) of Common Stock (the "Common
Shares") less the Exercise Price then in effect and the denominator of which is
the Current Market Price.
(c) Upon any exercise of this Warrant, if the Warrant Shares are not
to be issued to the Holder, the Form of Subscription shall also state the name
of the Person to whom the certificates for the Warrant Shares are to be issued,
and if the number of Warrant Shares to be issued does not include all the
Warrant Shares purchasable hereunder, it shall also state the name of the Person
to whom a new Warrant for the unexercised portion of the rights hereunder is to
be delivered and such investment representations as are set forth in Article IV
of the Purchase Agreement. In the event of any exercise of the rights
represented by this Warrant, a certificate or certificates for the Warrant
Shares, registered in the name of the Person entitled to receive the same, shall
be delivered to the Holder hereof within a reasonable time, not exceeding ten
days, after the rights represented by this Warrant shall have been so exercised,
and, unless this Warrant has expired, a new Warrant representing the number of
Warrant Shares (including any fractional share), if any, with respect to which
this Warrant shall not then have been exercised shall also be issued to the
Person entitled to receive the same within such time. The Person in whose name
any certificate for Warrant Shares is issued upon exercise of this Warrant shall
for all purposes be deemed to have become the Holder of record of such shares on
the date on which this Warrant was surrendered and payment of the Exercise Price
was made, irrespective of the date of delivery
2
<PAGE> 3
of such certificate. The Corporation shall pay all expenses, taxes and other
charges payable in connection with the preparation, issuance and delivery of
share certificates for Warrant Shares and new Warrants, except that, if share
certificates or new Warrants shall be registered in a name or names other than
the name of the Holder, funds sufficient to pay all transfer taxes (if any)
payable as a result of such transfer shall be paid by the Holder at the time of
delivery of the aforementioned notice of exercise or promptly upon receipt of a
written request of the Corporation for payment.
(d) Upon exercise of this Warrant, the Corporation (unless otherwise
requested by the Majority in Interest) will issue fractional shares of its
Common Stock, but the Corporation shall not distribute cash in lieu of such
fractional shares. The number of Warrant Shares issuable upon exercise of this
Warrant shall be computed on the basis of the aggregate number of Warrants to be
exercised to be converted. If fractional shares of Common Stock which would
otherwise be issuable upon conversion of any such share are not issued, the
Corporation shall pay a cash adjustment in respect of such fractional interest
in an amount equal to the product of (i) the price of one share of Common Stock
as determined in good faith by the Board of Directors of the Corporation and
(ii) such fractional interest. The holders of fractional interests shall not be
entitled to any rights as stockholders of the Corporation in respect of such
fractional interests.
Section 2. Covenants of the Corporation. The Corporation covenants and
agrees that:
(a) All Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and non-assessable, and free from all taxes, liens, security interests,
charges or other encumbrances with respect to the issuance thereof.
(b) The Corporation will at all times have authorized and reserved,
free from preemptive rights, a sufficient number of Warrant Shares to provide
for the exercise of the rights represented by this Warrant.
(c) The Corporation will, in good faith and as expeditiously as
possible, endeavor to make any filings with or obtain any approvals required to
be made or obtained with or by any Governmental Authority of the United States
of America, any state within the United States, and any political subdivision of
any of the foregoing, as the case may be, prior to or in respect of the exercise
of this Warrant (including, without limitation, making all filings required to
be made by the Corporation), provided that the Corporation shall not (unless
otherwise required) be required by this paragraph (c) to comply with the
reporting requirements of applicable securities laws or otherwise qualify as a
reporting issuer or permit the public trading of its shares.
(d) The Corporation, in reliance upon the investment representations
of the Holder or any transferee of the Holder, shall take all such actions as
may be necessary to ensure that all Warrant Shares issuable upon the exercise of
this Warrant may be so issued without violation of any Applicable Law or the
requirements of any exchange upon which the Corporation's shares may be listed,
provided that the Corporation shall not (unless otherwise required) be required
by
3
<PAGE> 4
this paragraph (d) to comply with the reporting requirements of applicable
securities laws or otherwise to qualify as a reporting issuer or to permit the
public trading of its shares.
(e) Notwithstanding any other provision hereof, if the exercise of
any portion of this Warrant is to be made in connection with a public offering
of securities of the Corporation or sale of effective voting control of the
Corporation, the exercise of any portion of this Warrant may, at the election of
the Holder, be conditioned upon the consummation of the public offering or sale
in which case such exercise shall not be deemed to be effective until the
consummation of such transaction.
(f) The Corporation shall pay all transactional taxes attributable
to the issuance or delivery of Warrant Shares; provided, however, that the
Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for Warrant Shares in a name other than that of the Holder.
(g) Whenever the Corporation is required by the terms of this
Warrant to retain any professionals (accountants, investment bankers,
arbitrators, etc.), if required by such professionals, the Corporation shall
execute a retainer or engagement letter containing reasonable terms and
conditions, including, without limitation, customary provisions concerning the
rights of indemnification and contribution by the Corporation in favor of such
professionals and their officers, directors, employees, agents and Affiliates.
(h) The Corporation shall not, by any action including, without
limitation, amending its Amended Articles of Incorporation, any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate to protect the rights of the
Holder hereof against impairment. Without limiting the generality of the
foregoing, the Corporation will not undertake any reverse stock split,
combination, reorganization or other reclassification of its capital stock which
would have the effect of making this Warrant exercisable for less than either
one Warrant Share and that percentage of the outstanding shares of Common Stock
to which it related immediately prior to such corporate action. Upon the request
of the Holder hereof, the Corporation will, at any time during the period this
Warrant is outstanding, acknowledge in writing, in form satisfactory to such
Holder, the continued validity of this Warrant and the Corporation's obligations
hereunder.
Section 3. Adjustment of Number of Shares and Exercise Price. In order to
prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 3,
and the number of Warrant Shares shall be subject to adjustment from time to
time as provided in this Section 3.
(a) If the Corporation shall, at any time or from time to time
during the Exercise Period, issue any shares of Common Stock (or be deemed to
have issued shares of Common Stock as provided herein), other than Excluded
Stock (as defined herein) without consideration or for a consideration per share
less than the Exercise Price for the Warrants, in effect immediately prior to
the issuance of such Common Stock, then the Exercise Price, as in effect
4
<PAGE> 5
immediately prior to each such issuance, shall forthwith be lowered to a price
equal to the quotient obtained by dividing:
(i) an amount equal to the sum of (x) the total number of
shares of Common Stock outstanding on a fully-diluted basis immediately
prior to such issuance, multiplied by the Exercise Price in effect
immediately prior to such issuance, and (y) the consideration received by
the Corporation upon such issuance; by
(ii) the total number of shares of Common Stock outstanding on
a fully-diluted basis immediately after the issuance of such Common Stock.
(b) For the purposes of any adjustment of the Exercise Price
pursuant to clause (a) above, the following provisions shall be
applicable:
(i) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall be deemed to
be the amount of cash paid therefor after deducting therefrom any
discounts, commissions or placement fees payable by the Corporation to any
underwriter or placement agent in connection with the issuance and sale
thereof.
(ii) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the Fair Value Per Share (as defined
herein) thereof as determined in good faith by the Board of Directors of
the Corporation, irrespective of any accounting treatment.
(iii) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock, or options to purchase
or rights to subscribe for such convertible or exchangeable securities
except for options to acquire Excluded Stock:
(A) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in Sections 3(b)(i) and 3(b)(ii), if any, received by the
Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the
Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities, options, or rights were issued and for a consideration
equal to the consideration received by the Corporation for any such
securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the additional consideration, if any, to be received by the
5
<PAGE> 6
Corporation upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in
each case to be determined in the manner provided in Sections
3(b)(i) and 3(b)(ii) above);
(C) on any change in the number of shares or exercise
price of Common Stock deliverable upon exercise of any such options
or rights or conversions of or exchanges for such securities, other
than a change resulting from the antidilution provisions thereof,
the Exercise Price shall forthwith be readjusted to the Exercise
Price as would have been obtained had the adjustment made upon the
issuance of such options, rights or securities not converted prior
to such change or options or rights related to such securities not
converted prior to such change been made upon the basis of such
change; and
(D) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the Exercise Price shall forthwith be
readjusted to the Exercise Price as would have been obtained had the
adjustment made upon the issuance of such options, rights,
securities or options or rights related to such securities been made
upon the basis of the issuance of only the number of shares of
Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities, or upon
the exercise of the options or rights related to such securities and
subsequent conversion or exchange thereof.
(c) If, at any time after the Date of Issuance, the number of shares
of Common Stock outstanding is increased by a stock dividend payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Exercise
Price shall be appropriately decreased so that the number of Warrant Shares
shall be increased in proportion to such increase in outstanding shares.
(d) If, at any time after the Date of Issuance, the number of shares
of Common Stock outstanding is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date for such combination,
the Exercise Price shall be appropriately increased so that the number of
Warrant Shares shall be decreased in proportion to such decrease in outstanding
shares.
(e) In the event of any capital reorganization of the Corporation,
any reclassification of the stock of the Corporation (other than a change in par
value or from par value to no par value or from no par value to par value or as
a result of a stock dividend or subdivision, split-up or combination of shares),
or any consolidation or merger of the Corporation, each Warrant Share shall
after such reorganization, reclassification, consolidation, or merger be
convertible into the kind and number of shares of stock or other securities or
property of the Corporation or of the corporation resulting from such
consolidation or surviving such merger to which the holder of the number of
shares of Common Stock deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation or merger) upon conversion of
such Warrant Share would have been entitled upon such reorganization,
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<PAGE> 7
reclassification, consolidation or merger. The provisions of this clause shall
similarly apply to successive reorganizations, reclassifications, consolidations
or mergers.
(f) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least .1% in such
Exercise Price; provided, that any adjustments not required to be made by virtue
of this sentence shall be carried forward and taken into account in any
subsequent adjustment. All calculations under Sections 3(a) through 3(e) above
shall be made to the nearest one hundredth (1/100) of a cent or the nearest one
tenth (1/10) of a share, as the case may be.
(g) In any case in which the provisions of this Section 3(g) shall
require that an adjustment shall become effective immediately after a record
date of an event, the Corporation may defer until the occurrence of such event
(A) issuing to the holder of any Warrant Share converted after such record date
and before the occurrence of such event the shares of capital stock issuable
upon such conversion by reason of the adjustment required by such event in
addition to the shares of capital stock issuable upon such conversion before
giving effect to such adjustments, and (B) if applicable, paying to such holder
any amount in cash in lieu of a fractional share of capital stock pursuant to
Section 1(d) above; provided, however, that the Corporation shall deliver to
such holder an appropriate instrument evidencing such holder's right to receive
such additional shares and such cash.
(h) Whenever the Exercise Price shall be adjusted as provided in
Section 3(d), the Corporation shall make available for inspection during regular
business hours, at its principal executive offices or at such other place as may
be designated by the Corporation, a statement, signed by its chief executive
officer, showing in detail the facts requiring such adjustment and the Exercise
Price that shall be in effect after such adjustment. The Corporation shall also
cause a copy of such statement to be sent by first class certified mail, return
receipt requested and postage prepaid, to each Holder of Warrants affected by
the adjustment at such Holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be included as part
of any notice required to be mailed under the provisions of Section 3(i) below.
(i) If the Corporation shall propose to take any action of the types
described in clauses (c), (d) or (e) of this Section 3, the Corporation shall
give notice to each Holder of Warrants, which notice shall specify the record
date, if any, with respect to any such action and the date on which such action
is to take place. Such notice shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such action
(to the extent such effect may be known at the date of such notice) on the
Exercise Price and the number, kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of such
action or deliverable upon exercise of this Warrant. In the case of any action
which would require the fixing of a record date, such notice shall be given at
least twenty (20) days prior to the date so fixed, and in case of all other
action, such notice shall be given at least thirty (30) days prior to the taking
of such proposed action. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of any such action.
(j) The Corporation shall at all times keep reserved, free from
preemptive rights, out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting
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<PAGE> 8
the exercise of this Warrant, sufficient number of shares of Common Stock to
provide for the Warrant Shares.
(k) Without duplication of any other adjustment provided for in this
Section 3, at any time the Corporation makes or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Corporation other than shares of
Common Stock, provision shall be made so that each Holder shall receive upon
exercise of the Warrant, in addition to the shares of Common Stock receivable
thereupon, the number of securities of the Corporation which it would have
received had its Warrant been exercised into shares of Common Stock on the date
of such event and had such holder thereafter, during the period from the date of
such event to and including the date of conversion, retained such securities
receivable by it pursuant to this paragraph during such period, subject to the
sum of all other adjustments called for during such period under this Section 3
with respect to the rights of such Holders.
(l) In the event that Majority in Interest consents in writing to
limit, or waive in its entirety, any anti-dilution adjustment to which the
Holders of the Warrants would otherwise be entitled hereunder, the Corporation
shall not be required to make any adjustment whatsoever with respect to any
Warrants in excess of such limit or at all, as the terms of such consent may
dictate.
(m) The Corporation will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 3
and in the taking of all such action as may be necessary or appropriate in order
to protect the exercise rights of the Holders of Warrants against impairment.
(n) The computations of all amounts under this Section 3 shall be
made assuming all other anti-dilution or similar adjustments to be made to the
terms of all other securities resulting from the transaction causing an
adjustment pursuant to this Section 3 have previously been made so as to
maintain the relative economic interest of the Warrants vis a vis all other
securities issued by the Corporation.
(o) The Corporation shall take or cause to be taken such steps as
shall be necessary to ensure that the par value per share of Common Stock is at
all time less than or equal to the Exercise Price.
Section 4. No Stockholder Rights; Limitation of Liability. The Holder
shall not be entitled to any voting rights or other rights as a stockholder of
the Corporation by reason of the rights granted under this Warrant until the
Holder shall purchase shares of Common Stock hereunder. No provision hereof, in
the absence of affirmative action by the Holder to purchase Warrant Shares, and
no enumeration herein of the rights or privileges of the Holder shall give rise
to any liability of such Holder for the payment of the Exercise Price or as a
stockholder of the Corporation.
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<PAGE> 9
Section 5. Warrant Agency; Transfer, Exchange and Replacement of Warrants.
(a) Warrant Agency. As long as any of the Warrants remain
outstanding, the Corporation shall perform the obligations of and be the warrant
agency with respect to the Warrants (the "Warrant Agency") at its address set
forth on the signature pages hereof or at such other address as the Corporation
shall specify by notice to the Holders.
(b) Ownership of Warrant. The Corporation may deem and treat the
Person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any Person
other than the Corporation) for all purposes and shall not be affected by any
notice to the contrary, until due presentment of this Warrant for registration
of transfer as provided in this Section 5.
(c) Transfer of Warrant. The Corporation agrees to maintain at the
Warrant Agency books for the registration of transfers of the Warrants, and
transfer of this Warrant and all rights hereunder shall be registered, in whole
or in part, on such books, upon surrender of this Warrant at the Warrant Agency,
together with a written assignment of this Warrant duly executed by the Holder
or its duly authorized agent or attorney, with (if the Holder is a natural
person) signatures guaranteed by a bank or trust company or a broker or dealer
registered with the NASD, and funds sufficient to pay any transfer taxes payable
upon such transfer. The Holder shall be permitted to transfer all or any portion
of this Warrant at any time and from time to time, subject, however, to
compliance with the provisions (i) regarding transferability set forth in the
Stockholders Agreement, including, under certain circumstances, the requirement
that the transferee become a party to the Stockholders Agreement and (ii) of the
Act and Applicable Law. Upon surrender and, if required, such payment, the
Corporation shall execute and deliver a new Warrant or Warrants in the name of
the assignee or assignees and in the denominations specified in the instrument
of assignment (which shall be whole numbers of shares only unless the assignor
is transferring the entire Warrant) and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and this Warrant
shall promptly be canceled. The Corporation shall not at any time, except upon
the dissolution, liquidation or winding-up of the Corporation, close such
register so as to result in preventing or delaying the exercise or transfer of
this Warrant.
(d) Division or Combination of Warrants. This Warrant may be divided
or combined with other Warrants upon presentment hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Warrant Agency,
together with a written notice specifying the names and denominations in which
the new Warrant or Warrants are to be issued, signed by the holders hereof and
thereof or their respective duly authorized agents or attorneys. Subject to
compliance with Section 5(c) as to any transfer or assignment which may be
involved in the division or combination, the Corporation shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be
divided or combined in accordance with such notice.
(e) Loss, Theft, Destruction of Warrant Certificates. Upon receipt
of evidence by the Corporation of the ownership of and the loss, theft,
destruction or mutilation of any Warrant and, in the case of any such loss,
theft or destruction, upon receipt of indemnity or security by the Corporation
or, in the case of any such mutilation, upon surrender and cancellation of such
9
<PAGE> 10
Warrant, the Corporation will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same aggregate number of shares of Common Stock.
(f) Expenses of Delivery of Warrants. The Corporation shall pay all
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of Warrants hereunder.
Section 6. Listing on Securities Exchanges. The Corporation shall list on
each securities exchange on which any Common Stock may at any time be listed,
subject to official notice of issuance upon the exercise of this Warrant, and
shall maintain, so long as any other shares of its Common Stock shall be so
listed, such listing of all shares of Common Stock from time to time issuable
upon the exercise of this Warrant, and the Corporation shall so list on each
national securities exchange, and shall maintain such listing of, any other
shares of capital stock of the Corporation issuable upon the exercise of this
Warrant if and so long as any shares of capital stock of the same class shall be
listed on such national securities exchange by the Corporation. Any such listing
shall be at the Corporation's expense.
Section 7. Availability of Information. The Corporation shall comply with
all applicable public information reporting requirements of all applicable
securities laws (including those required to make available the benefits of Rule
144 under the Act) to which it may from time to time be subject. The Corporation
shall also cooperate with each holder of this Warrant and holder of any Common
Stock issued upon exercise of this Warrant in supplying such information as may
be necessary for such holder to complete and file any information reporting
forms currently or hereafter required by any Governmental Authority as a
condition to the availability of an exemption from the registration provisions
of any applicable securities law for the sale of any Warrant or Common Stock
issued upon exercise of this Warrant.
Section 8. Successors. All the provisions of this Warrant by or for the
benefit of the Corporation or the Holder shall bind and inure to the benefit of
their respective successors and assigns.
Section 9. Headings. The headings of sections of this Warrant have been
inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 10. Remedies; Amendment and Waiver.
(a) No failure or delay of any party in exercising any power or
right hereunder shall operate as a waiver thereof (except where a specific time
period for the exercise of such power or right is expressly set forth herein),
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No notice or demand on any party in any case shall entitle such
party to any other or future notice or demand in similar or other circumstances.
The rights and remedies of the Holder are cumulative and not exclusive of any
rights or remedies which it would otherwise have. The Corporation stipulates
that remedies at law of the Holder of this Warrant in the event of any default
or
10
<PAGE> 11
threatened default by the Corporation in the performance of or compliance with
any of the terms of this Warrant are not, and will not be, adequate, and that,
to the fullest extent permitted by law and equity, such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
(b) Except as otherwise provided herein, the provisions of the
Warrants may be amended and the Corporation may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Corporation has obtained the written consent of the Majority in
Interest. The provisions of the Purchase Agreement and the Stockholders
Agreement may be amended, modified or waived only in accordance with the
respective provisions thereof. Any such amendment, modification or waiver
effected pursuant to and in accordance with the provisions of this Section 10 or
the applicable provisions of the Purchase Agreement or the Stockholders
Agreement shall be binding upon the Holders of all Warrants and Warrant Shares,
upon each future Holder thereof and upon the Corporation. In the event of any
such amendment, modification or waiver, the Majority in Interest shall give
prompt notice thereof to all Holders of Warrants and Warrant Shares and, if
appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
Section 11. Severability. Whenever possible, each provision of this
Warrant will be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Warrant is held to be invalid,
illegal or unenforceable in any respect under any Applicable Law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, and such invalid, void or
otherwise unenforceable provisions shall be null and void. It is the intent of
the parties, however, that any invalid, void or otherwise unenforceable
provisions be automatically replaced by other provisions which are as similar as
possible in terms to such invalid, void or otherwise unenforceable provisions
but are valid and enforceable to the fullest extent permitted by law.
Section 12. Definitions; Interpretation.
(a) Definitions. Capitalized terms used but not otherwise defined
herein have the meanings assigned thereto in the Purchase Agreement. The
following terms have meanings set forth below:
"Amended Articles of Incorporation" means the Amended and Articles
of Incorporation of the Corporation dated as of the date hereof.
"Current Market Price" means (i) if the exercise of this Warrant
occurs in connection with a public offering of the Company, the "initial price
to public" specified in the final prospectus with respect to the public offering
or (ii) if the exercise of this warrant occurs after or not in connection with a
public offering of the Company, the average of the closing bid and asked prices
of the Company's Common Stock quoted in the Over-The-Counter Market Summary on
the Nasdaq National Market or the closing price quoted on any exchange on which
the Common Stock is listed, whichever if applicable, as published in The Wall
Street Journal for the fifteen trading days prior to the date of determination
of the Current Market Price. Notwithstanding the foregoing sentence, if the
Company is party to a merger or sale of all or
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<PAGE> 12
substantially all or substantially all of the Company's assets, "Current Market
Price" shall mean the value that would have been received in respect of a
Warrant Share had the Warrant been exercised prior to such merger or sale. If
the Common Stock is not traded Over-The-Counter or on an exchange, or the
Company is not a party to a merger or sale of all or substantially all of its
assets, the Current Market Price shall be determined in good faith by the
Company's Board of Directors upon a review of all factors relevant to the value
of the Company as a going concern after applying appropriate minority or
illiquidity discounts. If the holder hereof does not believe the determination
of Current Market Price has been determined by the Company's Board of Directors
in a manner consistent with the criteria as provided above the holder hereof
shall request the Company to re-determine Current Market Price or request that
the Current Market Price shall be determined based on the factors described
above by an investment banker of national reputation selected by the Company and
reasonably acceptable to the Holder. The fees and expenses of such investment
banker shall be borne by the Company unless the Current Market Price determined
by such investment banker is less than the current Market Price determined by
the Company and then the fees and expenses of such investment banker shall be
shared equally between the Company and the Holder.
"Date of Issuance" means May 7, 1999.
"Excluded Stock" shall mean (i) up to 5,000,000 shares (as adjusted
equitably for stock dividends, stock splits, combinations, etc.) of Common Stock
issuable upon (i) exercise of stock options granted to officers and employees of
the Corporation or its subsidiaries, (ii) shares of Common Stock issued upon
exercise of this Warrant, including in the case of both (i) and (ii), any
additional shares of Common Stock as may be issued by virtue of antidilution
provisions, if any, applicable to such options, warrants or shares, as the case
may be, and (iii) shares of Common Stock issued upon exercise.
"Fair Value Per Share" shall mean the fair value of each share of
Stock, as determined in good faith by the Board.
"Person" shall be construed broadly and shall include any natural
person, company, partnership, joint venture, corporation, business trust,
unincorporated organization or Governmental Authority.
"Stock" shall mean (i) the presently issued and outstanding shares
of Common Stock and Preferred Stock and any options or stock subscription
warrants exercisable therefor (which options and warrants shall be deemed to be
that number of outstanding shares of Stock for which they are exercisable), (ii)
any additional shares of capital stock of the Company hereafter issued and
outstanding and (iii) any shares of capital stock of the Company into which such
shares may be converted or for which they may be exchanged or exercised.
"Warrant Agency" has the meaning given to such term in Section
5(a).
"Warrant Shares" means the Common Stock issued or issuable upon
exercise of the Warrants; provided that if there is a change such that the
securities issuable upon exercise of the Warrants are issued by an entity other
than the Corporation or there is a change in the class of
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<PAGE> 13
securities so issuable, then the term "Warrant Shares" shall mean the securities
issuable upon exercise of the Warrants.
(b) Terms Generally. The definitions contained in this Warrant shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation."
Section 13. Governing Law.
(a) ALL QUESTIONS CONCERNING THE CONSTRUCTION, INTERPRETATION AND
VALIDITY OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE
OR CONFLICT OF LAW PROVISION OR RULE (WHETHER IN THE STATE OF NEW YORK OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) FOR ALL PURPOSES OF THIS WARRANT AND FOR ALL PURPOSES OF ANY
SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THE TRANSACTIONS CONTEMPLATED
HEREBY OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, THE CORPORATION HEREBY
SUBMITS TO THE PERSONAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND
THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY, AND
ANY APPELLATE COURT FROM ANY SUCH STATE OR FEDERAL COURT, AND HEREBY IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK COURT OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE CORPORATION HEREBY AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN ANY OTHER JURISDICTION WITHIN THE UNITED STATES BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY UNITES STATES LAW. NOTHING IN THIS
WARRANT SHALL AFFECT ANY RIGHT THAT THE HOLDER MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS WARRANT OR ANY RELATED MATTER AGAINST THE
CORPORATION OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(c) THE CORPORATION HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, (i) ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT OR ANY RELATED MATTER IN
ANY NEW YORK STATE OR FEDERAL COURT SITTING IN NEW YORK CITY, (ii) THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH
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<PAGE> 14
SUIT, ACTION OR PROCEEDING IN ANY SUCH COURT AND (iii) TRIAL BY JURY IN ANY SUCH
SUIT, ACTION OR PROCEEDING.
(d) THE CORPORATION HEREBY DESIGNATES AND APPOINTS FIBERNET EQUAL
ACCESS, L.L.C. AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE
CORPORATION WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT TO
RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE CORPORATION BE EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL
BE MAILED BY REGISTERED MAIL TO THE CORPORATION AT ITS ADDRESS SET FORTH ON THE
SIGNATURE PAGES HEREOF EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW,
ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF
PROCESS. IF ANY AGENT APPOINTED BY THE CORPORATION REFUSES TO ACCEPT SERVICE,
THE CORPORATION HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE
SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE HOLDER TO BRING
PROCEEDINGS AGAINST THE CORPORATION IN THE COURTS OF ANY OTHER JURISDICTION.
Section 14. Notices. All notices, demands and requests of any kind to be
delivered to any party hereto in connection with this Warrant shall be in
writing, (a) delivered personally, (b) sent by internationally-recognized
overnight courier, (c) sent by first class, registered or certified mail, return
receipt requested or (d) by telecopy, telegram or other means of recorded
telecommunication with confirmed receipt (with hard copy to follow). Any notice,
demand or request so delivered shall constitute valid notice under this Warrant
and shall be deemed to have been received (i) on the day of actual delivery in
the case of personal delivery, (ii) on the next Business Day after the date when
sent, in the case of delivery by internationally-recognized overnight courier,
(iii) on the tenth Business Day after the date of deposit in the U.S. mail in
the case of mailing or (iv) one business day after being sent by telecopy with
confirmed receipt (with hard copy to follow). The mailing address of the
Corporation is set forth on the signature pages hereto, and the mailing
addresses of the Holders are set forth in the Stockholders Agreement and the
mailing address of each transferee of a Warrant will be set forth on the Form of
Assignment. Any party hereto may, from time to time by notice in writing served
upon the other as aforesaid, designate a different mailing address or a
different person to which all such notices, demands or requests thereafter are
to be addressed.
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<PAGE> 15
IN WITNESS WHEREOF, FIBERNET TELECOM GROUP, INC. has caused this
Warrant to be executed by its duly authorized officers under its corporate seal,
and this Warrant to be dated as of the date first set forth above.
FIBERNET TELECOM GROUP, INC.
By:
--------------------------------------
Name:
Title:
Address:
570 Lexington Avenue
New York, NY 10022
Attention: President
ATTEST:
- ------------------------
Secretary
<PAGE> 16
FORM OF SUBSCRIPTION
[To be signed upon exercise of Warrant]
TO FiberNet Telecom Group, Inc.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, ______ of Common Stock of FiberNet Telecom
Group, Inc., and herewith tenders payment of [identify amount and form of
payment] in full payment of the purchase price for such shares, and requests
that the certificates for such shares be issued in the name of, and be delivered
to, _________________________, whose address is _________________________.
The undersigned hereby affirms the investment representations made in Article IV
of the Securities Purchase Agreement dated as of May 7, 1999 between FiberNet
Telecom Group, Inc. and the signatories thereto.
Dated:
(Signature)
(Address)
<PAGE> 17
FORM OF ASSIGNMENT
[To be signed only upon transfer of Warrant]
For value received, the undersigned hereby sells, assigns and transfers unto
________________________, all of the rights represented by the within Warrant to
purchase shares of Common Stock of FiberNet Telecom Group, Inc., to which the
within Warrant relates, and appoints ___________________ Attorney to transfer
such right on the books of ____________________ with full power of substitution
in the premises.
Dated:
(Signature)
(Address of Assignor)
Signed in the presence of:
Address of Assignee:
<PAGE> 1
EXHIBIT F
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND NOT WITH A VIEW TO THE DISTRIBUTION THEREOF AND HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES OR BLUE SKY LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION UNDER SUCH ACT OR LAWS AND THE
RULES AND REGULATIONS THEREUNDER. IN ADDITION, THE TRANSFER OF THIS WARRANT IS
SUBJECT TO THE TERMS OF THE STOCKHOLDERS AGREEMENT DATED AS OF MAY 7, 1999 AMONG
FIBERNET TELECOM GROUP, INC. AND CERTAIN STOCKHOLDERS NAMED THEREIN. COPIES OF
SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
HEREOF TO THE SECRETARY OF FIBERNET TELECOM GROUP, INC.
FIBERNET TELECOM GROUP, INC.
COMMON STOCK WARRANT
May __, 1999
This certifies that, for value received, [PURCHASER] or its
successors, assigns and/or transferees, (the "Holder"), is entitled to purchase
from FIBERNET TELECOM GROUP, INC., a Nevada corporation (the "Corporation"),
________________shares of Common Stock of the Corporation at a per share price
equal to $1.50 (as adjusted from time to time as provided in Section 3 hereof,
the "Exercise Price"), at any time or from time to time during the Exercise
Period. "Exercise Period" shall mean the period commencing on the Date of
Issuance (as defined herein) and ending at midnight on May 7, 2004. The
Corporation shall give the Holder written notice of the expiration of the
Exercise Period at least 30 days but not more than 90 days prior to the
expiration of the Exercise Period; failure to give such notice properly shall
result in the Exercise Period being extended for an additional 30 days.
This Warrant is one of one or more warrants (the "Warrants") of the
same form and having the same terms as this Warrant (other than differences in
the Holder and the number of Warrant Shares (as defined herein) issuable),
entitling the holders of such Warrants (collectively, the "Holders" and each,
individually, a "Holder") initially to purchase up to an aggregate of 1,600,000
shares of Common Stock. The Warrants have been issued pursuant to a certain
Securities Purchase Agreement, dated as of May 7, 1999 (as amended from time to
time, the "Purchase Agreement"), among the Corporation and the Purchasers (as
defined therein), and the Holder is entitled to certain benefits as set forth
therein and to certain benefits, and subject to certain restrictions on
transfer, described in the Stockholders Agreement, dated as of May 7, 1999,
among the Corporation and certain stockholders of the Corporation named therein
(the "Stockholders Agreement"). The Corporation shall keep a copy of the
Purchase Agreement and
<PAGE> 2
any amendments thereto, at its principal place of business and shall furnish,
without charge, copies thereof to the Holder upon request.
Certain terms used in this Warrant are defined in Section 13 herein.
Section 1. Exercise of Warrant.
At the option of the Holder, the Holder may exercise the rights
represented by this Warrant as follows:
(a) The rights represented by this Warrant may be exercised by the
Holder hereof, in whole or in part at any time or from time to time during the
Exercise Period, by delivering to the Corporation at its offices set forth on
the signature pages hereof, the following three items: (i) a written notice
executed by the Holder (or its authorized representative) electing to exercise
all or any portion of this Warrant, and if the Holder is exercising this Warrant
in part, identifying the number of Warrant Shares to be acquired, such notice to
be substantially in the Form of Subscription attached hereto, (ii) this Warrant,
and (iii) payment to the Corporation of the Exercise Price for each share (or
fraction thereof) being purchased by delivery of any combination of one or more
of the following: (A) cash, wire transfer or check or (B) reduction of the
monetary Obligations owing to the Holder pursuant to the Purchase Agreement or
the Notes.
(b) In addition to the exercise of all of the Warrants by the
payment of the Exercise Price in cash or check as set forth in Section 1(a)
above, and in lieu of any such payment, the Holder has the right to exercise the
Warrants by surrendering a Warrant with the attached Form of Subscription duly
executed, in exchange for the number of Warrant Shares equal to the product of
(x) the number of shares of Common Stock as to which the surrendered Warrant is
being exercised multiplied by (y) a fraction, the numerator of which is the
Current Market Price (as defined in Section 11) of Common Stock (the "Common
Shares") less the Exercise Price then in effect and the denominator of which is
the Current Market Price.
(c) Upon any exercise of this Warrant, if the Warrant Shares are not
to be issued to the Holder, the Form of Subscription shall also state the name
of the Person to whom the certificates for the Warrant Shares are to be issued,
and if the number of Warrant Shares to be issued does not include all the
Warrant Shares purchasable hereunder, it shall also state the name of the Person
to whom a new Warrant for the unexercised portion of the rights hereunder is to
be delivered and such investment representations as are set forth in Article IV
of the Purchase Agreement. In the event of any exercise of the rights
represented by this Warrant, a certificate or certificates for the Warrant
Shares, registered in the name of the Person entitled to receive the same, shall
be delivered to the Holder hereof within a reasonable time, not exceeding ten
days, after the rights represented by this Warrant shall have been so exercised,
and, unless this Warrant has expired, a new Warrant representing the number of
Warrant Shares (including any fractional share), if any, with respect to which
this Warrant shall not then have been exercised shall also be issued to the
Person entitled to receive the same within such time. The Person in whose name
any certificate for Warrant Shares is issued upon exercise of this Warrant shall
for all purposes be deemed to have become the Holder of record of such shares on
the date on which this Warrant was surrendered and payment of the Exercise Price
was made, irrespective of the date of delivery
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<PAGE> 3
of such certificate. The Corporation shall pay all expenses, taxes and other
charges payable in connection with the preparation, issuance and delivery of
share certificates for Warrant Shares and new Warrants, except that, if share
certificates or new Warrants shall be registered in a name or names other than
the name of the Holder, funds sufficient to pay all transfer taxes (if any)
payable as a result of such transfer shall be paid by the Holder at the time of
delivery of the aforementioned notice of exercise or promptly upon receipt of a
written request of the Corporation for payment.
(d) Upon exercise of this Warrant, the Corporation (unless otherwise
requested by the Majority in Interest) will issue fractional shares of its
Common Stock, but the Corporation shall not distribute cash in lieu of such
fractional shares. The number of Warrant Shares issuable upon exercise of this
Warrant shall be computed on the basis of the aggregate number of Warrants to be
exercised to be converted. If fractional shares of Common Stock which would
otherwise be issuable upon conversion of any such share are not issued, the
Corporation shall pay a cash adjustment in respect of such fractional interest
in an amount equal to the product of (i) the price of one share of Common Stock
as determined in good faith by the Board of Directors of the Corporation and
(ii) such fractional interest. The holders of fractional interests shall not be
entitled to any rights as stockholders of the Corporation in respect of such
fractional interests.
Section 2. Covenants of the Corporation. The Corporation covenants
and agrees that:
(a) All Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and non-assessable, and free from all taxes, liens, security interests,
charges or other encumbrances with respect to the issuance thereof.
(b) The Corporation will at all times have authorized and reserved,
free from preemptive rights, a sufficient number of Warrant Shares to provide
for the exercise of the rights represented by this Warrant.
(c) The Corporation will, in good faith and as expeditiously
as possible, endeavor to make any filings with or obtain any approvals required
to be made or obtained with or by any Governmental Authority of the United
States of America, any state within the United States, and any political
subdivision of any of the foregoing, as the case may be, prior to or in respect
of the exercise of this Warrant (including, without limitation, making all
filings required to be made by the Corporation), provided that the Corporation
shall not (unless otherwise required) be required by this paragraph (c) to
comply with the reporting requirements of applicable securities laws or
otherwise qualify as a reporting issuer or permit the public trading of its
shares.
(d) The Corporation, in reliance upon the investment representations
of the Holder or any transferee of the Holder, shall take all such actions as
may be necessary to ensure that all Warrant Shares issuable upon the exercise of
this Warrant may be so issued without violation of any Applicable Law or the
requirements of any exchange upon which the Corporation's shares may be listed,
provided that the Corporation shall not (unless otherwise required) be required
by
3
<PAGE> 4
this paragraph (d) to comply with the reporting requirements of applicable
securities laws or otherwise to qualify as a reporting issuer or to permit the
public trading of its shares.
(e) Notwithstanding any other provision hereof, if the exercise of
any portion of this Warrant is to be made in connection with a public offering
of securities of the Corporation or sale of effective voting control of the
Corporation, the exercise of any portion of this Warrant may, at the election of
the Holder, be conditioned upon the consummation of the public offering or sale
in which case such exercise shall not be deemed to be effective until the
consummation of such transaction.
(f) The Corporation shall pay all transactional taxes attributable
to the issuance or delivery of Warrant Shares; provided, however, that the
Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for Warrant Shares in a name other than that of the Holder.
(g) Whenever the Corporation is required by the terms of this
Warrant to retain any professionals (accountants, investment bankers,
arbitrators, etc.), if required by such professionals, the Corporation shall
execute a retainer or engagement letter containing reasonable terms and
conditions, including, without limitation, customary provisions concerning the
rights of indemnification and contribution by the Corporation in favor of such
professionals and their officers, directors, employees, agents and Affiliates.
(h) The Corporation shall not, by any action including, without
limitation, amending its Amended Articles of Incorporation, any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate to protect the rights of the
Holder hereof against impairment. Without limiting the generality of the
foregoing, the Corporation will not undertake any reverse stock split,
combination, reorganization or other reclassification of its capital stock which
would have the effect of making this Warrant exercisable for less than either
one Warrant Share and that percentage of the outstanding shares of Common Stock
to which it related immediately prior to such corporate action. Upon the request
of the Holder hereof, the Corporation will, at any time during the period this
Warrant is outstanding, acknowledge in writing, in form satisfactory to such
Holder, the continued validity of this Warrant and the Corporation's obligations
hereunder.
Section 3. Adjustment of Number of Shares and Exercise Price. In
order to prevent dilution of the rights granted under this Warrant, the Exercise
Price shall be subject to adjustment from time to time as provided in this
Section 3, and the number of Warrant Shares shall be subject to adjustment from
time to time as provided in this Section 3.
(a) If the Corporation shall, at any time or from time to time
during the Exercise Period, issue any shares of Common Stock (or be deemed to
have issued shares of Common Stock as provided herein), other than Excluded
Stock (as defined herein) without consideration or for a consideration per share
less than the Exercise Price for the Warrants, in effect immediately prior to
the issuance of such Common Stock, then the Exercise Price, as in effect
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immediately prior to each such issuance, shall forthwith be lowered to a price
equal to the quotient obtained by dividing:
(i) an amount equal to the sum of (x) the total number of
shares of Common Stock outstanding on a fully-diluted basis immediately
prior to such issuance, multiplied by the Exercise Price in effect
immediately prior to such issuance, and (y) the consideration received by
the Corporation upon such issuance; by
(ii) the total number of shares of Common Stock outstanding on
a fully-diluted basis immediately after the issuance of such Common Stock.
(b) For the purposes of any adjustment of the Exercise Price
pursuant to clause (a) above, the following provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall be deemed to
be the amount of cash paid therefor after deducting therefrom any
discounts, commissions or placement fees payable by the Corporation to any
underwriter or placement agent in connection with the issuance and sale
thereof.
(ii) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the Fair Value Per Share (as defined
herein) thereof as determined in good faith by the Board of Directors of
the Corporation, irrespective of any accounting treatment.
(iii) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock, or options to purchase
or rights to subscribe for such convertible or exchangeable securities
except for options to acquire Excluded Stock:
(A) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in Sections 3(b)(i) and 3(b)(ii), if any, received by the
Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the
Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities, options, or rights were issued and for a consideration
equal to the consideration received by the Corporation for any such
securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the additional consideration, if any, to be received by the
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<PAGE> 6
Corporation upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in
each case to be determined in the manner provided in Sections
3(b)(i) and 3(b)(ii) above);
(C) on any change in the number of shares or exercise
price of Common Stock deliverable upon exercise of any such options
or rights or conversions of or exchanges for such securities, other
than a change resulting from the antidilution provisions thereof,
the Exercise Price shall forthwith be readjusted to the Exercise
Price as would have been obtained had the adjustment made upon the
issuance of such options, rights or securities not converted prior
to such change or options or rights related to such securities not
converted prior to such change been made upon the basis of such
change; and
(D) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the Exercise Price shall forthwith be
readjusted to the Exercise Price as would have been obtained had the
adjustment made upon the issuance of such options, rights,
securities or options or rights related to such securities been made
upon the basis of the issuance of only the number of shares of
Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities, or upon
the exercise of the options or rights related to such securities and
subsequent conversion or exchange thereof.
(c) If, at any time after the Date of Issuance, the number of shares
of Common Stock outstanding is increased by a stock dividend payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Exercise
Price shall be appropriately decreased so that the number of Warrant Shares
shall be increased in proportion to such increase in outstanding shares.
(d) If, at any time after the Date of Issuance, the number of shares
of Common Stock outstanding is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date for such combination,
the Exercise Price shall be appropriately increased so that the number of
Warrant Shares shall be decreased in proportion to such decrease in outstanding
shares.
(e) In the event of any capital reorganization of the Corporation,
any reclassification of the stock of the Corporation (other than a change in par
value or from par value to no par value or from no par value to par value or as
a result of a stock dividend or subdivision, split-up or combination of shares),
or any consolidation or merger of the Corporation, each Warrant Share shall
after such reorganization, reclassification, consolidation, or merger be
convertible into the kind and number of shares of stock or other securities or
property of the Corporation or of the corporation resulting from such
consolidation or surviving such merger to which the holder of the number of
shares of Common Stock deliverable (immediately prior to the time of such
reorganization,
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<PAGE> 7
reclassification, consolidation or merger) upon conversion of such Warrant Share
would have been entitled upon such reorganization, reclassification,
consolidation or merger. The provisions of this clause shall similarly apply to
successive reorganizations, reclassifications, consolidations or mergers.
(f) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least .1% in such
Exercise Price; provided, that any adjustments not required to be made by virtue
of this sentence shall be carried forward and taken into account in any
subsequent adjustment. All calculations under Sections 3(a) through 3(e) above
shall be made to the nearest one hundredth (1/100) of a cent or the nearest one
tenth (1/10) of a share, as the case may be.
(g) In any case in which the provisions of this Section 3(g) shall
require that an adjustment shall become effective immediately after a record
date of an event, the Corporation may defer until the occurrence of such event
(A) issuing to the holder of any Warrant Share converted after such record date
and before the occurrence of such event the shares of capital stock issuable
upon such conversion by reason of the adjustment required by such event in
addition to the shares of capital stock issuable upon such conversion before
giving effect to such adjustments, and (B) if applicable, paying to such holder
any amount in cash in lieu of a fractional share of capital stock pursuant to
Section 1(d) above; provided, however, that the Corporation shall deliver to
such holder an appropriate instrument evidencing such holder's right to receive
such additional shares and such cash.
(h) Whenever the Exercise Price shall be adjusted as provided in
Section 3(d), the Corporation shall make available for inspection during regular
business hours, at its principal executive offices or at such other place as may
be designated by the Corporation, a statement, signed by its chief executive
officer, showing in detail the facts requiring such adjustment and the Exercise
Price that shall be in effect after such adjustment. The Corporation shall also
cause a copy of such statement to be sent by first class certified mail, return
receipt requested and postage prepaid, to each Holder of Warrants affected by
the adjustment at such Holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be included as part
of any notice required to be mailed under the provisions of Section 3(i) below.
(i) If the Corporation shall propose to take any action of the types
described in clauses (c), (d) or (e) of this Section 3, the Corporation shall
give notice to each Holder of Warrants, which notice shall specify the record
date, if any, with respect to any such action and the date on which such action
is to take place. Such notice shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such action
(to the extent such effect may be known at the date of such notice) on the
Exercise Price and the number, kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of such
action or deliverable upon exercise of this Warrant. In the case of any action
which would require the fixing of a record date, such notice shall be given at
least twenty (20) days prior to the date so fixed, and in case of all other
action, such notice shall be given at least thirty (30) days prior to the taking
of such proposed action. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of any such action.
(j) The Corporation shall at all times keep reserved, free from
preemptive rights, out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting
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<PAGE> 8
the exercise of this Warrant, sufficient number of shares of Common Stock to
provide for the Warrant Shares.
(k) Without duplication of any other adjustment provided for in this
Section 3, at any time the Corporation makes or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Corporation other than shares of
Common Stock, provision shall be made so that each Holder shall receive upon
exercise of the Warrant, in addition to the shares of Common Stock receivable
thereupon, the number of securities of the Corporation which it would have
received had its Warrant been exercised into shares of Common Stock on the date
of such event and had such holder thereafter, during the period from the date of
such event to and including the date of conversion, retained such securities
receivable by it pursuant to this paragraph during such period, subject to the
sum of all other adjustments called for during such period under this Section 3
with respect to the rights of such Holders.
(l) In the event that Majority in Interest consents in writing to
limit, or waive in its entirety, any anti-dilution adjustment to which the
Holders of the Warrants would otherwise be entitled hereunder, the Corporation
shall not be required to make any adjustment whatsoever with respect to any
Warrants in excess of such limit or at all, as the terms of such consent may
dictate.
(m) The Corporation will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 3
and in the taking of all such action as may be necessary or appropriate in order
to protect the exercise rights of the Holders of Warrants against impairment.
(n) The computations of all amounts under this Section 3 shall be
made assuming all other anti-dilution or similar adjustments to be made to the
terms of all other securities resulting from the transaction causing an
adjustment pursuant to this Section 3 have previously been made so as to
maintain the relative economic interest of the Warrants vis a vis all other
securities issued by the Corporation.
(o) The Corporation shall take or cause to be taken such steps as
shall be necessary to ensure that the par value per share of Common Stock is at
all time less than or equal to the Exercise Price.
Section 4. No Stockholder Rights; Limitation of Liability. The
Holder shall not be entitled to any voting rights or other rights as a
stockholder of the Corporation by reason of the rights granted under this
Warrant until the Holder shall purchase shares of Common Stock hereunder. No
provision hereof, in the absence of affirmative action by the Holder to purchase
Warrant Shares, and no enumeration herein of the rights or privileges of the
Holder shall give rise to any liability of such Holder for the payment of the
Exercise Price or as a stockholder of the Corporation.
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<PAGE> 9
Section 5. Warrant Agency; Transfer, Exchange and Replacement of
Warrants.
(a) Warrant Agency. As long as any of the Warrants remain
outstanding, the Corporation shall perform the obligations of and be the warrant
agency with respect to the Warrants (the "Warrant Agency") at its address set
forth on the signature pages hereof or at such other address as the Corporation
shall specify by notice to the Holders.
(b) Ownership of Warrant. The Corporation may deem and treat the
Person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any Person
other than the Corporation) for all purposes and shall not be affected by any
notice to the contrary, until due presentment of this Warrant for registration
of transfer as provided in this Section 5.
(c) Transfer of Warrant. The Corporation agrees to maintain at the
Warrant Agency books for the registration of transfers of the Warrants, and
transfer of this Warrant and all rights hereunder shall be registered, in whole
or in part, on such books, upon surrender of this Warrant at the Warrant Agency,
together with a written assignment of this Warrant duly executed by the Holder
or its duly authorized agent or attorney, with (if the Holder is a natural
person) signatures guaranteed by a bank or trust company or a broker or dealer
registered with the NASD, and funds sufficient to pay any transfer taxes payable
upon such transfer. The Holder shall be permitted to transfer all or any portion
of this Warrant at any time and from time to time, subject, however, to
compliance with the provisions (i) regarding transferability set forth in the
Stockholders Agreement, including, under certain circumstances, the requirement
that the transferee become a party to the Stockholders Agreement and (ii) of the
Act and Applicable Law. Upon surrender and, if required, such payment, the
Corporation shall execute and deliver a new Warrant or Warrants in the name of
the assignee or assignees and in the denominations specified in the instrument
of assignment (which shall be whole numbers of shares only unless the assignor
is transferring the entire Warrant) and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and this Warrant
shall promptly be canceled. The Corporation shall not at any time, except upon
the dissolution, liquidation or winding-up of the Corporation, close such
register so as to result in preventing or delaying the exercise or transfer of
this Warrant.
(d) Division or Combination of Warrants. This Warrant may be divided
or combined with other Warrants upon presentment hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Warrant Agency,
together with a written notice specifying the names and denominations in which
the new Warrant or Warrants are to be issued, signed by the holders hereof and
thereof or their respective duly authorized agents or attorneys. Subject to
compliance with Section 5(c) as to any transfer or assignment which may be
involved in the division or combination, the Corporation shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be
divided or combined in accordance with such notice.
(e) Loss, Theft, Destruction of Warrant Certificates. Upon receipt
of evidence by the Corporation of the ownership of and the loss, theft,
destruction or mutilation of any Warrant and, in the case of any such loss,
theft or destruction, upon receipt of indemnity or security by the Corporation
or, in the case of any such mutilation, upon surrender and cancellation of such
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<PAGE> 10
Warrant, the Corporation will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same aggregate number of shares of Common Stock.
(f) Expenses of Delivery of Warrants. The Corporation shall pay all
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of Warrants hereunder.
Section 6. Listing on Securities Exchanges. The Corporation shall
list on each securities exchange on which any Common Stock may at any time be
listed, subject to official notice of issuance upon the exercise of this
Warrant, and shall maintain, so long as any other shares of its Common Stock
shall be so listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of this Warrant, and the Corporation shall so list on
each national securities exchange, and shall maintain such listing of, any other
shares of capital stock of the Corporation issuable upon the exercise of this
Warrant if and so long as any shares of capital stock of the same class shall be
listed on such national securities exchange by the Corporation. Any such listing
shall be at the Corporation's expense.
Section 7. Availability of Information. The Corporation shall comply
with all applicable public information reporting requirements of all applicable
securities laws (including those required to make available the benefits of Rule
144 under the Act) to which it may from time to time be subject. The Corporation
shall also cooperate with each holder of this Warrant and holder of any Common
Stock issued upon exercise of this Warrant in supplying such information as may
be necessary for such holder to complete and file any information reporting
forms currently or hereafter required by any Governmental Authority as a
condition to the availability of an exemption from the registration provisions
of any applicable securities law for the sale of any Warrant or Common Stock
issued upon exercise of this Warrant.
Section 8. Successors. All the provisions of this Warrant by or for
the benefit of the Corporation or the Holder shall bind and inure to the benefit
of their respective successors and assigns.
Section 9. Headings. The headings of sections of this Warrant have
been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 10. Remedies; Amendment and Waiver.
(a) No failure or delay of any party in exercising any power or
right hereunder shall operate as a waiver thereof (except where a specific time
period for the exercise of such power or right is expressly set forth herein),
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No notice or demand on any party in any case shall entitle such
party to any other or future notice or demand in similar or other circumstances.
The rights and remedies of the Holder are cumulative and not exclusive of any
rights or remedies which it would otherwise have. The Corporation stipulates
that remedies at law of the Holder of this Warrant in the event of any default
or
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threatened default by the Corporation in the performance of or compliance
with any of the terms of this Warrant are not, and will not be, adequate, and
that, to the fullest extent permitted by law and equity, such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
(b) Except as otherwise provided herein, the provisions of the
Warrants may be amended and the Corporation may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Corporation has obtained the written consent of the Majority in
Interest. The provisions of the Purchase Agreement and the Stockholders
Agreement may be amended, modified or waived only in accordance with the
respective provisions thereof. Any such amendment, modification or waiver
effected pursuant to and in accordance with the provisions of this Section 10 or
the applicable provisions of the Purchase Agreement or the Stockholders
Agreement shall be binding upon the Holders of all Warrants and Warrant Shares,
upon each future Holder thereof and upon the Corporation. In the event of any
such amendment, modification or waiver, the Majority in Interest shall give
prompt notice thereof to all Holders of Warrants and Warrant Shares and, if
appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
Section 11. Severability. Whenever possible, each provision of this
Warrant will be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Warrant is held to be invalid,
illegal or unenforceable in any respect under any Applicable Law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, and such invalid, void or
otherwise unenforceable provisions shall be null and void. It is the intent of
the parties, however, that any invalid, void or otherwise unenforceable
provisions be automatically replaced by other provisions which are as similar as
possible in terms to such invalid, void or otherwise unenforceable provisions
but are valid and enforceable to the fullest extent permitted by law.
Section 12. Definitions; Interpretation.
(a) Definitions. Capitalized terms used but not otherwise defined
herein have the meanings assigned thereto in the Purchase Agreement. The
following terms have meanings set forth below:
"Amended Articles of Incorporation" means the Amended and
Articles of Incorporation of the Corporation dated as of the date hereof.
"Current Market Price" means (i) if the exercise of this
Warrant occurs in connection with a public offering of the Company, the "initial
price to public" specified in the final prospectus with respect to the public
offering or (ii) if the exercise of this warrant occurs after or not in
connection with a public offering of the Company, the average of the closing bid
and asked prices of the Company's Common Stock quoted in the Over-The-Counter
Market Summary on the Nasdaq National Market or the closing price quoted on any
exchange on which the Common Stock is listed, whichever if applicable, as
published in The Wall Street Journal for the fifteen trading days prior to the
date of determination of the Current Market Price. Notwithstanding the foregoing
sentence, if the Company is party to a merger or sale of all or
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substantially all or substantially all of the Company's assets, "Current Market
Price" shall mean the value that would have been received in respect of a
Warrant Share had the Warrant been exercised prior to such merger or sale. If
the Common Stock is not traded Over-The-Counter or on an exchange, or the
Company is not a party to a merger or sale of all or substantially all of its
assets, the Current Market Price shall be determined in good faith by the
Company's Board of Directors upon a review of all factors relevant to the value
of the Company as a going concern after applying appropriate minority or
illiquidity discounts. If the holder hereof does not believe the determination
of Current Market Price has been determined by the Company's Board of Directors
in a manner consistent with the criteria as provided above the holder hereof
shall request the Company to re-determine Current Market Price or request that
the Current Market Price shall be determined based on the factors described
above by an investment banker of national reputation selected by the Company and
reasonably acceptable to the Holder. The fees and expenses of such investment
banker shall be borne by the Company unless the Current Market Price determined
by such investment banker is less than the current Market Price determined by
the Company and then the fees and expenses of such investment banker shall be
shared equally between the Company and the Holder.
"Date of Issuance" means May 7, 1999.
"Excluded Stock" shall mean (i) up to 5,000,000 shares (as
adjusted equitably for stock dividends, stock splits, combinations, etc.) of
Common Stock issuable upon (i) exercise of stock options granted to officers and
employees of the Corporation or its subsidiaries, (ii) shares of Common Stock
issued upon exercise of this Warrant, including in the case of both (i) and
(ii), any additional shares of Common Stock as may be issued by virtue of
antidilution provisions, if any, applicable to such options, warrants or shares,
as the case may be, and (iii) shares of Common Stock issued upon exercise.
"Fair Value Per Share" shall mean the fair value of each share
of Stock, as determined in good faith by the Board.
"Person" shall be construed broadly and shall include any
natural person, company, partnership, joint venture, corporation, business
trust, unincorporated organization or Governmental Authority.
"Stock" shall mean (i) the presently issued and outstanding
shares of Common Stock and Preferred Stock and any options or stock subscription
warrants exercisable therefor (which options and warrants shall be deemed to be
that number of outstanding shares of Stock for which they are exercisable), (ii)
any additional shares of capital stock of the Company hereafter issued and
outstanding and (iii) any shares of capital stock of the Company into which such
shares may be converted or for which they may be exchanged or exercised.
"Warrant Agency" has the meaning given to such term in Section
5(a).
"Warrant Shares" means the Common Stock issued or issuable upon
exercise of the Warrants; provided that if there is a change such that the
securities issuable upon exercise of the Warrants are issued by an entity other
than the Corporation or there is a change in the class of
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securities so issuable, then the term "Warrant Shares" shall mean the securities
issuable upon exercise of the Warrants.
(b) Terms Generally. The definitions contained in this Warrant shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation."
Section 13. Governing Law.
(a) ALL QUESTIONS CONCERNING THE CONSTRUCTION, INTERPRETATION AND
VALIDITY OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE
OR CONFLICT OF LAW PROVISION OR RULE (WHETHER IN THE STATE OF NEW YORK OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) FOR ALL PURPOSES OF THIS WARRANT AND FOR ALL PURPOSES OF ANY
SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THE TRANSACTIONS CONTEMPLATED
HEREBY OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, THE CORPORATION HEREBY
SUBMITS TO THE PERSONAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND
THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY, AND
ANY APPELLATE COURT FROM ANY SUCH STATE OR FEDERAL COURT, AND HEREBY IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK COURT OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE CORPORATION HEREBY AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN ANY OTHER JURISDICTION WITHIN THE UNITED STATES BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY UNITES STATES LAW. NOTHING IN THIS
WARRANT SHALL AFFECT ANY RIGHT THAT THE HOLDER MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS WARRANT OR ANY RELATED MATTER AGAINST THE
CORPORATION OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(c) THE CORPORATION HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, (i) ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT OR ANY RELATED MATTER IN
ANY NEW YORK STATE OR FEDERAL COURT SITTING IN NEW YORK CITY, (ii) THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH
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SUIT, ACTION OR PROCEEDING IN ANY SUCH COURT AND (iii) TRIAL BY JURY IN ANY SUCH
SUIT, ACTION OR PROCEEDING.
(d) THE CORPORATION HEREBY DESIGNATES AND APPOINTS FIBERNET EQUAL
ACCESS, L.L.C. AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE
CORPORATION WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT TO
RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE CORPORATION BE EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL
BE MAILED BY REGISTERED MAIL TO THE CORPORATION AT ITS ADDRESS SET FORTH ON THE
SIGNATURE PAGES HEREOF EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW,
ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF
PROCESS. IF ANY AGENT APPOINTED BY THE CORPORATION REFUSES TO ACCEPT SERVICE,
THE CORPORATION HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE
SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE HOLDER TO BRING
PROCEEDINGS AGAINST THE CORPORATION IN THE COURTS OF ANY OTHER JURISDICTION.
Section 14. Notices. All notices, demands and requests of any kind
to be delivered to any party hereto in connection with this Warrant shall be in
writing, (a) delivered personally, (b) sent by internationally-recognized
overnight courier, (c) sent by first class, registered or certified mail, return
receipt requested or (d) by telecopy, telegram or other means of recorded
telecommunication with confirmed receipt (with hard copy to follow). Any notice,
demand or request so delivered shall constitute valid notice under this Warrant
and shall be deemed to have been received (i) on the day of actual delivery in
the case of personal delivery, (ii) on the next Business Day after the date when
sent, in the case of delivery by internationally-recognized overnight courier,
(iii) on the tenth Business Day after the date of deposit in the U.S. mail in
the case of mailing or (iv) one business day after being sent by telecopy with
confirmed receipt (with hard copy to follow). The mailing address of the
Corporation is set forth on the signature pages hereto, and the mailing
addresses of the Holders are set forth in the Stockholders Agreement and the
mailing address of each transferee of a Warrant will be set forth on the Form of
Assignment. Any party hereto may, from time to time by notice in writing served
upon the other as aforesaid, designate a different mailing address or a
different person to which all such notices, demands or requests thereafter are
to be addressed.
14
<PAGE> 15
IN WITNESS WHEREOF, FIBERNET TELECOM GROUP, INC. has caused this
Warrant to be executed by its duly authorized officers under its corporate seal,
and this Warrant to be dated as of the date first set forth above.
FIBERNET TELECOM GROUP, INC.
By:____________________________________
Name:
Title:
Address:
570 Lexington Avenue
New York, NY 10022
Attention: President
ATTEST:
______________________________________
Secretary
<PAGE> 16
FORM OF SUBSCRIPTION
[To be signed upon exercise of Warrant]
TO FiberNet Telecom Group, Inc.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, of Common Stock of FiberNet Telecom Group,
Inc., and herewith tenders payment of [identify amount and form of payment] in
full payment of the purchase price for such shares, and requests that the
certificates for such shares be issued in the name of, and be delivered to,
_____________________, whose address is __________________.
The undersigned hereby affirms the investment representations made in Article IV
of the Securities Purchase Agreement dated as of May 5, 1999 between FiberNet
Telecom Group, Inc. and the signatories thereto.
Dated:
(Signature)
(Address)
<PAGE> 17
FORM OF ASSIGNMENT
[To be signed only upon transfer of Warrant]
For value received, the undersigned hereby sells, assigns and transfers unto
_________________, all of the rights represented by the within Warrant to
purchase shares of Common Stock of FiberNet Telecom Group, Inc., to which the
within Warrant relates, and appoints ___________________ Attorney to transfer
such right on the books of _____________________with full power of substitution
in the premises.
Dated:_____________________
(Signature)
(Address of Assignor)
Signed in the presence of:
Address of Assignee:
<PAGE> 1
EXHIBIT G
CERTIFICATE OF DESIGNATION
OF
SERIES C PREFERRED STOCK OF
FIBERNET TELECOM GROUP, INC.
Pursuant to Section 78.1955 of the General Corporation Law of the
State of Nevada, the undersigned, Frank Chiaino being the President of FIBERNET
TELECOM GROUP, INC., a corporation organized and existing under the laws of the
State of Nevada (the "Corporation"), hereby certifies that the following
resolution has been hereby adopted by the Board of Directors of the Corporation.
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of its
Articles of Incorporation (the "Articles of Incorporation"), there is hereby
created, out of 5,000,000 shares of Preferred Stock, $.001 par value, of the
Corporation authorized in Article IV of the Articles of Incorporation (the
"Preferred Stock"), a series of Preferred Stock of the Corporation which shall
be the Series C Convertible Preferred Stock ("Series C Preferred Stock"), $.001
par value, consisting of 133,333 shares, which series shall have the following
powers, designations, preferences and relative, participating, optional and
other rights, and the following qualifications, limitations and restrictions as
set forth on Exhibit A hereto.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation this ___ day of May, 1999.
----------------------------------
Name: Frank Chiaino
Title: President
----------------------------------
Name: Lawrence S. Polan
Title: Secretary
<PAGE> 3
SERIES C PREFERRED STOCK
1. Dividends.
When, as, and if declared by the Board out of funds legally
available for that purpose, the holders of Series C Preferred Stock shall be
entitled to share in any dividends declared and paid or set aside for the Common
Stock on a ratable basis based upon the number of shares of Common Stock into
which the Series C Preferred Stock is then convertible.
2. Liquidation.
Upon a Liquidation, after payment or provision for payment of the
debts and other liabilities of the Corporation the holders of Series C Preferred
Stock shall be entitled to receive, out of the remaining assets of the
Corporation available for distribution to its stockholders, with respect to each
share of Series C Preferred Stock, an amount equal to the Liquidation Amount of
such share before any distribution shall be made to the holders of the Common
Stock or any other class of capital stock of the Corporation ranking junior to
the Series C Preferred Stock, including holders of the Series A Preferred Stock
and the Series B Preferred Stock. If upon any Liquidation the assets of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the holders of Series C Preferred Stock the full Liquidation Amount to
which they shall be entitled, the holders of Series C Preferred Stock shall
share in any distribution of assets in accordance with such full Liquidation
Amount (pro rata in accordance with the total Liquidation Amount that each such
holder would have received had there been such sufficient assets). After the
payment of the full Liquidation Amount to the holders of Series C Preferred
Stock, such holders of Series C Preferred Stock shall have no claim to any
remaining assets of the Corporation, if any.
3. Redemption.
(a) Each holder of shares of Series C Preferred Stock shall have the
right to require the Corporation to redeem all such shares upon the earlier of
(i) the fifth anniversary of the Original Issuance Date and (ii) the occurrence
of any Redemption Event. At least twenty (20) days but not more than sixty (60)
days prior to each Redemption Event, the Corporation shall provide written
notice of such Redemption Event (a "Mandatory Redemption Notice") to each holder
of Series C Preferred Stock and the date on which such Redemption Event is
scheduled to occur. Each holder of Series C Preferred Stock may elect to have
its shares of Series C Preferred Stock redeemed under this Section 3(a) by
notifying the Corporation of such election no later than 30 days prior to the
fifth anniversary, of the Original Issuance Date or, if applicable, fifteen (15)
days after receipt of any Mandatory Redemption Notice. In the case of a
redemption pursuant to clause (ii) of this Section 3(a), the Corporation shall
effect such redemption immediately following the Redemption Event. In the case
of a redemption pursuant to clause (i) of this Section 3(a), the Corporation
shall effect such redemption in three (3) equal annual installments with the
first such installment due on the fifth anniversary of the Original Issuance
Date. If the assets of the Corporation available for redemption of Series C
Preferred Stock shall be insufficient to permit the payment of the full price
required to be paid under this Section 3, then the holders of Series C Preferred
Stock shall (in addition to their rights pursuant
<PAGE> 4
to Section 3(b) below) share ratably in any such redemption based on the
respective number of shares that such holders own.
(b) The price (the "Redemption Price") at which each share of Series
C Preferred Stock is to be redeemed by the Corporation pursuant to this Section
3 shall be equal to the Liquidation Amount of such share on the date of such
redemption. On and after any date that the Corporation actually redeems shares
of Series C Preferred Stock pursuant to this Section 3, all rights in respect of
the shares of Series C Preferred Stock to be redeemed, except the right to
receive the Redemption Price, shall cease and terminate, and such shares shall
no longer be deemed to be outstanding, whether or not the certificates
representing such shares have been received by the Corporation. The conversion
of any shares of Series C Preferred Stock into Common Stock shall have no effect
on the Redemption Price payable in connection with the redemption of the shares
of Series C Preferred Stock not so converted. The Redemption Price per share of
the Series C Preferred Stock called for redemption pursuant to this Section 3
and not redeemed on the date required therefor (the "Redemption Date") because
the funds legally available for redemption are not sufficient to redeem such
shares or for any other reason shall be the Redemption Price plus an interest
payment per share. The interest payment per share shall equal the applicable
Redemption Price per share multiplied by an interest rate of twelve percent
(12%) per annum, compounded annually; interest shall begin to accrue with
respect to a particular share of Series C Preferred Stock on the applicable
Redemption Date of such share and shall continue to accrue up to but excluding
the actual date on which the Corporation pays the Redemption Price for such
share.
(c) The number of shares of Series C Preferred Stock deemed to be
held by the holders of the Series C Preferred Stock and to be redeemed pursuant
to the terms of this Section 3 shall be increased on a one for one basis each
time the number of shares of Common Stock into which such shares of Series C
Preferred Stock are convertible pursuant to the terms of Section 5 hereof is
increased in accordance with the provisions of such Section 5.
(d) Any communication or notice relating to redemption given
pursuant to this Section 3 shall be sent by first-class certified mail, return
receipt requested, postage prepaid, to the holders of record of shares of Series
C Preferred Stock, at their respective addresses as the same shall appear on the
books of the Corporation, or to the Corporation at the address of its principal,
or registered office, as the case may be. At any time on or after the Redemption
Date, the holders of record of shares of Series C Preferred Stock being redeemed
in accordance with this Section 3 shall be entitled to receive the Redemption
Price upon actual delivery to the Corporation or its agents of the certificates
representing the shares to be redeemed.
4. Voting Rights.
(a) Prior to conversion thereof, in addition to the rights provided
by law or in the Corporation's By-laws, each share of Series C Preferred Stock
shall entitle the holder thereof to such number of votes as shall equal the
number of votes of 117.03 shares of Common Stock for each share of Common Stock
into which the Series C Preferred Stock is convertible. The holders of Series C
Preferred Stock shall be entitled to vote on all matters as to which holders of
Common Stock shall be entitled to vote, in the same manner and with the same
effect as such holders of Common Stock, voting together with the holders of
Common Stock as one class.
2
<PAGE> 5
(b) In addition to the other rights specified in this Section 4, the
Majority of Interest, voting separately as one class, shall at all times have
the special and exclusive right to elect two directors to the Board and any
Board committees. In any election of directors by the Series C Preferred Stock
pursuant to this Section 4(b), each holder of Series C Preferred Stock shall be
entitled to one vote for each share of Series C Preferred Stock held. The
Corporation shall take all actions necessary to effectuate the terms and
provisions of this Section 4(b). The special and exclusive voting rights of the
holders of Series C Preferred Stock contained in this Section 4(b) may be
exercised either at a special meeting of the holders of Series C Preferred Stock
called as provided below, or at any annual or special meeting of the
stockholders of the Corporation, or by written consent of such holders in lieu
of a meeting. The directors to be elected pursuant to this Section 4(b) shall
serve for a term extending from the date of their election and qualification
until their successor has been elected and qualified. If at any time any
directorship to be filled by the Majority in Interest pursuant to this Section
4(b) has been vacant for a period of ten (10) days, the Secretary of the
Corporation shall, upon the written request of any holder of Series C Preferred
Stock, call a special meeting of the holders of Series C Preferred Stock for the
purpose of electing a director to fill such vacancy. Such meeting shall be held
at the earliest practicable date, and at such place, as is specified in or
determined in accordance with the By-laws of the Corporation. If such meeting
shall not be called by the Secretary of the Corporation within ten (10) days
after personal service of such written request on him or her, then any holder of
Series C Preferred Stock may designate in writing one of their members to call
such meeting at the expense of the Corporation, and such meeting may be called
by such person so designated upon the notice required for annual meetings of
stockholders and shall be held at such place as specified in such notice. Any
holder of Series C Preferred Stock so designated shall have access to the stock
books of the Corporation relating to Series C Preferred Stock for the purpose of
calling a meeting of the stockholders pursuant to these provisions. At any
meeting held for the purpose of electing directors as provided in this Section
4(b), the presence, in person or by proxy, of the Majority in Interest shall be
required to constitute a quorum of the Series C Preferred Stock for such
election. A vacancy in the directorship to be elected by the Majority in
Interest pursuant to this Section 4(b) may be filled only by vote or written
consent in lieu of a meeting of the Majority in Interest.
(c) The Corporation shall not, without the affirmative consent or
approval of the Majority in Interest and Trident:
(i) in any manner authorize, create, designate, issue or sell
any class or series of capital stock (including any shares of treasury
stock) or rights, options, warrants or other securities convertible into
or exercisable or exchangeable for capital stock or any debt security
which by its terms is convertible into or exchangeable for any equity
security or has any other equity feature or any security that is a
combination of debt and equity, which, in each case, as to the payment of
dividends, distribution of assets or redemptions, including, without
limitation, distributions to be made upon a Liquidation, is pari passu
with or is senior to the Series C Preferred Stock or which in any manner
adversely affects the holders of the Series C Preferred Stock;
(ii) in any manner alter or change the terms, designations,
powers, preferences or relative, participating, optional or other special
rights, or the qualifications, limitations or restrictions, of the Series
C Preferred Stock;
3
<PAGE> 6
(iii) reclassify the shares of any class or series of capital
stock into shares of any class or series of capital stock (A) ranking,
either as to payment of dividends, distributions of assets or redemptions,
including, without limitation, distributions to be made upon a
Liquidation, senior to or on a parity with the Series C Preferred Stock,
or (B) which in any manner adversely affects the rights of the holders of
the Series C Preferred Stock in their capacity as such;
(iv) take any action to cause any amendment, alteration or
repeal of any of the provisions of (A) the Certificate of Incorporation or
(B) the By-laws of the Corporation, if such amendment, alteration or
repeal would have an adverse effect on the rights of the holders of the
Series C Preferred Stock; or
(v) approve or authorize any Liquidation or any
recapitalization of the Corporation or any subsidiary.
5. Conversion.
(a) Upon the terms set forth in this Section 5, each holder of each
share of Series C Preferred Stock shall have the right, at such holder's option,
at any time and from time to time, to convert such share into the number of
fully paid and nonassessable shares of Common Stock equal to the quotient
obtained by dividing (A) the Liquidation Amount by (B) the Conversion Price (as
defined below), as last adjusted and then in effect, by surrender of the
certificate representing such share. The Conversion Price per share at which
shares of Common Stock shall be issuable upon conversion of shares of Series C
Preferred Stock (the "Conversion Price") shall be the Series C Original Issuance
Price as adjusted pursuant to Section 5(f) below. The holder of any shares of
Series C Preferred Stock may exercise the conversion right pursuant to this
Section 5(a) by delivering to the Corporation the certificate for the shares to
be converted, duly endorsed or assigned in blank or to the Corporation (if
required by it), accompanied by written notice stating that the holder elects to
convert such shares and stating the name or names (with address) in which the
certificate or certificates for the shares of Common Stock are to be issued.
Conversion shall be deemed to have been effected on the date when such delivery
is made or upon the consummation of a Qualified Public Offering as provided
below, if applicable (in each such case, the "Conversion Date"). The Corporation
shall give holders of Series C Preferred Stock reasonable prior notice of a Sale
of the Corporation, including the price and material terms and conditions
thereof, in order to provide such holders a reasonable opportunity to consider
whether to redeem or convert the Series C Preferred Stock into Common stock at
or prior to such Sale of the Corporation.
(b) Upon the conversion of shares of Series C Preferred Stock owned
or held by the Majority in Interest in accordance with this Section 5 or the
conversion or repayment of the Notes owned or held by the Majority in Interest
in accordance with the terms of the Notes, all shares of Series C Preferred
Stock shall be deemed to be converted to that number of fully paid and
nonassessable shares of Common Stock equal to the quotient obtained by dividing
(A) Liquidation Amount for the share being converted by (B) the applicable
Conversion Price, as last adjusted and then in effect.
4
<PAGE> 7
(c) Upon the terms set forth in this Section 5, each share of Series
C Preferred Stock shall automatically be converted to that number of fully paid
and nonassessable shares of Common Stock equal to the quotient obtained by
dividing (A) the Liquidation Amount, if any for the share being converted by (B)
the applicable Conversion Price, as last adjusted and then in effect, upon the
consummation of a Qualified Public Offering.
(d) As promptly as practicable after the conversion of any shares of
Series C Preferred Stock into Common Stock under Section 5(a), 5(b) or 5(c)
above, the Corporation shall issue and deliver to or upon the written order of
such holder, to the place designated by such holder, a certificate or
certificates for the number of full shares of Common Stock to which such holder
is entitled, and a cash amount in respect of any fractional interest in a share
of Common Stock as provided in Section 5(f) below. The person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a stockholder of record on the Conversion Date unless the transfer
books of the Corporation are closed on that date, in which event such person
shall be deemed to have become a stockholder of record on the next succeeding
date on which the transfer books are open, but the Conversion Price shall be
that in effect on the Conversion Date, and the rights of the holder of the
shares of Series C Preferred Stock so converted shall cease on the Conversion
Date. Upon conversion of only a portion of the number of shares covered by a
certificate representing shares of Series C Preferred Stock surrendered for
conversion, the Corporation shall issue and deliver to or upon the written order
of the holder of the certificate so surrendered for conversion, at the expense
of the Corporation, a new certificate covering the number of shares of Series C
Preferred Stock representing the unconverted portion of the certificate so
surrendered.
(e) Upon conversion, the Corporation (unless otherwise requested by
the Majority in Interest) will issue fractional shares of its Common Stock, as
applicable, and shall not distribute cash in lieu of such fractional shares. The
number of full shares of Common Stock issuable upon conversion of Series C
Preferred Stock shall be computed on the basis of the aggregate number of shares
of such Series C Preferred Stock to be converted. If fractional shares of Common
Stock which would otherwise be issuable upon conversion of any such share are
not issued, the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to the product of (i) the price of one
share of Common Stock as determined in good faith by the Board and (ii) such
fractional interest. The holders of fractional interests shall not be entitled
to any rights as stockholders of the Corporation in respect of such fractional
interests.
(f) The Conversion Price for each share of Series C Preferred Stock
shall be subject to adjustment from time to time as follows:
(i) If the Corporation shall, at any time or from time to time
after the Original Issuance Date of the Series C Preferred Stock, issue
any shares of Common Stock (or be deemed to have issued shares of Common
Stock as provided herein), other than Excluded Stock without consideration
or for a consideration per share less than the Conversion Price for such
Series C Preferred Stock, in effect immediately prior to the issuance of
such Common Stock, then the Conversion Price, as in effect immediately
prior to each such issuance, shall forthwith be lowered to a price equal
to the quotient obtained by dividing:
5
<PAGE> 8
(A) an amount equal to the sum of (x) the total number
of shares of Common Stock outstanding on a fully-diluted basis
immediately prior to such issuance, multiplied by the Conversion
Price in effect immediately prior to such issuance, and (y) the
consideration received by the Corporation upon such issuance; by
(B) the total number of shares of Common Stock
outstanding on a fully-diluted basis immediately after the issuance
of such Common Stock.
(ii) For the purposes of any adjustment of the Conversion
Price pursuant to clause (i) above, the following provisions shall be
applicable:
(A) In the case of the issuance of Common Stock for cash
in a public offering or private placement, the consideration shall
be deemed to be the amount of cash paid therefor after deducting
therefrom any discounts, commissions or placement fees payable by
the Corporation to any underwriter or placement agent in connection
with the issuance and sale thereof.
(B) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the Fair Value Per Share
thereof as determined in good faith by the Board of Directors of the
Corporation, irrespective of any accounting treatment.
(C) In the case of the issuance of options to purchase
or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable
securities except for options to acquire Excluded Stock:
(1) the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to
purchase or rights to subscribe for Common Stock shall be
deemed to have been issued at the time such options or rights
were issued and for a consideration equal to the consideration
(determined in the manner provided in Sections 5(f)(ii)(A) and
5(f)(ii)(B) above), if any, received by the Corporation upon
the issuance of such options or rights plus the minimum
purchase price provided in such options or rights for the
Common Stock covered thereby;
(2) the aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for
any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for
such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been
issued at the time such securities, options, or rights were
issued and for a consideration equal to the consideration
received by the Corporation for any such securities and
related options or rights (excluding any cash received on
account of accrued interest or accrued
6
<PAGE> 9
dividends), plus the additional consideration, if any, to be
received by the Corporation upon the conversion or exchange of
such securities or the exercise of any related options or
rights (the consideration in each case to be determined in the
manner provided in Sections 5(f)(ii)(A) and 5(f)(ii)(B)
above);
(3) on any change in the number of shares or
exercise price of Common Stock deliverable upon exercise of
any such options or rights or conversions of or exchanges for
such securities, other than a change resulting from the
antidilution provisions thereof, the Conversion Price shall
forthwith be readjusted to the Conversion Price as would have
been obtained had the adjustment made upon the issuance of
such options, rights or securities not converted prior to such
change or options or rights related to such securities not
converted prior to such change been made upon the basis of
such change; and
(4) on the expiration of any such options or
rights, the termination of any such rights to convert or
exchange or the expiration of any options or rights related to
such convertible or exchangeable securities, the Conversion
Price shall forthwith be readjusted to the Conversion Price as
would have been obtained had the adjustment made upon the
issuance of such options, rights, securities or options or
rights related to such securities been made upon the basis of
the issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options or rights,
upon the conversion or exchange of such securities, or upon
the exercise of the options or rights related to such
securities and subsequent conversion or exchange thereof.
(iii) If, at any time after the Original Issuance Date, the
number of shares of Common Stock outstanding is increased by a stock
dividend payable in shares of Common Stock or by a subdivision or split-up
of shares of Common Stock, then, following the record date for the
determination of holders of Common Stock entitled to receive such stock
dividend, subdivision or split-up, the Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of Series C Preferred Stock shall be
increased in proportion to such increase in outstanding shares.
(iv) If, at any time after the Original Issuance Date, the
number of shares of Common Stock outstanding is decreased by a combination
of the outstanding shares of Common Stock, then, following the record date
for such combination, the Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on
conversion of each share of Series C Preferred Stock shall be decreased in
proportion to such decrease in outstanding shares.
(v) In the event of any capital reorganization of the
Corporation, any reclassification of the stock of the Corporation (other
than a change in par value or from par value to no par value or from no
par value to par value or as a result of a stock
7
<PAGE> 10
dividend or subdivision, split-up or combination of shares), or any
consolidation or merger of the Corporation, each share of Series C
Preferred Stock shall after such reorganization, reclassification,
consolidation, or merger be convertible into the kind and number of shares
of stock or other securities or property of the Corporation or of the
corporation resulting from such consolidation or surviving such merger to
which the holder of the number of shares of Common Stock deliverable
(immediately prior to the time of such reorganization, reclassification,
consolidation or merger) upon conversion of such share of Series C
Preferred Stock would have been entitled upon such reorganization,
reclassification, consolidation or merger. The provisions of this clause
shall similarly apply to successive reorganizations, reclassifications,
consolidations or mergers.
(vi) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least
.1% in such Conversion Price; provided, that any adjustments not required
to be made by virtue of this sentence shall be carried forward and taken
into account in any subsequent adjustment. All calculations under Sections
5(f)(i) through 5(f)(v) above shall be made to the nearest one hundredth
(1/100) of a cent or the nearest one tenth (1/10) of a share, as the case
may be.
(vii) In any case in which the provisions of this Section 5(f)
shall require that an adjustment shall become effective immediately after
a record date of an event, the Corporation may defer until the occurrence
of such event (A) issuing to the holder of any share of Series C Preferred
Stock converted after such record date and before the occurrence of such
event the shares of capital stock issuable upon such conversion by reason
of the adjustment required by such event in addition to the shares of
capital stock issuable upon such conversion before giving effect to such
adjustments, and (B) if applicable, paying to such holder any amount in
cash in lieu of a fractional share of capital stock pursuant to Section
5(f) above; provided, however, that the Corporation shall deliver to such
holder an appropriate instrument evidencing such holder's right to receive
such additional shares and such cash.
(viii) Whenever the Conversion Price shall be adjusted as
provided in Section 5(f)(iv), the Corporation shall make available for
inspection during regular business hours, at its principal executive
offices or at such other place as may be designated by the Corporation, a
statement, signed by its chief executive officer, showing in detail the
facts requiring such adjustment and the Conversion Price that shall be in
effect after such adjustment. The Corporation shall also cause a copy of
such statement to be sent by first class certified mail, return receipt
requested and postage prepaid, to each holder of Series C Preferred Stock
affected by the adjustment at such holder's address appearing on the
Corporation's records. Where appropriate, such copy may be given in
advance and may be included as part of any notice required to be mailed
under the provisions of Section 5(f)(ix) below.
(ix) If the Corporation shall propose to take any action of
the types described in clauses (iii), (iv) or (v) of this Section 5(f),
the Corporation shall give notice to each holder of shares of Series C
Preferred Stock, which notice shall specify the record date, if any, with
respect to any such action and the date on which such action is to take
8
<PAGE> 11
place. Such notice shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action (to
the extent such effect may be known at the date of such notice) on the
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon conversion of shares of
Series C Preferred Stock. In the case of any action which would require
the fixing of a record date, such notice shall be given at least twenty
(20) days prior to the date so fixed, and in case of all other action,
such notice shall be given at least thirty (30) days prior to the taking
of such proposed action. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of any such action.
(x) The Corporation shall at all times keep reserved, free
from preemptive rights, out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of Series
C Preferred Stock, sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Series C Preferred Stock.
(xi) Without duplication of any other adjustment provided for
in this Section 5, at any time the Corporation makes or fixes a record
date for the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in securities of the Corporation
other than shares of Common Stock, provision shall be made so that each
holder of Series C Preferred Stock shall receive upon conversion thereof,
in addition to the shares of Common Stock receivable thereupon, the number
of securities of the Corporation which it would have received had its
shares of Series C Preferred Stock been converted into shares of Common
Stock on the date of such event and had such holder thereafter, during the
period from the date of such event to and including the date of
conversion, retained such securities receivable by it pursuant to this
paragraph during such period, subject to the sum of all other adjustments
called for during such period under this Section 5 with respect to the
rights of such holder of Series C Preferred Stock.
(xii) In the event that Majority in Interest consent in
writing to limit, or waive in its entirety, any anti-dilution adjustment
to which the holders of the Series C Preferred Stock would otherwise be
entitled hereunder, the Corporation shall not be required to make any
adjustment whatsoever with respect to any Series C Preferred Stock in
excess of such limit or at all, as the terms of such consent may dictate.
(xiii) The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 5(f) and in the taking
of all such action as may be necessary or appropriate in order to protect
the exercise rights of the holders of Series C Preferred Stock against
impairment.
(xiv) The computations of all amounts under this Section 5(f)
shall be made assuming all other anti-dilution or similar adjustments to
be made to the terms of all other
9
<PAGE> 12
securities resulting from the transaction causing an adjustment pursuant
to this Section 5(f) have previously been made so as to maintain the
relative economic interest of the Series C Preferred Stock vis a vis all
other securities issued by the Corporation.
(xv) The Corporation shall take or cause to be taken such
steps as shall be necessary to ensure that the par value per share of
Common Stock is at all time less than or equal to the Conversion Price.
6. Negative Covenants.
Prior to the Board Change, the Board shall not without the consent
of at least one of the Investor Directors authorize any executive actions,
agreements, contracts, arrangements, obligations or similar arrangements, or
take any action that is deemed or could be deemed by the Majority in Interest to
adversely affect the rights, privileges and/or interests of the holders of
Series C Preferred Stock under this Certificate of Designation, the Transaction
Documents and/or any other certificates, agreements or documents related
thereto.
7. Definitions.
As used herein, the following terms shall have the following
meanings:
(a) "Affiliate" has the meaning ascribed to it in the Securities
Purchase Agreement.
(b) "Board" shall mean the Board of Directors of the Corporation.
(c) "Board Change" has the meaning ascribed to such term in the
Securities Purchase Agreement.
(d) "Change of Control of the Corporation" shall mean any
transaction or any event as a result of which (i) any one or more Persons
acquires or for the first time controls or is able to vote (directly or through
nominees or beneficial ownership) after the Original Issuance Date 25% or more
of any class of stock of the Corporation outstanding at the time having power
ordinarily to vote for directors of the Corporation or (ii) the control of more
than 25% of the number of shares of Common Stock held by Persons on the Original
Issuance Date has been transferred (including transfers by and among such
Persons) since the Original Issuance Date in the aggregate. For purpose of this
paragraph (b), "Common Stock" shall include shares of Common Stock issuable upon
exercise of warrants, options and other rights to acquire Common Stock
outstanding on the Original Issuance Date, whether or not at the time exercised
or exercisable.
(e) "Common Stock" shall mean the Common Stock, par value $.001, of
the Corporation.
(f) "Common Stock Equivalent" shall mean all shares of Common Stock
outstanding and all shares of Common Stock issuable (without regard to any
present restrictions on such issuance) upon the conversion, exchange or exercise
of all securities of the Corporation that are convertible, exchangeable or
exercisable for Common Stock and all Common Stock
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<PAGE> 13
appreciation rights, phantom Common Stock rights and other rights to acquire, or
to receive or to be paid amounts of, the Common Stock.
(g) "Excluded Stock" shall mean (i) up to $5,000,000 shares (as
adjusted equitably for stock dividends, stock splits, combinations, etc.) of
Common Stock issuable upon (i) exercise of stock options granted to officers and
employees of the Corporation or its subsidiaries, (ii) shares of Common Stock
issued upon conversion of shares of Series C Preferred Stock, including in the
case of both (i) and (ii), any additional shares of Common Stock as may be
issued by virtue of antidilution provisions, if any, applicable to such options,
warrants or shares, as the case may be, and (iii) shares of Common Stock issued
upon exercise.
(h) "Fair Value Per Share" shall mean the fair value of each share
of Stock, as determined in good faith by the Board.
(i) "Liquidation" shall mean any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, other
than any dissolution, liquidation or winding up in connection with any
reincorporation of the Corporation in Delaware.
(j) "Liquidation Amount" shall mean as to each share of Series C
Preferred Stock the Series C Original Issuance Price plus any accrued but unpaid
dividends.
(k) "Majority in Interest" shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
(l) "Notes" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
(m) "Original Issuance Date" for the Series C Preferred Stock means
the date of original issuance of the first share of the Series C Preferred
Stock.
(n) "Qualified Public Offering" shall have the meaning ascribed to
such term in the Securities Purchase Agreement.
(o) "Redemption Event" shall mean (i) a sale, merger or
consolidation of the Corporation resulting in the transfer of voting control or
majority economic interest of the Corporation, (ii) a sale or other disposition
of all or substantially all of the Corporation's assets, (iii) a Change of
Control of the Corporation or (iv) a breach by the Corporation of any term of
this Restated Certificate of Incorporation, as amended from time to time, or any
provision of the Securities Purchase Agreement, Stockholders Agreement or
Registration Rights Agreement (as defined in the Securities Purchase Agreement),
each dated as of the Original Issuance Date and as may be amended from time to
time which such breach remains outstanding and uncured for a period of 30 days
from the date of notice thereof.
(p) "Sale of the Corporation" shall mean (i) the sale of all or
substantially all of the Corporation's assets to a Person who is not an
Affiliate of the Corporation, (ii) the sale or transfer of the outstanding
capital stock of the Corporation to one or more Persons who are not Affiliates
of the Corporation, or (iii) the merger or consolidation of the Corporation with
or into another Person who is not an Affiliate of the Corporation, in each case
in clauses (ii) and (iii) above
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<PAGE> 14
under circumstances in which the holders of a majority in voting power of the
outstanding capital stock of the Corporation, immediately prior to such
transaction, own less than a majority in voting power of the outstanding capital
stock of the Corporation or the surviving or resulting corporation or acquirer,
as the case may be, immediately following such transaction. A sale (or multiple
related sales) of one or more subsidiaries of the Corporation (whether by way of
merger, consolidation, reorganization or sale of all or substantially all assets
or securities) which constitutes all or substantially all of the consolidated
assets of the Corporation shall be deemed a Sale of the Corporation.
(q) "Securities Purchase Agreement" shall mean that certain
agreement dated the date hereof, among the Corporation and the purchasers named
therein, as the same may be amended, modified or supplemented from time to time.
(r) "Series A Preferred Stock" shall mean the Series A Convertible
Cumulative Preferred Stock, par value $.001, of the Corporation.
(s) "Series B Preferred Stock" shall mean the Series B Voting
Preferred Stock, par value $.001, of the Corporation.
(t) "Series C Original Issuance Price" shall mean $1.50 per share of
Series C Preferred Stock.
(u) "Stock" shall mean (i) the presently issued and outstanding
shares of Common Stock and Preferred Stock and any options or stock subscription
warrants exercisable therefor (which options and warrants shall be deemed to be
that number of outstanding shares of Stock for which they are exercisable), (ii)
any additional shares of capital stock of the Company hereafter issued and
outstanding and (iii) any shares of capital stock of the Company into which such
shares may be converted or for which they may be exchanged or exercised.
(v) "Stockholders Agreement" shall mean that certain agreement dated
the date hereof among the Corporation and the stockholders named therein, as the
same may be amended, modified or supplemented from time to time.
(w) "Transaction Documents" shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
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<PAGE> 1
EXHIBIT H
- --------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENT
AMONG
FIBERNET TELECOM GROUP, INC.
AND
CERTAIN STOCKHOLDERS
DATED AS OF MAY 7, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
STOCKHOLDERS AGREEMENT dated as
of May 7, 1999, among FIBERNET TELECOM
GROUP, INC., a Nevada corporation (the
"Company"), and certain stockholders of the
Company identified on Annex I hereto (each,
a "Stockholder" and collectively, the
"Stockholders").
Each Stockholder owns, on the date hereof, that number of shares of
Stock (as hereinafter defined) set forth opposite such Stockholder's name on
Annex I hereto purchased pursuant to the Securities Purchase Agreement dated as
of the date hereof (the "Securities Purchase Agreement") among the Company and
the purchasers named therein. It is deemed to be in the best interest of the
Company and the Stockholders that provision be made for the continuity and
stability of the business and policies of the Company, and, to that end, the
Company and the Stockholders hereby set forth their agreement with respect to
the shares of Stock owned by the Stockholders.
NOW, THEREFORE, in consideration of the premises and of the mutual
consents and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
Section 1. Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Securities Purchase Agreement. As used
herein, the following terms shall have the following respective meanings:
"Affiliate" has the meaning ascribed thereto in the Purchase
Agreement.
"all or substantially all" shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
"Board" means the Board of Directors of the Company.
"Business Day" shall mean any day other than a Saturday or Sunday or
a day on which banks are authorized or required to be closed in New York, New
York.
"Charter" shall mean the Certificate of Incorporation of the
Company, as amended from time to time.
"Common Stock" shall mean the common stock, $.001 par value, of the
Company.
"Concordia" shall mean Concordia Telecom Management, L.L.C., a
Delaware limited liability company.
"Founders Shares" shall mean at any time the shares of Common Stock,
any securities which by their terms are exercisable or exchangeable for or
convertible into Common Stock, and any securities of the Company received in
respect thereof, which are held by the Founding Stockholders.
<PAGE> 3
"Founding Stockholders" shall mean the Persons listed as
Stockholders under the heading "Founding Stockholders" in Annex I hereto, and
shall include any successor to, or assignee or transferee of, any of the
Founding Stockholders whether or not such Persons shall agree in writing to be
treated as a Founding Stockholder and to be bound by the terms and to comply
with the provisions of this Agreement.
"Group" shall mean:
(i) in the case of any Stockholder who is an individual, (A) such
Stockholder, (B) the spouse, lineal descendants and adopted children of
such Stockholder and (C) any trust for the benefit of any of the
foregoing; and
(ii) in the case of any Stockholder which is a corporation, limited
liability company or partnership, (A) such corporation, limited liability
company or partnership, (B) any corporation or other business organization
to which such corporation, limited liability company or partnership shall
sell or transfer all or substantially all of its assets or with which it
shall be merged, (C) with respect to any limited liability company or
partnership, any partner (general or limited) or member thereof and (D)
any Affiliate of such corporation.
"Majority in Interest" has the meaning ascribed to such term in the
Securities Purchase Agreement.
"Operating Budget" has the meaning ascribed to such term in the
Securities Purchase Agreement.
"Person" shall mean any individual, partnership, corporation, group,
trust or other legal entity.
"Proportionate Percentage" shall mean:
(i) for the purposes of Section 3, the pro rata percentage of Stock
being offered by a Selling Group pursuant to Section 3 that each
Stockholder (other than the Selling Group) shall be entitled to purchase,
which pro rata percentage, as to each such Stockholder, shall be the
percentage figure which expresses the ratio, on a Common Stock equivalent
basis (which for purposes of this Agreement shall mean the conversion of
all securities convertible into Common Stock and the exercise of all
options and warrants then exercisable for Common Stock), between the
number of shares of Stock owned by such Stockholder and the aggregate
number of shares of Stock owned by all Stockholders (other than the
Selling Group) at the date of determination;
(ii) for the purposes of Section 4, the pro rata percentage of the
number of shares of Stock to which a Section 4 Offer relates that each
Stockholder shall be entitled to Transfer to the Section 4 Purchaser,
which pro rata percentage, as to each such Stockholder, shall be the
percentage figure which expresses the ratio, on a Common Stock equivalent
basis, between the number of shares of Stock owned by such Stockholder and
the aggregate number of shares of Stock owned by all Stockholders and the
Section 4 Offeree at the date of determination; and
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<PAGE> 4
(iii) for the purposes of Section 7, the pro rata percentage of
Stock subject to purchase pursuant to Section 7 that each Stockholder
shall be entitled to purchase, which pro rata percentage, as to each such
Stockholder, shall be the percentage figure which expresses the ratio, on
a Common Stock equivalent basis, between the number of shares of Stock
owned by such Stockholder and the aggregate number of shares of Stock
owned by all Stockholders at the date of determination.
"Purchase Agreement" shall mean the Securities Purchase Agreement dated as
of the date hereof by and among the Company and the Purchasers as the same may
be amended, modified or supplemented from time to time pursuant to the terms
thereof.
"Purchasers" shall mean the Persons listed as Stockholders under the
heading "Purchasers" in Annex I hereto, and shall include any successor to, or
assignee or transferee of, any of the Purchasers whether or not such Persons
shall agree in writing to be treated as a Purchaser and to be bound by the terms
and to comply with the provisions of this Agreement, each a "Purchaser".
"Qualified Public Offering" shall mean a fully underwritten public
offering (underwritten by a reputable underwriter of national reputation) of
shares of Common Stock registered pursuant to the Securities Act with proceeds
to the Company of at least $30,000,000 (net of underwriting discounts and
expenses) or otherwise on terms reasonably acceptable to the Majority in
Interest.
"Securities Act" shall mean the Securities Act of 1933 together with
any applicable regulations, as the same may be amended from time to time.
"Selling Group" shall mean a Stockholder or a member of the Group of
a Stockholder proposing to Transfer its Stock, or which has delivered a notice
of intention to Transfer, pursuant to Section 3 or Section 4 hereof.
"Series C Preferred Stock" shall mean the Series C Convertible
Preferred Stock, par value $.001, of the Company.
"Signal" shall mean Signal Capital Partners, L.P., a Delaware
limited partnership.
"Stock" shall mean (i) the presently issued and outstanding shares
of Common Stock and Series C Preferred Stock and any options, warrants or other
instruments exercisable therefor (which options, warrants or other instruments
shall be deemed to be that number of outstanding shares of Stock for which they
are exercisable), (ii) any additional shares of capital stock of the Company
hereafter issued and outstanding and (iii) any shares of capital stock of the
Company into which such shares may be converted or for which they may be
exchanged or exercised.
"Stockholders" shall mean those Persons identified on Annex I and
shall include any other person who agrees in writing with the parties hereto to
be bound by and to comply with all applicable provisions of this Agreement as a
Stockholder hereunder.
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<PAGE> 5
"Transfer", as to any Stock shall mean to sell, or in any other way
transfer, assign, pledge, distribute, encumber or otherwise dispose of, such
Stock, either voluntarily or involuntarily and with or without consideration.
"Trident" shall mean Trident Telecom Partners LLC, a Delaware
limited liability company.
Section 2. Limitations on Transfers of Stock by Stockholders.
The Stockholders shall not, at any time during the term of this
Agreement, Transfer any Stock without first complying with the provisions of
Sections 3, 4 and 6; provided, that a Stockholder may Transfer Stock to another
member of the Group of such Stockholders without complying with Sections 3, 4
and 6 if the recipient of such Stock shall agree in writing with the parties to
this Agreement to be bound by and to comply with all applicable provisions of
this Agreement and to be deemed a Stockholder; and provided further that in no
event shall any Stockholder Transfer any Stock prior to the first anniversary of
this Agreement without the prior written consent of Signal and Trident unless
such Transfer of Stock is specifically permitted under any exemption, rule or
regulation of the Securities Act. Any Transfer made or attempted to be made in
contravention of the terms of this Section 2 shall be null and void.
Section 3. Right of First Refusal.
Except as otherwise provided in Section 2, each Stockholder hereby
agrees that he or it shall not Transfer any Stock, except in accordance with the
following procedures:
(a) In the event such Stockholder desires to Transfer any of the
shares of Stock held by such Stockholder to a Person, the Selling Group shall
first deliver to the Stockholders a written notice (the "Section 3 Offer
Notice"), which shall be irrevocable for a period of 30 days after delivery
thereof, offering (the "Section 3 Offer") all of the Stock proposed to be
Transferred by the Selling Group at the purchase price and on the terms
specified therein (such Section 3 Offer Notice shall include the foregoing
information and all other relevant terms of the proposed Transfer). The
Stockholders shall have the right and option, for a period of 30 days after
receipt of a Section 3 Offer Notice, to accept all of its Proportionate
Percentage of the Stock so offered at the purchase price and on the terms stated
in the Section 3 Offer Notice by delivering written notice of acceptance to the
Selling Group within said 30-day period. If the Selling Group shall not have
received an acceptance for the Section 3 Offer from a Stockholder (the
"Non-Interested Stockholder") for all of its Proportionate Percentage of Stock
within said 30-day period, the Selling Group shall deliver to the Stockholders
which have delivered a written notice of acceptance for the Section 3 Offer a
second written notice (the "Section 3 Second Offer Notice"), which shall be
irrevocable for a period of 15 days after the delivery thereof, offering (the
"Section 3 Second Offer") all of the Stock proposed to be transferred by the
Selling Group not accepted by the Non-Interested Stockholders on the same terms
and conditions contained in the Section 3 Offer Notice. The Stockholders (other
than the Non-Interested Stockholders) shall have the right and option, for a
period of 15 days after receipt of a Section 3 Second Offer Notice, to accept
all or any part of its Proportionate Percentage of Stock so offered at the terms
stated in the Section 3 Second Offer Notice by delivering written notice of
acceptance to the Selling Group within said 15-day period.
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<PAGE> 6
(b) A notice of acceptance delivered by any of the Stockholders
pursuant to Section 3(a) shall be a binding commitment to purchase the Stock
referred to therein.
(c) Transfers of Stock under the terms of Section 3(a) shall be made
at the offices of the Company on a mutually satisfactory business day within 20
days after the expiration of the last applicable period described in Section
3(a) above. Delivery of certificates or other instruments evidencing such Stock
duly endorsed for transfer shall be made on such date against payment of the
purchase price therefor.
(d) If effective acceptance shall not be received pursuant to
Section 3(a) with respect to all Stock offered for Transfer pursuant to the
Section 3 Offer Notice, then the Selling Group may Transfer all or any part of
the Stock so offered and not so accepted at a price not less than the price, and
on terms not more favorable to the purchaser thereof than upon the terms, stated
in the Section 3 Offer Notice at any time within 30 days after the expiration of
the Section 3 Second Offer required by Section 3(a). In the event that the Stock
is not Transferred by the Selling Group during such 30-day period, the right of
the Selling Group to Transfer such Stock shall expire and the obligations of
this Section 3 shall be reinstated.
(e) Anything contained herein to the contrary notwithstanding, any
purchaser of Stock pursuant to Section 3 who is not then a Stockholder shall
execute and deliver a joinder agreement substantially in the form of Exhibit A
hereto by which a person shall be deemed to be a Stockholder for all purposes of
this Agreement.
(f) Restrictions shall terminate upon a Qualified Public Offering.
Section 4. Tag-along Right.
(a) In the event that a Stockholder ("Section 4 Offeror") desires to
Transfer any of the shares of Stock held by such Stockholder (the "Section 4
Offer") to a Person (the "Section 4 Purchaser"), the Selling Group shall
promptly forward a notice (the "Section 4 Offer Notice") complying with Section
4(b) to the Stockholders. Subject to Section 4(c), the Selling Group shall not
Transfer any Stock to the Section 4 Purchaser unless the terms of the Section 4
Offer are extended to the Stockholders with respect to their Proportionate
Percentage of the aggregate number of shares of Stock (on a Common Stock
equivalent basis) to which the Section 4 Offer relates, whereupon each
Stockholder shall be entitled to Transfer to the Section 4 Purchaser pursuant to
the Section 4 Offer the Stockholder's Proportionate Percentage of the aggregate
number of shares of Stock (on a Common Stock equivalent basis) to which the
Section 4 Offer relates by delivering a written notice of acceptance to the
Selling Group within 15 days after delivery of the Section 4 Offer Notice.
(b) Anything contained herein to the contrary notwithstanding, the
Section 4 Offeror shall, in addition to complying with the provisions of this
Section 4, comply with the provisions of Section 3 (it being understood that the
Section 3 Offer Notice contemplated by Section 3(a) and the Section 4 Offer
Notice may be included in a single notice), and each Stockholder, prior to
Transferring any Stock to the Section 4 Purchaser, shall comply with the
provisions of Section 3.
5
<PAGE> 7
(c) Anything contained herein to the contrary notwithstanding, any
purchaser of Stock pursuant to this Section 4 which is not then a Stockholder
shall agree in writing to be bound by all applicable provisions of this
Agreement and shall be deemed to be a Stockholder for all purposes of this
Agreement.
Section 5. Right of First Offer.
(a) In the event that Signal desires to propose to the Company to
Transfer to a Person all or substantially all of the then outstanding Stock
and/or substantially all of the stock and/or equity interests of the Company,
which includes more than fifty percent (50%) of the Stock owned or held by
Signal (the "Section 5 Offer"), Signal shall deliver a written notice to Trident
and the Founding Stockholders with respect to such Section 5 Offer, which shall
be irrevocable for a period of 10 days. Trident and the Founding Stockholders
shall have the right to offer (the "Section 5 Purchase Offer") to purchase that
number of shares of Stock owned or held by Signal included in the Section 5
Offer in any written notice delivered to Signal within said 10-day period.
Signal shall have the right to condition its acceptance of the Section 5
Purchase Offer, and Trident and the Founding Stockholders shall consent to such
conditions, on only the following: (i) approval by Signal of the Section 5
Purchase Offer and (ii) execution of all agreements and documents in connection
with the transactions contemplated by the Section 5 Purchase Offer within 60
Business Days after Signal's delivery of written notice to Trident and the
Founding Stockholders ("Section 5 Offer Acceptance Notice") accepting the
Section 5 Purchase Offer.
(b) Notwithstanding anything contained herein to the contrary, if
either Trident and/or the Founding Stockholders shall not have made a Section 5
Purchase Offer pursuant to this Section 5 and/or (x) Trident and the Founding
Stockholders or (y) Trident or the Founding Stockholders shall not have received
a Section 5 Offer Acceptance Notice pursuant to Section 5(a), the terms and
provisions of this Section 5 shall be of no further effect, and the terms and
provisions of Section 6 shall apply to any subsequent Section 5 Offer.
Section 6. Drag Along Right.
Anything contained herein to the contrary notwithstanding, if at any
time after the terms and provisions of Section 5 shall not apply pursuant to the
terms of Section 5, the Board, with the consent of the director(s) to be
appointed to the Board of Directors of the Company by Signal, shall approve (i)
a bona fide arms length proposal from a Person for the Transfer, directly or
indirectly, of all or a majority of the Stock of the Company to such Person,
(ii) the merger or consolidation of the Company with or into another Person in
which the Stockholders will receive cash or securities of any other Person for
their shares or (iii) the sale by the Company of all or substantially all of its
assets to a Person, in each of the above cases for a specified price payable in
cash or otherwise and on specified terms and conditions (a "Sale Proposal"),
then the Board may deliver a notice (a "Required Sale Notice") with respect to
such Sale Proposal to each other Stockholder (as well as each other holder of
any shares of Stock) stating that Signal has approved the Sale Proposal, the
Company proposes to effect the Sale Proposal and providing the identity of the
Persons involved in such Sale Proposal and the terms thereof. Each such
Stockholder and the members of the Group thereof, upon receipt of a Required
Sale Notice, shall be obligated to sell their Stock and participate in the
transaction (a
6
<PAGE> 8
"Required Sale") contemplated by the Sale Proposal, vote their shares of Stock
in favor of such Sale Proposal at any meeting of Stockholders called to vote on
or approve such Sale Proposal and otherwise to take all necessary action to
cause the Company and the Stockholders to consummate such Required Sale. Any
such Required Sale Notice may be rescinded by the Board, with the written
consent of Signal, by delivering written notice thereof to all of the
Stockholders.
Section 7. Pre-emptive Rights.
(a) Except in the case of Excluded Securities, the Company shall not
issue, sell or exchange, agree to issue, sell or exchange, or reserve or set
aside for issuance, sale or exchange, any (i) Stock, (ii) any other equity
security of the Company, (iii) any debt security of the Company which by its
terms is convertible into or exchangeable for any equity security of the Company
or has any other equity feature, (iv) any security of the Company that is a
combination of a debt and equity security or (v) any option, warrant or other
right to subscribe for, purchase or otherwise acquire any security of the
Company specified in the foregoing clauses (i) through (iv), unless in each case
the Company shall have first offered to sell such securities to the Stockholders
(the "Offered Securities"), at each Stockholder's respective Proportionate
Percentage at a price and on such other terms and conditions as shall have been
specified by the Company in writing delivered to each Stockholder (the "Offer"),
which Offer by its terms shall remain open and irrevocable for a period of 30
days from the date it is delivered by the Company to the Stockholder.
(b) The Company may specify in the Offer that all or a minimum
amount of the Offered Securities must be sold in such offering (to the
Stockholders and/or any third parties pursuant to Section 7(d)), in which case
any Notice of Acceptance (as defined below) shall be deemed conditioned upon (i)
receipt of Notices of Acceptance of all or such minimum amount, as applicable,
of the Offered Securities and/or (ii) the sale of all, or such minimum amount,
as applicable, of the Offered Securities pursuant to Section 7(d).
(c) Notice of the Stockholder's intention to accept, in whole or in
part, an Offer shall be evidenced by a writing signed by such Stockholder and
delivered to the Company prior to the end of the 30-day period of such Offer,
setting forth such portion of the Offered Securities the Stockholders elect to
purchase (the "Notice of Acceptance").
(d) In the event that Notice of Acceptance is not given by the
Stockholders in respect of all the Offered Securities, the Company shall have
120 days from the expiration of the foregoing 30-day period to sell all or any
part of such Offered Securities as to which Notice of Acceptances have not been
given by the Stockholders (the "Refused Securities") to any other person or
persons, but only upon terms and conditions in all material respects, including,
without limitation, unit price and interest rates, which are no more favorable
to such other person or persons and no less favorable to the Company than those
set forth in the Offer. Upon the closing, which shall include full payment to
the Company, of the sale to such other person or persons of all the Refused
Securities, the Stockholders shall purchase from the Company, and the Company
shall sell to the Stockholders, the Offered Securities in respect of which
Notice of Acceptances were delivered to the Company by the Stockholders, at the
terms specified in the Offer.
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<PAGE> 9
(e) In each case, any Offered Securities not purchased by the
Stockholders or any other person or persons in accordance with Section 7(d) may
not be sold or otherwise disposed of until they are again offered to the
Stockholders under the procedures specified in Sections 7(a), (c) and (d).
(f) The rights of the Stockholders under this Section 7 shall not
apply to the following securities (the "Excluded Securities"):
(i) (A) up to 5,000,000 shares (as adjusted equitably for stock
dividends, stock splits, combinations, etc.) of Common Stock issuable upon
exercise of stock options granted to officers, employees or directors of
the Company or its subsidiaries pursuant to and in accordance with any
Employee Plan duly authorized by the Board and/or the appropriate
committee thereof, (B) shares of Common Stock issued upon conversion of
shares of Series C Preferred Stock and (C) shares of Common Stock issued
upon exercise of the Warrants, including in the case of (A), (B) and (C),
any additional shares of Common Stock as may be issued by virtue of
antidilution provisions, if any, applicable to such options or shares, as
the case may be;
(ii) Stock issued as a stock dividend or upon any stock split or
other subdivision or combination of shares of Stock;
(iii) Stock issued as part of a Qualified Public Offering; and
(iv) Common Stock issued upon conversion of convertible securities
outstanding on the date of this Agreement and disclosed on the appropriate
Schedule to the Securities Purchase Agreement.
Section 8. Irrevocable Proxy.
(a) Each Founding Stockholder hereby grants to the Managing
Purchasers and their assignees an irrevocable proxy coupled with an interest
(the "Proxy") attached hereto as Exhibit B to vote the Founders Shares at each
and all meetings of the stockholders of the Company, to execute and otherwise to
exercise any consensual rights with respect to such Founders Shares to the same
extent and with the same effect as each of the Founding Stockholders could do
under any applicable agreement or instrument or any applicable laws or
regulations governing the rights and powers of stockholders of the Company
(collectively, the "Proxy Rights"); provided, that the exercise of any Proxy
Rights requires the consent of the majority of the Managing Purchasers unless,
in the sole judgment of the Majority in Interest that in order to protect its
investment, the Majority in Interest requires the sole right to exercise the
Proxy Rights in which case the Majority in Interest shall upon 10 days written
notice to each other Managing Purchaser have the sole right to exercise the
Proxy Rights until the Majority in Interest, in its sole discretion, shall deem
otherwise. Anything contained in the preceding sentence to the contrary
notwithstanding, the Proxy shall automatically terminate without further action
upon the earliest to occur of (i) the valid and enforceable Transfer of all
Stock owned by such Stockholder, (ii) a Qualified Public Offering or (iii) three
years from the date hereof. The Managing Purchasers shall have the right to
assign the Proxy to any of their Affiliates.
8
<PAGE> 10
(b) If the Proxy granted pursuant to Section 8(a) is not valid or is
otherwise ineffective for any reason, then each Founding Stockholder shall vote
all of his respective Founders Shares in the same manner as the Majority in
Interest votes any shares of Stock owned by the Majority in Interest at any and
all meetings of the stockholders of the Company, by written consent in lieu
thereof and otherwise in connection with any exercise of any consensual rights
with respect to such Founders Shares.
Section 9. Voting Agreement.
(a) Each Stockholder shall vote all of his or its Shares (by Proxy
if applicable) and shall take all other necessary or desirable actions within
his or its control (whether in such Stockholder's capacity as a stockholder of
the Company or otherwise, and including, without limitation, attendance at
meetings in person or by proxy for purposes of obtaining a quorum and execution
of written consents in lieu of meetings), and the Company shall take all
necessary and desirable actions within its control (including, without
limitation, calling special Board and stockholder meetings), so that:
(i) the authorized number of directors on the Board of the Company
shall be established at no less than six (6) directors;
(ii) the initial directors of the Board of the Company shall be
Santo Petrocelli, Sr., Lawrence S. Polan, Frank Chiaino, Timothy P. Bradley,
Michael S. Liss and Richard Sayers;
(iii) one Person designated by the Majority in Interest and one
Person designated by Trident shall have the right to observe and attend all
meetings, whether held by teleconference or otherwise, of the Board of the
Company and to receive all information and notices received by directors on the
Board of the Company.
(b) The consent of the director(s) designated by each of Signal and
Trident to the Board will be necessary for (i) any material change or
modification of the Company's business plan as agreed upon by the Managing
Purchasers as of the date hereof (the "Business Plan"), (ii) the redemption of
any capital stock, (iii) the issuance of securities senior to or on a parity
with the Preferred Stock, (iv) the authorization or issuance of securities
convertible into such senior or parity securities or (v) the amendment of the
Certificate of Incorporation of the Company. The consent of the director(s)
designated by Signal to the Board will be necessary for (i) any transactions
with an Affiliate or related party to the Company, (ii) any merger or
consolidation of the Company or any Subsidiary of the Company with any other
entity, (iii) the sale of all or substantially all of the assets of the Company
or its Subsidiaries, (iv) the approval or authorization of any liquidation, (v)
the removal of any senior executive of the Company, (vi) the incurrence of any
fund Indebtedness in excess of $500,000, (vii) the incurrence of any capital
expenditures in any 12-month period in excess of $100,000, which such capital
expenditures were not authorized in or by the Company's Business Plan or
Operating Budget or (viii) any changes to or removal of the Company's auditor.
9
<PAGE> 11
Section 10. Covenants.
(a) The Company and the Stockholders shall take any and all
necessary actions to make Exchange Act Filings (as defined in the Securities
Purchase Agreement) immediately after the Closing.
(b) The Company and the Stockholders shall take any and all
necessary actions to increase the size of the Board to six (6) directors, and to
appoint Charles Mahoney, Trey Farmer and Joseph Tortoretti as replacements for
Santo Petrocelli, Sr., Lawrence S. Polan and Frank Chiaino effective on the
Filing Expiration Date.
Section 11. Legend on Stock Certificates.
Each certificate representing shares of Stock issued under the
Securities Purchase Agreement shall bear a legend containing the following words
(in addition to any other legend required by law or applicable agreement):
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF MAY 7, 1999,
BY AND AMONG FIBERNET TELECOM GROUP, INC. AND CERTAIN HOLDERS OF THE
OUTSTANDING CAPITAL STOCK OF SUCH CORPORATION. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF SUCH
CORPORATION."
Section 12. Additional Shares of Stock; Etc.
In the event additional shares of Stock are issued by the Company to
a Stockholder of the Company at any time during the term of this Agreement,
either directly or upon the exercise or exchange of securities of the Company
exercisable for or exchangeable into shares of Stock, the Company shall cause
such additional shares of Stock, as a condition to such issuance, to become
subject to the terms and provisions of this Agreement.
Section 13. Duration of Agreement; Compliance.
The rights and obligations of each Stockholder under this Agreement
shall terminate as to such Stockholder upon the earliest to occur of (a) the
valid and enforceable Transfer of all Stock owned by such Stockholder, and (b) a
Qualified Public Offering.
Section 14. Severability; Governing Law.
If any provision of this Agreement shall be determined to be illegal
and unenforceable by any court of law, the remaining provisions shall be
severable and enforceable in accordance with their terms. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of New York (without regard to principles of
10
<PAGE> 12
conflicts of laws), except to the extent that this Agreement relates to the
internal laws of the Company, which shall be governed by and construed and
enforced in accordance with the laws of the State of New York.
Section 15. Successors and Assigns.
This Agreement shall bind and inure to the benefit of the parties
and their respective successors and assigns, transferees, legal representatives
and heirs.
Section 16. Notices.
All notices, requests, consents and other communications hereunder
to any party shall be deemed to be sufficient if contained in a written
instrument delivered in person or by telecopy or sent by nationally-recognized
overnight courier or first class registered or certified mail, return receipt
requested, postage prepaid, addressed to such party at the address set forth
below or at such other address as may hereafter be designated in writing by such
party to the other parties:
if to the Company, to:
FiberNet Telecom Group, Inc.
570 Lexington Avenue
New York, NY 10022
Telephone: (212) 421-4900
Telecopy: (212) 421-8860
Attention: President
if to the Stockholders, to their respective addresses set
forth on Annex I hereto with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Telephone: (212) 408-2400
Telecopy: (212) 408-2420
Attention: Gordon R. Caplan, Esq.
All such notices, requests, consents and other communications shall
be deemed to have been delivered (a) in the case of personal delivery or
delivery by telecopy, on the date of such delivery, (b) in the case of dispatch
by nationally-recognized overnight courier, on the next business day following
such dispatch and (c) in the case of mailing, on the third business day after
the posting thereof.
Section 17. Modification.
Except as otherwise provided herein, neither this Agreement nor any
provisions hereof can be modified, changed, discharged or terminated except by
an instrument in writing signed by the Company and a Majority in Interest of the
Purchasers; provided, however,
11
<PAGE> 13
that no modification or amendment shall discriminate against any Stockholder
without the consent of such Stockholder.
Section 18. Headings.
The headings of the sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be a part of this
Agreement.
Section 19. Nouns and Pronouns.
Whenever the context may require, any pronouns used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of names and pronouns shall include the plural and vice versa.
Section 20. Entire Agreement.
This Agreement and the other writings referred to herein or
delivered pursuant hereto contain the entire agreement among the parties hereto
with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements and understandings with respect thereto.
Section 21. Counterparts.
This Agreement may be executed in any number of counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute but one agreement.
12
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement on the date first above written.
FIBERNET TELECOM GROUP, INC.
By:__________________________________
Name:
Title:
SIGNAL CAPITAL PARTNERS, L.P.
By: Signal Capital Advisors, L.P.
Its: General Partner
By: Signal Capital Advisors, Inc.
Its: General Partner
By:__________________________________
Name:
Title:
TRIDENT TELECOM PARTNERS LLC
By: Trident Telecom Management LLC
Its: Managing Member
By: Needham Management, Inc.
Its: Managing Member
By:__________________________________
Name:
Title:
<PAGE> 15
CONCORDIA TELECOM MANAGEMENT, L.L.C.
By:__________________________________
Name: Michael Liss
Title: Sole Member
BURDEN DIRECT INVESTMENT FUND III
By: William A.M. Burden & Co., L.P.
Its: Managing General Partner
By: Burden Brothers, Inc.
Its: Sole General Partner
By:__________________________________
Name: Jeffrey A. Weber
Title: President and CEO
PEQUOT SCOUT FUND, LP
By:__________________________________
Name:
Title:
PENNY LANE PARTNERS, L.P.
By: Penny Lane Associates, L.P.
Its: General Partner
By: Penny Lane, Inc.
Its: General Partner
By:__________________________________
Name: William R. Denslow, Jr.
Title: Chairman, Penny Lane, Inc.
<PAGE> 16
LANCER OFFSHORE, INC.
By:__________________________________
Name:
Title:
ALEXANDER ENTERPRISE HOLDINGS CORP.
By:__________________________________
Name:
Title:
KING STREET CAPITAL LTD.
By:__________________________________
Name:
Title:
KING STREET CAPITAL LP
By:__________________________________
Name:
Title:
TAURUS TELECOMMUNICATION, INC.
By:__________________________________
Name:
Title:
<PAGE> 17
SMFS, INC.
By:__________________________________
Name:
Title:
LPS CONSULTANTS INC.
By:__________________________________
Name:
Title:
LTJ GROUP, INC.
By:__________________________________
Name:
Title:
<PAGE> 18
ANNEX I
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Stockholders Series C Convertible
Preferred Stock Common Stock
- -----------------------------------------------------------------------------------------------------
Purchasers
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Signal Capital Partners, L.P. 43,499.00 0
10 E. 53rd Street, 32nd Floor
New York, NY 10022
Attn: Timothy Bradley
Telephone: (212) 872-1180
Telecopier: (212) 208-2497
- -----------------------------------------------------------------------------------------------------
Trident Telecom Partners LLC 40,189.00 0
350 Park Avenue, 14th Floor
New York, NY 10022
Attn: Gerald Goldberg
Telephone: (212) 753-4718
Telecopier: (212) 753-5977
- -----------------------------------------------------------------------------------------------------
Concordia Telecom Management, L.L.C. 4,728.00 0
c/o FiberNet Telecom Group, Inc.
570 Lexington Avenue, 3rd Floor
New York, NY 10022
Attn: Michael S. Liss
Telephone: (212) 421-4900
Telecopier: (212) 421-8860
- -----------------------------------------------------------------------------------------------------
Burden Direct Investment Fund III 9,456.00 0
10 E. 53rd Street, 32nd Floor
New York, NY 10022
Attn: Jeffrey Weber
Telephone: (212) 872-1133
Telecopier: (212) 872-1199
- -----------------------------------------------------------------------------------------------------
Pequot Scout Fund, LP 9,456.00 0
500 Nyala Farm Road
Westport, CT 06880
Attn: Mark Broach
Telephone: (203) 429-2203
Telecopier: (203) 429-2410
- -----------------------------------------------------------------------------------------------------
Penny Lane Partners, L.P. 7,092.00 0
767 Fifth Avenue
New York, NY 10153
Attn: William R. Denslow Jr.
Telephone: (212) 980-4292
Telecopier: (212) 319-6046
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 19
<TABLE>
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Lancer Offshore, Inc. 4,728.00 0
375 Park Avenue
New York, NY 10152
Attn: Michael Lauer
Telephone: (212) 521-8400
Telecopier: (212) 521-8401
- -----------------------------------------------------------------------------------------------------
Alexander Enterprise Holdings Corp. 8,511.00 0
c/o Alpha Investment Inc.
499 Park Avenue, 24th Floor
New York, NY 10022
Attn: Richard O'Connell
Telephone: (212) 702-0606
Telecopier: (212) 421-0169
- -----------------------------------------------------------------------------------------------------
King Street Capital Ltd. 2,269.00 0
575 Lexington Avenue
New York, NY 10022
Attn: Ara Cohen
Telephone: (212) 350-4434
Telecopier: (212) 350-4702
- -----------------------------------------------------------------------------------------------------
King Street Capital LP 2,459.00 0
575 Lexington Avenue
New York, NY 10022
Attn: Ara Cohen
Telephone: (212) 350-4434
Telecopier: (212) 350-4702
- -----------------------------------------------------------------------------------------------------
Taurus Telecommunication, Inc. 946.00 0
3625 Ridge Run
Canandaigua, NY 14424
Attn: Richard Sayers
Telephone: (716) 396-0130
Telecopier: (716) 396-9237
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Founding Stockholders Series C Convertible Common Stock
Preferred Stock
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
SMFS, Inc. 0 6,900,000
c/o Petrocelli Communications Company
12-12 43rd Avenue
Long Island City, NY 11101
- -----------------------------------------------------------------------------------------------------
LTJ Group, Inc. 0 4,025,000
c/o FiberNet Telecom Group, Inc.
570 Lexington Avenue
New York, NY 10022
- -----------------------------------------------------------------------------------------------------
LPS Consultants, Inc. 0 575,000
c/o Petrocelli Communications Company
12-12 43rd Avenue
Long Island City, NY 11101
- -----------------------------------------------------------------------------------------------------
Frank Chiaino 0 0
6700 Song Hill Lane
Rochester, NY 14564
Telephone: (716) 924-5481
Telecopier:
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 21
EXHIBIT A
Joinder
By execution of this Purchaser Joinder, the undersigned agrees to
become a party to that certain Stockholders Agreement dated as of May 7, 1999
attached hereto, among FiberNet Telecom Group, Inc., a Nevada corporation, and
certain of its stockholders. The undersigned shall have all the rights, and
shall observe all of the obligations, applicable to a Stockholder.
Name:_______________________________
Address for Notices: With copies to:
____________________________________ ____________________________________
____________________________________ ____________________________________
____________________________________ ____________________________________
Signature:__________________________
Date:_______________________________
A-1
<PAGE> 1
EXHIBIT I
REGISTRATION RIGHTS AGREEMENT dated
as of May 7, 1999 (the "Agreement"), by and
among FIBERNET TELECOM GROUP, INC., a Nevada
corporation (the "Company"), the Purchasers
listed on Annex I hereto (the "Purchasers")
and certain stockholders listed under the
heading "Founding Stockholders" on Annex I
hereto (the "Founding Stockholders" and,
together with the Purchasers, the
"Stockholders").
Pursuant to the Securities Purchase Agreement (as defined below), the
Purchasers have the right to purchase or otherwise acquire shares of Common
Stock (as defined below) of the Company. The Company and the Stockholders deem
it to be in their respective best interests to set forth the rights of the
Stockholders in connection with public offerings and sales of the Common Stock.
Accordingly, the Company and the Stockholders agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to them in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.001 par value, of the Company.
"Concordia" means Concordia Telecom Management LLC, a Delaware limited
liability company.
"Exchange Act" means the Securities Exchange Act of 1934 or any successor
Federal statute, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect from time to time.
"Founders Shares" means at any time the shares of Common Stock, any
securities which by their terms are exercisable or exchangeable for or
convertible into Common Stock, and any securities of the Company received in
respect thereof, which are held by the Founding Stockholders and which have not
been previously sold to the public pursuant to a registration statement under
the Securities Act.
<PAGE> 2
"Other Shares" means at any time those shares of Common Stock which do not
constitute Primary Shares, Registrable Shares or Registrable Founders
Shares.
"Primary Shares" means at any time the authorized but unissued shares of
Common Stock or shares of Common Stock held by the Company in its treasury.
"Registrable Founders Shares" means at any time the Founders Shares of
Common Stock held by the Founding Stockholders.
"Registrable Shares" means at any time the Restricted Shares of Common
Stock held by the Purchasers.
"Registration Date" means the first date after the date hereof on which
any registration statement pursuant to which the Company shall have registered
shares of Common Stock under the Securities Act (other than on Form S-4 or S-8
promulgated under the Securities Act) for sale to the public shall have been
declared effective.
"Restricted Shares" means at any time the shares of Common Stock, any
securities which by their terms are exercisable or exchangeable for or
convertible into Common Stock, and any securities of the Company received in
respect thereof, which are held by the Purchasers and which have not previously
been sold to the public pursuant to a registration statement under the
Securities Act.
"Rule 144" means Rule 144 promulgated under the Securities Act or any
successor rule thereto.
"Securities Act" means the Securities Act of 1933 or any successor Federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.
"Securities Purchase Agreement" means the Securities Purchase Agreement
dated as of the date hereof among the Company and the Purchasers.
"Signal" means Signal Capital Partners, L.P., a Delaware limited
partnership.
"Total Registrable Shares" means the Registrable Shares and the
Registrable Founders Shares.
"Total Restricted Shares" means the Restricted Shares and the Founders
Shares.
"Transfer" means any disposition of any Restricted Shares or of any
interest therein which would constitute a sale thereof within the meaning of the
Securities Act, other than any such disposition pursuant to an effective
registration statement under the Securities Act and complying with all
applicable state securities and "blue sky" laws.
"Trident" means Trident Telecom Management LLC, a Delaware limited
liability company.
2
<PAGE> 3
ARTICLE II
REQUIRED REGISTRATIONS
2.1 Demand Registration.
If the Company shall be requested by (i) Signal and Concordia, (ii)
Trident and Concordia or (iii) Trident and Signal (i) having obtained the
written consent of (a) Signal and Concordia or (b) Trident and Concordia, as
applicable (the "Consent"), or (ii) having obtained a written waiver of such
Consent ("Waiver") at any time to effect the registration under the Securities
Act of Registrable Shares (a "Demand Registration"), the Company shall promptly
give written notice of such proposed registration to all holders of Restricted
Shares and shall offer to include in such proposed registration any Registrable
Shares requested to be included in such proposed Demand Registration by the
holders of Restricted Shares who shall respond in writing to the Company's
notice within 30 days after delivery of such notice (which response shall
specify the number of Registrable Shares proposed to be included in such
registration). If the Purchasers request a Demand Registration pursuant to this
Section, the Company shall promptly give written notice of such Demand
Registration to all holders of Founders Shares and shall offer to include in
such proposed registration any Registrable Founders Shares requested to be
included in such Demand Registration by the holders of Restricted Shares who
shall respond in writing to the Company's notice within 20 days after delivery
of such notice (which response shall specify the number of Registrable Founders
Shares proposed to be included in such Demand Registration). The Company shall
promptly use its best efforts to effect such registration under the Securities
Act of the Registrable Shares and Registrable Founder Shares which the Company
has been so requested to register and to have the registration statement filed
by the Company hereunder declared effective by the Commission within 90 days of
any requested filing (the "Demand Date") and make any other subsequent filings
to keep such registration statement effective; provided, however, that the
Company shall not be obligated to effect any registration under the Securities
Act except in accordance with the following provisions:
(a) the Company shall not be obligated to use its best efforts to
file and cause to become effective (i) more than two registration statements
initiated pursuant to this Section, (ii) any registration statement during any
period in which any other registration statement (other than on Form S-4 or Form
S-8 promulgated under the Securities Act or any successor forms thereto)
pursuant to which Primary Shares are to be or were sold has been filed and not
withdrawn or has been declared effective within the prior 90 days, or (iii) any
registration within twelve months of any other registration required under this
Section;
(b) the Company may delay the filing or effectiveness of any
registration statement for a period of up to 90 days after the date of a request
for registration pursuant to this Section if at the time of such request the
Company is engaged, or has fixed plans to engage within 60 days of the time of
such request, in a firm commitment underwritten public offering of Primary
Shares in which the holders of Restricted Shares or holders of Founders Shares
may include Registrable Shares or Registrable Founders Shares respectively
pursuant to Section 2.2; and
3
<PAGE> 4
(c) with respect to any registration pursuant to this Section, the
Company may include in such registration any Primary Shares or Other Shares;
provided, however, that if any managing underwriter for the public offering
contemplated by such registration advises the Company that the inclusion of all
Total Registrable Shares, Primary Shares and Other Shares proposed to be
included in such registration would interfere with the successful marketing
(including pricing) of all such securities, then the number of Total Registrable
Shares, Primary Shares and Other Shares proposed to be included in such
registration shall be included in the following order:
(i) first, the Total Registrable Shares, pro rata based upon
the number of Total Restricted Shares (based upon Common Stock
equivalents) owned by each holder thereof at the time of such
registration; and
(ii) second, the Primary Shares and the Other Shares.
A requested registration under this Section may be rescinded by written
notice to the Company by the Purchasers initiating such request. Such rescinded
registration shall not count as a registration statement initiated pursuant to
this Section for purposes of paragraph (a) above.
(d) The Purchasers requesting a registration pursuant to this
Section may, in the notice delivered pursuant to paragraph (a) above, elect,
with the consent of Signal and Trident, that such registration cover an
underwritten offering. Upon such election, such Purchasers shall select one or
more nationally recognized firms of investment banks to act as the managing
underwriters and shall select any additional investment banks to be used in
connection with such offering, provided that such investment banks must be
reasonably satisfactory to the Company, which selections shall be approved of by
Signal and Trident. The Company shall, together with all Purchasers and Founding
Stockholders proposing to sell Registrable Shares and Registrable Founders
Shares, respectively, in such offering, enter into a customary underwriting
agreement with such underwriters.
2.2 Piggyback Registration.
If the Company proposes for any reason to register Primary Shares or Other
Shares under the Securities Act (other than on Form S-4 or Form S-8 promulgated
under the Securities Act or any successor forms thereto), it shall promptly give
written notice to each Purchaser and Founding Stockholder of its intention so to
register the Primary Shares or Other Shares. Upon the written request, given
within 30 days after delivery of any such notice by the Company, of any
Purchaser (i) having obtained the Consent or (ii) a Waiver prior thereto, or any
Founding Stockholder to include in such registration Registrable Shares or
Registrable Founders Shares (which request shall specify the number of
Registrable Shares or Registrable Founders Shares proposed to be included in
such registration), the Company shall use its best efforts to cause all such
Total Registrable Shares to be included in such registration on the same terms
and conditions as the securities otherwise being sold in such registration;
provided, however, that if any managing underwriter for the public offering
contemplated by such registration advises the Company that the inclusion of all
Total Registrable Shares or Other Shares proposed to be included in such
registration would interfere with the successful marketing (including pricing)
of the Primary Shares proposed to be registered by the Company, then the number
of Primary
4
<PAGE> 5
Shares, Total Registrable Shares and Other Shares proposed to be included in
such registration shall be included in the following order:
(a) first, the Primary Shares;
(b) second, the Total Registrable Shares, pro rata based upon the
number of Restricted Shares and Founders Shares (based upon Common Stock
equivalents) respectively owned by each holder thereof at the time of such
registration; and
(c) third, the Other Shares.
2.3 Registration on Form S-3.
Anything contained in Section 2.1 to the contrary notwithstanding, at such
time as the Company shall have qualified for the use of Form S-3 promulgated
under the Securities Act or any successor form thereto, any Purchaser or group
of Purchasers, having obtained Consent or a Waiver, shall have the right to
request in writing an unlimited number of registrations on Form S-3 or such
successor form of Registrable Shares, which request or requests shall (i)
specify the number of Registrable Shares intended to be sold or disposed of,
(ii) state the intended method of disposition of such Registrable Shares, and
(iii) relate to Registrable Shares having an anticipated aggregate offering
price of at least $1,000,000; provided, however, that no Purchaser shall make
any request under this Section 2.3 if at such time all Registrable Shares held
by the Purchasers are freely tradeable under Rule 144. A requested registration
on Form S-3 or any such successor form in compliance with this Section shall not
count as a registration statement demanded pursuant to Section 2.1, but shall
otherwise be treated as a registration initiated pursuant to and shall, except
as otherwise expressly provided in this Section, be subject to Section 2.1. No
Purchaser or group of Purchasers shall exercise its or their rights under this
Section 2.3 more than two times in any twelve month period.
ARTICLE III
REGISTRATION OF SECURITIES
3.1 Preparation and Filing.
If and whenever the Company is under an obligation pursuant to the
provisions of this Agreement to use its best efforts to effect the registration
of any Total Registrable Shares, the Company shall, as expeditiously as
practicable:
(a) use its commercially reasonable efforts to cause a registration
statement that registers such Total Registrable Shares to become and remain
effective for a period of 180 days or until all of such Total Registrable Shares
have been disposed of (if earlier);
(b) furnish, at least five business days before filing a
registration statement that registers such Total Registrable Shares, a
prospectus relating thereto or any amendments or supplements relating to such a
registration statement or prospectus, to one counsel selected by the Majority in
Interest (the "Selling Purchasers' Counsel"), copies of all such documents
proposed to be filed (it being understood that such five-business-day period
need not apply to
5
<PAGE> 6
successive drafts of the same document proposed to be filed so long as such
successive drafts are supplied to such counsel in advance of the proposed filing
by a period of time that is customary and reasonable under the circumstances);
(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
at least a period of 180 days or until all of such Total Registrable Shares have
been disposed of (if earlier) and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of such Total
Registrable Shares;
(d) notify in writing the Selling Purchasers' Counsel promptly (i)
of the receipt by the Company of any notification with respect to any comments
by the Commission with respect to such registration statement or prospectus or
any amendment or supplement thereto or any request by the Commission for the
amending or supplementing thereof or for additional information with respect
thereto, (ii) of the receipt by the Company of any notification with respect to
the issuance by the Commission of any stop order suspending the effectiveness of
such registration statement or prospectus or any amendment or supplement thereto
or the initiation or threatening of any proceeding for that purpose and (iii) of
the receipt by the Company of any notification with respect to the suspension of
the qualification of such Total Registrable Shares for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purposes;
(e) use its commercially reasonable efforts to register or qualify
such Total Registrable Shares under such other securities or blue sky laws of
such jurisdictions as any seller of Total Registrable Shares reasonably requests
and do any and all other acts and things which may be reasonably necessary or
advisable to enable such seller of Total Registrable Shares to consummate the
disposition in such jurisdictions of the Total Registrable Shares owned by such
seller; provided, however, that the Company will not be required to qualify
generally to do business, subject itself to general taxation or consent to
general service of process in any jurisdiction where it would not otherwise be
required so to do but for this paragraph (e);
(f) furnish to each seller of such Total Registrable Shares such
number of copies of a summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such seller of Total Registrable Shares may
reasonably request in order to facilitate the public sale or other disposition
of such Total Registrable Shares;
(g) use its commercially reasonable efforts to cause such Total
Registrable Shares to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business and
operations of the Company to enable the seller or sellers thereof to consummate
the disposition of such Total Registrable Shares;
(h) notify on a timely basis each seller of such Total Registrable
Shares at any time when a prospectus relating to such Total Registrable Shares
is required to be delivered under the Securities Act within the appropriate
period mentioned in paragraph (a) of this Section, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not
6
<PAGE> 7
misleading in light of the circumstances then existing and, at the request of
such seller, prepare and furnish to such seller a reasonable number of copies of
a supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the offerees of such shares, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(i) make available for inspection by any seller of such Total
Registrable Shares, any underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other agent retained
by any such seller or underwriter (collectively, the "Inspectors"), all
pertinent financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all information
(together with the Records, the "Information") reasonably requested by any such
Inspector in connection with such registration statement. Any of the Information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, shall not be disclosed by the
Inspectors unless (i) the disclosure of such Information is necessary to avoid
or correct a misstatement or omission in the registration statement, (ii) the
release of such Information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction or (iii) such Information has been made
generally available to the public. The seller of Total Registrable Shares agrees
that it will, upon learning that disclosure of such Information is sought in a
court of competent jurisdiction, give notice to the Company and allow the
Company, at the Company's expense, to undertake appropriate action to prevent
disclosure of the Information deemed confidential;
(j) use its commercially reasonable efforts to obtain from its
independent certified public accountants "cold comfort" letters in customary
form and at customary times and covering matters of the type customarily covered
by cold comfort letters;
(k) use its commercially reasonable efforts to obtain from its
counsel an opinion or opinions in customary form;
(l) provide a transfer agent and registrar (which may be the same
entity and which may be the Company) for such Total Registrable Shares;
(m) issue to any underwriter, which underwriter shall be chosen by
the Company subject to the approval of a Majority in Interest of the Purchasers,
to which any seller of Total Registrable Shares may sell shares in such offering
certificates evidencing such Total Registrable Shares;
(n) list such Total Registrable Shares on any national securities
exchange or national automated quotation system on which any shares of the
Common Stock are listed or, if the Common Stock is not so listed, use its
commercially reasonable efforts to qualify such Registrable Shares for inclusion
on the automated quotation system of the National Association of Securities
Dealers, Inc. (the "NASD") or such national securities exchange as the Company
shall reasonably determine;
7
<PAGE> 8
(o) otherwise use its commercially reasonable efforts to comply with
all applicable rules and regulations of the Commission and make available to its
securityholders, as soon as reasonably practicable, earnings statements (which
need not be audited) covering a period of 12 months beginning within three
months after the effective date of the registration statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the Securities Act;
and
(p) use its commercially reasonable efforts to take all other steps
necessary to effect the registration of such Total Registrable Shares
contemplated hereby.
3.2 Information by Holder.
Each holder of Total Registrable Shares to be included in any registration
shall furnish to the Company such written information regarding such holder and
the distribution proposed by such holder as the Company may reasonably request
in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
3.3 Exchange Act Compliance.
From and after the Registration Date or such earlier date as a
registration statement filed by the Company pursuant to the Exchange Act
relating to any class of the Company's securities shall have become effective,
the Company shall comply with all of the reporting requirements of the Exchange
Act and shall comply with all other public information reporting requirements of
the Commission which are conditions to the availability of Rule 144 for the sale
of shares of Common Stock. The Company shall cooperate with each Purchaser in
supplying such information as may be necessary for such Purchaser to complete
and file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.
3.4 Expenses.
All expenses incurred by the Company in complying with this Article,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the NASD), fees and expenses of complying with
securities and blue sky laws, printing expenses, fees and expenses of the
Company's counsel and accountants, and reasonable fees and expenses of the
Selling Purchasers' Counsel, shall be paid by the Company; provided, however,
that all underwriting discounts and selling commissions applicable to the Total
Registrable Shares shall be borne by the sellers thereof, in proportion to the
number of Total Registrable Shares sold by such sellers.
ARTICLE IV
INDEMNIFICATION
4.1 Indemnification.
(a) In connection with any registration of any Total Registrable
Shares under the Securities Act pursuant to this Agreement, the Company shall
indemnify and hold harmless the
8
<PAGE> 9
seller of such Total Registrable Shares, each underwriter, broker or any other
person acting on behalf of such seller and each other person, if any, who
controls any of the foregoing persons within the meaning of the Securities Act
against any losses, claims, damages or liabilities, joint or several, (or
actions in respect thereof) to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the registration statement under which such Total Registrable
Shares were registered under the Securities Act, any preliminary prospectus or
final prospectus contained therein or otherwise filed with the Commission, any
amendment or supplement thereto or any document incident to registration or
qualification of any Total Registrable Shares, or arise out of or are based upon
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,
with respect to any prospectus, necessary to make the statements therein in
light of the circumstances under which they were made not misleading, or any
violation by the Company of the Securities Act or state securities or blue sky
laws applicable to the Company and relating to action or inaction required of
the Company in connection with such registration or qualification under such
state securities or blue sky laws; and shall reimburse such seller, such
underwriter, such broker or such other person acting on behalf of such seller
and each such controlling person for any legal or other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in said
registration statement, preliminary prospectus, final prospectus, amendment,
supplement or document incident to registration or qualification of any Total
Registrable Shares in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such seller or
underwriter specifically for use in the preparation thereof.
(b) In connection with any registration of Total Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Total
Registrable Shares shall indemnify and hold harmless (in the same manner and to
the same extent as set forth in the preceding paragraph of this Section) the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement, each underwriter, broker or other person
acting on behalf of such seller, each person who controls any of the foregoing
persons within the meaning of the Securities Act and each other seller of Total
Registrable Shares under such registration statement with respect to any
statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein or otherwise filed with the
Commission, any amendment or supplement thereto or any document incident to
registration or qualification of any Total Registrable Shares, if such statement
or omission was made in reliance upon and in conformity with written information
furnished to the Company or such underwriter through an instrument duly executed
by such seller specifically for use in connection with the preparation of such
registration statement, preliminary prospectus, final prospectus, amendment,
supplement or document; provided, however, that the maximum amount of liability
in respect of such indemnification shall be limited, in the case of each seller
of Total Registrable Shares, to an amount equal to the net proceeds actually
received by such seller from the sale of Total Registrable Shares effected
pursuant to such registration.
9
<PAGE> 10
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of the commencement of such action. In case any such action is brought against
an indemnified party, the indemnifying party will be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be responsible for any legal or other
expenses subsequently incurred by the latter in connection with the defense
thereof; provided, however, that if any indemnified party shall have reasonably
concluded that there may be one or more legal or equitable defenses available to
such indemnified party which are additional to or conflict with those available
to the indemnifying party, or that such claim or litigation involves or could
have an effect upon matters beyond the scope of the indemnity agreement provided
in this Section, the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party and such indemnifying
party shall reimburse such indemnified party and any person controlling such
indemnified party for that portion of the fees and expenses of any counsel
retained by the indemnified party which is reasonably related to the matters
covered by the indemnity agreement provided in this Section.
(d) If the indemnification provided for in this Section is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action 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 which resulted in such loss, claim, damage or
liability as well as any other relevant equitable considerations. 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 or alleged 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.
4.2 Underwriting Agreement.
Notwithstanding the provisions of Sections 3.1, 3.4, and 4.1, to the
extent that the Purchasers and/or Founding Stockholders selling Registrable
Shares or Registrable Founders Shares, respectively, in a proposed registration
shall enter into an underwriting or similar agreement, and such agreement
contains provisions covering one or more issues addressed in such Sections, the
provisions contained in such agreement shall supersede the provisions of
Sections 3.1, 3.4, and 4.1.
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<PAGE> 11
ARTICLE V
MISCELLANEOUS
5.1 Termination.
This Agreement shall terminate and be of no further force or effect when
the Purchasers cease to hold any Restricted Shares.
5.2 Successors and Assigns.
This Agreement shall bind and inure to the benefit of the Company and the
Purchasers and, subject to Section 5.3, their respective successors and assigns.
5.3 Assignment.
Each Purchaser or Founding Stockholder may assign its respective rights
hereunder to any other person or entity to whom Restricted Shares or Founders
Shares of such Purchaser or such Founding Stockholder, respectively, have been
sold or otherwise transferred.
5.4 Entire Agreement.
This Agreement contains the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior arrangements or
understandings with respect hereto.
5.5 No Conflict of Rights.
The Company represents and warrants to the Stockholders that the
registration rights granted to the Stockholders hereby do not conflict with any
other registration rights granted by the Company. The Company shall not, after
the date hereof, grant any registration rights which conflict with or impair the
registration rights granted hereby.
5.6 Notices.
All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or if sent by nationally-recognized overnight
courier, by telecopy, or by registered or certified mail, return receipt
requested and postage prepaid, addressed as follows:
if to the Company:
FiberNet Telecom Group, Inc.
570 Lexington Avenue
New York, NY 10022
Telecopier: (212) 421-4900
Telephone: (212) 421-8860
11
<PAGE> 12
Attention: President
if to any Stockholder, to its or his address set forth on Annex I;
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (i) in the case of
personal delivery, on the date of such delivery, (ii) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (iii) in the case of telecopy transmission, when received, and (iv)
in the case of mailing, on the third business day following that on which the
piece of mail containing such communication is posted.
5.7 Modifications; Amendments; Waivers.
The terms and provisions of this Agreement may not be modified or amended,
except pursuant to a writing signed by the Company and the Majority in Interest
of the Purchasers.
5.8 Counterparts.
This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
5.9 Headings.
The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be a part of this
Agreement.
5.10 Severability.
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any provision of this Agreement would be held in any
jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
5.11 GOVERNING LAW; SUBMISSION TO JURISDICTION.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. EACH OF THE OBLIGORS HEREBY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT FOR PURPOSES OF ALL LEGAL
12
<PAGE> 13
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH OF THE OBLIGORS IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURT AND ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE
OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 5.6. NOTHING IN THIS
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.
* * * * *
13
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed and delivered this
Registration Rights Agreement on the date first above written.
FIBERNET TELECOM GROUP, INC.
By:
-----------------------------------------
Name:
Title:
SIGNAL CAPITAL PARTNERS, L.P.
By: Signal Capital Advisors, L.P.
Its: General Partner
By: Signal Capital Advisors, Inc.
Its: General Partner
By:
-----------------------------------------
Name:
Title:
TRIDENT TELECOM PARTNERS LLC
By: Trident Telecom Management LLC
Its: Managing Member
By: Needham Management, Inc.
Its: Managing Member
CONCORDIA TELECOM MANAGEMENT, L.L.C.
By:
-----------------------------------------
Name:
Title:
<PAGE> 15
BURDEN DIRECT INVESTMENT FUND III
By: William A.M. Burden & Co., L.P.
Its: Managing General Partner
By: Burden Brothers, Inc.
Its: Sole General Partner
By:
-----------------------------------------
Name: Jeffrey A. Weber
Title: President and CEO
PEQUOT SCOUT FUND, LP
By:
-----------------------------------------
Name:
Title:
PENNY LANE PARTNERS, L.P.
By: Penny Lane Associates, L.P.
Its: General Partner
By: Penny Lane, Inc.
Its: General Partner
By:
-----------------------------------------
Name: William R. Denslow, Jr.
Title: Chairman, Penny Lane, Inc.
LANCER OFFSHORE, INC.
By:
-----------------------------------------
Name:
Title:
<PAGE> 16
ALEXANDER ENTERPRISE HOLDINGS CORP.
By:
-----------------------------------------
Name:
Title:
KING STREET CAPITAL LTD.
By:
-----------------------------------------
Name:
Title:
KING STREET CAPITAL LP
By:
-----------------------------------------
Name:
Title:
TAURUS TELECOMMUNICATION, INC.
By:
-----------------------------------------
Name:
Title:
SMFS, INC.
By:
-----------------------------------------
Name:
Title:
<PAGE> 17
LPS CONSULTANTS INC.
By:
-----------------------------------------
Name:
Title:
LTJ GROUP, INC.
By:
-----------------------------------------
Name:
Title:
--------------------------------------------
Frank Chiaino
<PAGE> 18
Annex I
PURCHASERS AND CERTAIN STOCKHOLDERS
PURCHASERS
Signal Capital Partners, L.P.
10 E. 53rd Street, 32nd Floor
New York, NY 10022
Attn: Timothy Bradley
Telephone: (212) 872-1180
Telecopier: (212) 208-2497
Trident Telecom Partners LLC
350 Park Avenue, 14th Floor
New York, NY 10022
Attn: Gerald Goldberg
Telephone: (212) 753-4718
Telecopier: (212) 753-5977
Concordia Telecom Management, L.L.C.
c/o FiberNet Telecom Group, Inc.
570 Lexington Avenue, 3rd Floor
New York, NY 10022
Attn: Michael S. Liss
Telephone: (212) 421-4900
Telecopier: (212) 421-8860
Burden Direct Investment Fund III
10 E. 53rd Street, 32nd Floor
New York, NY 10022
Attn: Jeffrey Weber
Telephone: (212) 872-1133
Telecopier: (212) 872-1199
Pequot Scout Fund, LP
500 Nyala Farm Road
Westport, CT 06880
Attn: Mark Broach
Telephone: (203) 429-2203
Telecopier: (203) 429-2410
Penny Lane Partners, L.P.
767 Fifth Avenue
New York, NY 10153
Attn: William R. Denslow Jr.
Telephone: (212) 980-4292
Telecopier: (212) 319-6046
<PAGE> 19
Lancer Offshore, Inc.
375 Park Avenue
New York, NY 10152
Attn: Michael Lauer
Telephone: (212) 521-8400
Telecopier: (212) 521-8401
Alexander Enterprise Holdings Corp.
c/o Alpha Investment Inc.
499 Park Avenue, 24th Floor
New York, NY 10022
Attn: Richard O'Connell
Telephone: (212) 702-0606
Telecopier: (212) 421-0169
King Street Capital Ltd.
575 Lexington Avenue
New York, NY 10022
Attn: Ara Cohen
Telephone: (212) 350-4434
Telecopier: (212) 350-4702
King Street Capital LP
575 Lexington Avenue
New York, NY 10022
Attn: Ara Cohen
Telephone: (212) 350-4434
Telecopier: (212) 350-4702
Taurus Telecommunication, Inc.
3625 Ridge Run
Canandaigua, NY 14424
Attn: Richard Sayers
Telephone: (716) 396-0130
Telecopier: (716) 396-9237
FOUNDING STOCKHOLDERS
SMFS, Inc.
c/o Petrocelli Communications Company
12-12 43rd Avenue
Long Island City, NY 11101
Attn: Santo Petrocelli, Sr.
Telephone: (718) 937-1200
Telecopier: (718) 433-0864
<PAGE> 20
LPS Consultants, Inc.
c/o Petrocelli Communications Company
12-12 43rd Avenue
Long Island City, NY 11101
Attn: Lawrence S. Polan
Telephone: (718) 937-1200
Telecopier: (718) 433-0864
LTJ Group, Inc.
c/o FiberNet Telecom Group, Inc.
570 Lexington Avenue
New York, NY 10022
Attn: Joseph Tortoretti
Telephone: (212) 421-4900
Telecopier: (212) 421-8860
Frank Chiaino
6700 Song Hill Lane
Rochester, NY 14564
Telephone: (716) 924-5481
<PAGE> 1
EXHIBIT J
IRREVOCABLE PROXY
FIBERNET TELECOM GROUP, INC.
The undersigned, LPS CONSULTANTS, INC. hereby irrevocably and
unconditionally appoints the Managing Purchasers (as such term is defined in the
Securities Purchase Agreement) the attorney and proxy of the undersigned, with
full power of substitution, to vote, with respect to (i) the election of
directors and any and all matters presented at any and all meetings of the
stockholders of the Company and (ii) the Transfer of Stock (as such terms are
defined in the Stockholders Agreement hereinafter referred to) in such manner as
such attorneys and proxy shall, in their sole discretion, deem proper, all of
the shares of Stock of FiberNet Telecom Group, Inc., a Nevada corporation (the
"Company"), standing in the name of the undersigned (including shares of Stock
acquired after the date hereof in respect of shares of Stock held on the date
hereof) at such time (the "Proxy Shares"), including the giving of any and all
stockholder consents (such rights, collectively with the rights listed in
clauses (i) and (ii) herein, the "Proxy Rights"); provided, that the exercise of
any Proxy Rights requires the consent of the majority of the Managing Purchasers
unless, in the sole judgment of the Majority in Interest that in order to
protect its investment, the Majority in Interest requires sole right to exercise
the Proxy Rights, in which case the Majority in Interest shall upon 10 days
written notice to each other Managing Purchaser have sole control of the Proxy
Rights until the Majority in Interest, in its sole discretion, shall deem
otherwise. This is an irrevocable proxy coupled with an interest and shall
become and remain valid and irrevocable until the automatic termination hereof
pursuant to the provisions of a Stockholders Agreement, dated as of May 7, 1999,
among the undersigned, the Company and certain stockholders of the Company, as
the same may be amended from time to time. The granting of this proxy shall
revoke all prior proxies given by the undersigned at any time with respect to
all Stock (and Proxy Shares) owned or controlled by the undersigned and no
subsequent proxies will be given with respect thereto by the undersigned, except
pursuant to the provisions of such Stockholders Agreement.
Dated: May 7, 1999
LPS CONSULTANTS, INC.
By:
-----------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT K
IRREVOCABLE PROXY
FIBERNET TELECOM GROUP, INC.
The undersigned, SMFS, INC., hereby irrevocably and unconditionally
appoints the Managing Purchasers (as such term is defined in the Securities
Purchase Agreement) the attorney and proxy of the undersigned, with full power
of substitution, to vote, with respect to (i) the election of directors and any
and all matters presented at any and all meetings of the stockholders of the
Company and (ii) the Transfer of Stock (as such terms are defined in the
Stockholders Agreement hereinafter referred to) in such manner as such attorneys
and proxy shall, in their sole discretion, deem proper, all of the shares of
Stock of FiberNet Telecom Group, Inc., a Nevada corporation (the "Company"),
standing in the name of the undersigned (including shares of Stock acquired
after the date hereof in respect of shares of Stock held on the date hereof) at
such time (the "Proxy Shares"), including the giving of any and all stockholder
consents (such rights, collectively with the rights listed in clauses (i) and
(ii) herein, the "Proxy Rights"); provided, that the exercise of any Proxy
Rights requires the consent of the majority of the Managing Purchasers unless,
in the sole judgment of the Majority in Interest that in order to protect its
investment, the Majority in Interest requires sole right to exercise the Proxy
Rights, in which case the Majority in Interest shall upon 10 days written notice
to each other Managing Purchaser have sole control of the Proxy Rights until the
Majority in Interest, in its sole discretion, shall deem otherwise. This is an
irrevocable proxy coupled with an interest and shall become and remain valid and
irrevocable until the automatic termination hereof pursuant to the provisions of
a Stockholders Agreement, dated as of May 7, 1999, among the undersigned, the
Company and certain stockholders of the Company, as the same may be amended from
time to time. The granting of this proxy shall revoke all prior proxies given by
the undersigned at any time with respect to all Stock (and Proxy Shares) owned
or controlled by the undersigned and no subsequent proxies will be given with
respect thereto by the undersigned, except pursuant to the provisions of such
Stockholders Agreement.
Dated: May 7, 1999.
SMFS, INC.
By:
-----------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT L
IRREVOCABLE PROXY
FIBERNET TELECOM GROUP, INC.
The undersigned, LTJ GROUP, INC. hereby irrevocably and
unconditionally appoints the Managing Purchasers (as such term is defined in the
Securities Purchase Agreement) the attorney and proxy of the undersigned, with
full power of substitution, to vote, with respect to (i) the election of
directors and any and all matters presented at any and all meetings of the
stockholders of the Company and (ii) the Transfer of Stock (as such terms are
defined in the Stockholders Agreement hereinafter referred to) in such manner as
such attorneys and proxy shall, in their sole discretion, deem proper, all of
the shares of Stock of FiberNet Telecom Group, Inc., a Nevada corporation (the
"Company"), standing in the name of the undersigned (including shares of Stock
acquired after the date hereof in respect of shares of Stock held on the date
hereof) at such time (the "Proxy Shares"), including the giving of any and all
stockholder consents (such rights, collectively with the rights listed in
clauses (i) and (ii) herein, the "Proxy Rights"); provided, that the exercise of
any Proxy Rights requires the consent of the majority of the Managing Purchasers
unless, in the sole judgment of the Majority in Interest that in order to
protects its investment, the Majority in Interest requires sole right to
exercise the Proxy Rights, in which case the Majority in Interest shall upon 10
days written notice to each other Managing Purchaser have sole control of the
Proxy Rights until the Majority in Interest, in its sole discretion, shall deem
otherwise. This is an irrevocable proxy coupled with an interest and shall
become and remain valid and irrevocable until the automatic termination hereof
pursuant to the provisions of a Stockholders Agreement, dated as of May 7, 1999,
among the undersigned, the Company and certain stockholders of the Company, as
the same may be amended from time to time. The granting of this proxy shall
revoke all prior proxies given by the undersigned at any time with respect to
all Stock (and Proxy Shares) owned or controlled by the undersigned and no
subsequent proxies will be given with respect thereto by the undersigned, except
pursuant to the provisions of such Stockholders Agreement.
Dated: May 7, 1999.
LTJ GROUP, INC.
By:
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Name:
Title:
