Document:

Exhibit 4.1

 

SUBORDINATED NOTE

 

THE
SECURITIES REPRESENTED BY 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 OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH
ACT OR SUCH LAWS.

 

COGENT COMMUNICATIONS GROUP, INC.

 

	
  $10,000,000

  	
   

  	
  February 24, 2005

  

 

Cogent
Communications Group, Inc., a Delaware corporation (“Payor”), for value
received, promises to pay to the order of Columbia Ventures Corporation (“Payee”
or the “Subordinated Creditor”) the principal amount of Ten Million Dollars
($10,000,000), together with accrued interest thereon, each calculated and
payable only as and to the extent set forth below in this Subordinated Note
(this “Note”).  The principal and
interest on this Note is payable in lawful money of the United States of
America in immediately available funds at the Payee’s principal business
address in the United States on record with the Payor or in such other manner
and at such other place as the Payor and Payee may mutually agree.

 

1.                                       Payment
of Principal and Interest

 

1.1                                 Calculation
and Payment of Interest.

 

Interest
on the principal balance of this Note outstanding from time to time until paid
in full shall accrue at the rate of (a) for the period from the date hereof
through August 24, 2005, 10% per annum, (b) for the period beginning on August  24, 2005 through February 24 2006, 11.0% per
annum, (c) for the period beginning on February 24 , 2006  through August 24, 2006, 12% per annum, (d)
for the period beginning on August 24, 2006 through  February 24, 2007, 13% per annum, (e) for the
period beginning on February 24, 2007 through 
August 24, 2007, 14% per annum, (f) for the period beginning on August
24, 2007 through  February 24, 2008, 15%
per annum, (g) for the period beginning on February 24, 2008 through  August 24, 2008, 16% per annum, (h) for the
period beginning on August 24, 2008 through 
the Maturity Date, 17% per annum, 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 on the Maturity Date (as defined herein).

 

1.2                                 Payment
on Maturity Date.  The principal
balance of, and all accrued and unpaid interest on, this Note shall be payable
immediately upon the earlier   of (i)
February 24, 2009 and (ii) the date upon which a Liquidity Event (as defined
herein) occurs.

 

1.3                                 Optional
Prepayment.      (a)
      Except as otherwise provided herein, Payor
may at its option at any time, without premium or penalty, prepay all or any
portion of this Note.

 

 

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

 

                                                1.4                                 Payment
Only on Business Days.  Any payment
hereunder which, but for this Section 1.4, would be payable on a day that is
not a Business Day, shall instead be due and payable on the first Business Day
next following such date for payment.

 

2.                                       Events
of Default

 

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

 

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

 

(ii)                                  Payor
voluntarily liquidates;

 

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

 

(iv)                              a
court of competent jurisdiction enters an order or decree (that remains
unstayed 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 its
property, or (c) orders the liquidation of Payor.

 

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

 

 3.                                    Subordination

 

3.1                                 Note
Subordinated 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 of
and the interest on this Note and any claim for rescission of the purchase of
this Note, and any claim that is the equivalent of or substitute for principal
of or interest on this Note, for damages arising from the purchase of this Note
or for reimbursement or contribution on account of such a claim, and all other
payments with respect to or on account of this Note (collectively, the “Subordinated
Debt”) are hereby expressly made subordinate and subject in 

 

2

 

right
of payment to the prior indefeasible payment in full in cash of all Senior
Indebtedness.  The existing and hereafter
acquired liens and security interests of the holders of Senior Indebtedness in
any collateral securing all or any portion of the Senior Indebtedness shall be
senior, regardless of the time or method of perfection, to any hereafter
acquired liens and security interests, if any, of the Subordinated Creditor (or
any agent therefor) in the collateral, if any, securing all or any portion of
the Subordinated Debt.  This Section 3
constitutes a continuing offer to all Persons who become holders of, or
continue to hold, Senior Indebtedness, each of whom is an obligee hereunder and
is entitled to enforce such holder’s rights hereunder, subject to the
provisions hereof, without any act or notice of acceptance hereof or reliance
hereon.  For purposes of this Section 3,
Senior Indebtedness shall not be deemed to have been paid and shall be deemed
to be outstanding in full until the termination of all commitments or other
obligations by any holder thereof and unless all such holders shall have
received indefeasible payment in full in cash of all obligations under or in
respect of Senior Indebtedness (including, without limitation, post-petition
interest, if any).

 

3.2                                 No
Payment on Note in Certain Circumstances.

 

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

 

(b)                                 The
Subordinated Creditor agrees that, so long as payments or distributions for or
on account of the Subordinated Debt are not permitted pursuant to this Section
3, the Subordinated Creditor will not take, sue for, ask or demand from Payor
payment of all or any amounts under or in respect of this Note, or commence, or
join with any creditor in commencing, directly or indirectly cause Payor to
commence, or assist Payor in commencing, any proceeding referred to in Section
3.3, and the Subordinated Creditor shall not take or receive from Payor,
directly or indirectly or on its behalf, in cash or other property or by
set-off or in any other manner, including, without limitation, from or by way of
collateral, payment of all or any amounts under or in respect of the
Subordinated Debt.  In the event that,
notwithstanding the foregoing provisions of this Section 3.2, any payment or
distribution of any kind or character, whether in cash, property or securities,
shall be received from Payor by the Subordinated Creditor while a Payment
Restriction exists for or on account of or in respect of the Subordinated Debt
before all Senior Indebtedness is indefeasibly paid in full in cash, such
payment or distribution shall be received and held in trust for, and shall
immediately be paid over (in the same form as so received, to the extent
practicable, and with any necessary endorsement) to the holders of the Senior
Indebtedness remaining unpaid or their representative or representatives, or to
the trustee or trustees under any such indenture or agreement under which any
Senior 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 the
payment or prepayment of Senior Indebtedness.

 

3.3                                 Dissolution;
Liquidation; Bankruptcy; Acceleration. 
In the event of (i) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
proceeding 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 

 

3

 

involuntary or whether or
not involving insolvency or bankruptcy, or (iii) any assignment for the
benefit of creditors or any other marshalling of assets or liabilities of the
Payor, or (iv) the acceleration of the Senior Indebtedness by reason of the
occurrence of a Senior Default (each such event, if any, herein sometimes
referred to as a “Proceeding”):

 

(a)                                  The
holders of all Senior Indebtedness shall first be entitled to receive payment
in full in cash of all Senior Indebtedness before any direct or indirect
payment may be made for or on account of payments under or in respect of the
Subordinated Debt, whether in cash, property or securities of any kind;

 

(b)                                 Any
payment or distribution of any kind or character, whether in cash, property or
securities (including any payment or distribution that may be payable by reason
of any other indebtedness of Payor being subordinated to payment of the
Subordinated Debt), to which the Subordinated Creditor would be entitled except
for the provisions of this Section 3, shall be paid and delivered by the
liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or other trustee or agent, directly to the holders of the Senior
Indebtedness or their representative or representatives, or to the trustee or
trustees under any indenture under which any instrument evidencing any of such
Senior 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 the
payment or prepayment of Senior Indebtedness, to the extent necessary to make
payment in full of all Senior Indebtedness remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of such Senior
Indebtedness.

 

(c)                                  The
holders of the Senior Indebtedness are hereby irrevocably authorized and
empowered (in their own names or in the name of the Subordinated Creditor or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution referred to in paragraph (b) above and
give acquittance therefor and to file and vote claims and proofs of claim and
take such other action (including, without limitation, voting the amounts owing
under the Subordinated Debt or enforcing any security interest or other lien
securing payment of the amounts owing under the Subordinated Debt) as they may
deem necessary or advisable for the exercise or enforcement of any of the
rights or interests of the holders of the Senior Indebtedness hereunder, provided
no such acquittance shall release liability of Payor to the holders of this
Note subject, nevertheless, to the provision of this Section 3.

 

(d)                                 The
Subordinated Creditor shall duly and promptly take such action as the holders
of Senior Indebtedness may reasonably request to execute and deliver to the
holders of Senior Indebtedness such powers of attorney, assignments, or other
instruments as the holders of Senior Indebtedness may reasonably request in
order to enable the holders of Senior Indebtedness to enforce any and all
claims with respect to, and any security interests and other liens securing
payment of, the amounts owing under the Subordinated Debt.

 

(e)                                  In
the event that, any payment or distribution of any kind or character, whether
in cash, property or securities (including any payment or distribution that may
be payable by reason of any other indebtedness of Payor being subordinated to
payment of the Subordinated Debt), shall be received by the Subordinated
Creditor for or on account of or in respect of the Subordinated Debt in
contravention of this Section 3.3 before all Senior 

 

4

 

Indebtedness is
indefeasibly paid in full in cash, such payment or distribution shall be
received and held in trust for, and shall immediately be paid over (in the same
form as so received, to the extent practicable, and with any necessary
endorsement) to the holders of the Senior Indebtedness remaining unpaid or
their representative or representatives, or to the trustee or trustees under
any such indenture or agreement under which any Senior 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 the payment or prepayment of
Senior Indebtedness, until all Senior Indebtedness shall have been indefeasibly
paid in full in cash, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness.

 

(f)                                    The
Subordinated Creditor agrees to execute and deliver to each holder of the
Senior Indebtedness or its representative all such further instruments
confirming the authorization referred to in the foregoing clauses of Section
3.3.

 

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

 

3.5                                 No
Prepayments.  Except as expressly
permitted by the Senior Indebtedness Documents, under no circumstances shall
the Payor be entitled to make, or the Subordinated Creditor be entitled to
demand, take, receive, or retain, any prepayments of interest or principal on
account of any of the Subordinated Debt from the Payor prior to the indefeasible
payment in full in cash of the Senior Indebtedness and the termination of all
lending commitments under the Senior Indebtedness Documents.  Payments received by the Subordinated
Creditor after acceleration of the Subordinated Debt or the commencement of a
Collection Action otherwise permitted by the provisions of this Subordinated
Note shall not constitute a prohibited prepayment under this Section 3.5.

 

3.6                                 Amendment
of Subordinated Debt Documents. 
Until the Senior Indebtedness is indefeasibly paid in full in cash and
notwithstanding anything contained in the Subordinated Debt Documents or any
Senior Indebtedness Document to the contrary, the Subordinated Creditor shall
not agree to any amendment, modification or supplement to the Subordinated Debt
Documents the effect of which is to change or amend any other term of the
Subordinated Debt Documents if such change or amendment would result in a
Senior Default.

 

3.7                                 Modifications
to Senior Indebtedness.  The holders
of the Senior Indebtedness may at any time and from time to time without the
consent of or notice to the Subordinated Creditor, without incurring liability
to the Subordinated Creditor and without impairing or releasing the obligations
of the Subordinated Creditor under this Subordinated Note, change the manner or
place of payment or extend the time of payment of or renew or alter any of the
terms of the Senior Indebtedness, or amend in any manner any agreement, note,
guaranty or other instrument evidencing or securing or otherwise relating to
the Senior Indebtedness.

 

3.8                                 Sale,  Transfer.  The Subordinated Creditor shall not sell,
assign, pledge, dispose of or otherwise transfer all or any portion of the
Subordinated Debt or any Subordinated Debt Document (a) without giving prior written notice of such action to
Payor, and (b) unless prior to the
consummation of any such action, the transferee thereof shall execute and
deliver to Payor an 

 

5

 

agreement (that shall be
enforceable by the holders of Senior Indebtedness) providing for the continued
subordination and forbearance of the Subordinated Debt to the Senior
Indebtedness as provided herein and for the continued effectiveness of all of
the rights of the holders of the Senior Indebtedness arising under the
provisions of this Subordinated Note. 
Notwithstanding the failure to execute or deliver any such agreement,
the subordination effected hereby shall survive any sale, assignment, pledge,
disposition or other transfer of all or any portion of the Subordinated Debt,
and the terms of this Subordinated Note shall be binding upon the successors
and assigns of the Subordinated Creditor.

 

3.9                                 Reserved.

 

3.10                           Obligations
of Payor Unconditional.  Nothing
contained in this Section 3 or elsewhere in this Note is intended to or shall
impair, as among Payor, its creditors (other than the holders of Senior
Indebtedness) and the Subordinated Creditor, the obligation of Payor, which is
absolute and unconditional, to pay to the Subordinated Creditor the principal
of and interest on and all other amounts due under this Note in accordance with
its terms, or is intended to or shall affect the relative rights of the
Subordinated Creditor and creditors of Payor (other than the holders of the
Senior Indebtedness), nor shall anything herein prevent the Subordinated
Creditor from exercising all remedies otherwise permitted by applicable law
upon default under this Note, subject to the provisions of this Section 3 and
to the rights of holders of Senior Indebtedness to receive distributions and
payments otherwise payable to the Subordinated Creditor.

 

3.11                           Reliance
on Judicial Order or Certificate of Liquidating Agent.  Upon any payment or distribution of assets of
Payor referred to in this Section 3, the Subordinated Creditor shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, delivered to the Subordinated Creditor, for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
Payor, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to Section 3 of
this Note.  Such reliance shall not affect
the rights of the holders of the Senior Indebtedness.

 

3.12                           Subordination
Rights Not Impaired by Acts or Omissions of Payor or Holders of Senior
Indebtedness.  No right of any
present or future holders of any Senior Indebtedness to enforce subordination
as provided herein will at any time in any way be prejudiced or impaired by any
act or failure to act on the part of Payor or by any act or failure to act by
any such holder, or by any act, failure to act or noncompliance by Payor, the
holders of Senior Indebtedness or their respective agents with the terms of
this Note, regardless of any knowledge thereof which any such holder or Payor
may have or otherwise be charged with. 
The provisions of this Section 3 are intended for the benefit of and
shall be enforceable directly by the holders of the Senior Indebtedness.

 

3.13                           Further
Assurances.  The Subordinated
Creditor and Payor each will, at Payor’s expense and at any time and from time
to time, promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that the
holders of Senior Indebtedness may request, in order to protect any right or
interest 

 

6

 

granted
or purported to be granted hereby or to enable the holders of Senior
Indebtedness to exercise and enforce their rights and remedies hereunder.

 

3.14                           No
Contrary Actions.  Payor agrees that
it 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                           Obligations
Hereunder Not Affected.  All rights
and interests of the holders of Senior Indebtedness hereunder, and all
agreements and obligations of the Subordinated Creditor and Payor under this
Section 3, shall remain in full force and effect irrespective of:

 

(i)                                     any lack of validity or enforceability of any successor
guaranty of any Senior Indebtedness Document;

 

(ii)                                  any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Senior Indebtedness, or any other amendment or waiver of or any
consent to any departure from any Senior Indebtedness Document, including,
without limitation, any increase in the Senior Indebtedness resulting from the
extension of additional credit to Payor or any of its Subsidiaries or
otherwise;

 

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

 

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

 

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

 

(vi)                              any other circumstance which might otherwise constitute a
defense available to, or a discharge of, Payor, the Subordinated Creditor or a
subordinated creditor.  The provisions of
this Section 3 shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Senior Indebtedness is rescinded
or must otherwise be returned by the holders of Senior Indebtedness upon the
insolvency, bankruptcy or reorganization of Payor or otherwise, all as though
such payment had not been made.

 

3.16                           Waiver.  The Subordinated Creditor and the Payor each
hereby waives promptness, diligence and notice of acceptance with respect to
any of the Senior Indebtedness and this Section 3 and any requirement that the
holders of Senior Indebtedness protect, secure, perfect or insure any security
interest or lien on any property subject thereto or exhaust any right or take
any action against Payor or any other person or entity or any collateral.

 

7

 

3.17                           No
Waiver; Remedies.  No failure on the
part of the holders of the Senior Indebtedness to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right.  The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.

 

3.18                           Continuing
Agreement; Assignments Under Senior Indebtedness
Agreements.  The provisions of this
Section 3 constitute a continuing agreement and shall (i) remain in full force
and effect until the earlier of (x) the date the obligation under this Note are
satisfied in full in accordance with this Section 1.2, or (y) the first
Business Day following  the indefeasible
payment in full in cash of the Senior Indebtedness, (ii) be binding upon the
Subordinated Creditor, Payor and their respective successors and assigns, and
(iii) inure to the benefit of, and be enforceable by, the holders of the Senior
Indebtedness and their successors, transferees and assigns.  Without limiting the generality of the foregoing
clause (iii), should holders of the Senior Indebtedness assign or otherwise
transfer all or any portion of their rights and obligations under any Senior
Indebtedness Document to any other Person, such other Person shall thereupon
become vested with all the rights in respect thereof granted to the holders of
the Senior Indebtedness herein or otherwise.

 

3.19                           Additional
Borrowing.  After the date hereof,
Payor shall not incur any Senior Indebtedness, including through the amendment,
modification, supplementation, refinancing or replacement of existing
indebtedness, other than in connection with the A/R-Secured Loan Agreement or
the Replacement Senior Secured Agreement.

 

4.                                       Certain
Definitions

 

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

 

“A/R-Secured
Loan Agreement” means an agreement pursuant to which Payor incurs up to $10
million in indebtedness secured 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 other than Saturdays, Sundays and days when commercial
banks are authorized or required by law to be closed for business in New York,
New York.

 

8

 

“Cisco
Credit Agreement” means the Third Amended and Restated Credit Agreement,
dated as of July 31, 2003, among Payor, Cogent Communications, Inc., Cogent
Internet, Inc., Cisco Systems Capital Corporation and the several financial
institutions from time to time party thereto, as such may be amended, modified,
supplemented, refinanced or replaced from time to time.

 

“Collection
Action” shall mean, with respect to the Subordinated Debt, (a) to sue for, take or receive from or on
behalf of the Payor of the Subordinated Debt, by set-off or in any other
manner, the whole or any part of any moneys that may now or hereafter be owing
by the Payor with respect to the Subordinated Debt; (b) to initiate or participate with others in any suit, action
or proceeding against the Payor (i) to
enforce payment of or to collect the whole or any part of the Subordinated Debt
or (ii) to commence judicial
enforcement of any of the rights and remedies under the Subordinated Debt
Documents or applicable law with respect to the Subordinated Debt; (c) to accelerate any Subordinated Debt; or
(d) to cause the Payor to honor any
redemption or mandatory prepayment obligation with respect to the Subordinated
Debt; or (e) to take any action to
realize upon any collateral securing the Subordinated Debt (if any) or to
exercise any other right or remedy with respect to such collateral.

 

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

 

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

 

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

 

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

 

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

 

“Person”
means any individual, firm, corporation, partnership, trust, incorporated or
unincorporated association,  joint
venture, association, joint-stock company, 
Governmental Authority  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 senior secured indebtedness as such may be amended,
modified, supplemented, refinanced or replaced from time to time.

 

9

 

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

 

“Senior
Indebtedness” means (i) all indebtedness
of the Payor outstanding under the Cisco Credit Agreement and the A/R-Secured
Loan Agreement, (ii)  all indebtedness of the Payor outstanding under the
Replacement Senior Secured Agreement and (iii) all obligations with
respect to the items listed in the preceding clauses (i) and (ii).  Notwithstanding anything to the contrary in
the foregoing, Senior Indebtedness will not include (a) any liability for
federal, state, local or other taxes owed or owing by Payor, (b) any
intercompany indebtedness of Payor to any of its subsidiaries, (c) any
accounts payable or other liability to trade creditors 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” means the Cisco Credit Agreement, the A/R-Secured
Loan Agreement, the Replacement Senior Secured Agreement and any other note,
agreement, indenture, mortgage, guaranty, pledge, security agreement or
instrument evidencing or securing Senior Indebtedness or pursuant to which
Senior Indebtedness is incurred, in each case as such agreement or document may
be amended, modified or supplemented from time to time, including without
limitation any agreement or document extending the maturity of, increasing the
aggregate commitments under, or refinancing, replacing or otherwise
restructuring all or any part of indebtedness under such agreement or document
or any replacement or successor agreement or document and whether by the same
or any other agent, lender or group of lenders, as any such document may be
amended, modified, supplemented, refinanced or replaced from time to time.

 

“Subordinated
Debt” shall have the meaning in Section 3.1 herein.

 

“Subordinated
Debt Documents” shall mean this Subordinated Note and all other documents,
agreements and instruments executed and delivered in connection herewith.

 

5.                                       Miscellaneous

 

5.1                                 Section
Headings.  The section headings
contained in this Note are for reference purposes only and shall not affect the
meaning or interpretation of this Note.

 

5.2                                 Amendment
and Waiver.  Subject to Sections 3.6
and 5.10 hereof, no provision of this Note may be amended or waived unless
Payor 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 of
any rights of Payee, nor shall any single or partial exercise thereof preclude
any other or future exercise thereof or the exercise of any other right, power
or privilege.

 

10

 

5.3                                 Successors,
Assigns and Transferors.  Subject to
Section 3.8, this Note may be freely assigned and transferred by Payee provided
that any such transfer complies with all applicable federal and state
securities laws.  Subject to the
foregoing, the obligations of Payor and Payee under this Note shall be binding
upon, and inure to the benefit of, and be enforceable by, Payor and Payee, and
their respective successors and permitted assigns, whether or not so expressed.

 

5.4                                 Governing
Law.  This Note shall be governed by,
and construed in accordance with, the laws of the State of New York without
giving effect to any conflicts of laws principles thereof that would otherwise
require 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 arrangements
reasonably 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 make
and deliver a new note of like tenor in lieu of such lost, stolen, destroyed or
mutilated Note, at Payee’s expense.

 

5.6                                 Waiver
of Presentment, Etc.  Except as otherwise provided herein, presentment, demand, protest,
notice of dishonor and all other demands and notices are hereby expressly
waived by Payor.

 

5.7                                 Usury.  Nothing contained in this Note shall be
deemed to establish or require the payment of a rate of interest in excess of
the maximum rate legally enforceable.  If
the rate of interest called for under this Note at any time exceeds the maximum
rate legally enforceable, the rate of interest required to be paid hereunder
shall be automatically reduced to the maximum rate legally enforceable.  If such interest rate is so reduced and thereafter
the maximum rate legally enforceable is increased, the rate of interest
required to be paid hereunder shall be automatically increased to the lesser of
the maximum rate legally enforceable and the rate otherwise provided for in
this Note.

 

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

 

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

 

11

 

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
Capital Corporation

9850 Double R
Boulevard, Park Center East

Reno, NV 89521

Attn.: 
Loan Operations

Fax: 
(775) 789-5866

 

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

 

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

 

5.9                                 Reserved.

 

5.10                           Action
by Payee.  Subject to the provisions
of Section 3.6 and this Section 5.10, Payee and Payor may enter into agreements
for the purpose of adding or modifying provisions of this Note or changing in
any manner the rights of 
Payee or Payor hereunder or waiving any covenant, default or
Event of Default hereunder.

 

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

 

12

 

IN
WITNESS WHEREOF, Payor has executed and delivered 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 and Subordinated Creditor under the attached
Subordinated Promissory Note, dated as of the date first written above (the “Note”)
hereby acknowledges the provisions of Section 3 of the Note and agrees to be
bound by the provisions thereof.

 

	
   

  	
  COLUMBIA
  VENTURES CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Kenneth D. Peterson, Jr.

  
	
   

  	
   

  	
  Chief Executive OfficerExhibit
10.1

 

	
   

  

 

 

NOTE PURCHASE AGREEMENT

 

by

and

among

 

Cogent Communications Group, Inc.

 

and

 

Columbia
Ventures Corporation

 

 

Dated
as 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

  	
   

  

 

i

 

	
  5.10

  	
  Private Placement

  	
   

  
	
  5.11

  	
  Corporate Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

  	
   

  
	
   

  	
   

  
	
  6.1

  	
  Corporate
  Existence and Authority

  	
   

  
	
  6.2

  	
  Organization;
  Authorization; No Contravention

  	
   

  
	
  6.3

  	
  Binding Effect

  	
   

  
	
  6.4

  	
  Purchase for Own Account

  	
   

  
	
  6.5

  	
  Financial Condition

  	
   

  
	
  6.6

  	
  Receipt of Information

  	
   

  
	
  6.7

  	
  Broker’s,
  Finder’s or Similar Fees

  	
   

  
	
  6.8

  	
  Governmental
  Authorization: Third Party Consents

  	
   

  
	
  6.9

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII. MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  7.1

  	
  Survival
  of Representations and Warranties

  	
   

  
	
  7.2

  	
  Notices

  	
   

  
	
  7.3

  	
  Successors and Assigns

  	
   

  
	
  7.4

  	
  Amendment and Waiver

  	
   

  
	
  7.5

  	
  Counterparts

  	
   

  
	
  7.6

  	
  Headings

  	
   

  
	
  7.7

  	
  Governing Law

  	
   

  
	
  7.8

  	
  Severability

  	
   

  
	
  7.9

  	
  Rules of Construction

  	
   

  
	
  7.10

  	
  Entire Agreement

  	
   

  
	
  7.11

  	
  Further Assurances

  	
   

  

 

ii

 

NOTE PURCHASE AGREEMENT

 

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

 

RECITALS:

 

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

 

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

 

AGREEMENT

 

NOW, THEREFORE, in
consideration of the mutual covenants and agreements set forth herein and for
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1                               Definitions.

 

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

 

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

 

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

 

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

 

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

 

 

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

 

“Securities Act”
means the Securities Act of 1933, as amended, and the rules and regulations of
the 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 connection
with the negotiation and preparation of the Transaction Documents, the
consummation of the transactions contemplated thereby and preparation for any
of the foregoing, including, without limitation, travel expenses, reasonable
fees, charges and disbursements of counsel and any similar or related legal
costs and legal expenses; and (ii) other expenses incurred by the Purchaser in
connection with the negotiation, preparation and consummation of the
Transaction Document and the transactions contemplated thereby.

 

ARTICLE II.

AUTHORIZATION OF NOTES;

PURCHASE AND SALE OF NOTES;

MAKING OF LOANS

 

2.1                               Notes.

 

On or before the Closing
Date, the Board of Directors of the Company will authorize the issuance and
sale of the Note as contemplated hereby.

 

2.2                               Purchase
and Sale of the Note.

 

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

 

2.3                               Closing.

 

The closing of the sale to
and purchase by the Purchaser of the Note (the “Closing”) shall occur at 11 o’clock
A.M., local time on the Closing Date.  At
the Closing, the Company shall deliver to the Purchaser the Note, free and
clear of any Liens of any nature whatsoever, registered in such Purchaser’s
name.

 

2

 

2.4                               The Loan.

 

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

 

2.5                               Fees and
Expenses.

 

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

 

ARTICLE III.

CONDITIONS TO THE OBLIGATION OF THE

PURCHASER TO PURCHASE THE NOTE

 

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

 

3.1                               Representations
and Warranties.

 

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

 

3.2                               Compliance
with Terms and Conditions of this Agreement.

 

The Company shall have
performed and complied with all of the agreements and conditions set forth
herein that are required to be performed or complied with by the Company on or
before that date.

 

3.3                               Delivery of
the Note.

 

The Company shall have
delivered to the Purchaser the Note.

 

3.4                               Documents.

 

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

 

3

 

relating
to the sale of the Note and the transactions required to be performed by the
Transaction Documents.

 

3.5                               Purchase
Permitted By Applicable Laws.

 

The acquisition of and
payment for the Note to be acquired by the Purchaser hereunder and the
consummation of this Agreement (a) shall not be prohibited by any Requirements
of Law, and (b) shall not conflict with or be prohibited by any Contractual
Obligation of the Company.

 

3.6                               Consents
and Approvals.

 

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

 

3.7                               No
Material Judgment or Order.

 

There shall not be any
judgment or order of a court of competent jurisdiction or any ruling of any
Governmental Authority or any condition imposed under any Requirement of Law
which, in the reasonable judgment of the Purchaser, would (i) prohibit the
purchase of the Note hereunder, (ii) subject the Purchaser to any penalty if
the Note were to be purchased hereunder, or (iii) question the validity or
legality of the transactions required to be performed under this Agreement.

 

ARTICLE IV.

CONDITIONS TO THE OBLIGATION OF

THE COMPANY TO CLOSE

 

The obligation of the
Company to issue and sell the Note and the other obligations of the Company
hereunder shall be subject to the satisfaction of the following conditions on
or before the Closing Date:

 

4.1                               Representations
and Warranties.

 

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

 

4

 

4.2                               Compliance
with this Agreement.

 

The Purchaser shall have
performed and complied with all of the agreements and conditions set forth
herein that are required to be performed or complied with by the Purchaser on
or before the Closing Date.

 

4.3                               Issuance
Permitted by Applicable Laws.

 

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

 

4.4                               Loan.

 

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

 

4.5                               Consents
and 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 of
Law and with respect to those material Contractual Obligations of the Purchaser
necessary or required in connection with the execution, delivery or performance
by the Purchaser shall have been obtained and be in full force and effect and
all waiting periods shall have lapsed without extension or imposition of any
conditions or restrictions.

 

4.6                               No
Material Judgment or Order.

 

There shall not be any
judgment or order of a court of competent jurisdiction or any ruling of any
Governmental Authority or any condition imposed under any Requirements of Law
which, in the reasonable judgment of the Company would (i) prohibit the sale of
the Note or the consummation of the other transactions hereunder, (ii) subject
the 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 performed
under this Agreement.

 

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

OF THE COMPANY

 

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

 

5.1                               Organization,
Good Standing and Qualification.

 

The Company is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware and has all requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted.

 

5

 

5.2                               Authorization.

 

The Company has all requisite corporate power and
corporate authority to enter into this Agreement and to consummate all acts
related to the issuance of the Note.  The
execution, delivery and performance by the Company of the Transaction Documents
and the consummation by the Company of the issuance of the Note and the other
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no further consent or
authorization is required by the Company or its Boards of Directors or
stockholders.  The Transaction Documents
have been duly executed and delivered by the Company and each Transaction
Document constitutes a valid and binding agreement of the Company, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors generally, or by general equity
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).

 

5.3                               No
Conflicts.

 

(a)                                  The execution, delivery and performance of this Agreement by
the Company, the performance by the Company of its obligations hereunder and
the consummation by the Company of the transactions contemplated hereby will
not:

 

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

 

(ii)                                  conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others 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 the
application of any change of control or similar provision (whether “single
trigger” or “double trigger”), any right of redemption or conversion or any
anti-dilution provision or similar rights);

 

(iii)                               result in the creation or imposition of any lien,
encumbrance, claim, security interest or restriction whatsoever upon any of
the  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, any
foreign, federal, state or local government or governmental agency, department,
or body in order for it to execute, deliver or perform any of its obligations
under or contemplated by this Agreement in accordance with the terms hereof.

 

6

 

5.4                               Legal
Proceedings.

 

Except as disclosed in the
SEC Filings (as defined below), there is no material legal or governmental
proceeding pending or, to the knowledge of the Company, threatened or
contemplated to which the Company is or may be a party or of which the business
or property of the Company is or may be subject.

 

5.5                               No
Violations.

 

Except as disclosed in the
SEC Filings, the Company is not in violation of its certificate of
incorporation or its by-laws, in violation of any law, administrative
regulation, ordinance or order of any court or governmental agency, arbitration
panel or authority applicable to the Company, which violation, individually or
in the aggregate, would have a material adverse effect on the business or
financial condition of the Company, or in default in any material respect in
the performance of any obligation, agreement or condition contained in any
material bond, debenture, note or any other evidence of indebtedness in any
indenture, mortgage, deed of trust or any other agreement or instrument to
which the Company is a party or by which the Company is bound or by which the
properties of the Company are bound or affected.

 

5.6                               Governmental Permits, Etc.

 

Except as disclosed in the
SEC Filings, the Company has all necessary franchises, licenses, certificates
and other authorizations from any foreign, federal, state or local government
or governmental agency, department, or body that are currently necessary for
the operation of the business of the Company as currently conducted, the
absence of which would have a material adverse effect on the business or
operations of the Company.

 

5.7                               Additional
Information.

 

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

 

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

 

b.                                      all other documents filed by the Company with the Securities
and Exchange Commission (the “SEC”) since the filing of the Annual
Report on Form 

 

7

 

10-K for the fiscal year
ended December 31, 2003, including the Company’s Quarterly Report on Form 10-Q
for 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 the
Company included in the SEC Filings and the additional financial statements of
the Company and the related notes, provided 
to the Purchaser by the Company, if any, complied as to form (and will
comply as to form) in all material respects with U.S. generally accepted
accounting principles (“GAAP”) and the published rules and regulations
of the SEC with respect thereto.  Such
financial statements have been prepared in accordance with GAAP, consistently
applied, during the periods involved (except in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements or as otherwise, in each case, may be permitted by the SEC
on Form 10-Q under the Exchange Act) and fairly present in all material
respects the consolidated financial position of the Company as of the dates
thereof and the consolidated results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).  Ernst &
Young LLP, which has examined certain of such financial statements, is an
independent certified public accounting firm within the meaning of the
Securities Act.

 

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

 

5.8                               No
Integrated Offering.

 

Neither the Company, nor any
person acting on its behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under
circumstances that would require registration of the Note under the Securities
Act or cause this offering of the Note to be integrated with prior offerings by
the Company for purposes of the Securities Act or any applicable stockholder
approval provisions, including, without limitation, under the rules and
regulations of the American Stock Exchange, nor will the Company take any
action or steps that would require registration of the Note under the
Securities Act or cause the offering of the Note to be integrated with other
offerings.

 

8

 

5.9                               Internal
Accounting Controls.

 

The Company maintains a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset and liability accountability, (iii) access to assets or incurrence of
liability is permitted only in accordance with management’s general or specific
authorization and (iv) the reported accountability for its assets is compared
with existing assets at reasonable intervals.

 

5.10                        Private
Placement.

 

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

 

5.11                        Corporate
Documents.

 

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

 

ARTICLE VI.

REPRESENTATIONS AND

WARRANTIES OF THE PURCHASER

 

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

 

6.1                               Corporate
Existence and Authority.

 

The Purchaser is  a corporation (a) duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
formation, (b) has all requisite power and authority to own its assets and
operate 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 and
performance by the Purchaser of the Transaction Documents and the consummation
of the transactions contemplated thereby, including, without limitation, the
acquisition of the Note:  (a) is within
the Purchaser’s corporate power and authority and has been duly authorized by
all necessary action on the part of the Purchaser; does not conflict with or
contravene the terms of the Purchaser’s charter or by-laws; and (c) will not
violate, conflict with or result in any material breach or contravention of (i)
any Contractual Obligation of the Purchaser, or (ii) the Requirements of Law or
any order or decree applicable to the Purchaser.

 

9

 

6.3                               Binding
Effect.

 

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

 

6.4                               Purchase
for Own Account.

 

The Note is being or will be
acquired by the Purchaser for its own account and with no intention of
distributing or reselling such security or any part thereof in any transaction
that would be in violation of the securities laws of the United States of
America, or any state, without prejudice, however, to the rights of the
Purchaser at all times to sell or otherwise dispose of all or any part of such
Note under an effective registration statement under the Securities Act, or
under an exemption from such registration available under the Securities Act,
and subject, nevertheless, to the disposition of such Purchaser’s property
being at all times within its control. 
If the Purchaser should in the future decide to dispose of the Note or
any part thereof, the Purchaser understands and agrees that it may do so only
in compliance with the Securities Act and applicable state securities laws, as
then in effect.  The Purchaser agrees to
the imprinting, so long as required by law, of a legend on certificate
representing  the Note to the following
effect:

 

“THE SECURITIES REPRESENTED
BY 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 OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
“

 

6.5                               Financial
Condition.

 

The Purchaser’s financial
condition is such that it is able to bear the risk of holding the Note for an
indefinite period of time and can bear the loss of its entire investment in the
Note.  The Purchaser has such knowledge
and experience in financial and business matters and in making high risk
investments of this type that it is capable of evaluating the merits and risks
of the purchase of the Note.

 

10

 

6.6                               Receipt of
Information.

 

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

 

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

 

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

 

6.8                               Governmental
Authorization: Third Party Consents.

 

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

 

6.9                               Litigation.

 

No Actions are pending, or
to the best knowledge of the Purchaser, threatened relating to or affecting the
transactions required to be performed by the Purchaser under the Transaction
Documents.

 

ARTICLE VII.

MISCELLANEOUS

 

7.1                               Survival
of Representations and Warranties.

 

All of the representations
and warranties made herein shall survive the Closing.

 

11

 

7.2                               Notices.

 

All notices, demands and
other communications provided for or permitted hereunder shall be made in
writing and shall be by registered or certified first-class mail, return
receipt 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 and
communications shall be deemed to have been duly given:  when delivered by hand, if personally
delivered; when delivered by courier, if delivered by commercial overnight
courier service; if delivered by facsimile, upon confirmation of such
transmission; and five business days after being deposited in the mail, postage
prepaid, if mailed.

 

7.3                               Successors
and Assigns.

 

This Agreement shall inure
to the benefit of and be binding upon the successors and permitted assigns of
the parties hereto.  This Agreement may
be assigned by the Purchaser to any permitted transferee of all or part of the
Note.  The Company may not assign any of
its rights under this Agreement without the written consent of the
Purchaser.  Except as provided in this
Section 7.3 and in the Note, no Person other than the parties hereto and their
successors and permitted assigns is intended to be a beneficiary of any of the
Transaction Documents.

 

12

 

7.4                               Amendment
and Waiver.

 

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

 

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

 

7.5                               Counterparts.

 

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

 

7.6                               Headings.

 

The headings in this
Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.

 

7.7                               Governing
Law.

 

This Agreement shall be
governed 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 the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way
impaired, unless the provisions held invalid, illegal or unenforceable shall
substantially impair the benefits of the remaining provisions hereof.

 

7.9                               Rules of
Construction.

 

Unless the context otherwise
requires, “or” is not exclusive, and references to sections or subsections
refer to sections or subsections of this Agreement.

 

13

 

7.10                        Entire
Agreement.

 

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

 

7.11                        Further
Assurances.

 

Each of the parties shall
execute such documents and perform such further acts (including, without
limitation, obtaining any consents, exemptions, authorizations, or other actions
by, or giving any notices to, or making any filings with, any Governmental
Authority or any other Person) as may be reasonably required or desirable to
carry out or to perform the provisions of this Agreement.

 

14

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed and delivered by their
respective officers hereunto duly authorized as of the date first above
written.

 

	
   

  	
  COGENT COMMUNICATIONS GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COLUMBIA VENTURES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

15

 

Schedule 1

 

	
  Purchaser

  	
   

  	
  Amount of Note

  	
   

  
	
  Columbia Ventures Corporation

  	
   

  	
  $

  	
  10,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
					

 

16

 

Exhibit A

 

SUBORDINATED
NOTE

 

THE SECURITIES REPRESENTED BY 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 OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
SUCH ACT OR SUCH LAWS.

 

COGENT
COMMUNICATIONS GROUP, INC.

 

	
  $10,000,000

  	
   

  	
  February 24, 2005

  

 

Cogent Communications Group, Inc., a Delaware
corporation (“Payor”), for value received, promises to pay to the order
of Columbia Ventures Corporation (“Payee” or the “Subordinated Creditor”) the
principal amount of Ten Million Dollars ($10,000,000), together with accrued
interest thereon, each calculated and payable only as and to the extent set
forth below in this Subordinated Note (this “Note”).  The principal and interest on this Note is
payable in lawful money of the United States of America in immediately
available funds at the Payee’s principal business address in the United States
on record with the Payor or in such other manner and at such other place as the
Payor and Payee may mutually agree.

 

1.                                       Payment
of Principal and Interest

 

1.1                                 Calculation
and Payment of Interest.

 

Interest on the principal balance of this
Note outstanding from time to time until paid in full shall accrue at the rate
of (a) for the period from the date hereof through August 24, 2005, 10% per
annum, (b) for the period beginning on August 
24, 2005 through February 24 2006, 11.0% per annum, (c) for the period
beginning on February 24 , 2006  through
August 24, 2006, 12% per annum, (d) for the period beginning on August 24, 2006
through  February 24, 2007, 13% per
annum, (e) for the period beginning on February 24, 2007 through  August 24, 2007, 14% per annum, (f) for the
period beginning on August 24, 2007 through 
February 24, 2008, 15% per annum, (g) for the period beginning on
February 24, 2008 through  August 24,
2008, 16% per annum, (h) for the period beginning on August 24, 2008
through  the Maturity Date, 17% per
annum, 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 on
the Maturity Date (as defined herein).

 

1.2                                 Payment
on Maturity Date.  The principal
balance of, and all accrued and unpaid interest on, this Note shall be payable
immediately upon the earlier   of (i)
February 24, 2009 and (ii) the date upon which a Liquidity Event (as defined
herein) occurs.

 

1.3                                 Optional
Prepayment.         (a)          Except
as otherwise provided herein, Payor may at its option at any time, without
premium or penalty, prepay all or any portion of this Note.

 

17

 

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

 

                                                1.4                                 Payment
Only on Business Days.  Any payment
hereunder which, but for this Section 1.4, would be payable on a day that is
not a Business Day, shall instead be due and payable on the first Business Day
next following such date for payment.

 

2.                                       Events
of Default

 

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

 

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

 

(ii)                                  Payor
voluntarily liquidates;

 

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

 

(iv)                              a
court of competent jurisdiction enters an order or decree (that remains
unstayed 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 its
property, or (c) orders the liquidation of Payor.

 

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

 

3.                                       Subordination

 

3.1                                 Note
Subordinated 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 of
and the interest on this Note and any claim for rescission of the purchase of
this Note, and any claim that is the equivalent of or substitute for principal
of or interest on this Note, for damages arising from the purchase of this Note
or for reimbursement or contribution on account of such a claim, and all other
payments with respect to or on account of this Note (collectively, the “Subordinated
Debt”) are hereby expressly made subordinate and subject in right of
payment to the prior indefeasible payment in full in cash of all Senior
Indebtedness.  The existing and hereafter
acquired liens and security interests of the holders of Senior Indebtedness in
any collateral securing all or any portion of the Senior Indebtedness 

 

18

 

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

 

3.2                                 No
Payment on Note in Certain Circumstances.

 

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

 

(b)                                 The
Subordinated Creditor agrees that, so long as payments or distributions for or
on account of the Subordinated Debt are not permitted pursuant to this Section
3, the Subordinated Creditor will not take, sue for, ask or demand from Payor
payment of all or any amounts under or in respect of this Note, or commence, or
join with any creditor in commencing, directly or indirectly cause Payor to
commence, or assist Payor in commencing, any proceeding referred to in Section
3.3, and the Subordinated Creditor shall not take or receive from Payor,
directly or indirectly or on its behalf, in cash or other property or by
set-off or in any other manner, including, without limitation, from or by way
of collateral, payment of all or any amounts under or in respect of the
Subordinated Debt.  In the event that,
notwithstanding the foregoing provisions of this Section 3.2, any payment or
distribution of any kind or character, whether in cash, property or securities,
shall be received from Payor by the Subordinated Creditor while a Payment
Restriction exists for or on account of or in respect of the Subordinated Debt
before all Senior Indebtedness is indefeasibly paid in full in cash, such
payment or distribution shall be received and held in trust for, and shall
immediately be paid over (in the same form as so received, to the extent
practicable, and with any necessary endorsement) to the holders of the Senior
Indebtedness remaining unpaid or their representative or representatives, or to
the trustee or trustees under any such indenture or agreement under which any
Senior 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 the
payment or prepayment of Senior Indebtedness.

 

3.3                                 Dissolution;
Liquidation; Bankruptcy; Acceleration. 
In the event of (i) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
proceeding 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 or
bankruptcy, or (iii) any assignment for the benefit of creditors or any
other marshalling of assets or liabilities of the Payor, or (iv) the
acceleration of the Senior Indebtedness by reason of the occurrence of a Senior
Default (each such event, if any, herein sometimes referred to as a “Proceeding”):

 

(a)                                  The
holders of all Senior Indebtedness shall first be entitled to receive payment
in full in cash of all Senior Indebtedness before any direct or indirect
payment may be made for or on 

 

19

 

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

 

(b)                                 Any
payment or distribution of any kind or character, whether in cash, property or
securities (including any payment or distribution that may be payable by reason
of any other indebtedness of Payor being subordinated to payment of the
Subordinated Debt), to which the Subordinated Creditor would be entitled except
for the provisions of this Section 3, shall be paid and delivered by the
liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or other trustee or agent, directly to the holders of the Senior Indebtedness
or their representative or representatives, or to the trustee or trustees under
any indenture under which any instrument evidencing any of such Senior
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 the payment
or prepayment of Senior Indebtedness, to the extent necessary to make payment
in full of all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of such Senior Indebtedness.

 

(c)                                  The
holders of the Senior Indebtedness are hereby irrevocably authorized and
empowered (in their own names or in the name of the Subordinated Creditor or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution referred to in paragraph (b) above and
give acquittance therefor and to file and vote claims and proofs of claim and
take such other action (including, without limitation, voting the amounts owing
under the Subordinated Debt or enforcing any security interest or other lien
securing payment of the amounts owing under the Subordinated Debt) as they may
deem necessary or advisable for the exercise or enforcement of any of the
rights or interests of the holders of the Senior Indebtedness hereunder, provided
no such acquittance shall release liability of Payor to the holders of this
Note subject, nevertheless, to the provision of this Section 3.

 

(d)                                 The
Subordinated Creditor shall duly and promptly take such action as the holders
of Senior Indebtedness may reasonably request to execute and deliver to the
holders of Senior Indebtedness such powers of attorney, assignments, or other
instruments as the holders of Senior Indebtedness may reasonably request in
order to enable the holders of Senior Indebtedness to enforce any and all
claims with respect to, and any security interests and other liens securing
payment of, the amounts owing under the Subordinated Debt.

 

(e)                                  In
the event that, any payment or distribution of any kind or character, whether
in cash, property or securities (including any payment or distribution that may
be payable by reason of any other indebtedness of Payor being subordinated to
payment of the Subordinated Debt), shall be received by the Subordinated
Creditor for or on account of or in respect of the Subordinated Debt in
contravention of this Section 3.3 before all Senior Indebtedness is
indefeasibly paid in full in cash, such payment or distribution shall be
received and held in trust for, and shall immediately be paid over (in the same
form as so received, to the extent practicable, and with any necessary
endorsement) to the holders of the Senior Indebtedness remaining unpaid or
their representative or representatives, or to the trustee or trustees under
any such indenture or agreement under which any Senior 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 the payment or prepayment of
Senior Indebtedness, until all Senior Indebtedness shall have been indefeasibly
paid in full in cash, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness.

 

20

 

(f)                                    The
Subordinated Creditor agrees to execute and deliver to each holder of the
Senior Indebtedness or its representative all such further instruments
confirming the authorization referred to in the foregoing clauses of Section
3.3.

 

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

 

3.5                                 No
Prepayments.  Except as expressly
permitted by the Senior Indebtedness Documents, under no circumstances shall
the Payor be entitled to make, or the Subordinated Creditor be entitled to
demand, take, receive, or retain, any prepayments of interest or principal on
account of any of the Subordinated Debt from the Payor prior to the
indefeasible payment in full in cash of the Senior Indebtedness and the
termination of all lending commitments under the Senior Indebtedness Documents.  Payments received by the Subordinated
Creditor after acceleration of the Subordinated Debt or the commencement of a
Collection Action otherwise permitted by the provisions of this Subordinated
Note shall not constitute a prohibited prepayment under this Section 3.5.

 

3.6                                 Amendment
of Subordinated Debt Documents. 
Until the Senior Indebtedness is indefeasibly paid in full in cash and
notwithstanding anything contained in the Subordinated Debt Documents or any
Senior Indebtedness Document to the contrary, the Subordinated Creditor shall
not agree to any amendment, modification or supplement to the Subordinated Debt
Documents the effect of which is to change or amend any other term of the
Subordinated Debt Documents if such change or amendment would result in a
Senior Default.

 

3.7                                 Modifications
to Senior Indebtedness.  The holders
of the Senior Indebtedness may at any time and from time to time without the
consent of or notice to the Subordinated Creditor, without incurring liability
to the Subordinated Creditor and without impairing or releasing the obligations
of the Subordinated Creditor under this Subordinated Note, change the manner or
place of payment or extend the time of payment of or renew or alter any of the
terms of the Senior Indebtedness, or amend in any manner any agreement, note,
guaranty or other instrument evidencing or securing or otherwise relating to
the Senior Indebtedness.

 

3.8                                 Sale,  Transfer. 
The Subordinated Creditor shall not sell, assign, pledge, dispose of or
otherwise transfer all or any portion of the Subordinated Debt or any
Subordinated Debt Document (a) without
giving prior written notice of such action to Payor, and (b) unless prior to the consummation of any
such action, the transferee thereof shall execute and deliver to Payor an
agreement (that shall be enforceable by the holders of Senior Indebtedness)
providing for the continued subordination and forbearance of the Subordinated
Debt to the Senior Indebtedness as provided herein and for the continued
effectiveness of all of the rights of the holders of the Senior Indebtedness
arising under the provisions of this Subordinated Note.  Notwithstanding the failure to execute or
deliver any such agreement, the subordination effected hereby shall survive any
sale, assignment, pledge, disposition or other transfer of all or any portion
of the Subordinated Debt, and the terms of this Subordinated Note shall be
binding upon the successors and assigns of the Subordinated Creditor.

 

3.9                                 Reserved.

 

3.10                           Obligations
of Payor Unconditional.  Nothing
contained in this Section 3 or elsewhere in this Note is intended to or shall
impair, as among Payor, its creditors (other than the holders of Senior 

 

21

 

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

 

3.11                           Reliance
on Judicial Order or Certificate of Liquidating Agent.  Upon any payment or distribution of assets of
Payor referred to in this Section 3, the Subordinated Creditor shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, delivered to the Subordinated Creditor, for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
Payor, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to Section 3 of
this Note.  Such reliance shall not
affect the rights of the holders of the Senior Indebtedness.

 

3.12                           Subordination
Rights Not Impaired by Acts or Omissions of Payor or Holders of Senior
Indebtedness.  No right of any
present or future holders of any Senior Indebtedness to enforce subordination
as provided herein will at any time in any way be prejudiced or impaired by any
act or failure to act on the part of Payor or by any act or failure to act by
any such holder, or by any act, failure to act or noncompliance by Payor, the
holders of Senior Indebtedness or their respective agents with the terms of
this Note, regardless of any knowledge thereof which any such holder or Payor
may have or otherwise be charged with. 
The provisions of this Section 3 are intended for the benefit of and
shall be enforceable directly by the holders of the Senior Indebtedness.

 

3.13                           Further
Assurances.  The Subordinated
Creditor and Payor each will, at Payor’s expense and at any time and from time
to time, promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that the
holders of Senior Indebtedness may request, in order to protect any right or
interest granted or purported to be granted hereby or to enable the holders of
Senior Indebtedness to exercise and enforce their rights and remedies
hereunder.

 

3.14                           No
Contrary Actions.  Payor agrees that
it 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                           Obligations
Hereunder Not Affected.  All rights
and interests of the holders of Senior Indebtedness hereunder, and all
agreements and obligations of the Subordinated Creditor and Payor under this
Section 3, shall remain in full force and effect irrespective of:

 

(i)                                     any
lack of validity or enforceability of any successor guaranty of any Senior
Indebtedness Document;

 

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

 

22

 

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

 

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

 

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

 

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

 

(vi)                              any
other circumstance which might otherwise constitute a defense available to, or
a discharge of, Payor, the Subordinated Creditor or a subordinated
creditor.  The provisions of this Section
3 shall continue to be effective or be reinstated, as the case may be, if at
any time any payment of any of the Senior Indebtedness is rescinded or must
otherwise be returned by the holders of Senior Indebtedness upon the
insolvency, bankruptcy or reorganization of Payor or otherwise, all as though
such payment had not been made.

 

3.16                           Waiver.  The Subordinated Creditor and the Payor each
hereby waives promptness, diligence and notice of acceptance with respect to
any of the Senior Indebtedness and this Section 3 and any requirement that the
holders of Senior Indebtedness protect, secure, perfect or insure any security
interest or lien on any property subject thereto or exhaust any right or take
any action against Payor or any other person or entity or any collateral.

 

3.17                           No
Waiver; Remedies.  No failure on the
part of the holders of the Senior Indebtedness to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right.  The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.

 

3.18                           Continuing
Agreement; Assignments Under Senior Indebtedness Agreements.  The provisions of this Section 3 constitute a
continuing agreement and shall (i) remain in full force and effect until the
earlier of (x) the date the obligation under this Note are satisfied in full in
accordance with this Section 1.2, or (y) the first Business Day following  the indefeasible payment in full in cash of
the Senior Indebtedness, (ii) be binding upon the Subordinated Creditor, Payor
and their respective successors and assigns, and (iii) inure to the benefit of,
and be enforceable by, the holders of the Senior Indebtedness and their
successors, transferees and assigns. 
Without limiting the generality of the foregoing clause (iii), should
holders of the Senior Indebtedness assign or otherwise transfer all or any
portion of their rights and obligations under any Senior Indebtedness Document
to any other Person, such other Person shall thereupon become vested with all
the rights in respect thereof granted to the holders of the Senior Indebtedness
herein or otherwise.

 

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

 

23

 

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

 

4.                                       Certain
Definitions

 

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

 

“A/R-Secured Loan Agreement” means an
agreement pursuant to which Payor incurs up to $10 million in indebtedness
secured 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 other
than Saturdays, Sundays and days when commercial banks are authorized or
required by law to be closed for business in New York, New York.

 

“Cisco Credit Agreement” means the
Third Amended and Restated Credit Agreement, dated as of July 31, 2003, among
Payor, Cogent Communications, Inc., Cogent Internet, Inc., Cisco Systems
Capital Corporation and the several financial institutions from time to time
party thereto, as such may be amended, modified, supplemented, refinanced or
replaced from time to time.

 

“Collection Action” shall mean, with
respect to the Subordinated Debt, (a) to
sue for, take or receive from or on behalf of the Payor of the Subordinated
Debt, by set-off or in any other manner, the whole or any part of any moneys
that may now or hereafter be owing by the Payor with respect to the
Subordinated Debt; (b) to initiate
or participate with others in any suit, action or proceeding against the Payor
(i) to enforce payment of or to
collect the whole or any part of the Subordinated Debt or (ii) to commence judicial enforcement of
any of the rights and remedies under the Subordinated Debt Documents or
applicable law with respect to the Subordinated Debt; (c) to accelerate any Subordinated Debt; or (d) to cause the Payor to honor any
redemption or mandatory prepayment obligation with respect to the Subordinated
Debt; or (e) to take any action to
realize upon any collateral securing the Subordinated Debt (if any) or to
exercise any other right or remedy with respect to such collateral.

 

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

 

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

 

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

 

24

 

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

 

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

 

“Person” means any individual, firm,
corporation, partnership, trust, incorporated or unincorporated
association,  joint venture, association,
joint-stock company,  Governmental
Authority  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 senior
secured indebtedness as such may be amended, modified, supplemented, refinanced
or replaced from time to time.

 

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

 

“Senior Indebtedness” means
(i) all indebtedness of the Payor outstanding under the Cisco Credit
Agreement and the A/R-Secured Loan Agreement, (ii)  all indebtedness of
the Payor outstanding under the Replacement Senior Secured Agreement and
(iii) all obligations with respect to the items listed in the preceding
clauses (i) and (ii).  Notwithstanding
anything to the contrary in the foregoing, Senior Indebtedness will not include
(a) any liability for federal, state, local or other taxes owed or owing
by Payor, (b) any intercompany indebtedness of Payor to any of its
subsidiaries, (c) any accounts payable or other liability to trade
creditors 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” means
the Cisco Credit Agreement, the A/R-Secured Loan Agreement, the Replacement
Senior Secured Agreement and any other note, agreement, indenture, mortgage,
guaranty, pledge, security agreement or instrument evidencing or securing
Senior Indebtedness or pursuant to which Senior Indebtedness is incurred, in
each case as such agreement or document may be amended, modified or
supplemented from time to time, including without limitation any agreement or
document extending the maturity of, increasing the aggregate commitments under,
or refinancing, replacing or otherwise restructuring all or any part of
indebtedness under such agreement or document or any replacement or successor
agreement or document and whether by the same or any other agent, lender or
group of lenders, as any such document may be amended, modified, supplemented,
refinanced or replaced from time to time.

 

“Subordinated Debt” shall have the
meaning in Section 3.1 herein.

 

“Subordinated Debt Documents” shall
mean this Subordinated Note and all other documents, agreements and instruments
executed and delivered in connection herewith.

 

25

 

5.                                       Miscellaneous

 

5.1                                 Section
Headings.  The section headings
contained in this Note are for reference purposes only and shall not affect the
meaning or interpretation of this Note.

 

5.2                                 Amendment
and Waiver.  Subject to Sections 3.6
and 5.10 hereof, no provision of this Note may be amended or waived unless
Payor 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 of
any rights of Payee, nor shall any single or partial exercise thereof preclude
any other or future exercise thereof or the exercise of any other right, power
or privilege.

 

5.3                                 Successors,
Assigns and Transferors.  Subject to
Section 3.8, this Note may be freely assigned and transferred by Payee provided
that any such transfer complies with all applicable federal and state
securities laws.  Subject to the
foregoing, the obligations of Payor and Payee under this Note shall be binding
upon, and inure to the benefit of, and be enforceable by, Payor and Payee, and
their respective successors and permitted assigns, whether or not so expressed.

 

5.4                                 Governing
Law.  This Note shall be governed by,
and construed in accordance with, the laws of the State of New York without
giving effect to any conflicts of laws principles thereof that would otherwise
require 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 arrangements
reasonably 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 make
and deliver a new note of like tenor in lieu of such lost, stolen, destroyed or
mutilated Note, at Payee’s expense.

 

5.6                                 Waiver
of Presentment, Etc.  Except as
otherwise provided herein, presentment, demand, protest, notice of dishonor and
all other demands and notices are hereby expressly waived by Payor.

 

5.7                                 Usury.  Nothing contained in this Note shall be
deemed to establish or require the payment of a rate of interest in excess of
the maximum rate legally enforceable.  If
the rate of interest called for under this Note at any time exceeds the maximum
rate legally enforceable, the rate of interest required to be paid hereunder
shall be automatically reduced to the maximum rate legally enforceable.  If such interest rate is so reduced and
thereafter the maximum rate legally enforceable is increased, the rate of
interest required to be paid hereunder shall be automatically increased to the
lesser of the maximum rate legally enforceable and the rate otherwise provided
for in this Note.

 

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

 

26

 

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 Capital
Corporation

9850 Double R Boulevard,
Park Center East

Reno, NV 89521

Attn.:  Loan Operations

Fax:  (775) 789-5866

 

27

 

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

 

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

 

5.9                                 Reserved.

 

5.10                           Action
by Payee.  Subject to the provisions
of Section 3.6 and this Section 5.10, Payee and Payor may enter into agreements
for the purpose of adding or modifying provisions of this Note or changing in
any manner the rights of  Payee or Payor
hereunder or waiving any covenant, default or Event of Default hereunder.

 

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

 

28

 

IN WITNESS WHEREOF, Payor has executed and
delivered 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 and
Subordinated Creditor under the attached Subordinated Promissory Note, dated as
of the date first written above (the “Note”) hereby acknowledges the
provisions of Section 3 of the Note and agrees to be bound by the provisions
thereof.

 

	
   

  	
  COLUMBIA
  VENTURES CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Kenneth D.
  Peterson, Jr.

  
	
   

  	
   

  	
  Chief
  Executive Officer

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