Exhibit 10.01
CONVERSION AND LOCK-UP LETTER
AGREEMENT
February 9, 2005
Cogent Communications Group, Inc.
1051 31 st Street, N.W.
Washington, DC 20007
Re:
COGENT COMMUNICATIONS GROUP
INC.
Ladies and Gentlemen:
THIS CONVERSION AND LOCK-UP LETTER
AGREEMENT (this “ Agreement ”) is made as of the
9 th day of February, 2005 by and among (i) Cogent
Communications Group, Inc., a Delaware corporation (the “
Company ”) and (ii) those stockholders of the
Company whose names are set forth on Schedule I hereto (the
“ Stockholders ”).
The Company understands that the
Stockholders propose to convert their shares of the Company’s
Series F Participating Convertible Preferred Stock, par value $.001
per share (the “ Series F Preferred Stock ”),
Series G Participating Convertible Preferred Stock, par value $.001
per share (the “ Series G Preferred Stock ”),
Series I Participating Convertible Preferred Stock, par value $.001
per share (the “ Series I Preferred Stock ”),
Series J Participating Convertible Preferred Stock, par value $.001
per share (the “ Series J Preferred Stock ”),
Series K Participating Convertible Preferred Stock, par value $.001
per share (the “ Series K Preferred Stock ”),
Series L Participating Convertible Preferred Stock, par value $.001
per share (the “ Series L Preferred Stock ”) and
Series M Participating Convertible Preferred Stock, par value $.001
per share (the “ Series M Preferred Stock ” and
together with the Series F Preferred Stock, the Series G Preferred
Stock, the Series I Preferred Stock, the Series J Preferred Stock,
the Series K Preferred Stock, and the Series L Preferred Stock, the
“ Preferred Stock” ) into shares of the
Company’s common stock, par value $.001 per share (the
“ Common Stock ”) and with respect to such
shares of Preferred Stock that are converted into shares of Common
Stock and any other shares of Common Stock now or hereafter
beneficially owned by the Stockholders, which conversion will occur
concurrently with the conversion of all outstanding shares of the
Company’s Series H Participating Convertible Preferred Stock,
par value $.001 per share, the undersigned Stockholders hereby
irrevocably agree as follows:
(i)
that the public trading price of the
Company’s Common Stock on the American Stock Exchange at the
close of the third (3 rd ) business day after the
issuance by the Company of a press release disclosing that the
holders of Preferred Stock intend to convert such shares of
Preferred Stock into shares of Common Stock (the “
Announcement ”) shall be the price at which the value
of each Stockholder’s shares in the Company, including shares
of Common Stock and shares of Preferred Stock (on an
as-if-converted-to-Common Stock basis), is determined (the “
Controlling Price ”) for purposes only of
Section (iii) hereof;
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(ii)
that on the fifth (5 th )
business day after the Announcement, each Stockholder shall deliver
to the Company written notice (“ Written Notice
”) of such Stockholder’s dollar value of Common Stock
owned, including in such dollar amount the assumed conversion of
all of such Stockholder’s shares of Preferred Stock, at the
Controlling Price (the “ Stockholder’s Value
”) and furthermore, such Written Notice shall include such
Stockholder’s intention of pursuing the course of action
mandated by Section (iii) (x) , (iii) (y) or
(iii) (z) of this Agreement, as the case may be;
(iii)
that (x) if the
Stockholder’s Value is equal to or greater than fifty million
dollars ($50,000,000) and if such Stockholder is not otherwise
exempt from making an HSR Filing (as defined below), then such
Stockholder shall make all necessary filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations thereunder (“ HSR Filing
”) within ten (10) business days of providing Written Notice,
or (y) if the Stockholder’s Value is less than fifty
million dollars ($50,000,000) but equal to or greater than twenty
five million dollars ($25,000,000) and if such Stockholder is not
otherwise exempt from making an HSR Filing, then such Stockholder
shall either elect to make an HSR Filing within ten (10) business
days of providing Written Notice or elect to convert such
Stockholder’s shares of Preferred Stock into shares of Common
Stock, the conversion of which shall occur immediately after all of
the holders of Preferred Stock who have elected to make an HSR
Filing have made such HSR Filing, or (z) if the
Stockholder’s Value is less than twenty five million dollars
($25,000,000), then such Stockholder is not required to take any
action;
(iv)
that the Stockholders will not,
without the unanimous prior written consent of the Company and all
the other Stockholders, directly or indirectly, during a period of
one hundred eighty (180) days from the date of this Agreement (the
“ Lock-Up Period ”), 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 a
“put equivalent position” (within the meaning of Rule
16-a-1(h) under the Securities Exchange Act of 1934, as amended
(“ The 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
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 of, any Common Stock (or any
securities convertible into, exercisable for or exchangeable for
Common Stock) or interest therein of the Company (all of the
foregoing transactions shall together be known as “
Transactions ”), provided, however , that
(x) prohibitions with respect to any Transactions shall not
apply to the number of shares of Common Stock set forth next to
each Stockholder’s name on Schedule II hereto (the
“ Exempted Shares ”) and furthermore that
(y) Transactions (including without limitation distribution
to the general partner or limited partners of a Stockholder) may
only be made with respect to such number of Exempted Shares in any
calendar month as set forth on Schedule III hereto and
provided, further , that the foregoing prohibitions shall
not apply to a Permitted UFO Transfer;
(v)
that the Stockholders authorize the
Company during the Lock-Up Period to cause the transfer agent (1)
to decline to transfer and/or (2) to note stop transfer
restrictions on the transfer books and records of the Company
and/or (3) to place appropriate legends on the certificates with
respect to any shares of Common Stock and any securities
convertible into exercisable or exchangeable for Common Stock for
which the undersigned is the record holder and, in the case of any
such share or securities for which the undersigned is the
beneficial but not
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the record holder, agrees to cause the record
holder to cause the transfer agent (1) to decline to transfer
and/or (2) to note stop transfer restrictions on such books and
records with respect to such shares or securities and/or (3) to
place appropriate legends on the certificates; and
(vi)
that the Stockholders will, upon the
sale of any shares of Common Stock or any other transaction
requiring filing a Form 4 under Section 16 of The Act on or
before April 26, 2005, enter into a settlement agreement with
the Company in the form attached hereto as Schedule IV (the
“ Settlement Agreement ”) prior to the
filing of such Form 4 with the SEC with respect to such sale or
transaction, and will deliver payment to the Company within five
(5) business days of entering into the Settlement Agreement the
amount equal to the short swing profits captured by such
Stockholder as a result of such sale requiring a Form 4 filing,
calculated pursuant to Section 16 of The Act.
The undersigned Stockholders further
agree, from the date hereof until the end of the Lock-Up Period,
that the undersigned will not exercise and will waive his, her or
its rights, if any, to require the Company to register its Common
Stock and to receive notice thereof, and further acknowledges that
the Company reserves the right to diligently pursue and prosecute
any of the undersigned acting in contravention of the foregoing;
provided, however , that the foregoing prohibition shall not
apply to any registration initiated by the Company for which the
undersigned Stockholders are entitled to receive notice thereof and
to exercise “piggyback” registration rights.
A “Permitted UFO
Transfer” shall mean a transfer by UFO Communications, Inc.,
of all, but not less than all of the capital stock of the Company
that it holds at the time of the transfer to any one or more of
Paladin Capital Partners Fund, L.P., Kline Hawkes Pacific Friends
Fund, LLC, or Kline Hawkes Pacific, L.P., pursuant to which the
number of Exempted Shares allocated to UFO Communicatons, Inc. is
reduced to zero and the number of Exempted Shares allocated to the
transferee(s) is not increased.
The undersigned Stockholders hereby
represent and warrant that the undersigned has full power and
authority to enter into this Agreement, 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.
This Agreement shall terminate and
be of no further force and effect upon the consummation of a firmly
underwritten public offering of the Common Stock pursuant to an
effective registration statement under the Securities Act of 1933,
as amended.
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[Signature Page to Conversion and
Lock-Up Letter Agreement]
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Very truly yours,
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OAK INVESTMENT PARTNERS IX,
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LIMITED PARTNERSHIP
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By:
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Oak Associates IX, LLC, its General
Partner
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By:
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Name: Edward Glassmeyer
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Title: Managing Member
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OAK IX AFFILIATES FUND, LIMITED
PARTNERSHIP
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By:
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Oak IX Affiliates, LLC, its General
Partner
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By:
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Name: Edward Glassmeyer
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Title: Managing Member
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OAK IX AFFILIATES FUND-A, LIMITED
PARTNERSHIP
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By:
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Oak Associates IX, LLC, it
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