Settlement and Standstill Agreement
This SETTLEMENT AND STANDSTILL AGREEMENT, dated as of July 13, 2007 (the
"Agreement"), is by and between Arbinet-thexchange, Inc., a Delaware corporation
("Arbinet"), and the individuals and entities listed on Schedule A hereto
(collectively, the "Stockholders").
WHEREAS, the Stockholders are the beneficial owners of shares of common
stock, par value $0.001 per share, of Arbinet (the "Common Stock"); and
WHEREAS, by letter dated March 19, 2007, Xxxxx Xxxxxx, as trustee for the
Singer Children's Management Trust (the "Trust"), provided notice to Arbinet of
her intention to nominate Xxxxx X'Xxxxxxx, Xxxx Xxxxxxx, and Xxxxxxx Xxxxxxxx
for election as directors of Arbinet at its 2007 annual meeting of stockholders
(the "Stockholder Nomination");
WHEREAS, Xxxx Xxxxxx acts as a consultant to the Trust; and
WHEREAS, subject to this Agreement the Trust intends hereby to withdraw the
Stockholder Nomination and refrain from contesting the election of directors at
Arbinet's 2007 annual meeting of stockholders; and
WHEREAS, Arbinet and the Stockholders intend to provide hereby for, among
other matters, enlargement of the Board of Directors of Arbinet (the "Board")
from six (6) to nine (9) members and for the appointment of Xxxxx X'Xxxxxxx,
Xxxx Xxxxxxx, and Xxxxxxx Xxxxxxxx to the Board to fill the vacancies resulting
therefrom, and furthermore, Arbinet and the Stockholders desire to otherwise
resolve all matters between them, including those matters at issue in or with
respect to the Stockholder Nomination.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Representations.
(a) Binding Agreement: Authority. Arbinet hereby represents and warrants
that this Agreement has been duly authorized, executed and delivered by Arbinet,
and is a valid and binding obligation of Arbinet, enforceable against Arbinet in
accordance with its terms. Each of the Stockholders represents and warrants
that this Agreement has been duly authorized, executed and delivered by such
Stockholder, and is a valid and binding obligation of such Stockholder,
enforceable against such Stockholder in accordance with its terms.
(b) Share Ownership of Common Stock. Each of the Stockholders hereby
represents and warrants that, as of the date hereof, it and its Affiliates and
Associates (as such terms are hereinafter defined) are the "beneficial owners"
(as such term is hereinafter defined) of the shares of Common Stock set forth
opposite their respective name on Schedule A hereto (the "Shares"), and that
neither it nor its Affiliates or Associates beneficially own, or have any
rights, options or agreements to acquire or vote, any other shares of Common
Stock.
(c) Defined Terms. For purposes of this Agreement, the term "Affiliate" and
"Associate" shall have the respective meanings set forth in Rule 12b-2
promulgated by the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). For purposes
of this Agreement, the terms "beneficial owner" and "beneficially own" shall
have the same meanings as set forth in Rule 13d-3 promulgated by the SEC under
the Exchange Act, except that a person shall also be deemed to be the beneficial
owner of all shares of Common Stock that such person has the right to acquire
pursuant to the exercise of any rights in connection with any securities or any
agreement, regardless of when such rights may be exercised and whether they are
conditional.
Section 2. Directors.
(a) Additional Directors. The Stockholders and Arbinet agree that as
promptly as practicable (but in no event more than the second (2 nd) business
day) following the execution of this Agreement by the parties hereto, the Board
will increase the size of the Board to nine (9) members and (i) appoint Xxxxx
X'Xxxxxxx and Xxxx Xxxxxxx (together with any successor nominees appointed by
the Stockholders pursuant to this Agreement, the "Class III Nominees") to fill
the newly created directorships on the Board as Class III directors whose term
shall expire at Arbinet's 2007 annual meeting of stockholders, and (ii) appoint
Xxxxxxx Xxxxxxxx to fill the newly created directorships on the Board as a Class
II director whose term shall expire at Arbinet's 2009 annual meeting of
stockholders . At such time as Xxxxx X'Xxxxxxx, Xxxx Xxxxxxx, and Xxxxxxx
Xxxxxxxx shall each become a director of Arbinet in accordance with the terms of
this Agreement, Xxxxx X'Xxxxxxx, Xxxx Xxxxxxx, and Xxxxxxx Xxxxxxxx shall agree
in writing to be bound by the terms and conditions of Arbinet's policies
applicable to directors, including, without limitation, Arbinet's Code of
Business Conduct & Ethics, Corporate Governance Guidelines, and Xxxxxxx Xxxxxxx
Policy.
(b) Nominations. Arbinet agrees to nominate Xxxxxxx X. Xxxxx, Xxxxx
X'Xxxxxxx and Xxxx Xxxxxxx for election as Class III directors of Arbinet at its
2007 annual meeting of stockholders, and use its reasonable best efforts to
cause the election of such persons, each to serve for a three-year term ending
upon the election of directors at Arbinet's 2010 annual meeting of stockholders
and until his or her successor is duly elected and qualified.
(c) Committees. Arbinet agrees to appoint (i) Xxxxx X'Xxxxxxx to the
Compensation Committee of the Board, (ii) Xxxx Xxxxxxx to the Audit Committee of
the Board, and (iii) Xxxxxxx Xxxxxxxx to the Nominating and Corporate Governance
Committee of the Board.
Section 3. Voting.
(a) 2007 Annual Meeting. The Stockholders, together with their Affiliates
and Associates, will not submit any stockholder proposal (pursuant to Rule 14a-8
or otherwise), or any notice of nomination or other business under Arbinet's
Second Amended and Restated By-laws, and will not nominate or oppose directors
for election at the 2007 annual meeting of stockholders of Arbinet. The
Stockholders shall cause all Shares of Common Stock beneficially owned by them,
and/or their Affiliates or Associates, as of the record date for the 2007 annual
meeting of stockholders of Arbinet, to be present for quorum purposes and to be
voted in favor
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of Xxxxxxx X. Xxxxx, Xxxxx X'Xxxxxxx, and Xxxx Xxxxxxx at such annual meeting or
at any adjournments or postponements thereof.
(b) Other Meetings. During the Standstill Period (as such term is
hereinafter defined), the Stockholders shall cause all Shares of Common Stock
beneficially owned by them, and/or their Affiliates or Associates, as of the
record date for any other meeting of stockholders of Arbinet, to be present for
quorum purposes and to be voted, at such meeting or any adjournments or
postponements thereof, in favor of any matter brought before such meeting upon
the recommendation of the Board by a two-thirds (2/3 rd) vote of those members
voting; provided, however, that this provision will not restrict the
Stockholders from voting as they deem appropriate in the exercise of their
fiduciary duty with respect to a merger, tender offer, reorganization,
recapitalization, sale of assets or other similar transaction that is submitted
for stockholder approval at such meeting (it being understood that to the extent
any such proposal includes the proposed election of an alternate slate of
directors in lieu of directors nominated by Arbinet, the Stockholders, together
with their Affiliates and Associates, will in all events be required to vote in
favor of Arbinet's nominees).
(c) Further Assurances. The Stockholders further agree to take all action
reasonably necessary to carry out the intention of this Section 3, including,
without limitation, delivering to Arbinet upon its written request (and
compliance by it with applicable laws) executed proxies naming the proxies
appointed by Arbinet for all shares of Common Stock beneficially owned by the
Stockholders and/or their Affiliates or Associates as of the record dates for
the aforementioned meetings of stockholders.
Section 4. Standstill Arrangements. Each of the Stockholders agrees that,
during the period from the date of this Agreement through July 13, 2008 (the
"Standstill Period"), neither it nor any of its Affiliates or Associates will,
without the written consent of Arbinet, directly or indirectly, solicit,
request, advise, assist or encourage others to (a) effect or seek, offer or
propose (whether publicly or otherwise) to effect, or cause or participate in or
in any way assist any other person to effect or seek, offer of propose (whether
publicly or otherwise) to effect or participate in, (i) any acquisition of any
assets of Arbinet or any of its subsidiaries; provided, however, that the
Stockholders shall be able to communicate directly to the Board and third
parties on a confidential, non-public basis proposals for a negotiated
acquisition of assets of Arbinet or any of its subsidiaries without the written
consent of Arbinet ; provided, further that any third party that the
Stockholders communicate with shall expressly agree not to make any public
disclosure or public announcement about such communications; (ii) any tender or
exchange offer, merger or other business combination involving Arbinet or any of
its subsidiaries ; provided, however, that the Stockholders shall be able to
communicate directly to the Board and third parties on a confidential,
non-public basis proposals for a negotiated tender or exchange offer, merger or
other business combination involving Arbinet or any of its subsidiaries without
the written consent of Arbinet; provided, further that any third party that the
Stockholders communicate with shall expressly agree not to make any public
disclosure or public announcement about such communications; (iii) any
recapitalization, restructuring, liquidation, dissolution or other extraordinary
transaction with respect to Arbinet or any of its subsidiaries; provided,
however, that the Stockholders shall be able to communicate directly to the
Board and third parties on a confidential, non-public basis proposals for a
negotiated recapitalization, restructuring, liquidation, dissolution or other
extraordinary transaction with respect to Arbinet or any of its
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subsidiaries without the written consent of Arbinet; provided, further that any
third party that the Stockholders communicate with shall expressly agree not to
make any public disclosure or public announcement about such communications; or
(iv) any "solicitation" of "proxies" (as such terms are used in the proxy rules
of the SEC) or consent to vote any voting securities of Arbinet; (b) form, join
or in any way participate in a "group" (as defined under the Exchange Act); (c)
except as otherwise expressly provided herein, otherwise act, alone or in
concert with others, to seek to control or influence the management, the Board
or policies of Arbinet; (d) nominate any persons as a director of Arbinet or
propose any matter to be voted on by stockholders of Arbinet; (e) take any
action which would reasonably be expected to force Arbinet to make a public
announcement regarding any of the types of matters set forth in (a) above; or
(f) except as otherwise expressly provided herein, enter into any discussions or
arrangements with any third party with respect to any of the foregoing. The
Stockholders also agree during the Standstill Period not to request Arbinet (or
its directors, officers, employees or agents), directly or indirectly, to amend
or waive any provision of this paragraph (including this sentence).
Section 5. Withdrawal of Demand and Stockholder Nomination and Proposal.
Upon the appointment of Xxxxx X'Xxxxxxx, Xxxx Xxxxxxx, and Xxxxxxx Xxxxxxxx to
the Board and the committees thereof as required by this Agreement, the Trust
hereby withdraws the Stockholder Nomination and shall immediately cease all
efforts, direct or indirect, in furtherance of the Stockholder Nomination and
any related solicitation.
Section 6. Press Releases and Other Public Statements. During the
Standstill Period, Arbinet and the Stockholders agree as follows:
(a) Arbinet agrees, subject to the requirements of applicable federal
securities laws, to provide the Stockholders with an opportunity to review and
comment on any press release, public filing, or letter to Arbinet's stockholders
containing statements about the Stockholders, prior to its public release.
(b) The Stockholders agree, subject to the requirements of applicable
federal securities laws, to provide Arbinet with an opportunity to review and
comment on any press release, public filing, or letter to Arbinet's stockholders
containing statements about Arbinet, prior to its public release.
(c) The initial press release with respect to the execution of this
Agreement shall be a press release to be reasonably agreed upon by Arbinet and
the Stockholders.
(d) Neither Arbinet nor any of the Stockholders, nor any of their
Affiliates or Associates, shall directly or indirectly make or issue or cause to
be made or issued any disclosure, announcement or statement (including without
limitation the filing of any document or report with the SEC or any other
governmental agency or any disclosure to any journalist, member of the media or
securities analyst) concerning the other party or any of its respective past,
present or future general partners, directors, officers or employees, which
disparages any of such other party's respective past, present or future general
partners, directors, officers or employees as individuals (recognizing that the
parties shall be free to comment in good faith regarding the business of
Arbinet, provided any such comment shall not otherwise violate the terms of this
Agreement).
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Section 7. Reimbursement of Certain Expenses. As of the date hereof,
Arbinet will pay to the Stockholders $25,000 as reimbursement for all of the
Stockholders out-of-pocket expenses incurred in connection with the 2007 annual
meeting of stockholders proxy contest and the negotiation of this Agreement.
Section 8. Remedies. Each party hereto hereby acknowledges and agrees that
irreparable harm would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to specific relief hereunder, including, without limitation, an injunction or
injunctions to prevent and enjoin breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof in any state or
federal court in the State of Delaware, in addition to any other remedy to which
they may be entitled at law or in equity. Any requirements for the securing or
posting of any bond with such remedy are hereby waived.
Section 9. Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and may
be amended only by an agreement in writing executed by the parties hereto.
Section 10. Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given, made or served, if in writing and sent by
U.S. registered mail, return receipt requested:
if to Arbinet Arbinet-thexchange, Inc.
Tower II, Suite 450
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel
with a copy to: Xxxxxxx Procter LLP
Exchange Place
Boston, Massachusetts 02109
Attention: Xxxxxx X. Xxxxxxx III
if to the Stockholders: Addressed to such Stockholder at the address
set forth on Schedule B hereto
Section 11. Law Governing. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware,
without regard to any conflict of laws provisions thereof. The parties, on
behalf of itself and its Affiliates and Associates, hereby irrevocably and
unconditionally consent to the exclusive jurisdiction of the courts in the State
of Delaware and/or the courts of the United States of America located in the
State of Delaware for any action, suit or proceeding arising out of or relating
to this Agreement or the transactions contemplated hereby, and agree not to
commence any action, suit or proceeding related thereto except in such courts.
The parties, on behalf of itself and its Affiliates and Associates, hereby
irrevocably and unconditionally waive any objection to the laying of venue of
any action, suit or
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proceeding arising out of this Agreement or the transactions contemplated
hereby, in the courts in the State of Delaware and/or the courts of the United
States of America located in the State of Delaware, and hereby further
irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such action, suit or proceeding in any such court has been
brought in any inconvenient forum.
Section 12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 13. No Presumption Against Draftsman. Each of the undersigned
parties hereby acknowledges the undersigned parties fully negotiated the terms
of this Agreement, that each such party had an equal opportunity to influence
the drafting of the language contained in this Agreement and that there shall be
no presumption against any such party on the ground that such party was
responsible for preparing this Agreement or any part hereof.
Section 14. Enforceability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that the parties
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such which may be hereafter declared invalid, void or
unenforceable. In addition, the parties agree to use their best efforts to
agree upon and substitute a valid and enforceable term, provision, covenant or
restriction for any such that is held invalid, void or unenforceable by a court
of competent jurisdiction.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Settlement and Standstill Agreement, or caused the same to be executed by its
duly authorized representative as of the date first above written.
ARBINET-THEXCHANGE, INC.
By: /s/ Xxxxx X. Xxxxx
----------------------------------
Name: Xxxxx X. Xxxxx
Title: Interim Chief Executive Officer and
President
SINGER CHILDREN'S FAMILY TRUST
By: /s/ Xxxxx Xxxxxx
----------------------------------
Name: Xxxxx Xxxxxx, its Trustee
/s/ Xxxx Xxxxxx
--------------------------------------
Xxxx Xxxxxx, individually and as consultant
to the Singer Children's Family Trust
/s/ Xxxxx Xxxxxx
--------------------------------------
Xxxxx Xxxxxx, individually
SCHEDULE A
Beneficial and Record Ownership of Common Stock
Number of Shares of Common Number of Shares of Common
Stockholder Stock Held Beneficially Stock Held of Record
------------------------------ -------------------------- --------------------------
Singer Children's Family Trust 2,460,174 2,460,174
Xxxx Xxxxxx 0 0
Xxxxx Xxxxxx 0 0
SCHEDULE B
Stockholder Address
----------- -------
Singer Children's Family Trust 000 Xxxxxxx Xxxxx
Xxxx Xxxxxx Xxxxxxxxx, Xxx Xxxxxx 00000
Xxxxx Xxxxxx
