Exhibit 3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS
AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
OF
SERIES L PARTICIPATING CONVERTIBLE PREFERRED STOCK
OF
COGENT COMMUNICATIONS GROUP, INC.
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
Cogent Communications Group, Inc., a Delaware
corporation (the “Corporation”), hereby certifies that, pursuant to the
authority contained in Article IV of its Certificate of Incorporation (the
“Certificate of Incorporation”) and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Corporation (the “Board”) on September 8, 2004 duly adopted
resolutions, which resolutions remain in full force and effect as of the date
hereof, establishing, in accordance with the provisions set forth in Article IV
of the Corporation’s Certificate of Incorporation, a series of authorized
preferred stock of the Corporation having a par value of $0.001 per share,
which series shall (i) be issuable as Series L Participating Convertible Preferred Stock
(the “Series L Preferred Stock”), (ii) consist of a total of 185.4 shares, and
(iii) have the following voting powers, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions thereof:
1. Voting.
Unless the context otherwise requires, the terms
defined in this Section 1 shall have, for all purposes of this resolution, the
meanings herein specified.
“Common Stock” shall mean the common stock, par
value $0.001 per share, of the Corporation.
“Convertibility Date” shall mean the earlier of
December 31, 2004 and the date on which the corporation files an amendment to
its Certificate of Incorporation amending the terms of each sub-series of its
Series G Participating Convertible Preferred Stock, providing that the issuance
of shares of its Series L Preferred Stock or the conversion of such shares into
Common Stock shall not be deemed an issuance of “Additional Shares of Common
Stock” as that term is defined in the Certificate of Designations, Preferences
and Relative, Participating, Optional and
Other Special Rights and Qualifications, Limitations and Restrictions of
such sub-series of Series G Participating Convertible Preferred Stock.
“Junior Stock - Primary” shall mean the Series K
Participating Convertible Preferred Stock with respect to the Series K
Secondary Liquidation Preference, Series J Participating Convertible Preferred
Stock with respect to the Series J Secondary Liquidation Preference, Series I
Participating Convertible Preferred Stock with respect to the Series I
Secondary Liquidation Preference, Series H Participating Convertible Preferred
Stock with respect to the Series H Primary Liquidation Preference, the Series G
Participating Convertible Preferred Stock with respect to the Series G
Secondary Liquidation Preference, the Series F Participating Convertible
Preferred Stock with respect to the Series F Secondary Liquidation Preference
and any other class or series of capital stock of the Corporation authorized on
or after the Original Issue Date (as defined herein) ranking junior to the
Series L Preferred Stock in respect of the right to receive dividends or, with
respect to the Primary Liquidation Preference (as defined herein), to
participate in any distribution upon liquidation, dissolution or winding-up of
the affairs of the Corporation, as applicable.
“Junior Stock - Secondary” shall mean the Series F
Participating Convertible Preferred Stock with respect to the Series F
Secondary Liquidation Preference and any other class or series of capital stock
of the Corporation authorized on or after the Original Issue Date ranking junior
to the Series L Preferred Stock in respect of the right to receive dividends
or, with respect to the Secondary Liquidation Preference (as defined herein),
to participate in any distribution upon liquidation, dissolution or winding-up
of the affairs of the Corporation, as applicable.
“Junior Stock” shall mean the Junior Stock – Primary
and the Junior Stock-Secondary, collectively.
“Pari Passu Stock - Primary” shall mean the Series K
Participating Convertible Preferred Stock with respect to the Series K Primary
Liquidation Preference, Series J Participating Convertible Preferred Stock with
respect to the Series J Primary Liquidation Preference, Series I Participating
Convertible Preferred Stock with respect to the Series I Primary Liquidation
Preference, Series G Participating Convertible Preferred Stock with respect to
the Series G Primary Liquidation Preference, the Series F Participating
Convertible Preferred Stock with respect to the Series F Primary Liquidation
Preference and any other class or series of capital stock of the Corporation
authorized on or after the Original Issue Date ranking pari passu with the
Series L Preferred Stock in respect of the right to receive dividends or with
respect to the Primary Liquidation Preference, to participate in any
distribution upon liquidation, dissolution or winding-up of the affairs of the
Corporation, as applicable.
“Pari Passu Stock - Secondary” shall mean the Series
K Participating Convertible Preferred Stock with respect to the Series K
Secondary Liquidation Preference, Series J Participating Convertible Preferred
Stock with respect to the Series J Secondary Liquidation Preference, Series I
Participating Convertible Preferred Stock with respect to the Series I
Secondary Liquidation Preference, Series G Participating Convertible Preferred
Stock with respect to the Series G Secondary Liquidation Preference, the Series
H Participating Convertible Preferred Stock with respect to the Series H
Primary Liquidation Preference, and any other class
or series of capital stock of the Corporation authorized on or after the
Original Issue Date ranking pari passu with the Series L Preferred Stock in
respect of the right to receive dividends or with respect to the Secondary
Liquidation Preference, to participate in any distribution upon liquidation,
dissolution or winding-up of the affairs of the Corporation, as applicable.
“Pari Passu Stock” shall mean the Pari Passu Stock –
Primary and the Pari Passu Stock -Secondary, collectively.
“Participating Preferred Stock” shall mean the Series F, G, H, I, J, K and L
Participating Convertible Preferred Stock, par value $0.001 per share, and any
other series of Preferred Stock of the Corporation that participates with the
Common Stock in liquidation after payment of all liquidation preferences.
“Preferred Stock”
shall mean the preferred stock, par value $0.001 per share, of the
Corporation, however designated.
“Senior Stock - Primary” shall mean any class or
series of capital stock of the Corporation authorized on or after the Original
Issue Date ranking senior to the Series L Preferred Stock in respect of the
right to receive dividends or with respect to the Primary Liquidation
Preference, to participate in any distribution upon liquidation, dissolution or
winding-up of the affairs of the Corporation, as applicable.
“Senior Stock - Secondary” shall mean the Series K
Participating Convertible Preferred Stock with respect to the Series K Primary
Liquidation Preference, the Series J Participating Convertible Preferred Stock
with respect to the Series J Primary Liquidation Preference, the Series I
Participating Convertible Preferred Stock with respect to the Series I Primary
Liquidation Preference, the Series G Participating Convertible Preferred Stock
with respect to the Series G Primary Liquidation Preference, the Series F
Participating Convertible Preferred Stock with respect to the Series F Primary
Liquidation Preference and any other class or series of capital stock of the
Corporation authorized on or after the Original Issue Date ranking senior to
the Series L Preferred Stock in respect of the right to receive dividends or
with respect to the Secondary Liquidation Preference, to participate in any
distribution upon liquidation, dissolution or winding-up of the affairs of the
Corporation, as applicable.
“Senior Stock” shall mean the Senior Stock – Primary
and the Senior Stock -Secondary, collectively.
“Series F Adjustment Factor” shall mean the fraction
designated as “Adjustment Factor” in the Certificate of Designations, Preferences
and Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations and Restrictions of the Series F Participating
Convertible Preferred Stock.
“Series F Primary Liquidation Preference” shall mean
the liquidation proceeds payable to the Series F Participating Convertible
Preferred Stock of the Corporation designated as “Primary Liquidation
Preference” in the Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights and Qualifications,
Limitations and Restrictions of the Series F Participating Convertible
Preferred Stock.
“Series F Secondary Liquidation Preference” shall
mean the liquidation proceeds payable to the Series F Participating Convertible
Preferred Stock of the Corporation designated as “Secondary Liquidation
Preference” in the Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights and Qualifications,
Limitations and Restrictions of the Series F Participating Convertible
Preferred Stock.
“Series G Controlling Adjustment Factor” shall mean
the smallest fraction designated as “Adjustment Factor” in the various
Certificates of Designations, Preferences and Relative, Participating, Optional
and Other Special Rights and Qualifications, Limitations and Restrictions of
each of the sub-series of the Series G Participating Convertible Preferred
Stock.
“Series G Primary Liquidation Preference” shall mean
the liquidation proceeds payable to each of the sub-series of the Series G
Participating Convertible Preferred Stock of the Corporation designated as
“Primary Liquidation Preference” in the Certificate of Designations,
Preferences and Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations and Restrictions of the Series G Participating
Convertible Preferred Stock.
“Series G Secondary Liquidation Preference” shall
mean the liquidation proceeds payable to the Series G Participating Convertible
Preferred Stock of the Corporation designated as “Secondary Liquidation
Preference” in the Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights and Qualifications,
Limitations and Restrictions of the Series G Participating Convertible
Preferred Stock.
“Series H Adjustment Factor” shall mean the fraction
designated as “Adjustment Factor” in the Certificate of Designations,
Preferences and Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations and Restrictions of the Series H Participating
Convertible Preferred Stock.
“Series H Primary Liquidation Preference” shall mean
the liquidation proceeds payable to the Series H Participating Convertible
Preferred Stock of the Corporation designated as “Primary Liquidation
Preference” in the Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights and Qualifications,
Limitations and Restrictions of the Series H Participating Convertible
Preferred Stock.
“Series I Adjustment Factor” shall mean the fraction
designated as “Adjustment Factor” in the Certificate of Designations,
Preferences and Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations and Restrictions of the Series I Participating
Convertible Preferred Stock.
“Series I Primary Liquidation Preference” shall mean
the liquidation proceeds payable to the Series I Participating Convertible
Preferred Stock of the Corporation designated as “Primary Liquidation
Preference” in the Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights and Qualifications,
Limitations and Restrictions of the Series I Participating Convertible
Preferred Stock.
“Series I Secondary Liquidation Preference” shall
mean the liquidation proceeds payable to the Series I Participating Convertible
Preferred Stock of the Corporation designated as “Secondary Liquidation
Preference” in the
Certificate of Designations, Preferences and
Relative, Participating, Optional and Other Special Rights and Qualifications,
Limitations and Restrictions of the Series I Participating Convertible
Preferred Stock.
“Series J Adjustment Factor” shall mean the fraction
designated as “Adjustment Factor” in the Certificate of Designations,
Preferences and Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations and Restrictions of the Series J Participating
Convertible Preferred Stock.
“Series J Primary Liquidation Preference” shall mean
the liquidation proceeds payable to the Series J Participating Convertible
Preferred Stock of the Corporation designated as “Primary Liquidation
Preference” in the Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights and Qualifications, Limitations
and Restrictions of the Series J Participating Convertible Preferred Stock.
“Series J Secondary Liquidation Preference” shall
mean the liquidation proceeds payable to the Series J Participating Convertible
Preferred Stock of the Corporation designated as “Secondary Liquidation
Preference” in the Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights and Qualifications,
Limitations and Restrictions of the Series J Participating Convertible
Preferred Stock.
“Series K Adjustment Factor” shall mean the fraction
designated as “Adjustment Factor” in the Certificate of Designations,
Preferences and Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations and Restrictions of the Series K Participating
Convertible Preferred Stock.
“Series K Primary Liquidation Preference” shall mean
the liquidation proceeds payable to the Series K Participating Convertible
Preferred Stock of the Corporation designated as “Primary Liquidation Preference”
in the Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights and Qualifications, Limitations and
Restrictions of the Series K Participating Convertible Preferred Stock.
“Series K Secondary Liquidation Preference” shall
mean the liquidation proceeds payable to the Series K Participating Convertible
Preferred Stock of the Corporation designated as “Secondary Liquidation
Preference” in the Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights and Qualifications, Limitations and
Restrictions of the Series K Participating Convertible Preferred Stock.
2. Voting.
Except as otherwise required by the General Corporation Law or provided
in this Certificate, the shares of Series L Preferred Stock shall not be
entitled to vote.
3. Preferences on
Liquidation, Dissolution etc.
(a) Liquidation Preference.
(i) Upon
any dissolution, liquidation, or winding up of the Corporation, whether
voluntary or involuntary, after payment of all amounts owing to holders of any
Senior Stock - Primary, the holders of outstanding shares of Series L 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, the
Series F Participating Convertible Preferred Stock with respect to the Series F
Secondary Liquidation Preference, the Series G Participating Convertible
Preferred Stock with respect to the Series G Secondary Liquidation Preference,
the Series H Participating Convertible Preferred Stock with respect to the
Series H Primary Liquidation Preference, the Series I Participating Convertible
Preferred Stock with respect to the Series I Secondary Liquidation Preference,
the Series J Participating Convertible Preferred Stock with respect to the
Series J Secondary Liquidation Preference, the Series K Participating
Convertible Preferred Stock with respect to the Series K Secondary Liquidation
Preference, or any other Junior Stock – Primary or Pari-Passu Stock –
Secondary, an amount equal to $5,000 per share, subject to appropriate
adjustment for stock splits, stock dividends, recapitalizations,
reclassifications and similar events which increase or decrease the number of
outstanding shares of Series L Preferred Stock (the “Primary 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 L Preferred Stock, the
Series K Participating Convertible Preferred Stock, the Series J Participating
Convertible Preferred Stock, the Series I Participating Convertible Preferred
Stock, the Series G Participating Convertible Preferred Stock, the Series F
Participating Convertible Preferred Stock and any other Pari Passu Stock -
Primary shall be insufficient to permit the payment in full to them of the
Primary Liquidation Preference, the Series F Primary Liquidation Preference,
the Series G Primary Liquidation Preference, the Series I Primary Liquidation
Preference, the Series J Primary Liquidation Preference, the Series K Primary
Liquidation Preference, and any other liquidation preferences ranking pari
passu therewith and owing with respect to any other Pari Passu Stock - Primary,
then the entire assets of the Corporation so to be distributed shall be
distributed ratably based upon their respective pari passu liquidation
preferences among such holders of the Series L Preferred Stock, the Series K
Participating Convertible Preferred Stock, the Series J Participating
Convertible Preferred Stock, the Series I Participating Convertible Preferred
Stock, the Series G Participating Convertible Preferred Stock, the Series F
Participating Convertible Preferred Stock and any other Pari Passu Stock -
Primary.
(ii)
Upon any dissolution, liquidation, or winding up of the Corporation,
whether voluntary or involuntary, after payment of the Primary Liquidation
Preference, the Series F Primary Liquidation Preference, the Series G Primary
Liquidation Preference, the Series I Primary Liquidation Preference, the Series
J Primary Liquidation Preference, the Series K Primary Liquidation Preference
and any other amounts owing to holders of any other Pari Passu Stock - Primary
and Senior Stock – Secondary, the holders of outstanding shares of Series L
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 Junior Stock, an amount equal to $10,000 per
share, subject to appropriate adjustment for stock splits, stock dividends,
recapitalizations, reclassifications and similar events which increase or
decrease the number of outstanding shares of Series L Preferred Stock (the
“Secondary Liquidation Preference” and together with the Primary Liquidation
Preference, the “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 L Preferred Stock, the
Series K Participating Convertible Preferred Stock, the Series J Participating
Convertible Preferred Stock, the Series I Participating Convertible Preferred
Stock, the Series G Participating Convertible Preferred Stock, the Series H
Participating Convertible Preferred Stock and any other Pari Passu Stock -
Secondary shall be insufficient to permit the payment in full to them of the
Secondary Liquidation Preference, the Series K Secondary Liquidation
Preference, the Series J Secondary Liquidation Preference, the Series I
Secondary Liquidation Preference, the Series G Secondary Liquidation Preference
and the Series H Primary Liquidation Preference and any other liquidation
preferences ranking pari passu therewith and owing with respect to any other
Pari Passu Stock - Secondary, then the entire assets of the Corporation so to
be distributed shall be distributed ratably based upon their respective pari passu
liquidation preferences among such holders of the Series L Preferred Stock, the
Series K Participating Convertible Preferred Stock, the Series J Participating
Convertible Preferred Stock, the Series I Participating Convertible Preferred
Stock, the Series G Participating Convertible Preferred Stock, the Series H
Participating Convertible Preferred Stock and any other Pari Passu Stock -
Secondary.
(b) Remaining Liquidating Distributions. After payment has been made in full to the
holders of Series L Preferred Stock, the Senior Stock, the Pari Passu Stock and
any Junior Stock of their liquidation preferences, all remaining assets of the
Corporation available for distribution shall be distributed ratably to the
holders of the Participating Preferred Stock and the holders of the Common
Stock, assuming for purposes of such calculation that all outstanding shares of
Participating Preferred Stock are converted into shares of Common Stock at
their then applicable conversion rates and that the Convertibility Date shall
have occurred.
(c) Assets other than Cash.
If assets other than cash are to be distributed to any holders of Series
L Preferred Stock or Common Stock pursuant to Article 3 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 Series L Preferred Stock or Common Stock pursuant
to Article 3 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 3 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) Amount Payable in Mergers, etc. The following events shall be treated as a liquidation,
dissolution or winding up within the meaning of this Article 3: (i) a consolidation, merger or
reorganization of the Corporation with or into any other corporation or
corporations in which the stockholders of the Corporation immediately before
such event shall own fifty percent (50%) or less (calculated on an as converted
basis, fully diluted) of the voting securities of the surviving corporation,
(ii) any transaction or series of related transactions in which at least
fifty percent (50%) of the Corporation’s voting power is transferred, (iii) the
sale, transfer or lease of all or substantially all of the assets of the
Corporation or (iv) any acquisition of shares of capital stock of the
Corporation (whether through a direct issuance by the Corporation, negotiated
stock purchase, a tender for such shares, merger, consolidation or otherwise)
by any party or group that did not beneficially own a majority of the voting
power of the outstanding shares of capital stock of the Corporation immediately
prior to such purchase, the effect of which is that such party or group
beneficially owns at least a majority of such voting power immediately after
such event (each a “Change of Control Transaction”). All consideration payable to the stockholders of the Corporation
in connection with any such Change of Control Transaction, or all consideration
payable to the Corporation and distributable to its stockholders, together with
all other available assets of the Corporation (net of obligations owed by the
Corporation that are senior to the Series L Preferred Stock), in connection
with any such Change of Control Transaction, shall be, as applicable, paid by
the purchaser to the holders of, or distributed by the Corporation in
redemption (out of funds legally available therefor) of, the Series L Preferred
Stock, the Pari Passu Stock and any Junior Stock in accordance with the
preferences and priorities set forth in Articles 3(a) and 3(b) above, with such
preferences and priorities specifically intended to be applicable in any such
Change of Control Transaction as if such transaction were a liquidation,
dissolution or winding up within the meaning of this Article 3. In furtherance of the foregoing, the
Corporation shall take such actions as are necessary to give effect to the
provisions of this Article 3(d), including causing the definitive
agreement relating to such Change of Control Transaction to provide for a rate
at which the shares of Series L Preferred Stock are converted into or exchanged
for cash, new securities or other property that gives effect to the provisions
of this Article 3, or otherwise causing such shares to be redeemed in a manner
consistent with the provisions of this Article 3. The amount deemed distributed
to the holders of Series L Preferred Stock upon any such transaction shall be
the cash or the value of the property, rights or securities distributed to such
holders by the Corporation or the acquiring person, firm or other entity, as
applicable. The provisions of this
Article 3(d) shall not apply to any reorganization, merger or consolidation
involving (1) only a change in the state of incorporation of the Corporation or
(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 which does
not change the rights, privileges or preferences or the relative proportions of
the stockholders as to each other as to before such event.
(e) Election to Convert. Notwithstanding anything contained
herein to the contrary, a holder of shares of Series L Preferred Stock may
elect to convert any or all of such shares of Series L Preferred Stock into
Common Stock at any time after the Convertibility Date 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 3 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 below.
4. Conversion
Rights. Conversion of the Series L 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 Article 4, any
shares of Series L Preferred Stock may, at the option of the holder, be
converted at any time from and after the Convertibility Date into fully-paid
and nonassessable shares of Common Stock.
The number of shares of Common Stock to which a holder of Series L
Preferred Stock shall be entitled upon conversion shall be the product obtained
by multiplying the “Conversion Rate” then in effect (determined as provided in
Article 4(b)) by the number of shares of Series L Preferred Stock being
converted.
(b) Conversion Rates. The
conversion rate in effect at any time for conversion of the Series L Preferred
Stock (the “Conversion Rate”) shall be the quotient obtained by dividing $5,000
by the “Conversion Price,” calculated as provided in Article 4(c).
(c) Applicable Conversion Prices.
The Conversion Price shall initially be $0.16130000 (the “Conversion
Price”). The initial Conversion Price
shall be adjusted from time to time in accordance with this Article 4. All references to a Conversion Price herein
shall mean the Conversion Price as so adjusted.
(d) Mechanics of Conversion.
Each holder of Series L Preferred Stock who wishes to convert the same
into shares of Common Stock pursuant to this Article 4 shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or any transfer agent for the Series L 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 Series L 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 date of such conversion) any
declared and unpaid dividends on the shares of Series L 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 Series L 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
Series L 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
Series L 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 L Preferred
Stock is issued (the “Original Issue Date”) effect a subdivision of the outstanding
Common Stock without a corresponding subdivision of the Series L Preferred
Stock, the Conversion Price in effect immediately before that subdivision with
respect to the Series L Preferred Stock shall be
proportionately decreased.
Conversely, if the Corporation shall at any time or from time to time
after the Original Issue Date combine the outstanding shares of Common Stock
into a smaller number of shares without a corresponding combination of the
Series L Preferred Stock, the Conversion Price in effect immediately before the
combination with respect to the Series L Preferred Stock shall be
proportionately increased. Any
adjustment under this Article 4(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 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, unless an equivalent dividend is
paid to the holders of the Series L Preferred Stock in respect of such stock,
the 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 multiplying each
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 Conversion
Price shall be recomputed accordingly as of the close of business on such
record date and thereafter each Conversion Price shall be adjusted pursuant to
this Article 4(f) to reflect the actual payment of such dividend or
distribution; and provided further, that if an adjustment has been made to any
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 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, unless an equivalent dividend is paid to
the holders of the Series L Preferred Stock in respect of such stock, provision
shall be made so that the holders of Series L 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 Series L 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 with respect to the rights of the holders of such shares of
Series L 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 Original Issue Date, the
Common Stock issuable upon the conversion of the Series L 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, consolidation or sale of assets provided for elsewhere in
this Article 4), in any such event each holder of shares of Series L 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 Series L 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) Sale of Shares Below Applicable
Conversion Price.
(1) If at any time or from time to time
after the Original Issue Date, the Corporation issues or sells, or is deemed by
the express provisions of this subsection (i) to have issued or sold,
Additional Shares of Common Stock (as hereinafter defined), other than (i)
pursuant to a transaction described in Articles 4(e)-(h) 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
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 Conversion Price, then in each such case the then existing
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 Conversion Price by a fraction (the “Adjustment Factor”)
(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)(2)) by the Corporation for the total
number of Additional Shares of Common Stock so issued would purchase at such
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). Notwithstanding the foregoing, if at any time or from time to
time after the Original Issue Date, the Corporation adjusts the conversion
price of the Series F Participating Convertible Preferred Stock, any sub-series
of the Series G Participating Convertible Preferred Stock, the Series H
Participating Convertible Preferred Stock, the Series I Participating
Convertible
Preferred Stock, the Series J Participating Convertible Preferred Stock or the
Series K Participating Convertible Preferred Stock or pursuant to Article
4(i)(1) of the Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights and Qualifications,
Limitations and Restrictions of such Preferred Stock, the Conversion Price
shall be reduced (in lieu of any applicable adjustment pursuant to the first
sentence of this subsection (i)(1)), as of the opening of business on the date
of such adjustment, to a price determined by multiplying the Conversion Price
in effect prior to the applicable issue or sale (or deemed issue or sale) by
the smallest of the Adjustment Factor, the Series F Adjustment Factor, the
Series G Controlling Adjustment Factor, the Series H Adjustment Factor, the
Series I Adjustment Factor, the Series J Adjustment Factor and the Series K
Adjustment Factor, as applicable.
(2) For the purpose of making any
adjustment required under this Article 4(i), 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.
(3) For the purpose of the adjustment
required under this Article 4(i), 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 Conversion
Price, 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 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(i) shall have the effect of increasing the Conversion Price to an
amount which exceeds the lower of (i) the Conversion Price that was in effect
on the original adjustment date or (ii) the Conversion Price 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 the Conversion Price, 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, the Conversion Price as
adjusted upon the issuance of such rights, options or Convertible Securities
shall be readjusted to the 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 Series L Preferred Stock.
(4) “Additional Shares of Common Stock”
shall mean, with respect to shares of Series L Preferred Stock, all shares of
Common Stock issued by the Corporation or deemed to be issued pursuant to this
Article 4(i), 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 10,000 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 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 2,000,000 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, (4) additional
convertible debt or equity issued in exchange for, upon conversion of, or as
paid-in-kind interest payment on, the 7.50% convertible notes due 2007 of
Allied Riser Communications Corporation outstanding on the Original Issue Date
and in accordance with the terms of such convertible notes as in effect on the
Original Issue Date, (5) up to 3,000 shares of Series I Participating
Convertible Preferred Stock and the shares of Common Stock issued or issuable
upon the conversion thereof, (6) up to 3,891 shares of Series J Participating
Convertible Preferred Stock and the shares of Common Stock issued or issuable
upon the conversion thereof, (7) up to 2,600 shares of Series K Participating
Convertible Preferred Stock and the shares of Common Stock issued or issuable
upon the conversion thereof, and (8) up to 185.4 shares of Series L Preferred
Stock and the shares of Common Stock issued or issuable upon the conversion
thereof.
(5) 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(i), into the Aggregate
Consideration received, or deemed to have been received by the Company for such
issue under this Article 4(i), for such Additional Shares of Common Stock.
(j) Accountants’ Certificate of
Adjustment. In each case of an
adjustment or readjustment of the Conversion Price for the number of shares of
Common Stock or other securities issuable upon conversion of the Series L
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 Series L 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 L Preferred Stock.
(k) 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, any Change of Control
Transaction, any sale of all or substantially all of the Corporation’s assets
or any voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, the Corporation shall mail to each holder of Series L 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 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.
(l) Automatic Conversion.
(1) On or after the Convertibility Date, each share of Series L
Preferred Stock shall automatically be converted into shares of Common Stock,
based on the Conversion Price, upon the affirmative election (whether made
before or after the Convertibility Date) of the holders of at least eighty
percent (80%) of the outstanding shares of the Series L Preferred Stock, the
Series K Participating Convertible Preferred Stock, the Series J Participating
Convertible Preferred Stock, the Series I Participating Convertible Preferred
Stock and Series G Participating Convertible Preferred Stock voting together as
a single class, provided, however, that the Series L Preferred Stock shall not
be converted pursuant to the first sentence of this Section 4(l)(1) unless all
of the shares of the Series K Participating Convertible Preferred Stock, the
Series J Participating Convertible Preferred Stock, the Series I Participating
Convertible Preferred Stock and the Series G Participating Convertible
Preferred Stock are automatically converted into shares of Common Stock either
before or at the same time as the Series L Preferred Stock is converted. Each share of Series L Preferred Stock shall
automatically be converted into shares of Common Stock based on the Conversion
Price 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 Corporation in which (i) the aggregate pre-money valuation of the
Corporation is at least five hundred million dollars ($500,000,000); and (ii)
the gross cash proceeds (before underwriting discounts, commissions and fees)
are at least fifty million dollars ($50,000,000) (a “Qualified Offering”). Upon such automatic conversion, any declared
and unpaid dividends shall be paid in accordance with the provisions of Article
5.
(2) On or after the Convertibility Date,
upon the occurrence of an event specified in paragraph (1) above, the
outstanding shares of Series L Preferred Stock 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 L Preferred
Stock 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 L Preferred Stock the holders of Series L
Preferred Stock shall surrender the certificates representing such shares at
the office of the Corporation or any transfer agent for the Series L Preferred
Stock. 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 Series L
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 unpaid dividends on such
shares of Series L Preferred Stock being converted, to and including the date
of such conversion.
(m) Fractional Shares. No
fractional shares of Common Stock shall be issued upon conversion of Series L
Preferred Stock. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Series L 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.
(n) 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
L 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 L 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 L 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.
(o) Notices. Any notice
required by the provisions of this Article 4 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.
(p) 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.
(q) Dilution or Impairment.
The Corporation shall not, without the appropriate vote of the
stockholders under the General Corporation Law of the State of Delaware and
Article 7 of this Certificate, 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 Series L Preferred Stock against dilution or other
impairment.
5. Dividend Rights.
(a) In the event dividends are paid on any share of Common Stock,
Pari Passu Stock or Junior Stock, the Company shall pay an additional dividend
on all outstanding shares of Series L 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 Common Stock, Pari Passu Stock or Junior Stock.
(b) The provisions of Article 5(a) shall not apply to a
dividend payable in Common Stock.
6. Residual Rights.
All rights accruing to the outstanding shares of the
Corporation not expressly provided for to the contrary herein or in
Article IV of the Certificate of Incorporation shall be vested in the
Common Stock.
7. Amendment.
No provision of this Certificate may be amended, modified
or waived without the written consent or affirmative vote of the holders of at
least a majority of the then outstanding shares of the Series L Preferred
Stock.
IN WITNESS WHEREOF, Cogent Communications Group, Inc. has caused this Certificate of Designations
to be executed and delivered in its name and on its behalf on September 15,
2004.
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COGENT COMMUNICATIONS GROUP, INC.
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By:
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/s/David Schaeffer
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Name: David Schaeffer
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Title: Chief
Executive Officer
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