NOTE PURCHASE AGREEMENT by and Among Cogent Communications Group, Inc.

Exhibit10.1

 

 

 

 

NOTE PURCHASE AGREEMENT

 

by

and

among

 

Cogent Communications Group, Inc.

 

and

 

ColumbiaVentures Corporation

 

 

Datedas of February 24, 2005

 

 

 

 



 

TABLE OF CONTENTS

 

ARTICLE I. DEFINITIONS

 

 

 

1.1

Definitions

 

 

 

 

ARTICLE II. AUTHORIZATION OF NOTES; PURCHASE AND SALE OF NOTES; MAKING OF LOANS

 

 

 

2.1

Notes

 

2.2

Purchase and Sale of the Note

 

2.3

Closing

 

2.4

The Loan

 

2.5

Fees and Expenses

 

 

 

 

ARTICLE III. CONDITIONS TO THE OBLIGATION OF THE PURCHASER TO PURCHASE THE NOTE

 

 

 

3.1

Representations and Warranties

 

3.2

Compliance with Terms and Conditions of this Agreement

 

3.3

Delivery of the Note

 

3.4

Documents

 

3.5

Purchase Permitted By Applicable Laws

 

3.6

Consents and Approvals

 

3.7

No Material Judgment or Order

 

 

 

 

ARTICLE IV. CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE

 

 

 

4.1

Representations and Warranties

 

4.2

Compliance with this Agreement

 

4.3

Issuance Permitted by Applicable Laws

 

4.4

Loan

 

4.5

Consents and Approvals

 

4.6

No Material Judgment or Order

 

 

 

 

ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

 

 

5.1

Organization, Good Standing and Qualification

 

5.2

Authorization

 

5.3

No Conflicts

 

5.4

Legal Proceedings

 

5.5

No Violations

 

5.6

Governmental Permits, Etc.

 

5.7

Additional Information

 

5.8

No Integrated Offering

 

5.9

Internal Accounting Controls

 

 

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NOTE PURCHASE AGREEMENT

 

THIS NOTE PURCHASE AGREEMENT(the “Agreement”) is entered into as of the 24th  day of February, 2005, by and among CogentCommunications Group, Inc., a Delaware corporation (the “Company”), andColumbia Ventures Corporation, a Washington State corporation (the “Purchaser”).

 

RECITALS:

 

A.                                   Upon the termsand subject to the conditions set forth in this Agreement, the Company proposesto issue and sell its Subordinated Promissory Note (the “Note”) to thePurchaser and to obtain from the Purchaser the loans as contemplated thereby.

 

B.                                     The Purchaserdesires to purchase from the Company the Note and to make the Loan ascontemplated thereby, as set forth on Schedule 1 hereto.

 

AGREEMENT

 

NOW, THEREFORE, inconsideration of the mutual covenants and agreements set forth herein and forgood and valuable consideration, the receipt and adequacy of which is herebyacknowledged, the parties hereto hereby agree as follows:

 

S

 

1.1                               Definitions.

 

As used in this Agreement,and unless the context requires a different meaning, the following terms havethe meanings indicated:

 

“Contractual Obligation”means any contract or agreement by which a Person is bound or to which itsassets are subject.

 

“Governmental Authority”means the government of any nation, state, city, locality or other politicalsubdivision of any thereof, any entity exercising executive, legislative,judicial, regulatory or administrative functions of or pertaining togovernment, and any corporation or other entity owned or controlled, throughstock or capital ownership or otherwise, by any of the foregoing.

 

“Person” means anyindividual, firm, corporation, partnership, trust, incorporated orunincorporated association, joint venture, joint stock company, GovernmentalAuthority or other entity of any kind, and shall include any successor (bymerger or otherwise) of such entity.

 

“Requirements of Law”means, as to any Person, the provisions of the Certificate of Incorporation andBy-laws or other organizational or governing documents of such Person, and anylaw, treaty, rule, regulation, right, privilege, qualification, license orfranchise, order, judgment, or determination of an arbitrator or a court orother Governmental Authority, in each case, applicable or binding upon suchPerson or

 



 

anyof its property or to which such Person or any of its property is subject orapplicable to any or all of the transactions contemplated by or referred to inthe Transaction Documents.

 

“Securities Act”means the Securities Act of 1933, as amended, and the rules and regulations ofthe Commission thereunder.

 

“Transaction Documents”means collectively, this Agreement and the Note.

 

“Transaction Expenses”means the fixed sum of $5,000.00 to cover  out-of-pocket (i) legal expenses incurred by the Purchaser in connectionwith the negotiation and preparation of the Transaction Documents, theconsummation of the transactions contemplated thereby and preparation for anyof the foregoing, including, without limitation, travel expenses, reasonablefees, charges and disbursements of counsel and any similar or related legalcosts and legal expenses; and (ii) other expenses incurred by the Purchaser inconnection with the negotiation, preparation and consummation of theTransaction Document and the transactions contemplated thereby.

 

 

2.1                               Notes.

 

On or before the ClosingDate, the Board of Directors of the Company will authorize the issuance andsale of the Note as contemplated hereby.

 

2.2                               Purchaseand Sale of the Note.

 

Upon the terms and subjectto the conditions herein contained, on February 24, 2005 or such other day asthe parties may mutually agree (the “Closing Date”), the Company shall issue tothe Purchaser, and the Purchaser shall acquire from the Company, the note(the  “Note” ) in the form of ExhibitA hereto and in the principal amount shown on Schedule 1 hereto.

 

2.3                               Closing.

 

The closing of the sale toand purchase by the Purchaser of the Note (the “Closing”) shall occur at 11 o’clockA.M., local time on the Closing Date.  Atthe Closing, the Company shall deliver to the Purchaser the Note, free andclear of any Liens of any nature whatsoever, registered in such Purchaser’sname.

 

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2.4                               The Loan.

 

Subject to the terms andconditions herein contained, at the Closing the Purchaser shall make a loan tothe Company (by wire transfer of immediately available funds) in the amount setforth opposite its name on Schedule 1.

 

2.5                               Fees andExpenses.

 

Concurrently with or aspromptly as practicable after the Closing, the Company shall reimburse thePurchaser for the Transaction Expenses, which payment shall be made by wiretransfer of immediately available funds to an account or accounts designated bythe Purchaser.

 

 

The obligation of thePurchaser to purchase the Note, to make its loan and to perform any of itsobligations hereunder (unless otherwise specified) shall be subject to the satisfactionof the following conditions on or before the Closing Date:

 

3.1                               Representationsand Warranties.

 

The representations andwarranties of the Company contained in Section 5 hereof shall be true andcorrect in all material respects at and as of that date, as if made at and asof such date.

 

3.2                               Compliancewith Terms and Conditions of this Agreement.

 

The Company shall haveperformed and complied with all of the agreements and conditions set forthherein that are required to be performed or complied with by the Company on orbefore that date.

 

3.3                               Delivery ofthe Note.

 

The Company shall havedelivered to the Purchaser the Note.

 

3.4                               Documents.

 

The Purchaser shall havereceived true, complete and correct copies of such documents and such otherinformation as it may have reasonably requested in connection with or

 

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relatingto the sale of the Note and the transactions required to be performed by theTransaction Documents.

 

3.5                               PurchasePermitted By Applicable Laws.

 

The acquisition of andpayment for the Note to be acquired by the Purchaser hereunder and theconsummation of this Agreement (a) shall not be prohibited by any Requirementsof Law, and (b) shall not conflict with or be prohibited by any ContractualObligation of the Company.

 

3.6                               Consentsand Approvals.

 

All requisite consents,exemptions, authorizations, or other actions by, or notices to, or filingswith, Governmental Authorities and other Persons in respect of all Requirementsof Law and with respect to Contractual Obligations of the Company necessary orrequired in connection with the execution, delivery or performance by theCompany of this Agreement shall have been obtained and be in full force andeffect and all waiting periods shall have lapsed without extension or theimposition of any conditions or restrictions.

 

3.7                               NoMaterial Judgment or Order.

 

There shall not be anyjudgment or order of a court of competent jurisdiction or any ruling of anyGovernmental Authority or any condition imposed under any Requirement of Lawwhich, in the reasonable judgment of the Purchaser, would (i) prohibit thepurchase of the Note hereunder, (ii) subject the Purchaser to any penalty ifthe Note were to be purchased hereunder, or (iii) question the validity orlegality of the transactions required to be performed under this Agreement.

 

 

The obligation of theCompany to issue and sell the Note and the other obligations of the Companyhereunder shall be subject to the satisfaction of the following conditions onor before the Closing Date:

 

4.1                               Representationsand Warranties.

 

The representations andwarranties of the Purchaser contained in Section 6 hereof shall be true andcorrect in all material respects at and as of the Closing Date as if made atand as of such date.

 

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4.2                               Compliancewith this Agreement.

 

The Purchaser shall haveperformed and complied with all of the agreements and conditions set forthherein that are required to be performed or complied with by the Purchaser onor before the Closing Date.

 

4.3                               IssuancePermitted by Applicable Laws.

 

The issuance of the Notehereunder and the consummation of this Agreement (a) shall not be prohibited byany Requirements of Law, and (b) shall not conflict with or be prohibited byany Contractual Obligations of the Purchaser.

 

4.4                               Loan.

 

The Purchaser shall havemade the loan as set forth in Section 2.4 hereof.

 

4.5                               Consentsand Approvals.

 

All consents, exemptions,authorizations, or other actions by, or notices to, or filings with,Governmental Authorities and other Persons in respect of all Requirements ofLaw and with respect to those material Contractual Obligations of the Purchasernecessary or required in connection with the execution, delivery or performanceby the Purchaser shall have been obtained and be in full force and effect andall waiting periods shall have lapsed without extension or imposition of anyconditions or restrictions.

 

4.6                               NoMaterial Judgment or Order.

 

There shall not be anyjudgment or order of a court of competent jurisdiction or any ruling of anyGovernmental Authority or any condition imposed under any Requirements of Lawwhich, in the reasonable judgment of the Company would (i) prohibit the sale ofthe Note or the consummation of the other transactions hereunder, (ii) subjectthe Company to any penalty if the Note were to be sold hereunder or (iii)question the validity or legality of the transactions required to be performedunder this Agreement.

 

 

Except as set forth in theCompany Disclosure Schedule attached hereto (the “Company DisclosureSchedule”), the Company represents and warrants to the Purchasers asfollows:

 

5.1                               Organization,Good Standing and Qualification.

 

The Company is a corporationduly organized, validly existing and in good standing under the laws ofDelaware and has all requisite corporate power and authority to carry on itsbusiness as now conducted and as proposed to be conducted.

 

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5.2                               Authorization.

 

The Company has all requisite corporate power andcorporate authority to enter into this Agreement and to consummate all actsrelated to the issuance of the Note.  Theexecution, delivery and performance by the Company of the Transaction Documentsand the consummation by the Company of the issuance of the Note and the othertransactions contemplated hereby have been duly authorized by all necessarycorporate action on the part of the Company and no further consent orauthorization is required by the Company or its Boards of Directors orstockholders.  The Transaction Documentshave been duly executed and delivered by the Company and each TransactionDocument constitutes a valid and binding agreement of the Company, enforceableagainst it in accordance with its terms, except as such enforceability may belimited by bankruptcy, insolvency, reorganization, moratorium and other similarlaws relating to or affecting creditors generally, or by general equityprinciples (regardless of whether such enforceability is considered in aproceeding in equity or at law).

 

5.3                               NoConflicts.

 

(a)                                  The execution, delivery and performance of this Agreement bythe Company, the performance by the Company of its obligations hereunder andthe consummation by the Company of the transactions contemplated hereby willnot:

 

(i)                                     result in a violation of the certificate of incorporation orbylaws of the Company;

 

(ii)                                  conflict with, or constitute a default (or an event whichwith notice or lapse of time or both would become a default) under, or give toothers any rights of termination, amendment, acceleration or cancellation of,or incremental, additional or varied rights under, any material agreement,indenture or instrument (including, without limitation, any stock option,employee stock purchase or similar plan or any employment or similar agreement)to which the Company is a party (including, without limitation, triggering theapplication of any change of control or similar provision (whether “singletrigger” or “double trigger”), any right of redemption or conversion or anyanti-dilution provision or similar rights);

 

(iii)                               result in the creation or imposition of any lien,encumbrance, claim, security interest or restriction whatsoever upon any ofthe  properties or assets of the Company;or

 

(iv)                              result in a violation of any Requirements of Law.

 

(b)                                 The Company is not required to obtain any consent,authorization or order of, or make any filing or registration with, anyforeign, federal, state or local government or governmental agency, department,or body in order for it to execute, deliver or perform any of its obligationsunder or contemplated by this Agreement in accordance with the terms hereof.

 

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5.4                               LegalProceedings.

 

Except as disclosed in theSEC Filings (as defined below), there is no material legal or governmentalproceeding pending or, to the knowledge of the Company, threatened orcontemplated to which the Company is or may be a party or of which the businessor property of the Company is or may be subject.

 

5.5                               NoViolations.

 

Except as disclosed in theSEC Filings, the Company is not in violation of its certificate ofincorporation or its by-laws, in violation of any law, administrativeregulation, ordinance or order of any court or governmental agency, arbitrationpanel or authority applicable to the Company, which violation, individually orin the aggregate, would have a material adverse effect on the business orfinancial condition of the Company, or in default in any material respect inthe performance of any obligation, agreement or condition contained in anymaterial bond, debenture, note or any other evidence of indebtedness in anyindenture, mortgage, deed of trust or any other agreement or instrument towhich the Company is a party or by which the Company is bound or by which theproperties of the Company are bound or affected.

 

5.6                               Governmental Permits, Etc.

 

Except as disclosed in theSEC Filings, the Company has all necessary franchises, licenses, certificatesand other authorizations from any foreign, federal, state or local governmentor governmental agency, department, or body that are currently necessary forthe operation of the business of the Company as currently conducted, theabsence of which would have a material adverse effect on the business oroperations of the Company.

 

5.7                               AdditionalInformation.

 

(i)                                     Except as disclosed in the Company Disclosure Schedule, theCompany has filed in a timely manner all documents that the Company wasrequired to file (i) under the Securities Exchange Act of 1934, as amended (the“Exchange Act”) and (ii) under the Securities Act, as of the datehereof.  The following documents(including all exhibits included therein and financial statements and schedulesthereto and documents incorporated by reference) (collectively, the “SECFilings”) complied in all material respects with the requirements of theExchange Act or the Securities Act, as the case may be, as of their respectivefiling dates, and the information contained therein was true and correct in allmaterial respects as of the date of such documents, and each of the followingdocuments as of the date thereof did not contain an untrue statement of amaterial fact or omit to state a material fact required to be stated therein ornecessary to make the statements therein, in light of the circumstances underwhich they were made, not misleading:

 

a.                                       the Company’s Annual Report on Form 10-K for the fiscal yearended December 31, 2003;

 

b.                                      all other documents filed by the Company with the Securitiesand Exchange Commission (the “SEC”) since the filing of the AnnualReport on Form

 

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10-K for the fiscal yearended December 31, 2003, including the Company’s Quarterly Report on Form 10-Qfor the fiscal quarters ended March 31, 2004, June 30, 2004, and September 30,2004, and pursuant to the reporting requirements of the Exchange Act;

 

(ii)                                  As of their respective dates, the financial statements of theCompany included in the SEC Filings and the additional financial statements ofthe Company and the related notes, provided to the Purchaser by the Company, if any, complied as to form (and willcomply as to form) in all material respects with U.S. generally acceptedaccounting principles (“GAAP”) and the published rules and regulationsof the SEC with respect thereto.  Suchfinancial statements have been prepared in accordance with GAAP, consistentlyapplied, during the periods involved (except in the case of unaudited interimstatements, to the extent they may exclude footnotes or may be condensed orsummary statements or as otherwise, in each case, may be permitted by the SECon Form 10-Q under the Exchange Act) and fairly present in all materialrespects the consolidated financial position of the Company as of the datesthereof and the consolidated results of its operations and cash flows for theperiods then ended (subject, in the case of unaudited statements, to normalyear-end audit adjustments).  Ernst &Young LLP, which has examined certain of such financial statements, is anindependent certified public accounting firm within the meaning of theSecurities Act.

 

(iii)                               Since December 31, 2003, except as specified in the SECFilings, the Company has not incurred or suffered any liability or obligation,matured or unmatured, contingent or otherwise, except in the ordinary course ofbusiness and except any such liability or obligation that has not had and couldnot reasonably be expected to have, individually or in the aggregate, amaterial adverse effect on the business or financial condition of theCompany.  Without limiting the foregoing,except as specified in the SEC Filings, the Company has no material liabilitiesor obligations that would reasonably be expected to be disclosed in order tocomply with Section 13(j) of the Exchange Act or an equivalent provision underthe Securities Act or any proposed rules promulgated by the SEC thereunder,including the rules regarding contractual commitments and contingentliabilities and commitments proposed in SEC Release No. 33-8144; 34-46767.

 

5.8                               NoIntegrated Offering.

 

Neither the Company, nor anyperson acting on its behalf has, directly or indirectly, made any offers orsales of any security or solicited any offers to buy any security, undercircumstances that would require registration of the Note under the SecuritiesAct or cause this offering of the Note to be integrated with prior offerings bythe Company for purposes of the Securities Act or any applicable stockholderapproval provisions, including, without limitation, under the rules andregulations of the American Stock Exchange, nor will the Company take anyaction or steps that would require registration of the Note under theSecurities Act or cause the offering of the Note to be integrated with otherofferings.

 

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5.9                               InternalAccounting Controls.

 

The Company maintains a systemof internal accounting controls sufficient to provide reasonable assurance that(i) transactions are executed in accordance with management’s general orspecific authorizations, (ii) transactions are recorded as necessary to permitpreparation of financial statements in conformity with GAAP and to maintainasset and liability accountability, (iii) access to assets or incurrence ofliability is permitted only in accordance with management’s general or specificauthorization and (iv) the reported accountability for its assets is comparedwith existing assets at reasonable intervals.

 

5.10                        PrivatePlacement.

 

The offer, sale and issuanceof the Note as contemplated by this Agreement is exempt from the registrationrequirements of the Securities Act and all applicable state securities laws.

 

5.11                        CorporateDocuments.

 

The Certificate and Bylawsof the Company are in the form provided to counsel for the Purchaser.

 

 

The Purchaser, herebyrepresents and warrants to the Company as of the date hereof as follows:

 

6.1                               CorporateExistence and Authority.

 

The Purchaser is  a corporation (a) duly organized, validlyexisting and in good standing under the laws of the jurisdiction of itsformation, (b) has all requisite power and authority to own its assets andoperate its business, and (c) has all requisite power and authority to execute,deliver and perform its obligations under each of the Transaction Documents.

 

6.2                               Organization;Authorization; No Contravention.

 

The execution, delivery andperformance by the Purchaser of the Transaction Documents and the consummationof the transactions contemplated thereby, including, without limitation, theacquisition of the Note:  (a) is withinthe Purchaser’s corporate power and authority and has been duly authorized byall necessary action on the part of the Purchaser; does not conflict with orcontravene the terms of the Purchaser’s charter or by-laws; and (c) will notviolate, conflict with or result in any material breach or contravention of (i)any Contractual Obligation of the Purchaser, or (ii) the Requirements of Law orany order or decree applicable to the Purchaser.

 

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6.3                               BindingEffect.

 

The Transaction Documents,when executed and delivered by the Purchaser, will constitutes the legal, valid and binding obligation of thePurchaser, enforceable against it in accordance with its terms, except asenforceability may be limited by applicable bankruptcy, insolvency, or similarlaws affecting the enforcement of creditors’ rights generally , or by general equity principles(regardless of whether such enforceability is considered in a proceeding inequity or at law).

 

6.4                               Purchasefor Own Account.

 

The Note is being or will beacquired by the Purchaser for its own account and with no intention ofdistributing or reselling such security or any part thereof in any transactionthat would be in violation of the securities laws of the United States ofAmerica, or any state, without prejudice, however, to the rights of thePurchaser at all times to sell or otherwise dispose of all or any part of suchNote under an effective registration statement under the Securities Act, orunder an exemption from such registration available under the Securities Act,and subject, nevertheless, to the disposition of such Purchaser’s propertybeing at all times within its control. If the Purchaser should in the future decide to dispose of the Note orany part thereof, the Purchaser understands and agrees that it may do so onlyin compliance with the Securities Act and applicable state securities laws, asthen in effect.  The Purchaser agrees tothe imprinting, so long as required by law, of a legend on certificaterepresenting  the Note to the followingeffect:

 

“THE SECURITIES REPRESENTEDBY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD OROTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENTUNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO ANAPPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.“

 

6.5                               FinancialCondition.

 

The Purchaser’s financialcondition is such that it is able to bear the risk of holding the Note for anindefinite period of time and can bear the loss of its entire investment in theNote.  The Purchaser has such knowledgeand experience in financial and business matters and in making high riskinvestments of this type that it is capable of evaluating the merits and risksof the purchase of the Note.

 

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6.6                               Receipt ofInformation.

 

The Purchaser has beenfurnished access to the business records of the Company and such additionalinformation and documents as such Purchaser has requested and has been affordedan opportunity to ask questions of and receive answers from representatives ofthe Company concerning the terms and condition of this Agreement, the purchase ofthe Note, the prospective operations, market potential, capitalization,financial conditions, and prospects of the business to be conducted by theCompany, and all other matters deemed relevant by the Purchaser.

 

6.7                               Broker’s,Finder’s or Similar Fees.

 

There are no brokeragecommissions, finder’s fees or similar fees or commissions payable in connectionwith the transactions contemplated hereby based on any agreement, arrangementor understanding with the Purchaser or any action taken by the Purchaser.

 

6.8                               GovernmentalAuthorization: Third Party Consents.

 

No approval, consent,compliance, exemption, authorization, or other action by, or notice to, orfiling with, any Governmental Authority or any other Person in respect of anyRequirements of Law, and no lapse of a waiting period under any Requirements ofLaw, is necessary or required in connection with the execution, delivery orperformance by such Purchaser (including, without limitation, the acquisitionof the Note) or enforcement against such Purchaser of this Agreement or theother Transaction Documents or the transactions contemplated thereby.

 

6.9                               Litigation.

 

No Actions are pending, orto the best knowledge of the Purchaser, threatened relating to or affecting thetransactions required to be performed by the Purchaser under the TransactionDocuments.

 

 

7.1                               Survivalof Representations and Warranties.

 

All of the representationsand warranties made herein shall survive the Closing.

 

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7.2                               Notices.

 

All notices, demands andother communications provided for or permitted hereunder shall be made inwriting and shall be by registered or certified first-class mail, returnreceipt requested, courier service or personal delivery or via facsimile:

 

(a)                                  if to Purchaser:

 

Columbia Ventures Corporation

203 SE Park Plaza Drive

Suite 270

Vancouver, WA 98684

Attn:  General Counsel

Fax:   (360) 816-1841

 

(b)                                 if to the Company:

 

Cogent Communications Group, Inc.

1015 31st Street, N.W.

Washington, D.C. 20007

Attention:  Robert Beury, Esq.

 

with a copy to:

 

Latham & Watkins

555 Eleventh Street, N.W., Suite 1000

Washington, D.C. 20004

Attention:  David M. McPherson,Esq.

 

All such notices andcommunications shall be deemed to have been duly given:  when delivered by hand, if personallydelivered; when delivered by courier, if delivered by commercial overnightcourier service; if delivered by facsimile, upon confirmation of suchtransmission; and five business days after being deposited in the mail, postageprepaid, if mailed.

 

7.3                               Successorsand Assigns.

 

This Agreement shall inureto the benefit of and be binding upon the successors and permitted assigns ofthe parties hereto.  This Agreement maybe assigned by the Purchaser to any permitted transferee of all or part of theNote.  The Company may not assign any ofits rights under this Agreement without the written consent of thePurchaser.  Except as provided in thisSection 7.3 and in the Note, no Person other than the parties hereto and theirsuccessors and permitted assigns is intended to be a beneficiary of any of theTransaction Documents.

 

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7.4                               Amendmentand Waiver.

 

(a)                                  No failure or delay on the part of the Company or thePurchaser in exercising any right, power or remedy hereunder shall operate as awaiver thereof; nor shall any single or partial exercise of any such right,power or remedy preclude any other or further exercise thereof or the exerciseof any other right, power or remedy.  Theremedies provided for herein are cumulative and are not exclusive of anyremedies that may be available to the Company or the Purchaser at law, inequity or otherwise.

 

(b)                                 Any amendment, supplement or modification of or to anyprovision of this Agreement, any waiver of any provision of this Agreement, andany consent to any departure by any party from the terms of any provision ofthis Agreement, shall be effective (i) only if it is made or given in writingand signed by the Company (if applicable) and the Purchaser, and (ii) only inthe specific instance and for the specific purpose for which made orgiven.  Except where notice isspecifically required by this Agreement, no notice to or demand on any party inany case shall entitle any party hereto to any other or further notice ordemand in similar or other circumstances.

 

7.5                               Counterparts.

 

This Agreement may beexecuted in one or more counterparts and by the parties hereto in separatecounterparts, each of which when so executed shall be deemed to be an originaland all of which taken together shall constitute one and the same agreement.

 

7.6                               Headings.

 

The headings in thisAgreement are for convenience of reference only and shall not limit orotherwise affect the meaning hereof.

 

7.7                               GoverningLaw.

 

This Agreement shall begoverned by and construed in accordance with the laws of the State of New York,without regard to the principles of conflicts of law of such state.

 

7.8                               Severability.

 

If any one or more of theprovisions contained herein, or the application thereof in any circumstance, isheld invalid, illegal or unenforceable in any respect for any reason, thevalidity, legality and enforceability of any such provision in every otherrespect and of the remaining provisions hereof shall not be in any wayimpaired, unless the provisions held invalid, illegal or unenforceable shallsubstantially impair the benefits of the remaining provisions hereof.

 

7.9                               Rules ofConstruction.

 

Unless the context otherwiserequires, “or” is not exclusive, and references to sections or subsectionsrefer to sections or subsections of this Agreement.

 

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7.10                        EntireAgreement.

 

This Agreement, togetherwith the exhibits and schedules hereto and the other Transaction Documents, isintended by the parties as a final expression of their agreement and intendedto be a complete and exclusive statement of the agreement and understanding ofthe parties hereto in respect of the subject matter contained herein andtherein.  There are no restrictions,promises, warranties or undertakings, other than those set forth or referred toherein or therein.  This Agreement,together with the exhibits hereto, and the other Transaction Documentssupersede all prior agreements and understandings between the parties withrespect to such subject matter.

 

7.11                        FurtherAssurances.

 

Each of the parties shallexecute such documents and perform such further acts (including, withoutlimitation, obtaining any consents, exemptions, authorizations, or other actionsby, or giving any notices to, or making any filings with, any GovernmentalAuthority or any other Person) as may be reasonably required or desirable tocarry out or to perform the provisions of this Agreement.

 

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IN WITNESS WHEREOF, theparties hereto have caused this Agreement to be executed and delivered by theirrespective officers hereunto duly authorized as of the date first abovewritten.

 

 

COGENT COMMUNICATIONS GROUP, INC.

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

COLUMBIA VENTURES CORPORATION

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

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Schedule 1

 

Purchaser

 

Amount of Note

 

Columbia Ventures Corporation

 

$

10,000,000.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Exhibit A

 

SUBORDINATEDNOTE

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTEREDUNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANYSTATE, AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO ANEFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIESLAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OFSUCH ACT OR SUCH LAWS.

 

COGENTCOMMUNICATIONS GROUP, INC.

 

$10,000,000

 

February 24, 2005

 

Cogent Communications Group, Inc., a Delawarecorporation (“Payor”), for value received, promises to pay to the orderof Columbia Ventures Corporation (“Payee” or the “Subordinated Creditor”) theprincipal amount of Ten Million Dollars ($10,000,000), together with accruedinterest thereon, each calculated and payable only as and to the extent setforth below in this Subordinated Note (this “Note”).  The principal and interest on this Note ispayable in lawful money of the United States of America in immediatelyavailable funds at the Payee’s principal business address in the United Stateson record with the Payor or in such other manner and at such other place as thePayor and Payee may mutually agree.

 

1.                                       Paymentof Principal and Interest

 

1.1                                 Calculationand Payment of Interest.

 

Interest on the principal balance of thisNote outstanding from time to time until paid in full shall accrue at the rateof (a) for the period from the date hereof through August 24, 2005, 10% perannum, (b) for the period beginning on August 24, 2005 through February 24 2006, 11.0% per annum, (c) for the periodbeginning on February 24 , 2006  throughAugust 24, 2006, 12% per annum, (d) for the period beginning on August 24, 2006through  February 24, 2007, 13% perannum, (e) for the period beginning on February 24, 2007 through  August 24, 2007, 14% per annum, (f) for theperiod beginning on August 24, 2007 through February 24, 2008, 15% per annum, (g) for the period beginning onFebruary 24, 2008 through  August 24,2008, 16% per annum, (h) for the period beginning on August 24, 2008through  the Maturity Date, 17% perannum, in each case computed on the basis of a 365-day year, as appropriate,for the actual number of days elapsed, commencing on the date hereof.  Such interest shall accrue, and be payable onthe Maturity Date (as defined herein).

 

1.2                                 Paymenton Maturity Date.  The principalbalance of, and all accrued and unpaid interest on, this Note shall be payableimmediately upon the earlier   of (i)February 24, 2009 and (ii) the date upon which a Liquidity Event (as definedherein) occurs.

 

1.3                                 OptionalPrepayment.         (a)          Exceptas otherwise provided herein, Payor may at its option at any time, withoutpremium or penalty, prepay all or any portion of this Note.

 

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(b)                                 Anyprepayment of this Note shall be applied as follows:  first, to payment of principal; and second,to payment of accrued interest.  Upon anypartial prepayment, at the request either of Payee or Payor, this Note shall besurrendered to Payor in exchange for a substitute note, which shall set forththe revised principal amount but otherwise be identical to this Note.  In the event that this Note is prepaid in itsentirety, this Note shall be surrendered to Payor for cancellation as acondition to any such prepayment.

 

                                                1.4                                 PaymentOnly on Business Days.  Any paymenthereunder which, but for this Section 1.4, would be payable on a day that isnot a Business Day, shall instead be due and payable on the first Business Daynext following such date for payment.

 

2.                                       Eventsof Default

 

(a)                                  Thefollowing shall constitute “Events of Default” under this Note:

 

(i)                                     Failureby Payor to make any payment required under this Note when the same becomes dueand payable (whether at maturity, by acceleration or otherwise); and thecontinuation of such failure for a period of ten (10) Business Days thereafterin the case of a payment default under Section 1.2(ii) hereunder only;

 

(ii)                                  Payorvoluntarily liquidates;

 

(iii)                               thePayor pursuant to or within the meaning of any Bankruptcy Law, (a) commences avoluntary case or proceeding, (b) consents to the entry of an order for reliefagainst it in an involuntary case or proceeding, (c) consents to theappointment of a Custodian of it or for all or substantially all of itsproperty, (d) makes general assignment for the benefit of its creditors, (e)generally is unable to pay its debts as they become due; or

 

(iv)                              acourt of competent jurisdiction enters an order or decree (that remainsunstayed and in effect for sixty (60) days) under any Bankruptcy Law that (a)is for relief against the Payor in an involuntary case or proceeding, (b)appoints a Custodian of the Payor or for all or substantially all of itsproperty, or (c) orders the liquidation of Payor.

 

(b)                                 Acceleration.  If an Event of Default occurs and iscontinuing, the Payee by written notice to the Payor (an “AccelerationNotice”), may, subject to the provisions of Section 3 hereof, declare theunpaid principal of and accrued interest on this Note to be immediately due andpayable.

 

3.                                       Subordination

 

3.1                                 NoteSubordinated to Senior Indebtedness. To the extent and in the manner hereinafter set forth in this Section 3,the indebtedness represented by this Note and the payment of the principal ofand the interest on this Note and any claim for rescission of the purchase ofthis Note, and any claim that is the equivalent of or substitute for principalof or interest on this Note, for damages arising from the purchase of this Noteor for reimbursement or contribution on account of such a claim, and all otherpayments with respect to or on account of this Note (collectively, the “SubordinatedDebt”) are hereby expressly made subordinate and subject in right ofpayment to the prior indefeasible payment in full in cash of all SeniorIndebtedness.  The existing and hereafteracquired liens and security interests of the holders of Senior Indebtedness inany collateral securing all or any portion of the Senior Indebtedness

 

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shall be senior, regardless of the time or method of perfection, to anyhereafter acquired liens and security interests, if any, of the SubordinatedCreditor (or any agent therefor) in the collateral, if any, securing all or anyportion of the Subordinated Debt.  ThisSection 3 constitutes a continuing offer to all Persons who become holders of,or continue to hold, Senior Indebtedness, each of whom is an obligee hereunderand is entitled to enforce such holder’s rights hereunder, subject to theprovisions hereof, without any act or notice of acceptance hereof or reliancehereon.  For purposes of this Section 3,Senior Indebtedness shall not be deemed to have been paid and shall be deemedto be outstanding in full until the termination of all commitments or otherobligations by any holder thereof and unless all such holders shall havereceived indefeasible payment in full in cash of all obligations under or in respectof Senior Indebtedness (including, without limitation, post-petition interest,if any).

 

3.2                                 NoPayment on Note in Certain Circumstances.

 

(a)                                  Tothe extent any payment hereunder is blocked by a Payment Restriction, no director indirect payment of any kind shall be made, asked for or demanded from Payoror accepted, received or retained from Payor with respect to principal,interest or other amounts due under this Note.

 

(b)                                 TheSubordinated Creditor agrees that, so long as payments or distributions for oron account of the Subordinated Debt are not permitted pursuant to this Section3, the Subordinated Creditor will not take, sue for, ask or demand from Payorpayment of all or any amounts under or in respect of this Note, or commence, orjoin with any creditor in commencing, directly or indirectly cause Payor tocommence, or assist Payor in commencing, any proceeding referred to in Section3.3, and the Subordinated Creditor shall not take or receive from Payor,directly or indirectly or on its behalf, in cash or other property or byset-off or in any other manner, including, without limitation, from or by wayof collateral, payment of all or any amounts under or in respect of theSubordinated Debt.  In the event that,notwithstanding the foregoing provisions of this Section 3.2, any payment ordistribution of any kind or character, whether in cash, property or securities,shall be received from Payor by the Subordinated Creditor while a PaymentRestriction exists for or on account of or in respect of the Subordinated Debtbefore all Senior Indebtedness is indefeasibly paid in full in cash, suchpayment or distribution shall be received and held in trust for, and shallimmediately be paid over (in the same form as so received, to the extentpracticable, and with any necessary endorsement) to the holders of the SeniorIndebtedness remaining unpaid or their representative or representatives, or tothe trustee or trustees under any such indenture or agreement under which anySenior Indebtedness may have been issued, for application (in the case of cash)to, or as collateral (in the case of non-cash property or securities) for thepayment or prepayment of Senior Indebtedness.

 

3.3                                 Dissolution;Liquidation; Bankruptcy; Acceleration. In the event of (i) any insolvency or bankruptcy case orproceeding, or any receivership, liquidation, reorganization or other similarproceeding in connection therewith, relative to the Payor or any of its assets,or (ii) any liquidation, dissolution or other winding up of the Payor,whether voluntary or involuntary or whether or not involving insolvency orbankruptcy, or (iii) any assignment for the benefit of creditors or anyother marshalling of assets or liabilities of the Payor, or (iv) theacceleration of the Senior Indebtedness by reason of the occurrence of a SeniorDefault (each such event, if any, herein sometimes referred to as a “Proceeding”):

 

(a)                                  Theholders of all Senior Indebtedness shall first be entitled to receive paymentin full in cash of all Senior Indebtedness before any direct or indirectpayment may be made for or on

 

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account of payments under or in respect of the Subordinated Debt,whether in cash, property or securities of any kind;

 

(b)                                 Anypayment or distribution of any kind or character, whether in cash, property orsecurities (including any payment or distribution that may be payable by reasonof any other indebtedness of Payor being subordinated to payment of theSubordinated Debt), to which the Subordinated Creditor would be entitled exceptfor the provisions of this Section 3, shall be paid and delivered by theliquidating trustee or agent or other person making such payment ordistribution, whether a trustee in bankruptcy, a receiver or liquidating trusteeor other trustee or agent, directly to the holders of the Senior Indebtednessor their representative or representatives, or to the trustee or trustees underany indenture under which any instrument evidencing any of such SeniorIndebtedness may have been issued for application (in the case of cash) to, oras collateral (in the case of non-cash property or securities) for the paymentor prepayment of Senior Indebtedness, to the extent necessary to make paymentin full of all Senior Indebtedness remaining unpaid, after giving effect to anyconcurrent payment or distribution to the holders of such Senior Indebtedness.

 

(c)                                  Theholders of the Senior Indebtedness are hereby irrevocably authorized andempowered (in their own names or in the name of the Subordinated Creditor orotherwise), but shall have no obligation, to demand, sue for, collect andreceive every payment or distribution referred to in paragraph (b) above andgive acquittance therefor and to file and vote claims and proofs of claim andtake such other action (including, without limitation, voting the amounts owingunder the Subordinated Debt or enforcing any security interest or other liensecuring payment of the amounts owing under the Subordinated Debt) as they maydeem necessary or advisable for the exercise or enforcement of any of therights or interests of the holders of the Senior Indebtedness hereunder, providedno such acquittance shall release liability of Payor to the holders of thisNote subject, nevertheless, to the provision of this Section 3.

 

(d)                                 TheSubordinated Creditor shall duly and promptly take such action as the holdersof Senior Indebtedness may reasonably request to execute and deliver to theholders of Senior Indebtedness such powers of attorney, assignments, or otherinstruments as the holders of Senior Indebtedness may reasonably request inorder to enable the holders of Senior Indebtedness to enforce any and allclaims with respect to, and any security interests and other liens securingpayment of, the amounts owing under the Subordinated Debt.

 

(e)                                  Inthe event that, any payment or distribution of any kind or character, whetherin cash, property or securities (including any payment or distribution that maybe payable by reason of any other indebtedness of Payor being subordinated topayment of the Subordinated Debt), shall be received by the SubordinatedCreditor for or on account of or in respect of the Subordinated Debt incontravention of this Section 3.3 before all Senior Indebtedness isindefeasibly paid in full in cash, such payment or distribution shall bereceived and held in trust for, and shall immediately be paid over (in the sameform as so received, to the extent practicable, and with any necessaryendorsement) to the holders of the Senior Indebtedness remaining unpaid ortheir representative or representatives, or to the trustee or trustees underany such indenture or agreement under which any Senior Indebtedness may havebeen issued, for application (in the case of cash) to, or as collateral (in thecase of non-cash property or securities) for the payment or prepayment ofSenior Indebtedness, until all Senior Indebtedness shall have been indefeasiblypaid in full in cash, after giving effect to any concurrent payment ordistribution to the holders of such Senior Indebtedness.

 

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(f)                                    TheSubordinated Creditor agrees to execute and deliver to each holder of theSenior Indebtedness or its representative all such further instrumentsconfirming the authorization referred to in the foregoing clauses of Section3.3.

 

3.4                                 Restrictionon Action by the Subordinated Creditor. Until the Senior Indebtedness is indefeasibly paid in full in cash, theSubordinated Creditor shall not take any Collection Action with respect to theSubordinated Debt.

 

3.5                                 NoPrepayments.  Except as expresslypermitted by the Senior Indebtedness Documents, under no circumstances shallthe Payor be entitled to make, or the Subordinated Creditor be entitled todemand, take, receive, or retain, any prepayments of interest or principal onaccount of any of the Subordinated Debt from the Payor prior to theindefeasible payment in full in cash of the Senior Indebtedness and thetermination of all lending commitments under the Senior Indebtedness Documents.  Payments received by the SubordinatedCreditor after acceleration of the Subordinated Debt or the commencement of aCollection Action otherwise permitted by the provisions of this SubordinatedNote shall not constitute a prohibited prepayment under this Section 3.5.

 

3.6                                 Amendmentof Subordinated Debt Documents. Until the Senior Indebtedness is indefeasibly paid in full in cash andnotwithstanding anything contained in the Subordinated Debt Documents or anySenior Indebtedness Document to the contrary, the Subordinated Creditor shallnot agree to any amendment, modification or supplement to the Subordinated DebtDocuments the effect of which is to change or amend any other term of theSubordinated Debt Documents if such change or amendment would result in aSenior Default.

 

3.7                                 Modificationsto Senior Indebtedness.  The holdersof the Senior Indebtedness may at any time and from time to time without theconsent of or notice to the Subordinated Creditor, without incurring liabilityto the Subordinated Creditor and without impairing or releasing the obligationsof the Subordinated Creditor under this Subordinated Note, change the manner orplace of payment or extend the time of payment of or renew or alter any of theterms of the Senior Indebtedness, or amend in any manner any agreement, note,guaranty or other instrument evidencing or securing or otherwise relating tothe Senior Indebtedness.

 

3.8                                 Sale,  Transfer. The Subordinated Creditor shall not sell, assign, pledge, dispose of orotherwise transfer all or any portion of the Subordinated Debt or anySubordinated Debt Document (a) withoutgiving prior written notice of such action to Payor, and (b) unless prior to the consummation of anysuch action, the transferee thereof shall execute and deliver to Payor anagreement (that shall be enforceable by the holders of Senior Indebtedness)providing for the continued subordination and forbearance of the SubordinatedDebt to the Senior Indebtedness as provided herein and for the continuedeffectiveness of all of the rights of the holders of the Senior Indebtednessarising under the provisions of this Subordinated Note.  Notwithstanding the failure to execute ordeliver any such agreement, the subordination effected hereby shall survive anysale, assignment, pledge, disposition or other transfer of all or any portionof the Subordinated Debt, and the terms of this Subordinated Note shall bebinding upon the successors and assigns of the Subordinated Creditor.

 

3.9                                 Reserved.

 

3.10                           Obligationsof Payor Unconditional.  Nothingcontained in this Section 3 or elsewhere in this Note is intended to or shallimpair, as among Payor, its creditors (other than the holders of Senior

 

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Indebtedness) and the Subordinated Creditor, the obligation of Payor,which is absolute and unconditional, to pay to the Subordinated Creditor theprincipal of and interest on and all other amounts due under this Note inaccordance with its terms, or is intended to or shall affect the relative rightsof the Subordinated Creditor and creditors of Payor (other than the holders ofthe Senior Indebtedness), nor shall anything herein prevent the SubordinatedCreditor from exercising all remedies otherwise permitted by applicable lawupon default under this Note, subject to the provisions of this Section 3 andto the rights of holders of Senior Indebtedness to receive distributions andpayments otherwise payable to the Subordinated Creditor.

 

3.11                           Relianceon Judicial Order or Certificate of Liquidating Agent.  Upon any payment or distribution of assets ofPayor referred to in this Section 3, the Subordinated Creditor shall beentitled to rely upon any order or decree made by any court of competentjurisdiction in which bankruptcy, dissolution, winding-up, liquidation orreorganization proceedings are pending, or a certificate of the receiver,trustee in bankruptcy, liquidating trustee, agent or other person making suchpayment or distribution, delivered to the Subordinated Creditor, for thepurpose of ascertaining the persons entitled to participate in suchdistribution, the holders of the Senior Indebtedness and other indebtedness ofPayor, the amount thereof or payable thereon, the amount or amounts paid ordistributed thereon and all other facts pertinent thereto or to Section 3 ofthis Note.  Such reliance shall notaffect the rights of the holders of the Senior Indebtedness.

 

3.12                           SubordinationRights Not Impaired by Acts or Omissions of Payor or Holders of SeniorIndebtedness.  No right of anypresent or future holders of any Senior Indebtedness to enforce subordinationas provided herein will at any time in any way be prejudiced or impaired by anyact or failure to act on the part of Payor or by any act or failure to act byany such holder, or by any act, failure to act or noncompliance by Payor, theholders of Senior Indebtedness or their respective agents with the terms ofthis Note, regardless of any knowledge thereof which any such holder or Payormay have or otherwise be charged with. The provisions of this Section 3 are intended for the benefit of andshall be enforceable directly by the holders of the Senior Indebtedness.

 

3.13                           FurtherAssurances.  The SubordinatedCreditor and Payor each will, at Payor’s expense and at any time and from timeto time, promptly execute and deliver all further instruments and documents,and take all further action, that may be necessary or desirable, or that theholders of Senior Indebtedness may request, in order to protect any right orinterest granted or purported to be granted hereby or to enable the holders ofSenior Indebtedness to exercise and enforce their rights and remedieshereunder.

 

3.14                           NoContrary Actions.  Payor agrees thatit will not make any payment for or on account of or in respect of this Note,or take any other action, in contravention of the provisions of this Section 3.

 

3.15                           ObligationsHereunder Not Affected.  All rightsand interests of the holders of Senior Indebtedness hereunder, and allagreements and obligations of the Subordinated Creditor and Payor under thisSection 3, shall remain in full force and effect irrespective of:

 

(i)                                     anylack of validity or enforceability of any successor guaranty of any SeniorIndebtedness Document;

 

(ii)                                  anychange in the time, manner or place of payment of, or in any other term of, allor any of the Senior Indebtedness, or any other amendment or waiver of or any

 

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consent to any departure from any Senior Indebtedness Document,including, without limitation, any increase in the Senior Indebtednessresulting from the extension of additional credit to Payor or any of itsSubsidiaries or otherwise;

 

(iii)                               anytaking, exchange, release or non-perfection of any other collateral, or anytaking, release, amendment or waiver of or consent to departure from anyguaranty, for all or any of the Senior Indebtedness;

 

(iv)                              anymanner of application of collateral, or proceeds thereof, to all or any of theSenior Indebtedness, or any manner of sale or other disposition of anycollateral for all or any of the Senior Indebtedness or any other assets ofPayor or any of its Subsidiaries;

 

(v)                                 anychange, restructuring or termination of the corporate structure or existence ofPayor or any of its Subsidiaries; or

 

(vi)                              anyother circumstance which might otherwise constitute a defense available to, ora discharge of, Payor, the Subordinated Creditor or a subordinatedcreditor.  The provisions of this Section3 shall continue to be effective or be reinstated, as the case may be, if atany time any payment of any of the Senior Indebtedness is rescinded or mustotherwise be returned by the holders of Senior Indebtedness upon theinsolvency, bankruptcy or reorganization of Payor or otherwise, all as thoughsuch payment had not been made.

 

3.16                           Waiver.  The Subordinated Creditor and the Payor eachhereby waives promptness, diligence and notice of acceptance with respect toany of the Senior Indebtedness and this Section 3 and any requirement that theholders of Senior Indebtedness protect, secure, perfect or insure any securityinterest or lien on any property subject thereto or exhaust any right or takeany action against Payor or any other person or entity or any collateral.

 

3.17                           NoWaiver; Remedies.  No failure on thepart of the holders of the Senior Indebtedness to exercise, and no delay inexercising, any right hereunder shall operate as a waiver thereof; nor shallany single or partial exercise of any right hereunder preclude any other orfurther exercise thereof or the exercise of any other right.  The remedies herein provided are cumulativeand not exclusive of any remedies provided by law.

 

3.18                           ContinuingAgreement; Assignments Under Senior Indebtedness Agreements.  The provisions of this Section 3 constitute acontinuing agreement and shall (i) remain in full force and effect until theearlier of (x) the date the obligation under this Note are satisfied in full inaccordance with this Section 1.2, or (y) the first Business Day following  the indefeasible payment in full in cash ofthe Senior Indebtedness, (ii) be binding upon the Subordinated Creditor, Payorand their respective successors and assigns, and (iii) inure to the benefit of,and be enforceable by, the holders of the Senior Indebtedness and theirsuccessors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), shouldholders of the Senior Indebtedness assign or otherwise transfer all or anyportion of their rights and obligations under any Senior Indebtedness Documentto any other Person, such other Person shall thereupon become vested with allthe rights in respect thereof granted to the holders of the Senior Indebtednessherein or otherwise.

 

3.19                           AdditionalBorrowing.  After the date hereof,Payor shall not incur any Senior Indebtedness, including through the amendment,modification, supplementation, refinancing or

 

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replacement of existing indebtedness, other than in connection with theA/R-Secured Loan Agreement or the Replacement Senior Secured Agreement.

 

4.                                       CertainDefinitions

 

“Affiliate” means, as to any Person,any other Person which, directly or indirectly, is in control of, is controlledby, or is under common control with, such Person. A Person shall be deemed tocontrol another Person if the controlling Person possesses, directly orindirectly, the power to direct or cause the direction of the management andpolicies of the other Person, whether through the ownership of votingsecurities, membership interests, by contract, or otherwise.

 

“A/R-Secured Loan Agreement” means anagreement pursuant to which Payor incurs up to $10 million in indebtednesssecured by its accounts receivable, as such may be amended, modified,supplemented, refinanced or replaced from time to time.

 

“Bankruptcy Law” means Title 11, U.S.Code or any similar federal or state law for the relief of debtors.

 

“Business Day” means each day otherthan Saturdays, Sundays and days when commercial banks are authorized orrequired by law to be closed for business in New York, New York.

 

“Cisco Credit Agreement” means theThird Amended and Restated Credit Agreement, dated as of July 31, 2003, amongPayor, Cogent Communications, Inc., Cogent Internet, Inc., Cisco SystemsCapital Corporation and the several financial institutions from time to timeparty thereto, as such may be amended, modified, supplemented, refinanced orreplaced from time to time.

 

“Collection Action” shall mean, withrespect to the Subordinated Debt, (a) tosue for, take or receive from or on behalf of the Payor of the SubordinatedDebt, by set-off or in any other manner, the whole or any part of any moneysthat may now or hereafter be owing by the Payor with respect to theSubordinated Debt; (b) to initiateor participate with others in any suit, action or proceeding against the Payor(i) to enforce payment of or tocollect the whole or any part of the Subordinated Debt or (ii) to commence judicial enforcement ofany of the rights and remedies under the Subordinated Debt Documents orapplicable law with respect to the Subordinated Debt; (c) to accelerate any Subordinated Debt; or (d) to cause the Payor to honor anyredemption or mandatory prepayment obligation with respect to the SubordinatedDebt; or (e) to take any action torealize upon any collateral securing the Subordinated Debt (if any) or toexercise any other right or remedy with respect to such collateral.

 

“Custodian” means any receiver,trustee, assignee, liquidator, sequestrator or similar office under anyBankruptcy Law.

 

“Event of Default” means any of theoccurrences specified under Section 2 of this Note.

 

“Governmental Authority”means the government of any nation, state, city, locality or other politicalsubdivision of any thereof, any entity exercising executive, legislative, judicial,regulatory or administrative functions of or pertaining to government, and anycorporation or other entity owned or controlled, through stock or capitalownership or otherwise, by any of the foregoing.

 

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“Liquidity Event” means the consummation byPayor of one or more equity financings after the date hereof that generate netproceeds in an aggregate amount of at least $30 million (other than issuance ofequity securities to officers, directors, or employees of the Payor).

 

“Payment Restriction” means (i) anyterm of the Senior Indebtedness prohibiting or limiting Payor’s ability to makepayments on this Note or (ii) the existence of a Senior Default.

 

“Person” means any individual, firm,corporation, partnership, trust, incorporated or unincorporatedassociation,  joint venture, association,joint-stock company,  GovernmentalAuthority  or other entity of any kind,and shall include any successor (by merger or otherwise) of such entity.

 

“Replacement Senior Secured Agreement”means an agreement pursuant to which Payor incurs up to $17 million in seniorsecured indebtedness as such may be amended, modified, supplemented, refinancedor replaced from time to time.

 

“Senior Default” shall mean (i) anydefault or event of default as specified in the Senior Indebtedness Documents,which default or event of default entitles, or with the giving of notice orlapse of time or both entitles, the holders of the Senior Indebtedness toaccelerate the maturity of the Senior Indebtedness or (ii) any failure by thePayor to make any required installment payment of interest or principal, or anyother monetary payment, under the Senior Indebtedness Documents, which failurecontinues beyond the expiration of any applicable cure period provided by theterms of the Senior Indebtedness Documents, including, without limitation, anydefault in payment of Senior Indebtedness after acceleration thereof.

 

“Senior Indebtedness” means(i) all indebtedness of the Payor outstanding under the Cisco CreditAgreement and the A/R-Secured Loan Agreement, (ii)  all indebtedness ofthe Payor outstanding under the Replacement Senior Secured Agreement and(iii) all obligations with respect to the items listed in the precedingclauses (i) and (ii).  Notwithstandinganything to the contrary in the foregoing, Senior Indebtedness will not include(a) any liability for federal, state, local or other taxes owed or owingby Payor, (b) any intercompany indebtedness of Payor to any of itssubsidiaries, (c) any accounts payable or other liability to tradecreditors arising in the ordinary course of business, (d) the Payor’s 7 1/2 %Convertible Subordinated Notes Due 2007 or (e) its capital stock.

 

“Senior Indebtedness Documents” meansthe Cisco Credit Agreement, the A/R-Secured Loan Agreement, the ReplacementSenior Secured Agreement and any other note, agreement, indenture, mortgage,guaranty, pledge, security agreement or instrument evidencing or securingSenior Indebtedness or pursuant to which Senior Indebtedness is incurred, ineach case as such agreement or document may be amended, modified orsupplemented from time to time, including without limitation any agreement ordocument extending the maturity of, increasing the aggregate commitments under,or refinancing, replacing or otherwise restructuring all or any part ofindebtedness under such agreement or document or any replacement or successoragreement or document and whether by the same or any other agent, lender orgroup of lenders, as any such document may be amended, modified, supplemented,refinanced or replaced from time to time.

 

“Subordinated Debt” shall have themeaning in Section 3.1 herein.

 

“Subordinated Debt Documents” shallmean this Subordinated Note and all other documents, agreements and instrumentsexecuted and delivered in connection herewith.

 

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5.                                       Miscellaneous

 

5.1                                 SectionHeadings.  The section headingscontained in this Note are for reference purposes only and shall not affect themeaning or interpretation of this Note.

 

5.2                                 Amendmentand Waiver.  Subject to Sections 3.6and 5.10 hereof, no provision of this Note may be amended or waived unlessPayor shall have obtained the written agreement of Payee.  No failure or delay in exercising any right,power or privilege hereunder shall imply or otherwise operate as a waiver ofany rights of Payee, nor shall any single or partial exercise thereof precludeany other or future exercise thereof or the exercise of any other right, poweror privilege.

 

5.3                                 Successors,Assigns and Transferors.  Subject toSection 3.8, this Note may be freely assigned and transferred by Payee providedthat any such transfer complies with all applicable federal and statesecurities laws.  Subject to theforegoing, the obligations of Payor and Payee under this Note shall be bindingupon, and inure to the benefit of, and be enforceable by, Payor and Payee, andtheir respective successors and permitted assigns, whether or not so expressed.

 

5.4                                 GoverningLaw.  This Note shall be governed by,and construed in accordance with, the laws of the State of New York withoutgiving effect to any conflicts of laws principles thereof that would otherwiserequire the application of the law of any other jurisdiction.

 

5.5                                 Lost,Stolen, Destroyed or Mutilated Note. Upon receipt of evidence reasonably satisfactory to Payor of the loss,theft, destruction or mutilation of this Note and of indemnity arrangementsreasonably satisfactory to Payor from or on behalf of the holder of this Note,and upon surrender or cancellation of this Note if mutilated, Payor shall makeand deliver a new note of like tenor in lieu of such lost, stolen, destroyed ormutilated Note, at Payee’s expense.

 

5.6                                 Waiverof Presentment, Etc.  Except asotherwise provided herein, presentment, demand, protest, notice of dishonor andall other demands and notices are hereby expressly waived by Payor.

 

5.7                                 Usury.  Nothing contained in this Note shall bedeemed to establish or require the payment of a rate of interest in excess ofthe maximum rate legally enforceable.  Ifthe rate of interest called for under this Note at any time exceeds the maximumrate legally enforceable, the rate of interest required to be paid hereundershall be automatically reduced to the maximum rate legally enforceable.  If such interest rate is so reduced andthereafter the maximum rate legally enforceable is increased, the rate ofinterest required to be paid hereunder shall be automatically increased to thelesser of the maximum rate legally enforceable and the rate otherwise providedfor in this Note.

 

5.8                                 Notices.  Any notice, request, instruction or otherdocument to be given hereunder by either party to the other shall be in writingand shall be deemed given when received and shall be (i) delivered personallyor (ii) mailed by certified mail, postage prepaid, return receipt requested or(iii) delivered by FedEx or a similar overnight courier or (iv) sent viafacsimile transmission to the fax number given below, as follows:

 

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If to Payor, addressed to:

 

Cogent Communications Group, Inc.

 

1015 31st Street, N.W.

 

Washington, D.C. 20007

 

Attn: David Schaeffer

 

Fax No.: (202) 342-8269

 

 

with a copy to:

 

 

Latham & Watkins LLP

 

555 11th Street, N.W.

 

Washington, D.C.  20004

 

Attn: David McPherson

 

Fax No.: (202) 637-2201

 

 

If to Payee, addressed to:

 

Columbia Ventures Corporation

 

203 SE Park Plaza Drive

 

Suite 270

 

Vancouver, WA 98684

 

Attn:  General Counsel

 

Fax:   (360) 816-1841

 

 

If to holders of the Senior Indebtedness, addressed to:

 

Cisco Systems CapitalCorporation

9850 Double R Boulevard,Park Center East

Reno, NV 89521

Attn.:  Loan Operations

Fax:  (775) 789-5866

 

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or to such other place and with such other copies as either party maydesignate as to itself by written notice to the other party, or to such otherholders of Senior Indebtedness as the Payor may designated by written notice toPayee.

 

In the event that any notice under this Noteis required to be made on or as of a day which is not a Business Day, then suchnotice shall not be required to be made until the first day thereafter which isa Business Day.

 

5.9                                 Reserved.

 

5.10                           Actionby Payee.  Subject to the provisionsof Section 3.6 and this Section 5.10, Payee and Payor may enter into agreementsfor the purpose of adding or modifying provisions of this Note or changing inany manner the rights of  Payee or Payorhereunder or waiving any covenant, default or Event of Default hereunder.

 

5.11                           Fees.  Payor agrees to pay all costs (includingattorney’s and paralegal fees and expenses) incurred or paid by Payee inenforcing collection of this Note.

 

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IN WITNESS WHEREOF, Payor has executed anddelivered this Note as of the date hereinabove first written.

 

 

 

COGENT COMMUNICATIONS GROUP, INC.

 

 

 

 

 

 

 

By:

 

 

 

 

David Schaeffer

 

 

Chief Executive Officer

 



 

                                                Acknowledgment

 

Columbia Ventures Corporation, as Payee andSubordinated Creditor under the attached Subordinated Promissory Note, dated asof the date first written above (the “Note”) hereby acknowledges theprovisions of Section 3 of the Note and agrees to be bound by the provisionsthereof.

 

 

COLUMBIA VENTURES CORPORATION

 

 

 

 

By:

 

 

 

 

Kenneth D. Peterson, Jr.

 

 

Chief Executive Officer