EXHIBIT 10.3

 

June 13, 2003

 

FiberNet Telecom Group, Inc.

570 Lexington Avenue

New York, New York 10022

 

  RE:   Subordinated Draw Down Credit Facility

 

Ladies and Gentlemen:

 

1. Loan. This letter when fully executed will constitute a loan agreement (the
“Agreement”) among North Sound Legacy Fund LLC, North Sound Legacy Institutional
Fund LLC and North Sound Legacy International Ltd. (collectively, the
“Lenders”), and FiberNet Telecom Group, Inc., a Delaware corporation (the
“Borrower”), pursuant to which the Lenders, jointly and severally, on the terms
and conditions provided herein, shall agree to make one or more loans to or for
the benefit of the Borrower hereunder (each a “Loan” and collectively, the
“Loans”), provided the aggregate principal amount of all Loans shall not exceed
Three Million Dollars ($3,000,000.00). The day on which the Lenders make a Loan
is referred to herein as a “Closing Date.” Each Lender’s obligation to make a
Loan is subject to the Borrower’s fulfillment of each of the applicable
conditions set forth in Section 7 hereof.

 

2. Loan Documents.

 

a. Notes. At each Closing Date, the Loans shall be evidenced by separate
subordinated promissory notes issued to the Lenders in the principal amount of
each such Loan in the form attached hereto as Exhibit A (together with any
replacements and substitutes therefor, the “Notes”). The accrued interest on the
principal amount of the Notes shall be calculated at the rate of 6% per annum
and shall be payable semi-annually in cash, subject to Section 6 hereof, or in
shares of the Borrower’s common stock, par value $.001 per share (the “Common
Stock”), at the option of the Borrower, as more fully set forth in Section 5
hereof.

 

b. This Agreement, the Notes, the Draw Down Notices (as defined in Section 4
hereof) and each other document which evidences and/or secures the Loans are
hereinafter collectively rePferred to as the “Loan Documents.”

 

3. Term and Termination. Subject to Section 9 hereof, the aggregate principal
amount of the outstanding Notes and all accrued and unpaid interest thereon and
other sums owing hereunder and thereunder shall be due and payable on the
earlier (the “Maturity Date”) of: (i) July 31, 2007, or (ii) the acceleration of
the obligations as contemplated by this Agreement. The Maturity Date may be
extended as agreed upon in writing between the parties.

 

4. Draw Down Terms and Procedures. The Borrower shall deliver to the Lenders an
executed draw down notice in connection with each request for a Loan to be made
by the Lenders under this Agreement in the form attached hereto as Exhibit B (a
“Draw Down Notice”). The Draw Down Notice shall be delivered to the Lenders at
least two (2) business days prior to the Lenders making any Loan hereunder. The
Borrower shall not make any request for a Loan and the Lenders shall not be
obligated to honor any request for a Loan pursuant to this Agreement if such
request is for an amount exceeding $250,000 in any twenty-four (24) hour

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period; provided, however, this limitation may be waived with the prior written
consent of the Lenders. The right of the Borrower to issue a Draw Down Notice
and request a Loan pursuant to this Agreement shall terminate on December 31,
2003, unless otherwise extended in writing by the Lenders, the Borrower and the
Senior Lenders (as defined in Section 7 hereof) under the Senior Credit Facility
(as defined in Section 7 hereof). Other than with the prior written consent of
the Lenders, all Loans made to the Borrower pursuant to this Agreement shall be
used solely to repurchase shares of the Borrower’s Common Stock in the open
market or in private transactions. Upon the Lenders’ receipt of a Draw Down
Notice, the Lenders shall make the Loan to the Borrower within two (2) business
days of the date of receipt of such Draw Down Notice.

 

5. Repayment of Loans. Subject to the provisions of Section 6 hereof, the
Borrower may, at its option, repay the principal amount under the Notes and any
interest accrued thereon in cash, subject to Section 6 hereof, or in shares of
Common Stock. In the event that the Borrower elects to repay any of the
principal amount under the Notes or any interest accrued thereon in shares of
Common Stock, the Borrower shall provide each of the Lenders with twenty (20)
trading days prior written notice (the “Borrower’s Repayment Notice”) of its
intention to make such payments in shares of Common Stock. The number of shares
of Common Stock to be issued as payment of the principal amount under the Notes
and any interest accrued thereon and upon a Triggering Event (as defined in
Section 10 hereof) shall be an amount equal to the quotient of (a) aggregate
principal amount of the Notes plus accrued and unpaid interest thereon to be
paid in shares of Common Stock, divided by (b) ninety-two percent (92%) of the
average of the Volume Weighted Average Prices (as defined below) of the Common
Stock for the twenty (20) trading days immediately prior to the date of the
Borrower’s Repayment Notice. For purposes of this Agreement, Volume Weighted
Average Price shall mean the daily volume weighted average price (based on a
trading day from 9:30 a.m. to 4:00 p.m. eastern time) of the Common Stock on The
Nasdaq SmallCap Market or the OTC Bulletin Board as reported by Bloomberg
Financial LP using the AQR function. If the Borrower elects to repay the
outstanding principal amount of the Notes and accrued but unpaid interest
thereon in shares of Common Stock, the Borrower represents and warrants that the
shares of Common Stock shall be issued in a transaction exempt from registration
in accordance with the Securities Act of 1933, as amended (the “Securities
Act”). Notwithstanding any other provision in the Loan Documents, the Borrower
shall not be obligated to issue any shares of Common Stock in repayment of the
Loans and accrued interest thereon which, in the aggregate, would exceed 9.99%
of the outstanding Common Stock as of the date of this Agreement.

 

6. Subordination to Borrower’s Senior Credit Facility. This Agreement and the
Notes shall be subject to the terms and conditions of that certain Subordination
Agreement, dated of even date herewith among Deutsche Bank AG New York Branch,
as administrative agent for the Senior Lenders (as defined in Section 7.b.
hereof), and the Lenders (the “Subordination Agreement”), attached hereto as
Exhibit C.

 

7. Conditions Precedent.

 

a. Documents to be Delivered. The obligation of each Lender to make any Loan is
subject to the due execution and delivery by the Borrower (or the Borrower
causing the

 

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due execution and delivery) to each Lender of each of the following (all
documents to be in form and substance reasonably satisfactory to each Lender and
its counsel):

 

i. This Agreement, the Notes, the Draw Down Notice and each other instrument,
agreement and document to be executed and/or delivered pursuant to this
Agreement and/or the instruments, agreements and documents referred to in this
Agreement.

 

ii. A certified copy of the resolutions of the Board of Directors (or if the
Board of Directors takes action by unanimous written consent, a copy of such
unanimous written consent containing all of the signatures of the members of the
Board of Directors) of the Borrower, dated as of the initial Closing Date,
authorizing the execution, delivery and performance of the Loan Documents.

 

iii. A certificate, dated as of the applicable Closing Date, signed by an
executive officer of the Borrower to the effect that the representations and
warranties set forth in Section 8 of this Agreement are true and correct as of
the applicable Closing Date.

 

b. Absence of Certain Events. The occurrence of (i) a Material Adverse Effect
(as defined below) shall not have occurred and be continuing as of any Closing
Date; (ii) an Event of Default shall not have occurred and be continuing as of
any Closing Date; and (iii) an event of default under the Borrower’s senior
credit facility (the “Senior Credit Facility”) among the Borrower and the senior
lenders named therein (the “Senior Lenders”) shall not have occurred and be
continuing as of any Closing Date.

 

8. Representations and Warranties.

 

a. To induce each Lender, jointly and severally, to make the Loan, the Borrower
hereby represents and warrants to each Lender that:

 

i. The Borrower has been duly incorporated and is validly existing and in good
standing under the laws of the state of Delaware, with full corporate power and
authority to own, lease and operate its properties and to conduct its business
as currently conducted. The Borrower is duly qualified as a foreign entity to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. “Material Adverse Effect” means any material adverse effect on the
ability of the Borrower to perform its obligations hereunder or on the business,
operations, properties, prospects or financial condition of the Borrower.

 

ii. Each of the Loan Documents has been duly authorized, validly executed and
delivered on behalf of the Borrower and is a valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with its terms, subject
to limitations on enforcement by general principles of equity and by bankruptcy
or other laws affecting the enforcement of creditors’ rights generally, and the
Borrower has full power and authority to execute and deliver this Agreement and
the Loan Documents and to perform its obligations hereunder and thereunder.

 

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iii. The execution, delivery and performance of this Agreement and the Loan
Documents will not (i) conflict with or result in a breach of or a default under
any of the terms or provisions of, (A) the Borrower’s certificate of
incorporation or by-laws, or (B) any material provision of any indenture,
mortgage, deed of trust or other material agreement or instrument to which the
Borrower is a party or by which it or any of its material properties or assets
is bound, (ii) result in a violation of any material provision of any law,
statute, rule, regulation, or any existing applicable decree, judgment or order
by any court, Federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Borrower, or any of its material
properties or assets or (iii) result in the creation or imposition of any
material lien, charge or encumbrance upon any material property or assets of the
Borrower or any of its subsidiaries pursuant to the terms of any agreement or
instrument to which any of them is a party or by which any of them may be bound
or to which any of their property or any of them is subject.

 

iv. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Borrower is required
in connection with the valid execution and delivery of this Agreement or the
Loan Documents.

 

b. To induce the Borrower to enter into this Agreement, each of the Lenders,
severally and not jointly, hereby represents and warrants to the Borrower that:

 

i. Each of the Lenders has been duly organized and is validly existing and in
good standing under the laws of the state of its formation or incorporation.

 

ii. Each of the Loan Documents has been duly authorized, validly executed and
delivered on behalf of the Lenders and is a valid and binding obligation of the
Lenders enforceable against the Lenders in accordance with its terms, subject to
limitations on enforcement by general principles of equity and by bankruptcy or
other laws affecting the enforcement of creditors’ rights generally, and the
Lenders have full power and authority to execute and deliver this Agreement and
the Loan Documents and to perform their obligations hereunder and thereunder.

 

iii. The execution, delivery and performance of this Agreement and the Loan
Documents will not (i) conflict with or result in a breach of or a default under
any of the terms or provisions of, (A) the each of the Lender’s certificate of
formation or operational documents, or (B) any material provision of any
indenture, mortgage, deed of trust or other material agreement or instrument to
which each of the Lenders is a party or by which each or any of their material
properties or assets are bound, (ii) result in a violation of any material
provision of any law, statute, rule, regulation, or any existing applicable
decree, judgment or order by any court, Federal or state regulatory body,
administrative agency, or other governmental body having jurisdiction over each
of the Lenders, or any of its material properties or assets or (iii) result in
the creation or imposition of any material lien, charge or encumbrance upon any
material property or assets of the Borrower or any of its subsidiaries pursuant
to the terms of any agreement or instrument to which any of them is a party or
by which any of them may be bound or to which any of their property or any of
them is subject.

 

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iv. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Lenders are required
in connection with the valid execution and delivery of this Agreement or the
Loan Documents.

 

All representations and warranties made by the parties under or in connection
with this Agreement shall survive the making of the Loans and issuance and
delivery of the Notes to the Lenders, notwithstanding any investigation made by
the parties or on their behalf. All statements contained in any certificate
delivered by the Borrower to the Lenders under this Agreement or any Loan
Document shall constitute representations and warranties made by the respective
party hereunder.

 

9. Events of Default; Remedies. Upon the occurrence of any of the following
(each, an “Event of Default”):

 

a. the Borrower shall fail to make the payment of any amount of any principal
outstanding after the date such payment shall become due and payable hereunder
which failure shall continue for more than five (5) business days notice thereof
from the Lenders to the Borrower; or

 

b. the Borrower shall fail to make any payment of interest after the date such
interest shall become due and payable hereunder which failure shall continue for
more than five (5) business days notice thereof from the Lenders to the
Borrower; or

 

c. any representation, warranty, covenant or certification made by the Borrower
in any Loan Document or any certificate delivered by the Borrower to the Lenders
under this Agreement shall prove to have been false or incorrect in a material
respect or breached in a material respect on the date as of which made, and such
misstatement or breach is not cured within five (5) business days after receipt
of written notice thereof from the Lenders to the Borrower; or

 

d. the holder of any indebtedness (“Indebtedness”) of the Borrower shall
accelerate any payment of any amount or amounts of principal or interest on such
Indebtedness (other than the Indebtedness hereunder) prior to its stated
maturity or payment date the aggregate principal amount of which Indebtedness is
in excess of $1,000,000, whether such Indebtedness now exists or shall
hereinafter be created, and such accelerated payment entitles the holder thereof
to immediate payment of such Indebtedness which is due and owing and such
Indebtedness has not been discharged in full or such acceleration has not been
stayed, rescinded or annulled within twelve (12) business days of such
acceleration; or

 

e. a judgment or order for the payment of money shall be rendered against the
Borrower in excess of $1,000,000 in the aggregate (net of any applicable
insurance coverage) for all such judgments or orders against all such persons
(treating any deductibles, self insurance or retention as not so covered) that
shall not be discharged, and all such judgments and orders remain outstanding,
and there shall be any period of sixty (60) consecutive days following entry of
the judgment or order in excess of $1,000,000 or the judgment or order which
causes the aggregate amount described above to exceed $1,000,000 during which a
stay of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or

 

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f. the Borrower shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property or assets, (ii) admit in writing
its inability to pay its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the Bankruptcy Code or under the comparable laws of any jurisdiction
(foreign or domestic), (v) file a petition seeking to take advantage of any
bankruptcy, insolvency, moratorium, reorganization or other similar law
affecting the enforcement of creditors’ rights generally, (vi) acquiesce in
writing to any petition filed against it in an involuntary case under the
Bankruptcy Code or under the comparable laws of any jurisdiction (foreign or
domestic), or (vii) take any action under the laws of any jurisdiction (foreign
or domestic) analogous to any of the foregoing; or

 

g. a proceeding or case shall be commenced in respect of the Borrower without
its application or consent, in any court of competent jurisdiction, seeking (i)
the liquidation, reorganization, moratorium, dissolution, winding up, or
composition or readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of it or of all or any substantial
part of its assets or (iii) similar relief in respect of it under any law
providing for the relief of debtors, and such proceeding or case described in
clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect,
for a period of sixty (60) consecutive days or any order for relief shall be
entered in an involuntary case under the Bankruptcy Code or under the comparable
laws of any jurisdiction (foreign or domestic) against the Borrower or action
under the laws of any jurisdiction (foreign or domestic) analogous to any of the
foregoing shall be taken with respect to the Borrower and shall continue
undismissed, or unstayed and in effect for a period of sixty (60) consecutive
days;

 

THEN, the Lenders may, at their election and without demand or notice of any
kind, which are hereby waived, declare the unpaid balance of the Notes, and
accrued interest thereon, immediately due and payable, proceed to collect the
same, and exercise any and all other rights, powers and remedies given it by the
Loan Documents or otherwise at law or in equity.

 

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10. Mandatory Repayment. If the Volume Weighted Average Prices (as defined in
Section 5 hereof) of the Common Stock equals or exceeds $2.00 for a period of
ten (10) consecutive trading days (a “Triggering Event”), the Lenders may
request in writing within two (2) business days of such Triggering Event (the
“Lenders’ Repayment Notice”), the repayment of all outstanding principal and
accrued interest under the Notes as set forth in this Section 10. In the event
that the Lenders do not timely deliver a Lenders’ Repayment Notice, then such
right to repayment shall expire, and in which case, the Lenders’ right to
repayment under this Section 10 shall only arise again upon a subsequent
Triggering Event. The Borrower shall repay the outstanding principal and accrued
interest under the Notes to the Lenders in cash, subject to Section 6 hereof, or
in shares of Common Stock (determined in accordance with Section 5 hereof), at
the option of the Borrower, within five (5) business days of the Borrower’s
receipt of the Lenders’ Repayment Notice. If shares of Common Stock are issued
to the Lenders upon a Triggering Event in accordance with this Section 10, the
Borrower represents and warrants that the shares of Common Stock shall be issued
in a transaction exempt from registration in accordance with the Securities Act.

 

11. Miscellaneous.

 

a. This Agreement shall be governed by and construed in accordance with the laws
of the State of New York without giving effect to the choice of law provisions.
This Agreement shall not be interpreted or construed with any presumption
against the party causing this Agreement to be drafted.

 

b. Each of the Borrower and each Lender (i) hereby irrevocably submits to the
jurisdiction of the United States District Court sitting in the Southern
District of New York and the courts of the State of New York located in New York
county for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement or the Loan Documents and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Borrower and each Lender
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address set forth in Section 13(j)
below and agrees that such service shall constitute good and sufficient service
of process and notice thereof. Nothing in this Section 13(c) shall affect or
limit any right to serve process in any other manner permitted by law.

 

c. Any forbearance, failure, or delay by a party hereto in exercising any right,
power, or remedy shall not preclude the further exercise thereof, and all of
such party’s rights, powers, and remedies shall continue in full force and
effect until specifically waived in writing by such party.

 

d. This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.

 

e. The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.

 

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f. If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.

 

g. The Borrower shall reimburse the Lenders, on demand, for all reasonable fees
and costs incurred by the Lenders (including reasonable fees and costs of the
Lenders’ counsel) in connection with the enforcement of the Lenders’ rights and
remedies thereunder.

 

h. This Agreement, the Subordination Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein. No provision of this Agreement may be waived
or amended other than by an instrument in writing signed by all parties to this
Agreement.

 

i. Any notices, demands or waivers required or permitted to be given under the
terms of this Agreement shall be in writing and shall be sent by certified or
registered mail (return receipt requested) or delivered personally or by courier
(including a recognized overnight delivery service) and shall be effective five
(5) days after being placed in the mail, if mailed, or upon receipt, if
delivered personally or by courier, in each case to the address of the party to
receive such notice, demand or waiver as set forth below:

 

If to the Borrower:

 

FiberNet Telecom Group, Inc.

570 Lexington Avenue

New York, New York 10022

Attention: President

Tel. No.: (212) 405-6200

Fax No.: (212) 421-8860

 

With a copy to:

 

Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.

666 Third Avenue

New York, New York 10017

Attention: Todd E. Mason

Tel. No.: (212) 935-3000

Fax No.: (212) 983-3115

 

If to North Sound Legacy Fund LLC, North Sound Legacy Institutional Fund LLC or
North Sound Legacy International Ltd.:

 

c/o North Sound Capital LLC

53 Forest Avenue, Suite 202

 

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Old Greenwich, CT 06870

Attention: Andrew Wilder

Fax No.: (203) 967-5701

 

with a copy to:

 

Jenkens & Gilchrist Parker Chapin LLP

The Chrysler Building

405 Lexington Avenue

New York, New York 10174

Attention: Christopher S. Auguste

Tel. No.: (212) 704-6000

Fax No.: (212) 704-6288

 

Each party shall provide notice to the other party of any change in address,
such notice to become effective upon receipt.

 

j. This Agreement shall be binding upon and inure to the benefit of the parties
and their successors and assigns. The Borrower shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of the
Lenders. Notwithstanding the foregoing, each Lender may assign its rights
hereunder to any other person or entity (the “Assignee”) without the consent of
the Borrower provided that the Assignee provides written acknowledgement that
this Agreement and the Notes are subject to the Subordination Agreement.

 

k. This Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other person. For the avoidance of
doubt, the provisions in the Subordination Agreement are for the benefit of the
Senior Lenders and their respective permitted successors and assigns, and are
not for the benefit of, nor may any provision thereof be enforced by, any other
person.

 

l. All remedies of the Lenders (i) are cumulative and concurrent, (ii) may be
exercised independently, successively or together against the Borrower, (iii)
shall not be exhausted by any exercise thereof, but may be exercised as often as
occasion therefor may occur, and (iv) shall not be construed to be waived or
released by the Lenders’ delay in exercising, or failure to exercise, them or
any of them at any time it may be entitled to do so.

 

[Signature page follows]

 

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By executing the appropriate signature line below, each of the executing
parties, intending to be legally bound hereby, agrees to the terms and
conditions of this Agreement as of the date hereof.

 

Very truly yours,

NORTH SOUND LEGACY FUND LLC

By:

 

 

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Name:

   

Title:

NORTH SOUND LEGACY INSTITUTIONAL FUND LLC

By:

 

 

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Name:

   

Title:

NORTH SOUND LEGACY INTERNATIONAL LTD.

By:

 

 

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Name:

   

Title:

 

FIBERNET TELECOM GROUP, INC.

By:

 

 

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Name

   

Title:

 

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Exhibit A

 

Form of Note

 

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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR FIBERNET TELECOM GROUP, INC. SHALL
HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED.

 

FIBERNET TELECOM GROUP, INC.

 

SUBORDINATED PROMISSORY NOTE

 

U.S. $                        

 

New York, New York

   

                     , 2003

 

FOR VALUE RECEIVED, the undersigned, FiberNet Telecom Group, Inc., a Delaware
corporation (the “Borrower”), hereby promises to pay to the order of
                                                                  or any future
permitted holder of this promissory note (the “Lender”), at the principal office
of the Lender set forth herein, or at such other place as the Lender may
designate in writing to the Borrower, the principal sum of up to
                                                      DOLLARS (U.S.
$                    ), together with all accrued but unpaid interest, in such
coin or currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts and in immediately available
funds, as provided in this promissory note (the “Note”). This Note is the Note
referred to in the Loan Agreement dated June 13, 2003 between the Borrower, the
Lender and the other lenders party thereto (the “Loan Agreement”).

 

1. Principal and Interest Payments.

 

(a) Subject to Section 6 of the Loan Agreement, the Borrower shall repay in full
the entire principal balance then outstanding under this Note on the earlier
(the “Maturity Date”) of: (i) July 31, 2007, or (ii) the acceleration of the
obligations as contemplated by this Note. The Maturity Date may be extended as
agreed upon in writing between the parties.

 

(b) Interest on the outstanding principal balance of this Note shall accrue at a
rate of six percent (6%) per annum. Interest on the outstanding principal
balance of the Note shall be computed on the basis of the actual number of days
elapsed and a year of three hundred and sixty (360) days and, subject to Section
6 of the Loan Agreement, shall be payable by the Borrower semi-annually, in
accordance with Section 2 of the Loan Agreement. Furthermore, upon the
occurrence of an Event of Default, then to the extent permitted by law, the
Borrower will pay interest to the Lender, payable on demand, subject to Section
6 of the Loan

 

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Agreement, on the outstanding principal balance of the Note from the date of the
Event of Default until payment in full at the rate of ten percent (10%) per
annum.

 

2. Repayment. Repayment of this Note shall be governed by the provisions of
Section 5 of the Loan Agreement.

 

3. Subordination to Borrower’s Senior Credit Facility. The subordinated nature
of this Note shall be as provided in Section 6 of the Loan Agreement.

 

4. Mandatory Repayment. The conditions upon which mandatory prepayment of this
Note shall occur shall be as provided in Section 10 of the Loan Agreement.

 

5. Payment on Non-Business Days. Whenever any payment to be made shall be due on
a Saturday, Sunday or a public holiday under the laws of the State of New York,
such payment shall be due on the next succeeding business day and such next
succeeding day shall be included in the calculation of the amount of accrued
interest payable on such date.

 

6. Replacement. Upon receipt of a duly executed, notarized and unsecured written
statement from the Lender with respect to the loss, theft or destruction of this
Note (or any replacement hereof), and without requiring an indemnity bond or
other security, or, in the case of a mutilation of this Note, upon surrender and
cancellation of such Note, the Borrower shall issue a new Note, of like tenor
and amount, in lieu of such lost, stolen, destroyed or mutilated Note.

 

7. Parties in Interest, Transferability. This Note shall be binding upon the
Borrower and its successors and assigns and the terms hereof shall inure to the
benefit of the Lender and its successors and permitted assigns. This Note may be
transferred or sold, subject to the provisions of Section 9 of this Note, or
pledged, hypothecated or otherwise granted as security by the Lender provided
that the Lender’s successors and permitted assigns provide written
acknowledgement that this Note is subject to the Subordination Agreement.

 

8. Remedies, Characterizations, Other Obligations, Breaches and Injunctive
Relief. Upon an Event of Default (as defined in the Loan Agreement), the Lender
shall have all the rights and remedies contained in the Loan Agreement. The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note or in the Loan Agreement, at law or in equity
(including, without limitation, a decree of specific performance and/or other
injunctive relief), and no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a Lender’s right to pursue actual damages for any failure by the
Borrower to comply with the terms of this Note. Amounts set forth or provided
for herein with respect to payments and the like (and the computation thereof)
shall be the amounts to be received by the Lender and shall not, except as
expressly provided herein, be subject to any other obligation of the Borrower
(or the performance thereof).

 

9. Compliance with Securities Laws. The Lender acknowledges that this Note is
being acquired solely for the Lender’s own account and not as a nominee for any
other party, and for investment, and that the Lender shall not offer, sell or
otherwise dispose of this Note other than in compliance with the laws of the
United States of America and as guided by the rules of the Securities and
Exchange Commission. This Note and any Note issued in substitution or

 

13

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replacement therefore shall be stamped or imprinted with a legend in
substantially the following form:

 

“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR FIBERNET TELECOM GROUP, INC. SHALL
HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH NOTE UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.”

 

“THE INDEBTEDNESS AND ALL OBLIGATIONS EVIDENCED OR REPRESENTED HEREBY, AND
CERTAIN OTHER SUBORDINATED CLAIMS, ARE POSTPONED, SUBORDINATED AND JUNIOR IN
RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS, AS DEFINED IN AND ON THE TERMS SET
FORTH IN THE SUBORDINATION AGREEMENT DATED AS OF JUNE 13, 2003, EXECUTED AND
DELIVERED FOR THE BENEFIT OF THE HOLDERS OF SUCH SENIOR INDEBTEDNESS BY THE
MAKER HEREOF, DEUTSCHE BANK AG NEW YORK BRANCH, AND CERTAIN OTHER SIGNATORIES
THERETO. THE PROVISIONS OF SAID AGREEMENT ARE HEREBY INCORPORATED HEREIN, AS IF
SET FORTH AT LENGTH HEREIN AND A COPY OF SAID AGREEMENT WILL BE PROVIDED BY
BORROWER UPON REQUEST”

 

10. Borrower Waivers. Except as otherwise specifically provided herein or in the
Loan Agreement, the Borrower and all others that may become liable for all or
any part of the obligations evidenced by this Note, hereby waive presentment,
demand, notice of nonpayment, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note, and do hereby consent to any number of renewals of extensions of the time
or payment hereof and agree that any such renewals or extensions may be made
without notice to any such persons and without affecting their liability herein
and do further consent to the release of any person liable hereon, all without
affecting the liability of the other persons, firms or Borrower liable for the
payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.

 

a. No delay or omission on the part of the Lender in exercising its rights under
this Note, or course of conduct relating hereto, shall operate as a waiver of
such rights or any other right of the Lender, nor shall any waiver by the Lender
of any such right or rights on any one occasion be deemed a waiver of the same
right or rights on any future occasion.

 

11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
choice of law provisions. This Agreement shall not be interpreted or construed
with any presumption against the party causing this Note to be drafted.

 

14

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12. Notices. Any notice, request, demand or other communication permitted or
required to be given hereunder shall be provided in the manner specified in the
Loan Agreement.

 

15

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IN WITNESS WHEREOF, the Borrower has executed and delivered this Note as of the
date first written above.

 

FIBERNET TELECOM GROUP, INC.

     

By:

 

--------------------------------------------------------------------------------

   

Name:

Title:

 

16

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Exhibit B

 

Form of Draw Down Notice

 

Reference is made to the Loan Agreement dated as of June 13, 2003 (the
“Agreement”) by and among FiberNet Telecom Group, Inc., a Delaware corporation
(the “Borrower”) and North Sound Legacy Fund LLC, North Sound Legacy
Institutional Fund LLC and North Sound Legacy International Ltd (the “Lenders”).
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Agreement.

 

In accordance with and pursuant to Section 4 of the Agreement, the Borrower
hereby issues this Draw Down Notice to request a Loan for the amount indicated
below.

 

Loan Amount:                                

 

Closing Date:                                 

 

Dated:                                     

 

FIBERNET TELECOM GROUP, INC.

     

By:

 

--------------------------------------------------------------------------------

   

Name:

Title:

Address:

   

 

 

Facsimile No.:

   

Wire Instructions:

 

--------------------------------------------------------------------------------

Contact Name:

 

--------------------------------------------------------------------------------

 

 

 

 

 

 

 

 

 

17

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Exhibit C

 

Form of Subordination Agreement

 

18

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SUBORDINATION AGREEMENT

 

This SUBORDINATION AGREEMENT (this “Agreement”) is made as of June 13, 2003
among DEUTSCHE BANK AG NEW YORK BRANCH, as Administrative Agent for the Senior
Lenders referred to below (the “Administrative Agent”), NORTH SOUND LEGACY FUND
LLC, a Delaware limited liability company, NORTH SOUND LEGACY INSTITUTIONAL FUND
LLC, a Delaware limited liability company and NORTH SOUND LEGACY INTERNATIONAL
LTD., a British Virgin Islands corporation (collectively, the “Subordinated
Lenders”, and together with the Administrative Agent, the “Parties”).

 

RECITALS

 

WHEREAS, FiberNet Operations, Inc. (“FiberNet”) and Devnet L.L.C. (“Devnet” and,
together with FiberNet, the “Borrowers”) are the borrowers under an Amended and
Restated Credit Agreement, dated as of February 9, 2001 (as amended from time to
time, the “Credit Agreement”), with, among others, the lenders from time to time
party thereto (the “Senior Lenders”) and the Administrative Agent;

 

WHEREAS, the obligations of the Borrowers under the Credit Agreement are
guaranteed by (i) FiberNet Telecom Group, Inc. (the “Parent”) pursuant to an
Amended and Restated Parent Guaranty Agreement, dated as of February 9, 2001
(the “Guaranty”), between the Parent and the Administrative Agent and (ii)
certain subsidiaries of FiberNet (together with the Parent, the “Guarantors”);

 

WHEREAS, the Parent is, concurrently herewith, entering into a subordinated draw
down credit facility, dated as of the date hereof among the Parent and the
Subordinated Lenders (the “Subordinated Credit Facility”), pursuant to which the
Parent, on the terms and conditions provided therein, agrees to issue one or
more unsecured subordinated promissory notes to the Subordinated Lenders in
connection with the draw down of loans by the Parent thereunder in the aggregate
principal amount of $3,000,000.00 (the “Notes”), a copy of which is attached
hereto as Exhibit A; and

 

WHEREAS, the Administrative Agent, the Parent, the Borrowers and the
Subordinated Lenders wish to agree as to certain matters concerning the
Subordinated Credit Facility and the Notes.

 

A G R E E M E N T

 

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which the Parties hereby acknowledge, the Parties, for themselves
and for each present and future holder of indebtedness under the Subordinated
Credit Facility and the Notes, hereby agree, for the direct and legally
enforceable benefit of each Lender under the Credit Agreement and each other
present and future holder of Senior Indebtedness, as follows:

 

1. Definitions and Rules of Construction.

 

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a. DEFINITIONS. The following terms, as used in this Agreement, have the
following meanings:

 

“Bankruptcy Case” means any proceeding commenced by or against the Parent or any
of its subsidiaries, under any provision of the Bankruptcy Code or under any
other federal or state bankruptcy or insolvency law, including assignments for
the benefit of creditors, formal or informal moratoria, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other similar relief, and all converted or succeeding cases in
respect thereof.

 

“Bankruptcy Code” means the United States Bankruptcy Code (11 U.S.C. § 101, et.
seq.), as amended, and any successor statute.

 

“Disqualified Stock” means any Capital Stock (as defined in the Credit
Agreement) that, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to repayment in full of all of the Senior
Indebtedness.

 

“Loan Documents” means, collectively, the Credit Agreement, the Guaranty, any
Loan Documents (as defined in the Credit Agreement), and any other document,
instrument, or agreement now existing or in the future entered into evidencing,
documenting, securing, or otherwise relating to Senior Indebtedness, together
with any amendments, replacements, substitutions, or restatements thereof.

 

“Proceeding” means any (a) insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Parent or any of its subsidiaries, its property or its creditors as such,
(b) proceeding for any liquidation, dissolution or other winding-up of the
Parent or any of its subsidiaries, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings, (c) general assignment for the
benefit of creditors of the Parent or any of its subsidiaries or (d) other
marshaling of the assets of the Parent or any of its subsidiaries.

 

“Qualified Common Stock” means any Common Stock of the Parent that is not
Disqualified Stock.

 

“Secured Party” has the meaning given such term in the Credit Agreement.

 

“Senior Indebtedness” means any and all presently existing or hereafter arising
indebtedness, claims, debts, liabilities, and obligations of the Parent or the
Borrowers owing to any Secured Party under or pursuant to any Loan Document,
whether direct or indirect, contingent or of any other nature, character, or
description (including all interest and other amounts accruing after
commencement of any Bankruptcy Case and all interest and other amounts that, but
for the provisions of the Bankruptcy Code, would have accrued and become due or
otherwise would have been allowed), and any refinancings, renewals, refundings,
or extensions of such amounts.

 

20

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“Subordinated Claims” means (a) all present and future indebtedness, claims,
debts, liabilities, and obligations against Parent or any of its subsidiaries on
account or in respect of the principal of and interest and prepayment premium
(if any) on the loans made under or evidenced by the Subordinated Credit
Facility and the Notes, including any guaranty thereof, (b) any and all
indebtedness, claims, debts, liabilities, and obligations arising under any of
the Subordinated Note Documents, and (c) any and all indebtedness, claims,
debts, liabilities, and obligations in any manner based thereon, arising
therefrom or related thereto, in each case whether now outstanding or at any
time hereafter arising and whether based on contract or quasi-contract or
founded in tort or arising by law or otherwise, and specifically includes
(without limitation) all claims against Parent or any of its subsidiaries for
fees, taxes, expense reimbursements, indemnities and other amounts, obligations
or liabilities under any Subordinated Note Document.

 

“Subordinated Note Documents” means the Notes, the Subordinated Credit Facility
and all other instruments and agreements of every type and description at any
time delivered by Parent or any of its subsidiaries evidencing, governing,
securing, assuring, or otherwise relating to the Notes or any other Subordinated
Claim.

 

b. OTHER DEFINITIONAL PROVISIONS. When used in this Agreement: (i) the words
“herein,” “hereof,” and “hereunder” and words of similar import shall refer to
this Agreement as a whole and not to any provision of this Agreement; (ii) the
words “include,” “includes,” and “including” are not limiting; the word “or”
has, except where otherwise required by the context, the inclusive meaning
represented by the phrase “and/or”; (iii) unless otherwise specified, the words
“Section,” “Schedule” and “Exhibit” refer to Sections of, and Schedules and
Exhibits to, this Agreement; and (iv) the singular includes the plural, and vice
versa, whenever the context so requires.

 

2. Payments Under Notes.

 

a. PAYMENT TERMS. Each of the Subordinated Lenders hereby acknowledges and
agrees that (i) the Subordinated Claims are not guaranteed by any subsidiary of
the Parent and are unsecured and (ii) no payment or distribution of any kind
(whether in the form of cash or other property) shall be made in connection with
any Subordinated Claim, including the Notes, whether on account of principal,
interest, fees, costs or expenses or otherwise, and whether at maturity, by
prepayment or otherwise, prior to the date on which all Senior Indebtedness has
been indefeasibly paid in full in cash (other than payments of principal and
interest made pursuant to the terms of the Subordinated Credit Facility and the
Notes in shares of Qualified Common Stock of the Parent) unless otherwise
consented to by the Majority Lenders (as defined in the Credit Agreement). Each
of the Subordinated Lenders agree that it will not ask, demand, sue for, take or
receive from the Parent by set-off or in any other manner, or retain payment (in
whole or in part) of any Subordinated Claim, including the Notes, or any
security therefor, unless and until all of the Senior Indebtedness has been paid
in full in cash. For the avoidance of doubt, the Senior Lenders will first be
entitled to receive payment in full in cash of the Senior Indebtedness before
the Subordinated Lenders will be entitled to receive or retain any payment
(whether in cash, property, securities or otherwise) on account of any
Subordinated Claim, including the Notes (other than payments of principal and
interest made

 

21

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pursuant to the terms of the Subordinated Credit Facility and the Notes in
shares of Qualified Common Stock of the Parent).

 

b. PAYMENTS HELD IN TRUST. If, notwithstanding the provisions of Section 2.1
above, any payments (other than payments of principal and interest made pursuant
to the terms of the Subordinated Credit Facility and the Notes in shares of
Qualified Common Stock of the Parent) are received by the Subordinated Lenders
or their agents on account of any Subordinated Claim, including amounts due
under the Notes, whether in the form of cash or other property, or any cash or
other property is delivered to the Subordinated Lenders or their agents
purportedly as collateral for the obligations of the Parent pursuant to any
Subordinated Claim, including under the Notes (any of which is not permitted),
such payments, cash or other property will, in each case, be deemed to have been
received for the account of the Administrative Agent and shall be held in trust
for the Secured Parties and immediately paid over to the Administrative Agent
for application as provided in the Credit Agreement and the Guaranty.

 

3. No Alteration.

 

a. NO ALTERATION. The payment and collateral restrictions contained herein shall
not be affected by any amendment, modification, supplement, extension, renewal,
restatement, or refinancing of any of the Senior Indebtedness nor by any action
or inaction which the Administrative Agent or any other Secured Party may take
or fail to take under or in respect of the Senior Indebtedness.

 

4. OTHER PROVISIONS.

 

a. MODIFICATION OF LOAN DOCUMENTS. Any of the Secured Parties may at any time
and from time to time without the consent of or notice to the Subordinated
Lenders, and without incurring liability to the Subordinated Lenders, or
impairing the obligations of the Subordinated Lenders under this Agreement,
agree to amend or modify in any manner any Loan Document (including, without
limitation, any one or more of the following: (a) change the manner, place or
terms of payment of or extend the time of payment of, or renew or alter, the
Senior Indebtedness or any collateral security or guaranty therefor, or
otherwise amend or supplement in any manner the Senior Indebtedness or any
instruments evidencing the same or any agreement under which the Senior
Indebtedness is outstanding or any Loan Document; (b) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing the
Senior Indebtedness; (c) release any person liable in any manner for the Senior
Indebtedness; and/or (d) exercise or refrain from exercising any rights against
the Parent and any other person).

 

b. MODIFICATION OF PROMISSORY NOTES. Prior to the Termination Date (as defined
below), the Subordinated Lenders shall not without the prior written consent of
the Administrative Agent:

 

i. Agree to any amendment, modification or supplement to the Subordinated Credit
Facility, the Notes or any other Subordinated Note Document; receive

 

22

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guaranties with respect to the Subordinated Credit Facility, the Notes or any
other Subordinated Note Document, or otherwise cause any person in addition to
the Parent to assume obligations with respect to the Subordinated Credit
Facility, the Notes or any other Subordinated Note Document; or accept or
receive any liens, security interests, deposits or collateral to secure payment
thereof; or

 

ii. Sell, assign, pledge, dispose of or otherwise transfer all or any portion of
any Subordinated Claim, including the indebtedness evidenced by the Notes,
unless prior to the consummation of any such action any transferee thereof
agrees in writing to be bound by the provisions hereof applicable to the
Subordinated Lenders and to the continued effectiveness of all of the rights of
the Secured Parties under this Agreement. Notwithstanding the failure of any
such transferee to so agree, this Agreement shall survive any such sale,
assignment, pledge, disposition or other transfer, and the terms of this
Agreement shall be binding upon any such transferee.

 

c. ACCELERATION AND ENFORCEMENT OF SUBORDINATED CLAIMS. Each of the Subordinated
Lenders agrees not to demand, accelerate, bring suit to collect or otherwise
exercise or enforce any right or remedy in respect of the amounts due under the
Subordinated Credit Facility and the Notes or commence or prosecute any action
or proceeding thereon or otherwise exercise or enforce any right or remedy in
respect of the amounts due under the Subordinated Credit Facility and the Notes,
including any right or remedy that otherwise might be available to it in any
Bankruptcy Case, unless the Senior Indebtedness outstanding under the Loan
Documents has been declared immediately due and payable by the Senior Lenders or
has otherwise become immediately due and payable.

 

d. PROCEEDING AGAINST PARENT. Each of the Subordinated Lenders agrees not to
commence or join with any other creditor or creditors of the Parent in
commencing any Proceeding against the Parent or any of its subsidiaries.

 

e. BANKRUPTCY ISSUES.

 

i. This Agreement shall continue in full force and effect after the commencement
of a Bankruptcy Case (all references herein to the Parent being deemed to apply
to the Parent as debtor-in-possession and to a trustee for the Parent’s estate
in a Bankruptcy Case).

 

ii. In the context of a Bankruptcy Case, the Senior Indebtedness shall be paid
in full in cash before any payment of or with respect to any Subordinated Claim,
including the Notes, shall be made (whether in respect of principal, interest,
premium, fees, indemnities, commissions or otherwise).

 

iii. In the context of a Bankruptcy Case, any payment or distribution, whether
in cash, property or securities, which, but for the terms hereof, otherwise
would be payable or deliverable in respect of a Subordinated Claim, shall be
paid or delivered directly to the Administrative Agent (to be held or applied in
accordance with the terms of the Loan Documents) until all Senior Indebtedness
is paid in full in cash, and each of the Subordinated Lenders irrevocably
authorizes, empowers and directs all receivers, trustees, debtors in possession,
liquidators, custodians, conservators and others having authority in the
premises to

 

23

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effect all such payments and distributions, and each of the Subordinated Lenders
also irrevocably authorizes, empowers and directs the Administrative Agent to
demand, sue for, collect and receive every such payment or distribution.

 

iv. Each of the Subordinated Lenders agrees to execute and deliver to the
Administrative Agent all such further reasonable instruments confirming the
irrevocable authorizations referred to in the foregoing clause (C) as the
Administrative Agent may reasonably request at any time.

 

v. Each of the Subordinated Lenders agrees not to initiate or prosecute, or
encourage any other entity to initiate or prosecute, any claim, objection,
action or proceeding (or vote any claim in a Bankruptcy Case which would have
the effect of) challenging or objecting to the enforceability of the Senior
Indebtedness, any liens or security interests securing the Senior Indebtedness,
any claim or adequate protection rights granted or allowed by a bankruptcy court
in favor of the Secured Parties, the terms of any proposed orders authorizing
the use of cash collateral to which the holders of a majority in principal
amount of the Senior Indebtedness consent, or the terms of any proposed
debtor-in-possession financing to be provided by any Secured Party or otherwise
supported by the holders of a majority in the principal amount of the Senior
Indebtedness in a Bankruptcy Case.

 

vi. Each of the Subordinated Lenders agrees to execute, verify, deliver and file
any proofs of claim in respect of amounts owing under a Subordinated Claim
requested by the Administrative Agent or its successors in connection with any
Bankruptcy Case and irrevocably authorize, empower and appoint the
Administrative Agent as the Subordinated Lenders’ attorney-in-fact to execute,
verify, deliver and file such proofs of claim and to vote such claims in any
proceeding. In the event that the Administrative Agent or any such successor
votes any claim in accordance with the authority granted hereby, the
Subordinated Lenders shall not be entitled to change or withdraw such vote.

 

f. REMEDIES. In the event that the Subordinated Lenders or the Parent fails to
observe or perform any covenant or agreement to be observed or performed
hereunder, the Secured Parties and/or any agent(s) on their behalf may proceed
to protect and enforce their rights by suit in equity or action at law, whether
for specific performance of any term contained in these subordination
provisions, or for an injunction against the breach of any such term or in aid
of the exercise of any power granted in these subordination provisions or to
enforce any other legal or equitable right of the Secured Parties, or to take
any one or more such actions.

 

g. FURTHER ASSURANCES. Each of the Subordinated Lenders, at its own cost, shall
take any further action as the Senior Lenders or any agent thereof may
reasonably request in order to carry out more fully the intent and purpose of
these subordination provisions.

 

h. BINDING EFFECT; LEGENDS. This Agreement shall be a continuing agreement,
shall be binding upon and shall inure to the benefit of the parties hereto from
time to time and their respective successors and assigns, shall be irrevocable,
and shall remain in full force and effect until the Senior Indebtedness shall
have been indefeasibly paid in full in cash, the commitments under the Credit
Agreement shall have been irrevocably terminated, all letters of credit issued
pursuant to any Loan Document shall have expired or terminated and the Interest

 

24

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Rate Agreements (as defined in the Credit Agreement) shall have been irrevocably
terminated (the latest to occur of the foregoing being referred to as the
“Termination Date”), but shall continue to be effective, or be reinstated, as
the case may be (and the Termination Date shall accordingly be extended), if any
payment, or any part thereof, of any amount paid by or on behalf of the Parent
or the Borrowers with regard to any Senior Indebtedness is rescinded or must
otherwise be restored or returned upon or as a result of any Bankruptcy Case, or
for any other reason, all as though such payments had not been made.

 

Parent and each holder of Subordinated Claims represents, warrants and agrees
that the following legend will be and shall at all times remain placed
conspicuously upon the face and signatures pages of the Notes and each other
instrument evidencing any Subordinated Claim held by such holder:

 

“The indebtedness and all obligations evidenced or represented hereby, and
certain other subordinated claims, are postponed, subordinated and junior in
right of payment to Senior Indebtedness, as defined in and on the terms set
forth in the Subordination Agreement dated as of June 13, 2003, executed and
delivered for the benefit of the holders of such Senior Indebtedness by the
maker hereof, Deutsche Bank AG New York Branch, and certain other signatories
thereto. The provisions of said agreement are hereby incorporated herein, as if
set forth at length herein and a copy of said agreement will be provided by
Parent upon request.”

 

Parent agrees that neither Parent nor any of its subsidiaries shall at any time
issue any promissory note in substitution, replacement or exchange for the Notes
or any such other instrument, and (notwithstanding any contrary agreement
enforceable by any holder of Subordinated Claims) neither Parent nor any of its
subsidiaries shall be obligated to issue any such promissory note or other
instrument, except only a promissory note that has such legend likewise placed
thereon.

 

i. SUBROGATION. No payment or distribution to any holder of Senior Indebtedness
pursuant to the provisions hereof shall entitle the Subordinated Lenders to
exercise any right of subrogation in respect thereof until the indefeasible
payment in full in cash of all Senior Indebtedness, the termination of all
commitments under the Credit Agreement, the termination of all Interest Rate
Agreements (as defined in the Credit Agreement) to which any Secured Party is a
party, and the termination or expiration of each letter of credit issued by any
Secured Party pursuant to the terms of any Loan Document. Subject to and from
and after the indefeasible payment in full in cash of all Senior Indebtedness,
the termination of all commitments under the Credit Agreement, the termination
of all Interest Rate Agreements to which any Secured Party is a party, and the
termination or expiration of each letter of credit issued by any Secured Party
pursuant to the terms of any Loan Document, the Subordinated Lenders shall be
subrogated to the rights of the Secured Parties to receive payments or
distributions of cash, property or securities of the Parent applicable to the
Senior Indebtedness until all amounts owing on the Subordinated Credit Facility
and the Notes shall be paid in full. For purposes of such subrogation, no
payments or distributions to the Secured Parties to which the Subordinated
Lenders would be entitled but for the provisions hereof, and no payments paid

 

25

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over by the Subordinated Lenders to the Secured Parties pursuant to the
provisions hereof, shall, as among the Parent, its creditors other than the
Secured Parties, and the Subordinated Lenders, be deemed to be a payment or
distribution on account of the Subordinated Credit Facility and the Notes.

 

j. REPRESENTATIONS AND WARRANTIES. Each of the Subordinated Lenders hereby
represent and warrant to each present and future holder of any Senior
Indebtedness that (a) it and the other Subordinated Lenders party hereto all,
collectively, own and are the sole holders of indebtedness outstanding under the
Subordinated Credit Facility and the Notes, (b) it has duly executed and
delivered this Agreement, in compliance with all laws and regulations applicable
to it and all agreements binding upon it, with full power and authority to bind
itself, and (c) this Agreement is binding upon and legally enforceable against
it.

 

5. MISCELLANEOUS.

 

a. WAIVER. Any waiver or amendment hereunder must be evidenced by a signed
writing of the party to be bound thereby, and shall only be effective in the
specific instance.

 

b. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York . The parties agree that
actions may be tried and litigated in the state and federal courts located in
the County of New York in the State of New York.

 

c. HEADINGS. The headings in this Agreement are for convenience of reference
only, and shall not alter or otherwise affect the meaning hereof.

 

d. PARTIES INTENDED TO BE BENEFITED. All of the understandings, covenants, and
agreements contained herein are solely for the benefit of the Parties, their
successors and assigns, and the Secured Parties, and there are no other parties,
including the Parent, the Borrowers or any of its or their creditors,
successors, or assigns, which are intended to be benefited in any way by this
Agreement.

 

e. NO LIMITATION INTENDED. Nothing contained in this Agreement is intended to or
shall affect or limit, in any way, the rights of the Secured Parties with
respect to any third parties. The Secured Parties hereby specifically reserve
all of their respective rights against the Parent, the Borrowers and all other
third parties.

 

f. NOTICE. Whenever it is provided herein that any notice, demand, request,
consent, approval, declaration, or other communication shall or may be given to
or served upon any of the parties hereto, or whenever any of the parties desires
to give or serve upon the other communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration, or other
communication shall be in writing and shall be delivered either in person, with
receipt acknowledged, or by regular, registered, or certified

 

26

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United States mail, postage prepaid, by facsimile, or by recognized overnight
courier service, addressed as follows:

 

If to the Administrative Agent, at:

 

Deutsche Bank AG New York Branch

Telecom Portfolio Management

31 West 52nd Street, 7th Floor

Mailstop: NYC01-0701

New York, New York 10019

Attention: Alexander Richarz

Fax: (646) 324-7455

 

and with a copy to:

 

Latham & Watkins

885 Third Avenue

New York, New York 10022

Attention: John N. Toufanian, Esq.

Fax: (212) 751-4864

 

If to North Sound Legacy Fund LLC, North Sound Legacy Institutional Fund LLC or
North Sound Legacy International Ltd.:

 

c/o North Sound Capital LLC

53 Forest Avenue, Suite 202

Old Greenwich, CT 06870

Attention: Andrew Wilder

Fax No.: (203) 967-5701

 

and with a copy to:

 

Jenkens & Gilchrist Parker Chapin LLP

The Chrysler Building

405 Lexington Avenue

New York, New York 10174

Attention: Christopher S. Auguste

Tel. No.: (212) 704-6000

Fax No.: (212) 704-6288

 

or at such other address as may be substituted by notice given as herein
provided. Giving of any notice required hereunder may be waived in writing by
the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given when received.

 

g. SEVERABILITY; INTERPRETATION. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid

 

27

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under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement. To the extent any
provision hereof is inconsistent with any provision in any of the Subordinated
Note Documents, the provisions of this Agreement shall govern.

 

h. COMPLETE AGREEMENT. This Agreement constitutes the complete agreement and
understanding of each of the Parties, and supersedes all prior or
contemporaneous oral and written negotiations, agreements and understandings,
express or implied, with respect to the subject matter hereof.

 

i. NO JOINT VENTURE. Each of the Parties acknowledges and confirms that this
Agreement shall not create a joint venture, agency or fiduciary relationship.

 

j. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
and by the parties each in separate counterparts, each of which shall be an
original, but all of which shall together constitute one and the same Agreement.

 

k. ATTORNEYS FEES AND EXPENSES. If any action is brought to enforce the
provisions of this Agreement, the prevailing party in such action shall be
entitled to recover its reasonable attorneys fees and costs.

 

l. WAIVER OF JURY TRIAL. Each of the parties hereby expressly waives any right
to trial by jury of any claim, demand, action or cause of action (a) arising
under this agreement or any other instrument, document, or agreement executed or
delivered in connection herewith, or (b) in any way connected with or related or
incidental to the dealings of the parties with respect to this agreement or any
other instrument, document or agreement executed or delivered by them in
connection herewith, or the transactions related hereto or thereto, in each case
whether now existing or hereafter arising, and whether sounding in contract or
tort or otherwise. Each of the parties hereby agrees and consents that any
claim, demand, action or cause of action shall be decided by court trial without
jury, and that any of them may file an original counterpart or a copy of this
section with any court as written evidence of the consent to the waiver of right
to trial by jury.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first herein above set forth.

 

DEUTSCHE BANK AG NEW YORK BRANCH,

as Administrative Agent

By:  

 

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Name:  

 

--------------------------------------------------------------------------------

Title:  

 

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By:  

 

--------------------------------------------------------------------------------

Name:  

 

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Title:  

 

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NORTH SOUND LEGACY FUND LLC,

as Subordinated Lender

By:  

 

--------------------------------------------------------------------------------

Name:  

 

--------------------------------------------------------------------------------

Title:  

 

--------------------------------------------------------------------------------

 

 

NORTH SOUND LEGACY INSTITUTIONAL FUND LLC,

as Subordinated Lender

By:  

 

--------------------------------------------------------------------------------

Name:  

 

--------------------------------------------------------------------------------

Title:  

 

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NORTH SOUND LEGACY INTERNATIONAL LTD.,

as Subordinated Lender

By:  

 

--------------------------------------------------------------------------------

Name:  

 

--------------------------------------------------------------------------------

Title:  

 

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29

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ACKNOWLEDGMENT

 

Each of the undersigned hereby acknowledges that it has received a copy of the
foregoing Agreement and consents thereto, and agrees to recognize all rights
granted thereby to the parties thereto, and will not do any act or perform any
obligation which is not in accordance with the agreements set forth in such
Agreement. Each of the undersigned further acknowledges that it is not an
intended beneficiary or third party beneficiary under the Agreement.

 

Dated as of June 13, 2003.

 

FIBERNET TELECOM GROUP, INC.,

a Delaware corporation

By:  

 

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Name:     Title:    

 

 

FIBERNET OPERATIONS, INC.,

a Delaware corporation

By:  

 

--------------------------------------------------------------------------------

Name:     Title:    

 

 

DEVNET L.L.C.

a Delaware limited liability company

By:  

 

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Name:     Title: