Execution Copy
EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
Dated as of August 28, 2001
By and Among
ALLIED RISER COMMUNICATIONS CORPORATION,
COGENT COMMUNICATIONS GROUP, INC.
And
XXXXXXXX XXXXXX MERGER SUB, INC.
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TABLE OF CONTENTS
PAGE
ARTICLE 1. The Merger.............................................................................................2
Section 1.01 The Merger.................................................................................2
Section 1.02 Reverse Stock Split........................................................................2
Section 1.03 Closing....................................................................................2
Section 1.04 Effective Time.............................................................................2
Section 1.05 Effects of the Merger......................................................................2
Section 1.06 Certificates of Incorporation and Bylaws...................................................2
Section 1.07 Board of Directors and Officers of the Surviving Corporation...............................3
ARTICLE 2. Effect of the Merger on the Capital Stock of the Constituent Corporations; Exchange of Certificates...3
Section 2.01 Effect on Capital Stock....................................................................3
Section 2.02 Exchange of Certificates...................................................................4
Section 2.03 Stock Options..............................................................................6
Section 2.04 Restricted Stock; ESPP.....................................................................7
Section 2.05 Warrants...................................................................................7
Section 2.06 Appraisal Rights...........................................................................7
ARTICLE 3. Representations and Warranties.........................................................................8
Section 3.01 Representations and Warranties of Parent and Merger Sub....................................8
Section 3.02 Representations and Warranties of the Company.............................................18
ARTICLE 4. Covenants Relating to Conduct of Business.............................................................23
Section 4.01 Conduct of Business.......................................................................23
Section 4.02 No Solicitation...........................................................................26
ARTICLE 5. Additional Agreements.................................................................................28
Section 5.01 Preparation of the Form S-4 and the Company Proxy Statement; Company Stockholders'
Meeting...................................................................................28
Section 5.02 Letters of the Company's Accountants......................................................29
Section 5.03 Letters of Parent's Accountants...........................................................29
Section 5.04 Access to Information; Confidentiality....................................................30
Section 5.05 Reasonable Best Efforts...................................................................30
Section 5.06 Employee Benefits.........................................................................31
Section 5.07 Indemnification, Exculpation and Insurance................................................31
Section 5.08 Fees and Expenses.........................................................................32
Section 5.09 Public Announcements......................................................................32
Section 5.10 Affiliates................................................................................33
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TABLE OF CONTENTS
(continued)
PAGE
Section 5.11 Listing or Nasdaq Quotation...............................................................33
Section 5.12 Tax Treatment.............................................................................33
Section 5.13 Further Assurances........................................................................33
Section 5.14 Transfer Taxes............................................................................33
Section 5.15 Series C Preferred Stock..................................................................33
Section 5.16 Certain Insurance.........................................................................33
ARTICLE 6. Conditions Precedent..................................................................................34
Section 6.01 Conditions to Each Party's Obligation To Effect the Merger................................34
Section 6.02 Conditions to Obligations of the Company..................................................34
Section 6.03 Conditions to Obligations of Parent.......................................................35
Section 6.04 Frustration of Closing Conditions.........................................................36
ARTICLE 7. Termination, Amendment and Waiver.....................................................................36
Section 7.01 Termination...............................................................................36
Section 7.02 Effect of Termination.....................................................................37
Section 7.03 Amendment.................................................................................38
Section 7.04 Extension; Waiver.........................................................................38
Section 7.05 Procedure for Termination, Amendment, Extension or Waiver.................................39
ARTICLE 8. General Provisions....................................................................................39
Section 8.01 Nonsurvival of Representations and Warranties.............................................39
Section 8.02 Notices...................................................................................39
Section 8.03 Definitions...............................................................................40
Section 8.04 Interpretation............................................................................41
Section 8.05 Counterparts..............................................................................41
Section 8.06 Entire Agreement; No Third-Party Beneficiaries............................................41
Section 8.07 Governing Law.............................................................................41
Section 8.08 Assignment................................................................................41
Section 8.09 Enforcement...............................................................................42
Section 8.10 Severability..............................................................................42
ANNEX I Index of Defined Terms................................................................................AI-1
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LIST OF EXHIBITS
Exhibit A Form of Restated Certificate of Incorporation of Parent
Exhibit B Form of Restated Bylaws of Parent
Exhibit C Conversion Ratio
Exhibit D Form of Rule 145 Letter
Exhibit E Form of Lock-Up Agreement
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AGREEMENT AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of
August 28, 2001, by and among
Allied Riser Communications Corporation, a
Delaware corporation (the "Company"), Cogent Communications Group, Inc., a
Delaware corporation ("Parent"), and Xxxxxxxx Xxxxxx Merger Sub, Inc., a
Delaware corporation and wholly owned subsidiary of Parent ("Merger Sub").
RECITALS:
A. The respective Boards of Directors of the Company, Parent and Merger
Sub have approved this Agreement and declared advisable the merger of Merger Sub
with and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement, and have determined that the Merger is
in the best interests of each corporation and its respective stockholders;
B. Upon any necessary approval by the stockholders of Parent and
effective immediately prior to the Effective Time (as defined herein), Parent
will effect a reverse stock split with respect to its then-outstanding shares of
common stock, par value $.001 per share (the "Parent Common Stock"), such that
each share of Parent Common Stock shall be converted into 0.1 of a share of
Parent Common Stock (the "Reverse Stock Split"). Any fractional share which
results from the Reverse Stock Split will be rounded up to the next whole share;
C. Parent intends to issue shares of Series C Preferred Stock,
substantially on the terms set forth in the Parent Restated Certificate (as
defined herein) and Section 3.01(b) of Parent Disclosure Schedule (as defined
herein) (such stock, "Series C Preferred Stock"), in a private placement to
occur prior to the Effective Time;
D. Each of the respective Boards of Directors of the Company, Parent
and Merger Sub has determined that the Merger and the other transactions
contemplated hereby are consistent with, and in furtherance of, its respective
business strategies and goals;
E. The Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
F. For federal income tax purposes, it is intended that the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the rules and regulations
promulgated thereunder and that this Agreement constitute a plan of
reorganization.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
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ARTICLE 1.
The Merger
Section 1.01 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Section 251 of the
Delaware
General Corporation Law (the "DGCL"), Merger Sub shall be merged with and into
the Company at the Effective Time. Following the Effective Time, the Company
shall continue as the surviving corporation of the Merger (the "Surviving
Corporation").
Section 1.02 Reverse Stock Split. Immediately prior to the Effective
Time, subject to Parent Stockholder Approval (as defined herein), Parent shall
effect the Reverse Stock Split.
Section 1.03 Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the second Business Day (as defined herein)
after satisfaction or waiver of the conditions set forth in Article 6 (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of those conditions), unless another
time or date is agreed to by the parties hereto. The Closing will be held at the
offices of Parent's counsel, Xxxxxx & Xxxxxxx, 000 Xxxxxxxx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. 00000.
Section 1.04 Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, Merger Sub shall
file a certificate of merger pursuant to Section 251(c) of the DGCL (in any such
case, the "Certificate of Merger") executed in accordance with Section 103 of
the DGCL and shall make all other filings or recordings as may be required under
the DGCL. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the
Delaware Secretary of State, or at such other time
as the Company and Parent shall agree and specify in the Certificate of Merger
(the time the Merger becomes effective being hereinafter referred to as the
"Effective Time").
Section 1.05 Effects of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, at the Effective Time, except
as otherwise provided herein, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.06 Certificates of Incorporation and Bylaws.
(a) The Certificate of Incorporation of Merger Sub shall be the
Certificate of Incorporation of the Surviving Corporation at the Effective Time
and thereafter until changed or amended as provided therein or by applicable
law.
(b) The Bylaws of Merger Sub shall be the Bylaws of the Surviving
Corporation at the Effective Time and thereafter until changed or amended as
provided therein or by applicable law.
(c) The Amended and Restated Certificate of Incorporation of Parent,
substantially in the form attached hereto as Exhibit A, shall be the Certificate
of Incorporation of Parent (the "Parent Restated Certificate") at the Effective
Time and thereafter until changed or amended as provided therein or by
applicable law.
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(d) The Amended and Restated Bylaws of Parent, substantially in the
form attached hereto as Exhibit B, shall be the Bylaws of Parent (the "Parent
Bylaws") at the Effective Time and thereafter until changed or amended as
provided therein or by applicable law.
Section 1.07 Board of Directors and Officers of the Surviving
Corporation. The directors and officers of Merger Sub immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation,
until the earlier of their respective resignation or removal or until their
respective successors are duly elected and qualified, as the case may be. The
directors and officers of the Company shall cease to have any powers in respect
of the Surviving Corporation at the Effective Time.
ARTICLE 2.
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
Section 2.01 Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of capital stock of Merger Sub, Parent or the Company:
(a) Conversion Generally. Each share of common stock, par value $.0001
per share, of the Company ("Company Common Stock" or "Shares") issued and
outstanding immediately prior to the Effective Time (other than any Shares to be
canceled pursuant to Section 2.01(b)), subject to Section 2.02(e), shall be
converted into the right to receive the number of validly issued, fully paid and
nonassessable shares of Parent Common Stock (that have been registered in the
Merger with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act")), equal to the
Conversion Ratio (as defined in Exhibit C) (such shares of Parent Common Stock,
together with any fractional share issued pursuant to Section 2.02(e), the
"Merger Consideration"). As of the Effective Time, all such Shares shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each certificate previously representing any such Shares
shall thereafter represent the right to receive a certificate representing the
Merger Consideration. Certificates previously representing Shares shall be
exchanged for certificates representing whole shares of Parent Common Stock
issued in consideration therefor upon the surrender of such certificates in
accordance with the provisions of Section 2.02.
(b) Treasury Shares; Shares Held by Parent or Merger Sub. At the
Effective Time, each Share held by Parent or its Subsidiaries (as defined
herein) or in the treasury of the Company immediately prior to the Effective
Time shall be automatically canceled and extinguished and shall cease to exist
without any conversion thereof, and no payment shall be made with respect
thereto.
(c) Merger Sub. Each share of common stock, par value $.0001 per share,
of Merger Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and be exchanged for one newly and validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
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(d) Adjustment to Conversion Ratio. If, between the date of this
Agreement and the Effective Time, the outstanding shares of Parent Common Stock,
other than as a result of the Reverse Stock Split, or Company Common Stock shall
have been changed into a different number of shares or a different class, by
reason of any stock dividend thereon or any subdivision, reclassification,
recapitalization, split, combination or exchange thereof, the Conversion Ratio
shall be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange.
Section 2.02 Exchange of Certificates.
(a) Exchange Agent. At or prior to the Effective Time, Parent shall
deposit, or shall cause to be deposited, with a bank or trust company designated
by Parent and reasonably satisfactory to the Company (the "Exchange Agent"), for
the benefit of the holders of Shares, for exchange in accordance with this
Article 2, through the Exchange Agent, (i) certificates representing the Merger
Consideration and (ii) any dividends or distributions with respect thereto
(collectively, the "Exchange Fund") issuable and pursuant to this Section 2.02
in exchange for outstanding Shares. The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the Merger Consideration and any such
dividends or distributions in accordance with this Section 2.02.
(b) Exchange Procedures. Parent shall instruct the Exchange Agent to,
as soon as reasonably practicable after the Effective Time, mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding Shares (the "Certificates") (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in customary form) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing the Merger Consideration. Upon surrender to the
Exchange Agent of a Certificate for cancellation together with such letter of
transmittal, properly completed and duly executed, and such other documents as
may be required pursuant to such instructions, the holder of such Certificate
shall be entitled to receive in exchange therefor (i) a certificate representing
the Merger Consideration in respect of the Shares formerly represented by such
Certificate (after taking into account all Shares then held by such holder),
including any fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 2.02(e), and (ii) any dividends or other
distributions to which such holder is entitled pursuant to Section 2.02(c), and
the Certificate so surrendered shall forthwith be canceled. No interest will be
paid or accrued on any unpaid dividends and distributions payable to holders of
Certificates. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company, a certificate representing
the proper number of shares of Parent Common Stock may be issued to a transferee
if the Certificate representing such Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.02, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender (i) the certificate representing the Merger
Consideration, including any fractional share of Parent Common Stock to which
such holder is entitled pursuant to Section 2.02(e), and (ii) any dividends or
other distributions to which such holder is entitled pursuant to Section
2.02(c).
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(c) Distributions with Respect to Unsurrendered Certificates. No
dividends or other distributions with respect to Parent Common Stock with a
record date on or after the date of the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of Company
Common Stock, represented thereby until such holder shall surrender such
Certificate in accordance with this Article 2. Subject to the effect of
applicable laws, following surrender of any such Certificate there shall be paid
to the holder of the certificate representing shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such shares of Parent
Common Stock to which such holder is entitled pursuant to this Article 2 and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date on or after the date of the Effective Time but
prior to such surrender and with a payment date subsequent to such surrender
payable with respect to such shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock All shares of
Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article 2 shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the shares of
Company Common Stock previously represented by such Certificates, subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which may
have been declared or made by the Company on such shares of Company Common Stock
which remain unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Article
2 except as otherwise provided by law.
(e) No Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Company Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of Parent Common Stock (after taking into account all Certificates
delivered by such holder) shall be entitled to receive an additional fraction of
a share of Parent Common Stock to create a whole share such that no such holder
will receive any fractional share of Parent Common Stock.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Shares on the date that is one
year after the Effective Time shall be delivered to Parent, upon demand, and any
holders of Shares who have not theretofore complied with this Section 2.02 shall
thereafter look only to Parent for (i) the shares of Parent Common Stock
representing Merger Consideration, including any fractional share of Parent
Common Stock to which such holder is entitled pursuant to Section 2.02(e), and
(ii) any dividends or other distributions with respect to Parent Common Stock to
which they are entitled pursuant to Section 2.02(c), in each case, without any
interest thereon.
(g) Withholding. Parent or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Shares such amounts as Parent or the Exchange Agent
are required to deduct and withhold
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under applicable law with respect to the making of such payment. To the extent
that amounts are so withheld by Parent or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of Shares in respect of whom such deduction and withholding was
made by Parent or the Exchange Agent.
(h) No Liability. None of Parent, the Surviving Corporation or the
Exchange Agent shall be liable to any person in respect of any Merger
Consideration or any dividends or distributions with respect thereto, in each
case delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificate shall not have been
surrendered prior to the date that is three years after the Effective Time (or
immediately prior to such earlier date on which any Merger Consideration,
including any fractional share of Parent Company Stock issuable pursuant to
Section 2.02(e), or any dividends or distributions payable to the holder of such
Certificate pursuant to this Article 2, would otherwise escheat to or become the
property of any Governmental Entity), any such Merger Consideration or dividends
or distributions in respect thereof shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims or interests of any person previously entitled thereto.
(i) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration, including any fractional share of Parent
Common Stock issuable pursuant to Section 2.02(e), and any unpaid dividends and
distributions in respect thereof, in each case pursuant to this Agreement.
Section 2.03 Stock Options. At the Effective Time, all unexercised and
unexpired options to purchase Company Common Stock ("Company Stock Options")
then outstanding, under any stock option plan of the Company, including the
Company's 1999 Amended and Restated Stock Option and Equity Incentive Plan, 2000
Stock Option and Equity Incentive Plan, and any other plan, agreement or
arrangement (the "Company Stock Option Plans"), whether or not then exercisable,
will be assumed by Parent. Each Company Stock Option so assumed by Parent under
this Agreement will continue to have, and be subject to, the same terms and
conditions applicable to such holder's Company Stock Option set forth in the
applicable Company Stock Option Plan and any agreements thereunder immediately
prior to the Effective Time, except that (i) each Company Stock Option will be
exercisable (or will become exercisable in accordance with its terms) for that
number of whole shares of Parent Common Stock equal to the product of the number
of Shares that were issuable upon exercise of such Company Stock Option
immediately prior to the Effective Time multiplied by the Conversion Ratio,
rounded to the nearest whole number of shares of Parent Common Stock and (ii)
the per-share exercise price for the shares of Parent Common Stock issuable upon
exercise of such Company Stock Option assumed will be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock at
which such Company Stock Option was exercisable immediately prior to the
Effective Time by the Conversion Ratio, rounded to the nearest whole cent. The
conversion of any Company Stock Options to which Section 421(a) of
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the Code applies into options to purchase Parent Common Stock shall be made in a
manner consistent with Section 424(a) of the Code so as not to constitute a
"modification" of such Company Stock Options within the meaning of Section 424
of the Code.
Section 2.04 Restricted Stock; ESPP. If any Shares that are outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition ("Company Restricted
Stock") providing that such Shares may be forfeited or repurchased by the
Company upon any termination of the stockholders' employment, directorship or
other relationship with the Company (and/or any affiliate of the Company) under
the terms of any agreement with the Company that does not by its terms provide
that such repurchase option, risk of forfeiture or other condition lapses upon
consummation of the Merger, then the shares of Parent Common Stock issued upon
the conversion of such Shares in the Merger will continue to be unvested and
subject to the same repurchase options, risks of forfeiture or other conditions
following the Effective Time, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends noting
such repurchase options, risks of forfeiture or other conditions. The Company
shall take all actions that may be necessary to ensure that, from and after the
Effective Time, Parent is entitled to exercise any such repurchase option or
other right set forth in any such restricted stock purchase agreement or other
agreement. The Company shall take all action necessary to cause any current
offer period under the Company 2000 Employee Stock Purchase Plan (the "Company
ESPP") to end no later than the earlier of September 30, 2001 or the date
immediately preceding the Effective Time (the "ESPP Termination Date") and any
outstanding options to purchase Company Common Stock under the Company ESPP
shall be exercised as of the ESPP Termination Date pursuant to Section 7(h) of
the Company ESPP. The Company shall take all actions necessary to provide that
the Company ESPP shall terminate as of the ESPP Termination Date as permitted
under Section 10 of the Company ESPP, and that as of the Effective Time there
are no options or other rights to purchase Company Common Stock outstanding
under the Company ESPP or any other plan, program or arrangement intended to
qualify as an "employee stock purchase plan" within the meaning of Code Section
423(b).
Section 2.05 Warrants. At the Effective Time, by virtue of the Merger
and without the need for any further corporate action, each warrant to acquire
Shares ("Company Warrant") outstanding immediately prior to the Effective Time
shall be automatically converted into a warrant to acquire, on the same terms
and conditions as were applicable under such Company Warrant, the number of
shares of Parent Common Stock (rounded to the nearest whole share) determined by
multiplying the number of shares of Company Common Stock subject to such Company
Warrant by the Conversion Ratio, at a price per share of Parent Common Stock
equal to (A) the aggregate exercise price for the shares of Company Common Stock
otherwise purchasable pursuant to such Company Warrant divided by (B) the
aggregate number of shares of Parent Common Stock deemed purchasable pursuant to
such Warrant; provided, however, that such exercise price shall be rounded to
the nearest whole cent. The Company shall use its reasonable best efforts to
cause each Company Warrant to be amended prior to the Effective Time so as to
comply with this Section 2.05.
Section 2.06 Appraisal Rights. Notwithstanding Section 2.01, if for any
reason appraisal rights under Section 262 of the DGCL become available to
holders of Shares in connection with the Merger, Shares outstanding immediately
prior to the Effective Time and
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held by a holder who properly exercises and perfects appraisal rights for such
Shares in accordance with the DGCL shall not be converted into a right to
receive the Merger Consideration, unless such holder fails to perfect or
effectively withdraws or otherwise loses his or her right to appraisal. If after
the Effective Time such holder fails to perfect or effectively withdraws or
loses his or her right to appraisal, such Shares shall be treated as if they had
been converted as of the Effective Time into a right to receive the Merger
Consideration. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of Shares, and Parent shall have the right
to participate in all negotiations and proceedings with respect to such demands.
The Company shall not, except with the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, any such demands. Any
amounts paid to a holder pursuant to a right of appraisal will be paid by the
Company.
ARTICLE 3.
Representations and Warranties
Section 3.01 Representations and Warranties of Parent and Merger Sub.
Except as expressly set forth on the Disclosure Schedule delivered by Parent and
Merger Sub to the Company in connection with the execution of this Agreement
(the "Parent Disclosure Schedule"), Parent and Merger Sub hereby jointly and
severally represent and warrant to the Company as follows:
(a) Organization, Standing and Power. Each of Parent and its
Subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may be,
and authority to carry on its business as now being conducted, except for those
jurisdictions where the failure to be so organized, existing or in good standing
is not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on Parent. Each of Parent and its Subsidiaries is duly qualified
or licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, except for those
jurisdictions in which the failure to be so qualified or licensed or to be in
good standing individually or in the aggregate is not reasonably likely to have
a Material Adverse Effect on Parent. Parent has made available to the Company
prior to the execution of this Agreement complete and correct copies of the
certificate of incorporation and bylaws of Parent and its Subsidiaries, in each
case as amended to date.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of Parent consists of 70,000,000 shares of Parent Common Stock, and
46,000,000 shares of Preferred Stock, of which 26,000,000 shares are designated
Series A Preferred Stock ("Series A Preferred Stock") and 20,000,000 shares are
designated Series B Preferred Stock ("Series B Preferred Stock"). As of August
20, 2001, (i) 14,086,142 shares of Parent Common Stock were issued and
outstanding, (ii) no shares of Parent Common Stock were held by Parent in its
treasury, (iii) 26,000,000 shares of Series A Preferred Stock were issued and
outstanding, (iv) 19,809,783 shares of Series B Preferred Stock were issued and
outstanding, (v) no shares of Series C Preferred Stock were outstanding; (vi)
2,227,500 shares of Parent Common Stock were reserved for issuance pursuant to
warrants to purchase Parent Common Stock (the "Parent Warrants"), and (vii)
5,848,481 shares of Parent Common Stock were reserved for issuance
8
pursuant to options outstanding under Parent's stock option plans (such plans,
collectively, the "Parent Stock Plans"). Prior to the Closing Date, shares of
Series C Preferred Stock with an aggregate purchase price of at least
$30,000,000 will be issued, together with the additional Parent Warrants
described in Section 3.01(b) of the Parent Disclosure Schedule. There are no
rights (other than outstanding stock options or other rights to purchase or
receive Parent Common Stock granted under the Parent Stock Plans (collectively,
the "Parent Stock Options")) to receive shares of Parent Common Stock on a
deferred basis granted under the Parent Stock Plans or otherwise. No notes,
bonds, debentures, or other indebtedness of Parent having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of Parent may vote are issued or outstanding.
All outstanding shares of capital stock of Parent are, and all shares which may
be issued in connection with Parent Warrants, Parent Stock Options, and Series C
Preferred Stock will be, when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. Except as set forth
in this Section 3.01(b) (including pursuant to the conversion or exercise of the
securities referred to above), (x) there are not issued, reserved for issuance,
or outstanding (A) any shares of capital stock or other voting securities of
Parent, (B) any securities of Parent or any of its Subsidiaries convertible into
or exchangeable or exercisable for shares of capital stock or other voting
securities of, or other ownership interests in, Parent or any of its
Subsidiaries, (C) any warrants, calls, options or other rights to acquire from
Parent or any Subsidiary of Parent, and no obligation of Parent or any
Subsidiary of Parent to issue, any capital stock or other voting securities of,
or other ownership interests in any securities convertible into or exchangeable
or exercisable for capital stock or other voting securities of Parent or any of
its Subsidiaries and (y) as of the date hereof, there are not any outstanding
obligations of Parent or any Subsidiary of Parent to repurchase, redeem or
otherwise acquire any such securities or to issue, deliver or sell, or cause to
be issued, delivered or sold, any such securities. Parent is not a party to any
voting agreement with respect to the voting of any such securities.
(c) Authority; Noncontravention. Each of Parent and Merger Sub has the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement, subject to the
Parent Stockholder Approval (as defined herein), if required. The execution and
delivery of this Agreement by each of Parent and Merger Sub and, subject to
Parent Stockholder Approval, if required, the consummation by each of Parent and
Merger Sub of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, as applicable. This Agreement has been duly executed and delivered by each
of Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes a valid and binding obligation of each of
Parent and Merger Sub, enforceable against each of Parent and Merger Sub in
accordance with its terms. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under, or result in the
creation of any pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens") upon any of
the properties or assets of Parent or any of Parent's Subsidiaries under, (i)
the certificate of incorporation or bylaws of Parent or the comparable
organizational documents of any of Parent's Subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit,
9
concession, franchise, license or similar authorization applicable to Parent or
any of its Subsidiaries or their respective properties or assets, or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Parent or any of its Subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights, losses or Liens that
are not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on Parent or Merger Sub. No consent, approval, order or
authorization of, action by, or in respect of, or registration, declaration or
filing with, any federal, state, local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or authority
or any non-governmental self-regulatory agency, commission or authority (each, a
"Governmental Entity") is required by or with respect to Parent or any of
Parent's Subsidiaries in connection with the execution and delivery of this
Agreement by Parent and Merger Sub or the consummation by Parent and Merger Sub
of the transactions contemplated by this Agreement, except for (1) if necessary,
the filing of a premerger notification and report form by Parent under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); (2) the filing with the SEC of (A) the registration statement on Form S-4
to be filed with the SEC by Parent in connection with the issuance of Parent
Common Stock in the Merger (such registration statement, as amended or
supplemented from time to time, the "Form S-4"), (B) a proxy statement in
conformance with Rule 14a-101 relating to the Company Stockholder Meeting (as
defined herein) (such proxy statement, as amended or supplemented from time to
time, the "Company Proxy Statement") and (C) such reports under Section 13(a),
13(d), 15(d) or 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and the
transactions contemplated by this Agreement; (3) the filing of the Certificate
of Merger with the
Delaware Secretary of State and appropriate documents with
the relevant authorities of other states in which Parent is qualified to do
business; (4) such filings with and approvals of the Nasdaq National Market
System, the American Stock Exchange or, in Parent's reasonable discretion after
consultation with the Company, another national stock exchange, to permit the
shares of Parent Common Stock that are to be issued in the Merger to be traded
on the Nasdaq National Market System or any such exchange; and (5) such other
consents, approvals, orders or authorizations the failure of which to be made or
obtained is not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on the Surviving Corporation. All consents, approvals,
orders, authorizations and filings (collectively, the "Consents") that are (i)
referred to in the immediately preceding sentence or (ii) disclosed or required
to be disclosed on Section 3.01(c) of the Parent Disclosure Schedule, are
referred to herein as the "Parent Material Consents".
(d) Information Supplied. None of the information supplied or to be
supplied by Parent and Merger Sub specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading or (ii) the Company Proxy Statement will, at the date it is
first mailed to the Company's stockholders or at the time of the Company
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein, in light of the
circumstances under which they are made, not misleading. The Form S-4 will
comply as to form in all material respects with the requirements of the
Securities Act and the
10
rules and regulations thereunder. The information provided by Parent and Merger
Sub specifically for inclusion in the Company Proxy Statement will comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations thereunder. No representation or warranty is made by
Parent or Merger Sub with respect to statements made or incorporated by
reference in the Form S-4 or the Company Proxy Statement based on information
supplied by any other party specifically for inclusion or incorporation by
reference in the Form S-4 or the Company Proxy Statement.
(e) Subsidiaries. Section 3.01(e) of the Parent Disclosure Schedule
lists each Subsidiary of Parent and its jurisdiction of organization. All
outstanding shares of capital stock of each such Subsidiary have been validly
issued and are fully paid and nonassessable and are owned, directly or
indirectly by Parent, free and clear of all Liens. The authorized capital stock
of Merger Sub consists of 1,000 shares of common stock, par value $.0001 per
share, 100 shares of which are validly issued and outstanding, fully paid and
nonassessable and are owned by Parent free and clear of all Liens. Merger Sub
does not have any issued or outstanding options, warrants, subscriptions, calls,
rights, convertible securities or other agreements or commitments obligating
Merger Sub to issue, transfer or sell any shares of its capital stock. Merger
Sub does not have any notes, bonds, debentures or other indebtedness
outstanding.
(f) Financial Statements. Section 3.01(f) of the Parent Disclosure
Schedule includes the unaudited consolidated balance sheet of Parent and its
Subsidiaries (the "Balance Sheet") as of June 30, 2001 (the "Balance Sheet
Date") and the related statements of operations, cash flows and changes in
stockholders' equity for the six months ended June 30, 2001. Prior to the
execution of this Agreement, Parent has provided complete and correct copies of
(i) the audited consolidated balance sheet of Parent and its Subsidiaries as of
the fiscal years ended December 31, 2000 and December 31, 1999, (ii) the audited
related statements of operations, cash flows and changes in stockholders' equity
for the years then ended, (iii) the related notes to such financial statements
as and for the years ended December 31, 1999 and 2000, and (iv) the reports of
Xxxxxx Xxxxxxxx LLP, Parent's independent public accountants ("Parent's
Accountants"), related to such financial statements (all of the balance sheets
and statements of operations, cash flows and changes in stockholders' equity,
notes and reports referred to in Section 3.01(f) being hereinafter referred to
as the "Financial Statements"). The Financial Statements: (a) are complete and
correct in all material respects and were prepared in accordance with the books
and records of Parent and its Subsidiaries; (b) present fairly in all material
respects the financial condition of Parent and its Subsidiaries and the results
of their operations and cash flows at the dates and for the respective periods
indicated; and (c) have been prepared in accordance with generally accepted
accounting principles ("GAAP"), applied on a consistent basis throughout the
periods covered by such statements, except as set forth in the notes or reports
of Parent's Accountants accompanying such financial statements and except with
respect to the Financial Statements at, and for the six months ended, June 30,
2001, which interim Financial Statements are subject to normal year end
adjustments and do not include notes as required by GAAP.
(g) Absence of Undisclosed or Contingent Liabilities. Except as and to
the extent fully reflected or reserved against in the Balance Sheet, as of the
Balance Sheet Date, neither Parent nor any of its Subsidiaries had any liability
or obligation, secured or unsecured (whether accrued, absolute or contingent,
known or unknown or otherwise), of a type required by
11
GAAP to be reflected in a balance sheet. Since the Balance Sheet Date, neither
Parent nor any of its Subsidiaries has incurred any liability or obligation, of
a type required by GAAP to be reflected in the Balance Sheet had such liability
or obligation existed as of the Balance Sheet Date that, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect.
(h) Absence of Certain Changes or Events. As of the date of this
Agreement, except for liabilities incurred in connection with or expressly
permitted by this Agreement, since the Balance Sheet Date the business of Parent
has been conducted in the ordinary course consistent with past practice and
there has not been (i) any Material Adverse Change in Parent, (ii) except
insofar as may have been required by a change in GAAP, any change in accounting
methods, principles or practices by Parent or any of its Subsidiaries materially
affecting the consolidated financial position or results of operations of Parent
or (iii) any tax election that individually or in the aggregate is reasonably
likely to have a Material Adverse Effect on the tax liability or tax attributes
of Parent or any of its Subsidiaries or any settlement or compromise of any
material income tax liability.
(i) Title to Properties; Absence of Liens; Entire Assets. Parent has
good and valid title to, or valid and subsisting leasehold interests in, all of
its properties and assets, real or personal, reflected on the Balance Sheet
(except for property and assets disposed of in the ordinary course of business
since the Balance Sheet Date), free and clear of any Liens, except for (i) Liens
reflected on the Balance Sheet, (ii) Liens that do not materially interfere with
the present use by Parent or any of its Subsidiaries of the property subject
thereto or affected thereby, and (iii) Liens for taxes, assessments or
governmental charges, or landlords', mechanics', workmen's, materialmen's or
similar liens, in each case that are not delinquent or which are being contested
in good faith.
(j) Litigation. There is no suit, action, proceeding or investigation
pending or, to the Knowledge of Parent, threatened against or affecting Parent
or any of its Subsidiaries that, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on Parent nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Parent or any of its Subsidiaries having, or which is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Parent.
(k) Compliance with Applicable Laws. Parent and its Subsidiaries hold
all permits, licenses, variances, exemptions, orders, registrations and
approvals of all Governmental Entities which are required for the operation of
the business of Parent and its Subsidiaries taken as a whole (the "Parent
Permits"), except where the failure to have any such Parent Permits is not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on Parent. Parent and its Subsidiaries are in compliance with the terms
of the Parent Permits and all applicable statutes, laws, ordinances, rules and
regulations, except where the failure so to comply is not, individually or in
the aggregate, reasonably likely to have a Material Adverse Effect on Parent.
(l) Contracts.
(i) Neither Parent nor any of its Subsidiaries are in violation of
or in default under (nor does there exist any condition which upon the
passage of time or the
12
giving of notice or both would cause such a violation of or default under)
any loan or credit agreement, bond, note, mortgage, indenture, lease or
other contract, agreement, obligation, commitment, arrangement,
understanding, instrument, permit or license to which it is a party or by
which it or any of its properties or assets is bound, except for violations
or defaults that are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on Parent. Neither Parent nor any
of its Subsidiaries are a party to or bound by any non-competition agreement
or any other similar agreement or obligation which, individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect on the
Surviving Corporation.
(ii) Each of Parent and its Subsidiaries (A) has performed in all
respects the obligations required to be performed by it under each of the
contracts to which it is a party and (B) is not (with or without the lapse
of time or the giving of notice, or both) in breach or default thereunder,
except in any case where the failure to do so is not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on Parent. To
the Knowledge of Parent, there is no default by any of the other parties
under any commitment, contract or agreement to which Parent or any of its
Subsidiaries is a party that is reasonably likely to have a Material Adverse
Effect on Parent.
(m) Brokers and Intermediaries. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission, or the reimbursement of expenses,
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Merger Sub.
(n) Tax Matters.
(i) Each of Parent and its Subsidiaries has filed all material tax
returns and reports required to be filed by it and all such returns and
reports are complete and correct in all material respects, or requests for
extensions to file such returns or reports have been timely filed, granted
and have not expired, except to the extent that such failures to file, to be
complete or correct, or to have extensions granted that remain in effect are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on Parent. Parent and each of its Subsidiaries has paid or
caused to be paid (or Parent has paid on its behalf) all taxes shown as due
on such returns.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed in writing against Parent or any of its Subsidiaries that are not
adequately reserved for, except for deficiencies that are not, individually
or in the aggregate, reasonably likely to have a Material Adverse Effect on
Parent.
(iii) Neither Parent nor any of its Subsidiaries has taken or
agreed to take any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code.
13
(iv) Neither Parent nor any of its Subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355 of
the Code (x) in the two years prior to the date of this Agreement or (y) in
a distribution which could otherwise constitute part of a "plan" or "series
of related transactions" (within the meaning of Section 355(e) of the Code)
in conjunction with the Merger.
(o) Employee Benefits. Parent has made available to the Company prior
to the execution of this Agreement complete and correct copies of all of its
"employee benefit plans", as defined in Section 3(3) of ERISA, and any other
material employee benefit arrangements, severance, termination pay, consulting,
change in control, compensation and death benefit agreements, material
compensation agreements, retirement, deferred compensation, bonus, stock option,
stock purchase, hospitalization, medical insurance, retiree post-employment
health insurance, life insurance, programs or contracts covering employees or
former employees of Parent or any of its Subsidiaries and maintained by or
contributed to by Parent or any of its Subsidiaries and all "employee pension
plans", as defined in Section 3(2) of ERISA (the "Pension Plans") that are:
maintained by (A) Parent or any of its Subsidiaries or (B) any Affiliate of
Parent or any of its Subsidiaries that is a member of a controlled group of
organizations (within the meaning of Section 414(b), (c), (m) or (o) of the
Code) of which Parent or any of its Subsidiaries are members (the "Controlled
Group Member"), (collectively, all the plans set forth in Section 3.01(o) of the
Parent Disclosure Schedule are the "Employee Benefit Plans"). The Employee
Benefit Plans do not include any "multiemployer plans" as defined in Section
4001(a)(3) of ERISA ("Multiemployer Plans").
(i) Neither Parent nor any of its Subsidiaries has any obligation
to make any contribution to any Multiemployer Plans.
(ii) The Pension Plans intended to qualify under Section 401 of the
Code and the trusts maintained pursuant thereto do so qualify and are exempt
from federal income taxation under Section 501 of the Code. To Parent's
Knowledge, no fact or set of circumstances has occurred that materially
adversely affects the qualification of the Pension Plans. The Pension Plans
are in compliance in all material respects with the applicable provisions,
if any, of ERISA and the Code, except where such noncompliance has not
materially adversely affected the qualification of the Pension Plans.
(iii) Parent has not sponsored, contributed to, maintained or
established a defined benefit Pension Plan for the benefit of its employees.
(iv) To Parent's Knowledge, there are no pending actions, claims or
lawsuits that have been asserted or instituted against any of the Employee
Benefit Plans, the assets of any of the trusts under such plans or the plan
sponsor or the plan administrator, or against any fiduciary of any of the
Employee Benefit Plans with respect to the operation of such plans (other
than routine benefit claims), that is, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on Parent.
(v) All amendments and actions required to bring the Employee
Benefit Plans into conformity with the applicable provisions of ERISA and
other
14
applicable laws have been made or taken except to the extent that such
amendments or actions are not required by law (or the Internal Revenue
Service in connection with the remedial amendment periods) to be made or
taken until a date after the Closing Date.
(vi) To Parent's Knowledge, the Employee Benefit Plans have been
maintained in all material respects in accordance with the provisions of
applicable state and federal law.
(vii) None of Parent or any of its Subsidiaries or any Controlled
Group Member maintains a retiree life and retiree health insurance plan that
is a "welfare benefit plan" within the meaning of Section 3(1) of ERISA and
that provides for continuing benefits or coverage for any participant or any
beneficiary of any participant, except as may be required under the
Comprehensive Omnibus Budget Reconciliation Act of 1986, as amended
("COBRA") and at the expense of the participant or the participant's
beneficiary.
(p) Intellectual Property. Except as is not reasonably likely to have a
Material Adverse Effect on Parent, each of Parent and its Subsidiaries owns or
possesses, or will own or possess as of the Closing Date, adequate licenses or
other rights to use all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, inventions, drawings,
designs, proprietary know-how or information or other rights (each, a
"Proprietary Right" and collectively, "Proprietary Rights") necessary for the
operation of its business as presently conducted (other than the interests, if
any, of the grantors of the licenses). Except as is not reasonably likely to
have a Material Adverse Effect on Parent, all Proprietary Rights under which any
of Parent or any of its Subsidiaries is a licensee are valid and enforceable
against it and the other parties thereto in accordance with their terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
in general and subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law). Except
for licenses and similar rights granted in the ordinary course of business
consistent with past practice, neither Parent nor any of its Subsidiaries has
granted any material license or other material right to any third party with
respect to the Proprietary Rights. Except as is not reasonably likely to have a
Material Adverse Effect on Parent, the consummation of the transactions
contemplated hereby will not result in the impairment or termination of any
Proprietary Right. To the Knowledge of Parent, there has been no
misappropriation of any material trade secrets or other material confidential
Proprietary Right of any of Parent or any of its Subsidiaries by any person, and
no employee, independent contractor, franchisee, dealer or agent of any of
Parent or any of its Subsidiaries has misappropriated any material trade secrets
of any other person in the course of such performance as an employee,
independent contractor, franchisee, dealer or agent. Except as is not reasonably
likely to have a Material Adverse Effect on Parent, no legal proceedings have
been asserted, are pending, or to the Knowledge of Parent, are threatened
against any of Parent or any of its Subsidiaries (i) based upon or challenging
or seeking to deny or restrict the use by such person of any Proprietary Right,
(ii) alleging that any services provided by, processes used by, or products
manufactured or sold by Parent or any of its Subsidiaries infringe upon or
misappropriate intellectual property rights of any third party, or (iii)
alleging that any licensed Proprietary Right infringes on the
15
intellectual property right of any third person or is being licensed or
sublicensed in conflict with the terms of any license or other agreement.
(q) Environmental Matters.
(i) Parent has obtained or applied for all material permits,
licenses and other such authorizations required to be obtained by it for the
operation of its business under federal, state, local and foreign statutes,
laws, regulations, ordinance, rules, or other requirement of any
Governmental Entity relating to the protection, investigation or restoration
of the environment or human health and safety (the "Environmental Laws").
(ii) Parent and each of its Subsidiaries, is or has been (A) in
compliance with all material terms and conditions of the permits, licenses
and authorizations required by Environmental Laws, and (B) is in compliance
with all other material limitations, restrictions, conditions, standards,
prohibitions, requirements and obligations, contained in the Environmental
Laws presently in effect or contained in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder and issued by a governmental entity.
(iii) There are no civil, criminal or administrative actions,
suits, hearings, proceedings, written notices of violation, claims or
demands pending or, to the Knowledge of Parent, threatened against any of
Parent or its Subsidiaries under the Environmental Laws that are reasonably
likely to have a Material Adverse Effect on Parent.
(iv) There have been no spills, discharges or releases of any
hazardous substance by Parent or any of its Affiliates or, to the Knowledge
of Parent, by third parties, in, on or under the real property currently or
formerly owned, leased, or used by Parent that could result in any
investigation or remedial action by any Governmental Entity pursuant to any
Environmental Law that are reasonably likely to have a Material Adverse
Effect on Parent.
(v) To Parent's Knowledge, no facility or property of Parent to
which Parent transported or arranged for the transportation of any hazardous
substance that is listed or proposed for listing on the National Priorities
List promulgated pursuant to the Comprehensive Environmental Response
Cleanup and Liability Act ("CERCLA"), on CERCLIS (as defined in CERCLA) or
on any similar federal or state list of sites requiring investigation or
remediation.
(r) Insurance. Parent maintains such policies of general, liability,
workers' compensation, life, directors' and officers' liability and other forms
of insurance applicable to the business of Parent as are customary for
businesses of such type. Such policies are valid and enforceable in accordance
with their terms and are in full force and effect. Such policies of insurance
are of the type and in amounts reasonably deemed by management of Parent to be
sufficient for their purpose. No notice of cancellation with respect to any such
policy has been received prior to the date hereof.
16
(s) Books and Records. The books and records of Parent and each of its
Subsidiaries have been and are being maintained in all material respects in
accordance with applicable legal and accounting requirements. The books of
account and other financial records of Parent and each of its Subsidiaries are
each true, correct and complete in all material respects, and accurately reflect
the operations of the business and financial condition of Parent and each of its
Subsidiaries and the net worth and book value of its properties. All other
corporate records of Parent and each of its Subsidiaries, including those
relating to employees of Parent and each of its Subsidiaries, furnished to the
Company pursuant to this Agreement, are each true, correct and complete in all
material respects.
(t) Affiliate Transactions. Neither Parent nor any of its Subsidiaries
has engaged in any transaction that would be required to be disclosed pursuant
to Item 404 (a), (b) or (c) of Regulation S-K under the Exchange Act had Parent
been subject to the reporting requirements of the Exchange Act.
(u) Condition and Sufficiency of Assets. Parent owns or has valid
rights to use all of the assets necessary for the operation of the business of
Parent as conducted as of the date hereof, except where the failure thereof,
individually or in the aggregate, is not reasonably likely to cause a Material
Adverse Effect on Parent.
(v) Real Property. To the Knowledge of Parent, (i) each of Parent and
its Subsidiaries owns or has leases or rights of access to the real property
reasonably necessary to conduct Parent's and such Subsidiaries' businesses as
presently conducted; (ii) Parent's and each of its Subsidiaries' use of the same
are in material compliance with all applicable laws, ordinances and regulations,
including building, zoning, environmental and other laws and ordinances; (iii)
all material leases pursuant to which Parent or any of its Subsidiaries leases
real property are in writing and a copy of each such lease is in the possession
of Parent and (vi) with respect to each parcel of real property leased by Parent
or one or more of its Subsidiaries, no person other than Parent or such
Subsidiary, as the case may be, as lessee, and the lessor has any real property
interest, including any leasehold interest, in such parcel, except where such
interests are not, individually or in the aggregate, reasonably expected to have
a Material Adverse Effect on Parent.
(w) Ownership of the Company Stock. Neither Parent nor any Subsidiary
of Parent owns as of the date hereof or, except as a result of the Merger, will
acquire any stock of the Company.
(x) Voting Requirements. The affirmative vote of the holders of (i) a
majority of the voting power as a single class of Parent Common Stock, the
Series A Preferred Stock, the Series B Preferred Stock, and, upon issuance, the
Series C Preferred Stock, on an as converted basis, and (ii) two-thirds of the
voting power as a single class of the Series A Preferred Stock, the Series B
Preferred Stock, and upon issuance, the Series C Preferred Stock, on an as
converted basis, to adopt this Agreement and approve the transactions
contemplated by this Agreement ("Parent Stockholder Approval") are the only
votes of the holders of any class or series of Parent's capital stock necessary,
if any, to approve and adopt this Agreement and the transactions contemplated
hereby.
17
Section 3.02 Representations and Warranties of the Company. Except as
expressly disclosed in the Company SEC Documents (as defined in Section 3.02(e))
filed and made publicly available prior to the date of this Agreement (as
amended to the date of this Agreement, the "Company Filed SEC Documents") or as
set forth on the Disclosure Schedule delivered by the Company to Parent in
connection with the execution of this Agreement (the "Company Disclosure
Schedule"), the Company represents and warrants to Parent as follows:
(a) Organization, Standing and Corporate Power. Each of the Company and
its Subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may be,
and authority to carry on its business as now being conducted, except for those
jurisdictions where the failure to be so organized, existing or in good standing
is not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Company. Each of the Company and its Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
except for those jurisdictions in which the failure to be so qualified or
licensed or to be in good standing is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on the Company. The Company
has made available to Parent prior to the execution of this Agreement complete
and correct copies of its certificate of incorporation and bylaws, in each case
as amended to date.
(b) Subsidiaries. Section 3.02(b) of the Company Disclosure Schedule
sets forth a list of all of the Subsidiaries of the Company. All of the
outstanding shares of capital stock of, or other equity interests in each
Subsidiary have been validly issued and are fully paid and nonassessable and are
owned, directly or indirectly, by the Company, free and clear of all Liens.
(c) Capital Structure. As of the date hereof, the authorized capital
stock of the Company consists of 1,000,000,000 shares of the Company Common
Stock, and 100,000 shares of preferred stock, par value $.0001 per share
("Company Preferred Stock"). As of August 19, 2001 (i) 62,027,045 shares of
Company Common Stock were issued and outstanding, (ii) 1,846,019 shares of
Company Common Stock were held by Company in its treasury, (iii) no shares of
Company Preferred Stock were issued and outstanding, (iv) 4,499,051 shares of
Company Common Stock were reserved for issuance pursuant to warrants to purchase
Company Common Stock (the "Company Warrants") (v) 6,862,508 shares of Company
Common Stock were reserved for issuance pursuant to options outstanding under
the Company's stock option plans (such plans, collectively, the "Company Stock
Plans"), (vi) 9,759,270 shares of Company Common Stock were reserved for
issuance upon conversion of the 7.5% Convertible Subordinated Notes due 2007
(the "Notes"), and (vii) 11,892,000 shares of Company Common Stock were reserved
as payment for interest on the Notes. There are no rights (other than
outstanding Company Stock Options) to receive shares of the Company Common Stock
on a deferred basis granted under the Company Stock Plans or otherwise. As of
the date of this Agreement, approximately $123,600,000 in principal amount of
the Notes is issued and outstanding and no other bonds, debentures, or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of the Company may vote are issued or outstanding. All
18
outstanding shares of capital stock of the Company are, and all shares which may
be issued in connection with the Company Warrants and Company Stock Options will
be, when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. Except as set forth in this Section
3.02(c) (including pursuant to the conversion or exercise of the securities
referred to above), (x) there are not issued, reserved for issuance or
outstanding (A) any shares of capital stock or other voting securities of the
Company, (B) any securities of the Company or any of its Subsidiaries
convertible into or exchangeable or exercisable for shares of capital stock or
other voting securities of, or other ownership interests in, the Company or any
of its Subsidiaries, (C) any warrants, calls, options or other rights to acquire
from the Company or any Subsidiary of the Company, and no obligation of the
Company or any Subsidiary of the Company to issue, any capital stock or other
voting securities of, or other ownership interests in any securities convertible
into or exchangeable or exercisable for capital stock or other voting securities
of the Company or any of its Subsidiaries and (y) as of the date hereof, there
are not any outstanding obligations of the Company or any Subsidiary of the
Company to repurchase, redeem or otherwise acquire any such securities or to
issue, deliver or sell, or cause to be issued, delivered or sold, any such
securities. The Company is not a party to any voting agreement with respect to
the voting of any such securities.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to the
Company Stockholder Approval, to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement by the Company and,
subject to the Company Stockholder Approval, the consummation by the Company of
the transactions contemplated by this Agreement, have been duly authorized by
all necessary corporate action on the part of the Company. This Agreement has
been duly executed and delivered by the Company, and assuming the due
authorization, execution and delivery by Parent and Merger Sub, constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of the Company's Subsidiaries under, (i) the certificate of incorporation or
bylaws of the Company or the comparable organizational documents of any of the
Company's Subsidiaries, (ii) any loan, credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise,
license or similar authorization applicable to the Company or any of the
Company's Subsidiaries or their respective properties or assets or (iii) subject
to the governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its Subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights, losses or Liens that
are not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Company. No consent, approval, order or authorization of,
action by, or in respect of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to the Company or any of the
Company's Subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated by this Agreement, except for (1) the filing of a
19
premerger notification and report form by the Company under the HSR Act; (2) the
filing with the SEC of (A) the Form S-4, (B) the Company Proxy Statement under
14a-101 and (C) such reports under Section 13(a), 13(d), 15(d) or 16(a) of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement; (3) the filing of the Certificate
of Merger with the
Delaware Secretary of State and appropriate documents with
the relevant authorities of other states in which the Company is qualified to do
business; (4) such other consents, approvals, orders or authorizations the
failure of which to be made or obtained is not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on the Surviving
Corporation. The Consents referred to in the immediately preceding sentence,
together with any Consents disclosed or required to be disclosed in Section
3.02(d) of the Company Disclosure Schedule, are referred to herein as the
"Company Material Consents".
(e) SEC Documents; Undisclosed Liabilities. The Company has timely
filed all required reports, schedules, forms, statements and other documents
(including exhibits and all other information incorporated therein) with the SEC
since and including October 28, 1999 (collectively, "Company SEC Documents"). As
of their respective dates, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Company SEC Documents, and none of the Company SEC Documents
when filed contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent that information contained in any Company
SEC Document has been revised or superseded by a later-filed Company SEC
Document, none of the Company SEC Documents contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in Company SEC Documents comply as to form,
as of their respective dates of filing with the SEC, in all material respects
with applicable accounting rules and regulations of the SEC ("Accounting
Rules"), with respect thereto, are complete and correct in all material respects
in accordance with the books and records of the Company and its Subsidiaries,
have been prepared in accordance with GAAP (except, in the case of unaudited
statements, as permitted by the Accounting Rules), applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto),
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end
adjustments). Except (i) as reflected in such financial statements, in the notes
thereto or elsewhere in the Company Filed SEC Documents or (ii) for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby or thereby, neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature which, individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect on the
Company.
(f) Information Supplied. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in (i) the Form S-4 will, at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue
20
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or (ii) the Company
Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholder Meeting (as hereinafter
defined), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein, in light of the circumstances under
which they are made, not misleading. The Company Proxy Statement will comply as
to form in all material respects with the requirements of the Exchange Act and
the rules and regulations thereunder. The information provided by the Company
specifically for inclusion in the Form S-4 will comply as to form in all
material respects with the requirements of the Securities Act and the rules and
regulations thereunder. No representation or warranty is made by the Company
with respect to statements made or incorporated by reference in the Form S-4 or
the Company Proxy Statement based on information supplied by any other party
specifically for inclusion or incorporation by reference in the Form S-4 or the
Company Proxy Statement.
(g) Absence of Certain Changes or Events. As of the date of this
Agreement, except for liabilities incurred in connection with or expressly
permitted by this Agreement, since June 30, 2001 the business of the Company and
its Subsidiaries has been conducted in the ordinary course consistent with past
practice and there has not been (i) any Material Adverse Change in the Company,
(ii) except insofar as may have been required by a change in GAAP, any change in
accounting methods, principles or practices by the Company or any of its
Subsidiaries materially affecting the consolidated financial position or results
of operations of the Company or (iii) any tax election that individually or in
the aggregate is reasonably likely to have a Material Adverse Effect on the tax
liability or tax attributes of the Company or any of its Subsidiaries or any
settlement or compromise of any material income tax liability.
(h) Litigation. There is no suit, action, proceeding or investigation
pending or, to the Knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries that, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on the Company nor is there
any judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its Subsidiaries having, or
which is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(i) Compliance with Applicable Laws. The Company and its Subsidiaries
hold all permits, licenses, variances, exemptions, orders, registrations and
approvals of all Governmental Entities which are required for the operation of
the business of the Company and its Subsidiaries taken as a whole (the "Company
Permits"), except where the failure to have any such Company Permits is not
individually or in the aggregate reasonably likely to have a Material Adverse
Effect on the Company. The Company and its Subsidiaries are in compliance with
the terms of the Company Permit and all applicable statutes, laws, ordinances,
rules and regulations, except where the failure so to comply is not individually
or in the aggregate reasonably likely to have a Material Adverse Effect on the
Company.
21
(j) Taxes.
(i) Each of the Company and its Subsidiaries has filed all material
tax returns and reports required to be filed by it and all such returns and
reports are complete and correct in all material respects, or requests for
extensions to file such returns or reports have been timely filed, granted
and have not expired, except to the extent that such failures to file, to
be complete or correct or to have extensions granted that remain in effect
are not individually or in the aggregate reasonably likely to have a
Material Adverse Effect on the Company. The Company and each of its
Subsidiaries has paid or caused to be paid (or the Company has paid on its
behalf) all taxes shown as due on such returns.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed in writing against the Company or any of its Subsidiaries that are
not adequately reserved for, except for deficiencies that are not
individually or in the aggregate reasonably likely to have a Material
Adverse Effect on the Company.
(iii) Neither the Company nor any of its Subsidiaries has taken or
agreed to take any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
(iv) Neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying for tax-free treatment
under Section 355 of the Code (x) in the two years prior to the date of
this Agreement or (y) in a distribution which could otherwise constitute
part of a "plan" or "series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.
(k) Brokers. No broker, investment banker, financial advisor or other
person, other than Xxxxxxxx Xxxxx Xxxxxx & Xxxxx ("Xxxxxxxx Xxxxx"), is entitled
to any broker's, finder's, financial advisor's or other similar fee or
commission, or the reimbursement of expenses, in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
(l) Ownership of Parent Stock. Neither the Company nor any Subsidiary
of the Company owns as of the date hereof or will acquire, any capital stock of
Parent or Merger Sub.
(m) Voting Requirements. The affirmative vote of the holders of a
majority of the voting power of all outstanding shares of Company Common Stock
at the meeting of stockholders of the Company (the "Company Stockholder
Meeting") to adopt this Agreement and to approve the transactions contemplated
by this Agreement ("Company Stockholder Approval") is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve and adopt this Agreement and the transactions contemplated hereby.
(n) Opinion of Financial Advisor. The Company has received the opinion
of Xxxxxxxx Xxxxx, dated the date of this Agreement, to the effect that, as of
such date, the Conversion Ratio is fair from a financial point of view to the
stockholders and creditors of the
22
Company and its Subsidiaries, a signed copy of which has been or promptly will
be delivered to Parent.
(o) WARN Compliance. The Company and its Subsidiaries are, and at all
times in the last twelve months have been, in compliance in all material
respects with the Work Adjustment and Retraining Notification Act, 29 U.S.C.
Section 2109 et seq. and the regulations promulgated thereunder in connection
with any applicable events.
ARTICLE 4.
Covenants Relating to Conduct of Business
Section 4.01 Conduct of Business.
(a) Conduct of Business. Except as set forth in Section 4.01(a) of the
Parent Disclosure Schedule, the Company Filed SEC Documents or Section 4.01(a)
of the Company Disclosure Schedule, as applicable, or as otherwise expressly
permitted by this Agreement (including as expressly permitted pursuant to
clauses (i) through (xii) of this Section 4.01(a)) or as consented to in writing
by the other party hereto, such consent not unreasonably to be withheld or
delayed, during the period from the date of this Agreement to the Effective
Time, each of the parties hereto shall, and shall cause its Subsidiaries to,
carry on their respective businesses in the ordinary course consistent with past
practice and, to the extent consistent therewith, use all commercially
reasonable efforts to preserve intact its current business organizations, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them to the end that its goodwill and
ongoing businesses shall be unimpaired at the Effective Time. In addition,
Parent and its Subsidiaries shall not take any actions that, individually or in
the aggregate, delay the filing or require any amendment or supplement, in any
material respect, to the Form S-4 or a recirculation of the Company Proxy
Statement. In addition, the Company and its Subsidiaries shall not incur any
expenses or make any payments that, in the aggregate, exceed the amounts
contemplated by, or take any action that is materially inconsistent with, the
statement of authorized Company cash expenditures attached to Section 4.01 of
the Company Disclosure Schedule (the "Authorized Company Cash Expenditures").
Without limiting the generality of the foregoing, during the period from the
date of this Agreement to the Effective Time, except as set forth in the Company
Filed SEC Documents or Section 4.01(a) of the Company Disclosure Schedule, as
applicable, as otherwise contemplated by this Agreement (including Section
4.02(d)), as required by applicable law or a Governmental Entity or as consented
to in writing by the Parent, which consent shall not unreasonably be withheld,
the Company shall not, and shall not permit any of its Subsidiaries to:
(i) other than dividends and distributions by a direct or indirect
wholly owned Subsidiary of the Company to the Company, and dividends and
distributions by the Company's other Subsidiaries, of which the Company
receives its proportionate share, (x) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its
capital stock in any form, (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
or (z) purchase, redeem or otherwise acquire any shares of capital stock of
the Company or any of its Subsidiaries or any other
23
securities thereof or any rights, warrants or options to acquire any such
shares or other securities (other than the purchase, redemption or other
acquisition of the Company Stock Options, by such entity, as required by and
in accordance with the respective terms of the Company Stock Plans, as
applicable, as in effect on the date hereof);
(ii) issue, deliver, sell, grant, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities (other than (A) the issuance of shares of the Company Common
Stock upon the exercise of the Company Stock Options as of the date of this
Agreement in accordance with their terms on the date of this Agreement, (B)
the issuance of shares of the Company Common Stock upon the exercise of the
Company Warrants outstanding as of the date of this Agreement in accordance
with their terms on the date of this Agreement or (C) the issuance of shares
of the Company Common Stock upon the conversion of the Notes outstanding as
of the date of this Agreement in accordance with their Terms on the date of
this Agreement;
(iii) amend its certificate of incorporation, bylaws or other
comparable organizational documents;
(iv) acquire or agree to acquire, other than for cash, by merging
or consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any person, other than purchases
of supplies in the ordinary course of business consistent with past
practice; provided, however, that this paragraph (iv) shall not prohibit (x)
any merger or consolidation of a direct or indirect wholly owned Subsidiary
of the Company with and into the Company or another direct or indirect
wholly owned Subsidiary of the Company, (y) the sale of a substantial
portion of the stock or assets of a direct or indirect wholly owned
Subsidiary of the Company to the Company, or another direct or indirect
wholly owned Subsidiary of the Company, or (z) the creation of new, wholly
owned Subsidiaries of the Company organized to conduct or continue
activities expressly permitted under this Agreement;
(v) (A) incur any material indebtedness for borrowed money or
guarantee any such material indebtedness of another person, issue or sell
any debt securities or warrants or other rights to acquire any debt
securities of the Company, or any of its Subsidiaries, guarantee any debt
securities of another person, enter into any "keep well" or other agreement
to maintain any financial statement condition of another person or enter
into any arrangement having the economic effect of any of the foregoing,
except for short-term borrowings incurred in the ordinary course of business
(or to refund existing or maturing indebtedness) consistent with past
practice and intercompany indebtedness between the Company and any of its
wholly owned Subsidiaries, or between such wholly owned Subsidiaries, or (B)
make any material loans, advances or capital contributions to, or
investments in, any other person;
(vi) pay, discharge, settle or satisfy, other than for cash, any
claims, liabilities, obligations or litigation (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction, in the
24
ordinary course of business consistent with past practice or in accordance
with its terms, of any liability recognized or disclosed in the most recent
consolidated financial statements (or the notes thereto) included in the
Company Filed SEC Documents or the Authorized Company Cash Expenditures, or
incurred since the date of such financial statements for an amount not to
exceed the amount of the specific reserve in respect of such claim,
liability, obligation or litigation included in such financial statements in
the aggregate for all such claims, liabilities, obligations or litigation,
or waive the benefits of, or agree to modify in any manner, any standstill
or similar agreement to the Company, or any of its Subsidiaries is a party;
(vii) except as required by law or contemplated hereby enter into,
adopt or amend in any material respect or terminate any benefit plan,
collective bargaining agreement, employment agreement, deferred compensation
agreement, consulting agreement, severance agreement, termination agreement
or any other agreement, plan or policy involving the Company or its
Subsidiaries, and one or more of its directors, officers or employees, or
materially change any actuarial or other assumption used to calculate
funding obligations with respect to any pension plan, or change the manner
in which contributions to any pension plan are made or the basis on which
such contributions are determined;
(viii) enter into or terminate any contract or commitment, or
violate, amend or otherwise modify or waive any of the terms of any of its
contracts;
(ix) materially reduce the amount of any material insurance
coverage provided by existing insurance policies;
(x) amend or modify in any way its accounting methods, principles,
policies, procedures or practices, except as may be required by GAAP,
Regulation S-X promulgated by the SEC or applicable statutory accounting
principles;
(xi) authorize, commit or agree to take, any of the foregoing
actions; or
(xii) make any tax election that, individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect on the tax liability
or tax attributes of a party to this Agreement or any of its Subsidiaries or
settle or compromise any material income tax liability;
(b) Other Actions. Except as required by applicable law or as expressly
permitted by this Agreement, no party to this Agreement shall, nor shall it
permit any of its respective Subsidiaries to, voluntarily take any action that
would, or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement that
are qualified as to materiality becoming untrue at the Effective Time, (ii) any
of such representations and warranties that are not so qualified becoming untrue
in any material respect at the Effective Time, or (iii) any of the conditions to
the Merger set forth in Article 6 not being satisfied.
(c) Advice of Changes. Each party to this Agreement shall promptly
advise the other party orally and in writing to the extent it has Knowledge of
(i) any representation or
25
warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) any event or proposed action that is
reasonably likely to cause the failure of it to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement and (iii) any change or event having, or
which is reasonably likely to have, a Material Adverse Effect on such party or
on the truth of their respective representations and warranties or the ability
of the conditions set forth in Article 6 to be satisfied; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement.
Section 4.02 No Solicitation.
(a) The Company shall not, and shall not permit any of its Subsidiaries
to, nor shall it authorize or permit any of its directors, officers or employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate or encourage (including
by way of furnishing information), or take any other action designed to
facilitate, any inquiries or the making of any proposal that constitutes a
Takeover Proposal (as defined below) or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal; provided, however, that if, at any
time prior to the date of the Company Stockholder Meeting (the "Applicable
Period"), the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to the Company's stockholders or the Company's
securities holders under applicable law, the Company may, in response to a
Superior Proposal (as defined below) which was not solicited by it or which did
not otherwise result from a breach of this Section 4.02(a), and subject to
providing prior written notice of its decision to take such action to Parent and
compliance with Section 4.02(c), (x) furnish information with respect to the
Company and its Subsidiaries to any person making such Superior Proposal
pursuant to a customary confidentiality agreement (as determined by the Company
after consultation with its outside counsel) and (y) participate in discussions
or negotiations regarding such Superior Proposal. For purposes of this
Agreement, "Takeover Proposal" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of a business
that constitutes 15% or more of the net revenues, net income or the assets of
the Company and its Subsidiaries, taken as a whole, or 15% or more of any class
of equity securities of the Company or any of its Subsidiaries, any tender offer
or exchange offer that if consummated would result in any person beneficially
owning 15% or more of any class of equity securities of the Company or any of
its Subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its Subsidiaries, other than the transactions contemplated by
this Agreement.
(b) Except as expressly permitted by Section 4.02(c) or Section
4.02(f), neither the Board of Directors of the Company nor any committee thereof
shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Parent, the approval or recommendation by such Board of
Directors or such committee of the Merger or this Agreement, (ii) approve,
recommend, or (in accordance with Rule 14e-2(a)(2) under the Exchange Act)
remain neutral to, or propose publicly to approve, recommend, or remain so
26
neutral to, any Takeover Proposal, or (iii) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (each, an "Acquisition Agreement") related to any Takeover Proposal.
Neither the Board of Directors of Parent nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to the Company, the approval or recommendation by such Board of
Directors or such committee of the Merger or this Agreement, or (ii) announce,
commence or otherwise consummate any action referred to in Section 4.02(d) prior
to the receipt of the prior written consent of the Company as set forth in
Section 4.02(d).
(c) Notwithstanding the foregoing, during the Applicable Period, in
response to a Superior Proposal which was not solicited by the Company and which
did not otherwise result from a breach of Section 4.02(a), the Board of
Directors of the Company may (subject to this Section 4.02(c)) terminate this
Agreement (and concurrently with or after such termination, if it so chooses,
cause the Company to enter into any Acquisition Agreement with respect to any
Superior Proposal), but only at a time that is during the Applicable Period and
is after the second Business Day following Parent's receipt of written notice (a
"Notice of Superior Proposal") advising Parent that the Board of Directors of
the Company is prepared to accept a Superior Proposal, specifying the material
terms and conditions of such Superior Proposal and identifying the person making
such Superior Proposal. For purposes of this Agreement, a "Superior Proposal"
means any proposal made by a third party to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer, merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction, for consideration consisting of cash and/or securities, more than
50% of the combined voting power of the shares of common stock of the Company
then outstanding or all or substantially all the assets of the Company and
otherwise on terms which the Board of Directors of the Company determines in its
good faith judgment (after consultation with its independent financial advisors
and legal counsel) would, if consummated taking into account all the terms and
conditions of such proposal, be more favorable to the Company's stockholders
than the transactions contemplated by this Agreement and for which financing, to
the extent required, is then committed or which, in the good faith judgment of
the Board of Directors of the Company, is reasonably capable of being obtained
by such third party.
(d) Parent shall not, nor shall it permit any of its Subsidiaries to,
directly or indirectly through another person, consummate any acquisition of
capital stock or assets of another person, business combination,
recapitalization, merger, consolidation, liquidation, dissolution, similar
transaction, or any other action which would delay the filing of or require an
amendment or supplement in any material respect to the Form S-4 or a
recirculation of the Company Proxy Statement without the prior written consent
of the Company as evidenced by a majority vote of the Board of Directors of the
Company.
(e) In addition to the obligations of the Company and Parent set forth
in paragraphs (a), (b), (c) and (d) of this Section 4.02, the Company shall
immediately advise Parent orally and in writing of any request for information
or of any Takeover Proposal, the material terms and conditions of such request
or Takeover Proposal and the identity of the person making such request or
Takeover Proposal. The Company will keep Parent informed of the status and
material details (including amendments or proposed amendments) of any such
request or Takeover Proposal.
27
(f) Nothing contained in this Section 4.02 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders (including with respect to the delivery by the Company to
Parent of a Notice of Superior Proposal) if, in the good faith judgment of the
Board of Directors of the Company, after consultation with outside counsel,
failure so to disclose would be inconsistent with its obligations under
applicable law.
ARTICLE 5.
Additional Agreements
Section 5.01 Preparation of the Form S-4 and the Company Proxy
Statement; Company Stockholders' Meeting.
(a) As soon as practicable following the date of this Agreement, Parent
and the Company shall jointly prepare and file with the SEC a document or
documents that will constitute the Company Proxy Statement and the Form S-4.
Each of Parent and the Company shall use all reasonable efforts to have the Form
S-4 declared effective under the Securities Act as promptly as practicable after
such filing, including, in the case of the Company, providing all information
with respect to the Company to be included in the Form S-4. The Company will use
all reasonable efforts to cause the Form S-4 and Company Proxy Statement to be
mailed to Company's stockholders, and the Company and Parent will use all
reasonable efforts to obtain Company Stockholder Approval and Parent Stockholder
Approval, respectively, in each case as promptly as practicable after the Form
S-4 is declared effective under the Securities Act. Parent shall also take any
action (other than qualifying to do business in any jurisdiction in which it is
not now so qualified or to file a general consent to service of process)
required to be taken under any applicable state securities laws in connection
with the issuance of Parent Common Stock in the Merger and the Company shall
furnish all information concerning the Company and the holders of capital stock
of the Company as may be reasonably requested in connection with any such
action. No filing of, or amendment or supplement to, or correspondence to the
SEC or its staff with respect to, the Form S-4 or the Company Proxy Statement
will be made by either Parent or the Company, without providing the other a
reasonable opportunity to review and comment thereon. Parent will advise the
Company, promptly after it receives notice thereof, of the time when the Form
S-4 has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of the Parent
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction. Each of Parent and the Company shall promptly inform the other of
any request by the SEC for amendments or supplements to the Form S-4 or the
Company Proxy Statement or comments thereon and responses thereto or requests by
the SEC for additional information and will, as promptly as practicable, provide
to the Company or Parent, as the case may be, copies of all correspondence and
filings with the SEC with respect to the Form S-4 or the Company Proxy
Statement, as applicable. If at any time prior to the Effective Time any
information relating to Parent or the Company, or any of their respective
Affiliates, officers or directors, should be discovered by Parent or the Company
which should be set forth in an amendment or supplement to any of the Form S-4
or the Company Proxy Statement, so that any of such documents would not include
any misstatement of a material fact or omit to state any material fact necessary
to
28
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by law, disseminated to the stockholders of the Company. No
amendment or supplement to the information supplied by the Company for inclusion
in the Form S-4 shall be made without the approval of the Company, which
approval shall not be unreasonably withheld or delayed. For purposes of Sections
5.01, 3.01(d) and 3.02(f), information concerning or related to the Company, its
Subsidiaries or their respective Affiliates will be deemed to have been provided
by the Company and information concerning or related to Parent, its Subsidiaries
or their respective Affiliates will be deemed to have been provided by Parent.
(b) The Company shall, as soon as practicable following the date of
this Agreement, establish a record date (which shall be as soon as practicable
following the date of this Agreement) for, duly call, give notice of, convene
and hold the Company Stockholder Meeting for the purpose of obtaining the
Company Stockholder Approval and shall, through its Board of Directors,
recommend to its stockholders the approval and adoption of this Agreement, the
Merger and the other transactions contemplated hereby. Without limiting the
generality of the foregoing but subject to its rights to terminate this
Agreement pursuant to Sections 4.02(b) and 7.01, the Company agrees that its
obligations pursuant to the first sentence of this Section 5.01(b) shall not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of any Takeover Proposal.
(c) Parent shall, as soon as practicable following the date of this
Agreement, take all action necessary in accordance with the DGCL and its
Certificate of Incorporation and Bylaws and take all other action necessary to
obtain any necessary Parent Stockholder Approval and shall, through its Board of
Directors, recommend to its stockholders the approval and adoption of this
Agreement and the transactions contemplated hereby. Without limiting the
generality of the foregoing but subject to its rights to terminate this
Agreement pursuant to Section 7.01, Parent agrees that its obligations pursuant
to the first sentence of this Section 5.01(c) shall not be affected by the
commencement, public proposal, public disclosure or communication to the Company
of any Takeover Proposal.
Section 5.02 Letters of the Company's Accountants. If requested, the
Company shall use reasonable efforts to cause to be delivered to Parent two
letters from the Company's independent accountants, one dated a date within two
Business Days before the date on which the Form S-4 shall become effective and
one dated a date within two Business Days before the Closing Date, each
addressed to Parent, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements similar to the
Form S-4.
Section 5.03 Letters of Parent's Accountants. If requested, Parent
shall use reasonable efforts to cause to be delivered to the Company two letters
from Parent's independent accountants, one dated a date within two Business Days
before the date on which the Form S-4 shall become effective and one dated a
date within two Business Days before the Closing Date, each addressed to the
Company, in form and substance reasonably satisfactory to
29
the Company and customary in scope and substance for comfort letters delivered
by independent public accountants in connection with registration statements
similar to the Form S-4.
Section 5.04 Access to Information; Confidentiality. Subject to the
existing confidentiality agreement between the Company and Parent (the
"Confidentiality Agreement"), upon reasonable notice, each of the Company and
Parent shall, and shall cause each of its respective Subsidiaries to, afford to
the other party and to the officers, employees, accountants, counsel, financial
advisors and other representatives of such other party, reasonable access during
normal business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records and,
during such period, each of Parent and the Company shall, and shall cause each
of its respective Subsidiaries to, furnish promptly to the other party (a) a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of federal or
state securities laws and (b) all other information concerning its business,
operations, properties and personnel as such other party may reasonably request.
Neither the Company nor Parent shall be required to provide access to or
disclose information where such access or disclosure would contravene any
applicable law, rule, regulation, order or decree or would, with respect to any
pending matter, result in a waiver of the attorney-client privilege or the
protection afforded attorney work-product. The Company and Parent shall use
reasonable best efforts to obtain from third parties any consents or waivers of
confidentiality restrictions with respect to any such information being provided
by it. Each of Parent and the Company will hold, and will cause its respective
officers, employees, accountants, counsel, financial advisors and other
representatives and Affiliates to hold, any nonpublic information in accordance
with the terms of the Confidentiality Agreement.
Section 5.05 Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including using reasonable best
efforts to accomplish the following: (i) the taking of all reasonable acts
necessary to cause the conditions to Closing to be satisfied as promptly as
practicable, (ii) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iv) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the Merger or the other transactions contemplated hereby or
thereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed, and (v)
the execution and delivery of any additional instruments necessary to consummate
the Merger and the other transactions contemplated by, and to fully carry out
the purposes of, this Agreement. In connection with and without limiting the
foregoing, each party hereto and its Board of Directors shall (1) take all
action reasonably necessary to ensure that no state takeover statute or similar
statute or regulation is or becomes applicable to this Agreement, the Merger or
any of the other transactions contemplated by this
30
Agreement and (2) if any state takeover statute or similar statute becomes
applicable to this Agreement, the Merger or any other transactions contemplated
by this Agreement, take all action reasonably necessary to ensure that the
Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
this Agreement, the Merger and the other transactions contemplated by this
Agreement. Nothing in this Agreement shall be deemed to require a party hereto
to agree to, or proffer to, divest or hold separate any assets or any portion of
any business of such entity, any other party hereto, such party or any of their
respective Subsidiaries if the Board of Directors of a party hereto determines
that so doing would materially impair the benefit intended to be obtained by
such party in the Merger. Without limiting the generality of the foregoing, each
party hereto shall give the other party hereto the opportunity to participate in
the defense of any litigation against it and/or its directors relating to the
transactions contemplated by this Agreement. This Section 5.05 shall be deemed
not to have been breached by the Company as a result of any action taken by the
Company with respect to a Superior Proposal that is expressly permitted under
Section 4.02.
Section 5.06 Employee Benefits.
(a) Parent shall cause the Surviving Corporation to take all actions
and pay any amounts reasonably necessary to provide for the continuation of
health care benefits (the "Post-Merger Benefits") to those employees or former
employees of the Company set forth on Section 5.06 of the Company Disclosure
Schedule (the "Company Employees"). With respect to each terminated Company
Employee, the health care benefits to be provided to such employee shall
continue from such employee's termination date for the number of weeks equal to
the number of weeks of severance such employee receives or is entitled to
receive, as set forth in Section 5.06 of the Company Disclosure Schedule,
regardless of whether the Company Employee's severance is paid in lump sum. With
respect to each Company Employee, the Post-Merger Benefits shall be
substantially similar to the benefits that such Company Employee received or was
receiving on the date of this Merger Agreement, and the cost of such Post-Merger
Benefits and the manner of billing of such costs shall be substantially similar
to the cost of health care benefits and manner of billing of such costs to such
Company Employee as of the date of this Merger Agreement.
(b) Prior to the Closing Date, the Company shall take the actions set
forth in Section 4.01(a) of the Company Disclosure Schedule with respect to the
Company's 401(k) Plan.
Section 5.07 Indemnification, Exculpation and Insurance.
(a) The Company and Parent agree that all rights to indemnification and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time (and rights for advancement of expenses) now existing in favor of
the current or former directors or officers of the Company and its Subsidiaries
as provided in their respective certificates of incorporation or bylaws (or
comparable organizational documents) and any indemnification or other agreements
of the Company or its Subsidiaries as in effect on the date of this Agreement
shall be assumed by the Surviving Corporation in the Merger, without further
action, as of the Effective Time and shall survive the Merger and shall continue
in full force and effect in accordance with their terms.
31
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, it shall cause
proper provision to be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section 5.07.
(c) For six years after the Effective Time, the Surviving Corporation
shall maintain in effect (i) the Company's and its Subsidiaries' current
directors' and officers' liability insurance covering acts or omissions
occurring prior to the Effective Time covering each person currently covered by
the Company's and its Subsidiaries' directors' and officers' liability insurance
policy and (ii) the Company's and its Subsidiaries' current fiduciary liability
insurance policies covering acts or omissions occurring prior to the Effective
Time for employees who serve or have served as fiduciaries under or with respect
to any Company Benefit Plan, in each case on terms with respect to such coverage
and amounts no less favorable than those of each such policy in effect on the
date hereof; provided that the Surviving Corporation may substitute therefor
policies of the Company with respect to coverage and amount no less favorable to
such directors, officers or fiduciaries; provided however, that in no event
shall the Surviving Corporation be required to pay aggregate premiums for
insurance under this Section 5.07(c) in excess of 150% of the amount of the
aggregate premiums paid by a party to this Agreement in 2001 on an annualized
basis for such purpose, provided that the Surviving Corporation shall
nevertheless be obligated to provide such coverage as may be obtained for such
150% amount.
(d) Notwithstanding anything in this Agreement to the contrary, the
provisions of this Section 5.07 are intended to be for the benefit of, and will
be enforceable by, each indemnified party, his or her heirs, and his or her
representatives and (ii) are in addition to, and not in substitution for, any
other rights to indemnification or contribution that any such person may have by
contract or otherwise.
Section 5.08 Fees and Expenses. Except as provided in this Section 5.08
and in Section 7.02, all fees and expenses incurred in connection with the
Merger, this Agreement, and the transactions contemplated hereby and thereby
shall be paid by the party incurring such fees or expenses, whether or not the
Merger is consummated, except that each of the Company and Parent shall bear and
pay one-half of (a) the costs and expenses incurred in connection with the
filing, printing and mailing of the Form S-4 or the Company Proxy Statement, as
applicable, (including SEC filing fees) and (b) the filing fees, if any, for the
premerger notification and report forms under the HSR Act.
Section 5.09 Public Announcements. The Company and Parent will consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as either party may
determine is required by applicable law or by obligations pursuant to any
listing agreement with any national securities exchange or national trading
system. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement shall be in the form
heretofore agreed to by the parties.
32
Section 5.10 Affiliates. As soon as practicable after the date hereof,
the Company shall deliver to Parent a letter identifying all persons who are, at
the time this Agreement is submitted for adoption by the stockholders of the
Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use reasonable efforts to cause each such
person to deliver to Parent as of the Closing Date, a written agreement
substantially in the form attached as Exhibit D hereto.
Section 5.11 Listing or Nasdaq Quotation. The Company and Parent shall
use their reasonable best efforts to cause Parent Common Stock issuable in the
Merger to be approved for quotation on Nasdaq National Market System or listing
on the American Stock Exchange or, in Parent's reasonable discretion after
consultation with the Company, another national securities exchange, subject to
official notice of issuance, as promptly as practicable after the date hereof,
and in any event prior to the Effective Time.
Section 5.12 Tax Treatment. Each of the Company and Parent shall use
reasonable efforts to cause the Merger to qualify as a reorganization under the
provisions of Section 368(a) of the Code.
Section 5.13 Further Assurances. Each of Parent and the Company shall
deliver, or shall cause to be delivered, if required by the terms of any note,
indenture, credit agreement, warrant or other financing instrument or preferred
stock, as promptly as possible after the date hereof, but in no event less than
15 days prior to the Effective Time, any notice of the Merger or the
transactions contemplated by this Agreement.
Section 5.14 Transfer Taxes. All stock transfer, real estate transfer,
documentary, stamp, recording and other similar taxes (including interest,
penalties and additions to any such taxes) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the
Surviving Corporation.
Section 5.15 Series C Preferred Stock. Parent shall use reasonable best
efforts to cause the consummation of the issuance, as promptly as practicable
and in any event at least five Business Days prior to the Effective Time, of at
least $65,000,000 of shares of the Series C Preferred Stock on substantially the
terms set forth in the Parent Restated Certificate and Section 3.01(b) of the
Parent Disclosure Schedule.
Section 5.16 Certain Insurance. The Company shall use its reasonable
best efforts to maintain in effect at all times from the date of this Agreement
until the Closing Date, directors' and officers' liability insurance comparable
as to amount and other material terms of coverage with such insurance as in
effect on the date of this Agreement.
33
ARTICLE 6.
Conditions Precedent
Section 6.01 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) HSR Act. The waiting period (and any extension thereof), if any,
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(b) Governmental Approvals. All consents, approvals or orders of
authorization of, or actions by any required Governmental Entity shall have been
obtained.
(c) No Restraints. No judgment, order, decree, statute, law, ordinance,
rule or regulation, entered, enacted, promulgated, enforced or issued by any
Governmental Entity of competent jurisdiction or other legal restraint or
prohibition (collectively, "Restraints") shall be in effect, and there shall not
be pending any suit, action or proceeding by any Governmental Entity
specifically preventing the consummation of the Merger; provided, however, that
each of the parties shall have used its reasonable efforts to prevent the entry
of any such Restraints and to appeal as promptly as possible any such Restraints
that may be entered.
(d) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
(e) Listing or Nasdaq Quotation. The shares of Parent Common Stock
issuable pursuant to the Merger as contemplated by this Agreement shall have
been approved for quotation on Nasdaq National Market System or listing on the
American Stock Exchange or, in Parent's reasonable discretion after consultation
with the Company, another national securities exchange, subject to official
notice of issuance.
Section 6.02 Conditions to Obligations of the Company. The obligation
of the Company to effect the Merger is further subject to satisfaction or waiver
of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub set forth herein qualified as to materiality shall be
true and correct, and those not so qualified shall be true and correct in all
material respects, as of the date hereof and as of the Closing Date, as if made
at and as of such time (except to the extent expressly made as of an earlier
date, in which case as of such date).
(b) Performance of Obligations of Parent. Parent and Merger Sub shall
have performed in all material respects all covenants and obligations required
to be performed by them under this Agreement at or prior to the Closing Date.
(c) Tax Opinions. The Company shall have received from Xxxxx, Day,
Xxxxxx & Xxxxx, counsel to the Company, an opinion, dated as of the Closing
Date, stating that: (i) the Merger will qualify for Federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code and (ii)
Parent, Merger Sub and the Company will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code. The issuance of such opinion
shall be conditioned upon the receipt by such tax counsel of customary
representation
34
letters from each of the Company, Parent, and Merger Sub in form and substance
reasonably satisfactory to such tax counsel.
(d) Company Stockholder Approval. Company Stockholder Approval shall
have been obtained.
(e) Third Party Consents. Parent shall have obtained the Parent
Material Consents.
(f) Issuance of Series C Preferred Stock - Termination Fee. The
issuance of the Series C Preferred Stock shall have been consummated
substantially on the terms set forth in the Parent Restated Stock Certificate
and Section 3.01(b) of the Parent Disclosure Schedule attached hereto and Parent
shall have received at least $30,000,000 in gross proceeds in connection
therewith.
(g) Issuance of Series C Preferred Stock - Generally. The issuance of
the Series C Preferred Stock shall have been consummated substantially on the
terms set forth in the Parent Restated Certificate and Section 3.01(b) of the
Parent Disclosure Schedule and Parent shall have received at least $65,000,000
in gross proceeds in connection therewith.
Section 6.03 Conditions to Obligations of Parent. The obligation of
Parent to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth herein qualified as to materiality shall be true and
correct, and those not so qualified shall be true and correct in all material
respects, as of the date hereof and as of the Closing Date, as if made at and as
of such time (except to the extent expressly made as of an earlier date, in
which case as of such date).
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all covenants and obligations required to be
performed by them under this Agreement at or prior to the Closing Date.
(c) Tax Opinions. Parent and Merger Sub shall have received from Xxxxxx
& Xxxxxxx, counsel to Parent and Merger Sub, an opinion, dated as of the Closing
Date, stating that: (i) the Merger will qualify for Federal income tax purposes
as a "reorganization" within the meaning of Section 368(a) of the Code and (ii)
Parent, Merger Sub and the Company will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code. The issuance of such opinion
shall be conditioned upon the receipt by such tax counsel of customary
representation letters from each of Parent, Merger Sub and the Company in form
and substance reasonably satisfactory to such tax counsel.
(d) Parent Stockholder Approval. Parent Stockholder Approval shall have
been obtained, if required.
(e) Third Party Consents. The Company shall have obtained the Company
Material Consents.
35
(f) Lock-Up. Each of the persons set forth in Section 6.03(f) of the
Company Disclosure Schedule shall have executed and delivered to Parent an
agreement substantially in the form of Exhibit E to this Agreement.
(g) Litigation. Except as contemplated in Section 6.03(g) of the
Company's Disclosure Schedule, no litigation by or on behalf of any
securityholders shall be pending or threatened against the Company, its
Subsidiaries, or their respective directors or officers that is reasonably
likely to have a Material Adverse Effect on the Surviving Corporation, after
taking into account all relevant factors, including the potential availability
or lack thereof any insurance coverage in respect of all known claims asserted
in such litigation or threatened litigation.
Section 6.04 Frustration of Closing Conditions. Neither the Company nor
Parent may rely on the failure of any condition set forth in Section 6.01, 6.02
or 6.03, as the case may be, to be satisfied if such failure was caused by such
party's failure to use its reasonable best efforts to consummate the Merger and
the other transactions contemplated by this Agreement, as required by and
subject to Section 5.05.
ARTICLE 7.
Termination, Amendment and Waiver
Section 7.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Company Stockholder
Approval or, if required, the Parent Stockholder Approval:
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent:
(i) if the Merger shall not have been consummated by December 31,
2001; provided, however, that the right to terminate this Agreement pursuant
to this Section 7.01(b)(i) shall not be available to any party whose failure
to perform any of its obligations under this Agreement results in the
failure of the Merger to be consummated by such time;
(ii) if Company Stockholder Approval shall not have been obtained
at the Company Stockholders Meeting duly convened therefor or at any
adjournment or postponement thereof;
(iii) if Parent Stockholder Approval shall have been required for
approval of the Merger and shall not have been obtained;
(iv) if any Restraint shall be in effect and shall have become
final and nonappealable; provided that the party seeking to terminate this
Agreement pursuant to this Section 7.01(b)(iv) shall have used reasonable
best efforts to prevent such Restraint from becoming final and
nonappealable;
(c) by the Company, if Parent shall have breached or failed to perform
in any material respect any of its representations, warranties, covenants or
other agreements contained
36
in this Agreement, which breach or failure to perform (i) would give rise to the
failure of a condition set forth in clause (a) or (b) of Section 6.02, and (ii)
has not been or is incapable of being cured by Parent within 30 calendar days
after its receipt of written notice from the Company;
(d) by Parent, if the Company shall have breached or failed to perform
in any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or failure to perform
(i) would give rise to the failure of a condition set forth in clause (a) or (b)
of Section 6.03, and (ii) has not been or is incapable of being cured by the
Company within 30 calendar days after its receipt of written notice from Parent;
(e) by Parent, if the Company or any of its Subsidiaries or any of
their respective directors or officers shall participate in discussions or
negotiations in breach of Section 4.02 or shall take any action described in
Section 4.02(b), whether or not in breach of this Agreement; or
(f) by the Company, in accordance with Section 4.02(c); provided that,
in order for the termination of this Agreement pursuant to this paragraph (f) to
be deemed effective, the Company shall have complied with all provisions of
Section 4.02, and with applicable requirements of Section 7.02(c).
Section 7.02 Effect of Termination.
(a) In the event of termination of this Agreement by either Parent or
the Company as provided in Section 7.01, this Agreement shall forthwith become
void and have no effect, without any liability or obligation on the part of the
Company or Parent, other than the provisions of the Confidentiality Agreement,
Section 5.04 (last sentence only), Section 5.08, this Section 7.02, and Article
8, which provisions survive such termination, and except to the extent that such
termination results from the willful and material breach by a party of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
(b) Parent shall pay to the Company $5,000,000 in the event that the
Merger does not close by virtue of any of the following:
(i) the Company terminates this Agreement prior to Closing pursuant
to a breach of covenant as set forth in Section 7.01(c);
(ii) the Merger has not closed due to Parent's failure to obtain
Parent Stockholder Approval and the Company terminates this Agreement prior
to Closing pursuant to Section 7.01(b)(iii);
(iii) the Merger has not closed due to Parent's failure to obtain a
Parent Material Consent and the Company terminates this Agreement prior to
Closing pursuant to Section 7.01(b)(i); and
(iv) the Merger has not closed due to Parent's failure to raise at
least $30,000,000 in a private placement of Series C Preferred Stock and the
Company
37
terminates this Agreement prior to Closing due to failure to satisfy the
condition set forth in Section 6.02(f).
(c) The Company shall pay to Parent $5,000,000 in the event that the
Merger does not close by virtue of any of the following:
(i) Parent terminates this Agreement prior to Closing pursuant to a
breach of covenant as set forth in Section 7.01(d) or pursuant to Section
7.01(e);
(ii) the Merger has not closed due to the Company's failure to
obtain a Company Material Consent and Parent terminates this Agreement prior
to Closing pursuant to Section 7.01(b)(i); and
(iii) the Merger has not closed due to the Company's failure to
obtain the Company Stockholder Approval and Parent terminates this Agreement
prior to Closing pursuant to Section 7.01(b)(ii);
(iv) the Company terminates this Agreement pursuant to Section
7.01(f).
(d) Any payment to be made pursuant to this Section 7.02 shall be by
wire transfer of immediately available funds to an account designated by the
party receiving such payment promptly after the notice of termination or valid
demand has been delivered by such party to the other party.
(e) The parties to this Agreement acknowledge that the agreements
contained in this Section 7.02 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, the other
party would not enter into this Agreement; accordingly, if either party hereto
fails promptly to pay the amount due pursuant to this Section 7.02 (such party,
a "Breaching Party"), and, in order to obtain such payment, the non-Breaching
Party commences a suit which results in a judgment against the Breaching Party
for the fee set forth in this Section 7.02, such Breaching Party shall pay to
the non-Breaching Party its costs and expenses (including attorneys' fees and
expenses) in connection with such suit, together with interest on the amount of
the fee at the prime rate of Citibank, N.A. in effect on the date such payment
was required to be made.
Section 7.03 Amendment. This Agreement may be amended by the parties at
any time prior to the Effective Time; provided, however, that after any Company
Stockholder Approval or Parent Stockholder Approval, there shall not be made any
amendment that by law requires further approval by the stockholders of the
Company or further approval by the stockholders of Parent, as the case may be,
without the further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties.
Section 7.04 Extension; Waiver. At any time prior to the Effective
Time, a party may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or
38
(c) subject to the proviso of Section 7.03, waive compliance by the other party
with any of the agreements or conditions contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights.
Section 7.05 Procedure for Termination, Amendment, Extension or Waiver.
A termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver pursuant to Section
7.04 shall require action by the Board of Directors of the Company, Parent and
Merger Sub, as applicable, or, with respect to any amendment to this Agreement,
the duly authorized committee of its Board of Directors to the extent permitted
by law.
ARTICLE 8.
General Provisions
Section 8.01 Nonsurvival of Representations and Warranties. None of the
representations, warranties, covenants or agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.01 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
Section 8.02 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to the Company, to
Allied Riser Communications Corporation
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
with a copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
0000 X. Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxxx X. XxXxxxxx, Esq.
39
(b) if to Parent or Merger Sub, to
Cogent Communications Group, Inc.
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Xx., Esq.
with a copy to:
Xxxxxx & Xxxxxxx
000 00xx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000-0000
Telecopy No.: 000-000-0000
Attention: Xxxxxxx X. X'Xxxxx, Esq.
Section 8.03 Definitions. An index of defined terms is attached hereto
as Annex I. For purposes of this Agreement:
(a) an "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person, where "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the ownership
of voting securities, by contract, as trustee or executor, or otherwise;
(b) "Business Day" means any day other than Saturday, Sunday or any
other day on which banks in the State of New York generally are closed for
regular banking business;
(c) "Knowledge" of any person that is not an individual means, with
respect to any specific matter, the knowledge of such person's executive
officers and other officers having primary responsibility for such matter, in
each case obtained in the conduct of their duties in the ordinary course without
special inquiry;
(d) "Material Adverse Change" or "Material Adverse Effect" means, when
used in connection with Parent, the Company or the Surviving Corporation, any
change, effect, event, occurrence or state of facts (i) that is materially
adverse to the business, financial condition or results of operations of such
entity and its Subsidiaries, taken as a whole, or (ii) preventing or materially
delaying the consummation of the Merger, other than any change, effect, event,
occurrence or state of facts (x) relating to the economy in general (y) relating
to the industries in which such party operates in general and not specifically
relating to such party or, (z) relating to the Merger or any announcement
thereof;
(e) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
40
(f) a "Subsidiary" of any person means a corporation, limited liability
company, partnership or other person, more than 50% of the voting securities,
other voting ownership or voting partnership interests of which is sufficient to
elect at least a majority of its Board of Directors or other governing body (or,
if there are no such voting interests, 50% or more of the equity interests of
which) is owned directly or indirectly by such first person.
Section 8.04 Interpretation. When a reference is made in this Agreement
to an Article, Section, Annex or Exhibit, such reference shall be to an Article
or Section of, or an Annex or Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement (including Annex I) shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein. The definitions contained in
this Agreement (including Annex I) are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine and
neuter genders of such term. Any agreement, instrument or statute defined or
referred to herein or in any agreement or instrument that is referred to herein
means such agreement, instrument or statute as from time to time amended,
modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes) by succession of comparable
successor statutes and references to all attachments thereto and instruments
incorporated therein. References to a person are also to its permitted
successors and assigns. Terms used herein that are defined under GAAP are used
herein as so defined.
Section 8.05 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 8.06 Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the Exhibits, Schedules and Annexes attached hereto), and
the Confidentiality Agreement (a) constitute the entire agreement, and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter of this Agreement and (b) except for
the provisions of Article 2, are not intended to confer upon any person other
than the parties any rights or remedies.
Section 8.07 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of
Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
Section 8.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party. Any assignment in violation of the
preceding sentence shall be void. Subject to the
41
preceding two sentences, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and assigns.
Section 8.09 Enforcement. The parties agree that irreparable damage
would occur and that the parties would not have any adequate remedy at law in
the event that 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 an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of
Delaware or in
Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the personal jurisdiction
of any Federal court located in the State of Delaware or any Delaware state
court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a Federal court sitting in the State of
Delaware or a Delaware state court.
Section 8.10 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
42
IN WITNESS WHEREOF, the Company, Parent and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
ALLIED RISER COMMUNICATIONS CORPORATION
By: /s/ XXXXXX XXXXXXXX
------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Chief Executive Officer
and President
COGENT COMMUNICATIONS GROUP, INC.
By: /s/ XXXX XXXXXXXXX
------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Chief Executive Officer
XXXXXXXX XXXXXX MERGER SUB, INC.
By: /s/ XXXX XXXXXXXXX
------------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
43
ANNEX I
TO THE MERGER AGREEMENT
INDEX OF DEFINED TERMS
A
Accounting Rules...................................21
Acquisition Agreement..............................28
Affiliate..........................................42
Agreement...........................................1
Applicable Period..................................27
Authorized Company Cash Expenditures...............24
B
Balance Sheet......................................12
Balance Sheet Date.................................12
Breaching Party....................................40
Business Day.......................................42
C
CERCLA.............................................17
Certificate of Merger...............................2
Certificates........................................5
Closing.............................................2
Closing Date........................................2
Code................................................1
Company.............................................1
Company Common Stock................................3
Company Disclosure Schedule........................19
Company Employees..................................32
Company Filed SEC Documents........................19
Company Material Consents..........................21
Company Permits....................................22
Company Preferred Stock............................19
Company Proxy Statement............................11
Company Restricted Stock............................7
Company SEC Documents..............................21
Company Stock Option Plans..........................7
Company Stock Options...............................7
Company Stock Plans................................19
Company Stockholder Approval.......................23
Company Stockholder Meeting........................23
Company Warrant.....................................8
Company Warrants...................................19
Confidentiality Agreement..........................31
Consents...........................................11
Controlled Group Member............................15
D
DGCL................................................2
E
Effective Time......................................2
Employee Benefit Plans.............................15
Environmental Laws.................................17
Exchange Act.......................................11
Exchange Agent......................................4
Exchange Fund.......................................4
F
Financial Statements...............................12
Form S-4...........................................11
G
GAAP...............................................12
Governmental Entity................................11
H
Xxxxxxxx Xxxxx.....................................23
HSR Act............................................11
K
Knowledge..........................................42
L
Liens..............................................10
M
Material Adverse Change............................42
Material Adverse Effect............................42
Merger..............................................1
Merger Consideration................................3
Merger Sub..........................................1
Multiemployer Plans................................15
N
Notes..............................................19
Notice of Superior Proposal........................28
P
Parent..............................................1
Parent Bylaws.......................................3
Parent Common Stock.................................1
Parent Disclosure Schedule..........................9
Parent Material Consents...........................11
Parent Permits.....................................13
Parent Restated Certificate.........................3
Parent Stock Options................................9
Parent Stock Plans..................................9
Parent Stockholder Approval........................18
Parent Warrants.....................................9
Parent's Accountants...............................12
Pension Plans......................................15
person.............................................43
AI-1
ANNEX I
TO THE MERGER AGREEMENT
INDEX OF DEFINED TERMS
(CONTINUED)
Post-Merger Benefits...............................32
Proprietary Right..................................16
Proprietary Rights.................................16
R
Restraints.........................................35
Reverse Stock Split.................................1
S
SEC.................................................3
Securities Act......................................3
Shares..............................................3
Subsidiary.........................................43
Superior Proposal..................................28
Surviving Corporation...............................2
T
Takeover Proposal..................................27
AI-2
EXHIBIT A
FORM OF
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
COGENT COMMUNICATIONS GROUP, INC.
PURSUANT TO SECTIONS 228, 242 AND 245 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
-----------------------------------------------
(ORIGINALLY INCORPORATED UNDER THE SAME NAME ON DECEMBER 12, 2000)
Cogent Communications Group, Inc., (the "Corporation"), a
corporation organized and existing under, and by virtue, of the provisions of
the General Corporation Law of the State of Delaware (the "General Corporation
Law"), DOES HEREBY CERTIFY AS FOLLOWS:
1. That the name of the Cogent Communications Group, Inc.
2. That on August __, 2001 the Board of Directors duly adopted
resolutions proposing to amend and restate the certificate of incorporation of
this Corporation, declaring said amendment and restatement to be advisable and
in the best interests of this Corporation and its stockholders, and authorizing
the appropriate officers of this Corporation to solicit the consent of the
stockholders therefor.
3. That in lieu of a meeting and vote of stockholders, consents in
writing have been signed by holders of outstanding stock having not less than
the minimum number of votes that is necessary to consent to this amendment and
restatement, and, if required, prompt notice of such action shall be given in
accordance with the provisions of Section 228 of the General Corporation Law.
4. This Second Amended and Restated Certificate of Incorporation
restates and integrates and further amends the certificate of incorporation of
the Corporation, as heretofore amended or supplemented.
The text of the Corporation's certificate of incorporation is amended and
restated in its entirety as follows:
ARTICLE 1. NAME.
The name of the Cogent Communications Group, Inc.
ARTICLE 2. REGISTERED OFFICE AND AGENT.
The address of the registered office of the Corporation in the State of
Delaware is 0000 Xxxxxxxxxxx Xxxx, Xxxxx 000, in the City of Wilmington, in the
County of Xxx Xxxxxx, 00000, Xxxxxxxx. The name of its registered agent at such
address is the Company Corporation.
ARTICLE 3. PURPOSE.
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law.
ARTICLE 4. CAPITAL STOCK.
A. AUTHORIZED SHARES. The total number of shares of capital stock of
all classes that the Corporation will have the authority to issue is three
hundred sixty-six million seven hundred seven thousand six hundred fifty-eight
(366,707,658) shares, of which: (i) two hundred eleven million (211,000,000)
shares, of a par value of $.001 per share, shall be of a class designated
"Common Stock"; and (ii) one hundred fifty-five million seven hundred seven
thousand six hundred fifty-eight (155,707,658) shares, of a par value of $.001
per share, of Preferred Stock, twenty-six million (26,000,000) of which shall be
of a series designated as the "Series A Participating Convertible Preferred
Stock" (the "Series A Preferred Stock"), twenty million (20,000,000) of which
shall be of a series designated as the "Series B Participating Convertible
Preferred Stock" (the "Series B Preferred Stock,") and one hundred nine million
seven hundred seven thousand six hundred fifty-eight (109,707,658) of which
shall be of a series designated as the "Series C Participating Convertible
Preferred Stock" (the "Series C Preferred Stock" and together with the Series A
Preferred Stock and the Series B Preferred Stock, the "Preferred Stock").
The designations, preferences, privileges and powers and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions of the Preferred Stock and the Common Stock shall be as follows:
2
B. PREFERRED STOCK.
1. Voting.
(a) Except as otherwise required by the General Corporation Law
or provided in this Certificate, the shares of Preferred Stock shall be voted
together with the shares of the Common Stock without distinction as to class or
series at each annual or special meeting of stockholders of the Corporation, and
may act by written consent in the same manner as the Common Stock, upon the
following basis: each holder of a share of Preferred Stock will be entitled to
one vote for each share of Common Stock such holder of Preferred Stock would
receive upon conversion of such share of Preferred Stock held by such
stockholder into Common Stock. Such determination shall be made with (1) respect
to a meeting of the stockholders of the Corporation on the record date fixed for
meeting, or (2) with respect to a written consent of the stockholders of the
Corporation, on the effective date of such written consent.
(b) Notwithstanding the provisions of Article 4.B.1(a) hereof,
for so long as 40,950,000 shares of Preferred Stock are outstanding, the
affirmative vote or consent of the holders of two-thirds of the issued and
outstanding shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock voting together as a single class, shall be required
to:
(1) Except pursuant to (i) employee stock option and similar
incentive plans approved by the Board or (ii) a conversion or exchange right set
forth in this Certificate of Incorporation, designate, authorize, create, issue,
sell, redeem or repurchase any class or series of equity securities or
equity-backed securities of the Corporation or any Subsidiary, including without
limitation, 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 (collectively,
"Equity Securities");
(2) Subject to the provisions of Article 4.B.4 hereof, declare
or pay any dividends or make any distributions of any kind with respect to any
outstanding Equity Securities of the Corporation or any Subsidiary;
(3) Approve the merger, consolidation, dissolution or
liquidation of the Corporation or any Subsidiary, or any transaction having the
same effect;
(4) Increase or decrease the aggregate number of authorized
shares of Common Stock or Preferred Stock;
(5) Sell all or substantially all of the assets of the
Corporation, whether directly through a sale of the Corporation's interests in
its Subsidiaries or other assets, or indirectly through a sale of the assets of
its Subsidiaries, taken as a whole, in one transaction or any series of
transactions, or approve any transaction or series of transactions having the
same effect;
3
(6) Cause, directly or indirectly, a material change in the
nature of the business or strategic direction of the Corporation and its
Subsidiaries, taken as a whole;
(7) Approve the filing for bankruptcy of or any decision not
to take action to prevent a filing for bankruptcy or not to oppose an
involuntary filing for bankruptcy or other winding up of the Corporation or any
Subsidiary; or
(8) Approve the establishment and maintenance of an Executive
Committee of the Board of Directors or increase or decrease the number of
directors composing the Board of Directors.
(c) Notwithstanding the provisions of Article 4.B.1(a) hereof,
holders of Series A Preferred Stock, voting as a class, will have the authority
through the affirmative vote or consent of the holders of not less than a
majority of the then outstanding shares of Series A Preferred Stock to elect two
(2) of the seven (7) members of the Corporation's Board of Directors.
(d) Notwithstanding the provisions of Article 4.B.1(a) hereof,
holders of Series B Preferred Stock, voting as a class, will have the authority
through the affirmative vote or consent of the holders of not less than a
majority of the then outstanding shares of Series B Preferred Stock to elect one
(1) of the seven (7) members of the Corporation's Board of Directors.
(e) Notwithstanding the provisions of Article 4.B.1(a) hereof,
holders of Series C Preferred Stock, voting as a class, will have the authority
through the affirmative vote or consent of the holders of not less than a
majority of the then outstanding shares of Series C Preferred Stock to elect one
(1) of the seven (7) members of the Corporation's Board of Directors.
(f) Notwithstanding the provisions of Article 4.B.1(a) hereof,
holders of Series A, Series B and Series C Preferred Stock, voting together as a
class, will have the authority through the affirmative vote or consent of the
holders of not less than a majority of the then outstanding shares of Series A,
Series B and Series C Preferred Stock, to nominate one (1) of the three (3)
members to be appointed to the Compensation Committee of the Corporation's Board
of Directors.
2. Preferences on Liquidation, Dissolution etc.
(a) Liquidation Preference. Upon any dissolution, liquidation, or
winding up of the Corporation, whether voluntary or involuntary, after payment
of all amounts owing to holders of any capital stock ranking senior to the
Series C Preferred Stock, the holders of outstanding shares of Series C
Preferred Stock will be entitled to receive, out of the assets of the
Corporation remaining after all of the Corporation's debts and liabilities have
been paid or otherwise provided for, but before any payments have been made to
the holders of Common Stock, Series A and Series B Preferred Stock or any other
class or series of capital stock of the
4
Corporation ranking junior in preference to the Series C Preferred Stock, an
amount equal to the amount actually paid in cash for such share of Series C
Preferred Stock (the "Series C Original Purchase Price") plus interest accruing
on the Series C Original Purchase Price from the issue date of the securities in
respect of which the Series C Preferred Stock were issued through the date of
such payment at a per annum rate of interest equal to the three month London
Interbank Offered Rate, as announced on the first business day of each calendar
quarter in the "Money Rates" column of the Eastern Edition of The Wall Street
Journal, plus one hundred and fifty (150) basis points plus any declared and
unpaid dividends, if any (as to all holders entitled thereto, the "Series C
Aggregate Liquidation Preference"). If upon any such dissolution, liquidation,
or winding up of the affairs of the Corporation, whether voluntary or
involuntary, the assets of the Corporation available to be distributed as
aforesaid among the holders of the Series C Preferred Stock shall be
insufficient to permit the payment in full to them of the Series C Aggregate
Liquidation Preferences, then the entire assets of the Corporation so to be
distributed shall be distributed ratably based upon their respective Series C
Aggregate Liquidation Preferences among such holders of the Series C Preferred
Stock. Upon any dissolution, liquidation, or winding up of the Corporation,
whether voluntary or involuntary, after payment of all amounts owing to holders
of any capital stock ranking senior to the Series A Preferred Stock and the
Series B Preferred Stock, including the Series C Preferred Stock, the holders of
outstanding shares of Series A Preferred Stock and Series B Preferred Stock will
be entitled to receive, out of the assets of the Corporation remaining after all
of the Corporation's debts and liabilities have been paid or otherwise provided
for, but before any payments have been made to the holders of Common Stock or
any other class or series of capital stock of the Corporation ranking junior in
preference to the Series A Preferred Stock and the Series B Preferred Stock, an
amount equal to $1.00 per share (the "Series A Original Purchase Price") in the
case of the Series A Preferred Stock, and an amount equal to $4.55 per share
(the "Series B Original Purchase Price") in the case of the Series B Preferred
Stock, plus interest accruing on the Series A or Series B Original Purchase
Price, as the case may be, from the issue date of the securities in respect of
which the Series A Preferred Stock or the Series B Preferred Stock, as the case
may be, were issued through the date of such payment at a per annum rate of
interest equal to the three month London Interbank Offered Rate, as announced on
the first business day of each calendar quarter in the "Money Rates" column of
the Eastern Edition of The Wall Street Journal, plus one hundred and fifty (150)
basis points (as to all holders entitled thereto, the "Series A Aggregate
Liquidation Preference" in the case of the Series A Preferred Stock and the
"Series B Aggregate Liquidation Preference" in the case of the Series B
Preferred Stock (the Series A and Series B Aggregate Liquidation Preferences,
collectively being referred to as the "Junior Aggregate Liquidation
Preferences")). If upon any such dissolution, liquidation, or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the assets of the
Corporation available to be distributed as aforesaid among the holders of the
Series A Preferred Stock and the Series B Preferred Stock shall be insufficient
to permit the payment in full to them of the Series A and Series B Aggregate
Liquidation Preferences, then the entire assets of the Corporation so to be
distributed shall be distributed ratably based upon their respective Junior
Aggregate Liquidation Preferences among such holders of the Series A Preferred
Stock and the Series B Preferred Stock.
(b) Remaining Liquidating Distributions. After payment has been
made in full to the holders of Preferred Stock of their respective Aggregate
Liquidation Preferences, all
5
remaining assets of the Corporation available for distribution shall be
distributed ratably to the holders of the Preferred Stock and the holders of the
Common Stock, assuming for purposes of such calculation that all outstanding
shares of Preferred Stock are converted into shares of Common Stock at their
then Applicable Conversion Rates (as defined in Article 4.b.3(c) below), until,
with respect to the Series A, Series B and Series C Preferred Stock, such time,
if ever, as the amount distributed pursuant to Article 4.B.2(a) above plus the
amount distributed pursuant to the provisions of this paragraph equals, with
respect to each outstanding share of Series A Preferred Stock, $3.00 (as
adjusted for any stock splits, reverse stock splits, recapitalizations and
similar capital events affecting the number of shares of Series A Preferred
Stock then outstanding); with respect to each outstanding share of Series B
Preferred Stock, $9.10 (as adjusted for any stock splits, reverse stock splits,
recapitalizations and similar capital events affecting the number of shares of
Series B Preferred Stock then outstanding); with respect to each outstanding
share of Series C Preferred Stock, $2.40 (as adjusted for any stock splits,
reverse stock splits, recapitalizations and similar capital events affecting the
number of shares of Series C Preferred Stock then outstanding) (the "Pari Passu
Distributions"). After payment in full of the Junior Aggregate Liquidation
Preferences and the Pari Passu Distributions to the holders of the Series A,
Series B and Series C Preferred Stock, the outstanding shares of Series A,
Series B and Series C Preferred Stock shall be deemed to be redeemed and
cancelled and the remaining assets and funds of the Corporation will be ratably
distributed to all holders of the Common Stock.
(c) Assets other than Cash. If assets other than cash are to be
distributed to any holders of Preferred Stock or Common Stock pursuant to
Article 4.B.2 hereof, the amount received by such holders upon receipt of those
assets shall be deemed to be the fair market value of such assets as determined
in good faith by the Board of Directors of the Corporation in accordance with
sound financial practice. If shares of stock or other securities are distributed
to any holders of Preferred Stock or Common Stock pursuant to Article 4.B.2
hereof, the fair market value shall mean per share or unit of such security, at
any date, the average of the daily market prices for the twenty trading business
days ending on the second trading day immediately preceding the date of
distribution. The market price for each such business day shall be the last
sales price on such day as reported on the consolidated transaction reporting
system for the principal securities exchange on which the shares of stock or
other securities being distributed pursuant to Article 4.B.2 hereof is then
listed or admitted to trading (or, if applicable, the last sale price reported
by the National Association of Securities Dealers Automated Quotation Service
("NASDAQ") National Market System), or, if no sale takes place on such day on
any such exchange or no such sale is quoted on such system, the average of the
closing bid and asked prices on such day as so reported, or, if such securities
are not then listed or admitted to trading on any stock exchange, the market
price for each such business day shall be the average of the reported closing
bid and asked prices on such day in the over-the-counter market, as reported by
NASDAQ. If no market prices are reported, then the market price shall be the
fair market value as determined in good faith by the Board of Directors. If such
securities are subject to an agreement or other restriction limiting their free
marketability, the loss of that marketability shall be considered by the Board
of Directors in making its determination of fair market value.
(d) Deemed Liquidations. A consolidation, merger or
reorganization of the Corporation with or into any other corporation or
corporations in which the stockholders of the
6
Corporation shall own less than a majority (calculated on an as converted basis,
fully diluted) of the voting securities of the surviving corporation or any
transaction or series of related transactions in which in excess of fifty
percent (50%) of the Corporation's voting power is transferred or the sale,
transfer or lease of all or substantially all of the assets of the Corporation
shall be deemed a liquidation, dissolution or winding up within the meaning of
this Article 4.B.2 (each, a "Deemed Liquidation"). Notwithstanding the
foregoing, the holders of two-thirds of the then outstanding Preferred Stock,
voting together as a single class, shall have the right to elect the benefits of
the provisions of Article 4.B.3(i) in lieu of receiving payment in respect of a
Deemed Liquidation of the Corporation pursuant to this Article 4.B.2 for such
Preferred Stock, and such election, if made, shall be binding on all holders of
Preferred Stock then outstanding. The provisions of this Article 4.B.2 shall not
apply to any reorganization, merger or consolidation involving (1) only a change
in the state of incorporation of the Corporation, (2) a merger of the
Corporation with or into a wholly-owned subsidiary of the Corporation which is
incorporated in the United States of America, or (3) a merger of the Corporation
with or into an entity, substantially all of the outstanding equity securities
(or equity-linked securities) of which are owned by then current holders of the
Preferred Stock or their affiliates.
(e) Election to Convert. Notwithstanding anything contained
herein to the contrary, a holder of shares of Preferred Stock may elect to
convert any or all of such shares of Preferred Stock into Common Stock at any
time prior to close of business of the Company on the date prior to the day on
which any liquidation preference provided for in this Article 4.B is to be paid.
Any such conversion shall be at the then Applicable Conversion Rate and on the
other terms and conditions set forth in Article 4.B.3 below.
3. Conversion Rights. Conversion of the Preferred Stock into
shares of Common Stock shall be subject to the following provisions:
(a) Optional Conversion. Subject to and in compliance with the
provisions of this Section Article 4.B.3, any shares of Preferred Stock may, at
the option of the holder, be converted at any time into fully-paid and
nonassessable shares of Common Stock. The number of shares of Common Stock to
which a holder of Series A Preferred Stock shall be entitled upon conversion
shall be the product obtained by multiplying the "Series A Conversion Rate" then
in effect (determined as provided in Article 4.B.3(b)) by the number of shares
of Series A Preferred Stock being converted; the number of shares of Common
Stock to which a holder of Series B Preferred Stock shall be entitled upon
conversion shall be the product obtained by multiplying the "Series B Conversion
Rate" then in effect (determined as provided in Article 4.B.3(b)) by the number
of shares of Series B Preferred Stock being converted; and the number of shares
of Common Stock to which a holder of Series C Preferred Stock shall be entitled
upon conversion shall be the product obtained by multiplying the "Series C
Conversion Rate" then in effect (determined as provided in Article 4.B.3(b)) by
the number of shares of Series C Preferred Stock being converted.
(b) Conversion Rates. The conversion rate in effect at any time
for conversion of the Series A Preferred Stock (the "Series A Conversion Rate")
shall be the quotient obtained by dividing the Series A Original Issue Price by
the "Series A Applicable Conversion Price," calculated as provided in Article
4.B.3(c). The conversion rate in effect at
7
any time for conversion of the Series B Preferred Stock (the "Series B
Conversion Rate") shall be the quotient obtained by dividing the Series B
Original Issue Price by the "Series B Applicable Conversion Price," calculated
as provided in Article 4.B.3(c). The conversion rate in effect at any time for
conversion of the Series C Preferred Stock (the "Series C Conversion Rate")
shall be the quotient obtained by dividing $1.20 by the "Series C Applicable
Conversion Price," calculated as provided in Article 4.B.3(c).
(c) Applicable Conversion Prices. The Series A Applicable
Conversion Price shall initially be the Series A Original Issue Price (the
"Series A Applicable Conversion Price"). The Series B Applicable Conversion
Price shall initially be $3.505663 (the "Series B Applicable Conversion Price").
The Series C Applicable Conversion Price shall initially be the Series C
Original Issue Price (the "Series C Applicable Conversion Price", and together
with the Series A Applicable Conversion Price and Series B Applicable Conversion
Price, the "Applicable Conversion Prices"). The initial Applicable Conversion
Prices shall be adjusted from time to time in accordance with this Article
4.B.3. All references to an Applicable Conversion Price herein shall mean the
Applicable Conversion Price as so adjusted.
(d) Mechanics of Conversion. Each holder of Preferred Stock who
wishes to convert the same into shares of Common Stock pursuant to this Article
4.B.3 shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or any transfer agent for the Preferred Stock,
and shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of
Preferred Stock being converted. Thereupon, the Corporation shall promptly issue
and deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay in cash or, to the extent sufficient funds are not available
therefor, in Common Stock (at the Common Stock's fair market value as determined
by the Board of Directors as of the sate of such conversion) any declared and
unpaid dividends on the shares of Preferred Stock being converted. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Preferred
Stock to be converted, and the person entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder of such shares of Common Stock on such date. Upon conversion of
only a portion of the number of shares of Preferred Stock represented by a
certificate 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 Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(e) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the date that the first
share of the Series C Preferred Stock is issued (the "Series C Original Issue
Date") effect a subdivision of the outstanding Common Stock without a
corresponding subdivision of the Preferred Stock, the Applicable Conversion
Price in effect immediately before that subdivision with respect to the
Preferred Stock shall be proportionately decreased. Conversely, if the
Corporation shall at any time or from time to time after the Series C Original
Issue Date combine the outstanding shares of Common Stock into a smaller number
of shares without a corresponding combination of the Preferred Stock, the
Applicable Conversion Price in effect immediately before the combination with
respect to the
8
Preferred Stock shall be proportionately increased. Any adjustment under this
Article 4.B.3(e) shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(f) Adjustment for Common Stock Dividends and Distributions. If
the Corporation at any time or from time to time after the Series C Original
Issue Date makes, or fixes a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, in each such event the Applicable Conversion
Prices that are then in effect shall be decreased as of the time of such
issuance or, in the event such record date is fixed, as of the close of business
on such record date, to the price determined by, by multiplying each Applicable
Conversion Price then in effect by a fraction (1) the numerator of which is the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date, and
(2) the denominator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution; provided, however, that if
such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, each Applicable
Conversion Price shall be recomputed accordingly as of the close of business on
such record date and thereafter each Applicable Conversion Price shall be
adjusted pursuant to this Article 4.B.3(f) to reflect the actual payment of such
dividend or distribution; and provided further, that if an adjustment has been
made to any Applicable Conversion Price on the fixing of the record date for a
dividend or distribution, no additional adjustment shall be made when such
dividend is paid or distribution is made.
(g) Adjustments for Other Dividends and Distributions. If the
Corporation at any time or from time to time after the Series C Original Issue
Date 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, in each such
event provision shall be made so that the holders of Preferred Stock shall
receive upon conversion thereof, in addition to the number of shares of Common
Stock receivable thereupon, the amount of other securities of the Corporation
which they would have received had their shares of Preferred Stock been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period, subject to all other adjustments called for during such period under
this Article 4.B.3 with respect to the rights of the holders of such shares of
Preferred Stock or with respect to such other securities by their terms;
provided, however, that if such a provision has been made on the fixing of the
record date for a dividend or distribution, no additional provision shall be
made when such dividend is paid or distribution is made.
(h) Adjustment for Reclassification. Exchange and Substitution.
If at any time or from time to time after the Series C Original Issue Date, the
Common Stock issuable upon the conversion of the Preferred Stock is changed into
the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or a reorganization,
merger,
9
consolidation or sale of assets provided for elsewhere in this Article 4.B.3),
in any such event each holder of shares of Preferred Stock shall have the right
thereafter to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change by holders of the maximum number of shares of Common Stock into
which such Preferred Stock could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
(i) Reorganizations. Mergers. Consolidations or Sales of Assets.
If at any time or from time to time after the Series C Original Issue Date,
there is a capital reorganization of the Common Stock (other than a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Article 4.B.3), as a part
of such capital reorganization, provision shall be made so that the holders of
Preferred Stock shall thereafter be entitled to receive upon conversion of such
Preferred Stock the number of shares of stock or other securities or property of
the Corporation to which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Article 4.B.3 with respect to the rights
of the holders of Preferred Stock after the capital reorganization to the end
that the provisions of this Article 4.B.3 (including adjustment of the
Applicable Conversion Price then in effect and the number of shares issuable
upon conversion of the Preferred Stock) shall be applicable after that event and
be as nearly equivalent as practicable. Notwithstanding anything contained
herein to the contrary, the foregoing shall not apply with respect to any Deemed
Liquidation of the Corporation unless holders of two-thirds of the Preferred
Stock then outstanding so elect in accordance with the provisions of Article
4.B.2(d).
(j) Sale of Shares Below Applicable Conversion Price.
(1) If at any time or from time to time after the Series C
Original Issue Date, the Corporation issues or sells, or is deemed by
the express provisions of this subsection (j) to have issued or sold,
Additional Shares of Common Stock (as hereinafter defined), other than
(i) pursuant to a transaction described in Articles 4.B.3(e)-(i) above
for which adjustment was made as provided in the applicable Article or
(ii) the issuance of Common Stock, or options or warrants to purchase
Common Stock, issued to financial institutions or lessors in
connection with commercial credit arrangements, equipment financings
or similar transactions, as approved by the two-thirds (2/3rds) of the
then sitting members of the Board of Directors, in any event for an
Effective Price (as hereinafter defined) less than the then-effective
Series A Applicable Conversion Price in the case of the Series A
Preferred Stock or the Series C Applicable Conversion Price in the
case of the Series C Preferred Stock, then and in each such case the
then existing Series A Applicable Conversion Price and/or Series C
Applicable Conversion Price, as the case may be, shall be reduced, as
of the opening of business on the date of such issue or sale (or such
deemed issuance or sale), to a price determined by multiplying the
then Applicable Conversion Price for such series of Preferred Stock by
a fraction (i) the numerator of which shall be (A) the number of
shares of Common Stock deemed
10
outstanding (as defined below) immediately prior to such issue or
sale, plus (B) the number of shares of Common Stock which the
Aggregate Consideration received (as defined in subsection (j)(3)) by
the Corporation for the total number of Additional Shares of Common
Stock so issued would purchase at such Applicable Conversion Price,
and (ii) the denominator of which shall be the number of shares of
Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale plus the total number of Additional Shares of
Common Stock so issued. For the purposes of the preceding sentence,
the number of shares of Common Stock deemed to be outstanding as of a
given date shall be the sum of (A) the number of shares of Common
Stock actually outstanding and (B) the number of shares of Common
Stock issuable upon conversion of the then outstanding Preferred Stock
and the exercise of all outstanding rights, warrants and options to
purchase Common Stock or Convertible Securities (as defined below).
(2) If at any time or from time to time after the Series C
Original Issue Date, the Corporation issues or sells, or is deemed by
the express provisions of this subsection (j) to have issued or sold,
Additional Shares of Common Stock (as hereinafter defined), other than
(i) pursuant to a transaction described in Articles 4.B.3(e)-(i) above
for which adjustment was made as provided in the applicable Article,
or (ii) the issuance of Common Stock, or options or warrants to
purchase Common Stock, issued to financial institutions or lessors in
connection with commercial credit arrangements, equipment financings
or similar transactions, as approved by the two-thirds (2/3rds) of the
then sitting members of the Board of Directors, in any event for an
Effective Price (as hereinafter defined) (I) less than the
then-effective Series C Applicable Conversion Price, then and in each
such case the then existing Series B Applicable Conversion Price shall
be reduced, as of the opening of business on the date of such issue or
sale (or such deemed issuance or sale), to a price determined by
subtracting from the Series B Applicable Conversion Price an amount
equal to the difference between the Series C Applicable Conversion
Price prior to such issuance or sale (or deemed issuance or sale) and
the Series C Applicable Conversion Price after such issuance or sale
(or deemed issuance or sale) provided, however, that if the issuance
or sale giving rise to the adjustment is a transaction in which the
holders of the Series B Preferred Stock have the opportunity to
purchase the Additional Shares of Common stock being issued or sold,
then with respect to the holders with an opportunity to participate,
the foregoing adjustment shall only be made with respect to shares of
Series B Preferred Stock held by such holders that have purchased
shares in such issuance or sale equal to such holder's then pro rata
ownership of the Corporation (calculated on an as-converted-to-Common
Stock basis)or (II) less than the then-effective Series B Applicable
Conversion Price and equal to or greater than the then-effective
Series C Applicable Conversion Price, then and in each such case the
then existing Series B Applicable Conversion Price shall be reduced,
as of the opening of business on the date of such issue or sale (or
such deemed issuance or sale), to a price determined by multiplying
the then Applicable Conversion Price for such series of Preferred
Stock by a fraction (i) the numerator of which shall be (A) the number
of shares of Common Stock deemed outstanding (as defined below)
immediately prior to such issue or sale, plus (B) the number of shares
of Common Stock which the Aggregate Consideration received (as defined
in subsection (j)(3)) by the Corporation for the total number of
Additional Shares of Common Stock so issued would
11
purchase at such Applicable Conversion Price, and (ii) the denominator
of which shall be the number of shares of Common Stock deemed
outstanding (as defined below) immediately prior to such issue or sale
plus the total number of Additional Shares of Common Stock so issued.
For the purposes of the preceding sentence, the number of shares of
Common Stock deemed to be outstanding as of a given date shall be the
sum of (A) the number of shares of Common Stock actually outstanding
and (B) the number of shares of Common Stock issuable upon conversion
of the then outstanding Preferred Stock and the exercise of all
outstanding rights, warrants and options to purchase Common Stock or
Convertible Securities (as defined below).
(3) For the purpose of making any adjustment required under
this Article 4.B.3(j), the "Aggregate Consideration" received by the
Corporation for any issue or sale of securities shall (A) to the
extent it consists of cash, be computed at the net amount of cash
received by the Corporation after deduction of any underwriting or
similar commissions, compensation or concessions paid or allowed by
the Corporation in connection with such issue or sale but without
deduction of any expenses payable by the Corporation, (B) to the
extent it consists of property other than cash, be computed at the
fair value of that property as determined in good faith by the Board
of Directors, and (C) if Additional Shares of Common Stock,
Convertible Securities or rights or options to purchase either
Additional Shares of Common Stock or Convertible Securities are issued
or sold together with other stock or securities or other assets of the
Corporation for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably
determined in good faith by the Board of Directors to be allocable to
such Additional Shares of Common Stock, Convertible Securities or
rights or options.
(4) For the purpose of the adjustment required under this
Article 4.B.3(j), if the Corporation issues or sells any rights or
options for the purchase of, or stock or other securities convertible
into, Additional Shares of Common Stock (such convertible stock or
securities being herein referred to as "Convertible Securities") and
if the Effective Price of such Additional Shares of Common Stock is
less than the effective Series A Applicable Conversion Price in the
case of the Series A Preferred Stock or the Series B Applicable
Conversion Price in the case of the Series B Preferred Stock or the
Series C Applicable Conversion Price in the case of the Series C
Preferred Stock, the Corporation shall be deemed to have issued at the
time of the issuance of such rights or options or Convertible
Securities the maximum number of Additional Shares of Common Stock
issuable upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares an amount equal to the
total amount of the consideration, if any, received by the Corporation
for the issuance of such rights or options or Convertible Securities,
plus, in the case of such rights or options, the minimum amounts of
consideration, if any, payable to the Corporation upon the exercise of
such rights or options, plus, in the case of Convertible Securities,
the minimum amounts of consideration, if any, payable to the
Corporation upon the conversion thereof (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities);
provided that if in the case of Convertible Securities the minimum
amounts of such consideration cannot be ascertained, but are a
function of antidilution or similar
12
protective clauses, the Corporation shall be deemed to have received
the minimum amounts of consideration without reference to such
clauses; provided further that if the minimum amount of consideration
payable to the Corporation upon the exercise or conversion of rights,
options or Convertible Securities is reduced over time or on the
occurrence or non-occurrence of specified events other than by reason
of antidilution adjustments, the Effective Price shall be recalculated
using the figure to which such minimum amount of consideration is
reduced; provided further that if the minimum amount of consideration
payable to the Corporation upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased,
the Effective Price shall be again recalculated using the increased
minimum amount of consideration payable to the Corporation upon the
exercise or conversion of such rights, options or Convertible
Securities. No readjustment in respect of any rights, options or
Convertible Securities pursuant to this Article 4.b.3(j) shall have
the effect of increasing the Series A Applicable Conversion Price or
the Series B Applicable Conversion Price or the Series C Applicable
Conversion Price to an amount which exceeds the lower of (i) the
Applicable Conversion Price for such series that was in effect on the
original adjustment date or (ii) the Applicable Conversion Price for
such series that would have resulted from any issuance of Additional
Shares of Common Stock between the original adjustment date and the
date of such readjustment for which no adjustment was made. No further
adjustment of Series A Applicable Conversion Price or the Series B
Applicable Conversion Price or the Series C Applicable Conversion
Price, as the case may be, as adjusted upon the issuance of such
rights, options or Convertible Securities, shall be made as a result
of the actual issuance of Additional Shares of Common Stock on the
exercise of any such rights or options or the conversion of any such
Convertible Securities. If any such rights or options or the
conversion privilege represented by any such Convertible Securities
shall expire without having been exercised, each Applicable Conversion
Price as adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Applicable
Conversion Price which would have been in effect had an adjustment
been made on the basis that the only Additional Shares of Common Stock
so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or rights of
conversion of such Convertible Securities, and such Additional Shares
of Common Stock, if any, were issued or sold for the consideration
actually received by the Corporation upon such exercise, plus the
consideration, if any, actually received by the Corporation for the
granting of all such rights or options, whether or not exercised, plus
the consideration received for issuing or selling the Convertible
Securities actually converted, plus the consideration, if any,
actually received by the Corporation (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities)
on the conversion of such Convertible Securities, provided that such
readjustment shall not apply to prior conversions of Preferred Stock.
(5) "Additional Shares of Common Stock" shall mean, with
respect to any shares of Preferred Stock, all shares of Common Stock
issued by the Corporation or deemed to be issued pursuant to this
Article 4.B.3(j), whether or not subsequently reacquired or retired by
the Corporation other than (1) shares of Common Stock issued upon
conversion of any Preferred Stock, (2) up to [25,900,000] shares of
Common Stock
13
issued or issuable pursuant to options, warrants or other rights (as
adjusted for any stock splits, reverse stock splits, recapitalizations
and similar capital events) issued to employees, officers or directors
of, or consultants or advisors to the Corporation or any Subsidiary
pursuant to stock purchase or stock option plans or other arrangements
that are approved by the Board of Directors, (3) up to [11,010,641]
shares of Common Stock issued or issuable pursuant to options,
warrants or other rights (as adjusted for any stock splits, reverse
stock splits, recapitalizations and similar capital events) issued to
investors in or lenders to the Corporation and (4) up to [1,382,477]
shares of Series C Preferred Stock issued or issuable pursuant to
options, warrants or other rights (as adjusted for any stock splits,
reverse stock splits, recapitalizations and similar capital events)
issued to investors in the Corporation.
(6) The "Effective Price" of Additional Shares of
Common Stock shall mean the quotient determined by dividing the total
number of Additional Shares of Common Stock issued or sold, or deemed
to have been issued or sold by the Company under this Article
4.B.3(j), into the Aggregate Consideration received, or deemed to have
been received by the Company for such issue under this Article
4.B.3(j), for such Additional Shares of Common Stock.
(k) Accountants' Certificate of Adjustment. In each case of an
adjustment or readjustment of an Applicable Conversion Price for the number of
shares of Common Stock or other securities issuable upon conversion of a series
of Preferred Stock, the Corporation, at its expense, shall compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
shares of such series of Preferred Stock at the holder's address as shown in the
Corporation's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (1) the consideration received
or deemed to be received by the Corporation for any Additional Shares of Common
Stock issued or sold or deemed to have been issued or sold, (2) the Applicable
Conversion Price for such series in effect prior to and after giving effect to
such adjustment or readjustment, (3) the number of Additional Shares of Common
Stock and (4) the type and amount, if any, of other property which at the time
would be received upon conversion of such shares of such series of Preferred
Stock.
(l) Notices of Record Date. Upon (i) any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation, any merger or consolidation of the Corporation with or into any
other Corporation, or any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, the Corporation shall mail to each holder of
Preferred Stock at least twenty (20) days prior to the record date specified
therein a notice specifying (1) the date on which any such record is to be taken
for the purpose of such dividend or distribution and a description of such
dividend or distribution, (2) the date on which any such reorganization,
reclassification, consolidation, merger, dissolution, liquidation or winding up
is expected to become effective, and the material
14
terms of such transaction, and (3) the date, if any, that is to be fixed as to
when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, dissolution, liquidation or winding up.
(m) Automatic Conversion.
(1) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock, based on the then Applicable
Conversion Price, (A) at any time upon the affirmative election of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding shares of the Preferred Stock, or (B) immediately upon the
closing of a firmly underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock for the account
of the Company in which (i) the aggregate pre-money valuation of the
Company is at least five hundred million dollars ($500,000,000); and
(ii) the gross cash proceeds to the Company (before underwriting
discounts, commissions and fees) are at least fifty million dollars
($50,000,000). Upon such automatic conversion, any declared and unpaid
dividends shall be paid in accordance with the provisions of Article
4.B.4.
(2) Upon the occurrence of an event specified in paragraph
(1) above, the outstanding shares of Series A Preferred Stock and/or
Series B Preferred Stock and/or Series C Preferred Stock, as the case
may be, shall be converted automatically without any further action by
the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its
transfer agent; provided, however, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing such
shares of Series A Preferred Stock and/or Series B Stock and/or Series
C Preferred Stock, as the case may be, are either delivered to the
Corporation or its transfer agent as provided below, or the holder
notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection with such certificates. Upon the
occurrence of such automatic conversion of the Series A Preferred
Stock and/or the Series B Preferred Stock and/or Series C Preferred
Stock, as the case may be, the holders of Series A Preferred Stock
and/or the Series B Preferred Stock and/or Series C Preferred Stock,
as the case may be, shall surrender the certificates representing such
shares at the office of the Corporation or any transfer agent for the
Series A Preferred Stock and/or the Series B Preferred Stock and/or
Series C Preferred Stock, as the case may be. Thereupon, there shall
be issued and delivered to such holder promptly at such office and in
its name as shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common Stock
into which such shares of Preferred Stock surrendered were convertible
on the date on which such automatic conversion occurred, and the
Corporation shall promptly pay in cash or, at the option of the
Corporation, Common Stock (at the Common Stock's fair market value
determined by the Board as of the date of such conversion), or, at the
option of the Corporation, both, all declared and
15
unpaid dividends on such shares of Preferred Stock being converted, to
and including the date of such conversion.
(n) Fractional Shares. No fractional shares of Common Stock shall
be issued upon conversion of Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Corporation shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board)
on the date of conversion.
(o) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
(p) Notices. Any notice required by the provisions of this
Article 4.B.3 shall be in writing and shall be deemed effectively given: (i)
upon personal delivery to the party to be notified, (ii) when sent by confirmed
telex or facsimile if sent during normal business hours of the recipient; if
not, then on the next business day, (iii) five (5) days after having' been sent
by registered or certified mail, return receipt requested, postage prepaid, or
(iv) one (1) day after deposit with a nationally recognized overnight courier,
having specified next day of delivery, with written verification of receipt. All
notices shall be addressed to each holder of record at the address of such
holder appearing on the books of the Corporation.
(q) Payment of Taxes. The Corporation shall pay all taxes imposed
by the State of Delaware (or any other jurisdiction in which the Company is then
located or conducting business) (other than taxes based upon income) and other
governmental charges that may be imposed with respect to the issue or delivery
of shares of Common Stock upon conversion of any shares of Preferred Stock.
(r) Dilution or Impairment. The Corporation shall not amend its
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Preferred Stock
against dilution or other impairment.
16
4. Dividend Rights
(a) Holders of Series C Preferred Stock, prior and in preference
to the holders of any other stock of the Company ("Junior Stock"), shall be
entitled to receive, when and as declared by the Board of Directors, but only
out of funds that are legally available therefore, cash dividends at the rate of
eight percent (8%) of the Series C Original Purchase Price (as defined below)
per annum on each outstanding share of Series C Preferred Stock (as adjusted for
any stock splits, reverse stock splits, recapitalizations and similar capital
events effecting the number of shares of Series C Preferred Stock then
outstanding). Such dividends shall be payable only when, as and if declared by
the Board of Directors and shall be non-cumulative. Any partial payment will be
made among the holders of the Series C Preferred Stock ratably in proportion ot
the payment each such holder is otherwise entitled to receive.
(b) So long as any shares of Series C Preferred Stock are
outstanding, the Company shall not pay or declare any dividend, whether in cash
or property, or make any other distribution on the Junior Stock, or purchase,
redeem or otherwise acquire for value any shares of Junior Stock until all
dividends on the Series C Preferred Stock shall have been paid or declared and
set apart, except for:
(1) acquisitions of Common Stock by the Company pursuant to
agreements which permit the Company to repurchase such shares at
cost upon termination of services to the Company; or
(2) acquisitions of Common Stock in exercise of the
Company's right of first refusal to repurchase such shares.
(c) In the event dividends are paid on any share of Junior Stock,
the Company shall pay an additional dividend on all outstanding shares of Series
C Preferred Stock in an amount equal per share (on an as-if-converted to Common
Stock basis) to the amount paid or set aside for each share of Junior Stock.
(d) The provisions of Article 4.B.4(b) and 4.B.4(c) shall not
apply to a dividend payable in Common Stock.
C. COMMON STOCK.
1. Prior Rights of Preferred Stock. The voting, dividend and
liquidation rights of the holders of the Common Stock are subject to and
qualified by the rights of the holders of the Preferred Stock and any other
series of preferred stock as may be issued in accordance with the provisions
hereof.
2. Voting Rights. The holders of the Common Stock are entitled to
one vote for each share held at all meetings of stockholders. There shall be no
cumulative voting.
3. Dividends. Subject to the provisions of Article 4.B.1(b)
hereof, dividends may be declared and paid on the Common Stock from funds
lawfully available therefor as and
17
when determined by the Board of Directors and subject to any preferential
dividend rights of any then outstanding preferred stock.
4. Increases or Decreases. Subject to the provisions of Article
4B.1, the number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares of Common Stock then outstanding
or reserved for conversion of the outstanding Preferred Stock) by the
affirmative vote of the holders of at least two-thirds (66 2/3 %) of the
outstanding stock of the Corporation (voting together on an as-if converted
basis).
ARTICLE 5. COMPROMISE OR ARRANGEMENT WITH CREDITORS.
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application had been made, be binding on all the
creditors or class of creditor, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE 6. DIRECTORS LIABILITY; INDEMNIFICATION.
A. INDEMNIFICATION. The Corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law, as the same may be
amended and supplemented from time to time, indemnify and advance expenses to,
(i) its directors and officers, and (ii) any person who, at the request of the
Corporation is or was serving as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, from
and against any and all of the expenses, liabilities, or other matters referred
to in or covered by said section as amended or supplemented (or any successor),
for actions taken in such person's capacity as such a director, officer,
employee or agent, and then only to the extent such person is not indemnified
for such actions by such other corporation, partnership, joint venture, trust or
other enterprise; provided, however, that except with respect to proceedings to
enforce rights to indemnification, the Bylaws of the Corporation may provide
that the Corporation shall indemnify any director, officer or such person in
connection with a proceeding (or part thereof) initiated by such director,
officer or such person only if such proceeding (or part thereof) was authorized
by the Board of Directors of the Corporation. The Corporation, by action of its
Board
18
of Directors, may provide indemnification or advance expenses to employees and
agents of the Corporation or other persons only on such terms and condition and
to the extent determined by the Board of Directors in its sole and absolute
discretion. The indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in their official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
B. LIMITATION OF LIABILITY. No director of this Corporation shall be
personally liable to the Corporation or its stockholders for any monetary
damages for breaches of fiduciary duty as a director, notwithstanding any
provision of law imposing such liability; provided that this provision shall not
eliminate or limit the liability of a director, to the extent that such
liability is imposed by applicable law, (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law (iii) under Section 174 or successor provisions of the General
Corporation Law; or (iv) for any transaction from which the director derived an
improper personal benefit. This provision shall not eliminate or limit the
liability of a director for any act or omission if such elimination or
limitation is prohibited by the General Corporation Law. No amendment to or
repeal of this provision shall apply to or have any effect on the liability or
alleged liability of any director for or with respect to any acts or omissions
of such director occurring prior to such amendment or repeal. If the General
Corporation Law is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law, as so amended.
C. PROSPECTIVE AMENDMENT. Any repeal or modification of this Article 6
shall be prospective and shall not affect the rights under this Article 6 in
effect at the time of the alleged occurrence of any act or Omission to act
giving rise to liability or indemnification.
19
Executed in the name of the Corporation by its President, who declares,
affirms, acknowledges and certifies under penalties of perjury, that this is his
free act and deed and the facts stated herein are true.
Dated: August __, 0000
XXXXXX COMMUNICATIONS GROUP, INC.
/s/ Xxxxx Xxxxxxxxx
---------------------------------------------
Xxxxx Xxxxxxxxx
President
20
EXHIBIT B
Form of
BYLAWS
OF
COGENT COMMUNICATIONS GROUP, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I. OFFICES................................................................................................1
Section 1. Registered Office...............................................................1
Section 2. Other Offices...................................................................1
ARTICLE II. MEETINGS OF STOCKHOLDERS..............................................................................1
Section 3. Place of Meetings...............................................................1
Section 4. Annual Meeting of Stockholders..................................................1
Section 5. Quorum; Adjourned Meetings and Notice Thereof...................................1
Section 6. Voting..........................................................................2
Section 7. Proxies.........................................................................2
Section 8. Special Meetings................................................................3
Section 9. Notice of Stockholders, Meetings................................................3
Section 10. Maintenance and Inspection of Stockholder List..................................3
Section 11. Stockholder Action by Written Consent Without a Meeting.........................4
ARTICLE III. DIRECTORS............................................................................................4
Section 12. The Number of Directors.........................................................4
Section 13. Vacancies.......................................................................5
Section 14. Powers..........................................................................6
Section 15. Place of Directors' Meetings....................................................6
Section 16. Regular Meetings................................................................6
Section 17. Special Meetings................................................................6
Section 18. Quorum..........................................................................6
Section 19. Action Without Meeting..........................................................7
Section 20. Telephonic Meetings.............................................................7
Section 21. Committees of Directors.........................................................7
Section 22. Minutes of Committee Meetings...................................................8
Section 23. Compensation of Directors.......................................................8
ARTICLE IV. INDEMNIFICATION.......................................................................................8
Section 24. Power to Indemnify in Actions, Suits or Proceedings Other than
Those by or in the Right of the Corporation.....................................8
Section 25. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation....................................................9
Section 26. Authorization of Indemnification...............................................10
i
Section 27. Good Faith Defined.............................................................11
Section 28. Indemnification by a Court.....................................................11
Section 29. Expenses Payable in Advance....................................................12
Section 30. Non-exclusivity of Indemnification and Advancement of Expenses.................12
Section 31. Insurance......................................................................13
Section 32. Certain Definitions............................................................13
Section 33. Survival of Indemnification and Advancement of Expenses........................14
Section 34. Limitation on Indemnification..................................................14
Section 35. Indemnification of Employees and Agents........................................14
ARTICLE V. OFFICERS..............................................................................................15
Section 36. Officers.......................................................................15
Section 37. Election of Officers...........................................................15
Section 38. Compensation of Officers.......................................................15
Section 39. Term of Office; Removal and Vacancies..........................................15
Section 40. Chairman of the Board..........................................................16
Section 41. Chief Executive Officer........................................................16
Section 42. President......................................................................16
Section 43. Vice Presidents................................................................16
Section 44. Secretary......................................................................16
Section 45. Assistant Secretary............................................................17
Section 46. Treasurer......................................................................17
Section 47. Assistant Treasurer............................................................17
ARTICLE VI. CERTIFICATES OF STOCK................................................................................18
Section 48. Certificates...................................................................18
Section 49. Signatures on Certificates.....................................................18
Section 50. Statement of Stock Rights, Preferences, Privileges.............................18
Section 51. Lost Certificates..............................................................19
Section 52. Transfers of Stock.............................................................19
Section 53. Fixing Record Date.............................................................19
Section 54. Registered Stockholders........................................................20
ARTICLE VII. GENERAL PROVISIONS..................................................................................20
Section 55. Dividends......................................................................20
Section 56. Payment of Dividends; Directors' Duties........................................20
Section 57. Checks.........................................................................21
Section 58. Fiscal Year....................................................................21
Section 59. Corporate Seal.................................................................21
Section 60. Manner of Giving Notice........................................................21
Section 61. Waiver of Notice...............................................................21
Section 62. Annual Statement...............................................................21
ii
ARTICLE VIII. AMENDMENTS.........................................................................................22
Section 63. Amendment......................................................................22
iii
ARTICLE 1.
OFFICES
Section 1. Registered Office. The registered office of Cogent
Communications Group, Inc. (the "Corporation") shall be in the City of Dover,
County of Kent, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices
at such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE 2.
MEETINGS OF STOCKHOLDERS
Section 3. Place of Meetings. Meetings of stockholders shall be
held at any place within or outside the State of Delaware designated by the
Board of Directors. In the absence of any such designation, stockholders'
meetings shall be held at the principal executive office of the Corporation.
Section 4. Annual Meeting of Stockholders. The annual meeting of
stockholders shall be held each year at a date and a time designated by the
Board of Directors. At each annual meeting directors shall be elected and any
other proper business may be transacted.
Section 5. Quorum; Adjourned Meetings and Notice Thereof. A
majority of the stock issued and outstanding and entitled to vote at any meeting
of stockholders, the holders of which are present in person or represented by
proxy, shall constitute a quorum for the transaction of business except as
otherwise provided by law, by the Certificate of Incorporation, or by these
Bylaws. A quorum, once established, shall not be broken by the withdrawal of
enough votes to leave less than a quorum and the votes present may continue to
transact business until adjournment. If, however, such quorum shall not be
present or represented at any meeting
of the stockholders, a majority of the voting stock represented in person or by
proxy may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote thereat.
Section 6. Voting. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes, or the Certificate of Incorporation, or these Bylaws, a different vote
is required in which case such express provision shall govern and control the
decision of such question.
Section 7. Proxies. At each meeting of the stockholders, each
stockholder having the right to vote may vote in person or may authorize another
person or persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period. All
proxies must be filed with the Secretary of the Corporation at the beginning of
each meeting in order to be counted in any vote at the meeting. Each stockholder
shall have one vote for each share of stock having voting power, registered in
his name on the books of the Corporation on the record date set by the Board of
Directors as provided in Article V, Section 6 hereof. All elections shall be had
and all questions decided by a plurality vote.
2
Section 8. Special Meetings. Special meetings of the
stockholders, for any purpose, or purposes, unless otherwise prescribed by
statute or by the Certificate of Incorporation, may be called by the President
and shall be called by the President or the Secretary at the request in writing
of a majority of the Board of Directors, or at the request in writing of
stockholders owning at least 10% of the entire capital stock of the Corporation,
issued and outstanding, and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting. Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice.
Section 9. Notice of Stockholders, Meetings. Whenever
stockholders are required or permitted to take any action at a meeting, a
written notice of the meeting shall be given which notice shall state the place,
date and hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. The written notice of any meeting
shall be given to each stockholder entitled to vote at such meeting not less
than ten nor more than sixty days before the date of the meeting. If mailed,
notice is given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation.
Section 10. Maintenance and Inspection of Stockholder List. The
officer who has charge of the stock ledger of the Corporation shall prepare and
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting
3
is to be held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Section 11. Stockholder Action by Written Consent Without a
Meeting. Unless otherwise provided in the Certificate of Incorporation, any
action required to be taken at any annual or special meeting of stockholders of
the Corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE 3.
DIRECTORS
Section 12. The Number of Directors. The number of directors
which shall constitute the whole Board shall be seven (7). Thereafter, the
number of directors constituting the whole Board may be increased or decreased,
from time to time, in conformity with the Certificate of Incorporation or any
Stockholders Agreement (as defined below). The directors need not be
stockholders. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 13, and each director elected shall
hold office until his successor is elected and qualified; provided, however,
that unless otherwise restricted by the
4
Certificate of Incorporation, any stockholders agreement, the execution of which
is approved unanimously the Board of Directors (a "Stockholders Agreement"), or
by law, any director or the entire Board of Directors may be removed, either
with or without cause, from the Board of Directors at any meeting of
stockholders by a majority of the stock represented and entitled to vote
thereat. The term of service of directors shall be for three years per term.
Further the directors shall be classified into three classes, designated Class
I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third the total number of directors constituting the entire
Board of Directors; provided that each class shall have a term of service equal
to any other class, except for the initial term. The terms of the members of
each class shall be concurrent, and classes of directors may be staggered to
provide for continuity of membership of the Board of Directors. The initial term
of Class I shall terminate on the earlier of the first anniversary of the
Effective Date or the date of the next meeting of the stockholders. The initial
term of Class II shall terminate on the earlier of the second anniversary of the
Effective Date or the date of the next meeting of the stockholders. The initial
term of Class III shall terminate on the earlier of the third anniversary of the
Effective Date or the date of the next meeting of the stockholders. For the
purposes of these Bylaws, the "Effective Date" shall be the effective date of
the merger of the Corporation with
Allied Riser Communications Corporation.
Section 13. Vacancies. Vacancies on the Board of Directors by
reason of death, resignation, retirement, disqualification, removal from office,
or otherwise, and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole director, provided,
however, that the Board of Directors shall not take any action unless and until
the any Stockholders entitled to designate nominees of the Board of Directors
under any
5
Stockholders Agreement have been given adequate opportunity to do so.
Notwithstanding anything to the contrary contained herein, the term of any
Director who is also an officer of the Corporation shall terminate if he or she
ceases to be an officer of the Corporation.
Section 14. Powers. The Board of Directors shall elect and
appoint management to manage the business and property of the Corporation. In
addition to the powers and authorities by these Bylaws expressly conferred upon
them, the Board may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised or done by
the stockholders.
Xxxxxxx 00. Xxxxx of Directors' Meetings. The directors may hold
their meetings and have one or more offices, and keep the books of the
Corporation outside of the State of Delaware.
Section 16. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board.
Section 17. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the President on
forty-eight hours' notice to each director, either personally or by mail or by
facsimile; special meetings shall be called by the President or the Secretary in
like manner and on like notice on the written request of two directors.
Section 18. Quorum. At all meetings of the Board of Directors, a
two-thirds majority of the then-appointed directors shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the vote
of a majority of the directors present at any meeting
6
at which there is a quorum, shall be the act of the Board of Directors, except
as may be otherwise specifically provided by statute, by the Certificate of
Incorporation, by any Stockholders Agreement or by these Bylaws. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present. If only one
director is authorized, such sole director shall constitute a quorum. At any
meeting, a director shall have the right to be accompanied by counsel (provided
that such counsel shall agree to any confidentiality restrictions reasonably
imposed by the Corporation) and an observer (to the extent such right is agreed
upon in any Stockholders Agreement).
Section 19. Action Without Meeting. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 20. Telephonic Meetings. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such meeting.
Section 21. Committees of Directors. The Board of Directors may,
by resolution passed by a majority of the whole Board, designate one or more
committees, each such committee to consist of one or more of the directors of
the Corporation. The Board may
7
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall make recommendations regarding the
management of the business and affairs of the Corporation.
Section 22. Minutes of Committee Meetings. Each committee shall
keep regular minutes of its meetings and report the same to the Board of
Directors.
Section 23. Compensation of Directors. Unless otherwise
restricted by the Certificate of Incorporation, any Stockholders Agreement or
these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE 4.
INDEMNIFICATION
Section 24. Power to Indemnify in Other than Actions by or in the
Right of the Corporation. Subject to Section 26 of this Article IV, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party
8
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that such person is or was a
director or officer of the Corporation, or is or was a director or officer of
the Corporation serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, such person
had no reasonable cause to believe his or her conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that such person did not act in good faith and in a
manner which such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, had reasonably cause to believe that his or her conduct was
unlawful.
Section 25. Power to Indemnify in Actions by or in the Right of
the Corporation. Subject to Section 26 of this Article IV, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action or suit or by or in the right of
the Corporation to procure a judgment in its favor by reason of the fact that
such person is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
9
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation;
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 26. Authorization of Indemnification. Any indemnification
under this Article IV (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 24 or 25 of this Article IV, as the case may be. Such determination
shall be made (i) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (ii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (iii) by the stockholders. To the extent,
however, that a director or officer of the Corporation has been successful on
the merits or otherwise in defense if any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith, without the necessity of
authorization in the specific case.
10
Section 27. Good Faith Defined. For purposes of any determination
under Section 26 of this Article IV, a person shall be deemed to have acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal action or proceeding, to have had no reasonable cause to believe his or
her conduct was unlawful, if such person's action is based on the records or
books of account of the Corporation or another enterprise, or on information
supplied to such person by the officers of the Corporation or another enterprise
in the course of their duties, or on the advice of legal counsel for the
Corporation or another enterprise or on information or records given or reports
made to the Corporation or another enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Corporation or another enterprise. The term "another enterprise" as used in
this Section 27 shall mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise of which such person
is or was serving at the request of the Corporation as director, officer,
employee or agent. The provisions of this Section 27 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Section 24 or
25 of this Article IV, as the case may be.
Section 28. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 26 of this Article IV,
and notwithstanding the absence of any determination thereunder, any director or
officer may apply to the Court of Chancery of the State of Delaware or any other
court of competent jurisdiction in the State of Delaware for indemnification to
the extent otherwise permissible under Sections 24 and 25 of this Article IV.
The basis of such indemnification by a court shall be a determination by such
court that indemnification of the director or officer is proper in the
circumstances because such
11
person has met the applicable standards of conduct set forth in Section 24 or 25
of this Article IV, as the case may be. Neither a contrary determination in the
specific case under Section 26 of this Article IV nor the absence of any
determination thereunder shall be a defense to such application or create a
presumption that the director or officer seeking indemnification has not met any
applicable standard of conduct. Notice of any application for indemnification
pursuant to this Section 28 shall be given to the Corporation promptly upon the
filing of such application. If successful, in whole or in part, the director or
officer seeking indemnification shall also be entitled to be paid the expense of
prosecuting such application.
Section 29. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article IV.
Section 30. Non-exclusivity of Indemnification and Advancement of
Expenses. The indemnification and the advancement of expenses provided by or
granted pursuant to this Article IV shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation or any By-law, agreement,
contract, vote of stockholders or disinterested directors or pursuant to the
direction (howsoever embodied) of any court of competent jurisdiction or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office, it being the policy of the
corporation that indemnification of persons specified in Section 24 and 25 of
this Article IV shall be made to the fullest extent permitted by
12
law. The provisions of this Article IV shall not be deemed to preclude the
indemnification of any person who is not specified in Section 24 or 25 of this
Article IV but whom the Corporation has the power or obligation to indemnify
under the provision of the Delaware General Corporation Law ("DGCL") or
otherwise.
Section 31. Insurance.
The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director or officer of the Corporation or is or was a
director or officer of the Corporation serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power or the obligation to indemnify such person
against such liability under the provisions of this Article IV.
Section 32. Certain Definitions.
For the purposes of this Article IV, references to the
"Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or officers, so that any
person who is or was a director or officer of such constituent corporation, or
is or was a director or officer of such constituent corporation serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, shall stand in the same position under the
provisions of this Article IV with respect to the resulting or surviving
corporation as such person would have
13
with respect to such constituent corporation if its separate existence had
continued. For purposes of this Article IV, references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer which
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article IV.
Section 33. Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article IV shall, unless otherwise provided when
authorized or ratified. continue as to a person who has ceased to be a director
or officer shall inure to the benefit of the heirs, executors and administrators
of such a person.
Section 34. Limitation on Indemnification. Notwithstanding
anything contained in this Article IV to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 28
hereof), the Corporation shall not be obligated to indemnify any director or
officer (or his heirs, executors or personal or legal representatives) or
advance expenses in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or consented
to by the Board of Directors of the Corporation.
Section 35. Indemnification of Employees and Agents. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, provide rights to
14
indemnification and to advancement of expenses to employees and agents of the
Corporation similar to those conferred in this Article IV to directors and
officers of the Corporation.
ARTICLE 5.
OFFICERS
Section 36. Officers. The officers of this corporation shall be
chosen by the Board of Directors and shall include a President, a Secretary, and
a Treasurer. The Corporation may also have, at the discretion of the Board of
Directors, such other officers as are desired, including a Chairman of the
Board, one or more Vice Presidents, one or more Assistant Secretaries and
Assistant Treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 3 hereof. In the event there are two or more Vice
Presidents, then one or more may be designated as Executive Vice President,
Senior Vice President, or other similar or dissimilar title. Any number of
offices may be held by the same person unless the Certificate of Incorporation
or these Bylaws otherwise provide.
Section 37. Election of Officers. The Board of Directors, at its
first meeting after each annual meeting of stockholders, shall choose the
officers of the Corporation.
Section 38. Compensation of Officers. The salaries of all
officers and agents of the Corporation shall be fixed by the Board of Directors
on the advice and consent of the Compensation Committee thereof.
Section 39. Term of Office; Removal and Vacancies. The officers
of the Corporation shall hold office until their successors are chosen and
qualify in their stead. Any officer elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. If the office of any officer or officers becomes vacant
for any reason, the vacancy shall be filled by the Board of Directors.
15
Section 40. Chairman of the Board. The Chairman of the Board, if
such an officer be elected, shall, if present, preside at meetings of the Board
of Directors and shall have no power or authority to manage the affairs of the
corporation.
Section 41. Chief Executive Officer. The Chief Executive Officer
of the Corporation shall be the principle officer of the Corporation and shall
have general supervision, direction and control of the business and officers of
the Corporation. He shall preside at all meetings of the stockholders and, in
the absence of the Chairman of the Board, or if there be none, at all meetings
of the Board of Directors.
Section 42. President.
The President shall be the chief operating officer of the
Corporation. He shall assist the Chief Executive Officer at the Chief Executive
Officer's discretion in the performance of his duties.
Section 43. Vice Presidents. The Vice Presidents shall assist the
President at the President's discretion in the performance of his duties.
Section 44. Secretary. The Secretary shall attend all sessions of
the Board of Directors and all meetings of the stockholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose; and
shall perform like duties for the standing committees when required by the Board
of Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors.
He shall keep in safe custody the seal of the Corporation, and
when authorized by the Board, affix the same to any instrument requiring it, and
when so affixed it shall be attested by his signature or by the signature of an
Assistant Secretary. The Board of Directors may give
16
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his signature.
Section 45. Assistant Secretary. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors, or if there be no such determination, the Assistant
Secretary designated by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary.
Section 46. Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys, and other valuable effects in the name and to the credit of
the Corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the Corporation. If required by the Board of
Directors, he shall give the Corporation a bond, in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors, for the
faithful performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 47. Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer.
17
ARTICLE 6.
CERTIFICATES OF STOCK
Section 48. Certificates. Every holder of stock of the
Corporation shall be entitled to have a certificate signed by, or in the name of
the Corporation by, the Chairman or Vice Chairman of the Board of Directors, or
the President or a Vice President, and by the Secretary or an Assistant
Secretary, or the Treasurer or an Assistant Treasurer of the Corporation,
certifying the number of shares represented by the certificate owned by such
stockholder in the Corporation.
Section 49. Signatures on Certificates. Any or all of the
signatures on the certificate may be a facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent, or registrar at
the date of issue.
Section 50. Statement of Stock Rights, Preferences, Privileges.
If the Corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in Section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests
18
the powers, designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
Section 51. Lost Certificates. The Board of Directors may direct
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 52. Transfers of Stock. Upon surrender to the
Corporation, or the transfer agent of the Corporation, of a certificate for
shares duly endorsed or accompanied by proper evidence of succession,
assignation or authority to transfer, the Corporation shall issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its book.
Section 53. Fixing Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders, or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the
19
purpose of any other lawful action, the Board of Directors may fix a record date
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 54. Registered Stockholders. The Corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, save as
expressly provided by the laws of the State of Delaware.
ARTICLE 7.
GENERAL PROVISIONS
Section 55. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 56. Payment of Dividends; Directors' Duties. Before
payment of any dividend there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the directors shall
think conducive to the interests of the Corporation, and the directors may
abolish any such reserve.
20
Section 57. Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 58. Fiscal Year. The fiscal year of the Corporation shall
be the calendar year.
Section 59. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware." Said Seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 60. Manner of Giving Notice. Whenever, under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such director or stockholder, at his address as
it appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
telegram.
Section 61. Waiver of Notice. Whenever any notice is required to
be given under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
Section 62. Annual Statement. The Board of Directors shall
present at each annual meeting, and at any special meeting of the stockholders
when called for by vote of the stockholders, a full and clear statement of the
business and condition of the Corporation.
21
ARTICLE 8.
AMENDMENTS
Section 63. Amendment. These Bylaws may be altered, amended or
repealed or new Bylaws may be adopted by the Board of Directors or stockholders
at any annual, regular or special meeting, in accordance with the Certificate of
Incorporation and any Stockholders Agreement, if notice of such alteration,
amendment, repeal or adoption of new Bylaws be contained in the notice of such
meeting.
22
EXHIBIT C
SURVIVING CORPORATION
CONVERSION RATIO
SERIES C EQUITY PROCEEDS OR ADDITIONAL ISSUANCES ($ IN MILLION)
-------------------------------------------------------------------------------------------------------
$30.0 $50.0 $70.0 $90.0 $108.6 $130.2 $150.0
------------- ------------- ------------- ------------- ------------- ------------- -------------
SURVIVING CORPORATION
Company Shares
Outstanding 1,931,330.6 1,909,084.1 1,892,072.0 1,878,641.4 1,845,595.5 1,828,710.5 1,815,795.7
Parent Shares of
Surviving Corporation 12,541,108.1 14,303,826.6 16,066,545.1 17,829,263.6 19,230,330.4 21,027,430.3 22,674,771.8
------------- ------------- ------------- ------------- ------------- ------------- -------------
Fully Diluted Shares
Outstanding 14,472,438.7 16,212,910.7 17,958,617.1 19,707,905.0 21,075,925.9 22,856,140.8 24,490,567.5
CONVERSION RATIO FOR
COMPANY SHARES 0.0283486 0.0280221 0.0277724 0.0275752 0.0270902 0.0268423 0.0266528
Assumptions
Parent Total Shares
Outstanding 125,411,081.0 143,038,266.0 160,665,451.0 178,292,636.0 192,303,304.0 210,274,303.0 226,747,718.0
Parent Reverse
Split Ratio 1 : 10.0 1 : 10.0 1 : 10.0 1 : 10.0 1 : 10.0 1 : 10.0 1 : 10.0
Company Shares
Outstanding 68,127,878.0 68,127,878.0 68,127,878.0 68,127,878.0 68,127,878.0 68,127,878.0 68,127,878.0
% Company Ownership of
Surviving Corporation 13.34% 11.78% 10.54% 9.53% 8.76% 8.00% 7.41%
If the gross proceeds actually received by Parent in its issuance
of the Series C Preferred Stock (the "Series C Placement"), or in other
issuances made in accordance with the following paragraph, are in an amount not
stated in the chart above, the Conversion Ratio shall be calculated in the same
manner as set forth herein to account for such different amount (provided,
however, that if the amount of gross proceeds received by Parent in the Series C
Placement exceeds $150,000,000 the Conversion Ratio shall not be less than
0.0266528).
Prior to the Effective Time, Parent shall not issue or agree to
issue any additional shares of capital stock of Parent or derivatives thereof
(a) for less than $1.20 per share prior to the Reverse Stock Split (on a fully
diluted basis), payable in cash (or if payable other than in cash, subject to
Caesar's providing to Augustus an opinion reasonably acceptable to Augustus from
a nationally recognized investment banking firm that the fair market value of
the consideration to be received by Caesar for such shares is at least equal to
$1.20 per share), (b) on terms less favorable to the Company and its
stockholders than the terms of the Series C Preferred Stock as contemplated in
the Summary of Terms for Proposed Private Placement of Series C Preferred Stock
dated as of August 9, 2001, and (c) which, when combined with the numbers of
shares of Series C Preferred Stock issued by Parent, would result in the number
of common equivalent shares of Parent to exceed 24,490,567.5 (assuming the
Reverse Stock Split). Notwithstanding the above, nothing in this Exhibit C shall
permit Parent to take any actions that would, individually or in the aggregate,
delay the filing of the Form S-4, require any amendment or supplement, in any
material respect, to the Form S-4 or a recirculation of the Company Proxy
Statement.
EXHIBIT D
FORM OF
RULE 145 AFFILIATE LETTER
Cogent Communications Group, Inc.
0000 00xx Xxxxxx, X.X
Xxxxxxxxxx, X.X. 00000
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of
Allied Riser Communications Corporation, a Delaware
corporation (the "Company"), as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
promulgated under the Securities Act of 1933, as amended (the "Act"), although
nothing contained herein should be construed as an admission of such fact.
Pursuant to the
Agreement and Plan of Merger, dated as of August 28, 2001 (the
"Merger Agreement"), by and among Cogent Communications Group, Inc., a Delaware
corporation ("Parent"), Xxxxxxxx Xxxxxx Merger Sub, Inc., a Delaware corporation
and a wholly owned subsidiary of Parent ("Merger Sub") and the Company, Merger
Sub will be merged with and into the Company (the "Merger") and the Company will
be the surviving corporation (the "Surviving Corporation"). Capitalized terms
used herein but not defined shall have the meanings ascribed to such terms in
the Merger Agreement.
As a result of the Merger, I will receive shares of Parent Common Stock
in exchange for shares of Company Common Stock owned by me.
I represent, warrant to and covenant with Parent that in the event I
receive any Parent Common Stock as a result of the Merger:
A. I shall not make any sale, transfer or other disposition
(including any hedge or other arrangement to reduce the undersigned's
risks relating to any Parent Common Stock received by the undersigned
in the Merger) of Parent Common Stock in violation of the Act or the
rules and regulations thereunder.
B. I have carefully read this letter and discussed, to the
extent I felt necessary, with my counsel or counsel for the Company
applicable limitations upon my ability to sell, transfer or otherwise
dispose of Parent Common Stock.
C. I have been advised that the issuance of Parent Common
Stock to me pursuant to the Merger will be registered with the
Commission under the Act on a Registration Statement on Form S-4.
However, I have also been advised that I may be deemed to have been an
affiliate of the Company and the distribution by me of Parent Common
Stock has not been registered under the Act, and therefore I may not
sell, transfer or otherwise dispose of Parent Common Stock issued to me
in the Merger unless (i) such sale, transfer or other disposition has
been registered under the Act, (ii) such sale, transfer or disposition
is made in conformity with Rule 145, or (iii) in the opinion of counsel
reasonably acceptable to Parent, or pursuant to a "no action" letter
obtained by the undersigned from the
staff of the Commission, such sale, transfer or other disposition is
otherwise exempt from registration under the Act.
D. I understand that Parent is under no obligation to register
the sale, transfer or disposition of Parent Common Stock by me or on my
behalf under the Act or to take any other action necessary in order to
make compliance with an exemption from such registration available;
provided, however, that Parent shall use its reasonable best efforts to
meet the requirements of paragraph (c) of Rule 144 promulgated under
the Act.
E. I also understand that stop transfer instructions will be
given to Parent's transfer agent with respect to Parent Common Stock
and that there will be placed on the certificates for Parent Common
Stock issued to me, or any substitutions therefor, a legend stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN COMPLIANCE WITH THE
REQUIREMENTS OF RULE 145 OR PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 OR AN EXEMPTION
FROM SUCH REGISTRATION."
F. I also understand that unless the transfer by me of my
Parent Common Stock has been registered under the Act or is a sale made
in conformity with the provisions of Rule 145, Parent reserves the
right to put the following legend on the certificates issued to my
transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH
A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933."
I also understood and agree that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this letter
agreement. I also understand and agree that such legends and the stop orders
referred to above will be removed if two years shall have elapsed from the date
the undersigned acquired Parent Common Stock received in the Merger and the
provisions of Rule 145(d)(3) are then available to the undersigned, or Parent
has received either an opinion of counsel, which opinion and counsel shall be
reasonably satisfactory to Parent, or a
2
"no action" letter obtained by the undersigned from the staff of the Commission,
to the effect that the restrictions imposed by Rule 145 under the Act no longer
apply to the undersigned. For so long as this agreement is applicable and to the
extent necessary to permit the undersigned to sell Parent Common Stock pursuant
to Rule 145 and, to the extent applicable, Rule 144, the Parent agrees to use
its reasonable best efforts to permit such sales pursuant to Rule 145 and Rule
144.
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
------------------------------------------
Signature
------------------------------------------
Print Name
Accepted this ___ day of ___________ , 2001 by
COGENT COMMUNICATIONS GROUP, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
3
EXHIBIT E
FORM OF
LOCK-UP AGREEMENT
, 2001
______________________ ____
Cogent Communications Group, Inc.
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Ladies and Gentlemen:
The undersigned, __________________________, is a holder of securities
of Allied Riser Communications Group, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Company"), and wishes to
facilitate the merger of Xxxxxxxx Xxxxxx Merger Sub, Inc., a Delaware
corporation ("Merger Sub") and wholly owned subsidiary of Cogent Communications
Group, Inc., a corporation organized and existing under the laws of the State of
Delaware ("Parent"), into the Company, pursuant to that certain
Agreement and
Plan of Merger dated as of August 28, 2001 (the "Agreement" and such merger, the
"Merger"). The undersigned recognizes that the Merger will be of benefit to the
undersigned. The agreements set forth in this lock-up agreement are being
executed and delivered by the undersigned pursuant to Section 6.03(f) of the
Agreement.
In consideration of the foregoing and in order to induce Parent, Merger
Sub and the Company to effect the Merger, the undersigned hereby agrees (such
agreement, the "Lock-Up"), for the benefit of the Company and Parent, that
during the period beginning the date hereof and continuing to and including the
date 180 calendar days after the date (the "Effective Date") on which the
Effective Time (as defined in the Agreement) occurs (the "Lock-Up Period"), the
undersigned will not, directly or indirectly, issue, sell, offer or agree to
sell, grant any option for the sale of, pledge, make any short sale or maintain
any short position, establish or maintain an open "put equivalent position"
(within the meaning of Rule 16-a-1(h) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), enter into any swap, derivative transaction or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of any of Parent's outstanding securities,
including any securities convertible into or exercisable or exchangeable for
Parent's capital stock (the "Common Stock") (whether any such transaction is to
be settled by delivery of Common Stock, other securities, cash or other
consideration) or otherwise dispose (or publicly announce the undersigned's
intention to do any of the foregoing) of, directly or indirectly, any Common
Stock that the undersigned currently beneficially owns (within the meaning of
Rule 13d-3 under the Exchange Act), or of which the undersigned acquires
beneficial ownership during the Lock-Up Period (collectively, the "Lock-Up
Shares").
The undersigned acknowledges that agreements substantially the same as
the Lock-Up are being executed and delivered by certain other holders of
securities of the Company, as provided in the Agreement (such agreements,
together with the Lock-Up, the "Stockholder Lock-Ups" and each, a "Stockholder
Lock-Up"). The undersigned agrees that the Lock-Up is
subject to the following conditions: (i) there will be no waiver of any term or
condition of any Stockholder Lock-Up unless a majority of the Board of Directors
of Parent shall have voted in favor of such waiver after the Effective Time of
the Merger; and (ii) in the event that a waiver is obtained as to any term or
condition of any Stockholder Lock-Up pursuant to (i) above, then such term or
condition that has been so waived will automatically be waived for each other
person or entity that executed and delivered a Stockholder Lock-Up pursuant to
Section 6.03(f) of the Agreement.
Notwithstanding anything contained in this Agreement to the contrary,
during the Lock-Up Period, the Lock-Up Shares held by the undersigned will be
subject to the Lock-Up in accordance with the following schedule:
(1) Until 30 calendar days after (but not including) the
Effective Date, 100% of such Lock-Up Shares shall be
subject to the Lock-Up;
(2) From 31 calendar days after (but not including) the
Effective Date until 60 calendar days after (but not
including) the Effective Date, 84% of such Lock-Up
Shares shall be subject to the Lock-Up;
(3) From 61 calendar days after (but not including) the
Effective Date until 90 calendar days after (but not
including) the Effective Date, 68% of such Lock-Up
Shares shall be subject to the Lock-Up;
(4) From 91 calendar days after (but not including) the
Effective Date until 120 calendar days after (but not
including) the Effective Date, 52% of such Lock-Up
Shares shall be subject to the Lock-Up;
(5) From 121 calendar days after (but not including) the
Effective Date until 150 calendar days after (but not
including) the Effective Date, 36% of such Lock-Up
Shares shall be subject to the Lock-Up.
(6) From 151 calendar days after (but not including) the
Effective Date until 180 calendar days after (but not
including) the Effective Date, 20% of such Lock-Up
Shares shall be subject to the Lock-Up.
The undersigned further: (i) authorizes Parent during the Lock-Up
Period to cause the transfer agent to decline to transfer and/or to note stop
transfer restrictions with respect to the Lock-Up Shares on the transfer books
and records of Parent, provided that such transfer restrictions shall be voided
in such amounts as are necessary to reflect the periodic release of Lock-Up
Shares from the Lock-Up during the Lock-Up Period as contemplated by the above
paragraph; and (ii) represents and warrants that the undersigned has full power
and authority to enter into the agreements set forth herein, and that, upon
request, the undersigned will execute any additional documents necessary in
connection with enforcement hereof. Any obligations of the undersigned shall be
binding upon the successors and assigns of the undersigned.
Very truly yours,
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